From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Sep 12 2002 - 10:30:34 EDT
On Thu, 29 Aug 2002, Gil Skillman wrote: > But whether or not I'm convinced, I originally posted this scenario asking > if you found it relevant to our discussion. You've indicated that you > don't, so good enough--we might as well move on. In anticipation of the > next step of our discussion I went back and read your post in the archives > that first mentioned this notion that surplus value is determined prior (in > an analytical sense) to prices of production. I reproduce the relevant > passage below for reference: > > >... matrix algebra does not fit with Marx's logical > >method. Matrix algebra Marxism assumes that the rate of profit is > >determined simultaneously with prices of production and that the initial > >givens in Marx's theory of values and prices of production are the > >physical quantities of inputs and outputs. Marx's own logic, to the > >contrary, assumes that the rate of profit is determined prior to prices of > >production, by the Volume 1 analysis of capital in general, and that the > >initial givens are quantities of money-capital (constant capital and > >variable capital), quantities of abstract labor, and the money-value > >produced per hour of abstract labor. > > Questions (with apologies if you already addressed these before I became > aware of this exchange): (1) At what prices are the elements that determine > "the rate of profit" evaluated, if not prices of production, and what basis > is there for using these alternative prices, if they never actually obtain, > even abstractly? For example, in your above statement, at what prices are > "quantities of money-capital" and "the money-value produced per hour of > abstract labor" evaluated, if not the prices of production referred to > above, and on what grounds are they invoked? (2) In your reading, what > conditions does Marx require to render valid the postulate that the rate of > profit is determined (analytically) prior to prices of production? > > Posing these questions is an imposition, I realize, for which I apologize; > but I think these issues have to be clarified up front in order to avoid > future misunderstandings about what constitutes relevant arguments with > respect to Marx's analysis on this point. Thanks in advance. Gil, these are big questions. May I ask you to please read my two of my papers on my interpretation of Marx's theory (as time permits), where I discuss these questions at length? The two papers are: "Marx's Logical Method and the Transformation Problem," in Moseley (ed.), Marx's Method in 'Capital': A Reexamination (1993) "The `New Solution' to the Transformation Problem: A Sympathetic Critique," Review of Radical Political Economics, 2000, 32 (2): 282-316. My interpretation is derived mostly from Mattick, Rosdolsky, Carchedi, and Foley. Others with similar interpretations are David Yaffe and Paul Mattick, Jr. I will briefly discuss below the similarities and differences between my interpretation and the "new solution" presented by Foley and others. It is difficult to summarize briefly, but here goes (I would be happy to try to clarify further). It is somewhat lengthy. 1. C and V taken as given, as quantities of money-capital I argue that, in Marx's theory, the quantities of constant capital and variable capital are TAKEN AS GIVEN, PRESUPPOSED, as the two components of the initial money capital (M) invested in the first phase of the circulation of capital to purchase means of production and labor-power, respectively. The initial givens in Marx's theory are NOT the physical quantities of inputs, as in Sraffa's theory. 2. The circulation of capital The circulation of capital is of course represented symbolically by: M - C ... P ... C'- M' This general formula for capital is not just a helpful illustration. This general formula is Marx's overall analytical framework for Marx's theory. The initial given in Marx's theory is the starting point of the circulation of capital, M. And the main purpose of Marx's theory is to explain how this given, presupposed initial M is transformed into (M + dM), i.e. the original capital plus a surplus-value, at the end of the circulation of capital. This question applies to the total surplus-value produced in the capitalist economy as a whole. Marx's analytical framework of the circulation of capital is fundamentally different from Sraffa's "production of commodities by means of commodities". Marx's framework has to do with quantities of money-capital. Sraffa's framework has to do with physical quantities of inputs and outputs. 3. Theory of value surplus-value Marx's theory explains the origin and magnitude of dM on the basis of the initial givens of constant capital and variable capital, and also the additional assumptions of the quantity of abstract labor currently employed in the capitalist economy as a whole (L) and the money value added per hour of labor (m). The product of m and L yields the total money value added (or "new value" produced) in the capitalist economy as a whole: MVA = m L. The sum of MVA and the constant capital consumed (the "old value" or "transferred value") yields the value, or the total price, of commodities: P = C + MVA >From this theory of total price, Marx derived the total amount of surplus-value (S) produced within a given period of time. This derivation may be briefly summarized algebraically as follows: S = P - K = (C + MVA) - (C + V) = MVA - V = mL - mLn = m(L - Ln) S = mLs where K represents the cost price of commodities (= C + V), Ln the necessary labor-time or the time required for current labor to reproduce the equivalent of variable capital (= V/m), and Ls the surplus-labor time. 4. Partial explanation of C and V At the high level of abstraction of Volume 1, Marx provisionally assumed that the initial givens of constant capital and variable capital are proportional to the labor-time embodied in the means of production and wage goods, respectively. Marx made this provisional assumption because the price of individual commodities, and hence of groups of individual commodities, like the means of production and wage goods, have not yet been determined in the analysis of capital in general in Volume 1. The microeconomic assumption of proportionality between price and labor-time for individual commodities is the only one consistent with the macroeconomic labor theory of value developed in Volume 1. However, it is important to emphasize that this provisional assumption (or partial explanation of C and V) plays no role in the DETERMINATION of constant capital and variable capital, and hence plays no role in the determination of the total value and surplus-value, which is the main conclusion of Volume 1. The magnitudes of constant capital and variable capital are not determined as proportional to the labor-times embodied in the means of production and wage goods, respectively. The physical quantities of means of production and wage goods play no role in Marx's theory of value and surplus-value. Instead, value and surplus-value are determined (in part) by the magnitudes of constant capital and variable capital, which are taken as given, as quantities of money-capital invested to purchase means of production and labor-power in the first phase of the circulation of capital, whether or not these quantities of money-capital are proportional to the labor-times embodied in the means of production and wage goods. 5. Theory of prices of production Marx's theory of prices of production in Volume 3 can be then represented algebraically by the following simple equation: pi = ki + r ki where pi stands for the price of production of each commodity, ki for the cost price of commodities in each industry (equal to the sum of constant capital and variable capital), and r for the rate of profit (ignoring here the distinction between the stock and flow of capital). In this equation, the ki for each industry are TAKEN AS GIVEN sums of money-capital, just like the total quantities of C and V are taken as given in the theory of the total surplus-value in Volume 1 (the sum of the former is obviously equal to the latter). This is the reason why constant capital and variable capital DO NOT CHANGE, or do not have to be transformed, in the transformation of values into prices of production, i.e. in the transition from the macro analysis of the total surplus-value in Volume 1 to the micro analysis of prices of production in Volume 3: because the same quantities of constant capital and variable capital are taken as given in both of these levels of abstraction. The magnitudes of constant capital and variable capital are not first determined as the values of the means of production and wage goods, and then later transformed into the prices of these same means of production and wage goods, as in the Sraffian interpretation. Instead, the same quantities of money-capital used to purchase the means of production and labor-power are taken as given in both Volume 1 and Volume 3. In other words, these given quantities of money constant capital and variable capital "remain invariant" in the transition from the macro theory of the total surplus-value to the micro theory of prices of production. In this micro determination of prices of production in Volume 3, the general rate of profit (r) is taken as given, as PRE-DETERMINED by the prior macro theory in Volume 1. The rate of profit is equal to the total surplus-value for the economy as a whole (determined in the Volume 1 macro theory) divided by the total capital invested (constant capital plus variable capital, which, as we have seen, are taken as given in Volume 1); i.e. r = S / (C + V). 6. More complete explanation of C and V After the determination of prices of production, the initial givens of constant capital and variable capital can now be more fully explained as equal to the prices of production of the means of production and the means of subsistence, not equal to their values. The given magnitudes of constant capital and variable capital do not change from Volume 1 to Volume 3, but these given magnitudes can be more fully explained in Volume 3 than in Volume 1. 7. Comparison with the "new solution" My interpretation is similar to the "new solution" (presented in recent years by Foley and Dumenil and others) in the sense that the "new solution" also takes VARIABLE CAPITAL as given, as a quantity of money-capital, which does not change in the transformation of values into prices of production, as in my interpretation. However, the "new solution" is different from my interpretation in the sense that it does not take CONSTANT CAPITAL as given, but instead derives constant capital from given physical quantities of inputs, first as the value of the means of production and then as the price of production of the means of production, as in the Sraffian interpretation of Marx's theory. Therefore, I argue that there is an fundamental inconsistency in the "new solution" between these two different methods of determination of the two components of the initial money-capital (M) at the beginning of the circulation of capital. One component (variable capital) is taken as given and the other component (constant capital) is derived from given physical quantities. I argue that these two quantities of the initial money-capital should be determined IN THE SAME WAY, either taken as given or derived from given physical quantities. Marx never hinted that these two components of the initial money-capital should be determined in fundamentally different ways. Therefore, I conclude that the new solution "only goes halfway" in correcting the Sraffian misinterpretation of Marx's theory, and that it should instead "go all the way" by also taking constant capital as given, as quantities of money-capital. 8. Gold and the transformation of values into prices of production The above equation for the determination of prices of production does not apply to gold (the money commodity) because the money commodity has no price and hence no price of production. The result of the valorization process in the gold industry is not a commodity with a price, which still has to be converted into a quantity of money through sale, but is instead already a quantity of money. This quantity of money cannot change in the transformation of values into prices of production of other commodities. Furthermore, the inputs of constant capital and variable capital in the gold industry, like the inputs of constant capital and variable capital in all other industries, are TAKEN AS GIVEN, as the sums of money invested in the first phase of the circulation of capital in the gold industry to purchase means of production and labor-power. These given quantities of constant capital and variable capital in the gold industry, again like in all other industries, DO NOT CHANGE in the transformation of values into prices of production. Therefore, since the "price" of gold cannot change (since gold has no price) and since the inputs of constant capital and variable capital are taken as given and assumed not to change, it follows that the amount of surplus-value cannot be transformed into profit as a different magnitude in the transformation of values into prices of production. That is why I have argued that there is no "sharing of surplus-value" between the gold industry and other industries. The gold industry neither gains nor loses in the redistribution of surplus-value by means of prices of production. This is my answer to Gil's third point in his (7611), the reason why, according to Marx's theory, there is 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 other industries are determined independently of each other. Marx assumed that the composition of capital in the least productive gold mines was below the social average composition of capital (as with mining and agricultural industries in general). Under the further usual assumption of equal rates of surplus-value between the gold industry and all other industries, the conclusion that there is no "sharing of surplus-value" between the gold industry and other industries implies that the rate of profit in the gold industry is greater than the general rate of profit in other industries. Marx argued that, in mining and agricultural industries in general, at least part of the extra surplus-value produced would be appropriated by the landlords and mine owners in the form of absolute rent. In mining and agricultural industries in general, the amount of absolute rent depends in part on the level of demand. However, this is not true of the gold industry, because the money commodity has no price (as I have discussed in 7368). In this case, all of the extra surplus-value produced in the gold industry remains in the gold industry and the profit plus rent appropriated is equal to the surplus-value produced - which implies that no "sharing of surplus-value" and independent determination of the rate of profit in the gold industry. Gil (and others), I look forward to your response. Thanks again for this interesting and productive discussion. Comradely, Fred
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