[OPE-L:4908] causes of changes in prices of production

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Feb 15 2001 - 00:48:53 EST


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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