[OPE] No rise is s/v? Kliman's empirical work on the falling rate of profit (addition)

Paul C.,

What I forgot to say is that estimates of the fixed capital stock can also
be influenced to a greater or lesser extent by asset revaluations, insofar
as new and old assets are valued explicitly or implicity at current market
value. Thus, an element of the observed increase in the fixed capital stock
is no doubt due not to any physical increase in the capital stock, but due
to asset revaluations.

In empirical statistics there is always the problem of how you should value
assets, how you know what an asset is worth, and this becomes quite a
drawn-out discussion. Somehow this value must be inferred either from
purchases or from sales or from income receipts.

The basic three possibilities (with variants of those) are:

- value at acquisition cost (however defined)
- value at current market sale price, or replacement market price
- value according to the yield or income from the asset (earnings potential)

In reality, the statistician adopts a standard convention (a constant) for
the purpose of measurement that can reveal an indicator of change in
observable variables. But it can be a somewhat deceptive kind of procedure
insofar as you cannot really observe the value of the capital stock.

The fact, that in reality enterprises rarely know exactly what their assets
are currently worth, that they know this only within certain broad limits
(at any time they could be overvalued or undervalued) actually speaks in
favour of the classical theory of value, as I will explain in my article on
what I call the "inverse transformation problem", when I get time to write
it. In a sense, Sraffa's theory is a brilliant send-up of marginalist theory
but my own view, which is a criticism of the New Zealand Marxist Ronald L.
Meek, is that it fails to answer basic questions, and ends up assuming what
is to be explained.

Generations of economists from Paul Samuelson to Ian Steedman have argued
that value theory is redundant and that values do not exist independently of
prices. I think you can show that this kind of interpretation is simply
wrong, and you can make the epistemological or ontological argument simply
by taking a closer look at the forms of prices and how (social) accountants
actually perform their valuations. I have mentioned this on OPE-L before in
various contexts. For the serious scientific accountant, prices are not the
"obvious things" that economists pretend they are.

The intelligent Japanese scholar Michio Morishima (the original author of
the "fundamental Marxist theorem" which I, with Marx, regard as false) once
made an interesting case that you could actually deduce the existence of
surplus value as a logical consequence of the existence of profit in price
terms. I myself have drawn attention to the fact that social accounts
themselves aim to construct the "value" of something from "price" data,
creating the inverse transformation problem of how you get values from
prices. Primitive economists who regard prices as self-evident do not even
understand there's a problem.

Although economists deny the existence of value separate from prices, in
reality they are constantly forced to assume this. For instance,
conventional price theory provides no logical reason for the conservation of
value through successive exchanges, but in reality, accounting continually
assumes it. Even if value did not exist, we would be forced to invent it and
our theories of prices make no sense without reference to values. Traders
know this very well and they are constantly talking about the "underlying
values" of assets compared to their current valuations.

However it is quite an intricate argument, which must be carefully
formulated to make scientific sense, given that the term "value" is itself
ambiguous. As I explain in my "value form" wiki, economic value refers at
the same time to quantitative and qualitative dimensions, which can be
stated according to both absolute and relative criteria, and expressed both
as a relationship and as an attribute or an object in its own right.
http://en.wikipedia.org/wiki/Value-form

I think a problem of Marxist scholarship is that it has rarely delved
seriously into the problem of why you need a theory of economic value at
all, why not everything can be expressed in prices. If the truth be told, I
would be much happier if I could state everything in price terms, it is a
lot simpler, but in reality there is a problem of valuation that has to be
tackled. If, as I mentioned before on OPE-L, you unpack the meaning of
Milton Friedman's price theory for example, it turns out to be incoherent.
It is maybe a sexy theory, it provides pragmatic policy instruments, but
it's incoherent.

Thus, I consider that precisely on the issue where Marx's critics think that
they are on the strongest ground, they are scientifically on the weakest
ground. The real weakness of Marx's theory of capital has nothing to do with
the reality of value, but with the fact that he did not fully elaborate his
theory of production prices in his unpublished manuscripts - this leads to
the confusion of "natural prices" with "production prices". We have to
extract and rescue the substance of Marx's own theory of production prices
from the erroneous interpretations by Ronald Meek, Piero Sraffa, Fred
Moseley, Ian Wright and so on.

Marx does correctly acknowledge in Capital Vol. 3 that there are several
different kinds of production prices, but he failed to explicate this in
detail. And, as Ernest Mandel correctly noted, Marx implies that the sort of
conditions that prevail in agriculture which create surplus-profit also can
apply to other sectors, but Marx fails to provide a theory of real-world
capitalist competition in which this thesis is properly acknowledged and
integrated, a rather important omission since, as Mandel correctly noted,
the real trajectory of capitalist development is shaped by the search for
surplus profits (above-average profits), and the sectors generating the
greatest surplus profits are also the ones that are politically dominant (I
don't agree so much with Mandel's theorising about this, but his theoretical
intuitions about the whole issue were correct).

This whole controversy seems very scholastic, but actually it has strong
implications for socialist economics, since Marxism has always operated with
a false theories of markets and prices, and the problems caused by a labour
dictatorship are confused and conflated with the functioning of markets in a
socialist economy. This leads to a lot of scientific nonsense about how
capitalist economies really function and how socialist economies really
(can) function.

Jurriaan

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Received on Tue Oct 27 16:35:17 2009