Re: [OPE] devaluation and revaluation of variable capital

alejandro_agafonow@yahoo.es

Don’t worry Paul, I’m sure Ian Wright is going to reply, even though he is busy these days.

Nevertheless, since his “thermodymamic equilibrium” is based on the assumption that patterns of investment are “predictable” and so the cost structure that an economy is going to have in the future, I think his theory is flawed.

When we substitute “simple value” assumption for “reproduction value” –to use the terms chosen by Perelman- the theory of the gravitational force of labour weakens and so the LTV’s structure base on the assumption of labour as an objective source of value.

I think you & Cottrell’s theory is not immune either, even your positive proposition keep being feasible.

Yours sincerely,
Alejandro Agafonow

----- Mensaje original ----
De: Paul Cockshott <wpc@dcs.gla.ac.uk>
Para: Outline on Political Economy mailing list <ope@lists.csuchico.edu>
Enviado: viernes, 8 de febrero, 2008 16:32:23
Asunto: Re: [OPE] devaluation and revaluation of variable capital

Perhaps I should not be replying for Ian, but I dont think that these 
points necessarily weaken
his work. His concept of equilibrium is of a thermodymamic equilibrium 
with a stable
dispersion of prices around values. He does not imagine that all 
transactions take place
at value, instead the price of each transaction is a random variable 
whose expected value
is given as a linear function of labour content. Thus in Ians model 
uncertainty is built
in from the start.

Alejandro Agafonow wrote:
>
> Excellent thought Perelman! Your ideas deserve more attention from 
> Austrian economics camp and contemporary market socialism as well.
>
> The idea of rivalry investment projects based on expected labour 
> returns and the technology involved, was an issue discussed by USSR 
> economists (Strumilin and Kantorovich among others), even though 
> according to this scholars this returns would be calculated based on 
> strictly objectives criteria using lineal programming techniques for 
> differentiating between rivals investment projects. I think Paul 
> Cockshott in this forum has discussed something like this based on 
> Kantorovich.
>
> Even though this new can of worms would let LVT better understand 
> capitalism’s dynamic phenomena, since replaces a structured problem 
> able to be optimized (simple value) for another unstructured where 
> uncertainty intervenes (reproduction value), if I were Marxist I were 
> not so optimist like you and Charlie.
>
> I think that your analysis, that I consider right, opens a “second can 
> of worms” or Pandora’s box for LTV classical statement and for 
> transformation problem. Concerning the last one, since the pattern of 
> investment is unpredictable and so the cost structure that an economy 
> is going to have in the future, What justifies that Marxists calculate 
> in retrospective (a posteriori) the amount of labour transferred by 
> constant capital to conclude contrivedly that prices and values match?
>
> Concerning LTV classical statement, once we accept “reproduction value 
> perspective” instead simple value, falls down the idea of labour as a 
> gravitational centre around which spin prices. In fact, prices would 
> be the gravitational centre around which spin values –as I argued in 
> my previous two messages.
>
> Nevertheless, I think that a labour accounting economy as that 
> proposed by Cockshott and Cottrell is not fruitless, just that 
> requires a philosophical justification for the use of labour as 
> accounting unit instead of classical justification that they both 
> choose stating that labour is the objective source of value. In fact, 
> it is not wild to think in a labour accounting economy based in a 
> subjective theory of value!!!
>
> Perelmen, may I cite your post?
>
> Yours sincerely,
>
> Alejandro Agafonow
>
>
> ----- Mensaje original ----
> De: Michael Perelman <michael@ecst.csuchico.edu>
> Para: Outline on Political Economy mailing list <ope@lists.csuchico.edu>
> Enviado: viernes, 8 de febrero, 2008 3:52:29
> Asunto: Re: [OPE] devaluation and revaluation of variable capital
>
> In my work on constant capital, I have used this and other quotes like 
> it. Here is
> an example from an ancient article of mine:
>
> The most crucial step in his elaboration of the value theory is the 
> shift from
> value as a measure of the sum of the actual labor values used to 
> produce a commodity
> in the past to a new definition of value as the amount of labor that 
> would be
> required to reproduce the commodity today. In his words:
> ##[The] value [of a unit of capital] is no longer determined by the 
> necessary
> labour-time actually objectified in it, but by the labour-time 
> necessary either to
> reproduce it or the better machine .... When the machinery is first 
> introduced into
> a particular branch of production, new methods of reproducing it more 
> cheaply follow
> blow upon blow. [Marx 1977, p. 528]
> Reproduction value differs from simple value in one important respect: 
> simple
> values are objective values (presuming that we can measure the 
> previous inputs of
> abstract labor). In the case of simple values, we treat the lifetime 
> of the capital
> goods as given in advance. If a machine lasts ten years, we can assume 
> that 1/10 of
> its value is transferred to the commodities produced in a given year. 
> Each
> commodity that the machine produces will account for a portion of that 
> total value.
> Consequently, to calculate the value of a commodity, we merely have to 
> take the sum
> of the direct labor input and the amount of value transferred to the 
> commodity.
> In the case of reproduction values, quantitative measurement of value 
> is more
> difficult. We could even say that it is subjective since capitalists 
> cannot know in
> advance what will happen to the cost of reproducing their machines 
> once they
> purchase them.
> Marx understood that these considerations were important. He was 
> certain that,
> once produced, machines typically undergo dramatic revolutions in 
> reproduction
> values. He went so far as to insist that new technology destroys 
> capital values so
> rapidly that no factory ever covers its original production costs 
> (Perelman 1987,
> Ch. 4; see Marx to Engels on 14 August 1851, in Marx and Engels 1982, 
> p. 424; Marx
> 1967, III, p. 114; and Marx 1963, p. 65; Marx to Engels, 19 November 
> 1869; in Marx
> and Engels 1942, p. 270). Marx observed:
> ##The value of machinery, etc., falls ... because it can be reproduced 
> more
> cheaply. This is one of the reasons why large enterprises frequently 
> do not
> flourish until they pass into other hands, i.e., after their first 
> proprietors have
> been bankrupted, and their successors, who buy them cheaply, therefore 
> begin from
> the outset with a smaller outlay of capital. [Marx 1967; 3, p. 114]
> Marx cited Babbage's example of frames for making patent net that 
> initially sold
> for twelve hundred pounds. They cost only sixty pounds a few years 
> later (Marx
> 1977, p. 528; Babbage 1835, p. 286 and 214; see also Baumol and Willig 
> 1981; and
> Gaskell 1833, p. 43; cited in Alberro and Persky 1981). Babbage 
> claimed, "the
> improvements succeeded each other so rapidly that machines which had 
> never been
> finished were abandoned in the hands of their makers, because new 
> improvements had
> superseded their utility" (Babbage 1835, p. 286).
> Babbage's rule of thumb was that the cost of an original machine was 
> roughly five
> times the cost of a duplicate (Babbage 1835, p. 266). According to 
> Babbage's
> estimates, one hour of labor embodied in patent nets that were only a 
> few years old
> would be equivalent to three minutes of direct labor embodied in a new 
> machine.
> To the extent that Babbage's example was typical, quantitative 
> measurement of
> values would be difficult, if not impossible. Reproduction costs shift in
> unpredictable patterns. Because we cannot predict what future 
> technologies will be
> available at any given time in the future, we have no way of knowing 
> in advance how
> long a particular capital good will be used before it will be 
> replaced. A machine
> that lasts 20 years would presumably transfer value to the output at a 
> different
> rate from a machine that would be expected to last only a single year.
> Because we cannot see into the future, we can only retrospectively 
> calculate the
> appropriate amount of value transferred from the constant capital. In 
> other words,
> some time in the future after the equipment used in the production 
> process had been
> used up we could calculate the values of goods produced today. We 
> cannot calculate
> the values of goods produced today, because knowing the appropriate 
> values of the
> constant capital being transferred today is impossible without 
> advanced knowledge of
> future reproduction values.
> Alternatively, we could calculate the value of goods based on 
> capitalists'
> estimates of future depreciation patterns. Once we embark on the path 
> of taking
> subject estimates of future depreciation into consideration, we open a 
> new can of
> worms.
> To begin with, we have no way of knowing the capitalists' subjective 
> opinions. In
> addition, Marx's assertion about bankruptcies suggests that these 
> subjective
> opinions are grossly mistaken.
> Finally, capitalists are influenced by the relationship between risk 
> and rate of
> profit (or surplus value), introducing a further subjective influence 
> into value
> theory. Since capitalists might accept a low rate of return for what 
> they perceive
> to be a relatively small risk, measures based on their underlying 
> estimates about
> capital values will somehow have to take the extent of risk into account.
> Although replacing simple values with reproduction values makes 
> quantitative
> analysis more difficult, I want to demonstrate that the qualitative 
> insights of
> reproduction value theory make Marx's analysis of business cycle 
> theory more
> powerful than any analysis based on simple value theory. 
> Parenthetically, let me
> mention here that reproduction values can also increase, especially if 
> capitalism
> creates environmental destruction, which makes reproduction more 
> difficult. Here
> again reproduction value theory offers deeper insights into that 
> relationship
> between the resource base and economic conditions. I have treated this 
> matter
> elsewhere (Perelman 1987, Chapter 2). Now I want to concentrate on 
> Marx's analysis
> of how reproduction values change and how, in the short run, the 
> market allows
> prices to deviate from reproduction values.
>
> I have mentioned this idea several times on the list, but Jerry seems 
> to be the only
> one who expressed any sympathy for it.
>
>
> On Thu, Feb 07, 2008 at 09:18:25AM -0500, Gerald Levy wrote:
> > Hi Paul C and Alejandro A:
> >
> > "Depreciation of labour" may not be the exact phrase used by Marx
> > in _Capital_, but there is a discussion of the "revaluation and 
> devaluation
> > of the variable capital" in Volume III, Chapter 6, Section 2. After
> > explaining the release and tying-up of constant capital, he goes on to
> > discuss variable capital later on in the section (beginning on p. 
> 209 in
> > the Penguin/Vintage edition).
> >
> > Note the reference to "moral depreciation" earlier in that same page.
> >
> > In solidarity, Jerry
> >
> >
> >
> > > To be sure one would have to look at the original french and then
> > > compare the usage with what
> > > was current in mid 19th Century french literature.
> >
> > > By the phrase 'depreciation of labour, I think Marx meant, in those
> > > passages, a decline in the payment
> > > to labour or a decline in wages. This is something different from a
> > > depreciation of commodities below
> > > their value.
> > > It must also be born in mind that this is a relatively early text, 
> and
> > > his economic terminology at
> > > this stage is not quite the same as he used later on in Capital.
> >
> > _______________________________________________
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> > https://lists.csuchico.edu/mailman/listinfo/ope
>
> -- 
> Michael Perelman
> Economics Department
> California State University
> Chico, CA 95929
>
> Tel. 530-898-5321
> E-Mail michael at ecst.csuchico.edu
> michaelperelman.wordpress.com
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