[OPE-L:7396] [OPE-L:927] Re: Re: Marx's concept of price of production

Fred B. Moseley (fmoseley@mtholyoke.edu)
Tue, 27 Apr 1999 13:35:36 -0400 (EDT)

Thanks to Jerry for his response to my earlier post and his further
questions. Below are my responses to Jerry's questions.

On Thu, 22 Apr 1999, Gerald Levy wrote:

> Date: Thu, 22 Apr 1999 22:40:31 -0400 (EDT)
> From: Gerald Levy <glevy@pratt.edu>
> To: ope-l@galaxy.csuchico.edu
> Subject: [OPE-L:920] Re: Marx's concept of price of production
> Hi Fred. Thanks for your [OPE-L:919]. You wrote:
> > By contrast, in Andrew and Ted's numerical examples in their published
> > works, productivity and the real wage are assumed to remain constant,
> > but their prices of production continue to change from period to period,
> > because their input prices are not equal to their output prices and hence
> > the equalization of profit rates in subsequent periods will require
> > further changes in their "prices of production", even though
> > productivity and the real wage remain constant. There is nothing
> > like this in any of the texts in which Marx discussed his concept of
> > prices of production. Hence, I conclude that Andrew and Ted's
> > interpretation of Marx's concept of price of production is erroneous.
> The above raises what I think we both (and probably Andrew, Ted, and Alan
> -- although I hasten to add that I can not speak for them) would agree
> are two separate questions:
> 1) Marx's concept of POP
> =====================
> This has been the issue that you have been focused on -- like a laser
> beam -- in this thread. I think that there is also probably broad
> agreement that this question must be answered with reference to what
> Marx wrote (the "evidence") and which interpretation makes the most
> sense with reference to what Marx wrote on other subjects (in other
> words, which interpretation seems best to fit into the rest of his
> theory). You have written a lot on this subject -- as have Alan and
> Andrew (among others). I have no doubt that Andrew and Alan have *not*
> conceded this point to you and we will hear from them more in due
> course. I, of course, look forward to their response and your future
> contributions on this matter (and those of anyone else who would like
> to add something to this thread).

I too look forward to Andrew's and Alan's responses and to comments by
others and further discussion.

> 2) Changes in input and output prices
> ==================================
> You insist that input prices equal output prices within a period ... in
> Marx's theory. This is part and parcel of your answer to 1) above.
> *Yet* -- (if for just a moment we set aside what Marx wrote on this
> topic in relationship to POP) -- will you not concede that input prices
> do *not* have to equal output prices within a period?

Certainly, for actual market prices, input prices are in
general not equal to output prices. In other words, the
economy in general is not in equilibrium, but in
disequilibrium. However, Marx assumed that there is a
tendency for market prices to fluctuate around long-run
equilibrium prices, Marx's theory in Capital is about these
long-run equilibrium prices. And, as I have argued in
previous posts, these long-run equilibrium prices require
that input prices are equal to output prices.

> If you don't agree, then I would like to hear your reasoning.
> If you do agree, then this raises several distinct questions such as:
> a) what is the appropriate level of abstraction to interrogate this
> issue?;

To interrogate what issue? That input prices are not
equal to output prices? According to Marx's theory, this
issue can be interrogated only at a level of abstraction lower
than Capital. Volume 3 of Capital is about prices of
production, which are long-run equilibrium prices that
require that input prices are equal to output prices. If input
prices are not equal to output prices, then the output prices
cannot be long-run equilibrium prices, and hence cannot be
Marx's prices of production.

> b) what do you believe can cause input prices to differ
> (systematically?) from output prices?;

The anachy of capitalist production; the lack of
conscious coordination of capitalist production; the
systematic failure for supplies to equal to demands.
However, again, Marx nonetheless assumed that there is
also a systematic tendency for disequilibrium prices to
fluctuate around equilibrium prices, and Marx's theory in
Volume 3 of Capital is about the latter.

> c) what is the relationship between changes that occur within a
> period to what occurs over a longer time horizon?

I am not sure what you mean here. The distinction I
would emphasize is between changes in prices of
production and changes in market prices. Prices of
production change only due to changes in productivity or
the real wage. As long as these fundamental causes remain
constant, then prices of production will remain constant
over this period of time. On the other hand, market prices
change due to changes in supplies and demands, and they
generally change every period.

> d) shouldn't we, as we move to a more concrete level of abstraction,
> investigate non-equilibrium processes, including those that happen
> during a period?

Again, I am not sure what you mean here by "processes
... that happen within a period." Supply and demand?

In any case, I agree that we should move toward more
concrete disequilibrium analysis. I have already said this a
number of times. I think an urgent research task in the
years ahead should be to further develop Marx's theory in
this direction. I think that Abelardo's attempts to explain
long-run center-of-gravity prices with unequal rates of
profit is an important step in this direction. And I am sure
that much of the work of TSS will also be helpful in this
more concrete analysis.

But I also think that it is necessary (or at least helpful) to
first be as clear as possible about what Marx himself did in
Capital. And I think that it is clear that Marx was assuming
and explaining prices of production as long-run equilibrium
prices in Volume 3 of Capital. Marx's theory in Volume 3
is not about actual market prices (Alan), nor about short-
run equilibrium prices (Andrew) that change every period,
even if productivity and the real wage remain constant. In
other words, it is a mistake to say that Marx himself
already extended his theory in Capital to this concrete level
of disequilibrium. That extension of Marx's theory is what
remains for us to do. It does not help to say that Marx
already did it.

To elaborate a bit further: there are two main reasons why
Volume 3 of Capital is focused on prices of production, as
long-run equilibrium prices, and is not concerned with
actual market prices.

1. The general aim of all three volumes of Capital is to
explain the "general laws" or the "inner laws" of capitalist
production (or the "dominant tendencies" or the "general
laws that govern the fluctuations"). Marx's aim was
explicitly and emphatically NOT to explain the temporary
deviations of the phenomena from these general laws, or
actual market prices. Prices of production - i.e. long-run
equilibrium prices that serve as the center-of-gravity of the
temporary fluctuations of market prices - are the "general
law of competition" and is the key concept of Volume 3.

In Boston, I presented two pages of key passages from Volume 3
in which Marx explicitly stated that the aim of his theory is to explain
the general laws (as long-run tendencies) of capitalist production, not
the deviations from these general laws, and that prices of
production is one such general law. I would be happy to post
these passages or send them to anyone who is interested.

2. This specific aim of Volume 3 is to explain the
distribution of surplus-value, i.e. to explain how the
different particular forms of surplus-value - industrial
merchant profit, interest, and rent - are determined as parts
of the (already determined) total surplus-value produced by
the surplus labor of workers. Part 2 of Vol. 3 explains how
long-run equilibrium prices with equal rates of profit can be
explained on the basis of the labor theory of value (which
was of course the key "stumbling block" of Ricardian
economics, because equal rates of profit appear to
contradict the labor theory of value). Part 4 revises the
determination of prices of production presented in Part 2 to
take into account commercial capital and commercial profit.
Part 5 explains the division of the general rate of profit into
profit of enterprise and interest, on the assumption of equal
rates of profit. Part 6 explains how landlords appropriate
another part of the total surplus-value as rent, with the
explicitly stated assumption throughout that agricultural
commodities (like all commodities) exchange at their prices
of production (e.g. p. 779). Part 7 explains how the
different forms of surplus-value explained in Volume 3 -
industrial profit, merchant profit, interest, and rent - appear
to capitalists (and hence to vulgar economists) as
independent sources of value, rather than due to the surplus
labor of workers.

For all these abstract purposes, it is not necessary - and
indeed would be a distraction - to also explain actual market
prices in every period. The deviations of actual market
prices from prices of production in every period are
irrelevant to Marx's more abstract purpose of explaining
the distribution of surplus-value, and hence are ignored.

But now it is our job to move beyond these abstract
purposes, and to also explain more concrete phenomena of
capitalist economies, like unequal rates of profit, etc.

I look forward very much to further discussion of these
important issues.