From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Mon Jan 30 2006 - 15:53:53 EST
Hi Ian, Thanks for your response. You are very clear in setting out the arguments. In reply (maybe too long): >I think my overall point is that I want to take the neo-Ricardian formalisation of the TP seriously, whereas you seem to be rejecting it on grounds of realism. Well maybe there is merit in the neo-Ricardian argument in some way, we'll see, I am undecided. But as far as I understand, it tries to make the argument work without any reference to values, just prices (both real prices and ideal prices, although this distinction is fuzzed). As soon as we argue that the price-level for output is not established by the individual enterprise, but by "the market" (the overall supply-demand relationship), then I think we are already referring to value, to value theory which is necessary to relate the prices involved. So really I have no special epistemic problem with Marx's argument, what interests me is what the empirical evidence of the observable trends is. I guess that I am closer to TSS in that sense. >No, I don't think so. Marx was not concerned with uncertainty of profit realisation in ch. 9, unless I've missed something. I am sure he is abstracting away from such factors. He later talks about market prices. I think he is concerned to show that, despite appearances, labour value is conserved in price, so that the Vol I. law of value still obtains. It's important for Marx here that the quantitative connection is maintained. Well, in his example, Marx does write: "To the same extent that one section of commodities is sold above its value, another is sold below it. And it is only because they are sold at these prices that the rates of profit for capital I-V are equal to 22 percent, irrespective of their organic compositions" (Cap 3, Pelican, p. 257). It is true, he nowhere refers to "uncertainty of profit realisation" directly, specifically, in chapter 9. But he does aim to explain there why "How much of this profit is mediated by the overall exploitation of labour by capital as a whole, i.e. by all his fellow capitalists, this interconnection is a complete mystery to him" (ibid. p. 270). Specifically, "What the capitalist sees, and therefore the political economist as well, is that the part of the paid labour that falls to each item of the commodity changes with the productivity of labour, and so too does the value of each individual article; he does not see that this is also the case with the unpaid labour contained in each article, and the less so, as the average profit is in fact only accidentally determined by the unpaid surplus labour absorbed in his own sphere. The fact that the value of commodities is determined by the labour they contain now continues to percolate only in this crudified and naive form." (p. 272). I would say that is broadly speaking true to this day; all the talk is about "productivity" with very little understanding of what it really means. I do not think that "labour value is conserved in price" because I think values in Marx's sense can only be expressed or manifested as quantities of labour, real or ideal prices, or exchange ratios. There is no other way of knowing what values are, beyond theorising about them. At best you can say e.g. that relative aggregate labour magnitudes are proportional to relative aggregate output price magnitudes, which you can measure. But proof of this is an empirical proof. >It can, given the starting assumptions. You can count labour values. You can count prices. In what way are they related? Okay, what you can do, is assign a numerical magnitude to a product-value for theoretical purposes. That is what Marx often does, to save himself from the intricacies of price fluctuations. But if you do that, and you draw an equation between value numbers and price numbers, you cannot thereby supply any logical proof that as a matter of fact value magnitudes must necessarily be proportional to price magnitudes. All you can do is illustrate a theoretical argument about how values and prices might evolve, given certain assumptions. Why does Marx refer to "values" at all here? Basically, I think for three main reasons: (1) it's a theoretical shorthand to make a complex story (which would involve price fluctuations) simple, (2) all the labour-activities and the outputs are related at a level that goes beyond prices and sets limits for prices, (3) he aims to explain a "law of motion" (dynamic principle) governing economic behaviour of actors in a market situation none has control over. The law of value is not an accounting principle, or an aggregation principle, but a law of motion. >Yes, I agree. But there's a logical proof that Marx's theory of value is logically impossible. I don't buy it for one minute, but that's what the TP is. Neo-Ricardians, in general, reject labour theories of value on these grounds (e.g. Steedman). According to them, there isn't an important relationship between labour-time and prices. The question is not one of proving, but disproving. Well, if there is such a logical disproof, it would have to show the internal incoherence of the theory. But from what I understand of it, neo-Ricardians do not actually accomplish that. The reason is, that they introduce assumptions alien to Marx's argument, and basically just try to relate prices, based on eclectic assumptions about economic value. Marx is according to them not entitled to assume, for the sake of argument, that the cost-prices are equal to their values, but why? Why is this unreasonable? That aside, the neo-Ricardian examples do not seem realistic, and seem to have very little in common with business realities. Actually, measuring an "internal rate of return" is actually a hell of a lot of work, and mostly, businesspeople do not even know what their business is worth as a "going concern". All they have is input costs, output prices, cost-centres and revenue streams. The only "incoherence" I can think of is quite simply that Marx combines values and prices in one equation, or assumes for the sake of argument they are identical, but as far as I can see he does that only to show, in a simplified way, a "moving reality" in which the micro-level and the macro-level reciprocally affect each other. Values are conserved and transferred between successive exchanges by production, but what the incremental (added) value will be, is determined at the macro-level, that's the problem (in business language, ""the state of the market"). >Yes, maybe for Marx (e.g. TSS intepretation heavily emphasises a dynamic reading of Marx). Nonetheless, there is a modern TP, which is static. You are rejecting this special case study. Well I am prepared to look into it, but I didn't think it was particularly useful, at least not for Marx's purposes. It could, however, elucidate aspects which Marx hadn't thought of (one has to experiment with things). Modern economics moves from observed prices to ideal prices stating an aggregate value, Marx goes the other way round. I don't think either procedure is any less problematic than the other. But, not being a professional economist, I do not normally cudgel my brains over the implications of a model unless I think it is reasonably realistic. >But the possibility of that reconciliation is precisely what is at question. You know that neo-Ricardian critics will interpret your last statement as dialectical "mumbo-jumbo". They will say that no such contradiction is reconciled in practice, and that this is just Marxist wishful thinking, that somehow the economy sorts out their theoretical confusions for them (etc.). But in that case the Neo-Ricardians are in truth not Ricardians at all, because for Ricardo (as for Marx) there really was this problem, i.e. output could sell above or below value in the marketplace, with value defined in terms of labour-content. It was an empirical observation of Ricardo and other economists that capitals of equal sizes reaped very similar returns, regardless of labour-time expended. There was therefore an inconsistency between theory and observation. The returns were supposed to be determined by direct labour input. Marx then asks, how is this inconsistency possible in the first place? There is a puzzle leading to a discovery. In answering it, he argues that this inconsistency (or paradox) must be understood not statically, but in terms of a moving reality, in which "the parts" and "the whole" reciprocally influence each other in the dimension of time, and additionally he also tries to explain the objective causes for why the idea that "the value of commodities is determined by the labour they contain" henceforth continues "to percolate only in this crudified and naive form" of "productivity". This is a perfectly acceptable idea, which I think can be stated and formalised without any reference to "dialectics" whatsoever. But in the process, a mutation occurs in Ricardo's theory, namely, value is no longer a technical function or numeraire, but becomes a socially determined, aggregate relationship that can be understood only in motion, in a temporal perspective. The fact, that prices and values deviate from each other, itself becomes highly important in explaining the dynamics of competition, the behaviour of producing enterprises and the growth of production. Economics is full of paradoxes, there are many books about this from many perspectives, and indeed, to be in business, they say you have to "learn to live with paradoxes". But what are these paradoxes made of? Contradictions. What is a dialectical contradiction? A situation where a condition involves the presence of its opposite as a requirement for its existence, giving rise to a mediation between the condition and its opposite. Nothing particularly mystical about that. I assume Marx would have said something like "The utility of my value theory is that it permits one to grasp the economic reality dynamically in such a way that there is one set of conceptual distinctions covering both the micro-level and the macro-level together", in other words you have one theory of social reality in its totality, showing the place of its different facets. This in contrast to a theory in which X is real at the micro-level, but not real at the macro-level, and vice versa. You could also drop all talk of value, but the problem is, for any more complex discussion of prices, assumptions about value are made anyway. So really the interesting questions I think do not concern "proving the concept of value" but looking at whether they can make sense of empirical reality or not, or if we have to adjust our concepts in the light of experience. I had an interesting exchange with Jonathan Nitzan, who argues that price relations really refer to power relations instead of value relations: big price - big power, small price - small power, sort of thing. That's another way to look at it... until you experience the constraints of labour-time... Jurriaan
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