[OPE-L:7175] [OPE-L:692] Re: Market Values and Market Prices

John R. Ernst (ernst@PIPELINE.COM)
Tue, 16 Mar 1999 15:05:05

A response to Jerry's [OPE-L:682]:

Lest we travel too quickly into a dispute over method, let me
be more clear on the problems I see when we deal with the matter
at hand. If assume that fixed capital is present, then

1. There is no tendency for the rate of profit measured in
the usual fashion to equalize.

2. Even in an equilibrium situation the rates of profit would
generally not be equal but the rates of return would be.

3. Prices of production should be computed using rates of return
not rates of profit.

4. Capitalists do not use the usual rate of profit to guide
their investment decisions rather they would consider the rate of
return on the investment.

5. The falling rate of profit can occur as the rate of return on
investment is increasing.

Hence, when we look at the transformation procedure in Marx or in
those who attempt to correct him or to defend him, it is unclear to
me how and why we arrive at equal rates of profit. Surplus value
is not redistributed among capitals according to the rate of profit.
I do not know how by abstracting from a system in which the rates of
return are used one arrives at one in which the rates of profit are
equal. Indeed, I had written:

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

About which Jerry remarked:

"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)."

My comment:

I am uncomfortable with this statement in this context. That is, it's
well and good that the movements between the abstract and concrete are
complex; but here I am suggesting that when we show redistribution of
surplus value according to a simple rate of profit, we have abstracted
from nothing at all except perhaps an economy in which fixed capital
does not exist.

As we deal with the redistribution of surplus value, we encounter
those who suggest Marx made a stupid mistake in his transformation
procedure by not transforming the inputs. The very possibility of
simultaneously assigning values to inputs and outputs is eliminated
when we use the RRI since to know how much depreciation occurs in
a given period one has to know the RRI. Hence, I suggest we start
with, say, five sectors in which the RRI for each sector is the same.
We can then consider the living labor to see how we can begin to
distinguish between living labor and dead labor in terms of prices.
For me, this is a bit like doing the transformation procedure in
reverse. I would say that this is moving from the concrete to
the abstract.