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

From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Fri Jun 23 2006 - 12:02:27 EDT

```Ian, we can keep playing this ping-pong for ever. What
you call distributed surplus is what I call necessity.
which you cut out--probably you thought it was
irrelevant to the discussion. But let me put it back
again, as I think it is critical.

2t. of corn + 4000 hr. of Labor --> 10 t. of corn
Marx's calculation:
Value of 1 ton of Corn = 500 hrs. of labor
Marx's labor-value equation:
1000 c + 4000 L = 5000 hr. of total value
which implies, given wages = 0.001 tons of corn per
hr. of labor,
1000c + 2000v + 2000s = 5000 total value
But you insist that the accounting should be rather
like this:
1000c + 4000L + 2000cc = 5000 hrs. of labor
But of course this would be ridiculous on the face of
it, so you say that representation of the technology
as 2t. of corn + 4000 hr. of Labor --> 10 t. of corn
is wrong. It should rather be
2t. of corn + 4t. of cc + 4000L --> 10t. of corn
And so per unit of value of corn itself is 1000 hrs.
of labor. But then you don't tell us what this 4t. of
cc does in the production process? If it is needed in
the production process as the 2t. of raw materials
then in economics for centuries we have been calling
it necessity of production. Then your system does not
have any surplus and it is equivalent to subsistence
economy. The property of this system is well known,
you are not bringing anything new here. Your new
element is that you want to call 4 tons of capitalist
consumption both surplus and the necessity in the
system. But you cannot do that--it involves logical
contradition of terms. A necessity by definition is
not a surplus and a surplus by definition not a
necessity. Let me at the cost of repeating myself nth
time, make the point that if the 4cc is the necessity
of production then when I reduce the wages to 2 tons
of corn, we have now a surplus of 2 tons in the system
properly speaking, what happens to your accounting
system now?"

the basic point is that you cannot get your value of
corn as 1000 hrs. of labor without treating the
capitalist consumption of 4 tons of corn as input to
the system. At this time I'm not asking you to justify
how you can treat capitalist consumption as input in
the system of production--may be it is the spiritual
content of production. My point is that at the formal
2t.RW + 4t.CC + 4t.WC = 10t. output
is equivalent to Sraffa's subsistence system. And both
of you get the same result. Even Adam Smith would get
the same result for this system. But how could this be
a criticism of Sraffa? You do not formally want to go
beyond Sraffa's 1st chapter and tell me that I'm
begging the question; but Sraffa and most of us want
to go beyond that. What I'm unable to understand is
what do you gain by doing what you are doing. You have
made the system so regid that it cannot move anyway,
you have desolved the notion of surplus and thus
exploitation, and then you tells us that labor theory
of value is valid. But valid for what? Didn't
everybody know that in a no-surplus economy the labor
theory of value gives the right exchange rations?
Actually, you don't need to introduce labor at all in
your system. You can do the whole exercise in terms of
materials as Sraffa in chapter one does. So what kind
of defense of labor theory of value this formal system
can produce?

In an earlier mail you had suggested that your
accounting comes out right in von Neumann's growth
context and I had ignored it to keep our focus on one
matter at a time. Though it is well known that in von
Neumann's growth model, the rate of profits would come
out to be equal to Marx's S/(C+V), but still, I think,
your accounting system should breakdown in this
context as well. For every production period, the
outputs would be larger than inputs in von Neumann's
model.

This time you have introduced technical change to
attack Sraffa. Though Sraffa is not designed to study
technical change, you must know that he is able to
handle it quite well as he does in his chapter on
land. The point is that treating of technical change
as magic is childish. Technical changes require
investments of various sorts and they have to be
modeled that way. If technical change means
introduction of new machines etc., then one has to
first create such machine producing sector which in
its first production perid would be a non-basic and in
the next phase when it is introduced in production
process proper will turn basic. They can be modeled if
one thinks through them. But to say that it takes 2t.
of corn to produce 10 tons of corn in time 1 and by
magic just 1 ton of corn in time 2 is not dealing with
issues of technical change in any serious way. Cheers,
ajit sinha

--- Ian Wright <wrighti@ACM.ORG> wrote:

> Hi Ajit
>
> I think if we can agree on given assumptions then we
> will make progress.
>
> > The 2t. of corn as raw material is a historical
> > datum for Sraffa, it will not change whatever you
> do
> > with the 10t; of the output. However, if I give
> less
> > or more to the workers or the capitalists from the
> > output, in your case that must show up in the
> input
> > otherwise your accounting system breaks down.
>
> Apply this same reasoning to technical change that
> occurs in the
> production period. Of the 10t of output, say that
> only 1t now need be
> allocated to raw materials, due to corn-saving
> technical change.
> Sraffian labour-values are a function of the
> technical matrix. Hence,
> according to your argument we must conclude that in
> this case Sraffa's
> labour-value accounting breaks down (and his price
> accounting to
> boot).
>
> My point is this: the Sraffian system in particular,
> and linear
> production theory in general, is not a dynamic
> theory. It abstracts
> from change that occurs in a production period.
>
> For example, the TSS school has complained that
> Sraffa's theoretical
> framework breaks down when we introduce technical
> change in the
> production period. Your criticism of real-cost
> accounting is a
> mirror-image: you state that real-cost accounting
> breaks down when we
> introduce a change in the distribution of real
> income in the
> production period. Both critiques are external, in
> the sense that they
> reject the assumptions of the model class. Sraffa
> abstracts from
> technical change and changes in the distribution of
> real income (he
> considers only nominal changes, and then, arguably,
> only in a
> counterfactual manner). Real-cost accounting also
> makes these
> assumptions because it derives from an immanent
> critique of Sraffa.
>
> However, I sympathise with both these external
> critiques: any
> realistic model of an economy must handle dynamic
> change. In contrast,
> Sraffa, and linear production theory in general, can
> only deliver
> comparative statics. For example, real-cost
> accounting allows
> comparison of two configurations of an economy with
> different real
> income distributions and different techniques.
>
> Implicit in your critique, however, is the claim
> that Sraffa's labour
> values, because they are independent of the real
> distribution of
> income, do not break down when we consider changes
> in the distribution
> of real income in the production period. But as I
> mentioned -- and you
> have yet to respond to this -- the claim begs the
> question.
>
> The real-cost crtique of Sraffa's labour values
> denies they are the
> correct measure of replacement costs even if we
> assume no changes in
> the distribution of real income in the production
> period. The validity
> of Sraffian labour-values in the special case of
> self-replacing
> equilibrium is precisely what is now in question.
> Once it is shown
> that Sraffian labour-cost accounting does not hold
> in this special
> case, and under-estimates replacement costs, then
> what rational
> justification is there for claiming general
> validity?
>
> In summary, the terms of this debate, stated at the
> beginning of the
> thread, is that we are considering a state of
> self-replacing
> equilibrium in which the surplus is distributed in
> real terms,
> abstracting from technical change and changes in the
> real distribution
> of income in the production period. This is a
> natural set of
> assumptions when reasoning about equilibrium linear
> production models.
>
> > What I have been trying to tell you is
> > that you can either have a 'closed' model, which
> is
> > represented by subsistence economy, or have a
> > 'surplus' model but not both. You are trying to
> have
> > both, which entails logical contradiction.
>
> You think there must be a logical contradiction
> because you fail to
> distinguish between an undistributed surplus and a
> distributed
> surplus. More on this below.
>
> > It is you who had introduced the time-scripts to
> > counter my point that outputs cannot be inputs to
> > itself.
>
> I assure you that you first introduced time-scripts.
> That's because,
> in my view, you began to shift the terms of the
> debate from
> self-replacing equilibrium to a non-equilibrium
> situation.
>
> > In your above statement you have again
> > introduced time-script.
>
> To illustrate your use of time scripts.
>
> > Your 2 tons of corn as raw material is a
> historical datum--logically, i.e. there
> > is no logical posibility of changing it after you
> have got your 10 tons of output out of it.
> > Can you say the same for your 4 tons of corn as
> capitalist consumption?
>
> Yes.
>
> > If you can, then it is also a historical
> > datum and you cannot logically change it after
> getting
> > your 10 tons of corn.
>
> Yes. (Although I hesitate to use the term
> "historical datum").
>
> > Now you cannot say that
> > logically I cannot give more to the capitalists
> from
> > the 10 tons of corn, can you?
>
> No I cannot.
>
> > Since you cannot, then I am free to give 6 tons of
> corn to the capitalists and
> > 2 tons to the workers out of the 10 tons.
>
> Yes you are.
>
> > This cannot be logically denied. But when I do
> something which is
> > logically possible, your principle of accounting
> breaks down.
>
> Yes; but only in the sense that all linear
> production models break
> down if we introduce certain kinds of changes within
> the production
> period. The correct thing to do, given the absence
> of a dynamic
> theory, is to formulate a new closed model that
> reflects the new
> distribution of real income and perform a
> comparative static analysis;
> there are some examples in the paper.
>
> Allow me to repeat an earlier point in a slightly
> different form: This
> external critique that you have introduced also
> applies to Sraffa's
> labour-cost accounting. For example, if you are free
> to change the
> distribution of real income then I hope you will
> grant me the freedom
> to change the technique and introduce technical
> change in the
> production period. In which case, Sraffa's
> labour-cost accounting
> "breaks down". Do you accept the legitimacy of this
> external
=== message truncated ===

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