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

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Sat Jan 28 2006 - 12:48:15 EST

>How are you proposing going from:
>L(c) and L(s)/L(v)?

Ian, though I shall speak to this below, I actually think going from
prices of production to simple price/values is a waste of time. What
is important for Marx is the movement of the
macro sums over time, the total surplus value, the average rate of profit, the
total value.

To my mind, surplus value is not produced at the level of individual
capitals or even
branches. For this implies that if one were to take away some
individual capitals or a whole
branch, then surplus value would be reduced accordingly. But the
capitalist totality is more
than a sum of its parts (it is not a Cartesian totality, to use
Stephen Cullenberg's term), for said taking away may not just reduce
surplus value but
destroy the system as such--there would be no surplus value at all. Just as we
say that moving a heavy table is not the work of the individuals Jim
and Bob but of the
collective or transindividual subject Jim and Bob, surplus value is
not produced by
separate workforces at individual capitals. Surplus value is produced
by the collective
working class. It is a macro phenomenon produced by a transindividual subject
(I think Lucien Goldmann's theory of the transindividual subject may be
one of the most important philosophical contributions to Marxist
philosophy); surplus
value is appropriated at the level of the totality. Marx's social
ontology is based
on the reality of transindividual subjects. Methodological
individualist Marxism is
an impossibility.

>Hi Rakesh
>Thanks for explaining your point of view, one you've obviously thought
>about a lot.
>>  I accept Fred's and Alejandro's argument that the inputs are already
>>  in the form of market prices, givens which cannot be retrospectively
>>  transformed.
>We need a MELT to translate those into labour-values. How is it
>defined in Fred and Alejandro's argument? (No need to answer if you
>don't have the time -- although I am very interested).

Fred argues that Marx posits MELT/m as given and fixed throughout capital. But
let us hope that he clarifies
Its actual magnitude seems to be arbitrary in Marx's theoretical apparatus,
but positing it as fixed and given allows Marx to have a measuring apparatus
for this theoretical investigation.


"Through prices the fluctuations of a given capital in the course of its
circuit become expressed in money, which serves as measure of value
required for accounting. And with respect to this measure of value marx
proceeds from the assumption, which is purely fictitious and which forms
the basis of his analysis, that hte value of money is contant. At first
sight this appears to be all teh more suprising in the sense that, in his
polemic with Ricardo's 'invariable measure of value,' Marx emphasizes that
gold can only serve as a measure of value becuse its own value is variable.
But science needs invariable measures: 'the interest in comparing the value
of commodities in different historical periods is, indeed, not an
*economic* interest as such, but an academic interest.' (Marx)

"From the historical surveys of the development of thermometry we know that
a reliable measure of heat variations was established through the
fundamental work of Amonton, with the discovery of two fundamental points
(boiling point and the absolute null point of water) for liquid used as the
measure of heat variations. This alone could establish the constant
reference points with which it became possible to compare the variable
states of heat (Mach)

"There are no such constant reference points for gold as the measure of
value. So an exact measure of the value fluctuations of commodities would
be impossible. On the one hand changes in the value of the money commodity
may differ from the changes in the value of individual commodity types. In
this case we have no exact measure to ascertain how far, say, the rising
prices of a given commodity have been caused through changes in its own
value and how far through changes in the value of the money commodity. In
this case, suppose we were studying variations in the magnitude of surplus
value; then, with a variable value of money, it would be difficult to tell
whether a given increment in value (or price) was not something merely
apparent and caused purely by changes in the
value of money.

"'In all these examples there would however have been no actual change in
the magnitude of capital value, and only in th emoney expression of the
same value and the same surplus value...there is, therefore, but the
appearance of change in the magnitude of employed capital.' (Marx)

"Alternatively the value of money varies in the same proportion as the
values of other commodities, for instance due to general changes in the
productivity--a limiting case that is scarcely possible in reality. In that
case there would have been enormous absolute changes in the real relations
of production and wealth, but these actual changes would be invisible on
the surface, because the relative proportions of individual commodity
values would remain the same. The price index would not register the actual
changes in productivity.

"Thus it was entirely valid for Marx to substitute the 'power of
abstraction' for the missing constant reference points, so falling into
line with Galileo's principle: "measure whatever is measurable, and make
the nonemeasurable measurable.' For instance to ascertain the impact of
changes in productivity on the formation of value and surplus value, Marx
is forced to introduce the assumption that the value of money is contant.
This assumption is therefore a methodological postulate that equips Marx
with an exact measure for ascertaining values of industrial capital during
its circuit. It is an assumption underlying all three volumes of Capital."

>>  However, I have further argued that the transformation problem is one
>>  of going from the prices of inputs to the value of the used up means of
>>  production and the rate of surplus value. In other words, I have said that
>>  for one hundred years Marxist criticism has got Marx's admission of a
>>  mistake exactly ass backwards.
>Assuming the aggregate inputs are: price of constant, P(c), variable,
>P(v), and surplus (total profit) P(s).
>OK. Given P(c),P(v),P(s) in price terms, according to your
>interpretation, we want:
>(i) value of constant capital, L(c),
>(ii) ratio of total surplus-value to value of variable capital, L(s)/L(v).
>Assume a MELT M, with units dollars per hour. How is it defined?

Arbitrarily but once defined it is fixed. But that it is how it is defined in
Marx's exposition, and I suppose the question you are posing is how is it
defined in present economy. We have Fred's neo quantity Marxist theory, and
Duncan Foley's new interpretation.

>Again, you don't need to answer if you don't have the time, but I am
>very interested.
>Also, your explanation of why you think the traditional interpretation
>of the TP is faulty was too compressed for me. If you're willing to
>expand that'd be great. I'm interested in trying to understand which
>category your interpretation falls into. It sounds like you might be
denying a premiss of the traditional TP.

Marx however never did himself say that he had left his
transformation from values to prices incomplete by failing to extend
the transformation to the inputs (see Moseley [2000] and Ramos M.
[1998-9])).  There has been much controversy over the nature of
Marx's admission of failure in Capital, volume 3, p. 265. I argue
that the problem to which Marx was calling attention was the exact
opposite of what it has commonly  understood to be since von
Bortkiewicz wrote his famous criticism one hundred years ago. In my
reading, Marx admits that he had wrongly assumed in writing the
tables that he could infer the value transferred from the means of
production from the machine's flow price as recorded in the cost
price. In other words, Marx recognized that he had failed to
transform the prices of production of  the input means of production
backward from prices of production to  values in the determination of
the values of outputs.  Once the value-price proportionality
assumption is dropped in the third volume, the assumption embedded in
the input value columns were no longer tenable, for those values were
derived from the prices to which they were falsely thought to be
proportional.  Moreover,  let us stipulate that Marx had assumed that
each wage good has a labor value of one and allows for the employ of
one worker. But after Marx carries out the transformation, we know
that wage goods may have sold above or below their value. If they
sold above value, then the variable capital in the cost price would
not have allowed for the hire of as many workers and thus as high
rate of exploitation as Marx had assumed in transformation tables. If
wage goods sold below value, then the variable in the cost price
would have allowed for the hire of more workers and thus a higher s/v
(the ratio of surplus value to variable capital) than Marx had
assumed.  My interpretation offers, then,  the problem of an inverse
transformation. That is, the problems are not in the failure to
transform the inputs from values into prices but in terms of the
assumptions Marx actually did make in his tables about the value
transferred and s/v as he moved from cost prices to output values and
prices of production. Ultimately value transferred and s/v cannot be
known directly but only inferred from price data. In constructing his
tables Marx made it seem as if such value related variables are
something we can know directly and explicitly and write into the
transformation tables. That in my opinion is the problem to which
Marx was calling attention. And he had to fail since value magnitudes
can never be known directly or explicitly, or even easily inferred
from price data, including flow price data. The mistake in his
transformation tables to which Marx was admitting was simply that he
had treated the value transferred, the rate of exploitation and the
value added as if they were on the same phenomenal level as the money
sums invested as constant and variable capital But this violates his
own theory of fetishism: value can only be represented in money price
though money price mis-represents value. Representation is not
necessarily not mis-representation (Mattick, Jr, 1991).  In short,
Marx never admitted to a failure to transform the inputs from values
to prices and there is thus no gap in his theory which calls for the
use of linear production theory by means of which the inputs and
outputs can be transformed together into identical prices. Simply
put, the first table is not in values; they specify the cost price of
commodities, and cost price is obviously a monetary phenomenon. If
the inputs which enter into cost prices are already (as the term
indicates) in the form of prices, why do they have to be transformed
into prices? I therefore reject the idea that Marx himself gave his
imprimatur to a problem that can only be solved by means of linear
production theory,

Enough for now.

Thank you kindly for your interest.

Yours, Rakesh

>As far as I understand it, Marx assumed a uniform rate of
>surplus-value prior to the transformation, both per sector and over
>the whole economy. After the transformation, there are non-uniform
>rates of surplus-value in different sectors, because individual
>capitals get a share of the total according to the size of total, not
>variable, capital advanced. But the overall rate of surplus-value is
>unchanged (rate of exploitation is constant). It doesn't seem to me
>that Marx is using the transformation procedure to deduce the overall
>rate of surplus-value. It's a given isn't it?
>I note your mention of Shaikh's iterative solution. To keep things
>short I've ignored it.

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