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

From: Allin Cottrell (cottrell@WFU.EDU)
Date: Mon Mar 26 2007 - 16:54:56 EDT

On Sun, 25 Mar 2007, Rakesh Bhandari wrote:

>> Rakesh, I don't really see how the "inverse transformation"
>> differs from the "forward transformation", other than verbally. In
>> each case, one is recognizing that if you write down a set of
>> "prices" for inputs, you can't take these magnitudes as both
>> (a) indicating the value transferred from inputs to output, and
>> (b) indicating the price of the inputs as would enter into
>>     the formation of a price of production for the output.
> I take these magnitudes to indicate b, not a.
> Marx takes the cost prices of commodities as a precondition--given,
> unchangeable if you would only read the entire paragraph you quoted.

I'm talking about the status of the input prices Marx used when
setting up his examples.  These are not "given" is any real sense,
Marx has made them up.  He gets to decide what they're supposed to
represent.  He may be tempted to choose (b), but if he does so
this would seem to undermine his argument: he's lost contact with
the value basis.  He's trying to demonstrate the relationship
between values and prices (of production), not the relationship
between prices and prices.

>> I remain of the view (Shaikh, Morishima) that Marx's
>> transformation should be seen as the first step in an iteration
>> that would produce a consistent set of prices of production.
> It's a dubious exercise not because one need not begin the iteration
> with labor values but because there will never be enough time for the
> iterations to reach equilibrium.

By "iteration" here I mean an iterative calculation, which is not
supposed to model a real-time process.  Time is not an issue, and
a dozen or so iterations are enough to get results to a reasonable
degree of precision.  The iteration does not model a real-time
process because it assumes an equalized rate of profit each
"period" (it's better to call these "rounds" than periods).
Iterative calculations are often a cheap way of, in effect,
solving sets of simultaneous equations, and can be more
illuminating than straight simultaneous solution.

(One of the problems I have with TSS is that in that literature
what I'm calling an iteration is misleadingly claimed to be
"sequential" in the sense of dynamic.)

>>> Marx never admitted the need for an equilibrium price theory in
>>> which inputs and outputs are transformed into the same prices of
>>> production.
>> He didn't use the phrase "equilibrium prices", but the concept of
>> price of production depends on the notion of an equalized rate of
>> profit, and that is surely an equilibrium idea -- in fact, an
>> excessively strong one.
> Yes but it's not the equilibrium idea of a timeless price, of the
> inputs and outputs having the same prices of production. Ricardo
> would not have accepted this aspect of equilibrium either.

An equilibrium construct may be either static or dynamic.  With
regard to prices of production the usual construct is static (in
both Ricardo and Marx).  A dynamic price-of-production equilibrium
construct would involve determining an equilibrium time-path for
prices.  I think there's a conflation here: neither Ricardo nor
Marx thought of prices of production as "timeless", in the sense
that they recognized all sorts of factors that would cause these
prices to change over time (and also, cause divergence of actual
prices from p-of-p).  However, neither had a dynamic equilibrium

Allin Cottrell

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