Re: [OPE-L] what is irrational in the functioning of capitalism?

From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Mon Dec 04 2006 - 18:33:29 EST


--- clyder@GN.APC.ORG wrote:

> Issues being discussed with Ajit
>
> 1. How do you define a big economy?
> 2. The significance of correlations between market
> prices and values.
> 3. Does Sraffas theory make wrong predictions
> 4. Does his theory ( and that of Marx in vol 3 of
> capital ) make counter factual
> assumptions.
>
>
> 1. I had originally said that one needs some way of
> saying what is a big and
> what is a small economy. This came from Ajit
> proposing a big economy with only
> a few tens of thousands of employees.
>
> I had said that labour employed was the natural
> measure of size. He countered
> that India had more workers than  the US but a
> smaller economy.
> I then said that what counted was socially necessary
> labour time and that in
> India workers were unproductively employed compared
> to the USA. He then says:
> "Well, let's say both Indian and the US firms are
> producing the same thing and you find that the
> Indian
> firm produces the same amount in physical terms in
> 20
> hours of labor, which an American firm takes only
> one
> hour to produce. Now let us suppose the Indian
> economy
> uses 100 hours of its labor to produce 5 units of x.
> You will say that by socially necessary labor-time
> criterion, the size of the Indian economy is equal
> to
> 5 hours of labor. Now it is clear that to produce 5
> units of x it will take exactly 5 hours of Amerian
> labor. Thus the two economies will be of exactly the
> same size if the US economy also produced 5 units of
> x. Now, for the US economy to be bigger than Indian
> Economy by your measure of socially necessary labor,
> it must produce more than 5 units of x. Which is
> what
> my criteria in the first place suggested. You are
> simply running in a circle. If the Indian economy
> and
> the US economy are producing different physical
> goods
> then the measurement of socially necessary labor
> must
> go through their prices and exchange rates first,
> and
> your circular reasoning in this case become even
> more
> obvious."
>
> It becomes clear that from this Ajits original
> meaning of a large economy was
> one with a large physical product. The question of
> how one compares the output
> sizes of two economies with a different mix of
> goods, probably knows no
> unambiguous answer. The existence of some overlap in
> the goods produced will
> tend to give some rough indication of relative
> productivies and thus what
> counts as socially necessary labour time on the
> world market, but such
> estimates are rough and ready.
>
> This brings us back to Ajits original point which
> was that in a large economy
> with only a few thousand employees then the rate of
> surplus value and rate of
> profit do not correspond well with the conceptions
> of the labour theory of
> value.
>
> I think this depends upon which standard of value
> one takes that internal to the
> hyper productive economy, or that pertaining in
> other economies whose
> productivity is orders of magnitude lower.
>
> In terms of the hyperproductive economy,there is no
> reason to suppose that
> either the rate of surplus value, the organic
> composition of capital, or the
> rate of profit will be anything out of the ordinary
> when measured in terms of
> its domestic labour hours. When measured in terms of
> the labour hours of other
> less productive economies the organic composition
> might well appear very high.
> But this is not a fundamental critique of the labour
> theory of value since it
> draws attention to a phenomenon familiar even to
> Adam Smith who in his lectures
> on Jurisprudence favourably contrasts the living
> standard of a Scottish day
> labourer with an 'indian prince' ( meaning from the
> context a native American).
> Smith points out that due to a higher productivity
> of labour, the real wage of a
> day labourer was far above the income of an Indian
> prince. But it would have
> been inappropriate to apply valuations based on
> north American Indian
> productivity to early capitalist Britain.
___________________________
Paul, I don't understand why you are introducing
irrelevent stuff into a simple argument. for
simplicity sake let's take a one commodity corn
economy:
1 ton of corn + 8 hrs. of labor --> 8002 tons of corn
wages = 1 ton of corn for a day, i.e. 8 hrs. of labor.

What is the rate of profit in the system?
Rare of Profit = 8000/2 = 4000%

What is the value of 1 ton of corn?
Value of 1 ton of corn = 8/8001 hrs. of labor
Surplus value = 8 - 8/8001 hrs. of labor
Rate of surplus value = (64008 - 8)8001/(8001x8)
Now try to tell your students that capitalists get
their profits because workers produce their wages in a
few seconds (8/8001 hrs.) and the rest of the time
they work for the capitalist and see how convinced
they will be. Put a few more zeros on the right hand
side of the production equation and you will see how
ridiculous the argument will begin to sound, and
particularly when you will have billions of people
living with only few thousand workers working.

The other big problem with this accounting is that it
gives a very wrong sense of the notion of
exploitation. A well paid engineer with a comfortable
working environment and a comfortabe life would be
characterised as severly exploited compared to a
worker breaking stones under 45 blazing sun. This
kind of reasoning informs many Marxists to argue in
favour of the so-called 'labor intensive' technologies
against the more productive technologies (and why not,
it at least will reduce the rate of exploitation--the
less productive an economy the less exploitative it
is!).
___________________________
>
> 2. Correlation between market prices and labour
> values.
>
> Ajit says:
> "Statistics cannot give you more than corelation and
> corelation can be accidental. But I do not need to
> explain these corelation (and to what extent the
> data
> is reliable to be accepted as correct observation)
> because I don't work in this area."
>
> I agree that one has to be cautious in placing too
> much reliance on a single
> result, which is why replication is so important in
> science. The high
> correlations between labour value and price might,
> in a single case be
> accidental, but when they have been replicated in
> economy after economy, then
> it strains credibility to mark them as accidental
> rather than systematic to
> capitalism.
>
> One example of an apparently accidental result was
> Allin and my observation that
> the apparent rate of surplus value ( profit/wage
> ratio) was higher in industries
> with above average compositions of capital. We took
> this to indicate some
> partial equalization of profit rates - the sort of
> thing that the neo-Ricardian
> school assumed as complete phenomenon. However this
> now appears to be a
> peculiarity of the UK data. Zachariahs results
> indicate that it is not
> generally replicated. Thus the theory of prices of
> production seems to have
> somewhat weaker empirical support than we had
> initially assumed.
_____________________________
Paul, The empirical stuff is not relevant in this
case. I'm interested in reading the theories of the
classical authors--Marx for example. Marx did not come
up with the empirical theory of value or prices. If
anything, your results could be treated as an
empirical refutation of Marx's theory of value and
prices of production. No one can deny that Marx put a
lot of emphasis on the gravitational mechanism of the
market, which is nothing but the tendency for the rate
of profits to equalize. By the way, if I remember
correctly a few years ago Dumenil and Levy had come
out with a book on theory of profits, which showed
that empirically in the long term context there is
very strong tendency for the rate of profits to
equalise and this, of course, was presented as a
defense of Marx. Have you seen their work? Cheers,
ajit sinha




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