[OPEL:6176] Re: Marx and historical costs

Wed, 11 Feb 1998 21:34:56

A couple of points re Fred''s PIAF:

> Date: Wed, 11 Feb 1998 17:01:29 -0500 (EST)
> From: "Fred B. Moseley" <fmoseley@mtholyoke.edu>
> To: ope-l@galaxy.csuchico.edu
> Subject: Marx and historical costs

Fred writes:

> 1. I have argued that Marx had a consistent interpretation of
> the valuation of constant capital in terms of current costs. This
> consistent valuation in terms of constant costs applies both to
> the stock and to the flow of constant capital and also applies
> both to the case of technological change and to the case of a
> change in the value of money. I will leave aside for now the
> question of whether "current costs" refer to the beginning or
> the end of the current period. The main point for now is that
> constant capital is definitely NOT valued at historical cost in
> Marxs theory, in the cases of either technological change or a
> change in the value of money. Marx always assumed that
> constant capital is valued at current costs, not at historical
> costs.

The problem with this piece is that Fred does not explain clearly the
key concepts he is using. So, I would ask him:

a) What are "current costs"?

b) What are "historical costs"?

c) Fred says that he "will leave aside for now the question of
whether "current costs" refer to the beginning or the end of the
current period". But this is imposible in this discussion. The whole
problem lies in looking for a precise *temporal* definition of the
magnitudes arising in the capital circuit. In particular, for
calculating the profit rate we MUST relate magnitudes at the
beginning and at the end of the circuit. If there is technical change,
these magnitudes do differ. So we cannot "leave aside for now" if
"current cost" refer to the beginning or the end of the period. If we
abstract this, we are abstracting the problem we are dealing with.

We have to decide:

i) In a given circuit, how many relevant magnitudes should we
consider? We can answer: there is only one magnitude which arises at
the end of the circuit OR there are two magnitudes, input and output

ii) Does the expression "current cost" refer to a price (or value)
fixed at the beginning or at the end of the circuit?

The different answers we give to these questions define different

This means that the textual evidence Fred has gathered could be read
in different ways, in accordance with the answer we give to the above
questions. So, Fred wants that we support the idea that "Marx always
assumed that constant capital is valued at current costs", but
frankly I don''t know what is the meaning of this term in Fred''s

Fred adds:

> To repeat: as a result of the increase of productivity, the
> capital that was previously worth $100 is now worth $200 or
> $50. Could there be a clearer statement of the revaluation of
> the existing capital.

But NO-ONE negates this, Fred. OF COURSE, existing capital can be
revaluated. This is not the problem. The problem is the following:

How do you calculate the rate of profit in this case? Let us take the
case in which the means of production are now worth $50, and let us
suppose that total profit was $100. There are 2 positions:

a) What I think you understand for "current cost" would state that
the amount of money originally advanced is completely irrelevant.
What matters is the "current, --actually, "end of period"-- cost". So
the profit rate is $100/$50 = 200%. For this position, it seems that
the capital circuit is not really carried out during an interval of
time. The most strange result of this is that the capitalist should
be very happy for losing money: On account of the means of
production, she had advanced $100 at the beginning of the circuit.
At the end, the means of production are worth only $50. But, in this
interpretation she would say: "Great news! I had $100 and now $50!
I''m getting rich!"

b) The second position (that Fred and Andrew call "historical cost"
but this is a very imprecise word) states that at the beginning of
the circuit $100 were advanced. At the end of the circuit, the
capitalist has means of production "revaluated" to $50, so she lost
$50, and has a gross profit amounting to $100. The profit rate is
calculated as: ($100-$50)/$100 = 50%. Precisely, the profit rate is
lower BECAUSE "the revaluation of the existing capital." If the means
of production had not changed in valued, then the profit rate had
been: $100/$100 = 100%.

So, no-one is negating that existing capital can be "revaluated".
I think there is a confusion between two magnitudes:

a) The advanced capital.

b) The price (or value) of the means of production.

The latter certainly can change. The advanced capital is a magnitude
that is fixed in a certain point of time and cannot be retroactively
revaluated. The difference between both magnitudes gives us the
"moral depreciation" (or windfall profits).

My last questions are: How can the capitalist in the above example
retroactively change the $100 she advanced at the beginning of the
circuit? If this could be done, capitalists could raise their profit
rate magically. I invest $1000 in stocks today. One month later those
stocks are worth only $100 (which is their "current cost"!) Well, how
can I recover the $1000 I advanced one month before? How can I say
that, "actually", my advanced capital is only $100? Where are the
$900? So, I frankly do not undestand how this magnitude can be
retroactively "revaluated".


Alejandro Ramos