[OPE-L:7493] [OPE-L:1030] Re: Marx's Concept of Prices of Production

John R. Ernst (ernst@PIPELINE.COM)
Sun, 07 Mar 1999 10:47:19

RE: Fred's 1028

Let me go over the major issues in our discussion with the
your post in mind.

Time. At no point have you specified the period of time
involved when productivity changes produce changes in prices of
production. Indeed, in your post, you state:

"I know of no passage in all of Marx's writings on his concept of price of
production (which I reviewed in my Boston paper) in which there is any
hint or suggestion that a given change in productivity will result in a
SEQUENCE of changes in prices of production that will continue for many
periods into the future. Rather for Marx, there is a one-to-one
relationship between productivity and prices of production. A given level
of productivity determines a unique price of production (or if considering
all commodities together, a unique set of prices of production). A change
of productivity in a given industry, or in industries that produce its
means of production, will determine a new unique price of production for
that industry, not a sequence of many different prices of production in
subsequent periods. After a change of productivity and the resulting
change in the price of production, prices of production will remain
constant unless there is a new change of productivity. In order for
prices of production to change again, and continue to change, productivity
itself must continue to change. And this doesn't happen in Andrew and
Ted's examples."

Ted's and Andrew's work aside, are you really saying that the *instant*
productivity changes take place, changes in the prices of production
take place? You do seem to impute this view to Marx. Indeed,
you wrote:

"In the passages in which Marx discussed this issue, he always said that a
change of productivity results in 'a new price of production'. In one
place, Marx referred to the new price of production as the 'permanent
price' (TSV. II. 213), to distinguish it from the temporary fluctuations
of market prices. But nothing is said about further changes in prices of
production in subsequent periods from a single change of productivity."

Now changes in productivity that instantaneously change prices of production
are "permanent" prices? Permanent for how long? I assume till the next
instant given that technical change takes place from instant to instant.
That is, if changes in productivity are more or less continuous for
the economy as a whole, these "permanent" prices prevail only for
an instant. Must Marx actually say that price changes are not instantaneous?
You seem to think so as you write:

"John, if you know of any passages that support your interpretation of a
given change of productivity resulting in a continuing sequence of changes
in prices of production, please let me know. Otherwise, I think it has to
be concluded that this is not what Marx meant."

If changes in the prices of production due to increases in productivity are
instantaneous, what is Marx doing in Chapter 10 of Vol. 3? There he

"The really difficult question is this: how is the equalization of profits
into a general rate of profit brought about, since it is a result rather than
a point of departure?" (Chap. 10, para 5, p 174, Int. Edition)

Later in that chapter Marx writes:

"Now, if the commodities are sold at their values, then, as we have shown,
very different rates of profit arise in the various spheres of production,
depending on the different organic compositions of the masses of capital
invested in them. But capital withdraws from a sphere with a low rate
of profit and invades others, which yield a higher rate of profit. Through
this incessant outflow and influx, which depends on how the rate of profit
falls here and rises there, it creates such a ratio of supply to demand
that the average profit in the various spheres of production becomes the
same, and values are, therefore, converted (verwandeln, JE from the
German) into prices of production." (Ch 10, para 55, p 195 Int Ed.)
(in Vintage, the transalation is better; see p 297.)

In my judgment, here Marx tells us something of the transformation
(Verwandlung, JE from the German) from values into prices of production.
For him, it is clearly a process that takes place in time and not
a procedure accomplished in an instant.

Turning to your comments on Ted's and Andrew's efforts as well as
my reading of their work, you wrote:

"Their numerical examples are in terms of fixed quantities of inputs
and output in all periods. In the initial period, their input prices
are assumed to be equal to the values of the means of
production and real wages. (This is the way they explain the
transformation of values into prices of production.) Due to the
equalization of profit rates, the output prices of the first period
(the 'prices of production') will not be equal to the input prices
(values) of the first period. This has nothing to do with prior changes
in productivity, but is simply the result of the transformation of values
into prices of production, assuming a given level of productivity.
The output prices of the first period then become the input prices of the
second period. Further equalization of profit rates in the second period
then require that the output prices (the 'prices of production') to
change again. And similar changes in 'prices of production' continue to
occur in subsequent periods, even though productivity remains constant.
None of this depends in any way on a change of productivity prior to
period 1. And there is nothing like this in Marx's texts."

I do think there is something like it Marx's texts as shown above. Marx
himself describes the transformation process as occurring in time; Ted
and Andrew divide that time into periods of production. Here I see no
essential problem with their efforts. What they do not show as they
move from period to period is the manner in which market prices
signal the various capitals to move from one sphere to another. Yet
as this takes place, do prices of production cease to exist? I think
not and see no problem with computing prices of production at the
end of each period. As you know, I, in agreement with them, would
not revalue the inputs due to the changes in prices of production
that occur in a given period.

What have we established so far? First, that Marx describes a
transformation process that takes place in time. Second, time
is incorporated into the work of Ted and Andrew. Yet a bit
of confusion remains given my reading of their work.

They are actually transforming values (their starting point)
into prices of production. Their effort seems to correspond
to that of Marx as much as possible given that it is, at least in
part, a response to misreadings of Marx. To apply your criticism
to them, you have to maintain that prices of production only
exist when the economy is in equilibrium. However, when those
incessant outflows and influxes cease or when we abstract from
the very process Marx describes, we collapse his description of
a process into a mathematical calculation for conditions that
exist only at point in time.

Turning to my reading of their work in light of your understanding
of Marx, let me consider your statement that

"John now argues that the changes in Andrew and Ted's prices of production
are actually the result of changes in productivity THAT HAS OCCURRED IN
PAST PERIODS, before period 1 in Andrew and Ted's examples. According to
John, this prior productivity change sets in motion a SEQUENCE OF CHANGES
of prices of production that continues in subsequent periods, even though
productivity remains constant in these subsequent periods."

I had assumed that we were discussing the causes of changes in
prices of production given the existence of prices of production. That
is, you assume that the input prices are already transformed and proceed
to divide up surplus value according to the sizes of the capitals involved.
I have no problem with starting in this fashion. But if the already
transformed unit input prices differ from the unit output prices of a
given period, it seems to me that this could be traced to changes in
productivity or the real wage. Again this assumes that the starting
unit input prices are prices of production and not values as they are
in Ted's and Andrew's effort.

We could incorporate your starting point into their starting
point by assuming not only that input prices are equal to
values but also that those values are equal to the prices
of production of the previous period. We are now ready
to construct the common starting point. At that point,
let us vary the compositions of capital. Hence, we implicitly
assume that technical change is taking place in the initial
period. If capitals capture surplus value according to
their sizes, then we have output prices which are prices
of production that differ from the input prices which were
the prices of production from the previous period. Since
we are dealing with reproduction with the same set of use
values as inputs in each period, clearly in the next period
prices of production will continue to change until input prices
equal output prices.

To be sure, we have to distinguish between starting from prices
of production and starting from values. If we say that we're starting
from values that are not equal to prices of production, then the
evidence is fairly clear that the work of Ted and Andrew corresponds
to Marx's description of the transformation as a process. If, on
the other hand, we say that we're starting from input prices
that are already transformed and if those input prices differ from
the output prices of a given period, then implicitly technical change or a
change in the real wage has occurred. In either case, I see no reason
to find fault with introducing the notion of time into the analysis.
Indeed, failure to do so would mean that prices of production exist
only at a point in time since only then could we say with certainty
that no technical change is taking place. Prices of production thus
become a useless concept for the analysis of economy in which technical
change is generally continuous.