[OPE-L:1664] Re: Re: Re: determination of value transferred

Subject: [OPE-L:1664] Re: Re: Re: determination of value transferred
From: Andrew_Kliman (Andrew_Kliman@email.msn.com)
Date: Thu Nov 11 1999 - 14:33:28 EST

This is a reply to Fred's OPE-L 1654, and a comment on the ensuing
discussion between John and Jerry OPE-L 1658-1660.

John's OPE-L 1658 is completely right, of course. Despite his
denials, Fred's interpretation of the determination of value
transferred is the standard simultaneist one, in which "...
valuation of the given amount of constant capital can only take
place after reproduction takes place. ... to determine input
prices at the beginning of the period we must already know the
output prices at the end of the period. ... your relative
prices are the same ones that any Sraffian would derive."

Jerry (OPE-L) asks whether Fred hasn't already answered these
objections. He has tried to do so, but in fact he hasn't. It
isn't his fault. The objections are simply unanswerable. For the
last 3-1/2 years, at least, I've been asking Fred again and again
to produce even a single example in which, given the absence of
fixed capital, he obtains results that contradict those of the
self-styled "Sraffians" and other proponents of simultaneism. He
hasn't been able to do so.

Again, this is not Fred's fault. No one could do so. It simply
isn't possible. If you revalue the constant capital at
post-production replacement cost, you are valuing inputs and
outputs simultaneously. You therefore necessarily get the
well-known simultaneist results:

* Marx was wrong to say that rising productivity brought about by
mechanization can lower the general rate of profit

* Marx was wrong to say that changes in production conditions in
luxury industries lead to changes in the general rate of profit

* Marx was wrong to say that variations in output prices do not
lead to changes in the general rate of profit


I and others have produced example after example demonstrating
this. Fred simply has not been able to challenge them, or to
produce even a single counterexample. Once more, I repeat, that
isn't his fault. No such counterexample is possible.

Why, then, doesn't Fred just acknowledge this? Leaving aside any
speculation about subjective factors, about which I don't care,
the reason is that constant capital-value in his interpretation is
"given," and he believes that its givenness rescues his
interpretation from the results that follow inexorably from
simultaneous valuation.

He's simply wrong about this. His "givenness" is superfluous,
irrelevant, a red herring. It has no implications; it changes
nothing. It is what philosophers call "empty." And that is
because it is not "givenness" in the normal sense. Fred holds
that constant capital is REVALUED at post-production replacement
cost. He also says that the value transferred from constant
capital is GIVEN. According to standard usage, this is simply
self-contradictory: if something is a given, it is a datum, a
premise. It IS. You don't fool with it. You don't revalue it.
If you do so, IT IS NO LONGER A GIVEN.

But this is not what Fred means by "given." What he means is that
the post-production replacement cost of the inputs IS the "given"
value transferred from constant capital. I quote from his latest

"... what is the precise magnitude of the C that is taken as

"According to my interpretation, the precise magnitude of the C
that is taken as given is determined by current reproduction
[replacement] costs. Therefore, if the value of the means of
production ... changes ANYTIME between the purchase of the means
of production and the sale of the the output, then the value of
the GIVEN constant capital also changes."

Note that this would make no sense if "GIVEN" were to have its
usual meaning. If something is caused to change, it is not given,
according to standard usage. But according to Fred's usage,
there's no contradiction between the givenness of constant capital
and its determination at post-production replacement cost.

say, as the garden-variety adherents of simultaneism do, that the
technology and real wages are the givens, the value transferred is
determined by the post-production replacement cost of the inputs.
If on the "other" hand you say, as Fred does, that the constant
capital-value is given, the value transferred is STILL determined
by the post-production replacement cost of the inputs! The
"givenness" of constant capital is utterly irrelevant. Assert it
or deny it, it makes no difference. Either way, one gets the SAME
numbers, and therefore the SAME anti-Marx results. The "other"
hand is the SAME hand. This doesn't mean that Fred is a
"Sraffian," but it does mean that his position is
INDISTINGUISHABLE from theirs on this matter.

To illustrate, here's how, under garden-variety simultaneism, and
under Fred's interpretation, values would be computed in an
economy that produces corn by means of corn and living labor.

Garden-Variety Simultaneism
Under garden-variety simultaneism, we start with physical data as
our givens:

3 bushels seed-corn, 8 hrs. labor ---> 5 bushels corn output.

We then solve for the unknown unit value, v:

3v + 8 = 5v

v = 4.

If the value of money = 1/MELT = 1 hr/$, then the money price of
corn, as input and as output, is

p = 4/1 = $4/bushel.

The money-value transferred from constant capital is thus

($4/bu)*(3 bu) = $12.

Fred's Interpretation
Under Fred's interpretation, we again have the 8 hrs. labor, and
the value of money = 1, so the monetary expression of the value
added by living labor is 8/1 = $8. To get the total value (W) of
corn output, we add to this the constant capital-value
transferred, C, which is "given." Thus:

C + $8 = W.

But the "given" C is itself given by the post-production
replacement cost of the seed-corn. Denoting the unit replacement
price as P, W = 5P and C = 3P, and plugging these in, Fred gets

3P + $8 = 5P

P = $4/bu.

The money-value transferred from constant capital is thus

C = ($4/bu)*(3 bu) = $12.

Different "method," different "interpretation," different
"givens." Yet the SAME numbers, the SAME determinants, the SAME
anti-Marx results.

Fred's route is just more circuitous -- an "irrelevant detour," to
borrow a phrase from Samuelson. C + $8 = W is a superfluous
distraction; it does no work. All of the work is done by the
physical quantities, together with the postulate that the input P
equals the output P -- the same physical quantities and the same
stationary price postulate employed in garden-variety
simultaneism. They are what yield 3P + $8 = 5P. It is that
equation which allows Fred to solve for P, and it is that solution
for P, together with the 3 bu. of seed-corn, which gives him his
"given" value of C. Fred could thus begin with 3P + $8 = 5P, as
other proponents of simultaneism do, and save himself a few steps.

Note that he must FIRST take the physical quantities as given, and
use them along with the stationary price postulate, to write down
3P + $8 = 5P. Only AFTER solving for P can he then determine his
C. And only THEN is its actual magnitude given; until then, it is
just an unknown. So Fred's "given" PRESUPPOSES a PRIOR given --
*alternative* to that theory, but merely its *result*.

Thus the following response by Fred is simply not correct:

"Andrew argues in his most recent post that our two
interpretations of constant capital will be different because
constant capital is determined "temporally" in his interpretation,
and is detemined "simultaneously" with output prices in my
interpretation. But this is a misunderstanding of my
interpretation of the determination of constant capital and prices
of production. According to my interpretation, prices of
production are NOT determined simultaneously with input prices
(in the Sraffian way, with the physical inputs and outputs as the
initial givens), but are instead determined in the way I have
just described, WITH CONSTANT CAPITAL TAKEN AS GIVEN, and with
the precise magnitude of the given constant capital depending on
current reproduction costs."

The major error is the word "instead." As I've just shown for the
umpteenth time, Fred has no way of getting his "given" C without
*first* equating input and output prices. The ONLY "given" value
of C that satisfies Fred's condition (C must be valued at
replacement cost) is $12, which of course means that the
replacement price of corn is $4/bu. These are the SAME results as
the "Sraffian" ones. They are the results obtained by equating
the input price with the output price.

Fred, if you wish to dispute this, you simply need to provide us
with a value of C other than $12 that you'd accept, and a value of
P other than $4/bu, for the economy illustrated above.

But if these are your figures, and they are the "Sraffian"
figures, then it follows syllogistically that your figures are the
"Sraffian" figures.

True, your logical method, "givens," and so forth may be
different, but they fail to distinguish your RESULTS from those of
the "Sraffians." The stationary price postulate does all the
analytical work. That postulate gives the "Sraffians" their
results. It gives you your results. Since it is the same
postulate, you get the same results.

No discourse on method is relevant here. I've show that the
difference in method is without implications. By pointing to
differences in method, you would not prove anything. You must
either disprove my demonstration, by producing NUMBERS that show
that your method *does* lead to different results, or accept the
demonstration. Merely to re-assert that your method is different
and "therefore" your results are different is to beg the question.
I am challenging your "therefore"; I am saying that your
methodological difference from garden-variety simultaneism is an
empty one; I'm saying that your results are the same DESPITE the
differences in method. I've been saying this for years and I'll
keep saying it until Thompson and Sinha and their buddies finally
succeed in silencing me for good. PLEASE, PLEASE, PLEASE stop and
consider whether the premise you have taken for granted all this
time, as obvious and common-sensical -- the premise that
methodological differences produce differences in results -- might
not be true in this case. PLEASE, PLEASE, PLEASE turn your
attention to showing us that they do produce differences in the
results, or acknowledge that they do not. Please take this point
seriously. I'm begging you.


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