From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sat Mar 03 2007 - 18:39:52 EST
To indicate my interpretation more clearly, a simple sketch - consider the value-forms of a produced commodity at different stages: 1) production stage: the commodity has an emergent value and possibly a hypothetical price; 2) finished product, before sale by the producer: it has a value, but just exactly what that value is, is rather indeterminate; we can say it took a certain amount of labour hours to produce (its unit labour-cost) and we can estimate this is above/below or equal to the current general norm for that product in a branch of industry; even so, there is no perfect mathematical exactitude possible here. We do not know exactly what fraction of society's total labour-hours is involved. 3) Exchange value of the commodity: this refers to the quantity of (any) other commodities that it would normally exchange for, providing somewhat more exactitude about its value. Once we know a trading ratio, we could also e.g. compare the respective quantities of labour-time involved, but there's no guarantee that the trading ratio expresses an equal exchange of labour hours, or that it will stay constant. 4) The potential supply price of the commodity: the exact money price that is the asking unit-price, or the price it will most likely fetch. 5) The actual unit-price of the commodity that is realised upon sale. 6) How the actual price result is accounted for. Point (1) is that in real business, ideal prices and current sale prices for that commodity are data, which are being used at every stage from production to sale, i.e. the producers operate within a certain "price regime", in which real or ideal money-units act as an ongoing yardstick to indicate the commercial viability of the proceedings, and account for the capital involved. Even here no mathematical perfection is possible, insofar as prices change over time, costs are not completely quantified or open to interpretation, losses of some kind occur during the process, transaction charges apply, there are misinterpretations or calculation errors, the time-factor changes prices etc. Nevertheless money-prices are the most exact measure practically possible, and the bottom line is that the commodity is sold for a specific actual price. At all stages, an active process of "valuing" is thus going on (these days finance controllers talk about "value-based management"). Point (2) is that although the ideal and real prices used seem very exact, in reality they are changeable and sometimes conditional (subject to qualification). It is not just that there may be a discrepancy between the potential price and the actual price fetched, but also that the currency may be subject to inflation, that some kind of price negotiation goes on, that the use of credit modifies the prices, that conditions change within an accounting period etc. Yet, for the purpose of accounting for production costs and revenues in an interval of time, we require definite prices obtained with a standard procedure. Then it turns out, that pricing is not necessarily as simple as sticking a price-label on a product, since to arrive at standard prices we may have to make some adjustments. We might begin to reckon with all kinds of prices to arrive at price aggregates reflecting the valuation standards required by the auditor, and thus, the valuation we achieve in the end may differ to some extent from the actual prices obtained (perhaps even by an unknown amount); we have in effect some price aggregates which are ideal prices. Point (3) is that prices are numbers, and numbers can be computed exactly, giving the glamour of precision, yet in the real world prices are changeable and sometimes it is difficult to establish exactly what they are or were, so that we have to impute or estimate. So although prices seem to offer scientific precision, in reality they often don't. Prices are nice when they're predictable in a regular trading process, but they can be unpredictable in an irregular trading process. Point (4) is that "aggregate labour hours worked" cannot be established with exactitude at any level of analysis, even if hypothetically we knew exactly when every employee clocked in and clocked out for a whole year. Because apart from sickies, accidents and the like, we do not know the actual amount of time each employee is "on task" producing something. In the best of cases, "aggregate labour hours worked" is only an estimate. Point (5) is that when you think all of this through, as Oskar Morgenstern did, you might well ask: how is it possible to have any precise knowledge about an economy at all, or even an individual business? All we really have is the law of averages, ranges of likelihood, margins of error, and known norms in describing a trading process in motion, that in reality evades the sharp and exact definitions such as we might construct. If anything is clear here, it is that it takes theory to understand the economic process, but the real question is what knowledge the theory can achieve. Jurriaan
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