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

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Wed Apr 18 2007 - 11:10:04 EDT

>Hi Rakesh, thanks for your latest reply and for the discussion in
>general, which I think is productive.  A few responses below.
>Quoting Rakesh Bhandari <bhandari@BERKELEY.EDU>:
>>>Hi Rakesh,
>>>The kind of scenario that you suggest (constant and more or less
>>>proportional changes of values for all commodities) is possible, but
>>>there is no indication in this passage that this kind of scenario is
>>>what Marx had in mind.
>>>And, even in this case, if the prices of production of outputs remain
>>>constant over longer periods of time, then so will the prices of
>>>production of the inputs, and thus the prices of production of the
>>>inputs will be equal to the prices of production of the outputs, as I
>>>have argued.
>>Don't think has to follow.
>Yes, it does have to follow.  If the prices of production of the inputs
>are NOT = to the prices of production of the outputs, then the prices
>of production of the outputs would have to change in the next period,
>and in subsequent periods, in order to equalize the rate of profit
>across industries.  Just look at any of Kliman and McGlone’s numerical
>So if the prices of production of the outputs remain constant over
>“prolonged periods”, then the prices of production of the inputs must
>be = to the prices of production of the outputs.

No. If prices of production are aggregate 
industry prices (and you say that they are) and 
if each period there is proportional productivity 
growth and expansion and if the MEL is constant, 
then prices of production will not change each 
period. But unit values and prices would have. So 
the constancy of prices of production  does not 
prove the interperiodic constancy of unit values 
and unit prices.

>>To some extent I do think Marx gets trapped by Smith's Newtonian
>>image of value as a center of gravity, which is of course meant to
>>invest the market with an equilibrium tendency. And the astronomical
>>metaphor is of course the crux of the matter.
>>  Smith's metaphor is however ideological and apologetic, and also
>>grounded in an economy of manufactures in which the revolutionization
>>of the forces of production has not yet become endemic.
>>So as an immanent critique of Smith's reversion to an adding up
>>theory of value as a center of gravity, Marx does at times seem to
>>accept the dubious equilibrium idea that value remains fixed over the
>>long term only to show that Smith's natural (long term center of
>>gravity) price arrived at adding up the equilibrium wage, profit and
>>rent is in fact only the transformed value, price of production. At
>>its most basic level, Marx's theory of the price of production is
>>simply the critique of Smith's adding up theory of value, which
>>includes a demonstration of why it has a hold over those trapped in
>>bourgeois production.
>I think it is generally true that, whenever Marx talked about prices of
>production, in any of the drafts of Capital, he talked about prices of
>production as long-run center-of-gravity prices, and in this respect
>Marx’s prices of production are the same as Smith’s and Ricardo’s
>“natural prices”, as Marx explicitly stated several times, including in
>the following passage from the end of Chapter 10 of Volume 3:
>"And what we call price of production is in fact the same thing that
>Adam Smith calls ‘natural price’, Ricardo ‘price of production’ or
>‘cost or production’, and the Physiocrats ‘prix necessaire’, though
>none of these people explained the difference between price of
>production and value".   (p.300; see also TSV, Chapter 10, Section 5A,
>and Selected Correspondence, p. 122)
>And when Marx discusses changes of prices of production at the end of
>Chapter 9 (and elsewhere), prices of production do not cease to be
>long-run center-of-gravity prices; only the centers-of-gravity
>themselves change.

Again you and many others are conflating the 
classical conception of long term center of 
gravity and the neoclassical one. The latter has 
a conception of a stationary unit market price in 
the form of market clearing price. The emphasis 
of the former is on the equalization of rewards 
for capital and labor in the long run. Marx can 
accept that no industry over the long term is 
going to beat the average rate of profit without 
thinking that technology is stable such that 
there is a stationary unit price which serves as 
a center of gravity. Almost everything in his 
theory both explicit and implied suggests that 
there is no such stability of technology. As 
Blaug has shown, most economists misread the 
classical economists with the eyes of the 
neoclassical economist they have been trained to 

Won't be able to respond to rest (as well as Paul 
C's interesting message) until later this week.

Yours, Rakesh

>>But in terms of Marx's own understanding of capitalism as the
>>impetuous development of the productive forces--and here one need
>>only consult the following section of Capital 3, speaking of Korsch
>>see also his chapter on the law of value in his Karl Marx-- there is
>>actually no room for unit values which remain fixed over the long or
>>even medium term as after all there need only be productivity gains
>>in some of the capital good industries each period for there to be
>>general decline in unit values in each period.
>I don’t understand this argument, which you repeat several times.
>Which capital goods are you thinking about that are inputs to many
>industries in general?  Oil?  It seems to me that most capital goods
>are quite industry specific, and are used in only one industry, or a
>small group of industries.  If so, then changes in the values of
>capital goods do not have a general effect on the values of many final
>goods, as you suggest.
>>Indeed given that the tendential periodic overproduction of capital
>>goods is not a source of insurance but anarchy in capitalism--see
>>here Allin's and my comments on simple reproduction--there is likely
>>to be real (not perfect) competition among Div I producers on the
>>basis of fairly constant technical improvements which will force
>>competitors to make use of the superior goods and thereby
>>continuously reduce unit values. In other words, my argument for
>>perpetual disequilibrium and the continuous reduction of unit values
>>is grounded in Grossman's theory of  capitalist dynamics, not simply
>>exegetical evidence.
>I think this is an important distinction.  I am talking  (for now)
>about Marx’s logic, what Marx did in Capital.  It may be that what Marx
>did in Capital is inadequate in some ways, and needs to be supplemented
>with Grossman, etc.  But I think we should keep these two questions
>And I think that Marx assumed in Capital that prices of production are
>long-run center-of-gravity prices that remain more or less constant
>over "prolonged periods", as did Smith and Ricardo before him.
>>>In addition, I think that Marx thought that prices of production would
>>>remain constant prolonged periods because the values of commodities
>>>remain more or less constant over longer periods and would change only
>>>occasionally for any single commodity.  At least this is what he
>>>assumed in his theory of prices of production.
>>But unit values will change as long  there is drop every production
>>period in the value of only
>>some of the means of production. And that is overwhelmingly likely.
>see above reply to this argument
>>The static formalism
>>simply has to force data to meet its theoretical assumptions as
>>Guisanni has long argued.
>which Guissani paper do you have in mind?
>>>>As far as I can see this is the only passage from volume 3 that
>>>>either you or Allin has quoted to demonstrate that Marx believed that
>>>>unit values were even roughly constant over time.
>>>I would say that you have not provided any textual evidence in which
>>>Marx states that he assumes in his theory of prices of production that
>>>the values of commodities change “ceaselessly”.
>>OK, but I have given reasoning for why this is so, and unit values
>>only have to change in some mop commodities for there to be a general
>>change in unit values.
>again, see my reply above to this argument
>>>  The textual evidence
>>>that you have cited at the end of Chapter 9 of Volume 3 makes the
>>>theoretical point that changes in prices of production are caused by
>>>changes in the values of commodities, either in the final goods or in
>>>the means of production that are inputs for the final goods.  Marx does
>>>not state in these pages that he assumes that values are changing all
>>>the time for all commodities.  He simply argues that, when prices of
>>>production do change, they change because of a change of values.  This
>>>argument implies nothing about the frequency of these changes.
>>But that cuts both ways. Neither for you nor for me. I am happy to
>>say that Marx's whole emphasis is capitalism's impetuous development
>>of the productive forces and the consequences of the resultant
>>inverse growth between use values and unit values. This is of course
>>screamingly obvious in the next section of Capital III.
>I agree of course that Marx’s theory emphasizes capitalism’s very
>strong tendency toward technological change, and that this is the basis
>of his theory of the falling rate of profit.  However, the theory of
>the falling rate of profit is a long-run tendency for the economy as a
>whole.  Continual technological change for the economy as a whole does
>not necessarily imply or require continual technological change in each
>And I repeat that, whenever Marx discussed prices of production, he
>treated them as long-run center-of-gravity prices, and had little or
>nothing to say about continual technological change.  Treating prices
>of production as long-run center-of-gravity prices does not imply that
>there is no tendency of the rate of profit to fall.  So I don’t think
>your textual evidence in Part 3 of Volume 3 is relevant to his theory
>of prices of production in Part 2.
>>>You INFER from these pages that Marx assumes that the values of all
>>>commodities are changing all the time.  But that is an inference that
>>>you are making; it is not an inference that Marx made.  So I don’t
>>>think these pages provide any support for your interpretation.
>>>Rakesh, are you arguing that constant capital is valued at the actual
>>>historical prices of production of the means of production (at the time
>>>the means of production were purchased)?  If so, then I think this is
>>>clearly a misinterpretation of Marx’s theory.  There is tons of textual
>>>evidence, which I have presented on numerous occasions (but not
>>>recently), that Marx assumed that constant capital is valued at the
>>>CURRENT prices of production of the means of production (as inputs, as
>>>already evidenced by the purchase of the means of production on the
>>>market).  So that, if there is a change in the current prices of
>>>production of the means of production on the market, then the value of
>>>the constant capital invested in all similar means of production still
>>>in process (i.e. before the output produced with these means of
>>>production are sold) is revalued to equal the current prices of
>>>production of these means of production.
>>I think the rate of profit should be calculated in terms of the
>>historic costs of capital while the value transferred should be
>>determined in terms of the current value of the means of production.
>Then we might not disagree very much after all!  This is encouraging.
>Leaving aside for now the fixed constant capital in the denominator of
>the rate of profit, if you agree that constant capital component of the
>value of commodities (the “value transferred” component) is valued at
>the current cost of the means of production, then input prices are = to
>output prices, as I have argued.  Not because input prices and output
>prices are determined simultaneously from given physical quantities (as
>in Sraffian theory), but because, once the prices of production of the
>means of production as outputs change, then the prices of production of
>all similar means of production still in process as inputs change
>correspondingly to reflect the current prices of production of the
>means of production as outputs.
>Do you see what I mean?  What do you think?
>Thanks again for the discussion.
>This message was sent using IMP, the Internet Messaging Program.

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