[OPE] Another bit on production prices and equilbrium

(if you want to read it)

Suppose we find that Marx was absolutely correct to argue that output prices
basically depend on cost-prices, turnovers and profit rates, which in the
last instance are proportional to quantities of human work-time.

But suppose that we also find that the production prices he has in mind are
only strictly theoretical prices, which do not really exist (the regulating
price is also influenced by other factors) and which would be realized only
in a momentary, sporadic coincidence, when the actual price matches the
theoretical price.

The question is then how the capitalist production system could, in reality,
achieve/constitute a relative balance in the real world, through a set of
prices which almost never exist?

This is precisely the problem which conventional equilibrium theory
encounters as well (a set of prices can be identified so that all markets
will clear, even although those prices never truly exist, since the assumed
conditions are counterfactual), but the deeper problem is that within this
framework, prices can be explained only by other prices, whether real prices
or ideal prices (I wrote a wiki on this distinction
http://en.wikipedia.org/wiki/Real_prices_and_ideal_prices ).

Effectively we end up arguing that the "price system" or the "price
mechanism" holds things in place, but really there is no "mechanism", only
price structures of sorts and price movements; the approach winds up in
tautological non-sequiturs; and, when a slump occurs, recourse must be had
by the analyst to something other than prices to explain prices, whether
that happens to be the psychological preferences of buyers and sellers, or
cooperative human work effort, or state policies.

I think Marx never believed that economic equilibrium was created through
prices or price fluctuations themselves (prices were only mediators of value
proportions), I think he was talking about the laws (or parameters)
governing the competition for surplus-value and profit created by
co-operative labour effort.

If historical materialism means anything, it is that capitalist society is
not simply held together in equilibrium by prices or markets (by the
activity of buying and selling), but rather by (1) the necessity to do paid
work to survive and prosper, under given relations of voluntary and
involuntary cooperation (social relations of production) - in part enforced
by the state - which introduces the distinction between voluntary and
involuntary (coerced) exchanges, (2) enforcible property rights which are
the superstructure of those social relations (In conventional theory, of
course, involuntary exchanges usually do not exist, or they are an
abberation, such as when the state or a cartel fixes a price; all exchanges
are usually regarded as voluntary, which is the basis of the theory of
market choices and preferences; but in reality there is both freedom and
coercion in markets, so that power relationships are intrinsic to them as
various authors note).

The real analytical problem, I suggest, is that Marx, concerned primarily
with product "values" expressed as standard price averages, or as price
aggregates, never delved more deeply into the phenomenology of prices
themselves - regarding the diverse price phenomena mainly as rather
self-evident surface phenomena, and referring only to accounting "tricks"
and "swindles". The point here is that, at the level of Cap. Vol. 3,
price-forms are not self-evident anymore, and that there is a lot more to be
said about price information and its human processing (which also involves
choices and preferences) as such (when e.g. Joe Stiglitz talks about
information asymmetry, he is touching on an important aspect of this issue).
There are actual prices reflecting money exchanged, computational (ideal)
prices guiding buyers and sellers, the processing of price information by
the human brain, and the social co-existence of human beings as price-takers
and price-makers. The effect is that the concept of production price itself
is crucially unclear, and from this perspective the "transformation problem"
is a pointless detour because it misses the real conceptual problem.

Marx himself stated grandiosely "Our concern is... to discover and present
the concete forms which grow out of the process of capital's movement
considered as a whole... The configurations of capital, as developed in this
volume, thus approach step by step the form in which they appear on the
surface of society, in the action of different capitals on one another, i.e.
in competition, and in the everyday consciousness of the agents of
production themselves." (Cap. Vol. 3, Penguin ed., chapter 1, p. 117). The
point here is that in truth Marx never carried the metamorphosis of "forms"
through to the end, even although he does his best to explain in a
non-philosophical, testable way why the observed economic phenomena appear
different from the way they really are (in terms of their evolutionary
origin, their historical source in human practices). Had he done so, he
would necessarily not only had to revisit monetary and credit theory, but
also delve theoretically much more into the valuation of resources as
prices. Luck has it that economic science did not die off, and that many
subsequent authors do offer important insights into the matter. But I'm
afraid we do not get very far if, in trying to complete Marx's theoretical
project, we take on board equilibrium ideas quite incompatible with his
theory.

Jurriaan

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Received on Mon Jan 31 12:22:42 2011