[OPE-L:7171] [OPE-L:682] Re: Re: Market Values and Market Prices

Gerald Levy (glevy@pratt.edu)
Tue, 16 Mar 1999 05:28:04 -0500 (EST)

A response to John's [OPE-L:681]:

> (begin excerpt from my post which John quoted, JL)
> b) stratification of constant fixed capital by quality (this would take
> into account different "vintages");
> (this would entail some specification of the notion of "choice
> of technique")
> c) specify, at least for accounting purposes, a projected rate of
> depreciation;
> (the projected rate of depreciation should take b) into account, even
> though forced obsolescence and "moral depreciation" can't be
> accurately accounted for in advance) (end excerpt, JL)
> 1. Your idea that we must deal with stratification and the
> changes in it that occur as accumulation takes place at a more
> concrete level of the analysis makes an assumption which I
> do not think is true. Specifically, by abstracting from the
> changing stratification of fixed capital as one deals with
> how surplus value is allocated, one, at least, gives the
> impression that he or she has abstracted from the manner
> in which those changes effect the accumulation process.

As can be seen from my last post, I wasn't abstracting from the
stratification of fixed capital. To be able to show changes in
stratification in an abstract model, one must make some assumptions about
*when* the changes occur. E.g. do they occur before the beginning of a new
period (my choice as a simplifying assumption)?; or, do they occur
continuously during each period?; or is there some type of (patterned or
random] discontinuous change that should be modelled? It seems to me that
technological change, in actuality, occurs in a discontinuous manner.
Yet, this doesn't rule out the use of simplifying assumptions in a more
abstract treatment, does it?

> How did we get from the concrete to the
> abstract?

You repeat this expression several times in your post. Yet, the movement,
as Marx explained it in the _Grundrisse_, is *not* a simple movement from
the concrete to the abstract. Rather, also at the risk of simplifying, one
goes from the concrete to the abstract to the concrete again via
successive layers or levels of abstraction (and checks along the way
concerning the concrete).

> What is the issue here? If we start with the assumption that
> there is stratification and equal rates of return, why and
> how are we considering a transformation process in which the
> rates of profit are equal?

The rates of profit can be equalized in theory -- particularly if we
abstract from questions like how differences in the form of competition
can impede this process. Yet, there is no logical requirement stating that
because profit equalization is *possible* at one level of abstraction,
that it will happen in the concrete.

> Quite honestly, I think we have
> ignored the problem and not abstracted from anything at all.
> We simply hope that changes in stratification will not matter.

If changes in stratification "matter" in terms of the profit equalization
process (which, of course they do), then this could only help ensure that
the abstract tendency for profit rate equalization is either realized in
a modified way or not realized at all. What is there to be feared in the
possibility (or I would say probability) that profit rate equalization
does not occur (or occurs in a highly modified way)?

> In c you suggest
> we introduce a "projected rate of depreciation" while putting aside
> the notions of forced obsolescence and moral depreciation.

I didn't suggest "putting aside" moral depreciation and forced
obsolescence. What I suggested, rather, is that while one can estimate
moral depreciation in advance, there is no way of knowing whether the
estimates made before the fact will be realized in the manner anticipated
(as you know, I have made this point before on this list). Thus, even when
capitalists "know" that moral depreciation will occur, they can't be sure
that their estimates for moral depreciation will be (even roughly)
accurate. After all, if what we are attempting to understand is the
capitalist market, how can we abstract from at least the possibility of
risk and uncertainty?

> Generally, as capital
> ages less would be allocated to depreciation and more to
> profit. Depreciation seems to "accelerate" naturally as
> capitalists use a RRI to reckon profitability.

True enough, but capitalists can't simply create profit out of
depreciation. Accountants and capitalists alike aren't magicians. If
their accounting methods for depreciation are off the mark, then it
will catch up to them -- if not this year, then in another

> Third, lest we fall into the trap of attempting to derive
> the concrete from the abstract, I would suggest that we
> consider a situation in which all capitals are earning the
> same rate of return and then examine that same situation in
> terms of value production.

When we are dealing with constant fixed capital and variable capital
(where v > 0), we are *already* dealing with value production
irrespective of whether all capitals are earning the same rate of return.

> However, I do think
> that as we work on this stuff, we first need to travel from the
> concrete to the abstract.

I think we need to discuss the methodological questions more.

In solidarity, Jerry