From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Thu Aug 29 2002 - 15:21:41 EDT
This post is from Michele Naples. rb _______________________ It?s been interesting to read the discussion about gold, Marx?s view that it exchanges at value and the implications for the transformation problem. I have to say at the outset, however, that I view any effort to fit Marx into a long-run equilibrium box as the imposition of the Walrasian method on an exploitation theory of the profit rate, which is not methodologically sound. If capitalism is crisis-prone, it must be overdetermined, not determinate. There are supposed to be too many variables and too few unknowns. This does not violate the labor theory of value, it means capitalism is incapable of long-run equilibrium. To me this is an appealing conclusion. I frankly don?t understand why anyone would rather conclude that it?s necessary to choose between surplus value or values as aggregating to profits or prices, since the resultant Ricardian profit rate (dependent only on production conditions in basics) still violates Marx?s theory that economy-wide conditions were determinate. Marx explicitly challenged Ricardo?s view on this in his Theories of Surplus Value. People may find these solutions interesting, but they are not Marx. That said, on gold, Fred rightly points out that Marx hung his view that gold exchanges at value on its lower-than-average composition of capital, and that it?s not clear why mining or agriculture today should necessarily have below-average compositions. Coal mining, for instance, has a huge composition of capital relative to the economy average, at least in price terms. Doesn?t the marginal mine still earn a rent? Given Marx?s emphasis on private property in the means as the basis for capturing surplus value, I would think the answer is yes. [BTW, Fred, I?d think the value of a mined good is not determined by labor productivity in the marginal mine, but on the average technique employed. It?s the socially necessary labor. So it seems to me that if the lowest-rent mine is not best-practice or average-practice, it would create less than one unit of snal (labor-value units) per hour.] Rakesh is right to emphasize that the quantity of gold in existence swamps current production, and that this makes gold quite different from other commodities. Gold, like the housing stock, is an asset, a stock far exceeding current flows. But Marx was clear that today?s flow, and the associated value of producing gold today, determine the value of any of the gold stock. Rakesh also talked about the demand for gold as hedge against inflation?that?s not appropriate here, since it?s a short-term problem generated by monetary crisis, not a value question. It has to do with the fact that gold is the ultimate means of payment and store of value, it does not cause its value to be higher or lower. Marx argued in the Grundrisse, I think, that in times of crisis when the price of gold rises, the reality is that the value of goods are falling, since there is widespread overproduction, beyond what was socially necessary. There is no change in the value of gold despite the rush to gold. Rakesh has suggested that gold?s value be seen as resulting from a monopoly (over the means of production by gold-mine owners) and therefore absolute rent can be interpreted as a monopoly rent. I?m concerned that this takes us down a slippery slope towards neoclassical modeling, diminishing returns, etc. What strikes me is that is that farm and mine products are what we now commonly call raw materials or primary products. They are not produced with other inputs, they are extracted from the earth. Just as joint products are not the same as capital goods that have not been fully depreciated (the Ricardian treatment of fixed capital), farm and mine product are not the same as produced means of production, they are extracted. So then logically they should be dealt with differently from produced intermediate goods. I don?t think we need to make the case in terms of the organic composition of capital in those sectors, as Marx did. The point is the crucial, irreplaceable role that the land component plays in their availability, and the power this gives those mine- and landowners to charge rent. From this perspective, even if coal mining has an above-average organic composition of capital, and therefore coal operators should earn surplus value above what is produced in coal, in addition those operators should keep the surplus value their land-holding permits them to lay claim to. Then the value of coal and surplus value created in coal-mining would set the rent on coal mines, and the organic composition of capital in coal would determine how much additional surplus value would be allocated to coal operators from other sectors. From this perspective all of the profit over and above rent that coal operators get is surplus value created in other sectors. Thing is, I don?t see that this insight does anything to substantially modify the standard equilibrium solution to the transformation problem. The value of the m gold and other mine or farm products is known before the profit rate is known, and their surplus values do not get redistributed through the pricing mechanism. Nevertheless the n-m other sectors earn only the uniform profit rate based on the redistributing surplus value, determined by the surplus value in the b-m basic sectors that is allocated subject to profit-rate equalization, assuming that no mine or farm product isn?t basic, although a few may be. [Even diamonds have industrial uses, but perhaps asparagus and endive are only luxuries.] This is still a profit rate that does not depend on production conditions in non-basics, and as such it is a Ricardian but not Marxian solution to the transformation problem. Thanks for including me in the discussion. I?ll be interested to hear others? thoughts. - Michele
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