Hi Fred and others, Just saw your (Fred's) new defense of your interpretation of KM's value theory in science and society. While in this post I refer to comments by you, Alejandro, Carchedi, Laibman, Grossmann, , John E, Allin, Steve K, Gouverneur and Shaikh, I continue to think that the two main aspects of your interpretation--the monetary thesis that price is the necessary form of value and the macro thesis that the mass of surplus value is explanatorily fundamental--are correct, and constitute very important steps forward in understanding Marx. Of course I am also very sympathetic to the TSS rejction of equilibrium prices and the methodology of comparative statics, though I am at a loss why the TSS'ers do not recognize that in his 1941 dynamics book to which Mattick Sr wrote an introduction, Grossmann demonstrated how at odds Marx was at equilibrium assumptions of bourgeois economists. I noticed however that you did not mention that your interpretation requires that Marx's mention of double divergence in Capital 3 and TSV be excised in effect from the text. Shouldn't you comment on this problem with your interpretation even if Laibman does not recognize it? i still think my inverse transformation interpretation of what marx himself is saying is the best for three reasons (well the fourth reason would be that it is consistent with the monetary and macro sides of your interpretation): i. it does not require marx's text to be cut up arbitrarily--double divergence is preserved; ii. it accommodates your and alejandro's evidence that the cost prices are a given precondition and the inputs don't have to be transformed; and finally iii. it allows us to see why the error to which marx was admitting has real significance for the transformation calculations that he carried out--that is, marx is saying that he was mistaken in assuming that value transferred from the means of production could be identified with the visible flow price of the machine (in your interpretation marx is cautioning only against a mistake his readers may make, not a mistake he has himself made in his transformation tables; but i don't think this reading of a mistake is convincing and my interpretation of the mistake to which marx is admitting leads exactly to the problem of double divergence which you want to excise from the text!). Moreover, my inverse transformation interpretation makes sense of what Marx says about the average commodity. marx is not saying that the value of a or any commodity is determined by "adding up" c + v + s. He is saying that total commodity output--or the average commodity--can be "represented" as c + v + s. total commodity value and the value of any commodity is merely the summation of indirect and direct socially necessary labor time. as for laibman, even if he does not want to accept carchedi's (and ernst's) temporal, disequilibrium argument (by which i am generally persuaded) and insists that the socio-technical conditions must be kept constant in an iterative, price-adjusting solution until equilibrium prices are reached, i still think he underestimates the power of the gouverneur-shaikh solution. g-s argues that the inputs are in direct or simple prices (here fred we are all agreed that the inputs have to be in some price form because of how price is the necessary form of appearance of value, though i agree with you and alejandro that the inputs themselves don't have to be transformed...), but if the inputs are indeed in simple or direct prices, this implies that the value of money is already given and should be held constant in the transformation (moreover, as grossmann argued, the constant value of money is a crucial methodological assumption throughout the three volumes of Capital, and no clear reason is given why that methdological assumption should be dropped in capital 3, ch. 9); so i think gouverneur is correct to assume that this implies total simple price must then equal total price of production as neither the given value of money nor the given labor embodied in the output changes in the course of the transformation. I agree with the Winternitz point that this is the invariance condition in the spirit of the marxian system. in the original article laibman himself said it does not matter whether the inputs are in values or direct/simple prices. So it seems safe to assume that the inputs are in price form and make up the cost prices of the commodities. what do we make of the fact that except in freak cases the sum of surplus value in the simple price scheme will not be equal to (and may even be less than!) the sum of profit in the price of production scheme? Doesn't this destroy the exploitation theory of profit since profit cannot be shown to have even a mediated relationship to surplus value produced by labor alone? i know you are not interested in this problem, so no reason to read on if you have read this far anyway! i have been arguing that this is not damaging as laibman claims. Laibman simply thinks the labor theory of value goes up in smoke because the mass of surplus value and the mass of profit are not equal after a complete transformation, but at the least he has to make a stronger case here. Why Laibman insists that he is a Marxist after repudiating the labor theory of value escapes me, but I digress. I. the mass of surplus value does not change in real terms in gouverneur's complete transformation. it still buys the same physical mass of dept 3 or luxury goods; why does this not confirm marx's insight that distribution itself is not sufficient to generate real, i.e., not merely nominal, increase in surplus value? For example, if capitalists pay below value for means of production they may have to pay above value for luxury goods. Nothing real gained. II even in the worst case scenario in which the mass of profit is nominally larger than the mass of surplus value as a result of the complete transformation, why does this disprove the labor theory of value; after all, this greater mass of profit does not result from economists having solved the 'complete' transformation equations but as a result of workers transferring gratis to the output the full value of means of production which are bought at prices less than value and/or workers being exploited at a higher rate as a result of wage goods selling at less than their value. I don't see why a nominal change in the mass of profit disproves that the only source of surplus value is living labor which not only transfer gratis in its concrete activity the value of what it works up but also produces newly added value. Of course Allin may say that it is now impossible to prove positively the link between the exploitation of labor and profit, but this is a much weaker claim than the one than the claim that the complete transformation destroys Marx's labor theory of value with all the strict mathematical necessity of why 2 + 2 cannot equal 5. The mass of surplus value in the first scheme and the mass of profit in a complete transformation scheme may not in fact be equal, but this does not mean that living labor is not the source off all non wage income. After all, we still have many other reasons for preferring an exploitation theory over some variant of an agio or technical surplus explanation for the mass of profit. III i argue that in the gouverneur-shaikh solution the equality of the mass of surplus value and the mass of profits is indeed kept in the macro determinative sense that Marx meant it (and unlike Steve Keen, I do agree very much with Fred's interpretation of Marx's method of macro to micro determination). In order to carry out the iteration, one applies PV ratios to the inputs. But then one has a new total cost price. In order to proceed from there one must *first* determine the total mass of surplus value which labor has produced by taking from total price the new cost prices--surplus value for me has no other form than as just this intrinsically monetary residual; that is, surplus value does not exist or is not defined in some pure value account parallel to a price acount--so I also share the critique of dualism or the two systems approach. This first calculation gives us for each new iteration the sum of surplus value which *then* sets the limit to what the mass of profits can add up to, so this mass of surplus value must be calculated *before* the profit rate and individual branch profits are determined. So both the explanatory primacy of surplus value and the equality between the mass of surplus value and the mass of profits are maintained in each stage of the iteration, including the last one at which point equilibrium prices are realized. So whatever the (nominal!) changes in total profit as a result of a complete transformation in which one makes the fantastic assumption that socio-technical conditions remain constant until equilibrium prices are reached, I do not see how and why these changes damage the labor theory of value. However one wants to solve this hoary problem, it seems to me that many of us here are agreed the so called transformation problem has been an almost subconscious wish that by dismissing Marx's theory as logically contradictory then the real contradictions, general crises and catastrophes which it predicts that will develop as the system moves ever forward will somehow disappear or those contradictions at the least will reduced to squabbles over the distribution of income? Doesn't the choice by many of us to be in the academy already reflect the strongest wish to be free of those real contradictions and catastrophes? I know there are people on this list that have contempt for the simple, very untechnical way I dismiss this value-price transformation problem and hold on to the exploitation theory of surplus value, but I do understand what these criticisms amount to. And of all the ways to develop Marx given outstanding problems in the theory of national differences in wages, the world market, the role of the state, the theory of rent as states become landlords, the theory of money and credit and derivatives, the theory of fictitious capital etc., I just can't but help see development of Marx in the direction of static neo ricardian value theory as a detour to nowhere. But I don't think we'll be free of the task of answering charges of Marx's logical contradiction and the irrationality of Marxian commitments until the real contradictions that Marx's theory lays bare are themselves superceded. rakesh
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