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This is a reply to Andy's (3676). Andy, thanks very much for your helpful
post. With limited time, the following is a very brief and bare-bones
sketch of my understanding of the givens in Marx's theory, within the
context of the main questions of Marx's theory. I would be happy to
elaborate and support individual points later. Please let me know what you
1. The overall analytical framework for Marx's theory is the CIRCULATION
OF CAPITAL, expressed symbolically as M - C … P … C' - (M + dM).
This framework highlights the MAIN QUESTION of Marx's theory: the
explanation (detemination) of dM.
2. More specifically, the dM that Marx's theory attempts to explain is the
dM for the economy as a whole, the dM for the "TOTAL SOCIAL CAPITAL" or
"capital in general".
3. The M and the dM are ADJUSTED FOR CAPITAL GAINS (or losses) due to
changing asset prices. Marx's theory is not intended to explain the dM
that arises from capital gains; that is easy to explain. Rather, Marx's is
intended to explain how dM happens WITHOUT CAPITAL GAINS - that is the
difficult and interesting question. That is why Marx assumed CURRENT
COSTS. This is all current costs means: adjusting M and dM for capital
gains or losses, in order explain the (theoretically more significant) dM
4. In the explanation of the adjusted dM, the adjusted M is taken as
given. Marx's theory attempts to explain the adjusted dM on the basis of
the given adjusted initial M (and Marx's "labor theory of value"). In
other words, Marx's theory attempts to explain how the given adjusted
initial M becomes M + dM.
Marx divided the initial M into two theoretically significant components:
constant capital and variable capital (i.e M = C + V). Since the initial
M is taken as given, so are its two components (C and V). Constant capital
is the component of M that is affected by capital gains and losses.
Therefore, the constant capital that is taken as given is the adjusted
constant capital (i.e. the constant capital in current costs).
5. The reason why Marx took C and V as given in his theory of dM is that,
according to his theory, it is not possible at the beginning to provide a
full explanation of C and V. C and V are identically equal to the prices
of production of the means of production and means of subsistence,
respectively. The prices of production of these sets of goods involve the
equalization of profit rates across industries. According to Marx's
logical method, it is not possible at this early stage of the analysis to
explain the equalization profit rates; this explanation comes later in Part
2 of Volume 3. First, the total amount of profit (or dM) must be explained
(which is the main task of Volume 1). Therefore, C and V have to be taken
as given in the beginning.
After prices of production are explained, then the previously given
constant capital and variable capital are explained; constant capital as
the current price of production of the means of production and variable
capital as the price of production of the means of subsistence.
6. I think this is an unique logical method, different from mathematical
models with "endogenous" and "exogenous" variables. Variables that are
initially taken as given are eventually explained. I think this is an
important example of what is meant by the logical method of "posit the
presuppositions". I do not understand Marx's method completely, but I
think something like this is going on.
I look forward to your reply - and to others' comments. Thanks again for
the stimulating discussion.
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