On Mon, 17 Jun 2002, mongiovg wrote: > Regarding Fred's: > > > >It seems to me that there is something fundamentally wrong with Sraffa's > >concept of absolute prices. These prices are not exchange-ratios with > >money, but are instead simply pure numbers. However, the Sraffian > >equations are supposed to represent the sum of ACTUAL costs of the inputs > >in his industry (pi*aij) and ACTUAL prices of the output in each industry > >(pj). The actual costs and actual prices in the real capitalist economy > >are EXCHANGE RATIOS WITH MONEY. But the Sraffian absolute prices are NOT > >exchange-ratios with money; they are simply pure numbers. Therefore, the > >Sraffian absolute prices do no adequately express what absolute prices > >really are in the real capitalist economy - exchange ratios with money. > > > > An off-the-top-of-the-head response to this is that cost is ultimately a > matter of what resources--material inputs, including wage goods--are used up > in producing the social product. For purposes of calculating the profit rate > we want to express that cost as a price-value magnitude. So we weight the > inputs by their prices of production. It matters not which commodity is > numeraire in this procedure, and one can always convert to money prices by > selecting the appropriate numeraire. Fred's position appears to be grounded in > a view that Marx was addressing a different problem from the one Ricardo & > Sraffa were grappling with: for otherwise, relative prices would be all that > matter to Marx as well. My next question, then, would be, what exactly is it > that Marx was trying to explain in his value theory and how is it different > from what Ricardo was doing? As I say, I don't think it was all that > different, at bottom, from what Ricardo was doing. Gary, thanks very much for this question. I am happy to try to answer it. Actually I think what Ricardo was doing with his value theory was similar to what Marx was doing. But Sraffa was doing something entirely different from Marx and Ricardo. What Marx was doing with his value theory was to EXPLAIN SURPLUS-VALUE, i.e. to explain the increment of money (dM) that emerges in the circulation of capital, in the capitalist economy as a whole. Marx posed this question clearly and starkly in Chapter 4 of Volume 1. This is a question that is about money and absolute prices. The question is: why is the absolute amount of money received from the sale of commodities greater than the absolute amount of money invested to produce the commodities, and what determines the magnitude of this absolute difference? Marx answered this question in Chapters 6 and 7 of Volume 1: surplus-value is due to surplus labor, i.e. surplus-value is the difference between the value produced by workers and the wages they are paid. The rest of Volume 1 analyzes the trends in the rate of surplus-value and the composition of capital over time. These trends are then combined in Volume 3 in the famous theory of the falling rate of profit. These are the questions that Marx's theory of value is mainly about. None of this has anything to do with the relative prices between individual commodities (e.g. wheat and iron), as in Sraffa's theory. Ricardo was doing something similar to Marx with his value theory. As Ricardo put it in the Preface to his Principles, the main objective of political economy is to determine the trends over time in the distribution of income among the three great classes (wages, profit, and rent). Ricardo first tried to answer this question without using value theory (in a pamphlet written in 1815 entitled "Essay on the Influence of a Low Price of Corn on the Profits of Stock"), but then he realized that this was not possible because the capitalist economy includes many different products, not just corn. So he developed his theory of value - his version of the labor theory of value - in order to analyze this all-important question of the trends in the distribution of income over time. Again, as in Marx, Ricardo's question had nothing to do with a set of relative prices among individual commodities, as in Sraffa's theory. Ricardo's theory did involve a kind of gross relative price between corn (or agricultural goods in general) and manufactured goods, but specific relative prices among individual commodities were of no interest. What was of paramount interest to Ricardo was the effect of the relative increase in the price of agricultural goods on the distribution of income between wages and profit. By contrast, Sraffa did something entirely with his value theory. Sraffa determined a set of (n-1) relative prices among individual commodities, which was of no interest to Marx and Ricardo. Sraffa did not analyze the trends over time in the distribution of income. Sraffa's theory is all about the determination of the set of relative prices, under increasingly complex assumptions (e.g. fixed capital and joint production). Sraffa's "problematic" was entirely different from Marx's and Ricardo's "problematic". Furthermore, since Sraffa'a theory is only a theory of relative prices, and not a theory of absolute prices (as we have seen in this discussion), Sraffa's theory is NOT CAPABLE of answering Marx's question of the origin and magnitude of the absolute increment of money (surplus-value) that emerges in the circulation of capital. Marx's theory on the other hand, is able to answer Sraffa's question of relative prices, although Marx was not very interested in this question. Gary (and others), do you see what I mean - that Marx used his value theory to answer an entirely different question from Sraffa, and that absolute prices are necessary to answer Marx's question? Thanks again for this interesting discussion. Comradely, Fred
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