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In 3774 Ajit argued for a need for a theory of prices.
There is indeed a real problem here.
After much effort on my part, Ajit finally agreed with me (and Fred)
however that in Marx's positive theory the cost price of a commodity is
given by the money sum laid out as constant and variable capital.
Since in his transformation example Marx had assumed that means of
production and wage goods had been sold at their value, he has to modify
cost prices now that he has demonstrated why prices of production
have to differ from values.
It is of course impossible to make the modifications unless we know the
unit prices at which wage goods and means of production sold in the
previous period. And unless we know this, we cannot calculate the exact
prices of production or profit rate for this period. Ajit is correct here.
What are we to do? Now I suggest that an unreasonable solution to this
problem is worse than no solution at all. That is, in order to determine
the unit prices of the inputs Ajit makes the unreasonable assumption that
they are the same as the unit prices of the outputs. Carchedi, Freeman,
Kliman and Giusanni have argued against the making of this assumption. In
his review of Freeman and Carchedi, John King (if memory serves me) has
countered that Marx worked himself on the basis of stationary prices. But
this is to misread Marx as I have said half a dozen times.
In vol 2 Marx makes the simplfying assumption of constant values (or
prices) in order to render tractable the study of the possibility of
reproduction without a permanent consumption deficit. That assumption along
with others (e.g. annual turnover of fixed capital) plays no role in the
third volume in which the technical conditions are dynamically transformed
in each period, which disallows unit input prices from equalling unit
output prices. King's criticism of Freeman and Carchedi arises out of total
incomprehension of Marx's method of successive approximations, as
reconstructed by Grossmann.
Moreover, I have argued that the modification of cost prices makes no
difference to the point Marx is making here. So no solution to the
modification of cost prices is better than the unreasonable Sraffian one.
That is, however cost prices are modified, the general rate of profit is
determined in the same way. Total value, less total cost prices=total
profit, then divided by total cost price gives r (or the mark up as Ajit
calls it). That is, Marx is laying bare here in the general rate of profit
the form in which the law of value must assert itself.
Ajit then said I had confused my units. But I don't see this. Let us say
that the monetary expression of social labor time is one dollar per hour of
social labor. Then total value has a monetary expression, and thus total
cost price can be subtracted from it.
I also tried to show that there is a simple step from Marx's value based
theory of the formation of the general rate of profit to his crisis theory.
Ajit then accused me of talking nonsense. Quite a strong charge. I then
asked him what Marx is getting at Capital 3 (Vintage), p. 270 (if memory
serves me). I am at a hotel terminal without my books. As far as I can see,
there has been no effort to make sense of what Marx is saying here.
All the best, Rakesh
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