[OPE] classical macrodynamics and the labor theory of value

From: Jurriaan Bendien <jurriaanbendien@online.nl>
Date: Thu Jan 27 2011 - 09:02:13 EST

It's a very interesting paper, but the apparent mathematical rigour obscures
certain conceptual issues I think. As I mentioned before, I think the
Marxian concept of prices of production is more complex than the Ricardian
and Smithian Marxists have hitherto allowed for. I will set out the four
sets of conceptual issues (A,B,C,D) schematically for the sake of clarity:

A. Marx uses the concept loosely to refer to three different things:

1) Theoretical equilibrium prices. These are commodity prices which would
apply (a) if the commodities are sold at prices earning the average rate of
profit on capital invested, and/or (b) if supply and demand for the
commodities are equal, even if this equality is never reached.

2) Regulating prices. These are commodity price-levels reflecting the prices
which apply if the commodities are sold at prices earning the average rate
of profit on capital invested. They "regulate" in the sense that they set
upper and lower limits for price-levels. There is a "predominant"
price-level above or below which commodities are much less likely to be

3) Empirical price averages across a longer interval of time. These are a
statistical average of the commodity price-levels in the long term, obtained
by averaging out the different prices which a type of commodity trade for.

The theoretical/analytical question that has to be answered for an adequate
theory of dynamics, is then how exactly these three aspects are related.
B. Marx is insufficiently specific about the valuation and timing of
production prices. Several different production prices can be distinguished:

1) the private or enterprise production price which forms the starting-point
of the analysis. This price equals the cost-price and profit on production
capital invested which applies to the new output of a specific enterprise
when this output is sold by the enterprise. This production price can be
compared to the average production price that obtains for a sector or

2) the sectoral production price. This price equals the average cost-price
and average profit on production capital invested which applies to the
output of a commodity produced by a specific industry, sector or branch of
production (at "producer's prices"). This is the average production price
which applies for a particular type or class of product, reflecting the
average return the producers can normally expect to obtain. In particular,
Marx notes the differences between industrial and agricultural production

3) the inter-sectoral production price. This price refers to the sale of
output at producers' prices which reflect an average profit rate on a
quantity of capital invested that applies to various different sectors of
industry (this is the fully formed production price Marx most often has in
mind in his theoretical discussions; it reflects the product-price at which
the average rate of profit on capital applying to a whole economic community
is obtained).

4) the economic production price. This price equals the average cost price
and average profit of an output at the point of sale to the final consumer,
including labour-value contributed by all the different enterprises
participating in its production (factory, storage, transport, packaging
etc.). In modern times, "costing" production in order to establish the
expected yield on capital invested in it often involves assessing the whole
value chain relative to the price level at which products can be sold to the
final consumer. The question then is, how can the whole production of a
product - from the factory gate to the final consumer - be organized so that
it can sell to the final consumer at a price that the market will bear?

We can losely talk about production prices, but obviously there is a
considerable difference in valuation depending on whether we assume
producer's output prices or final consumer prices, or whether we assume
national or world market prices.
C. Marx notes that there may be a long-term divergence between commodity
values and production-prices, for example between the manufacturing sector
and the agricultural sector (where the manufacturing production price is
above value and the agricultural production price is below value, long term,
effectively "an unequal exchange").

1) This raises the important question of whether, if there is the
possibility of longer-lasting deviations between commodity values and
production prices among different sectors, how the production price can be
an "equilibrium price" at all. Presumably, the system would be in
equilibrium only if the production price of commodities is equal to the
value of commodities. If such deviations occur, how do we define the
equilibrium state?

2) According to Marx, production prices exist irrespective of whether supply
and demand balance out, and irrespective of whether the production prices
are equal to commodity values or not. They exist as theoretical price levels
and as empirical price-levels. The question then is whether or in what sense
these prices can be considered as equilibrium prices (or "equilibrating"
prices) at all.
D. When Marx draws an analogy between his own concept of production prices
and the "natural prices" of the political economists, he obviously does not
mean, as Ricardian and Smithian Marxists argue, that his production prices
are identical to the "natural prices".

1) Marx (contrary to Ricardian and Smithian Marxists) regarded the concept
of "natural prices" as an ideology which failed to explain the operative
equilibrating forces, and merely assumed that they are there.

2)Apart from rejecting the very notion that there are such things as
"natural" prices (a concept which evades the whole problem of what the
equilibrium would consist in), the production prices of commodities may
according to Marx diverge greatly from commodity values for a prolonged

3) If Marxian production prices were really "natural prices", it would
effectively mean that production prices equal commodity values, in other
words they would be "standard supply prices" which accurately express
commodity values. But Marx's argument is precisely that production prices
deviate from commodity values and are not equal to the latter, it is merely
that commodity values constrain the amount of fluctuation of production
prices, and that production prices constrain the amount of fluctuation of
actual market prices.

4) If by definition there are always deviations between commodity values,
their production prices and actual market prices, then a market equilibrium
never exists other than in theory. At best we could say that the evidence
for equilibrium is that markets do clear, even if commodities are sold above
or below their values, or above andbelow their production prices. But if
there are incessant price fluctuations, in what sense can we say there is
real evidence for any equilibrium at all? This question rapidly transforms
into the question of what is being "equilibrated" anyway - if not the
supply-demand relationship, then the "production system" or the "economic
system". But this eliding from one notion of equilibrium to another
conflates the concept of equilibrium with the capacity for the economic
system to reproduce itself on a larger and larger scale. Logically, however,
enlarged reproduction does not require equilibrium, it might just be that
this enlarged reproduction occurs haphazardly through continual adjustments
and with incessant price fluctuations.

5) If the notion of equilibrium is only a purely theoretical idealisation
for which there is no empirical evidence other than the imperfect
adjustments of supply and demand to each other (under the conditions that
more or less could technically be supplied but isn't, and human needs are
greater or lesser than the actual "monetarily effective" demand for
commodities that would satisfy needs), the question is raised whether the
counter-factual idealisation of equilibrium is at all useful for
understanding the dynamics of enlarged capitalist reproduction. If the
production system is said to move towards equilibrium, as the foundation for
a theory of capitalist dynamics, but there is no empirical evidence whatever
for it, what justifies the use of the concept of equilibrium at all?

To my knowledge these issues have never been seriously addressed by the


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Received on Thu Jan 27 09:07:34 2011

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