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In reply to Paul's [OPE-L:3544]
>
>Of course one can not forget wage costs as a flow but they are small as a stock
>
This is an empirical matter, and I wouldn't be quick to prejudge it. The
stock of v is accounted for in capitalist books as part of the value of
inventories of goods in process (since wage costs have to be assigned).
This category is not negligible itself, and I suspect that research would
show a significant proportion of it represents wages.
I would suggest that the accounting procedure is correct here. If wages are paid
weekly, then the mean stock of variable capital is about 2 to 3 days wages. Since
in practice wages are paid in arrears, the stock of variable capital is, from the point
of view of the firms, actually in debit to the workers. The inventories of goods in
process already include the value transfered to them by labour, by this point the
labour has been expended and only its effects remain
1. a change in the material form of the goods
2. an increase in their value
It would be a mistake to include any of this as variable capital as the increment
of value in the stocks of work in progress includes both the necessary and surplus
labour time.
The only instance where variable capital exists as a significant positive stock is
where substantial wage payments are advanced prior to work being done.
I had, prior to last year tended to treat variable capital in the conventional way when
processing national accounts. I would express profit rates as
p/(K+v)
with v being the annual wage bill. The error of my ways were pointed out by
Maniattis in his article in Capital and Class earlier this year. I now accept the
argument that one should not include v when computing the rate of profit using
national accounts. If anything one should express it as
p
--------
(K - tv/2)
where t is the average payment period of wages as a fraction of a year,
and v is the rate of wages paid per year. This gives us a consistent stock
quantity to divide by and, moreover, allows for the fact that employees advance
their labour to capital rather than vice-versa.
Duncan
Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
(212)-854-3790
fax: (212)-854-8947
e-mail: dkf2@columbia.edu
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