[OPE-L:5468] Re: On confusions due to consumption

Mon, 15 Sep 1997 08:50:49 -0700 (PDT)

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Re Paul C's ope-l 5451:

Paul, thanks for your response. Hope my poor English will be
understandable for you.

I think the discussion arises from different, lets say "methological
points of view". It seems you are thinking in a kind of ex-ante
imaginary scenario in which capitalists, in an *atemporal* way,
"choose" among different techniques, i.e. something similar to
that one can find in a Microeconomics texbook. Im thinking in a
*temporal* process through which the law of value operates and, in
particular, in the *ex-post results* of this temporal process. It
seems to me that the ex-ante framework is deeply *static*, excluding
the conceptualization of the temporal process of capital

You say:

> Yes but the average in any real capitalist economy will be chosen
> with respect to costs and profitability. A process such as that
> suggested by Kliman could not be profitable and would not be
> chosen and could not become the average.

I think "Klimans process" is similar to the example I suggested re
barley in Scotland. Barley capitalists invested money guessing to
gain some profit at the end of the year, lets say, 20%. But there is
some disease which they *cannot* predict ex-ante. The disease results
in a barley negative net product.

I think you are saying (please, correct me if Im wrong) that
if capitalists had been able to predict the disease in their ex-
ante calculations, they wouldnt have invested in barley. The reason
is that a negative net product would imply a "negative value",
a situation that transforms barley cultivation in an "unproductive"
activity ("unproductive" meaning that it produces less use-value than
that it consumes), so that it would have been discarded, investing
the money in other activities, for example holding barley instead of
sowing it.

If this is so, I dont disagree completely with you but my analysis is
something different. Capitalists ex-ante calculations give them only
a vague idea that, at the end of the year, they will gain 20%. So
they advance money in barley because it seems to be profitable. But
we have the *unexpected* disease which provokes a partial destruction
of the harvest. I think the *necessary ex-post* outcome of this is a
rising in both, the unit *value* and *price* of barley. That is, a
quite different result from the predicted "negative value" in your ex-
ante scenario.

Marx considers this in "Notes on Wagner": "...if the price of
grain rises after a bad harvest, then its *value* rises, for one
thing, because a given amount of labour is *contained in a smaller
product*; for another thing, its *selling price* rises by much more
still..." C.W., Vol. 24, p. 531. So, unit value rises because total
labor spent is objectified in a smaller amount of barley, and price
rises due to the speculation caused by the bad harvest.

It is perfectly possible that, although a big amount of the *use-
value* barley had been lost, the *value appropriated* by selling the
remaining part of the harvest comes to be more than that expected. In
other words, thanks to the disease, barley cultivation as a whole
yields that year more than 20%.

Capitalism is a money, value-grounded economy, not a use-value
oriented one, unfortunately. Profitability and costs are measured in
*value* terms (in terms of social labor-time represented by
money), not in *use-value* terms. It seems to me that this point
is not completely clear in your post: Sometimes you speak about
"profitability" and "costs" in terms of *prices*, but these prices
seem to have no connection whatsoever with *values*; they are not
representations of value: What are they? Sometimes you speak about
"profitability" in *use-value* terms, something foreign to capitalism.

So, we have, firstly, that ex-ante calculations can be quite
different from ex-post results and, secondly, that ex-ante guesses
are not done with a "use-value logic" as, seemingly, you are
suggesting. In other words, if capitalists had been able to predict
the disease spreading in barley fields, they would have considered
this activity as (though very risky) extremely profitable, given the
known consequences in terms of rising prices and speculation. They
would foresee wonderful businesses. Scarcity of some use-value
usually shifts capitalists to this activity.

Certainly, in a *very hypothetic* situation in which capitalists
would know *with absolute certitude* (a "perfect knowdledge of
the future") that the net product will be negative, a lot of them
would prefer -as you suggest- to hold barley instead of planting it:
At the end of the year, they would have more barley for selling at
speculative prices. But, even though, some of them could think that,
as the disease would spread randomly, they could be not completely
affected by it. Therefore, an individual positive net product could
be possible, thereby making more money than storing the seed. You
have also to consider that stocks have a cost and may be destroyed
producing a negative net product too. That is, if you stock the
barley and a couple of bugs decide to have some meal, you have indeed
a negative net product. (I think, this is what Andrew K. is
suggesting in ope-l 5450.)

But, instead of focusing on capitalist *imaginary expectations*,
what I wish to stress is that, actually, capitalists dont care about
*use-value* magnitudes but about *value* magnitudes. Capitalists dont
care if they sowed 100 Ton of barley and harvested only 80 Ton (net
product = -20). What they care about is the *price* (the monetary
representation of *value*) at the end and at the beginning of the
year. For example, if each Ton of barley costed them $2 (total
investment, $200) and, given the disease, prices rises to $5/Ton,
they will pocket 80*$5 = $400. One could even think that the disease
is provoked by some capitalists in order to reduce barley *physical*
output and to raise the *value* appropriated!

That is, even in your ex-ante imaginary and atemporal framework
(which I dont find particularly useful to describe capitalism), the
criterion to choose between profitable investments is not a *use-
value* magnitude, as net product, but a *value* magnitude. Barley
cultivation could be labelled as "highly risky", but this doesnt mean
"unproductive" of *value*, at all.

> This is absurd, holding stocks is always an available process.
> Speculation associated with the holding of stocks is an inherent
> part of commodity producing economies.

Sure, but there is no way to knowing at the beginning of the year
that the disease will come. Everything seems to indicate that profit
will be positive. So, it makes no sense to hold *abnormal* stocks.
Or, if you want, the probability of making more money holding
abnormal stocks than cultivating the seed is so small that this
process is promptly discarded. Although available *in abstract*, it
is actually out of consideration. There is not reasonable element to
include this situation in the "blueprint" of capitalists imaginary

> It is because knowledge of the future is not perfect that one always
> has speculative stock holding. If the agricultural process in
> question is subject to catastrophic crop failures of the type
> described, there will always be significant stock holding by
> speculators.

Im not suggesting that catastrophic failures are frequent.

> Under these circumstances what determines the value of the product
> is the long term average productivity, taking good years on bad, and
> taking the costs of storage for insurance purposes into account.

Agree. These stocks will offset in some degree the rising in the
value of the crop. Actually, value is determined not only by the
fresh product, but by the sum of fresh product + stocks. But all this
doesnt mean that the *value* of the crop is negative if net product
is negative. A negative net product will *raise* the "temporal
average" you are referring to.

> In that case the producers of the crop who experienced the crop
> failure will experience significant financial losses having to
> purchase new seed from the speculators to continue production at
> the previous scale. Their losses will be 1. the money laid out
> on wages 2. the money laid out to replenish seed from the
> speculators

This could be the sad situation of *some* capitalists whose harvest
is completely lost. But the remaining part of the harvest will have a
greater *value* per unit and a very high price. This means that, as a
whole, this year, barley branch appropriates *value* from other
branches and has a profit rate higher than the average. (See "Notes
on Wagner" for this kind of analysis.)

> Under these circumstances the labour was clearly unproductive,
> failing to return the value of labour power, far less return a
> profit. It belongs in the same category as the labour of personal
> servants that that the estate owners might employ.

In capitalism, "productive labor" means labor which produces *surplus-
value* and I dont see why a "negative net product", which is a *use-
value* magnitude, would imply that there is no surplus *value*. If
total output + stocks = 0, I, of course, agree with you. But a
"negative net product" doesnt mean this, but only that total
(positive) physical output is lesser than total physical input.

> Prices will rise for Barley in Scotland to take into account the
> additional costs associated with importing the crop, along with the
> rise in the world market price brought about by the world wide fall
> in production relative to labour expended.

Here you seem to agree that VALUE is rising. So, you are not
restricting the range of your "value function". Nor are you stating
that value is "negative".

> There is confusion as to the range over which the value function
> is defined. As the net product falls towards zero the value tends
> to infinity. Once the net product becomes negative, value becomes
> undefined, since no process producing a negative net product will
> be employed in a capitalist economy.

Note that in your "value function", value depends on a use-value
category: net product. This, of course, could be a possible theory of
value, but I think there is textual evidence enough to dispute that
it is not Marx's theory. According to Marx, value doesnt depend on
the amount of use-value produced, but on the socially necessary labor-
time spent. In the case of a negative net product of barley, we have
a couple of positive magnitudes, namely, social labor-time spent and
total physical output. The quotient of these magnitudes is also a
positive magnitude, neither a negative nor an undefined one, as
arises from your (use-value) "value function" in the range over < or
= 0.

If value is not defined in function of use-value but in function of
the social labor-time spent, it is positive even in the range in
which net product is < or = 0. "Negative value" here is only a
paradox arising from a definition of value that, I think, doesnt
represent Marx's theory correctly although, of course, I agree that
it is *another* possible theory of value. It is not clear to me,
however, what is the advantage in supporting this use-value theory
of value. Even less clear is why this should be a correct
formalization of Marx's theory.

But, moreover, when capitalists choose a productive process, they
dont know, they *cannot* know, if net product will be negative. This
is an ex-post result. Any probabilistic reasoning is only this:
probabilistic. So, a technique will be employed conjecturing that it
will yield a positive net product, but it might happen that, ex-
post, it will not.

Summing up: The problem Im considering is not if this or that
activity can be profitable in the imaginary world of capitalist
expectations. These are only a result of a *mental state* similar to
that they have when betting on horse races. The problem is, rather,
how is calculated value when there is a negative net product in
*reality*, not in the imagination of capitalists.

If a negative net product is a non-possibility in the *expectations*
of capitalists (no-one will bet on a horse with 3 legs!), it is,
however, a daily possibility in *reality* (a horse breaks a leg
during the race!)

Since a negative net product is a real possibility, I think you
cannot exclude this range from your "value function" by arguing that
it is not viable in the imaginary world of capitalists expectations.
The issue here is that, since your value function states that value
depends on use-value, it gives a negative number when there is a
negative net product, something that is in strong contrast with any
reasonable guessing on that situation.

Alejandro R.