On Wed, 14 Feb 2001, Drewk wrote: > In reply to OPE-L 4893: > > Yes, Fred, you're right that our assumption that initial prices = > values, together with the assumption of simple reproduction, > implies that the prices of production change because the general > rate of profit changes, not because technology has changed. I > hadn't put the pieces together. My apologies. Andrew, thanks for this acknowledgment of the error in this part of your previous argument (that changes in your prices of production could be due to changes in the productivity of labor prior to your period 1). > You're not right, however, when you say that this is contrary to > Marx's theory. As Eduardo has pointed out, and as I noted in > OPE-L 4871, Marx clearly says that production prices can change > because the general profit rate changes. He also clearly says > that the general profit rate changes in response to changes in > *market prices*, whatever their cause. It follows that production > prices change in response to changes in market prices. 1. Yes, of course, changes of prices of production could be due to changes in the general rate of profit. But Marx argued that changes in the rate of profit are themselves ultimately due to changes in the values of commodities, or changes in productivity of labor, somewhere in the economy. For example, from Chapter 12 of Volume 3 (pp. 307-08): "The price of production of a commodity CAN VARY FOR ONLY TWO REASONS: (1) A CHANGE IN THE GENERAL RATE OF PROFIT. This is possible only if the average rate of surplus-value itself alters, or, given an average rate of surplus-value, the ratio between the sum of surplus-value appropriated and the total social capital advanced. In so far as the change in the rate of surplus-value does not rest on the depression of wages below their normal level, or a rise above this - and movements like this are never more than oscillations - it can occur only because the value of labor-power has either fallen or risen; BOTH OF THESE ARE IMPOSSIBLE WITHOUT A CHANGE IN THE PRODUCTIVITY OF LABOR of that labor that produces the means of subsistence, i.e. WITHOUT A CHANGE IN VALUE of the commodities that are consumed by the worker. Alternatively, there may be a change in the ratio between the sum of surplus-value appropriated and the total social capital advanced... If the same labor sets more constant capital in motion, it has become more productive, and vice versa. Thus A CHANGE HAS TAKEN PLACE IN THE PRODUCTIVITY OF LABOR AND A CHANGE MUST HAVE OCCURRED IN THE VALUE of certain commodities... (2) The general rate of profit remains unaltered. In this case the production price of a commodity can change only because ITS VALUE HAS ALTERED; because MORE OR LESS LABOR IS REQUIRED for its actual reproduction, whether because of a CHANGE IN THE PRODUCTIVITY OF LABOR that produces the commodity in its final form, or in that of the labor producing those commodities that go towards producing it. The price of production of cotton yarn may fall either because raw cotton is produced more cheaply, or because the work of spinning has become more productive as a result of better machinery... ALL CHANGES IN THE PRICE OF PRODUCTION OF A COMMODITY CAN BE ULTIMATELY REDUCED TO A CHANGE IN VALUE ..." Thus we see that, according to Marx, there are "ONLY TWO REASONS" for a change in the price of production of a commodity: either a change in the value of that commodity or a change in the general rate of profit, the latter of which is itself due to a change in the value of commodities (i.e. a change in the productivity of labor) somewhere in the economy. NOTHING is said here about changes in market prices as a possible third cause of changes in prices of production. Similar passages (stating in effect that all changes in prices of production are ultimately due, in one way or another, to changes in the productivity of labor) can also be found Chapter 9 of Volume 3 (pp. 265-67), Chapter 10 of Volume 3 (pp. 280-81), and in the earlier 1861-63 Manuscript (TSV.II. 213-16). 2. I am not sure what passage(s) that you have in mind from Chapter 6 of Volume 3 in which Marx allegedly said that the rate of profit may change as a result of changes in market prices. Perhaps it is the following passage (from p. 208), which doesn't actually say market prices, but seems to imply market prices: "Our whole investigation has proceeded from the assumption that any rise of fall in prices is an expression of real fluctuations in value. But since we are dealing here with the effect that these price fluctuations have on the profit rate, it is actually a matter of indifference what their basis might be. The present argument is just as valid if prices rise or fall not as a result of fluctuations in value, but rather as a result of the intervention of the credit system, competition, etc." If you have other passages in mind, please let me know. However, Marx also said in the beginning of the section in which this passage appears (p. 205) that this whole chapter is really at a lower level of abstraction, and does not belong here in the analysis of capital in general (it is "outside the scope of this work"). Rather, it belongs to its "possible continuation" in a later book on competition and the credit system. Marx stated: "The phenomena under investigation in this chapter assume for their full development the credit system and competition on the world market, the latter being the very basis and living atmosphere of the capitalist mode of production. These CONCRETE forms of capitalist mode of production, however, can be comprehensively depicted only after the general nature of capital is understood; it is therefore OUTSIDE THE SCOPE OF THIS WORK to present them - they belong to a possible continuation. Yet the phenomena listed in the title to this section [revaluation and devaluation of capital; release and tying up of capital] can still be discussed here in broad lines." Therefore, the rate of profit that is discussed in this chapter and that may be affected by a change of market prices is a more concrete rate of profit than the general rate of profit that determines prices of production in Volume 3 of Capital. The general rate of profit that determines prices of production is a more abstract rate of profit that is not affected by changes of market prices, as we have seen above. 3. However that might be, a change of market prices cannot possibly be the cause of changes in your prices of production, because you explicitly state in your articles that you are abstracting from market prices. For example in your first article, you state: "ABSTRACTING FROM THE PROCESS OF COMPETITION, WE WILL SHOW NO MARKET PRICE OSCILLATIONS." (p. 70) Therefore, a change in market prices cannot be the cause of changes in the rate of profit in your interpretation, and hence cannot be the cause of changes in your prices of production, contrary to your argument. That possibility is ruled out by your explicit abstraction from market prices. So this part of your argument is also erroneous. 4. The reason why your prices of production continue to change from period to period, even though there is no change in the productivity of labor, is that your inputs of constant capital and variable capital change from period to period. And the reason why your inputs of constant capital and variable capital change from period to period is that you assume that, in any given period, input prices are NOT equal to output prices. If, to the contrary, input prices were assumed to be equal to output prices (as I argue Marx did in his abstract theory of prices of production), then the inputs of constant capital and variable capital would not change in the next period, UNLESS THERE IS A CHANGE IN THE PRODUCTIVITY OF LABOR SOMEWHERE, and consequently the prices of production would not change, unless there is a change in the productivity of labor somewhere. One can see this in periods 13 and 14 of the numerical example in Andrew's original article. Therefore, I think it has to be concluded that Andrew's "prices of production" (which change even though there is no change in the productivity of labor) are a misinterpretation and Marx's prices of production (which change only if there is a change in the productivity of labor). I look forward to further discussion. Comradely, Fred
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