Re: [OPE-L] price of production/supply price/value

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Feb 01 2006 - 07:43:23 EST

Andrew Brown wrote:

>I do not follow the specifics of your argument. It has value (labour-time) and price categories all meshed together confusingly to my eye. Whatever the specifics your argument, it clearly turns on dynamic considerations not evident in the static TP (potentially reinforcing my point about abstraction and causation). Where are cycles, crises, bubbles in fixed and financial capital, boom, bust etc. in your account?
The so called static TP also rests on dynamics which it does not supply. It
assumes that there are a pair of dynamic processes which:
1) Move capital between branches of production based on their profit rates
2) Move prices up an down in response to capital movements

Unless both of these hold there would be no equal rate of profit nor
an necessary divergence of price from value.

The TP treatment of the rate of profit is doubly degenerate
it assumes
a) a single rate of profit within a branch - in practice firms within
    a branch have divergent rates
b) that all branches have the same rate - in practice different branches
    have systematically different rates

The assumptions underlying the TP are extraordinarily strong - they
amount to assuming that the system adopts a configuration of very low
entropy, but we know that all complex systems tend to high entropy
configurations. The low entropy configuration is proposed without
providing any plausible dynamics that would bring it into existence.

I was making very parsimonious assumptions in my post:
a) Assume that the selling prices of firms are a random function
of the value of their products.
b) Set constraints on how wide the dispersion of this random
distribution can be, derived from the social average rate of

On general statistical grounds we would expect the
distribution of prices/values to be chaotic subject
to the constraint that only a very small portion of firms
can be selling commodites at a price that is < c+v  in flow terms.
Suppose less than 5% of firms are doing this.
If we know the social average ratio of R= s/(s+c+v)
then we know that R >= 2 standard deviations of the
dispersion of  prices around values, and from this we can
work out how close prices can be expected to be to values.

It is much harder to construct a plausible argument why
about the dispersion of market prices around prices of production.

These assumptions are pretty robust, They make no particular
assumptions about crises, boom/bust cycles etc, all they depend
on is that capitalism is anarchic and chaotic.

>       -----Original Message-----
>       From: OPE-L on behalf of Paul Cockshott
>       Sent: Tue 31/01/2006 09:51
>       Cc:
>       Subject: Re: [OPE-L] price of production/supply price/value
>       Andrew Brown wrote:
>       >
>       >Imo, the economic basis for refuting neo-R critique lies in the
>       >necessity for there to be limits on prices, to ensure enough needs of
>       >workers are met, and enough profit needs of capitalists are met, across
>       >the economy and through time. These limits are given by SNLT.
>       >
>       >The theory of exploitation shows in essence how the system actually
>       >enforces these limits. But it is folly to think that at any point in
>       >time the aggregate equalities actually hold at market prices because the
>       >limits take effect only through rupture and crisis.
>       >
>       >
>       I think this understates the power of value constraints. They operate
>       all the time and are considerably stronger than profit equalising
>       constraints.
>       A firm whose selling price does not cover the direct and indirect wage
>       costs
>       has a short life expectancy, whereas a firm can go on indefinitely
>       with a rate of profit below the economy average, provided that its gearing
>       ratio is low.
>       Assuming price/direct costs are normally distributed, the first criterion
>       means that the standard deviation of this distribution must be small.
>       Suppose the rate of surplus value is 50%, then we would expect that
>       coefficient of variation of the price / value ratio would have to be less
>       than 0.25, because otherwise more than 5% of firms would not even
>       be meeting their direct and indirect wage costs ( and hence since the
>       indirect wage costs are always less than C, would be running at
>       a large loss ).
>       It is hard to see that the constraints on the coefficient of variation of
>       the rate of profit are anything like as tight. Provided that the rate of
>       profit was still positive, a firm could continue operating with a profit
>       rate 2 SDs away from the mean.
>       --
>       Paul Cockshott
>       Dept Computing Science
>       University of Glasgow
>       0141 330 3125

Paul Cockshott
Dept Computing Science
University of Glasgow

0141 330 3125

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