[OPE-L:3636] Re: Re: Re: Re: Re: Re: Re: Re: constant capital and variable capital

From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Thu Aug 10 2000 - 01:56:18 EDT

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It seems this did not go through yesterday. So this is another attempt. ajit
Rakesh Bhandari wrote:

> >>
> >> Marx is arguing that we need to make a transformation of the inputs from
> >> the prices at which they were bought to their value--though the profit
> >> appropriated will be determined by cost price.
> >
> >_________________
> >
> >What do you mean by cost price? Cost price should include profits, shouldn't
> >it? Cheers, ajit sinha
> Cost price should include profits? You dare call me confused. You obviously
> have not noted that Marx is not adding surplus value and constant capital
> but variable capital and constant capital in the cost price column. Of
> course this mistake is an easy one for the tyro since the two numbers are
> the same due to Marx's assumption of 100% rate of exploitation.


Rakesh, you of course are not a student of classical economics, otherwise you
wouldn't like to sound so smart when your mistake was pointed out politely. Cost
price is a well defined concept in classical economics. It basically amounts to some

version of Adam Smith's additive theory of value. Here all the elements of natural
price, i.e. natural rate of wages, natural rate of profit, and natural rate of rent
is considered a minimum cost that must be paid to bring forth the supply of the
commodity in the long-term context. "Cost price" without including the profit in
your example is a meaningless concept. Now, first let us suppose (and here i'm going

along with your way of reasoning) that it takes $2 worth of one unit of commodity x
and $4 worth of wages for labor to produce one unit of y. Now the price of y must be

more than $6 if profit is positive. So how could "cost price" of y be $6? Is the
"cost price" of x $2? If so, then it includes the profit in it. Now, most likely you

are using a wrong term. Instead of meaning "cost price", which implies a particular
theory of value, you simply meant "cost", i.e., cost to the capitalist or capital
investment needed to produce one unit of y is $6. But you should know that Sraffa
has proven that the concept of cost is irrational or undefined prior to the
determination of prices.

> Rakesh:
> Profit is appropriated on the basis of cost price--how could it possibly
> include profit. What price has the production of a commodity cost a
> capitalist? The money sums he laid out for the means of production and
> productive labor power--on this cost price basis he will appropriate
> profit, so how could it include profit unless you are making the point that
> the capitalist has to buy means of production tendentially at their prices
> of production, which includes the average rate of profit from the prior
> period? What are you getting at?


I think I have explained it above. What I'm getting at is that you should use the
terms more carefully. Otherwise you add to the already existing high level of

> Ajit:
> >Then those numbers are simply gibberish. Remember, our problem was how to
> >calculate the value of constant capital.
> >___________
> No Ajit that's your problem: my problem (and Marx's in the chapters we are
> discussing) is how to calcuate the average rate of profit and production
> prices. For this matter the price value divergences in terms of the inputs
> will cancel out. I give my reasons below.


I thought you were critiquing my criticism of Fred's position on how to calculate
the constant capital. Now, you say we are discussing some chapter of *Capital*, I
presume. I don't know when did that start.

> Ajit:
> >
> >But how do you calculate the value of the means of production and the value of
> >money. Above you say that you don't know how to calculate the value of the
> >means of production. Then how do you know that the value of the means of
> >production differ from the value of the money needed to purchase them?
> >_________________
> Well first we can assume that there is no difference, which is what Marx
> does in the tableaux. The money price of the means of production and their
> value is assumed to be the same.
> Second, we can then allow for the possibility that there was divergence in
> the prior period from which came this period's inputs for the same reason
> that the present example is showing divergence between the value and the
> price of the output.


By the way, the prior period and present period etc. has nothing to do with the
problem. In anycase, you need to specify what are the reasons for the divergence of
your money price of the means of production and value of the same. Unless you do
that, you simply cannot make another move on the chess board. By the way, you still
haven't told me how do you calculate these value magnitudes. If the units of your
value magnitudes are different from your money prices, then what does this
divergence between the two mean?

> Rakesh:
> Third we can assume that the divergences with the inputs cancel themselves
> out for the same reason that they do in the case of the outputs displayed
> in the tableaux.


Then we can also assume that we have a can opener too. If the theoretical problems
can always be solved by assuming that they don't exist, then of course life will be
nice and simple. But unfortunately it is not so. I'm not sure what Tableaux you are
talking about here. yours? Or somebody else's? No matter whatever Tableaux it is,
you should know that the total value equal to total prices of production is a
condition that is imposed on the system because there are n+1 unknowns and only n
equations in the system. It is similar to adding an equation as x=1, that is
defining commodity x as money commodity. There is no "reason" that total value and
prices of production will equate. However, once you have imposed this constraint on
the system, then your "assumption" will be simply illegitimate because you would be
what is called overdetermining the system.

> Rakesh:
> That is my reasoning for the the two conditions which I submitted for the
> numbers in the c column.


Now you should know that your reasoning was not reasonable.

> Rakesh:
> I also submit that it is the most reasonable interpretation of Capital 3
> pp. 264-65 for which you have not provided an alternative explanation.


If your interpretation is "the most reasonable interpretation of Capital 3 pp.
264-65", then one will have no option then to forget about the transformation
problem, because it is nothing but sheer nonsense.

> Rakesh:
> The Sweezy/Meek point is that Marx recognized the need to transform the
> inputs from value to price but did not know how to go about doing so due to
> lack of needed mathematical tools.
> I am arguing that Marx is not arguing that the inputs should be transformed
> into prices. I agree with Fred that they are already in prices, which is
> why Marx says they need to be transformed into values in order to
> understand the value transferred in each branch of production, though
> profit will of course be appropriated on the basis of cost price.


So how is value calculated, Rakesh? Why don't you ever answer this simple question?
If you could answer that simple question, then you will not have to go through all
this rigmarole.

> Ajit:
> >Not if you are serious about the problem. According to your conditions I could
> >put four zeros ar even negative or imaginary numbers under the c column. But
> >they would be patently nonsensical numbers.
> >_______________

> Rakesh:
> Well, I could have added the third condition that the numbers must be
> realistically possible, so no imaginary, etc numbers allowed.


Do you think that solves your problem of arbitrariness? Such conditions make sense
only if you could have more than one solution possible, and some solutions could be
ruled out on realistic grounds.

> >> Rakesh:
> >>
> >> The point of the example is not what c exactly is; the point is that value
> >> of the means of the production consumed in a commodity should not be
> >> equated with the cost price of a commodity.
> >
> >_____________________
> >
> >Of course not! The point is that you are extremely confused. The reason is that
> >you have been lost in the woods for quite some time. And I'm showing you light,
> >but you refuse to see it.
> >___________
> I don't think the second sentence provides the reason for the first,
> explains the first. It's rather a metaphoric expression of the first
> sentence.



> If you do have point, try to spell it out. If you want to flame
> me, try to rise above the banal.


If my points are banal and you are talking wisdom, then i think only god can save
Marxism. Let's be serious and open with each other for a minute. I'm not trying to
flame you at all. But if you think that you are not confused with respect to value
theory and the transformation problem in Marx, then you must be kidding yourself. I
may not be necessarily right about these issues, but i'm not as badly confused as
you are. I'm only trying to help you to see what a muddled way of reasoning you have

got yourself into on this issue. Cheers, ajit sinha

> Rakesh

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