In Rakesh's (4786), he presents an equation - equation (2b) - that is supposed to express my interpretation of Marx's theory of value (I have already discussed Rakesh's equation (2a) in my last post): (2b) Value of money needed to purchase MP + Lc = V This equation is NOT an accurate expression of my interpretation of Marx's theory. All the variables in this equation (as I understand them) are in units of labor-time. But I don't think Marx's theory of value is about labor-time alone. Rather, it is about a determinative relation between money and labor-time. The monetary variables in Marx's theory of value are missing in Rakesh's equation (2b). So Rakesh's equation (2b) brings us back to the fundamental issue of the meaning of value in Capital, an issue we have discussed before, but evidently we still need to discuss some more. My equation for Marx's theory of value, as I have discussed many times, is the following: (2c) W = C + N = C + m Lc In this equation, W and C are monetary variables, Lc is a labor-time variable, and m expresses how much money-value is produced per labor-hour. Marx's theory of value explains the aggregate price of commodities (W) on the basis of the given constant capital ( C) and the quantity of current labor (Lc). Marx's theory of value is not about labor-times only, with no money in the theory at all. I think Marx would turn over ... 2. Labor-time is indeed the SUBSTANCE of value, but money is the necessary FORM OF APPEARANCE of value. After Marx derived money as the necessary form of appearance of value in Chapter 1 of Volume 1, from then on, whenever Marx discusses the "value" of commodities, without further qualification, he almost always means money, or the form of appearance of value. This monetary meaning of "value" is clear, for example, at the beginning of Volume 3, where Marx summarized his theory of value and surplus-value, already presented in Volume 1. The value of commodities is discussed throughout as a quantity of money, e.g. $600. This value of $600 is determined by the equation: W = C + N = C + V + S $600 = $400 + $100 + $100 A part of this value of $600 just replaces the capital advanced of $500. The excess of the value of commodities over the capital expenditure (or the cost price) is the surplus-value ($600 - $500 = $100). The value of commodities produced is repeatedly compared with the capital expenditure. The capital expenditure is surely in terms of money, right? Then, if these quantitative comparisons between value and price of production are to be meaningful, the value of commodities must also be defined in terms of money, right? Let's review these important initial paragraphs of Volume 3 of Capital. After the first introductory paragraph, Chapter 1 begins with the following concise summary of Marx's theory of value, which is expressed in terms of money: "The VALUE of any commodity C produced in the capitalist manner can be depicted by the formula: C = c + v + s. If we subtract from the value of this product the surplus-value s, there remains a mere equivalent or replacement value in commodities for the CAPITAL VALUE c + v LAID OUT on the elements of production. Let us say that the production of a certain article requires a CAPITAL EXPENDITURE of $500: $20 for wear and tear of the instruments of labor, $380 for raw materials and $100 for labor-power. If we take the rate of surplus-value as 100 per cent, the VALUE of the product is 400c + 100v + 100s = $600." Please note: "the VALUE of the product IS ... $600." Marx then defined the important concept of cost price, also in terms of money (that part of the value of commodities that replaces the capital expenditure): "After deducting the surplus-value of $100, there remains a commodity value of $500, and this simply replaces the CAPITAL EXPENDITURE of $500. This part of the VALUE of the commodity that replaces the PRICE of the means of production consumed and the labor-power employed, simply replaces what the commodity cost the capitalist himself and is therefore the COST PRICE of the commodity, as far as he is concerned. ... If we call the cost price k, the formula c + v + s is transformed into the formula C = k + s, or commodity value = cost price + surplus-value." Marx then went on to emphasize that the concept of cost price has nothing to do with the determination of value; both cost price and value continue to be discussed as sums of money: "Yet the category of COST PRICE has nothing to do with the formation of commodity VALUE or the process of capital's valorization. If I know that five-sixths of a commodity VALUE of $600, i.e. $500, is simply an equivalent, a replacement value, for the CAPITAL OF $500 THAT HAS BEEN SPENT, and that this is therefore just sufficient to buy back the material elements of this capital, I shall neither know how this five-sixths of the commodity's value which forms its cost price was produced, nor can I explain the origin of the last sixth that forms its surplus-value. Please note that in the first sentence in this passage, the "FORMATION OF COMMODITY VALUE" is a synonym for "the PROCESS OF CAPITAL'S VALORIZATION". The "process of capital's valorization" is obviously a monetary process: M becomes M + dM. Likewise, the "formation of commodity value" is also a monetary process: the price of commodities is greater than their cost price. Marx then presented another concise summary of his theory of value, again in terms of money, and explicitly cites his theory of value and surplus-value in Volume 1: "We know from Volume 1 (Chapter 9, p. 320) that the VALUE of the product newly formed, in this case $600, is composed of (1) the reappearing value of the constant capital of $400 spent on the means of production, and (2) a newly produced value of $200." Algebraically: W = C + N. Marx then went on to compare the value of commodities with the capital advanced, both of which are sums of money: "If we now compare CAPITAL ADVANCE on the one hand and COMMODITY VALUE on the other, we have: I. CAPITAL ADVANCE of $500 = $400 in capital spent on means of production (price of the means of production) + $100 in capital spent on labor ... II. COMMODITY VALUE of $600 = cost price of $500 ($400 price of the means of production + $100 price of the 666 working days) + $100 surplus-value. Again, this comparison is nonsense unless commodity value is defined in terms of money. And on and on, all in terms of money. Marx does not ever say in this chapter anything like (as Rakesh seems to suggest): "value is a quantity of labor-time, which can be illustrated indirectly by money, on the assumption that m = 1." What Marx is discussing in this chapter (and elsewhere) is not quantities of labor-time, but rather quantities of money-capital in circulation - quantities of money-capital advanced to purchase means of production and labor-power and quantities of money-capital recovered through the sale of commodities. That is the essence of capitalism, and that is what Marx's theory of value and surplus-value is about. The analytical framework of Marx's theory of value and surplus-value is the circulation of capital: M - C ... (M + dM), which is a monetary process. Similarly, we have seen in previous posts that in Part 2 of Volume 3 that Marx repeatedly compared the VALUE of commodities and the PRICE OF PRODUCTION of commodities, both for individual commodities and for the total social capital. The price of production of commodities is clearly a monetary variable, right? Therefore, as in the comparisons of value and capital expenditure discussed above, so also in these many comparisons of value and price of production, such a quantitative comparison makes sense only if value is also defined in terms of money. All the algebraic formulations on pp. 263-65 discussed in my last post (including especially in the "missing paragraph") would be meaningless if values were defined in units of labor-time and price of production in units of money. So I conclude that when Marx says "value IS $600" or "value = $600", that is exactly what he means. He does NOT mean that value is 600 labor-hours which, under the assumption of m = 1, can be illustrated by $600. Marx's theory of value is about quantities of money-capital in circulation. I will argue in a subsequent post that Rakesh's three criticisms of "my" equation (2b) do not in fact apply to my own equation (2c). But I think the above discussion of the fundamental issue of the meaning of value is enough for now. I look forward to replies and comments and further discussion. Comradely, Fred
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