From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Jan 02 2008 - 18:39:35 EST
The federal reserve man is discussing the prices of financial assets, the marxist theory relates to prices of reproducible commodities. He also assumes that there is 'a price' rather than a random dispersion of prices around a mean. The subjective element in 'valuation' relates only to exchange value not value, the question is the extent to which objective value lies behind and determines exchange value. Paul Cockshott Dept of Computing Science University of Glasgow +44 141 330 3125 www.dcs.gla.ac.uk/~wpc/reports/ -----Original Message----- From: OPE-L on behalf of Jurriaan Bendien Sent: Wed 02/01/2008 7:54 PM To: OPE-L@SUS.CSUCHICO.EDU Subject: [OPE-L] The phenomenology of prices Regrettably I haven't been able to work on this issue in more depth yet, but just to indicate briefly, imagine abstractly for example the following simplified sequence of operations: (1) A firm has some cash to spend. (2) The cash is used in a transaction, to purchase something from another firm for a price. (3) The price resulting from the transaction is recorded in the bookkeeping ledger of the buying firm and the selling firm, in a particular category, as data. (4) The enterprise accountant of each firm includes the price data in a certain category of his account. (5) The social accountant uses the data in the enterprise accounts to construct the social account (or uses the tax report). (6) The economist uses the data in the social account to test his model. (7) The newspaper reports the conclusion of the economist about the data, which has a certain effect on the market. Point is, the price information undergoes a kind of metamorphosis, being categorised and recategorised along the way, being combined with other price information, and reframed etc. and the question then is, what are all the cognitive and social presuppositions/assumptions in this activity, which make it all possible? This kind of thing is what Marx does not make fully explicit in his theory, he more or less assumes it. In the process of moving from an actual price to an ideal price, however, the price information is "transformed" in certain sorts of ways (and possibly distorted in some way). Generally, as I said, I am inclined to think that Sombart (1894) was mistaken to label Marx's theory an "objective" theory of economic value, in the sense of value being an objective quality or quantity only. Firstly, economic value is - as Krader notes - intrinsically something that can have both subjective and objectified dimensions, and its objectified dimension still presupposes subjective human valuations. Secondly, a dynamic theory of value has to consider not just the objective outcome of human valuations, but also the living activity of human subjects making the valuations that bring about a certain objective value result, out of certain objective value antecedents, within historical time. Indeed, Marx make a case for the idea that, value relations being what they are, they necessarily present themselves in a certain (reified or partial) way in the consciousness of economic actors, making it unnecessary for them to be aware of the full social or economic meaning of their own activity. He could not really do this, however, if he thought that value was only an objective quality, not mediated by human consciousness. But if it is mediated by human consciousness, then there is necessarily also a subjective and intersubjective dimension. (We could then of course construct a hierarchy of utility preferences, but we could also for example construct a hierarchy of verifiable needs (e.g. J.B. Davis, I. Gough)). So anyway the idea is that in an integrated, dynamic theory of economic value, you would explicitly combine the active valuing behaviours of economic actors with the objective (aggregate) value antecedents and consequences of those behaviours. The difference from e.g. George Soros's interpretation would be that, at any time, objectified value relations exist even simply as an effect of social existence, together with subjective valuations, and that the subjective valuations are determinate for that reason (some valuations are objectively ruled out, some are more likely than others, and some are most likely to occur). As regards "inputs and outputs", the point really is that we can value them in many different kinds of ways, as flows, stocks, or assets, using different concepts of value and different valuation assumptions. It is customary to regard the "inputs and outputs" as self-evident categories, but one ought to ask what assumptions are being made in asserting them as quantities in the first place. When I used the I/O data as a student, it was more in the form of time-series data showing movements across time. But as I learnt more about the assumptions made in the computation of this data, I grew more aware about its limitations. If you consider this type of inquiry to be all a bunch of nonsense, try having a read of Fed Governor Kroszner discoursing about the concept of "price discovery" in the wake of the "market failure" highlighted by the subprimes crisis: "When a product's track record is not well established, there should be a strong market demand for information in order to facilitate price discovery. Price discovery is the process by which buyers' and sellers' preferences, as well as any other available market information, result in the "discovery" of a price that will balance supply and demand and provide signals to market participants about how most efficiently to allocate resources. This market-determined price will, of course, be subject to change as new information becomes available, as preferences evolve, as expectations are revised, and as costs of production change. In order for this process to work most effectively, market participants must utilize information relevant to value that product. Of course, searching out and using relevant sources of information--as well as determining what information is relevant--has its own costs. To underscore the last point, with new instruments, it may not even be clear exactly what information is needed for price discovery--that is, some market participants may not know what they do not know and they may therefore terminate the information-gathering stage prematurely, unwittingly bearing the risks and costs of incomplete information." http://www.federalreserve.gov/newsevents/speech/kroszner20071130a.htm Clearly I am not the only one pondering the issue, greater minds than mine are pronouncing on it all the time :-) Jurriaan
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