With your indulgence, I want to return to the textual evidence presented
by Rakesh to support his interpretation (which is really the standard
interpretation) that the COST PRICE IS DIFFERENT in the determination of
the value and the price of production of commodities, and that Marx
acknowledged that he had failed to makes this distinction in his own
determination of prices of production. Rakesh has presented two main
passages to support his interpretation: pp. 264-65 and pp. 308-09 of
Volume 3 (1981 Vintage edition). I want to review these two passages and
the surrounding context in detail, the first passage in this post and the
second passage in a subsequent post. I think the issue is important
enough for a detailed reexamination of the textual evidence. Those not
interested can of course hit the delete button.
Rakesh's first passage on pp. 264-65 is in the last of five important
paragraphs in the middle of Chapter 9 (pp. 263-64) in which Marx discussed
the relation between VALUE, COST PRICE, and PRICE OF PRODUCTION in his
theory. Of special importance in these paragraphs for the current
discussion is whether Marx said that the cost price is THE SAME or is
DIFFERENT in the determination of value and price of production. Rakesh's
interpretation is that the magnitude of the cost price is DIFFERENT in the
determination of price of production than in the determination of
value. I argue, to the contrary, that the cost price is THE SAME for the
determination of both value and price of production. We shall see what
Marx said in these crucial paragraphs about the cost price in the
determination of value and price of production.
The first of these five paragraphs introduces the subject of these key
concepts in Marx's theory:
"In Volumes 1 and 2 we were only concerned with the VALUE of
commodities. Now a part of this value has split away as the COST PRICE,
on the one hand, while on the other, the PRODUCTION PRICE of the commodity
has also developed, as a transformed form of value." (emphasis in the
original)
Notice to begin with that there is no mention here of two cost prices, one
for the determination of value and one for the determination of price of
production. There is only "THE cost price", which is contrasted with
value and price of production. This is the way the cost price is
discussed throughout.
In Marx's Manuscript of 1864-65, from which Engels edited what we know as
Volume 3, the next paragraph is an extremely important one, in which Marx
clearly stated the relation between his concepts of value, cost price, and
price of production, including in unambiguous algebraic formulations
(Marx's original manuscript has recently been published in full in German
for the first time, but unfortunately has not yet been translated into
English). However, for some inexplicable reason, Engels LEFT OUT THIS
CRUCIAL PARAGRAPH in his edition of Volume 3. This "missing
paragraph" has been discovered recently by Alejandro Ramos (International
Journal of Political Economy, Winter 1998-99). This crucial paragraph is
as follows:
"The cost price is, as we see, always smaller than the value of the
commodity. The price of production can be smaller, bigger, or equal to
the value of the commodity. The value of the commodity = the value of the
capital consumed in the production of the commodity plus the
surplus-value. If we take, as in the original development of the cost
price (Chapter 1), cost price = value of the capital advanced in the
production of the commodities, we have the following equations:
value = cost price + surplus-value V = K + s
or profit as identical with surplus-value or = K + p
cost price = value - surplus-value or K = V - s
price of production = cost price + profit P = K + p'
calculated according to the general rate of profit = p'.
Because K = V - s and V = K + s, the value of the commodity is always >
than the cost price. Depending on whether s or p' of each special
production sphere is bigger or smaller or equal, > < or = to the average
profit determined by the general rate of profit, then P > < or = V.
Because V = K + s or p, and P = K = p', V = P when s = p', > P when
p' < s, and < P when p' > s."
Thus we can see in this paragraph that THERE IS ONLY ONE COST PRICE (K) in
the determination of both value and price of production. The value of
commodities = COST PRICE + surplus-value (V = K + s) and the price of
production of commodities = COST PRICE + average profit (P = K + p'). The
K is these two equations is the same K. There is not one K for the
determination of value and another K for the determination of price of
production. Since K is the same for both value and price of production,
whether price of production is equal to, greater than, or less than, value
depends solely on whether the average profit is equal to, greater than, or
less than the surplus-value. All this is clearly and unambiguously stated.
Marx then went on in the next two paragraphs to repeat and elaborate these
same points, again with algebraic formulations and numerical
examples. Especially interesting is the case of COMMODITIES PRODUCED WITH
CAPITAL OF AVERAGE COMPOSITION, in which case price of production = value.
"If we take it that the composition of the average social capital is 80c +
20v, and the annual rate of surplus-value s' = 100 per cent, the average
annual profit for a capital of 100 is 20 and the average annual rate of
profit is 20 per cent. For any cost price k of the commodities annually
produced by a capital of 100, their price of production will be k +
20. In those spheres of production where the composition of capital is
(80-x)c + (20+x)v, the surplus-value actually created within this sphere,
or the annual profit produced, is 20+x, i.e. more than 20, and the
commodity value produced is k + 20 + x, more than k + 20, or more than the
price of production. In those spheres of production where the composition
of capital is (80+x)c + (20-x)v, the surplus-value or profit annually
created is 20-x, i.e. less than 20, and the commodity value therefore is k
+ 20 - x, more than k + 20, or more than the price of production. Leaving
aside any variation in turnover times, THE PRODUCTION PRICES OF
COMMODITIES WOULD BE EQUAL TO THEIR VALUES ONLY IN CASES WHERE THE
COMPOSITION OF CAPITAL WAS BY CHANCE PRECISELY 80c+ 20v...
How these capitals function after the average rate of profit is
established, on the assumption of one turnover in the year, is shown by
the following table, in which capital I represents the average
composition, with an average rate of profit of 20 per cent.
I. 80c + 20v + 20s. Rate of profit = 20 per cent.
Price of the product = 120. Value = 120.
II. 90c + 10v + 10s. Rate of profit = 20 per cent.
Price of the product = 120. Value = 110.
III. 70c + 30v + 30s. Rate of profit = 20 per cent.
Price of the product = 120. Value = 130."
(emphasis added)
Could it be clearer that the COST PRICE IS THE SAME for the determination
of both values and prices or production? In these examples, the cost
price is always equal to 100, in the determination of both the value and
the price of production of the different commodities. The COST PRICE DOES
NOT CHANGE from one magnitude in the determination of value to another
magnitude in the determination of price of production. The only
difference between values and prices of production is whether
surplus-value or average profit is added to this same cost price.
Marx continued:
"Commodities produced by capital II thus have a value less than their
price of production, and those produced by capital III have a price of
production that is less than their value. Only for capitals such as I, in
branches of production whose composition chanced to coincide with the
social average would the value and the price of production be the same."
Thus we can see that Marx concludes that for average commodities (and for
average commodities alone), THE PRICE OF PRODUCTION IS EQUAL TO THEIR
VALUE. Since the cost price is the same for both value and price of
production, and since for these average commodities average profit =
surplus-value, it follows that price of production of these average
commodities is equal to their value. This conclusion of the equality
between the price of production and the value of average commodities,
which is emphasized by Marx, is VALID IF AND ONLY IF THE COST PRICE K IS
THE SAME in the determination of both the price of production and the
value of these commodities. I will return to this important point in my
next post.
Then we come to the fifth and final paragraph in this discussion of the
relation between value, cost price, and price of production. This
paragraph begins with the following sentences emphasized by Rakesh to
support his interpretation:
"The development given above also involves a MODIFICATION IN THE
DETERMINATION OF A COMMODITY'S COST PRICE. It was originally assumed that
the cost price of a commodity equaled the value of the commodities
consumed in production. But for the buyer of a commodity, it is the price
of production that constitutes its cost price and can thus enter into
forming the price of another commodity. As the price of production of a
commodity can diverge from its value, so the cost price of a commodity, in
which the price of production of other commodities is involved, can also
stand above or below the portion of its total value that is formed by the
value of the means of production going into it. It is necessary to bear
in mind this MODIFIED SIGNIFICANCE OF THE COST PRICE, and therefore to
bear in mind too that if the cost price of a commodity is equated with the
value of the means of production used up in producing it, it is always
POSSIBLE TO GO WRONG. (emphasis added).
Rakesh's interpretation of these sentences (the standard
interpretation) is that the "modified significance of the cost
price" means that the MAGNITUDE OF THE COST PRICE IS DIFFERENT in the
determination of value than in the determination of prices of
production. Marx was supposedly acknowledging in this passage that in his
own determination of prices of production earlier in the chapter, he had
failed to make this transformation.
But such an interpretation is contradicted by the preceding three
paragraphs, which we have just reviewed, and in which Marx clearly stated
that the cost price IS THE SAME MAGNITUDE in the determination of both the
value and the price of production of commodities. If Marx were saying in
this paragraph that the cost price is different in the determination of
value and price of production, then all the algebraic formulations in the
preceding paragraphs about whether P > < or = V, depending solely on
whether p' > < or = s, would be nonsense. Likewise, the discussion about
average commodities, whose price of production = value, would also be
nonsense.
Furthermore, this interpretation is also contradicted by the rest of the
very same paragraph, which is also ignored by its proponents, including
Rakesh. The rest of this paragraph is as follows:
"Our present investigation does not require us to go into further detail
on this point. THE cost price of a commodity is a GIVEN PRECONDITION,
independent of his, the capitalist's, production, while the result of his
production is a commodity that contains surplus-value, and therefore an
excess value over an above ITS cost price. As a general rule, the
principle that THE cost price of a commodity is less than its value has
been transformed in practice into the principle that ITS cost price is
less than the price of production. For the total social capital, where
price of production equals value, this assertion is identical with the
earlier one that THE cost price is less than the value. Even though it
has a different meaning for the particular spheres of production, the
basic fact remains that, taking the social capital as a whole, THE cost
price of the commodities that this produces is less than their value, or
than the price of production which is identical with this value for the
total mass of commodities." (emphasis added)
Thus we can see that in the rest of this paragraph Marx states that, even
though the cost price is not equal to the value of the inputs, it is still
nonetheless true that surplus-value = value - cost price, from which it
follows that value = cost price + surplus-value, as in the preceding
paragraphs. The same cost price is subtracted first from the value of
commodities (to determine surplus-value) and then from the price of
production to determine the average profit. There is only one magnitude
of cost price mentioned here. Notice how many times Marx said "the" cost
price or "its" cost price. Nothing is said about two magnitudes of cost
price, one for the determination of value and another for the
determination of price of production. The same cost price is taken as a
"given precondition" in the determination of both the value and the price
of production of commodities. Therefore, Rakesh's interpretation of the
beginning of this paragraph is also contradicted by the rest of the very
same paragraph.
There is another interpretation of the beginning of this paragraph that is
not contradicted by the preceding three paragraphs and by the rest of the
same paragraph. According to this alternative interpretation, the
"modified significance of the cost price" does not mean that the magnitude
of the cost price is different in the determination of value and price of
production. Rather, it means that the same cost price that is taken as
given in the determination of both value and price of production (as
discussed in Marx's previous paragraphs) IS ITSELF DETERMINED DIFFERENTLY
THAN WE ORIGINALLY ASSUMED. We originally assumed in Volume 1 that the
cost price is equal to the value of the inputs. However, after the
determination of prices of production in Volume 3, we now see that the
given cost price is equal to the price of production of the inputs. BUT
THIS MORE COMPLETE EXPLANATION OF THE GIVEN COST PRICE DOES NOT CHANGE THE
MAGNITUDE OF THE GIVEN COST PRICE. The same cost price continues to be
taken as given in the determination of both the value and the price of
production of commodities. This alternative interpretation, unlike the
standard interpretation, is consistent with the surrounding paragraphs, in
which Marx clearly stated that the cost price is the same in the
determination of both value and price of production.
Therefore, it seems to me that the overall weight of these important
paragraphs in Chapter 9 supports the interpretation that Marx assumed that
the cost price IS THE SAME in the determination of both value and price of
production; i.e. that the cost price DOES NOT CHANGE from one magnitude
for the determination of value to another magnitude for the determination
of price of production. The standard interpretation ignores what Marx
said in surrounding paragraphs, and therefore misinterprets the few
sentences that it focuses on. The crucial "missing paragraph" no doubt
contributed to this misinterpretation. But now that the missing
interpretation has been discovered and we can see the whole context of
these paragraphs more clearly, there is less justification for this
continuing misinterpretation.
This conclusion is further strengthened by additional passages in Chapter
11 and 12 of Volume 3, in which Marx returned to the subject of the price
of production of average commodities, and which I will discuss in my next
post.
Thanks for your indulgence. I look forward to replies and comments and to
further discussion.
Comradely,
Fred
This archive was generated by hypermail 2b30 : Wed Jan 31 2001 - 00:00:03 EST