Steve writes in 4392:
You would acknowledge that the labor theory of value is 'false' in
equilibrium--in that it suffers from insurmountable logical inconsistencies
which you attribute to the equilibrium methodology itself, rather
than theunderlying logic of the labor theory of value
_______________
Nope Steve I have now accepted (for the sake of argument only) the
equilibrium methodology and still demonstrated that there is no
transformation problem.
I shall try to be as clear as possible again.
I agree that the inputs have to be tranformed into prices of
production and the cost prices thereby modified.
I *assume* for the purposes of argument that we should have the
identical unit prices of production on both sides, though I think
this assumption is a positive obstacle to the advance of knoweldge.
I argue that a transformation of the *prices* of the inputs cannot
change the indirect and direct labor embodied in the output and thus
its value: total value/ price is therefore held invariant in the
transformation.
I derive PV ratios from the output prices of prod and apply them to the inputs.
I then add up the total cost prices and subtract them from total
value to derive a new mass of surplus value.
Dividing this modified mass of surplus value by the modified cost
prices, I then derive a new average profit rate, then new branch
profits and then new branch prices of production from which are
derived new PV ratios again applied to the inputs.
The process is iterated until equilibrium.
So far the well-known Shaikh-Gouverneur iteration which results in a
sum of surplus value and average profit rate which are both different
than in the second tableau.
I argue that these differences do not represent a violation of the
second equality which is not an invariance condition. Two reasons:
A. since Marx defined surplus value as total value minus cost price
and the rate of profit as surplus value over "cost price" or "total
capital advanced" (terms which he uses as synonyms in capital 3, ch
2) , he could not have thought that the mass of surplus value and the
rate of profit would remain invariant if the cost prices are modified
due a transforming of the inputs.
That is, I argue that the interpretation of the second equality as an
invariance condition is a total fabrication of Bortkiewicz-Sweezy.
What is the meaning of the second equality then?
B. it means, as Fred has laid out, that the mass of surplus value
has to be determined prior to and then itself determines the sum of
the sum of branch profits. This is exactly how it is done in each new
iteration:
(1)total value-sum of modified cost prices=
(2)modified mass of surplus value=
modified mass of surplus value
(3) ______________________________ X modified cost price of each branch=
total modified cost prices
(4)the profits of each branch the sum of which is total profits=
(5)total surplus value
The determination of the sum of branch profits by the mass of surplus
value is thus maintained in each iteration and in the final
equilibrium state.
It is in fact the maintaining of this equality that tells us how to
go about doing the iteration and determining each branch's profits
which added to their respective modified cost prices generate the new
branch prices of production in each iteration.
My easily understood contribution then is my argument that the
iterative process actually maintains both equalities.
My disagreement with Gouverneur is three fold:
1. This iterative process does not violate but rather assumes the
second equality, which he wrongly interprets as an invariance
condition (Marx could not have thought that the mass of surplus value
and the rate of profit would remain invariant as cost prices are
modified--see A above).
2. He does not understand that the only reason to transform the
inputs into the same prices of production as the outputs is to
satisfy the equilibrium conditions stipulated by bourgeois economics
and thus respond to equilibrium theorists on their own terms.
3. The point of this input transformation exercise actually is to
demonstrate formally Marx's insight that unless the inputs are
modified, it is possible to go wrong in the determination of economic
magnitudes (the average rate of profit and prices of production are
indeed different in the final state than in the original unmodified
one); I do not take this exercise to be the supply of additional
reasons for the two equalities which, properly understood, are
instead assumed throughout the iteration.
I call the above response to the transformation problem on the
assumptions of equilibrium thinking the
Shaikh-Gouverneur-Moseley-Bhandari solution.
It is of course possible that the first three would disavow the affiliation.
All the best, Rakesh
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