From: Diego Guerrero (diego.guerrero@CPS.UCM.ES)
Date: Mon Mar 26 2007 - 05:34:34 EDT
Hi, Ajit:
You wrote commenting on Fred:
"If this is crucial, then you should know that you have
been making a crucial mistake all along. How does a
firm gets its revenue? By selling the goods it has
produced. When it sells a good, it sells it at a
price. Only AFTER selling its goods it receives a sum
of money that is its revenue. So revenue by definition
is quantity sold multiplied by its price. There is
only one way arrow of determination in the equation
PxQ = M. You cannot know M unless you know both P and
Q. In other words, if P is unknown, then M is unknown.
In your equation P = M/Q (assuming Q is known), you
have one equation in two unknowns, P and M, and so it
determines nothing."
1. This debate reminds me of the forest/tree question. You think we must
study the tree before looking at the forest. By contrast, I think Fred,
others and also I follow Marx in thinking that the correct procedure is
studying the forest before analysing the tree. In my opinion, it is not
mainly a question of sequential versus simultaneous. It goes beyond: it is
the question of the necessary rejection of methodological individualism.
Those who believe necessary to start from the individual behaviour in order
to understand the system seem to forget that the individuals are socially or
globally determined. Micro-agents must be understood in their macroeconomic
circumstance. This is for instance why for Marx classes come before
individuals.
2. So, when you say that "There is only one way arrow of determination in
the equation PxQ = M", I agree. But the arrow goes in the opposite direction
you are thinking. It is not true that "You cannot know M unless you know
both P and Q" and also that firm gets its revenue only "By selling the goods
it has produced".
First, the firm has other revenues apart from the sale of its outputs. Ask
the accountants, please. Second, there is more money apart from firms'
money. One rich can sell one of his mansions or one Picasso and set up a new
firm with this money. Or sell a package of shares. Money can come from
robbery, black money, corrupt governments. or from the old gold mines of the
Spanish Empire in America and other beautiful historical origins. There is
history, and there was the primitive accumulation of capital too. Third,
there is a difference between stocks and flows. It is necessary to start
from stocks, even if for practical reasons it is convenient in some cases to
simplify and to assume for example that we are dealing with a model of only
circulating capital. Think of the following example. Suppose that in a
national economy your P and Q are the same in two successive weeks, but the
country's stock exchange goes down a 5% in the meanwhile. So for you the
capital in the economy is the same before and after this fall?
3. In my opinion, Fred is consistent with Marx's idea that the law of value
is a real force that tends to make real prices to fluctuate around their
regulating labour-values and labour-prices. Marx follows Ricardo in that
there are certain commodities that have to be put aside from the primary
analysis because for them it is only demand what determines their prices.
But even in this case, once this money and all money, coming from wherever,
enters the process of production as an amount of means of production and
labour-force bought with a definite amount of C and V, the result is that
labour will create value in such a way that the new prices come to be
determined by the (Marx' labour) law of value.
4. I summarize my view at last. Every day (or month or year), each kind of
output turns out to have an average price and, as the price has to be always
the same for the seller and the buyer, if that output is an input for other
firm this input must have the same price as the output because it is the
same commodity of course. In analyzing these prices, everyone can pay
attention to whatever he wants. Every theoretician chooses his framework of
analysis. Marx preferred-and some follow him in this-to pay attention to the
process of labour and for this reason he considered that the individual
price of each of the means of consumption was a secondary issue. The sum of
money necessary for letting labour to create value in the technically
appropriate way is just a prerequisite of the analysis (as the use values
and utility are, and we don't pay attention to utility when analysing
prices). The retorts are secondary when analyzing the chemical process.
[Apart from the fact that retorts don't produce the chemical process, but
this is another issue].
Cheers,
Diego
----- Original Message -----
From: "ajit sinha" <sinha_a99@YAHOO.COM>
To: <OPE-L@SUS.CSUCHICO.EDU>
Sent: Wednesday, March 21, 2007 4:03 PM
Subject: Re: [OPE-L] questions on the interpretation of labour values
> --- Pen-L Fred Moseley <fmoseley@MTHOLYOKE.EDU> wrote:
>
>> >> > Ajit:
>> >> > How much is your M, Fred? Just tell me how much
>> is
>> >> > your M. If you are going to begin your theory
>> with
>> >> a
>> >> > given M, you need to know how much it is. I'm
>> not
>> >> > asking for any explanation, just tell me how
>> much
>> >> it
>> >> > is. Where do you get your data for M? If you
>> are
>> >> > unable to tell us how much is your M, then how
>> >> could
>> >> > you claim that M increases to (M + dM)? Just
>> think
>> >> > about it?
>> > Fred:
>> >> M is whatever it is in the real capitalist
>> economy.
>> >> With unlimited
>> >> resources, one could estimate M. But this is not
>> >> necessary for the
>> >> theory. M is an actual magnitude, which exists
>> >> prior to the production
>> >> of the output, and which can be taken as given as
>> >> such, whatever it is.
>> >> M is divided into C and V. The actual C,
>> whatever
>> >> it is, becomes one
>> >> component of the total price of commodities. The
>> >> actual V, whatever it
>> >> is, is subtracted from new-value to determine S.
>> >> The variables in the
>> >> theory represent these actual magnitudes, even
>> >> though we don't know
>> >> what these magnitudes are.
>> > ___________________________
>> > Ajit:
>> > You don't need any resource to answer my very
>> simple
>> > question. If a student of yours asks you how much
>> is
>> > the GDP of the USA in 2006, I would guess you
>> don't
>> > tell him/her that it would need billions of
>> dollars of
>> > resources to answer your question. You would
>> either
>> > direct the student to National income data or tell
>> the
>> > student the principle of calculating the GDP.
> Fred:
>> But the government does spend billions of dollars to
>> collect and
>> process the data in order to estimate GDP! The US
>> Bureau of Economic
>> Analysis has hundreds of employees. That is why it
>> is readily
>> available. M is just as observable as GDP, but the
>> resources of the
>> government are used to estimate GDP, not M.
> ____________________
> Ajit:
> But you know how to calculate GDP in principle, don't
> you? Why can't you tell how to estimate your M in
> principle?
> ______________________
> Ajit:
>> > I gave
>> > you one example and asked you just tell me how
>> much is
>> > your empirically given M in this example. You are
>> > simply unable to tell me. Let us suppose you don't
>> > like my example, then you construct your own
>> example
>> > and explain to me what you mean by "empirically
>> given"
>> > M with which your theory begins with. If you
>> cannot do
>> > even this much, then it is obvious that your
>> theory is
>> > stillborn.
> Fred:
>> As I already told you, M is whatever the capitalist
>> invests to purchase
>> means of production and labor-power. M refers to
>> actual magnitudes in
>> the real capitalist economy, even though we don't
>> know what the actual
>> magnitudes are (although we could in principle know
>> these magnitudes,
>> with enough resources).
> ______________________
> Ajit:
> No. To know the principle, you don't need any
> resources. You simply don't know the principle, so you
> keep repeating "M is whatever it is" as a mantra. But
> I know the principle, which I gave you in the very
> first post. You can arrive at your M by adding the
> quantities of constant capital elements used in the
> production process multiplied by their respective
> prices. You cannot accept it, but then you do not have
> any other principle to replace it.
> ________________________
> Ajit:
>> Now, if by "total price" you mean "total revenue"
>> (even though you don't clarify whether you mean
> gross
>> or net), it should be clear to anybody the that
> total
>> gross revenue is nothing but quantity of goods sold
>> multiplied by its price and the net revenue is
> nothing
>> but total gross revenue minus total quantity of
>> constant capital used in the production process
>> multiplied by their prices plus the depreciation of
>> fixed capital plus the total wage bill. This is the
>> only way a firm or an industy satistics of total
>> revenue is arrived at. It makes no sense to say it
> is
>> given.
> ______________
> Fred:
> This is really the crucial point.
>
> It is true that C is by definition (as an identity) =
> (UPmp) (Qmp),
> where UP stands for unit price, and mp stands for
> means of production.
> But this does not mean that C is determined by this
> equation.
>
> According to Marx's theory, unit prices are determined
> by the
> quotient
> of prices of production ("gross industry revenue") and
> the quantity
> of
> good produced:
>
> UP = PP / Q
> ______________________
> Ajit:
> If this is crucial, then you should know that you have
> been making a crucial mistake all along. How does a
> firm gets its revenue? By selling the goods it has
> produced. When it sells a good, it sells it at a
> price. Only AFTER selling its goods it receives a sum
> of money that is its revenue. So revenue by definition
> is quantity sold multiplied by its price. There is
> only one way arrow of determination in the equation
> PxQ = M. You cannot know M unless you know both P and
> Q. In other words, if P is unknown, then M is unknown.
> In your equation P = M/Q (assuming Q is known), you
> have one equation in two unknowns, P and M, and so it
> determines nothing.
>
> But I have a feeling I'm wasting my time here because
> I alreay know your answer: 'M is known prior to the
> knowledge of P and Q and it is whatever it is.' And
> this time the M happens to be the revenue and not
> capital. Cheers, ajit sinha
>
>
>
>
>
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