From: Philip Dunn (pscumnud@DIRCON.CO.UK)
Date: Sun Apr 17 2005 - 08:29:42 EDT
A profit-rate invariant solution to the Marxian transformation problem Capital & Class, Spring 2004 by Loranger, Jean-Guy "... the transformation of all costs implies that the ex post money wage rate is different from its ex ante labour value, the ex post exploitation rate is different from its ex ante value and the ex post money value added is different from its ex ante labour value, which is the case in the neoRicardian solution but not in the DFL solution." It really is like that commedy routine where closing one drawer makes another one open. Loranger goes in for some Adam Smith bashing: ""The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities (A. Smith 1776, ch.5, p. 31)." This statement is typical of Smith's command labour theory of value where he specifies that, although value originates in labour, the value of a commodity is not labour incorporated by the production process but is labour value gained through the exchange process." Ricardo objects: "If the quantity of labour realized in commodities, regulate their exchangeable value, every increase of the quantity of labour must augment the value of that commodity on which it is exercised, as every diminution must lower it. Adam Smith, who so accurately defined the original source of exchangeable value, and who was bound in consistency to maintain, that all things became more or less valuable in proportion as more or less labour was bestowed on their production, has himself erected another standard measure of value, and speaks of things being more or less valuable, in proportion as they will exchange for more or less of this standard measure. Sometimes he speaks of corn, at other times of labour, as a standard measure; not the quantity of labour bestowed on the production of any object, but the quantity which it can command in the market: as if these were two equivalent expressions, and as if because a man's labour had become doubly efficient, and he could therefore produce twice the quantity of a commodity, he would necessarily receive twice the former quantity in exchange for it. If this indeed were true, if the reward of the labourer were always in proportion to what he produced, the quantity of labour bestowed on a commodity, and the quantity of labour which that commodity would purchase, would be equal, and either might accurately measure the variations of other things: but they are not equal; the first is under many circumstance an invariable standard, indicating correctly the variations of other things; the latter is subject to as many fluctuations as the commodities compared with it. Adam Smith, after most ably showing the insufficiency of a variable medium, such as gold and silver, for the purpose of determining the varying value of other things, has himself, by fixing on corn or labour, chosen a medium no less variable. (Ricardo, Priciples, chapter 1 section 1)" Now Smith is confusing even though he endeavoured to be perspicuous. He may or may not be confused as well. Chapter V is about real and nominal price, about money, although the fact that exchange is mediated by money is often left out: "The power which that ossession immediately and directly conveys to him, is the power of purchasing; acertain command over all the labour, or over all the produce of labour whic is then in the market. His fortune is greater or less, precisely in proportion to the extent of this power; or to the quantity either of other men's labour, or, what is the same thing, of the produce of other men's labour, which it enables him to purchase or command. The exchangeable value of every thing must always be precisely equal to the extent of this power which it conveys to its owner." (A. Smith 1776, ch.5) Note that command over labour [sc. labour-power] and command over the produce of labour [sc. living labour, labour-content??] are the same thing here. We are in "that early and rude state of society which preceeds both the accumulation of stock and the appropriation of land". They diverge later. Ricardo's objection relies on using the first measure. A neo-Smithian theory of money would be as follows. Money is purchasing power. The intrinsic value of money is its power to command labour. Or rather powers. The power to command labour-power is the real value of money, measured by the ratio of aggregate labour time to the aggregate nominal wage bill. The power to command living labour is the absolute value of money, measured by the ratio of aggregate labour time to aggregate nominal value added. Since money is the universal equivalent the relative value of a produced commodity, its intrinsic embodied labour value, is precisely equal to the value of the sum of money it sells for. Smith was right. "The exchangeable value of every thing must always be precisely equal to the extent of this power which it conveys to its owner." Philip Dunn
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