[OPEL:6209] Re: Marx and historical costs

Sat, 22 Feb 1998 18:57:16 +0000

A comment on the PIAF:

> Date: Sun, 22 Feb 1998 16:15:41 +0100
> From: "jurriaan bendien" <Jbendien@globalxs.nl>
> To: <ope-l@galaxy.csuchico.edu>
> Subject: Re: Marx and historical costs

Jurriaan writes:

> I confess I find the debate on historical costs a bit curious... So
> what is the debate really about ? The correct measurement of profitability
> in labour value terms?

In a very simplified way, I think,the debate could be illustrated by
means of the following example in which there is only circulating

a) M - C
On Monday, a yarn-producing capitalist purchases 100 lb of cotton ($1/lb)
and pays $50 for 100 person-hours of living labor. So, $150 are advanced
as capital. The relation between labor and money is $1 = 1 hour.

b) ... P...
On Tuesday, the workers produce 100 lb of yarn by consuming (i.e.
destroying) the cotton. There is no waste of raw material. The value
of cotton is then transferred to the yarn. The 100 person-hours are
consumed in the labor process. This day there are no circulation activities.

c) C'-M'
On Wednesday, the capitalist comes back to the market and sells the
yarn. Additionally, s/he replaces the cotton consumed one day before, and
re-purchases labor power. Both commodities will consumed in the next
labor process to be carried out on Thursday. On Wednesday, the relation
money/labor-time and the wage remain constant but the price of cotton has
fallen to $0.5/lb because a better harvest.

So, Jurriaan, how do you calculate the rate of profit and the unit value of
yarn on Wednesday? (Note that there is no inflation in this example.)

Alejandro Ramos
Buenos Aires

> In the course of an accounting year, profitability may be affected by such
> things as general price inflation, changes in the prices of inventories
> (which may be revalued - and which is recognised in national accounts), and
> changes in the price of fixed capital due to moral depreciation,
> technological improvements, technological obsolescence, capacity
> utilisation
> and so on.
> The "real" rate of profit is obviously the rate of profit in current
> prices or values applicable to costs, sales and realised profits. For
> example if the
> inflation rate is 12% and the unadjusted profit rate is 10% then a
> capitalist will not think his return is really 10% but less, taking into
> account the erosion of buying power occurring in the meantime. Within
> certain limits, inventory revaluation due to price changes in stocks may
> increase reported profits and so on, independently of actual material
> production or product sales. It is very difficult to establish empirically
> exactly what the "real" rate of profit is, various measurements are
> possible, and we can obtain only crude indicators of the trend while
> investigating the extent and limits of various factors which may modify
> reported figures. I would suggest this is generally the case as well in
> business practice, employers are constantly working with approximations and
> relative "unknowns" - the "true" rate of profit is only known in
> retrospect. That is perhaps the sense in which we should be talking about
> "historical costs".
> Regards
> Jurriaan Bendien.