From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sun Apr 29 2007 - 09:05:34 EDT
Thank you Fred for your clarifying paper. However, may I ask what you make of the following quote from Marx Cap. 3 ch. 21: "If supply and demand coincide, the MARKET PRICE of the commodity CORRESPONDS to its PRICE OF PRODUCTION, i.e. its price is then governed by the inner laws of capitalist production, independent of competition, since fluctuations in supply and demand explain nothing but divergences between market prices and prices of production - divergences which are mutually compensatory, so that OVER CERTAIN LONGER PERIODS THE AVERAGE MARKET PRICES ARE EQUAL TO THE PRICES OF PRODUCTION. As soon as they coincide, these forces cease to have any effect, they cancel each other out, and the general law of price determination then emerges as the law of the individual cases as well; market price then corresponds to price of production in its immediate existence and not only as an average of all price movements, and the price of production, for its part, is governed by the immanent laws of the mode of production. Similarly with wages. If supply and demand coincide, their effect ceases, and wages are equal to the value of labour-power." (Pelican edition, p. 477-478). The reason why Marx says all this is, because he wants to contrast the regulation of commodity prices by "natural" prices with the regulation of the cost of loan capital, i.e. he argues there is no "natural" (or equilibrium) rate of interest, only a rate of interest that results from competition. Marx says here that market prices deviate from production prices only because of supply/demand imbalances, but when supply and demand adjust to each other over time, then at least the *average market prices* would be empirically *equal* to the production prices. It would of course be a mistake to interpret simply that production prices ARE actual market prices, or to assume that production prices are necessarily empirical prices rather than theoretical (ideal) prices. Indeed Marx implies the developmental trajectory of capitalist production is governed precisely by the divergences between product-values, production prices of products and market prices of products; these divergences set the parameters of competition in costs, sales and profits. However Marx does appear to say here that if there are no fluctuations in supply and demand anymore (a stabilized market), average market price and production price for a type of good will be empirically identical. If there exists no observational evidence for production prices of any kind whatsoever at any time, then it is in principle impossible to give any proof that market prices are regulated by production prices, or that market prices will gravitate long-term towards production prices. Take for example the bread market. It's a fairly stable market annually worth between about 16 and 23 billion dollars in the US, or about 3 billion pounds in the UK, growing at around 2% annually. It is possible to obtain very detailed information about the units of bread produced, prices, capital and labour costs. So it should be possible to estimate the cost prices and profits for different types of bread from the data as well as labour costs, and thus estimate empirically the production prices, product values and average market prices. Jurriaan
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