[OPE-L] price of production/supply price/value

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Thu Jan 26 2006 - 14:30:38 EST

Ian Wright wrote:

"If value-theory fails in this special case -- then why should it scale up
to your more realistic situations? One contribution of the TSS approach is
to argue that this special case is irrelevant. I am not so sure."

That's a fair comment, but I am a bit hesitant answering it because, beyond
drafting a few notes, I haven't finally decided on what the answer is, and
although both TSS and simultaneism highlight important implications of
Marx's argument, neither of them is fully satisfactory in my way of
thinking. I want to reread Bortciewicz's original argument as well.

Perhaps I shouldn't write about this, if I haven't had the time to prepare
the full argument on this, but what I was responding to mainly was the idea
implied by Rakesh that Marx's product values must be (real or ideal) prices,
and I don't think they are. I would say that there could even be a case,
where total values produced are *not* proportional or equal to total
production prices. As far as I can see, the transformation problem was
really Ricardo's problem. As Engels summarises in his Preface to Cap. Vol.
2, "In actual fact, equal capitals, regardless of how much or how little
labour is employed by them, on average produce equal yields in equal times.
Here, there is therefore a contradiction of the law of value which had been
noticed by Ricardo himself, but which his school was unable to reconcile.
Rodbertus likewise could not, although he noted this contradiction." That
was the problem that Marx tried to solve in Cap. Vol. 3. He had already
noted its existence in the Grundrisse manuscript, or even earlier.

What has value? The products of human labor. This allows us to say that some
products are objectively worth more, others less, according to their real
production cost, that their use will be economised, and that value relations
exist between them. How does this value manifest itself in trade (exchange)
however? Through money-prices, real or ideal. Does that mean values are
really identical with real or ideal prices? No, precisely because value and
value relations exist *independently* of exchange, and because price
relations can express values more or less accurately, or not at all.
Depending on what prices are fetched, goods may indeed exchange in a way
completely contrary to their objective value relation measured in quantities
of labour effort.

What is the significance of this theoretical system of co-existing value
relations and price relations anyway? Basically, I would say, to express the
societal process whereby production and demand adjust to each other, such
that comparative product-values still regulate (set limits for) prices, in a
situation where producing enterprises are under pressure to (or aim to)
maximise productivity and minimise costs, *quite irrespective* of what
exactly the ruling market prices for their output happen to be, to maximise
their own profit income and maintain their market position, with all the
implications that has for the social organisation of production. What are
called "market forces", really refer to the objective value relations,
imperfectly reflected in the evolution of real prices.

But what is the point of defining successive ideal or real price-forms,
expressing the value of products in exchange, isn't this all unnecessarily
complicated? I think what Marx intended here, was to sketch a economic
process of price formation and price dynamics in markets, in a way
consistent with the idea that the law of value continues to regulate the
expansion and contraction of branches of production, via the entry and exit
of capital among them, guided by profitability considerations, in a
many-faceted competitive process pivoted on the maximum production and
realisation of surplus-value. It's therefore not an exercise in comparative
statics. The formation of prices of production and market values is supposed
to mirror the development of an increasingly sophisticated market trade, in
which more and more inputs and outputs of production are priced goods, i.e.
the transition from simple commodity production to capitalist commodity
production. Unfortunately, Marx did not examine the whole notion of prices
more thoroughly, distinguishing clearly between qualitatively different
kinds of prices.

The math is no doubt important (though Bortciewicz's math is fairly simple)
but I am obviously more concerned with the concepts and assumptions, i.e.
what exactly I have to measure and equate, if at all, and why. Yes, you can
devise a model of simple reproduction in a closed economy where sectors
trade at production prices assuming the two famous identities, and maybe the
account balances, or it doesn't - a creative mathematician (which I did not
get to be) can usually find a way to formalise a problem so that it permits
of a solution, if the problem is stated in a valid way.

Point however I think is, that

- capitalist production as a whole is inherently *not* simple production,
but expanded reproduction, and it can exist only as expanded reproduction.
Capital cannot exist for any great length of time if it reaps zero return,
indeed it is almost tautological to say that capital is "value seeking
value-augmentation", even when a business operates at a loss.

- Capitalism does not progress to balanced economic development, but is
perpetually imbalanced economic development - and it is precisely the
imbalances of supply and demand that explain the economic behaviour of
market actors. The reproduction schemes aimed to show dynamically that the
whole of production can be organised through the circulation of capital,
without immediately collapsing, creating relatively stable new relations of
production, a new type of society which can withstand all sorts of market
fluctuations. But I don't think the schemes necessarily imply any particular
equilibrium condition. So long as workers produce more capital, the system
will stay intact (other than in wars, disasters, etc.).

- the levelling-out of profit rates is a process, occurring in the course of
time time, which happens only where there is genuine open competition among

If this is true, then what exactly is the "special case" a "special case"


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