[OPE-L:5239] RE: Luxury goods and profit rate

andrew kliman (Andrew_Kliman@msn.com)
Wed, 11 Jun 1997 11:44:17 -0700 (PDT)

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In reply to Duncan's ope-l 5229.

(1) He writes: "the conception of surplus value in UC would always include
the surplus value generated in luxury sectors, since it equals the non-wage
share in value added, which includes luxury production. The idea was precisely
to define an aggregate surplus value that would be distributed over various
sectors by prices (perhaps, but not necessarily to equalize profit rates), but
in such a way that the total surplus value is conserved, and proportional to
the unpaid labor time."

This is not at issue. The issue concerns determination: do changes in
production conditions in luxury sectors lead to changes in the general profit

What you have stipulated can be satisfied even if they don't. You define (the
monetary expression of) aggregate surplus-value in such a way that it must
always equal aggregate profit. That will be the case even if w is determined
as w = pb with fixed b, or b is determined by preferences and the budget
constraint w = pb, in which w (in terms of a numeraire commodity) is a daturm.
Yet in these latter cases, changes in technical coefficients in nonbasics
will not lead to changes in the general rate of profit.

As I've shown , given the simultaneist equation system

p = (pA + wl)(1+r)

and the aggregate budget constraint of workers

w = pb

the level of r is independent of technical coefficients in luxury sectors.
Nonetheless, (1/m)lx - wlx, where (1/m) = [p(I-A)x]/lx, necessarily equals
[p(I-A)x] - wlx.

(2) Duncan: " I took w* as given in my reply to you because it seemed to me
that was the "ground rule" of the transformation problem in the abstract. In
fact I suppose the value of labor-power in the UC sense is determined
conjuncturally by the intersection of a whole bunch of concrete
determinations. What makes me somewhat uncomfortable is my feeling that
there is a longer-run conception of workers' standard of living that plays a
real role in the system and is not just the ex post outcome period by period."

My critique of keeping w* the same in the imaginary "value system" and the
actual economy is that Marx's transformation deals with the values and prices
of one economy, not two different economies. Yet the "transformation problem"
is also not at issue.

What is at issue is whether, in the *actual* economy, changes in production
conditions in luxury sectors can lead to changes in the general profit rate.
When one stipulates that the w* of the actual economy is exogenous, one is not
saying it is invariant across two economies. Rather, one is asserting that,
in the actual economy, the wage share of NNP is determined prior to prices,
the money wage rate, the means of subsistence that workers need, etc., and
that it determines them.

Duncan rightly seems to have doubts about that: "I'm not committed to the
theory that w* is exogenously determined prior to w...," yet he says "I don't
agree that this is required for luxury sectors to influence the general rate
of profit, as I've tried to explain above."

"Above" seems to mean the argument I quoted in point (1). Again, the argument
doesn't work, because it does not demonstrate that changes in production
conditions in luxury sectors will lead to changes in the general rate of

I have yet to be shown that this can be demonstrated, except through the
dubious exogeneity of the wage share of NNP. I have shown that if, instead,
it is the money wage rate that is given, as part of capital advanced, then the
mere existence of budget constraints (pure tautologies) implies that the
simultaneist general profit rate is not dependent on luxury sectors.

Andrew Kliman