Ajit,
I was a bit surprised to read the following in your recent exchange
with Andrew.
Ajit (OPE-L 5094) wrote:
(snip)
So the valuation of capital, which is what input prices are in input-output
theory, must be made by the same prices as the prevailing output prices at
that point of time. Anybody, who has read Marx closely should be clear about
this. Marx categorically makes the point that if a commodity lasts for more
than one time period, for example cloth or machine, and the technology in
the meanwhile changes making the production of the same cloth or machines
easier, then the old cloth or machine would fall in value, since the value
of a type of commodity must be the same at any given point of time. All the
problems Andrew and John Ernst are talking about stems from a general
mishandling of the concept of money.
John comments:
It seems to me that there is a bit more involved here than how one treats
the concept of money. On this list, Duncan has referred to the issue as
losses due to asset revaluation. In his EEA paper, David Laibman notes
that there can be losses due to asset revaluation as technical change takes
place. How these losses are to be treated within structure of production
models is a problem.
Note that I find no fault with Sraffa for not dealing with this issue.
That was neither the point nor the purpose of his work. I would have
difficulty with Marx had he not dealt with the problem given that
he wanted to examine the capitalist economic system in motion or,
in my interpretation, as technical change takes place. Here then
I take the issue as one within the Marxian framework. Thus, I have
two problems with what you say in the above.
1. The difficulty with some input-output theories is that valuation
takes place at "a point in time." This generally avoids any attempt
to even consider asset losses as productivity increases. Now if
asset losses must be "abstracted from" in order to obtain an
acceptable price theory, then I am willing to consider other ways
to take into account these losses. This may eventually mean a
reconstruction of price theory. Until I am clearer on the
valuation of assets as technical change takes place, I am willing
to suspend judgment on any price theory that does not deal with
the issue.
2. Implicit in what you say in the above is that Marx was clear
on the entire matter of asset revaluation. Indeed, it would
seem that we are to regard him as an early input-output theorist.
Yet, when Marx introduces the concept of depreciation in CAPITAL,
we find something a bit less clear than you indicate. (Here, let
me add that I would appreciate your comments on the following
passage from Vol I, Ch 15, Sec 4 of CAPITAL.)
Marx wrote:
The material wear and tear of a machine is of two kinds. The one arises
from use, as coins wear away by circulating, the other from non-use, as
a sword rusts when left in its scabbard. The latter kind is due to the
elements. The former is more or less directly proportional, the latter
to a certain extent inversely proportional, to the use of the machine.
But in addition to the material wear and tear, a machine also
undergoes, what we may call a moral depreciation. It loses
exchange-value, either by machines of the same sort being produced
cheaper than it, or by better machines entering into competition with
it. <Note[64]> In both cases, be the machine ever so young
and full of life, its value is no longer determined by the labour
actually materialized in it, but by the labour-time requisite to
reproduce either it or the better machine. It has, therefore, lost
value more or less. The shorter the period taken to reproduce its total
value, the less is the danger of moral depreciation; and the longer the
working-day, the shorter is that period. When machinery is first
introduced into an industry, new methods of reproducing it more cheaply
follow blow upon blow, and so do improvements,
that not only affect individual parts and details of the
machine, but its entire build. It is, therefore, in the early days of
the life of machinery that this special incentive to the prolongation
of the working-day makes itself felt most acutely.
Note 64
The Manchester Spinner (Times, 26th Nov., 1862) before referred to says
in relation to this subject: "It (namely, the "allowance for deterioration
of machinery") is also intended to cover the loss which is constantly
arising from the superseding of machines before they are worn out, by
others of a new and better construction."
John continues:
Here we have capitalists setting aside funds as part of the depreciation
charges because of what Marx calls "moral depreciation." Are we to
take this seriously or should we ignore such losses? Can we construct
structure of production models that capture Marx's idea that capitalists
depreciate their assets in the manner he suggests? For me, these are
real questions that cannot and should not be written out of any economic
theory and, especially, any that purports to represent Marx's.
Ajit wrote:
The problem with Andrew is that he neither understands value, nor prices, nor
money as a unit of account; and these are the three concepts he is dealing
with. His basic problem with the input-output theory of prices is that
inputs are bought before outputs are produced and so their prices should be
different. But he should know that at any given time point there could be
only one price for a commodity.
John comments:
Again, the problem here is that production takes place in time. Thus,
as we consider inputs becoming outputs there are at least two points
in time involved. All would agree that at any point in time a commodity
can have only one price. But given that the prices at which a
commodity used as a capital input is purchased can differ from that
at which it is sold after production takes place due to decreases in
its value as productivity increases, the question becomes how one
takes into account those changes in asset valuation. Perhaps we
need to include within our concept of money the idea that it is
also a store of value. The preservation of that value becomes
problematic within the capitalist production process itself. It
is an issue that cannot be simply solved by appeals to authority or
by definition.
________________
Ajit,
In an effort to make all this a bit less acrimonious, let me
ask the following of you. I do so not to challenge you or
put you on the spot. I really want to know the how's and why's
of your thinking on these issues.
1. As I stated above, I would like to know how you read the
passage from Marx as cited above. This is a sincere request
as I really don't know how you have read it and do take you
seriously as someone who makes an effort to understand Marx.
2. You have read Sraffa and various others who use an
input-output approach much more than I have. Do they
account for what I have called "asset revaluation"? If they
do not, they do not. I do not consider this a problem
until they read this into Marx's CAPITAL where I obviously
find something different.
John