[OPE-L] Faux frais of production

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Apr 24 2006 - 14:16:43 EDT


Just a quick note in between things. Prof. Itoh, whom I cited in the
wikipedia entry http://en.wikipedia.org/wiki/Faux_frais_of_production, seems
to support your interpretation (his remark is apparently based on Cap. Vol.
2, chapter 6):

"Unlike pure circulation costs such as bookkeeping and advertising costs
which are ''faux frais'' specific only to a commodity economy, some portions
of the costs of storage and transport belong substantially to production
processes that are continued in the circulation sphere, and therefore add to
the substance of value and surplus-value just as production costs. The rest
of the costs of storage and transport, together with pure circulation costs,
proceed from the mere change in the form of value, and cannot enter into the
substance of value of commodities. Such circulation costs are ''faux frais''
which must be maintained by a part of surplus value." (Makoto Itoh, ''The
Basic Theory of Capitalism'', Barnes & Noble 1988, p. 227).

Following this line of argument, the faux frais are a deduction from the
total new surplus value, in the same way that e.g. Fred Moseley describes
the salaries of non-productive workers (in the Marxian sense) as a deduction
from total new surplus value.
Peculiarly though, while these flows are treated as a deduction from
surplus-value, they are in fact *included* in the social account for
aggregate surplus-value (in which case, we would really have to distinguish
between "gross" and "net" surplus value). This however is not the only
interpretation: Dr Murray E. G. Smith and Dr Shane Mage for instance
regarded the relevant outlays basically as circulating constant capital
expenditure, for the social point of view. It could also be argued that some
faux frais belong to the S component of the social product, others to C.

Marxists usually ignore the faux frais, but if in reality the so-called
incidental expenses beyond investment in means of production grow very large
(a magnitude to the order of perhaps? $2 trillion in the US, who knows), the
matter is certainly worth looking at in more detail. Some faux frais are
obviously excluded from official gross product accounts, on the ground that
they are regarded as unrelated to the value of production altogether (e.g.
as transfers of some type).

You might regard official accounts as statistical nonsense, however they do
have the advantage that they try to allocate almost all financial flows
within one system of accounts, which creates to a certain extent a kind of
"internal discipline" within the system (the possibility for telling
grotesque lies about financial flows is limited, if standard definitions are
accepted; of course you can always argue the definitions themselves
misrepresent or distort the real situation). An alternative set of Marxian
social accounts would need to proceed in a similar way. Like it or not,
social accounts of some type are necessary, and if so, we have to be able to
allocate all flows in a theoretically consistent way within the social

I think a significant trend in modern official social accounting is that
statisticians resort increasingly to mathematical models to extrapolate the
aggregates, because this - given budget constraints - is cheaper than
comprehensive direct surveys. That is, the estimates for aggregates may in
good part be extrapolated from key indicator variables, i.e. a limited set
of empirical variables statistically strongly correlated with changes in the
main aggregates. It is quite likely that this procedure would actually have
the statistical effect of smoothing out real economic fluctuations across
time to some extent, precisely because the procedure involves extrapolating
a current trend from past data. But while this means that observations of
short-term flunctuations might actually be spurious to an unknown extent,
the system I think still does pick up significant trends within a five or
ten year interval.


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