From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Thu Sep 05 2002 - 17:49:06 EDT
Hi, Fred, you raise a number of interesting issues that I attempt to address below. But perhaps we should also ask whether its worth pursuing this line, insofar as it concerns an analytical scenario whose only relevance is in assessing the sense of your claim (following Marx) that the determination of the rate of profit is analytically prior to the determination of prices of production. If you don't find it too onerous/obnoxious, I think that if you could address the questions I posed in the "Moving on..." post, we could figure out if there are interesting issues--(my interpretation: unresolved issues that can be pursued on mutually accepted theoretical grounds)--that might be pursued on this question. [Alternatively, if you could point me in the general direction of earlier posts in which you've already answered the questions I've posed, I could look them up in the archives myself.] Anyway, where I wrote > > On (b), as far as I can tell, no one has disputed my demonstration that > > *given these conditions* there is an inconsistency in the claim that the > > rate of profit is determined analytically prior to prices of > > production. The question is whether this demonstration is relevant to > > Marx's, and thus Fred's, analytical project, which brings us to > (a). Since > > Marx is dead, we have no way of settling the matter, so I won't bother > > trying. Marx does not clarify the matter either way in Ch. 9, and > > presumably neither side of this discussion pretends to be able to go back > > in time to read Marx's mind or to recall him from the dead to figure out > > the answer. But the discussion has at least given rise to a new (or at > > least not previously obvious) theoretical insight about the economic > > conditions under which Marx's/Fred's conclusion do and do not hold. You say >Gil, I certainly have disputed your "demonstration" and so has Rakesh. >On the following three main theoretical grounds: > >1. Gold is a scarce, privately-owned mineral, and therefore the income of >the gold industry must contain a component of rent. In terms of Sraffa's >theory, this adds an unknown, without adding another equation, so that the >rate of profit is not uniquely determined by given technical conditions of >production and the wage rate. > >In terms of Marx's theory, the existence of absolute rent implies that the >income of the gold industry is determined by the "value" of gold, >independently of the equalization of the rate of profit in the other >(n-1) industries, which reduces the number of equations by one, so that >again the rate of profit is not uniquely determined by given technical >conditions of production and the wage rate. Insofar as it is logically possible to imagine a world in which the realized level of this rent is zero, this observation doesn't rebut my point. What you assert here is, in effect, that by its nature, the production of gold *must* accrue a strictly positive absolute rent. Of course, the fact that gold is "privately owned" is not at issue; all commodities and means of production are privately owned under capitalism. "Scarcity" in the sense you intend it here only matters if the scarcity constraint is binding at the margin, which is once again a matter of historical contingency, not theoretical necessity. That is, one could without contradiction imagine the capitalistic production of gold in which the level of rent were in fact zero. (And not only *can* one, but the substance of your next point is that it's *quite plausible* to imagine a world in which the scarcity constraint on gold production is non-binding, since by your representation the supply of gold in circulation far exceeds the level of gold production!) And in that case, the inconsistency I asserted again arises. But now let me put the shoe on the other foot and accept for the sake of argument your suggestion that Marx excluded the gold commodity from his analysis for the sorts of reasons you and others have suggested. Granting that the return on gold production has a component of rent does not deny that it also has a component of profit. Therefore a portion of capitalist profit is earned in the gold production sector. Therefore if gold is excluded a priori, it is no longer necessarily true *for the production sectors that are included* that total profit equals total surplus value, since of course profit and surplus value earned in the gold industry may not be equated (I'll justify this claim in my response to your point #3 below). So the consequence of this exclusion, if accepted, is to rescue one of Marx's theoretical claims at the cost of losing another, at least as a categorical claim. >2. There always remains in existence a very large supply of gold in >circulation (approximately 20 times the quantity of current gold >production during the gold standard period), so that changes in current >gold production have only a very small effect of the rate of profit in the >gold industry, and thus there does not seem to be any effective mechanism >through which the rate of profit in the gold industry could be equalized >to the average rate of profit. Again, this is an accurate claim about descriptive reality that has no necessary relevance for the abstract theoretical considerations raised by Marx's discussion in K.III Ch 9 or the prices of production framework. Note that you could make the same sort of claim as above for *all* durable consumption goods: the supply of goods in circulation exceeds, often greatly, the amount of current production (consider: used musical instruments; cars; furniture; just about everything sold on e-bay). It also would apply to any durable constant capital goods that enjoy a secondary market (pickup or delivery trucks, say) Therefore, if this counts as a legitimate argument against the inclusion of the money commodity in the relevant equation system, then it must also count as an argument against including *any* durable consumption or constant capital good in Marx's transformation analysis and/or the Sraffian price of production equations. So, are you insisting that Marx (a) committed a logical error in his K.III Ch. 9 analysis by not recognizing, as you do above, that the continuing existence of previously produced durable goods hinders the mechanism for equating the rate of profit across sectors; or (b) Marx intended *also* to exclude sectors producing durable goods from his Ch. 9 analysis, further exacerbating the problem noted above in answer to your first point; or (c) Marx's Ch. 9 analysis *abstracts from* the sorts of problems you raise above. If your choice is (a) or (b), then my suggestion that Marx's analysis in Ch. 9 is invalid is established on alternative grounds. If your choice is (c), then I may legitimately base my analytical scenario on the same abstraction, thus negating the relevance of your point here. But second, it's not at all clear to me why the durability of the gold commodity should of itself hinder the "mechanism through which the rate of profit in the gold industry could be equalized to the average rate of profit." To begin with, "changes" in production are not at issue in this scenario; rather the question is whether the rate of profit in the gold industry would, under conditions of capitalist production, be equalized with the rate of return in other sectors, and I don't see how this would be affected by the existence of a secondary market in gold. With or without such a market, gold production would presumably expand if its rate of profit exceeded that in other sectors, and contract if it fell short of that in other sectors. >3. In terms of Marx's theory, since gold has no price, it is not possible >to transform the price of gold from value to price of production, and thus >it is not possible to transform the surplus-value contained in gold to >profit as a different magnitude. I don't see this. Granting that gold does not itself have a price denies *neither* (A) that gold is itself the measure of *monetary* value, so that one can derive the profit per unit of gold produced by subtracting from that unit the cost, in gold, of the inputs used up in producing that unit (e.g., if it costs me 50 cents to produce each unit of gold, then obviously I've earned a profit of 50 cents per unit of gold produced), *nor* (B) that gold itself, being a commodity, has a value, as do the constant and variable capital expended in producing gold, so that one may derive the surplus value contained in a unit of gold as the difference between its value and the value of the contant and variable capital used up in producing it. Thus, as I understand it, it *is* possible to determine both profit and surplus value associated with gold production, despite the fact that gold does not have a price in Marx's sense. Furthermore, these two quantities need not be equal, insofar as the prices of production of input commodities need not be equal to their values measured in money, and (even more evidently), the value of a unit of gold will not in general equal one. > This means that there can be no sharing >of surplus-value between the gold industry and other industries, which >implies that the rate of profit in the gold industry and the rate of >profit in the other (n-1) industries are determined independently of each >other. Again, in light of my previous response, I don't see how this is so. And even if your first statement here were true, I don't see how the conclusion you assert follows, since it would still be the case, other things being the same, that capitalist competition would serve to equalize the rate of profit across sectors. >Gil, I look forward to your responses on these theoretical points. > >Comradely, >Fred > >P.S. Beyond the points above, there is another even more fundamental >objection to your argument, that I have not yet discussed and will save >for a later post - that the initial givens in Marx's theory are not the >physical quantities of inputs and outputs (as in Sraffa's theory), but are >instead the money quantities of constant capital and variable capital >invested in the first phase of the circulation of capital to purchase >means of production and labor-power. But I don't see how this constitutes a legitimate (let alone fundamental) objection either, for two reasons: first, if one were to ask how the "money quantities" you speak of were determined, the only answer I could imagine would be by multiplying physical quantities of constant and variable capital inputs by their associated prices--so to *derive* the givens you ascribe to Marx's theory from data on production and market conditions, you would need to start from the more basic givens in Sraffa's theory. Second, the fact that Marx approaches the prices of production in a particular way does not *of itself* count as a valid objection to the logical coherence of proceeding in Sraffa's way. Therefore I could in principle grant your point about Marx's initial givens without at all taking away from the logical force of my claim of inconsistency on the basis of the Sraffian system including commodity money. >P.S.S > > > My original intention upon joining the discussion between Gary and Fred > was > > to begin with the scenario of commodity money and then move directly to > > that involving fiat money. But in light of discussion prompted by the > > first scenario, I think it's necessary first to ask Fred about the ground > > on which he advances (or understands Marx to advance) the theoretical > > conclusions we're discussing. So I'll wait for Fred before moving on to > the > > case of fiat money. > > > > Gil > >I look forward to reading how you will incorporate fiat money into the >Sraffian system of equations. It seems to me (and I think to Paul >C. too) that, in the case of fiat money, the rate of profit is definitely >not determined by given technical conditions and the real wage (even if >the case of commodity might remain in dispute). Yes, I'm looking forward to it too, but I still need to understand your position with respect to the questions I posed in the "Moving on..." post. Meanwhile, thanks for raising the interesting set of issues addressed above. Gil
This archive was generated by hypermail 2.1.5 : Fri Sep 06 2002 - 10:13:06 EDT