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This is a response to Ajit's (3810).
Ajit, I guess you did not bother to look up the references that I gave you
of Marx's comments on the effects of change in the value of money (the
inverse of m) on the rate of profit. So I guess I will have to write them
out for you.
"... a fall or rise in the value of money accompanied by a corresponding
rise of fall in wages etc. does not alter the relations but only their
monetary expression. If the same commodity is expressed in double the
number of pounds sterling, so also is that part of it which resolves into
profit, wages, or rent. But the ratio of these three to one another and
the real values they represent, remain the same. The same applies when
the profit is expressed by double the number of pounds, $100 is then
however represented by $200 so that the relation between profit and
capital, the rate of profit, REMAINS UNALTERED. The changes in the
monetary expression affect profit and capital simultaneously, ditto
profit, wages, and rent." (TSV.II: 203)
"The general rate of profit can never rise of fall through a rise of fall
in the total value of the capital advanced. If the value of the capital,
expressed in money, rises, the nominal monetary expression of the
surplus-value also rises. The RATE REMAINS UNCHANGED. Ditto in the case
of a fall." (Marx-Engels Collected Works, vol. 33, p. 106)
"Firstly, if other things being equal, and in particular the rate of
surplus-value, there is a change in the value of the money
commodity... Let the total capital be $100 and the profit $200, so that
the rate of profit is 20 per cent. If the price of gold is now halved or
doubled, in the first case the same capital that was previously worth $100
is now worth $200, and the profit has a value of $40 instead of $20
(i.e. it is expressed in this new amount of money). In the second case,
thek capital falls to a value of $50 and the profit is now expressed in a
product valued at $10. In both cases, however, 200:40 = 50:10 = 100:20 =
20 per cent. There would be no real change in the capital value in any
case such as this, but simmply a change in the monetary expression of the
same value and surplus-value. The rate of profit s/C, COULD NOT BE
AFFECTED." (C.III: 236)
"If it is only the money value that rises or falls (as a result of a
change in the value of money), the monetary expression of the
surplus-value rises or falls in the same proportion. The profit rate then
REMAINS UNCHANGED." (C.III: 238)
In other words, Marx assumed that, if the value of money changes, and
hence m changes, then the magnitudes of the inputs of constant capital and
variable capital will change proportionally. Assume that, in your
example, the value of money is cut in half or m doubles. Then, according
to Marx's assummption, the magnitudes of constant capital and variable
capital on the left-hand side of Ajit's equations would double, and the
dollar amounts on the right-hand side of the equations ($y and $z) would
also double. If these dollar amounts of the right-hand side are divided
by the quantities of output to obtain unit prices, as Ajit does, then the
unit prices of the outputs would indeed double. However, when these
twice-as-big unit prices are divided into the twice-as-big constant
capital and variable capital on the left-hand side, the same physical
quantities of inputs are obtained. Everything is completely logically
consistent here. A change of m does not cause the quantities of inputs
derived in this way to change at all.
Otherwise, if the magnitudes of constant capital and variable capital are
not adjusted for a change of m, then the doubling of output prices in the
above example would indeed result in a significant increase of
profit. But, a part of the profit would be due simply to
"inflation". Marx wanted to exclude these "inflation profits" (and
"deflation losses") from his theory of surplus-value. Marx wanted to be
able to explain how profits are produced, EVEN IF M REMAINS
CONSTANT! That is much more interesting and important than explaining
"inflation profits". Therefore Marx adjusted constant capital and variable
capital to current prices in order to exclude these "inflation profits".
Comradely,
Fred
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