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

From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Sun Feb 05 2006 - 11:33:57 EST

Hi Ian, I am finally getting around to responding to some of your
messages.  I only have time to work on this on the weekends,
but I appreciate very much the discussion.  Some comments below.

On Sun, 29 Jan 2006, Ian Wright wrote:

> You know, it is an amazing fact that Kurz & Salvadori's comprehensive
> presentation of linear production theory, "Theory of Production" (571
> pages), does not have money in the index. You'd think they'd slip it
> in just so people wouldn't point this out.

I agree that the omission of money is a big weakness of Sraffian theory.

> But, as you know, the Sraffian framework does describe situations in
> which profits are made, and situations with a net product, including
> an increasing net product.

But my point is that the Sraffian framework in terms of physical
quantities is entirely different from Marx's framework of the circulation
of money capital.

> Thanks for the attached papers below -- which I will read. Maybe I
> should not comment until then, but of course your claim contradicts
> the neo-Ricardian results on the TP, which in general demonstrate that
> there is no necessary relationship between labour values and aggregate
> price quantities. (This is an important point that I have only
> recently understood, thinking that the neo-Ricardian critique was
> essentially that Marx's conservation claims were contradictory. There
> is more to it than that. They argue that labour values and prices are
> in general unconnected accounting systems.)
> What is the key difference in your reading of the transformation that
> avoids the neo-Ricardian results?

The key difference is the different analytical frameworks, with
different initial givens, as I have been emphasizing.  Marx's
analytical framework is the circulation of money capital,
and takes the initial M as given (along with the quantity of
current labor and the MELT), and Sraffa's analytical framework
is the production of commodities by means of use-values,
with the physical quantities of inputs and outputs
(or the technical coefficients) as given.

> Are you rejecting simultaneous determination, for example?

Yes, I reject simultaneous determination.  That is, I argue that Marx's
theory is not based on the simultaneous determination of input prices and
output prices.  My rejection of simultaneous determination is not the same
as TSS (see below), but they have been pioneers in calling simultaneous
determination into question.

I argue that the analytical framework for Marx's theory is the circulation
of money capital:

        M - C ... P ... C' - M'

M is equal to the price of the inputs, and is taken as given, as existing
prior to production and the determination of the price of the outputs
(M'), and is used to determine M' and dM.  This is the sequential
determination of input prices and output prices, not simultaneous

This interpretation does not mean that the means of production are always
valued at their original "historical" price, as in some versions of TSS.
If the price of a given means of production (e.g. cotton in the production
of yarn) changes after it has been purchased in a prior circuit, then the
price of the cotton that is taken as given in the determination of the
price of the yarn is the NEW CURRENT price of the cotton, not the original
historical price.  Even though the price of the yarn is the current price
is its current price, the current price is still taken as given in the
determination of the price of the yarn; it is not determined
simultaneously with the price of the yarn.  Once means of production have
been purchased at the new price, then the price of all other cotton still
in the circulation of capital in the yarn industry (in the process of
production or produced but not yet sold) will be revalued according to the
new current price, and this new current price of the cotton is taken as
given in the determination of the price of the yarn.

Therefore, according to my interpretation of Marx's theory, input prices =
output prices, even though they are not determined simultaneously (derived
from given physical quantities).

Ian, some of your comments seem to suggest that input prices can = output
prices ONLY if there is simultaneous determination of input prices and
output prices.  But this is not true.

I think that part of the difficulty here is that linear production theory
makes the totally unrealistic assumptions that all industries have the
same turnover period, and furthermore that at the beginning of the period,
all capital is in the form of input commodities, then all these inputs
move together into the production process, and then all outputs are
completed at the same time, and finally (and most importantly) all outputs
are sold at the same time.  Sraffa called this method the "annual
harvest".  This totally unrealistic "harvest" method is necessary if all
prices are to be determined simultaneously, from given physical
quantities.  Sraffa's question is:  how can exchange of all goods take
place at the end of the period (after the "harvest"), so that the initial
physical quantities can be exactly reproduced, and the same process can
start all over again the next period.

This unrealistic scenario puts the revaluation of the prices of the means
of production into a misleading straightjacket.  It makes it look like the
revaluation of the prices of means of production can take place only at
"harvest time".  Either the "harvest time" of the current period, or, if
simultaneous determination is rejected, then the "harvest time" of the
previous period.  Revaluation of prices of the means of production cannot
take place between the time the means of production are purchased and the
output produced is sold, because it is assumed that no exchanges take
place during this interval of time.  TSS also usually presents their
interpretation in terms of this "annual harvest" model, and thus is
limited by this straightjacket.

But in reality, different industries have different turnover periods, and
in most industries production and sales are continuous, occurring daily,
not all together once a year.  Also in reality, capital is in all of its
forms simultaneously - part of the capital is money capital at the
beginning of the circuit, part of it is commodity capital as inputs, part
is productive capital, and part of it is commodity capital as outputs.
Therefore, if the price of a given means of production changes, due to
changes in the industry that produces that means of production, then as
soon as the means of production are purchased with the new price, then all
similar means of production in use in other industries, and at any stage
of the circuit of capital in these other industries, are revalued to equal
the new price of the means of production.

Therefore, current valuation is the result of this complex of overlapping
circuits, even though there is not simultaneous determination of input
prices and output prices (simultaneous determination is the myth of the
"harvest" method).

Some versions of TSS acknowledge the overlapping circuits, and argue that
constant capital can be revalued after the means of production are
purchased up until the point where the means of production enter
production, but not after that. Marx clearly stated many times that
constant capital can be revalued all the way up to the point where the
output produced with the given means of production is sold.

As for the MELT,
> I am working on this at the moment. Perhaps
> you'd be willing to take a look at it when done? I'd value your
> opinion.

Yes, I would be happy to read your paper on the MELT.


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