# Re: [OPE-L] questions on the interpretation of labour values

From: Pen-L Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Tue Mar 20 2007 - 23:29:09 EDT

```Quoting ajit sinha <sinha_a99@YAHOO.COM>:

> --- Pen-L Fred Moseley <fmoseley@MTHOLYOKE.EDU> wrote:
>
>> Quoting ajit sinha <sinha_a99@YAHOO.COM>:
>>
>> > Ajit:
>> > How much is your M, Fred? Just tell me how much is
>> > your M. If you are going to begin your theory with
>> a
>> > given M, you need to know how much it is. I'm not
>> > asking for any explanation, just tell me how much
>> it
>> > is. Where do you get your data for M? If you are
>> > unable to tell us how much is your M, then how
>> could
>> > you claim that M increases to (M + dM)? Just think
>> > about it?
> Fred:
>> M is whatever it is in the real capitalist economy.
>> With unlimited
>> resources, one could estimate M.  But this is not
>> necessary for the
>> theory.  M is an actual magnitude, which exists
>> prior to the production
>> of the output, and which can be taken as given as
>> such, whatever it is.
>>   M is divided into C and V.  The actual C, whatever
>> it is, becomes one
>> component of the total price of commodities.  The
>> actual V, whatever it
>> is, is subtracted from new-value to determine S.
>> The variables in the
>> theory represent these actual magnitudes, even
>> though we don’t know
>> what these magnitudes are.
> ___________________________
> Ajit:
> You don't need any resource to answer my very simple
> question. If a student of yours asks you how much is
> the GDP of the USA in 2006, I would guess you don't
> tell him/her that it would need billions of dollars of
> resources to answer your question. You would either
> direct the student to National income data or tell the
> student the principle of calculating the GDP.

But the government does spend billions of dollars to collect and
process the data in order to estimate GDP!  The US Bureau of Economic
Analysis has hundreds of employees.  That is why it is readily
available.  M is just as observable as GDP, but the resources of the
government are used to estimate GDP, not M.

> I gave
> you one example and asked you just tell me how much is
> your empirically given M in this example. You are
> simply unable to tell me. Let us suppose you don't
> like my example, then you construct your own example
> and explain to me what you mean by "empirically given"
> M with which your theory begins with. If you cannot do
> even this much, then it is obvious that your theory is
> still born.

As I already told you, M is whatever the capitalist invests to purchase
means of production and labor-power.  M refers to actual magnitudes in
the real capitalist economy, even though we don’t know what the actual
magnitudes are (although we could in principle know these magnitudes,
with enough resources).

> ___________________________________
> Frd:
>> The theory concludes that S is proportional to
>> surplus labor, even
>> though we don’t know what these actual magnitudes
>> are.  From this
>> conclusion, one can explain other important
>> phenomena of capitalist
>> economies, such as the conflict over the working
>> day, the conflict over
>> the intensity of labor, inherent technological
>> change, etc.
> ___________________
> Ajit:
> I'll believe the horoscope in a cheap magazine 100
> times more than anything you claim to tell from your
> theory. You don't seem to understand that you cannot
> add, subtract, multiply and divide and derive any kind
> of results from entities, which you yourself claim you
> don't know what their magnitudes are.

Sure you can.  The variables in my interpretation of Marx’s theory
refer to actually existing magnitudes, which can be added, subtracted,
etc.  No problem.  For example, even though we don’t know what the
actual magnitude of C is, it can nonetheless be assumed that C is the
first component of the prices of commodities, and is added to the
new-value component to determine the total price.

> _____________________
> Fred:
>> > Yes, I am definitely distinguishing between prices
>> of
>> > inputs and prices
>> > of outputs.  There is not simultaneous
>> determination
>> > in Marx’s
>> > theory,
>> > but rather sequential determination.  The prices
>> of
>> > the inputs (total
>> > prices, not unit prices) are taken as given in the
>> > determination of the
>> > prices of the outputs (again total prices, not
>> unit
>> > prices), and most
>> > importantly in the determination of the total
>> > surplus-value.
>> > ________________________
>> > Ajit:
>> > I'm sure I didn't go to the same school as you
>> did.
>> > But I, for the life of me, can't understand what
>> is
>> > this "total prices". What do you understand by the
>> > concept of price?
> Fred:
>> I am actually using “total price” in two different
>> senses, and I should
>> be clearer about that.  I usually mean the total
>> price of all the
>> commodities produced in the economy as a whole
>> (roughly equal to
>> nominal GDP, minus non-business sectors, plus the
>> cost of intermediate
>> goods).
> _____________________
> Ajit:
> What do you mean "plus cost of intermediate goods"?
> You calculate the cost of same intermediate goods 10
> times if the final goods production goes through 10
> different sectors? If, yes, then what kind of concept
> is this, and if not, then how is it different from
> nominal GDP?

There is “double-counting” in the sense that the cost of intermediate
goods is transferred to the price of the output (it becomes one
component of the price of the output).  This is in fact what happens.
The total price of commodities really does include this component.
This would be a problem only if the cost of intermediate goods were
“double counted” as value added.  But it is not.  It is clearly
distinguished from value added, and is a separate component of the
total price of commodities.  Why do you think this “double-counting” of
the cost of intermediate goods is a problem?

For example, in Marx's famous numerical example in Part 3 of Volume 2,
the total price of dept I is 6,000, and the total price of Dept. II is
3,000, and the total price for the economy as a whole is 9,000.

> __________________________
> Fred:
> But in the paragraph quoted above, I used
>> “total price” to
>> mean GDP (plus …) for a single industry, in order to
>> distinguish it
>> from the unit price of the commodity produced in
>> that industry.  It
>> really should be called something like “industry
>> revenue” or “industry
>> GDP”.  Prices of production in Marx’s theory are
>> these “industry
>> revenues”; they are not unit prices.
> ________________________
> Ajit:
> What is this (plus ...)?

“plus …” refers to “plus the cost of intermediate goods” in the
previous paragraph.

> If you want to say
> gross or net revenue of a firm or a sector, say that.

Yes, “gross industry revenue” is a good synonym for Marx’s prices of
production.  With the stipulation that “gross” here includes not only
depreciation cost, but also the cost of intermediate goods.

(By the way, I don’t understand your definition of “net revenue”.
First of all, you seem to be using “constant capital” to mean the
physical quantities of means of production, which is different from
Marx’s definition of constant capital, which is in terms of money (Marx
would say the “elements of constant capital” or the means of
production; perhaps this is what you meant).  And exactly what is
included in your “constant capital” – only intermediate goods or also
fixed capital goods?  And why do you add the “depreciation of fixed
capital”?  Isn’t this already included in “gross revenue” and hence is
implicitly included in “net revenue?  Similarly, why do you add the
wage bill?  Isn’t this also already included in “gross revenue” and
hence also implicitly included in “net revenue?

> Now, if by "total price" you mean "total revenue"
> (even though you don't clarify whether you mean gross
> or net), it should be clear to anybody the that total
> gross revenue is nothing but quantity of goods sold
> multiplied by its price and the net revenue is nothing
> but total gross revenue minus total quantity of
> constant capital used in the production process
> multiplied by their prices plus the depreciation of
> fixed capital plus the total wage bill. This is the
> only way a firm or an industy satistics of total
> revenue is arrived at. It makes no sense to say it is
> given.

This is really the crucial point.

It is true that C is by definition (as an identity) = (UPmp) (Qmp),
where UP stands for unit price, and mp stands for means of production.
But this does not mean that C is determined by this equation.

According to Marx’s theory, unit prices are determined by the quotient
of prices of production (“gross industry revenue”) and the quantity of
good produced:

UP  =  PP / Q

The theoretical rational for this determination of unit prices is that
commodities in capitalism are *products of  capital*, not single
individual commodities (“Commodities as the Product of Capital” is the
title of Section I of the “Results”).  Each individual commodity is
treated as a *aliquot part* of the total commodity product of capital
in an industry.  First the total price for the industry as a whole is
determined, and then the unit price of each individual commodity is
determined as an “aliquot part” of the total price.  Unit prices play
no role in Marx’s theory, but this is how they could be determined in
Marx’s theory, if one wanted to.

Marx’s clearest discussion of this point is in the “Results”
manuscript, in which he is still assuming that prices equal values,
rather than prices of production, but the method of determination of
unit prices is the same:

“Depending on the various rates of productivity of labour the *total
value* of £120 will be *shared out* among a greater or smaller number
of products, and the [unit] *price* individual article will stand *in
inverse ratio* to the total number of articles, and each item will
represent a larger or smaller aliquot part of the £120.  For example,
is the total product is 60 tons of coal, the 60 tons = £120 = £2 per
ton = £120 / 60; if it is 75 tons of coal, then each ton = £120 / 75 =
£1 12 s.; if it is 240 tons, then £120 / 240 = £.5, and so on.  The
[unit] price of the individual article then = (the total price of the
product) / (the total number of products)…”  (C.I. 969; emphasis in the
original).

The same general rule applies to the unit prices of means of production
(mp).  Therefore, according to Marx’s theory, C and the unit prices of
the mp are determined in the following way:

1.  C is first taken as given, as the money capital advanced to
purchase mp (as I have argued in previous posts), and used to determine
(in part) the price of the commodities produced.

2.  C is later explained as equal to the price of production of the mp
(or the “gross industry” in the mp industry).

3.  The unit price of the mp could be determined by dividing the price
of production of the mp by the quantity of mp, as discussed above:

UPmp  =  PPmp / Qmp

(and this division could be done for each particular kind of mp).

Therefore, it is indeed true that: C = (UPmp) (Qmp), but this does not
necessarily mean that C is determined by this product.  In Marx’s
theory, this identity is true because UPmp is derived from C (= PPmp)
divided by Qmp.

Comradely,
Fred

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