From: Jurriaan Bendien (andromeda246@HETNET.NL)
Date: Mon May 17 2004 - 20:26:00 EDT
> The identity, though, was that the sum of values equal the sum of prices > of production. That is true (although Marx's manuscript doesn't always make this explicit). But this does not affect my case. Specifically, Marx's manuscript (Cap. 3, Chapter 49) states "It is possible for a part of the surplus labour and hence surplus-value contained in commodities not to go directly into the equalisation that gives the average rate of profit, so that a part of the value of the commodities is not expressed at all in their price. But firstly, this is compensated for by a rise in the profit rate... Secondly, it is cancelled out in the average movement. (...) The sum of average profit plus ground rent can never be greater than the quantity of which these are parts, and this is already given before the division. Whether the entire surplus-value of commodities, i.e. all the surplus labour they contain, is realized in their price or not is therefore immaterial as far as we are concerned here. In actual fact the surplus-value is not completely realized, for since the amounts of socially necessary labour required for the production of a given commodity are constantly changing owing to the constant changes in productivity of labour, once section of commodities are always produced under abnormal conditions and must therefore be sold below their individual value." Whether or not the "price" Marx mentions is a production price or a final market price therefore does not affect the case, the general point is that price movements and productivity changes do not perfectly mesh at any time. The formed average production price, as I have argued before, is anyway not a direct producer's price, but a price pertaining to all the living labor performed by various enterprises in creating the final product purchased by the final consumer (in production, storage, transport and retail). It assumes a stable, developed market. I personally dissent of course from the interpretation that Marx doesn't offer a theory of price formation, because he does. But that theory really applies more to the overall dynamics of the capitalist system as a whole, the global trends of the system, and does not necessarily explain all sorts of special cases. But, he repeatedly argued, if you cannot formulate the conditions which apply in the purest, simplest cases, then you cannot understand how particular conditions might vary from them. And then all you have is an eclecticism which rejects the possibility of understanding a social totality human beings themselves have created. Marx then shrugs and continues: "At all events profit plus rent equals the entire realised surplus-value (surplus-labour), and for our present purpose the realised surplus-value can be equated with the total surplus-value; for profit and rent are realised surplus-value, i.e. the total surplus-value that goes into the prices of commodities, and thus for practical purposes all the surplus-value that forms a component of this price." (Capital Vol. 3, Pelican ed., p. 971-972; the German text is available e.g. at http://www.mlwerke.de/me/me25/me25_840.htm). No doubt, if he had prepared the text for publication, he would have said: profit+rent+interest+insurance+tax+faux frais. But notice anyway how he says "for present purposes", i.e. he leaves the possibility open for discussing how realised surplus-value might deviate from produced surplus-value. I think he must have realised that the discrepancy can also be an independent source of profit for the astute banker. Marx claims that "the sum of average profit plus rent can in its normal form never be greater than the total surplus-value, though it can be less" (p. 971) but if we consider credit and so-called "fictitious capital" (capitalisation on property ownership) it is evident that profit+rent (or profit+rent+interest+tax) could exceed surplus-value. That is, financial claims to the surplus-product can proliferate which exceed the actual value of current (or even future) surplus-product, and have the effect of forcing an increase in the rate of surplus-value over time, given the need to recoup previous claims made to the surplus-product from current output. What Marx called "abnormal" has, I would argue, become a widespread practice. Yet, Marx explicitly excluded entire sections of the > economy from the transformation when he stated that monopolies are > excluded. Yes, and that would exclude a large part of the world market, but the substance of his argument I think implies the formation of internationalised production prices (as Anwar Shaikh also suggested), i.e. an internationalised cost-structure and an internationalised market demand. The whole trend in international accounting practice is also in this direction, i.e. a standardisation of principles on the basis of current market value and current replacement cost. Simply put, just because you monopolise a resource, does not mean that you are not affected by cost-prices incurred in exploiting that resource, or by the market demand for your output. Of course you are. Oil sheikhs know that. Yet, the commodities produced by capitalist firms which > are monopolies have value -- even if the market price of those commodities > does not equal their value. It therefore follows that the claim that the > sum > of value equals the sum of prices can not hold at a more concrete level > of abstraction. That's correct I think. Marx felt the assumption of the accounting identity in the case of the "ideal average" conditions was justified because he thought the discrepancy between price and value wasn't so great in his own time, in Britain where he lived. And I think that was true in an overall sense (at least I haven't seen good empirical evidence to the contrary). But at a deeper level, his real argument is that the longer term tendency is always for values and prices to converge, whether through a secular evolution, or through sudden price-shocks when inflated prices are wiped out, and asset prices suddenly catch up with productivity changes. Although Isaac Newton apparently already knew about iteration, many iterative modelling techniques had not been invented yet in Marx's lifetime. > > It also holds, if we factor in what you referred to recently as the ongoing > process of the primitive accumulation of capital which involves plunder > (including, in the most recent period, privatization) that products which > didn't take the commodity-form can now have a price. Yet another > reason why the sum of value can not equal the sum of prices. Quite. I think there must be at least 7 reasons why the identity doesn't exist in reality. The question really is, why didn't Marx devote much time trying to prove the identity mathematically ? And I think the reason is that, actually, he thought it was really of little theoretical importance, his interest was in explaining the dynamics of competition, the formation and movements of prices, the motion of capital. It mattered little whether capitalists saw themselves as "profit-hungry" but rather what market forces and competition compelled them to do. If economic value itself cannot be measured other than in terms of priced costs, or else in terms of labor-hours performed, then trying to prove an identity of total prices and total values is just pointless. We're not interested in values as such, but in value-relations. The identity is only an assumption you make in modelling variations in capital costs, turnovers and realised returns. The real argument is about something else, namely how the relative movements of the cost-structure of production and the structure of market demand would affect competition, and thereby the share-out of surplus-value in terms of profit, interest and rents - and the overall impact that then has on the conditions of the working class and on class struggles. In my opinion, the only substantive case against Marx is not by Von Bortciewicz, but by Harry W. Pearson, who argued that "the economy has no surplus." But I don't think many class-conscious workers would fall for that one. If surplus-value only consisted of profit, then Marx wouldn't even have used the concept of surplus-value; but the point is that income from appropriating the products of work effort, in virtue of capital ownership, is realised in many different financial forms, and that is why the concept of surplus-value is necessary. Proving the identity is important, if it is believed that the necessary relationship between values and prices (1) can be proved only by, or (2) is dependent upon, a mathematical proof that in aggregate, they are quantitatively equal. But I don't think Marx was trying to do that, his concern is with price formation and relative price movements, and how that impacts of capitalist behaviour. A capitalist looks at the matter mainly from the point of view of the state of the market. The worker looks at the matter mainly from the point of view of the producer. The "proof" that can be supplied is only an empirical one, not a logical one, namely whether prices and competition in the system empirically behave in the way that Marx predicts they will behave, and for that purpose, you have to look at historical series of actual price movements and their relativities, and actual commercial behaviour. Marx in other words thought you need value-theory in this respect to explain those movements. If it could be proved somehow logically that the identity holds, then I think we would only be stating a theoretical tautology, namely that values imply prices. But that is not Marx's argument, because for Marx values exist independently of prices, because values denote labour-time, and systemically considered, prices only refer to how the valuation of that labour-time is expressed in exchange. That aside, the real world just happens to be a little "messier" than elegant econometric theorems. Assumed by proponents of the idea of a mathematical identity, is an ontological identity of price and value in aggregate, a "nice and neat accounting solution". But really for Marx, the function of the concept of value is different; it is to relate prices to labor-time and production conditions, in order to illuminate the situation of the working class, and the concept of economic value just happens to be the only way you can relate the market to the social organisation of an economic community, and to the real behaviour of economic agents. The idea of an ontological identity is spurious anyway, since the prices equated with values are production-prices, which are, at best, (1) average accounting prices calculated from real prices, (2) regulating prices setting the price-level in the market over time, or else (3) theoretically postulated prices explaining the trend in real market prices. In other words, they are not real prices except in special cases. Prof. Moseley describes this poetically with the astronomic term of "centres of gravity". This already suggests a movement, a motion, and not an accounting result, not a ledger concept. What Marx thinks justified the concept of production price, is (1) the real business practice of pricing (cost-price + mark-up) and (2) the market reality that competing producers face, in terms of the constraints of average cost-prices and the trend in average profitability, both of which are beyond their individual control, and to which they must adjust production conditions. And then Marx says, that it is precisely the actual way in which they adjust production conditions to that basic reality, that forms the real dynamic of capitalist development in the longer term. If rising productivity equals falling unit profitability, then what drives capitalist development is all those forces which offset that falling unit profitability. But that adjustment cannot occur in any old way; it occurs, says Marx, within the framework of given social relations, given property relations, and therefore it affects how those social relations will evolve. And that is what mattered most for Marx, i.e. the social parameters of class struggles, in a bella omni contra omnes. Without value-theory, all you can really do is extrapolate likelihoods from the past trend in prices, in an empiricist manner, or second-guess what market actors will do. The limits of that empiricism are, that previous price averages don't satisfactorily explain "what drives the market", and that "what motivates market players" could be all sorts of factors and those factors could change very quickly as new information comes to hand or is disseminated. And for Marx, it was quite clear "what drives the market" systemically, namely all those forces which maximise the volume of realised surplus-value (profit+rent+interest, i.e. the value-added) within an accounting period. In modern parlance, "returning maximum value to share-holders", i.e. a gross annual average return of around 10-12 percent on capital invested, no matter where it comes from. That in itself proves the validity of the concept of surplus-value, because we are talking about a net income receipt regardless of any particular source, provided it is legally tolerated. It's those forces governing the volume of surplus-value which Marx seeks to explain, in order to show the effect they have on human beings and their behaviour. Regards Jurriaan
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