Fred,
In OPE-L 3098, you take a position concerning historic
valuation that differs from mine and TSS orthodoxy.
What are some of the points of contention?
1. The missing money.
2. The value of money.
3. The role of empirical work concerning the FRP.
______________________
1. Missing Money.
I apologize for any unclarity in the quick example
to which you responded. Consider the example I
posted in my attempt to clarify matters with Duncan.
Let's say that I buy $90 worth of the commodity in a
one-commodity world and spending next to nothing on wages
manage to produce $120 worth of that commodity. The living
labor created a value of $30. Clearly, with this informa-
tion we would agree that my rate of profit is 33.3%. Of
that $120, I invest $100 in constant capital in the next
period and introduce a new technique, which I hope will
increase my profits as well as my profit rate. Despite
my hopes, it doesn't since the price of the commodity
falls after production such that the total price of
the output is $130. If we in the world of TSS look at
this situation, we see that there is $100 invested in
constant capital and, as before, $30 added to the product
by the living labor. For us, the given amount of living
labor is adding the same exchange value to the product in
both periods -- $30. To be sure, the rate of profit has
now fallen to 30% as the living labor created the $30 in
exchange value.
As I begin producing with my $90 investment, let's further
assume that 120 units of the commodity are produced. Each
then has a price of $1. In the next period, having invested
$100 to buy 100 units of the commodity produced in the
previous period. Let's say that I can now produce 200 units
of the commodity. Thus, I would expect that the gross output
would sell for $200. It doesn't. As stated above, it sells
for $130. Why $130? Here, I think, we see the assumption
of the LTV. That is, I invested $100 and the living labor adds
$30. The price of the total is thus, again, $130. The price
of the individual commodity fell from $1 in the first period.
to $130/200 to $.65 after production in the 2nd.
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All I am saying is that if you revalue the inputs for which
$100 was paid and compute a rate of profit greater than 30%
for capitalist with the new technique, then some money
disappeared. That is, using the output price of $.65, the
inputs would be valued at $65 and thus the rate of profit
would be 100%. (Note all the constant capital of $65 is
indeed transferred to the output.) Thus, the capitalist
who advanced $100, sold the output for $130, is now told
that his rate of profit is not 30% but 100%. He is told to
forget about the $35 lost as his constant capital depreciated.
Here the numbers are only used as an example and not to make
things more dramatic than they are. But the real question is
how such losses are to be incorporated into the analysis.
Duncan proposes to use an inventory value adjustment which I
am still checking out. As he does so, he readily admits that
the rate of profit using historic valuation does fall in
the above example. Where I find agreement with him is in
the need to take into account these losses of value which can
and do occur.
2. The value of money
Into the discussion concerning Duncan's use of an "inventory
value adjustment", you raised the question about the value
of money.
You state that
I agree that Marx generally assumed a constant value of
money in CAPITAL.
and go on to point out that
Marx also considered briefly at times the effects of a change in the
value of money, and from these passages, it is clear that such a change in
the value of money results in a reevaluation of constant capital, which in
turn implies that constant capital is not evaluated at historical costs
(see
more below).
It seems to me we are mixing things a bit here. You seem to say
that because Marx states that changes in the value of money do not
affect the rate of profit, the rate of profit must be evaluated as though
money did not exist. That is, the rate of profit you compute using
simultaneous valuation can be computed without any reference to money.
All one needs is the quantities of inputs and outputs. In the above
example, one does not need money at all to compute the rate of profit
in either period if inputs and outputs are simultaneously valued.
Now let's consider massive price inflation in the context of my
example. Recall I invested $100 and sold everything for $130. Thus,
my capital investment could purchase 10/13 of the output. If prices
suddenly doubled, I would still want to be able to purchase 10/13 of
the output. Of the $260 of output $200 would be funds sufficient
to purchase the 10/13 of the output. The prices doubled but the rate
of profit stayed the same, assuming I get my $200.
I am sure you will have more to say on this. But what have I done?
Having established the "correct" way to determine the rate of
profit, we can and should consider variations in the value of
money. I think the first step is to look at matters as the
value of money remains constant. Those matters do not simply
include the rate of profit but also how, in simple models and
examples, we can grasp the manner in which capitalist reproduction
takes place as technical change occurs.
3. The role of empirical work concerning the FRP.
As you know, I am a bit reluctant to allow empirical studies of
the FRP to guide the direction of matters. Why?
a. Those studies in using current costs imply that as the rate of
profit falls the constant capital to output ratio rises. Yet,
examples of capitalists investing in machinery that causes such
an increase are, at best, few and far between. Thus, given all the
sound and fury, surrounding Okishio and the choice of technique
problem, it would be helpful if we could look at actual changes in
technique.
b. Given studies that show a falling rate of profit in one country
like the U.S., we should also consider that capitals of relatively
low composition are often the first to flee the homeland. What's
left? Obviously, those of higher than average composition. Perhaps,
it is not surprising that the rate of profit falls in the U.S. and
other developed countries. If the capitals that went abroad in search
of higher profits are incorporated into such studies, it is unclear
that we would see an FRP.
Point B is clearly a conjecture on my part. But given the responses
to my calls for examples of the typical way Marx's notion of technical
change is interpreted, Point A teaches me that we need a better theory
to test before we develop theories from tests.
_______________
Regardless of our disagreements here, I was happy to read that
Fred says:
I also am in complete sympathy with John's project of extracting
a theory of accumulation from CAPITAL.
_____________________________________
Agreeing to disagree,
John
P.S. I did not comment on your response to my interpretation
of Marx on Ricardo. I am not dismissing but simply out of time.
P.S. You mention other passages where Marx speaks of the
change in the value of money not affecting the rate of profit.
As a fellow Marxologist, feel free to bombard me with quotes.