# Re: [OPE-L] workers' consumption and capitalists' consumption

From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Fri Jun 09 2006 - 06:34:37 EDT

```--- ajit sinha <sinha_a99@YAHOO.COM> wrote:

>
> Ian, I took a look at your corn-economy model. I
> think
> it confirms the conceptual error I am talking about.
> In your corn model, when the rate of profit is zero
> your real cost accounting and Sraffa's labor-value
> accounting give the same result, that is the
> labor-value of 1t. of corn is 500 hours. Then you
> cut
> the wages of workers in half, and a rate of profit
> of
> 66.3% emerges. Now, in this case also, Sraffa's
> labor
> accounting gives you the same labor-value equal to
> 500; however, your real cost accounting says that
> the
> labor-value in the second case must increase to 1000
> hours. At this stage, I think, you should have
> paused
> for a minute and thought in English rather than
> mathematics. How could one by simply taking food
> from
> the laborers and giving it to the capitalists
> increase
> the labor-values of goods? You are saying that the
> labor-time needed to produce a ton of corn doubles
> simply by taking half of the corn from the mouth of
> the laborers and giving it to the capitalists. Now,
> there has to be something wrong with such a
> statement,
> isn't it?
>
> The whole question of numeraire and also money in
> one
> good corn model makes no sense to me. Here again it
> seems you have allowed mathematics to take
> precedence
> over common sense. Any way, let's stick to my above
> comment for now. We can discuss all the other issues
> later, but this one needs to be settled first.
> Cheers,
> ajit
_____________
Ian, I thought some elaboration might help (I just
wrote a comment but I have a feeling that instead of
sending it I might have deleted it, so I do twice the
labor but don't produce any more value).

Any way. Let us take your corn example and work with
it.
2 t. of corn + 4000 hr. of labor --> 10 ton of corn

Sraffa's labor value in this system is straight away
500 hr. of labor per ton of corn. Note that to deduce
labor value you only need methods of production. There
is no need to know wages or profits or whether the
system is in equilibrum or not. But in your system you
first impute a wage of 0.002 ton of corn per hour to
workers. This puts your system into self-rplacing
state, and you derive the labor value equal to 500 hrs
of labor per ton of corn in this system. Then you go
on to stipulate that the wages of the workers have
been reduced to 0.001 ton of corn per hr. of labor.
This generates 4 tons of corn as surplus in your
system, which gives 4/6 or 66.3% of rate of profits to
the capitalists. For Sraffa, this makes no difference
to the labor-values of corn. But for you this
increases the labor-value of corn from 500 to 1000.
How does this happen? You argue (implicitly or
explicitlt) that capitalists consumption of the 4 tons
of corn should be put back as input in the system.
Thus your method of production changes to:
2 t. of corn as raw mat.+4t. of corn as cap. con.
+4000 hrs of labor--> 10 t. of corn
This obviously makes the value of corn equal to 1000
hrs of labor per unit of corn. Now the absurdity of
this change in the method of production should be
obvious. But I'll not belabor on that. I'll just
underline a few more obvious points: (1) when you
strip the system of all unnecessary complications,
then you can see the whole idea of 'money capital'
which is produced in capitalist household and price of
money capital, etc. melts away. The firms have corn
and corn is what they need as raw material as well as
for wages and the devidends to the capitalists are
also paid in corn. Nobody in the system needs anything
else than corn. Thus my point that the firms always
have their needed commodity capital should be clear
now. (2)Your procedure amounts to throwing back
physical capitalists consumption on the side of the
inputs in the methods of production. (3)In a multiple
commodity model you cannot properly allocate
capitalists consumptions as inputs for various sectors
unless you solve for rate of profits from Sraffa's
surplus equations. Thus your attempt to simultaneously
determine all prices and the rate of profits along
with all capitalists consumption treated as inputs in
the system is not possible--the system lacks one
equation. The whole idea of a separate money capital
sector, which produces a commodity called money
capital--a commodity which does not appear in the
input output structure but somehow gives you an
independent equation is not making any common sense. I
hope this was helpful. Cheers, ajit sinha

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