# [OPE-L:2447] Re: value of constant capital and variable capital

Paul Cockshott (wpc@cs.strath.ac.uk)
Mon, 3 Jun 1996 03:49:41 -0700

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I had originally written:
>
> This seems suspiciously close to defining value to be price, which is of
>course a rather easy way to transform values into prices of production.

In the course of a long reply Fred makes the point:
>
>6. Marx also took as given in this theory of surplus-value the quantity of
>current abstract labor (L) in the economy as a whole and the value of money
>(m) (as already noted). The inverse of the value of money (1/m) is the
>money-value produced per labor hour. The product of L and (1/m) determines
>the money-"new-value" (N) produced in the economy as a whole by current
>labor (i.e. N = (1/m)L ). This is the key assumption of Marx's labor theory
>of value and his surplus-labor theory of surplus-value.
>
Paul C
This is what I suspected you were doing. You take an equation that is
valid as an aggregate for the economy as a whole for deriving the average value
of money and then apply it to converting individual bundles of commodities
from money prices into labour values. There is obviously a dimension reduction
problem here. Value is a vector, you are substituting a scalar. This will give
rise to an error whose scale will depend upon how diverse your bundle of
commodities
is. If the money spent as constant capital is divided equally among a number
of commodities then the error is small. In the case of some industries this
is invalid. Try it for the oil refining industry. You will find that in this
case the error is considerable.

Fred:
>9. Finally, one key point with respect to Marx's theory of prices of
>production. Marx's theory of prices of production can be represented by the
>equation:
>
>(5) Pi = Ci + Vi + Ri
>
>where Ci and Vi are the amounts of constant capital and variable capital in
>each industry, and Ri is the profit in each industry and is equal to
>r(Ci+Vi) (ignoring the difference between flows and stocks). The key point
>is that, in this theory of prices of production, THE SAME QUANTITIES OF
>CONSTANT CAPITAL AND VARIABLE CAPITAL ARE TAKEN AS GIVEN as in the theory of
>surplus-value summarized above. The only difference is that in the theory
>of surplus-value the aggregate quantities of constant capital and variable
>capital are taken as given, and in the theory of prices of production the
>individual quantities of constant capital and variable capital in each
>branch of production are taken as given. By assumption, the sum of the Ci's
>is equal to C and the sum of the Vi's is equal to V. THIS is why constant
>capital and variable capital DO NOT CHANGE in the transition from the
>aggregate theory of surplus-value to the theory of prices of production, and
>why constant capital and variable capital DO NOT HAVE TO BE TRANSFORMED,

Paul C:
If one does not change their value composition in performing the transformation
one is implicitly transforming their use value composition to ensure that
the untransformed values and prices are consistent. If one is, like Marx, using
only 3 broad divisions of the economy then the errors arising from the
assumption
are negligable in practice. If one extents this to many products then the errors
might be significant.

I suspect that this approach is trying to occlude inconsistencies in the Marxian
theory of prices of production. If hard core Sraffians like Steadman decided to
debate the issue, you might find your positions hard to defend against him.
Paul Cockshott

wpc@cs.strath.ac.uk
http://www.cs.strath.ac.uk/CS/Biog/wpc/index.html