Alan, I wish we could sit down to compare notes again sometime as we
did at last summer's URPE conference. There I thought we were
converging, if not on agreement, at least on mutual understanding.
On the basis of this latest post I feel we're now spiralling away
from it.
Suffice it to say that I don't recognize my own arguments as they are
represented in your post. You ascribe positions and conclusions to me that I
have never taken, and that I certainly didn't express in my earlier
post. Worse, I detect from your wording a trace of irritation over a
perceived inconsistency in my discussion of value theory and the
nexus between accumulation and the rate of profit. I would like to
assure you, and demonstrate in what follows if possible, that this
inconsistency does not stem from what I actually said. For my part I
apologize if this misunderstanding stems from any ambiguity in my
original remarks.
Shifting gears and voice, I'll now turn to what I actually said, in
context:
"Alan writes, amidst other arguments:
>The simultaneous paradigm produces the absurd result that they can
>accumulate with a rising rate of profit.
"I don't see how this result can be labelled "absurd" without further
specification. In particular, the notion that a rising rate of
profit may coincide with capital accumulation is neither necessary
nor unique to the simultaneous approach to value determination. Nor
can it possibly be, since profit dynamics occur in the world of
prices, and the simultaneous approach establishes an algorithm for
determining values, understood quite independently of prices.
"For example, if the rate of profit is below the 'steady state' level
Marx speaks of in section 1 of Ch. 25, the rate of profit will rise
in an accumulating economy as long as the rate of capital
accumulation is below the (exogenously given) rate of labor force
growth, net of the rate of capital depreciation [I should have said
*plus* the rate of capital depreciation]. Nothing absurd about that.
Indeed, if the temporal approach doesn't deliver the same result
under such conditions, I'd say it's a defect rather than a virtue of
that approach. Conversely, if the rate of profit is above this
'steady state' level, the rate of profit will fall."
[Note the following about this passage: 1) it is not arguing in
favor of the simultaneous approach, just denying that the latter has
certain necessary 'absurd' properties; 2) it has nothing whatsoever to
do with my critique of Marx's *application* of value theory in the
conclusion of Ch. 5; 3) the indicated counter-example to Alan's
sweeping conclusion is taken directly from Marx, and does not depend
on a particular, simultaneous or temporal, reading of value theory,
as the penultimate sentence indicates. ]
To this Alan responds:
> The word 'absurd' might be a bit intemperate or dismissive, but what I
> meant was that it is completely contrary to natural common sense.
How is the counter-example I gave completely contrary to natural
common sense? I took it directly from Marx's argument in section 1,
Ch. 25, Vol. I of CAPITAL. Is Alan saying Marx's argument is
"completely contrary to natural common sense"?
> Every capitalist, every merchant, every banker, every accountant, and
> everyone who can do arithmetic knows that if your total profits are
> constant and your advanced capital is rising, then your rate of return
> falls.
These stipulations were not in the phrase I responded to. In my
counter example, total profits are rising because the wage rate is
falling (because labor supply is expanding faster than capital
stock). Nor, by the way, do I see that the simultaneous approach of
itself can possibly be inconsistent with Alan's remarks here, since
(as I said) the simultaneous approach is only an algorithm for
calculating values understood as independently of prices, and Alan's
comments here are manifestly about the world of prices.
"Capitalists,...merchants,....bankers,...[and] accountants don't
concern themselves with labor values.
> And by any normal definition of 'accumulate', your advanced
> capital is rising if you are accumulating. What else does the word mean?
> We can always redefine 'grow' to mean 'shrink' and 'shrink' to mean
> 'grow' but then we have a bit of explaining to do.
I suppose we could also redefine "independent of prices" as "dependent
on prices", but I agree we shouldn't do any of these things. It should be
clear from my remarks that I haven't. How does this comment apply to
what I've said?
> I admit that some truths contradict natural common sense - this is
> what fetishism is all about - but in such cases an extremely careful
> argument has to be constructed to show where the error arises. No such
> careful argument has been forthcoming. That is what I think absurd.
Again, what's wrong with my (i.e. Marx's) specific argument? That
is, how are Alan's remarks at all relevant to what I said?
> In particular a very large number of very respectable authors have
> for the last fifty years, proclaimed that 'obviously' the rate of profit
> must rise because 'obviously' capital stock gets cheaper, and chastise Marx
> vociferously for failing to recognise this 'obvious' fact. This, I
> think, has to be challenged frontally. It is not at all obvious.
I agree with the general principle Alan points to here, but it has
nothing to do with what I said.
> On the contrary, 'obviously' if you add one sum of money to another
> sum of money, the new sum of money is bigger. 'Obviously' if you invest,
> your capital stock grows. It is the contrary result, the result of the
> simultaneist paradigm, which is not obvious. We have to put the correct
> end of the telescope to our eyes to see what is clearly before us.
I agree about the telescope. I don't see how the contrary result is
a *necessary* consequence of the simultaneist paradigm, for the
reasons given (this "cheapening" happens in the world of prices, and
these may obey a logic somewhat different from that of values as
calculated in the simultaneous sense). I also don't see what this has to do
with what I wrote.
> The simultaneist paradigm redefines the meaning of 'accumulate'. It
> identifies the accumulation of commodities with the accumulation
> collection of 'physical goods', whatever that might mean, and then
> explains that the rate of profit cannot move as Marx suggests, because
> the stupid Marx failed to understand that a collection of physical
> goods can get cheaper even though there are more goods.
Same comments as above.
> I think this is a tortuous, roundabout, upside-down and ultimately
> wrong way of getting at what is going on. I think we should cut the
> Gordian knot. Accumulation is not the accumulation of use-values but
> of exchange-value, that is, money prices. This is what determines the
> physical behaviour, not the other way around. Let us start by studying
> the money, and then try to understand how the use-value aspect of
> production is thus constrained and ultimately determined. This, I
> think, is 'Marx's method'.
And it is just this method I invoke in applying Marx's argument of
Ch. 25, section 1. What's the problem?
> I think that, in common with every banker, every accountant, and
> everyone who can do arithmetic, Marx understood accumulation to mean
> the accumulation of exchange value, that is, accumulation in money
> terms, with the only proviso that money as the expression of value
> must be corrected for inflation (hence the importance of the much-
> maligned 'value of money'). In money terms, if the capitalists invest,
> then their advanced capital must grow. If you put money in the bank,
> your bank balance grows, no? If you use this same money to buy assets,
> this raises your gross worth, no? And if you exhaust these assets
> slower than you add to them, your gross worth will rise over time, no?
> This is what is 'obvious'.
Yes. But I see nothing in the simultaneous approach that logically
precludes accumulation being defined in this way. Also, I don't see
what this has to do with my counter-example to Alan's conclusion.
> What is not 'obvious' is why the simultaneous analysis comes up with a
> completely different result to this very straightforward fact. Yet
> simultaneist authors have until now proclaimed as 'obvious' that their
> analysis is correct and the facts are wrong. That is why I use the
> word 'absurd'. When you come up with a theory that contradicts the
> most plain everyday fact, then you should at least contemplate that
> something might be wrong with your theory. At least, this is what I
> understand by the scientific method.
Seems fair to me. Has nothing to do with what I wrote, or with any
*necessary* implication of the simultaneous approach, at least so far
as I can see.
Alan continues:
> Gil goes on to say:
>
> "In particular, the notion that a rising rate of profit may coincide
> with capital accumulation is neither necessary nor unique to the
> simultaneous approach to value determination. Nor can it possibly be,
> since profit dynamics occur in the world of prices, and the
> simultaneous approach only establishes an algorithm for determining
> values, understood quite independently of prices."
>
> That is, there is a different, secret and hidden profit rate - the
> 'value' rate of profit - which really is different from the observed,
> capitalist rate and has nothing to do with capitalist prices.
Yes, it is true that the value rate of profit, as defined via the
simultaneous approach, is different from the rate of profit in money
terms. As for Alan's last clause, I have not claimed that these
values have "nothing to do" with capitalist prices, I said that they
were *understood* or *conceived* independently of prices.
> In other words, after spending a not inconsiderable number of bytes
> establishing that 'Marx's value analysis' is fundamentally erroneous,
> Gil....
As I've explained previously on this net, my Ch. 5 critique does not
attempt to show that Marx's value analysis is "fundamentally
erroneous". It shows that a *particular application* of this value
analysis (that based on the invalid conclusion that surplus value
must be explained on the basis of price-value equivalence) is
invalid. Thus in this phrase Alan fundamentally misrepresents my argument.
> Gil now applies this same erroneous value theory to establish that
> things do not 'really' happen as they appear to happen. This strikes
> me as a slightly selective use of value theory. If we can throw it out
> of the window while discussing merchants and usurers, it is a bit cheeky
> to bring it in through the back door in order to 'prove' that these
> same usurers and merchants cannot work with the profit rate which
> simple arithmetic imposes upon them.
This necessarily and completely misrepresents what I have written.
1) The point of my Ch. 5 critique was not to establish that value
theory is erroneous (of course I have my doubts about the valid scope
of value theory, but these doubts apply with at least equal force to
the temporal interpretation, so this has nothing whatsoever to do
with the present argument).
2) I do not "apply this same erroneous value theory" in the present
argument, since a) my critique of Marx's use of price-value
equivalence in the account of capitalist exploitation has nothing
whatsoever to do with the present argument, and b) my counter-example
was taken directly from Marx, and applies no matter which approach to
value theory is used.
Thus I don't see how I've done anything "cheeky" or brought in
anything "through the back door."
> My argument is a teensy bit more consistent. I think the value theory
> which Gil deploys to produce his argument above, which he attributes to
> Marx, is not Marx's theory.
OK, let's test this. If Alan's comments are relevant to what I
actually wrote, Alan is denying here that Marx in Ch. 25, section 1
allowed that the rate of profit could rise even if the rate of
capital accumulation was positive. I must disagree. The relevant
passage:
"Or, the other alternative, accumulation slackens as a result of the
rise in the price of labour [notice Marx says "slackens", not
"stops" or "reverses"---GS], because the stimulus of gain is blunted.
The rate of accumulation lessens [not "goes to zero" or "becomes
negative"---GS]; but this means that the primary cause of that
lessening itself vanishes, i.e. *the disproportion between capital
and exploitable labour-power.* The mechanism of the capitalist
production process removes the very obstacles it temporarily creates.
*The price of labour[power] falls again to a level corresponding with
capital's requirements for self-valorization, *whether this level is
below, the same as, or above that which was normal before the rise of
wages took place.* [I, 770, Penguin edition; emphasis added]
I take the last sentence clearly to allow that a positive rate of
capital accumulation can coincide with a rising rate of profit--the
point of my counter-example.
On a separate note, I don't see how these remarks respond to my point
that the defects Alan points out are not a *necessary* consequence of
the simultaneous approach.
> I think Marx has a different value theory,
> which is not logically inconsistent.
This has nothing to do with what I wrote.
> But I don't use my version of Marx's value theory only when it suits
> me. I use it all the time.
Same here, or more to the point, I make clear what claims apply to
which version of Marx's value theory. There is no inconsistency
in my usage here.
> Because this *same* value theory produces an analysis of accumulation which
> accords with the known facts: it says that the rate of profit will fall
> when in fact it does fall. Gil's version of Marx's value theory
> produces an analysis of accumulation which contradicts the known facts.
No it doesn't. I've explained why it doesn't, and Alan does not
respond to this explanation.
> It says that the rate of profit will not fall when in fact it does fall.
I must disagree.
> For Marx (and, I would argue, the nondualist approach if applied consistently)
> the observed rate of profit really is the value rate of profit. There are
> not 'two' rates of profit, an observed and a secret rate. There is one
> single rate of profit, and it *is* the price rate of profit. That is the
> lesson which, it seems to me, the non-dualists have taught us.
In that case, the non-dualist approach must certainly support my
counter-example, since it concerned the price rate of profit. But if
that is the case, what in the world is Alan objecting to?
> It is true that the accounts can be done wrong. For example, as Fred,
> Anu and myself have shown, the capitalists misreport things like
> expenditure on unproductive labour, interest payments and the like,
> and to arrive at the correct money rate of profit these expenditures
> have to be accounted for what they really are, namely components of
> profit. It is also true that Marx, like the more sensible capitalists,
> has to correct for inflation. But these are corrections in price terms,
> not the substitution of a completely different rate of profit that has
> nothing to do with prices. Once these correction are done, the resultant
> money profits are subject to the same simple law: if you invest, your
> advanced capital grows.
This has nothing whatsoever to do with what I wrote.
> Thus when Gil writes
>
> "For example, if the rate of profit is below the "steady state" level
> Marx speaks of in section 1 of Ch. 25, the rate of profit will rise
> in an accumulating economy as long as the rate of capital
> accumulation is below the (exogenously given) rate of labor force
> growth, net of the rate of capital depreciation. Nothing absurd about
> that. Indeed, if the temporal approach doesn't deliver the same
> result under such conditions, I'd say it's a defect rather than a
> virtue of that approach. Conversely, if the rate of profit is above
> this "steady state" level, the rate of profit will fall."
>
> he takes it for granted (or cites as an unquestionable result) that
> capital depreciation is large enough to offset the very large sums of
> gross investment with which the capitalists augment their stock each
> year.
No. Nothing in what I said depends on this (and I apologize if my
typo, corrected above, suggested this interpretation). For example,
the counter-example goes through even if the rate of capital
depreciation is zero. All that is required is that the labor force
is growing at a faster rate than the capital stock.
> This amounts to saying that depreciation is utterly misreported by the
> capitalists,
No it doesn't. See above.
>whose accounts in fact show that net investment is
> positive at all times except for at most a year of crisis every seven
> to ten years, and that the capital stock of most of the nations I
> know, rises secularly. From where does this gross error on the
> capitalists' part arise? Why haven't the simultaneists reported this
> gross error and chastised the capitalists for it? Shouldn't the vast
> outpouring of work on the errors of poor Marx, who in the last
> analysis only confirms the capitalists' own estimates of depreciation,
> be directed at the foolish capitalists and their equally foolish
> accountants? Isn't this an equally great 'defect' in capitalist
> accounting?
Again, and finally, this has nothing whatsoever to do with my
argument.
In solidarity, Gil