[OPE-L:5363] RE: Luxury goods and profit rate

Ajit Sinha (ecas@cc.newcastle.edu.au)
Mon, 11 Aug 1997 03:53:53 -0700 (PDT)

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>>Just to get the ball rolling. Let me say that, as I see it, the idea of
>>exchange between *a* worker and *a* capitalist is not important in the
>>context of Marx's theory of wages and the transformation problem.

>It seems to me this kind of prejudges the issue. I think there are two
>sides to Marx's analysis. In Volume II he takes the point of view of the
>reproduction of capital, where the value of labor-power is important
>because it represents a cost (a money cost) to the capitalist. In Volume I,
>in my opinion, he strives for a more "pedagogical" approach that links his
>theory up closely with the Ricardo-Smith labor theory of value, and it's
>here that he tries to link up the value of labor-power with the commodities
>workers consume. It is important for the transformation problem, because,
>whether you accept the "new interpretation" or not, the reasoning shows
>that the conservation of surplus value in profit is closely connected to
>this issue.

I think there are two fundamental aspects to the whole theory of value and
exploitation in Marx: One is the pseudo exchange between the capitalist
class and the working class, and this is primarily concerned with the
theory of exploitation (main concentration of Volume one). This particular
aspect is governed by the determination of the length of the working day
and the length of the working day devoted to what the workers receive in
this so-called exchange. Now, how should this rate of exploitation be
determined is where we have some disagreement (my problem with the new
interpretation of exploitation is detailed in my paper 'A Critique of New
Solution' that I sent on the list sometime ago, and which is coming out in
the next issue of RRPE). But before we get to that, let me mention the
second aspect. The second aspect is the exchange between sectors and not
really individuals. This represents the social division of labor aspect of
the capitalist economy. Prices are necessarily a solution to the
intersectoral exchanges. The transformation problem is essentially a
problem of linking the relation of exploitation, i.e. the pseudo exchange
between the two classes, and the exchanges between sectors. I think, vol.2
is more concerned with the details of sectoral exchanges, given the rate of
exploitation, rather than individual exchanges between capitalists and
workers. The cost aspect of wages to individual sectors is primarily an
aspect of exchanges between the 'wage good' and the 'capital good' sectors.

I think the fundamental problem with which we are dealing with here, and
which started with my debate with Mike Lebowitz, is the meaning of the
given money wages. In a given input-output system once the real wages or
the money wages are given, then all the relative prices are known as well.
Workers accept money wages because they know what money can buy. When we
accept a salary of $50,000 or so or when workers accept a wage of $15/hour,
we have a fairly good idea of what standard of living such salary or wage
provides. Imagin that prices get determined by many other independent
forces quite independent of given money wages, in that case the given money
wages would turn out to be a kind of gambling for the workers. In such
circumstance, my contension is that the system of money wages would
collapse. This would introduce too much of uncertainty in the system. A
large population of a system will not accept gambling with its livelyhood
on annual or daily basis. There will be a demand that the employer provide
a housing, medical facilities, schooling for children, transportation, and
many such things, i.e. a demand for wages to be paid in real terms. That's
why a period of hyper inflation is an acute crisis situation for the
system. One may suggest that prices do change overtime even in a normal
situation which affects real wages. But such effects on real wages should
not be interpreted as a result of this unique factor of wages being paid in
money terms. But rather should be interpreted as a trend in real wages
determined by the real factors of the economy, as the classical economists
did. It would be incorrect to think that classical economists had some kind
of iron law of wages. What I'm trying to say is that the idea of 'given
money wages' implicitly assumes a given real wages. It could not stand
independently on its own. When we take given money wages, we take that the
money commodity is determined before hand. When we take real wages as given
then we have freedom to chose any commodity as money commodity, and this
provides a much more open enviorenment for working out a theory of prices.

>>I think
>>the idea of 'exchange' between the *working class* and the *capitalist
>>class* is the relevant idea here. Given that your own interpretation of the
>>transformation problem is more 'macro accounting' oriented, I hope you would
>>agree on the point that the wages question is eaaentially about the
>>'exchange' between the two classes, and not individual exchanges as such.

>But aren't there two stages? The class relations emerge from the repetition
>of the individual relations all over the society. The "exchange" between
>classes is not a real, direct, transaction at the macro level but a social
>reality that emerges from innumerable individual transactions.


This sounds like methodological individualism. I would suggest that no
individual exchange between a capitalist and a worker takes place prior to
or independent of the class relation they are part of. The system does not
come into being through individuals (rational) actions. Rather all the
individual actions take place within the given social relations.

>>Now, when we take the class oriented position, then the relevant information
>>we need to know to determine the real wages is how much of various goods and
>>services are consumed by the working class as a whole.

>Is this all? Couldn't wages deviate from the value of labor-power in
>periods of intense class struggle in one direction or another, for example?


Of course, real wages could be a bit higher or lower than the long term
value of labor-power in any given year. But these real wages could be
empirically calculated by looking at working class consumption. The value
of labor-power could be determined by say taking a ten year average of the
real wages.

>>This information can
>>be gathered without any reference to individual workers' subjectivities an
>>choices. Once we know the aggregate consumption of the working class and the
>>total numbers of workers employed/labor-time spent in the production
>>process, we can easily determine the 'average' real wages per worker/unit of
>>time. Thus, I think the problem of different workers might be having a
>>slightly different basket of consumption is irrelevant. What we are after is
>>the aggregate and the average derived from it. What would be your main
>>problem with this approach?

>As I said in my 1982 RRPE paper and in _Understanding Capital_, one must
>distinguish the _definition_ of the value of labor-power from the
>_determination_ of the value of labor-power. The NI involves only the
>definition. As long as you maintain the definition that the value of
>labor-power is the money wage divided by the monetary expression of labor
>time, you are perfectly free to argue that the wage is _determined_ so that
>it can pay for a certain historically and socially determined workers'
>standard of living. This is _not_ the same, however, as defining the value
>of labor-power as the labor time embodied in the commodities workers
>actually consume, as the Morishima/Seton/Roemer/etc interpretation does.


But the big problem, as I see it and as I have explained it in my paper
mentioned above, with NI definition is that it makes the rate of
exploitation dependent on the allocation of labor. In effect it says that
if the surf was working three days on his/her land and three days on the
landlords land, then the rate of exploitation would depend on whether the
surf is producing rice or wheat on the landlords land, given that the
intensity of work for the two crops remain the same. Don't you think that
this is a problem with NI? Cheers, ajit sinha
>Duncan K. Foley
>Department of Economics
>Barnard College
>New York, NY 10027
>fax: (212)-854-8947
>e-mail: dkf2@columbia.edu