From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Sat Feb 25 2006 - 04:55:23 EST
Jurriaan wrote: > > >The exact quote from Marx, often cited (because according to the TP >literature that gives the game away, as it were), is as follows: > >"The foregoing statements have at any rate modified the original assumption >concerning the determination of the cost-price of commodities. In other words, Marx is saying that he had assumed that the part of the cost price represented by the purchase of the means of production had been determined by the value of those means. But once he has demonstrated why prices of production must diverge from value we now know that the so called inputs had to have been bought at or around prices of production, not their values. Our assumptions about what determined the cost prices of commodities has changed. But this does not mean that Marx was in any way admitting that he needed to go back to his transformation tables and transform the money price which was advanced as constant capital so as to reflect what the money costs must have been since the means of production had to have sold at or near prices of production, not at prices proportional to their values. Marx is saying that the cost prices already reflect just that--that the money which was advanced as constant capital had to have been determined not by the value of the means of production, as monetarily expressed, but rather their prices of production. We can't change what has already happened (the advance of constant and variable capital), but we can change our understanding of what determined what has already happened. In this regard, I agree with Fred's reading of this passage. But this is why I differ from Fred's reading... Marx goes on to write: >We had >originally assumed that the cost-price of a commodity equalled the value of >the commodities consumed in its production. But for the buyer the price of >production of a specific commodity is its cost-price, and may thus pass as >cost-price into the prices of other commodities. Since the price of >production may differ from the value of a commodity, it follows that the >cost-price of a commodity containing this price of production of another >commodity may also stand above or below that portion of its total value >derived from the value of the means of production consumed by it. It is >necessary to remember this modified significance of the cost-price, and to >bear in mind that there is always the possibility of an error if the >cost-price of a commodity in any particular sphere is identified with the >value of the means of production consumed by it. Fred says that the error to which Marx was calling attention was simply the assumption that cost price of commodities had been determined by the value of the means of production and wage goods, as monetarily expressed. Fred argues that Marx only wants to disabuse us of an assumption we may have about how the cost prices of commodities is determined. I argue that Marx is admitting to a more substantive error in his actual calculations. Marx erred not in failing to transform the inputs from values to prices of production in his tables but in assuming that the values of commodities could be determined as the joint product of the living labor which they incorporated and the value of the money needed to purchase the consumed means of production. But the latter magnitude is not the same as the value of the consumed means of production, and that latter magnitude is what enters into the value of commodities, though their cost prices are tendentially determined in part by the prices of production of the used up means of production. At any rate, for this reason Marx says the value of commodities differ from their prices of production for two reasons. Not only because the price of production is determined in terms of the average rate of profit rather than the surplus value embodied in the commodity but also because the value transferred from the means of production is not determined in terms of that part of the cost price which reflects the depreciation of the means of production. But price of production is determined on the basis of cost price, not value, magnitudes--hence, price of production and value have to emerge for this second reason. The important question is how would or could Marx correct the error to which he (as opposed to Bortkiwiecz and Sweezy and almost every one since) was actually calling attention. Just as important is the question of why Marx rightly thought it inconsequential to correct the actual error to which he himself was calling attention. That is, why Marx rightly understood it to be a waste of time to correct his own transformation problem. Marx would have been confused by Samuelson's incomprehension of where his own tables had gone wrong until he understood that this incomprehension was just an excuse to formalize his thought with the straightjacket of linear algebra by means of which time and dynamics disappear in the simultaneous determination of the prices of inputs and outputs. Again what one hundred years of criticism has got wrong is what Marx understood as his own rather inconsequential transformation problem. I don't think Ian understood what I have been saying; nor do I think have you. I know I can be understood because Fred has understood me. But then economists, even heterodox ones, don't seem to realize the greatness of Grossman and Mattick. And among nineteenth century economists Richard Jones did not even receive one mention. So perhaps I should not be surprised by the silence which my argument has met on this list. Even heterodox economists tell us that Marx failed to transform his inputs from values to prices of production just as they are now allowing quite possibly the two most important Marxist economic thinkers of the last century to fall into oblivion. Rakesh >Our present analysis does >not necessitate a closer examination of this point. It remains true, >nevertheless, that the cost-price of a commodity is always smaller than its >value. For no matter how much the cost-price of a commodity may differ from >the value of the means of production consumed by it, this past mistake is >immaterial to the capitalist. The cost-price of a particular [purchased] >commodity is a definite condition which is given, and independent of the >production of our capitalist, while the result of his production [i.e. the >new output] is a commodity containing surplus-value, therefore an excess of >value over and above its cost-price." >http://www.marxists.org/archive/marx/works/1894-c3/ch09.htm OK that's Marx admission of an error or incompleteness in his transformation procedure. What I am arguing is that Marx is not admitting that he left his inputs in the form of value prices or simple prices or values. So what does Marx mean when he writes (to repeat the passage): >We had originally assumed that the cost-price of a commodity >equalled the value of >the commodities consumed in its production. But for the buyer the price of >production of a specific commodity is its cost-price, and may thus pass as >cost-price into the prices of other commodities. Since the price of >production may differ from the value of a commodity, it follows that the >cost-price of a commodity containing this price of production of another >commodity may also stand above or below that portion of its total >value derived from the value of the means of production consumed by >it. In order to get at what Marx is saying here, one need only compare this passage to another in chapter 12 at http://www.marxists.org/archive/marx/works/1894-c3/ch12.htm This is never done. >We have seen how a deviation in prices of production from values >arises from: 1) adding the average profit instead of the >surplus-value contained in a commodity to is cost-price; 2) the >price of production, which so deviates from the value of a >commodity, entering into the cost-price of other commodities as one >of its elements, so that the cost-price of a commodity may already >contain a deviation from value in those means of production consumed >by it, quite aside from a deviation of its own which may arise >through a difference between the average profit and the >surplus-value. >It is therefore possible that even the cost-price of commodities >produced by capitals of average composition may differ from the sum >of the values of the elements which make up this component of their >price of production. Suppose, the average composition is 80c+20v. >Now, it is possible that in the actual capitals of this composition >80c may be greater or smaller than the value of c, i.e., the >constant capital, because this c may be made up of commodities whose >price of production differs from their value. In the same way, 20v >might diverge from its value if the consumption of the wage includes >commodities whose price of production diverges from their value; in >which case the labourer would work a longer, or shorter, time to buy >them back (to replace them) and would thus perform more, or less, >necessary labour than would be required if the price of production >of such necessities of life coincided with their value. Marx is obviously saying that the 80c is determined by the price of production of items of constant capital, not by their value. That is, Marx is not admitting that he left his inputs untransformed, that he at any point had the costs of the means of production determined by value of those means, as monetarily expressed. Marx is quite clear that 80c had to be laid out to purchase the means of production at their prices of production. What he is saying is that the value transferred from those means of production may not be proportional to their respective prices of production, but this is just the error Marx made in writing up his transformation table. He assumed that he could determine the value transferred through the consumption of the means of production from their flow prices. Marx is also not saying that the 20 "dollars" laid out in variable capital was determined by the value of the wage goods (as monetarily expressed). In fact he is explicitly saying the opposite. Since the price of production of the consumed wage goods (20 v) may have been less than their value, the worker performs more unpaid labor time than if the wage goods had sold at their respective values, as monetarily expressed (which may have raised v to, say, $22). Fewer of his working hours count as necessary labor. Of course if price of production of wage goods had been higher than their value, then the capitalist would have to expend, say, 24 dollars on variable capital; necessary labor time thereby increased and surplus labor decreased. At any rate, at no point does Marx say that he did not transform his inputs from values or simple prices or values to prices of production. Unlike Fred Moseley and Alejandro Ramos Martinez, I do however think Marx was pointing to an error in his calculations. But this is exact opposite error it has understood to have been for more than 100 years. While Fred has well understood my point, I have been surprised that no other economist on this list has understood my attempt to shatter a one hundred year consensus about Marx having failed to transform the so called inputs from values to prices of production. I am pretty sure that the passage I just cited more than strongly suggests that people have simply misread Marx for a century. Rakesh >Rakesh is thus correct, insofar as Marx then argues explicitly that "for the >total social capital" in his numerical example, the aggregate production >price is equal the corresponding aggregate value produced. However, I think >it's rather obvious that, in the real world, the two could diverge within an >interval of time, and Marx suggests as much himself, in the above passage. >Reality is a little messier than a neat-and-tidy accounting consolidation or >arithmetic aggregation, and Marx also rejected the idea that value was >simply a price average. Typically Marx does distinguish clearly between the >value of products, corresponding to quantities of current SNLT, and the >prices realised for those products (Cap. 1, chapter 3), and argues that: > >"The possibility, therefore, of quantitative incongruity between price and >magnitude of value, or the deviation of the former from the latter, is >inherent in the price-form itself. This is no defect, but, on the contrary, >admirably adapts the price-form to a mode of production whose inherent laws >impose themselves only as the mean of apparently lawless irregularities that >compensate one another. The price-form, however, is not only compatible with >the possibility of a quantitative incongruity between magnitude of value and >price, i.e., between the former and its expression in money, but it may also >conceal a qualitative inconsistency, so much so, that, although money is >nothing but the value-form of commodities, price ceases altogether to >express value. Objects that in themselves are no commodities, such as >conscience, honour, &c., are capable of being offered for sale by their >holders, and of thus acquiring, through their price, the form of >commodities. Hence an object may have a price without having value." >http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm > >If e.g. annual gross product (new reproducible goods & services supplied or >stocked by producers) is estimated at $12 trillion, the suggestion is that >this aggregate (ideal) price would buy, or is equivalent to the value of, >that product. However, we should remember that this valuation always refers >conceptually to the monetary value of total outputs classified as >"production" at producer's sale prices, which might deviate from the Marxian >value, since e.g. if an output is sold above or below its value, it is >logically not necessarily the case that other outputs are sold above or >below value in magnitudes such that the price divergences occurring would >cancel each other out, yielding an aggregate output price equivalent to >aggregate value. (If, as proximate illustration, we would calculate total >hours worked by different countries and compare them with gross product >measures converted to a standard currency, I think we'd obtain some >surprising findings). > >Jurriaan
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