In his 3963, Ajit wrote: I don't have such trouble with the idea that money represents labor time. My problem is which money, and how and how much of labor time it represents. I don't think that when Marx said, "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 of production' ..." he simply made a huge error. All these are basically price concepts. So Marx's transformation problem is an attempt to develop his theory of prices based on labor-values of commodities, which are determined directly by the given technologies of production. _________________________ Me: Of course in developing that theory, Marx also shows that the law of value cannot directly account for the surface phenomena of bourgeois society, viz. prices. Marx's basic idea is that the form in which the law of value asserts itself is dynamic and changing. That is, the form in which the law of value is expressed is no longer in terms of prices but in terms of that which seems most clearly to contradict or at least modify the law of value--the principle of the average rate of profit. In this demonstration, Marx hardly descends to the determinants of actual relative prices in the market; nor does he have to. Read the chapter. Marx's effusive praise of Ricardo as scientist who attempted to explain the phenomena which appeared to refute most decisively the law of value on the basis of the law of value is rather obviously Marx's brimming self praise. _______________ Ajit: That's why I think taking prices as empirically given in this context is like putting the cart before the horse--it simply negates the theoretical problem posed. So what is the problem of "m" in this context? Now we know that by using either Seton's or Sraffa's formulations we could derive Marx's prices in terms of any commodity as money commodity. In Seton's formulation taking any commodity as 'money commodity' directly implies the assumption that we are assuming no value-price deviation for that particular commodity. _____________________ Me: For reasons of having through the power of abstraction to construct money as a theoretical reference point, Marx assumes away for the money commodity not only any price-value deviation but also any change in the value of money over time. Alas, this means that Marx is not after a realistic price theory which would be of interest to practical businessmen who needs to know how the actual value of money is changing over time ; rather Marx has an academic interest in comparing values in historical periods which means he must assume a constant value of money. This assumption is maintained throughout the three volumes of Capital. ___________________ Ajit: This gives us an "m" but this "m" will be completely arbitrary as well as logically not very sound. _____________ Me: The arbitariness would come from changing the money commodity in each successive period or even allowing the value of the same money commodity to change inter-periodically. In the case of the transformation tableaux, it is possible that the relative value of money was greater at the point that the inputs were purchased than when the outputs were sold. If we don't rule this out, it would then be impossible to demonstrate how the average rate of profit can be formed on the basis of the law of value alone. This is why there is no money commodity in the transformation tableau. Money has already been assumed to be an ideal or theoretical measure--a yardstick which is not changing. The assumption has to hold for the theoretical analysis in all three volumes of Capital. ______________________ Ajit: It is arbitrary because we could have chosen any commodity out of the n commodities as the money commodity, and so we could legitimately have n different values of "m". ______________ Me: To prevent such arbitrariness one must therefore choose one one money commodity and its value, and then stick with it. _______________ Ajit: It is logically also not coherent to claim, on the one hand, that in general all commodity prices must deviate from their values, and then claim, on the other hand, that for one arbitrary commodity this does not happen by decree. ________ Me: Not only is there is not price-value deviation in the value of money, the value of money is not even allowed to change over time. Far from being incoherent or arbitrary, any theoretical analysis of the dynamic system of capitalism over time could not get off the ground without the construction of a theoretical reference point. You seem not to understand this which is why I took the time to type out a long passage from Grossmann--you did not respond. It will help you understand not only Marx's method but the bold abstractions (or seemingly arbitrary or decreed abstractions) a successful science often has to make to puruse purely theoretical or academic topics of investigation. For example, don't you neo Ricardians claim that you have to assume constant returns to scale and invariant technical conditions--that is, decree the production system to be static in a seemingly arbitrary way--in order to carry out theoretical investigation. Marx also thinks that he has to hold the value of money as fixed and given. All the best, Rakesh ____________ It is like Marshall's claim that marginal utility of everything declines except money's. Thus this problem of "m" logically leads to finding out a theoretical commodity for which the value-price deviation will be zero. Marx's attempt to toy with the idea of a commodity produced with the average organic composition of capital was a search in this direction. But his investigation showed him that this was not completely satisfactory. If we leave out your empirical derivation of "m", and just deal with the claim that labor theory of value implies that the prices of net output (and in this case the prices will have to be prices of production and not the empirical market prices) must equal total live labor time. Then this gives us another "m". But then this is again a decree similar to saying that value-price deviation is zero for the money commodity. Moreover, given this "m" when we analyze the property of Marx's system, we find that many conclusion derived from taking this "m" do not sit well with Marx's analysis of his system. Same happens with other such candidates such as taking total prices of gross output equal to total gross value on the ground that prices must be bound by the total value substance. It seems to me that Sraffa's standard commodity comes closest to what Marx was looking for, but still is not completely satisfactory in my opinion. Thus i think the problem as posed by Marx is still unresolved, and probably insolvable. Now in your above statement, "...the basic macroeconomic determinants of profitability are the ratio of the value of output to the value of capital (what Tom Michl and I call the "productivity" of capital) and the ratio of profit to total value added (which is a transformation of the rate of exploitation). I take the essence of Marx's theory of value to be the observation that you can't change the rate of profit in the macroeconomy without changing one or the other or both of these variables." I'm not sure what you are trying to get at. In monetary terms your ratio of "value of output [gross] to value of capital" minus one will give you the rate of profit, i presume. Now this rate of profit is determined and will not change unless something changes either the value of output or the value of capital. What is the significance of the second ratio here? In anycase, I do not have any quibble over these macro level definitional identities. My problem is, how these macro level definitional identities help us in solving Marx's transformation problem? Cheers, ajit sinha
This archive was generated by hypermail 2b29 : Tue Oct 31 2000 - 00:00:08 EST