Hi Francisco, Nice to get a reply; it seemed that this thread had died a death. I'd have to generally agree with what you say here--that both sides are perceiving a quantitative use-value, so to some extent a partitioning of profits is going on. There is a further nuance, though: finance profits have a different legal status to capitalist profits, since interest must be paid whether or not the venture financed actually turns a profit. The rate of interest itself is also, as Post Keynesians argue, a barometer of our distrust of our expectations of the future--it is therefore to a large degree out of the (individual) control of both capitalists and bankers. In other words, Marx's logic here was merely a first-pass at a value-based analysis of finance. But it is a very perceptive first pass, and something which a labour theory of value approach to finance lacks. Cheers, Steve At 11:08 AM 3/30/01 -0300, you wrote: >Hi Steve, your implicit answer can be misleading. One can be lead to think >that since what is paid is the use value then all profits would be paid in >the form of interest. But if we consider that a borrowed sum is capital >for the borrower and capital for the lender then the same sum of money >have to function as capital for both of them. In other words it has to >function as use value for both of them. There is only one way that same >sum can function as use value for both, that is through the partition of >profits. So to pay for the use value and to pay the use value have >different meanings: the first one leaves room for thinking in terms of a >partition; the second one leads us to think that all profits have to be >paid as interest. I am only saying this because once we think of use value >as quantitative then formulations such as "payment of the use value of the >loan" seem to mean the payment of all the profits obtained. >Paulo > > > >Hi Jerry, >> >>I don't have much to add here, except to note that what Marx was >>contemplating when considering Ricardo was not rental of an existing mine, >>but the price a capitalist might pay to purchase a body of undeveloped ore. >>Rent would apply when the mine was actually producing, and a charge was >>being placed on the income flow. That is an interesting subject, but Marx >>and Ricardo were considering the purchase price of an undeveloped ore body. >> >>In this case, Marx raises an important issue which, I argue, is only >>understandable from the use-value/exchange-value/dialectic front. If you >>work from an LTV "labor is the source of all value" front, then no value >>can be placed upon an undeveloped ore body save the labor needed to >>discover its existence and estimate its size. If that did determine the >>price of the ore body, then it would sell very cheaply indeed. However, >>that's not the reality, as Marx clearly knew. >> >>However, if you approach it from the point of view that use-value is >>quantitative in the M--C--M+ circuit, and acknowledge that an undeveloped >>ore body is not a strict commodity (since no labor has gone into its >>production beyond the exploration labor), then you get the possibility Marx >>entertains: that the exchange-value of the ore body is set by its perceived >>quantitative use-value. >> >>I agree that this quantity is set normally by extrapolating current trends >>into the future--a common human means of coping with uncertainty about the >>future which Keynes wrote of very eloquently. >> >>The same sort of logic is used by Marx to discuss the price paid for >>credit. Here his answer is implicit: >> >>"What, now, does the industrial capitalist pay, and what is, therefore, the >>price of the loaned capital?... What the buyer of an ordinary commodity, >>buys is its use-value; what he pays for is its value. What the borrower of >>money buys is likewise its use-value as capital; but what does he pay for? >>Surely not its price, or value, as in the case of ordinary commodities." >>(Marx 1894, p. 352.) >> >>The implicit answer is that the borrower pays the use-value of the loan, >>which is: >> >>"Its use-value, however, lies in producing profit" (Ibid., p. 355. See also >>Marx 1861, Part III., pp. 457-58). >> >>As you comment in closing, this type of analysis entertains the conclusion >>that prices for many vital entities in capitalism--from workers wages to >>machinery to credit money--could deviate substantially from their >>labor-values. This leads to a theory of cyclical behaviour which I also see >>as a strength of Marx's analysis, when compared to the static focus of >>neoclassical and other classical schools. >> >>Cheers, >>Steve >>At 07:10 AM 3/25/01 -0500, you wrote: >> >Steve K raises some new issues in [5240]: >> > >> > > On this issue, I'm extrapolating from my >> > > interpretation of Marx: there is >> > > no textual support for this proposition. But there > is the quite >> explicit >> > > consideration of the related issue of how the >> > > exchange-value of an >> > > undeveloped mine is set (discussed further >> > > below). That discussion brings >> > > in the role which expectations of future profit >> > > play in setting the price a >> > > capitalist is willing to pay to secure ownership, >> > > which is a *subjective* >> > > estimation of a future quantity. >> > >> >On the issue of the undeveloped mine, we have >> >to look at *rent*. And, it is true, that there >> >can be, more concretely, a *speculative element* >> >in the determination of the exchange-value (NB: >> >not value) of this mine. The speculation would >> >take the form of assuming a rate of return on >> >investment (RRI) that is comparable to the >> >past earnings of similar-grade mines. This >> >calculation, which you call subjective, is >> >usually based on the assumption that past trends >> >in this market will continue into the future. Yet, >> >as is the case with all speculative activities, >> >although the anticipated RRI is greater, the >> >level of risk and uncertainty is also greater. >> >How this added risk is accessed -- both >> >by the seller and buyer of the mine -- >> >is important then for the determination of its >> >exchange value. Of course, objective facts >> >can intervene -- like an economic crisis -- and >> >render the risk calculations of the old or new >> >owner of the mine meaningless. >> > >> >In any event, this issue is far more concrete than >> >the one we have been discussing. It deals, most >> >fundamentally, with the *division of surplus value >> >among capitalists and landowners* rather than the >> >creation of surplus value. >> > >> > > This same issue >> > > arises in the case of >> > > machinery, which means that the price capitalists > are willing to >> pay for >> > > machines will rise above value when expectations > of future profit are >> > > high, >> > > and fall below it when expectations are dashed. >> > >> >It is true that there is a level of risk when purchasing >> >constant fixed capital and that capitalists can not >> >know with certainty the "lifetime" and total value >> >that will be transferred by that machinery. This is >> >due, most fundamentally, to moral depreciation. >> >Yet, other issues might affect the value transfer as >> >well. I discussed a couple (capacity utilization >> >and waste of constant circulating capital) in >> >recent threads (see [5186] and [5248]). Another >> >issue, where there emerges possible loss of >> >value, is as follows: even after capitalists are >> >assumed to buy the means of production at value, >> >the transfer of that value requires that these >> >elements of production must be set in motion >> >within that process. If they are simply in crates >> >on the loading dock they are not also transferring >> >value. Any delay in "start-up time" can, >> >assuming a fixed working "life" for the constant >> >fixed capital, thus result in a premature loss >> >of value. Also, especially for means of production >> >that represent "first generation" innovations, there >> >is a "learning by doing" curve that is experienced. >> >Thus, in the beginning if the learning process is >> >protracted and the new means of production are >> >not integrated into the production process >> >efficiently, then some proportion of value may be >> >lost. On the other hand, these technological >> >advances make *possible* (NB: possible not a >> >necessary consequence) a "technological >> >rent" by the innovating firm (s). In value terms, >> >one should see this technological rent as >> >representing a redistribution of surplus value >> >among capitalists -- in this sense there is a >> >similar mechanism to what was discussed above >> >re the undeveloped mine but in this case the >> >means of production represent value rather than >> >exchange-value and potential use-value alone. >> > >> >As for the question of expected profitability, I think >> >that Marx was well aware of this problem. Indeed, >> >his rejection of Say's Law requires a recognition >> >of the issue. More fundamentally, a recognition >> >of the temporal sequence in a circuit of capitalist >> >production and circulation requires a recognition >> >of this problem. I.e. prior to production, i.e. ex >> >ante, capitalists go into the market with M and >> >purchase c and v. Yet, they do not and *can not* >> >know with certainty what the result of their decision >> >will be in terms of profitability ex post. This is >> >because they do not and can not know with >> >certainty whether the output will be sold and, if >> >so, what the prices will be. Thus, even if there >> >is "pre-commensurization" of value prior to sale, >> >value itself is only fully constituted following sale. >> >Obviously they must come to *expect* a RRI for them to purchase the c and >> >v. But, their expectations may be proven ex post to either be >> >the case ... or not. In the latter case, the value that was *presumed* to >> >exist can be "lost" if no buyer >> >for the output is found. >> > >> >In terms of how this plays out in the business >> >cycle, that is an interesting issue. (I seem to >> >have accidentally edited this section of your >> >post where you were referring to the Minsky >> >financial instability thesis). Marx, as we know, >> >made the simplifying assumption at various >> >stages of his analysis that commodities in general, >> >on average, exchange at their values. Yet, I think >> >it could be said that this is the case only if, >> >among other things, we abstract from the different >> >phases of the cycle. Thus, it is entirely possible >> >that some commodities could systematically >> >exchange at market prices above their value >> >during the expansion when aggregate demand >> >and rates of return on investment are increasing >> >and then exchange at market prices below value >> >during the contractionary phase of the cycle. >> >This possibility, from my perspective, in no way >> >contradicts Marx's perspective on value. >> >Indeed, one might see it as an extension and >> >expression of that perspective. >> > >> > > This is something which is fundamental to modern > Post Keynesian >> > > thought--the role of capitalist expectations in >> > > setting asset (and >> > > machinery) prices, the role of uncertainty in >> > > investment decisions, etc. >> > > But they have no theory of value from which to >> > > derive these >> > > observations--they simply take it as a given. Yet > a theory of value >> >which >> > > explains it resides in Marx. >> > >> >I agree with this even though we differ in terms >> >of our perspectives on Marx's theory of value. > >Dr. Steve Keen >Senior Lecturer >Economics & Finance >Campbelltown, Building 11 Room 30, >School of Economics and Finance >UNIVERSITY WESTERN SYDNEY >LOCKED BAG 1797 >PENRITH SOUTH DC NSW 1797 >Australia >s.keen@uws.edu.au 61 2 4620-3016 Fax 61 2 4626-6683 >Home 02 9558-8018 Mobile 0409 716 088 >Home Page: http://bus.uws.edu.au/steve-keen/
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