**Next message:**Fred B. Moseley: "[OPE-L:4536] Re: Re: what is Volume 1 about?"**Previous message:**Rakesh Narpat Bhandari: "[OPE-L:4534] Re: Re: Re: Re: Re: "Don't go like that" (Was "What isVolume Iabout?")"**Messages sorted by:**[ date ] [ thread ] [ subject ] [ author ]

I sent the clarification of my argument below to a listmember in private correspondence. I am forwarding it to the list. Other than Andrew's serious objections, there have been two objections to how I proceed: 1. Fred's point that I understand the total to be in value units but the components of cost price and surplus value to be in money units. I argue that throughout the transformation Marx has assumed that the unit of account is the unit of labor time or that the monetary expression of labor value is one. Which means of course that total value has a monetary expression. In fact Sweezy begins this way, and grants that it is a perfectly reasonable way of proceeding. Fred has not yet responded to my reply. 2. Allin's objection that I have used a trick definition of surplus value. Following II Rubin, I argue that Marx always begins with total value or price (its monetary expression) as a fixed magnitude and then resolves it into cost price and surplus value which are inversely related. I thus argue that once we are given a fixed magnitude of total value in advance--as we are in the transformation exercise--any modification of cost price necessarily means an inverse modification of surplus value. Allin argues that surplus value is total value minus the value of the inputs. I argue that surplus value is *unpaid* labor time so if more or less is *paid* for the inputs than their value, less or more of total value or price (its monetary expression) is indeed resolved into surplus value. If one does not modify surplus value this way, then the sum of surplus value and cost price would no longer be determined by total value. Cost price and surplus value would no longer be antagonistic components of total value but rather independently determined magnitudes. I argue that such a result is grossly antithetical to Marx's line of reasoning: a modification of one component is always a modification in the opposite direction of the other component. Allin is busy, so he has not made a substantive counter-argument; perhaps someone else will. But I think the way which I have defined surplus value is at the very least a reasonable interpretation of Marx's definition of surplus value. If one sticks to this definition, the transformation problem disappears. Which is why Allin is convinced that this definition of surplus value must be a trick. At any rate here is the clarification of my argument to another member of the list: Both the physical and value production situation is being held constant. At no point are we changing the physical quantity of means of production and the number of worker hours; at no point are we changing the value of the means of production which have been consumed and transferred to the output and the newly produced value. Since Marx seems to take the unit of account to be the unit of labor value or to assume that the monetary expression of labor value is one--and Sweezy grants that this is a perfectly reasonable assumption--this means that the sum of "simple" prices in the unmodified scheme has to be set equal to the sum of prices of production in a fully transformed, inputs and outputs included, scheme. That is, since the sum total of values are given with the monetary expression of labor time, one has to maintain as invariant the sum total of prices. Sweezy himself began with this (correct) invariance condition, and only drops it because he found it too mathematically complicated! This leads to the well known criticism of overdetermination, specifically that given this invariance condition, then the sum of surplus value (or rate of profit) can no longer also be determined in terms of the "volume one analysis", as Meek puts Bortkiewicz's and Sweezy's point. Marx's unmodified tableau is presumably sticking to the volume one analysis since the sum of surplus value is total value minus value of the inputs. But I argue that this is not how surplus value is defined in volume I. Surplus value has always been dM, so that if M changes due to a modification of cost price on the basis of the transformation of the inputs, dM must change in the opposite direction since M' itself cannot be changed by the mere modification of cost price. (1) M' - (M + a) => dM - a Since, following Ricardo, a mere change in the compensation for paid (direct and indirect) labor (M + a) does not add up in itself to a change in the value or the price (its monetary expression) of the final product (M'), it can rather only imply an inverse change in the mass of surplus value (dM - a). This is simply Ricardo's critique of Smith's adding up theory of price, and the foundation stone of Marx's theory of surplus value (see Capital 3, Vintage p995). It thus does not follow that since Marx holds the mass of surplus value fixed as he transforms only the outputs by a redistribution of that fixed magnitude of surplus value in terms of a uniform profit rate that the mass of surplus value should also be assumed to be fixed when the transformation procedure is extended to the inputs. Since the latter ipso facto modifies total cost price, it has to modify the mass of surplus value in the opposite direction if both cost price and surplus value are to remain the resolved, inversely related components of total value or price. Since in Marx's tableaux total value or price (its monetary expression) is given in advance as the primary and fixed entity (being dependent on the quantity of indirect and direct labor needed to produce it), any increase in one of its parts (cost price) will invariably lead to a fall in the other (surplus value). In Marx's theory the parts are never treated as independently determined magnitudes but are always broken down from the total. It has been 100 years of dogma that once the transformation is completed by the transformation of the inputs, Marx thought that the mass of surplus value would again have to remain constant, instead of being modified in inverse direction to the modification of cost price. Marx simply could not have thought such a thing. What the complete transformation must solve for then is not only simply prices of production as the inputs are included in the procedure and cost price thereby modified but also the resultant modification of the sum of surplus value in terms of which the sum of branch profits is determined. The complete transformation is indeed a much more complicated exercise than the half done one which Marx presents us. But even if we are going to stipulate that the inputs and outputs should be transformed into the same unit prices of production--a so called vector of equilibrium prices--there is both a set of equations and a method of iteration by which the complete transformation can be carried out. I have proposed both of them for the first time. If one proceeds as I have recommended, the mass of surplus value will indeed change; however, it will remain entirely derived from unpaid labor, thereby not putting a chink in the theory of exploitation. Moreover, the modified sum of surplus value will equal the modified sum of the respective Dept profits. One may object that it is inconsistent to keep total value and price invariant throughout the transformation while allowing the sum of surplus value and the rate of profit to change. I argue that this is indeed not inconsistent. Since total value or price is given in advance as a fixed entity, any increase in one of its must parts must invariably lead to a decrease in the other part. This is in fact the only assumption consistent with Marx's theory of value. Since the complete transformation attempts to modify cost price on the basis of the transformation of the inputs, it must allow for an opposite modification in surplus value. Why? For example suppose as a result of the transformation of the inputs cost price increases (this is usually what happens in most examples since Dept I and II have higher than average OCC's and thus have their prices raised by the equalisation and since their output is the input to the system, cost price rises). Now if one simply adds on the old surplus value to these modified cost prices, one is no longer beginning with the total value of the commodity and breaking it down into its cost price and surplus value components. One is rather beginning with cost price and surplus value as independently determined magnitudes and arriving at price. This is grossly antithetical to Marx's way of reasoning. So the whole idea that the mass of surplus value should remain invariant as the cost price is modified by a transformation of the inputs is the fantastic invention by Bortkiewicz, Sweezy and Meek of an invariance condition to which Marx himself would never have subscribed. Yes, the mass of surplus value remains invariant when Marx is transforming the outputs, but it can no loner remain invariant when the inputs are included in the transformation procedure. To stipulate that the mass of surplus value remain invariant is in fact to stipulate that Marx follow an adding up theory of price. All the best, Rakesh ps here are the equations again: Here then is pretty much the old famous equilibrium scheme (the fourth equation however defines surplus value as total value minus cost price and then determines the sum of the individual branch profits as equal to surplus value) (1) c1 + v1 +s1 = c1 + c2 + c3 (C) (2) c2 + v2 +s2 = v1 + v2 + v3 (V) (3) c3 + v3 +s3 = s1 + s2 + s3 (SVA) (4) (C + V + SVA) - (C + V) = s1 + s2 + S3 On Marx's assumption, the set of transformation equations should be (5) (1+r) c1x + v1y = Cx (6) (1+r) c2x + v2y = Vy (7) (1+r) c3x + v3y = r(Cx + Vy) (SVB) (8) (Cx + Vy + SVB) - (Cx + Vy) = r(c1x + v1y) + r(c2x + v2y) + r(c3x + v3y) The invariance condition of course is (9) (C + V + SVA) = (Cx + Vy + SVB), For the reasons, above I do not assume that SVA = SVB. Far from being derived from volume I analysis, this assumption is antithetical to it. And here is the iteration which I propose: _______________ The initial value table: c v s value I 225.00 90.00 60.00 375.00 II 100.00 120.00 80.00 300.00 III 50.00 90.00 60.00 200.00 Tot. 375.00 300.00 200.00 875.00 Marx's first-step transformation takes the given total s and distributes it in proportion to (c+v). Thus: c v profit price pvratio I 225.00 90.00 93.33 408.33 1.0889 II 100.00 120.00 65.19 285.19 0.9506 III 50.00 90.00 41.48 181.48 0.9074 Tot. 375.00 300.00 200.00 875.00 1.0000 ___________________ Now what I am saying is simple. 1. Apply the PV ratios to the inputs. 2. Sum the new modified cost prices, the new totals in the c and v columns. 3. Subtract the total modified cost prices from the same total value of 875 4. Divide this sum of modified SURPLUS VALUE by the modified total cost prices, given in the second step, to arrive at r 5. Multiply the branch cost prices by this new r to arrive at branch profit. 6. Add each branch profit to each branch cost price to arrive at prices of production for each branch. 7. Determine new PV ratios on that basis. 8. Apply the PV ratios to the inputs. 9. Iterate until you arrive at equilibrium. That is, in each new iteration, the mass of surplus value is determined first in step 3 by substracting from total value the (modified) sum of paid direct and indirect labor, leaving of course the sum of unpaid labor as surplus value; then steps 4 and 5 ensure that the mass of profits will be equal to it. In each new iteration,the mass of surplus value has determined the sum of branch profits. And in each new iteration the sum of surplus value has derived entirely from unpaid labor. Allin followed Bortkiewicz and Sweezy in modifying the cost prices and then adding on the same old surplus value (200) so that a change in costs alone resulted in rising prices (1000, instead of 875). I argue that this is clear return to an adding up theory of price and that the labor theory of value itself implies that the sum of profit should move in inverse direction to the modification of cost price. This is ensured in step 3. Following Ricardo's critique of Smith, Marx argues that the value of a product is not determined by adding up wages, profit and rent. Rather he maintains that the size of a product's value--as determined by the quantity of (indirect and direct) labor expended in its production--is the *primary*, basic magnitude that then is resolved into or breaks down into cost price and surplus value. It is therefore obvious that once the entire magnitude (the value of the product) is given in advance as a fixed entity (being dependent on the quantity of labor needed to produce it), any increase in one of its parts (cost price) will invariably lead to a fall in the other (surplus value). So since at no point in the completion of the transformation have we changed the indirect and direct labor embodied in the output, the sum of prices in the unmodified scheme (875) should remain equal to the sum of the prices of production (as we are assuming that unit of account is the unit of labor time or that the monetary expression of labor time is one). Which means of course that if cost price is modified upward, the sum of profit has to be modified downward, not held invariant as 100 years of dogma has insisted! all the best, RB

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