From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Wed Jun 09 2004 - 22:33:05 EDT
Ajit seems to suggest in his comments below that the only variables that
are permissible in economic theories are EMPIRICALLY OBSERVABLE
MAGNITUDES. In other words, a positivist or operationalist philosophy of
science. Ajit keeps asking, "how do we EMPIRICALLY KNOW the L's and the m
in your equation?" He asserts that, unless these variables are
empirically known, then there is no theory.
But this is not true. Positivism is too narrow. It is also permissible
for economic theories to be based on the assumption of unobservable
variables. These assumptions cannot be directly empirically tested, but
they can be indirectly empirically tested, in terms of the conclusions
derived from these assumptions, which do refer to observable phenomena.
Marx assumed that commodities possess definite quantities of abstract
labor-time, even though it is not empirically known what these quantities
are. From this assumption Marx derived certain conclusions that do refer
to observable phenomena - inherent technological change, conflict over the
length of the working day, conflict over the intensity of labor, trends in
the rate of surplus-value, the composition of capital, and the rate of
profit, etc.
The appropriate empirical tests of Marx's theory are in terms of these
conclusions derived from Marx's assumption of abstract
labor-times. Rakesh made a similar point in recent posts, I believe.
An important example from physics of an explanatory variable that is not
directly observable is "force" in Newton's laws of mechanics. Force is
presumed to exist, and to be the cause of the acceleration of masses, but
force cannot be observed and measured independently of its effects on the
acceleration of masses.
Ajit seems to want a theory of price in terms of observable variables
only. Ajit, is that so? Do I understand you correctly? If so, then
why? Why do you think that only observable variables are permissible in
economic theories?
Marx called such economic theories "vulgar economics" - vulgar because
they "stick to the realm of appearances" and have no idea of the inner
unobservable determinants of these appearances.
Thanks for the discussion.
Comradely,
Fred
On Mon, 7 Jun 2004, ajit sinha wrote:
>
> --- Fred Moseley <fmoseley@MTHOLYOKE.EDU> wrote:
> Ajit: (2) If, as you say below, that "abstract labor"
> only shows up in money terms but its measure is in
> labor terms, then could you tell me how do you get
> your money values first and then how do you go about
> translating those money values to labor values?
> _________________
> Fred: This will take a longer answer. I realize now
> that your earlier question about how abstract labor is
> measured is different from what I originally thought.
> My answer to you in my last message about the
> measurement of abstract labor had to do with the high
> level of abstraction of Part 1 of Volume 1 (the
> "simple circulation of commodities"). Since most of
> the recent OPEL discussion about Marx's theory of
> money initiated by Rakesh was in terms of this high
> level of abstraction, that was also the implicit
> assumption of my answer. However, I argue that Marx's
> theory of price becomes more complicated once we reach
> capitalist production and the circulation of capital
> in Parts 2 and 3 of Volume 1 (and beyond). In Part 1
> ("simple circulation of commodities"), commodities are
> assumed to be present, with given quantities of
> socially necessary labor-time contained in them. Money
> is derived as the necessary form of appearance of
> socially necessary labor-time, and prices are
> determined as proportional to socially necessary
> labor-times (with the inverse of the value of money as
> the factor of proportionality, as in my original
> message): (1) Pi = Li / Lg
> ______________
> Ajit: But both your Li and Lg are known at this stage?
> ___________________
> Fred: "Simple circulation" is analyzed according to
> the symbolic formula: C - M - C in which the
> commodities assumed present are first sold for money
> and this money is then used to purchase other
> commodities. Then, beginning in Part 2, the level of
> abstraction changes to the circulation of CAPITAL,
> expressed symbolically to begin with in Chapter 4 in
> the abbreviated version of the "general formula for
> capital": M - C - M' where M' = M + dM In the
> circulation of capital, the starting point is not
> already produced commodities (C), but rather a
> quantity of money (M) advanced as capital. This
> initial quantity of money-capital (M) provides the
> initial givens in Marx's theory of price and
> surplus-value in Part 3 (and beyond). This initial
> money-capital (M) is divided into two components:
> constant capital advanced to purchase means of
> production (mp) and variable capital advanced to
> purchase labor-power (lp). Marx emphasized in Chapters
> 7 and 8 of Volume 1 that these two components of the
> initial money capital play entirely different roles in
> the determination of the price of the output and the
> resulting surplus-value. The money constant capital is
> transferred to the price of the output, and becomes
> the first component of the price of the output, and
> thus cannot be a source of surplus-value. This given
> money constant capital advanced is added together with
> the money new-value produced by current labor in order
> to determined the aggregate price of commodities
> _________________
> Ajit: But how do you know how much is this " money
> new-value" produced by the labor?
> ____________________
> Fred: (I have argued on many occasions that Volume 1
> is about the capitalist economy as a whole).
> Therefore, in capitalist production, which is preceded
> by the advance of money capital, the determination of
> prices is different from the determination of prices
> in "simple circulation". Instead of equation (1), we
> have: (2) P = C + N = C + m L In this equation, the C
> is taken as given, as the initial money-capital
> advanced to purchase mp. This given money constant
> capital is transferred to the price of the output, and
> becomes the first component of the price of the
> output. The L is also taken as given, as the total
> quantity of current socially necessary labor-time in
> the economy as a whole. This total quantity of labor
> is made homogeneous and added together by the given
> skill and intensity multipliers, as discussed in
> previous messages.
> _______________
> Ajit: I don't know about those previous messages, so
> please tell me how is this total quantity of labor is
> made homogeneous. Secondly, is "homogeneous" labor the
> same as "abstract" labor for you? This is a crucial
> point so please specify this one clearly.
> _____________________
> The proportionality factor m is also taken as given,
> and is the inverse of the value of money ( m = 1 / Lg
> ),
> _____________
> Ajit: What is proportionality factor? And how can it
> be taken as given? In your equation, m is not known
> since Lg is unknown.
> __________________________
> Fred: or the amount of money new-value produced per
> hour of abstract labor (which Foley and others have
> called the MELT - the monetary expression of
> labor-time).
> _______________
> Ajit: But you haven't told us yet how is abstract
> labor measured. So your above sentence has no meaning.
> ____________________
> Fred: These given magnitudes co-determine the
> aggregate price of commodities according to equation
> (2).
> _______________
> Ajit: but in your equation 2 both your m and L are
> unknown. By saying that they are given, all you are
> saying is that your theory is given by some entity
> like God, but you can't tell what it is. If you look
> at your equation 2, all you are saying is that my
> price is determined by adding up two elements: one is
> C, which is given and observable, and the second is a
> product of two elements, which you don't know what
> they are but you think they are given. What kind of
> theory or determination of anything it is?
> _________________________
> Fred: The first component of the price of commodities
> (the C) is taken as given because it has already been
> advanced at the beginning of the circulation of
> capital and thus existed prior to production. Other
> authors who have also argued that the initial
> money-capital is taken as given in Marx's theory of
> prices include Yaffe, Carchedi, Mattick Jr, and Mage.
> The second component of the price of commodities, the
> new-value component (N = mL) did not exist prior to
> production, but is instead created by the labor of the
> current period. N = mL is the basic assumption of
> Marx's labor theory of value, as an aggregate theory
> of price and surplus-value.
> The "new interpretation" has also emphasized this
> assumption as the fundamental assumption in Marx's
> labor theory of value. In the past, I have calculated
> the labor-time represented by the given money constant
> capital, as the ratio of this given money constant
> capital to m (or the MELT): i.e. Lc = C / m
> _______________
> Ajit: But Fred, how did you get your m in the first
> place? Let me put it other way, what is the value of m
> in the US today? Tell us how would you arrive at that
> value empirically?
> _________________
> I then added this quantity of labor represented by the
> given money constant capital to the total current
> living labor (L), in order to obtain the total labor
> contained in the total commodity product: TL = Lc + L.
> Ajit, I think this derivation of Lc from C is what
> your second question is about, right (or at least part
> of it)?
> ______________________
> Ajit: Lc is a problem as I have posed above. But here
> I have even more serious problem. How do you know your
> L? Cheers, ajit sinha
>
>
>
>
>
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