1. I have argued that Marx had a consistent interpretation of
the valuation of constant capital in terms of current costs. This
consistent valuation in terms of constant costs applies both to
the stock and to the flow of constant capital and also applies
both to the case of technological change and to the case of a
change in the value of money. I will leave aside for now the
question of whether "current costs" refer to the beginning or
the end of the current period. The main point for now is that
constant capital is definitely NOT valued at historical cost in
Marx's theory, in the cases of either technological change or a
change in the value of money. Marx always assumed that
constant capital is valued at current costs, not at historical
costs.
I have presented substantial textual evidence to support this
interpretation, including in OPEL 3507 which I have just
reposted. Andrew seems to agree that Marx SOMETIMES did
assume that the stock of constant capital is valued at current
costs. Indeed, given all the textual evidence, who could deny
this?
2. However, Andrew argues that Marx did not have one
general assumption regarding the valuation of the stock of
constant capital, but instead had different interpretations for
different purposes. Even though Marx assumed that constant
capital is valued in constant capital in the passages I have
quoted, Andrew argues that, FOR OTHER PURPOSES, Marx
assumed (at least in the case of technological change; I am still
not sure how Andrew interprets the case of a change in the
value of money), that the stock of constant capital is valued in
historical costs. (Although, as I understand Andrew, the flow
of constant capital continues to be valued in current costs, thus
resulting in an inconsistency not present in Marx¹s theory
between the valuation of the stock and the flow of constant
capital.)
The all-important example of this different assumption
regarding the valuation of the stock of constant capital in the
case of technological change, according to Andrew, is of course
the "falling rate of profit."
Now it seems to me highly unlikely that Marx would assume in
some cases that technological change results in a revaluation of
constant capital, but then when he comes to the crucial
question of the falling rate of profit (which is of course about
the effect of technological change on the rate of profit), that he
would make the opposite assumption that the stock of constant
capital is not revalued. Marx certainly never explicitly said
that, for the specific purpose of the theory of the falling rate of
profit, he was no longer assuming that technological change
resulted in a revaluation of the stock of constant capital, but
was instead making the opposite assumption (but continuing to
assume that the flow of constant capital is revalued in constant
costs!). But let's review Andrew's textual evidence.
3. Andrew presents three passages as textual evidence to
support his interpretation that in Marx's theory of the falling
rate of profit the stock of constant capital (the denominator in
the rate of profit) is valued in historical costs.
I will first discuss a passage from Section 3 of Chapter 14 of
Vol. 3 (on "cheapening of the elements of constant capital").
This passage is especially important because it is an explicit
discussionof the effect of technological change on the value of
constant capital, as related to the falling rate of profit. Andrew's
passage is the following part of a sentence:
... ³the depreciation of the existing capital (that is,
of its material elements) ...
Andrew then emphasizes Marx's parenthetical remark:
Now, why the parenthetical remark? Is it not to make
clear that the means of production, the material elements of
capital, can be cheapened, although the sum of value already
advanced cannot?
So, Andrew's argument seems to be that Marx's parenthetical
remark indicates that Marx is assuming here that technological
change will change the value of the existing means of
production, but will not change the value of the existing
constant capital. Indeed, Andrew suggests further that the title
of this Section 3 ("cheapening of the elements of constant
capital") also refers only to changes to the value of the means
of production (the "ELEMENTS of constant capital") and does not
refer to changes in the value of the constant capital itself, and
hence that this section is only about the cheapening of the
means of production and is not about cheapening of constant
capital.
But if Andrew's interpretation is correct, then how could this
cheapening of the means of production (but not the constant
capital) be a "countertendency" to the fall in the rate of profit?
(Chapter 14 is of course about "counteracting factors".) Why is
this "cheapening" (that does not affect the constant capital)
included in a list of the countertendencies to the falling rate of
profit? "Cheapening" can be a countertendency only if it refers
to the constant capital, the denominator in the rate of profit. If
³cheapening" does not affect the constant capital (but only the
value of the means of production), then it cannot affect the rate
of profit as a "countertendency".
Further evidence that "cheapening" in Section 3 means a
reduction in the value of the constant capital - both new
constant capital and the existing constant capital - is provided
by a reexamination of this section. In the first place, the first
sentence in this section explicitly links this section with Marx's
earlier discussion of how CHANGES IN THE VALUE OF CONSTANT CAPITAL
affect the rate of profit in Part 1 of Vol. 3 (Chapter 6 in particular):
Everything is relevant here that has been said in Part One
of this volume about causes that raise the rate of profit
while the rate of surplus-value remains constant, or at least
independently of the latter.
I have discussed in OPEL 3507 (Section A.2) a number of
passages from Chapter 6 which clearly state that the value of
constant capital is revalued as a result of technological change
and other factors that change the value of the means of
production. These passages will be briefly reviewed below in
#4.
Therefore, with this explicit link, it would appear that if
Chapter 6 is about how CHANGES IN THE VALUE OF CONSTANT
CAPITAL (not just changes in the value of the means of
production) and how these changes in constant capital affect
the rate of profit, then so is Section 3 of Chapter 14.
Secondly, Marx then went on in the rest of the first paragraph
on to discuss how ³the value of the constant capital does not
increase in the same proportion as its material volume" as a
result of technological change and increased productivity in the
production of the means of production. Therefore the meaning
of "cheapening" in the first paragraph of Section 3 is clearly a
cheapening of the value of the constant capital, not just a
cheapening of the value of the means of production.
Andrew's sentence fragment then comes from the first
sentence of the second paragraph of this section. The second
paragraph is about the revaluation of the "EXISTING capital"
and argues that the same devaluation of constant capital
discussed in the first paragraph with respect to new capital
also applies to the "exiting capital". The full paragraph is the
following:
Also related to what has been said is the devaluation of
EXISTING capital (i.e. of its material elements) that
goes hand in hand with the development
of industry. THIS TOO IS A FACTOR THAT STEADILY
OPERATES TO STAY THE FALL IN THE RATE OF PROFIT, even though
in certain circumstances it may reduce the mass of profit by
detracting from the mass of capital that produces profit.
We see here once again that the same factors that produce
the tendency of the rate of profit to fall also
moderate the realization of this tendency. (emphases
added)
Again, if Andrew's interpretation of "cheapening" or
"devaluation" (as applying only to the value of the means of
production and not to the constant capital) is correct, then: (a)
the meaning of "cheapening" has changed from the first
paragraph to the second without Marx saying so; and (2) the
second sentence in this paragraph is nonsensical. If the
"devaluation of the existing capital" means only the devaluation
of the means of production, but not the devaluation of the
constant capital, then this devaluation cannot be a "factor that
steadily operates to stay the fall in the rate of profit." In order
to "stay the fall in the rate of profit", "cheapening" must refer
to the value of the constant capital.
Therefore, it seems to me that this Section 3 of Chapter 14 on
"cheapening", including its reference back to Chapter 6,
provides very strong evidence that, in Marx's theory of the
falling rate of profit, he assumes that the existing constant
capital is cheapened as a result of technological change, i.e. is
valued in current costs. Otherwise, "cheapening" cannot be a
"countertendency" to the falling rate of profit.
4. Andrew¹s other two passages are the following passage from
Chapter 13 of Vol. 3:
Since the ratio of the mass of surplus-value to the value
of the INVESTED total capital forms the rate of profit,
this rate must constantly fall. (p. 213; emphasis Andrew's)
The drop in the rate of profit, therefore, expresses the
falling relation of surplus-value to ADVANCED total capital ...
(p. 236; emphasis Andrew's)
Here Andrew's argument rests on the assumption that the
words "original" and "advanced" mean that constant capital is
valued in historical costs. Andrew has also presented other
passages which, although they are not specifically about the
falling rate of profit, also define the rate of profit in relation to
the "advanced" capital.
However, in my (OPEL #3507, Section B.1), I have already
argued against this interpretation and presented two passages
in which Marx explicitly stated that the "advanced" capital is
revalued in the case of technological change. Hence "advanced"
capital cannot not mean valuation at historical costs.
Andrew has responded that these two passages do not mean
that the existing capital (which has been "advanced" in the
past) is revalued retroactively, but instead only mean that,
when some capital is used up and replaced, then the newly
advanced replacement capital increases or decreases, compared
to the used up capital. I agree that these two passages include
this latter case of new capital, but I argue that these passages
also include the retroactive revaluation of the
existing capital. Let us review these two passages.
The first passage is from Section 2 of Chapter 6 of Vol. 3:
We simply mean that the CAPITAL PRESENT INCREASES
OR DECREASES IN VALUE as the result of certain general
economic conditions ... ; i.e. that the value of the capital
ADVANCED to production RISES OR FALLS independently of its
valorization by the surplus-value it employs. (C.III., p. 206;
emphases added)
In the first place, the subject of this sentence is the "capital
present" which seems to suggest the existing capital. More
importantly, it is clear from this section as a whole that the
"revaluation of the advanced capital" applies both to new
capital and to the existing capital. In this section, Marx
discussed the revaluation of both circulating capital and fixed
capital. In both cases Marx discussed both the revaluation of
new capital and the revaluation of the "already functioning" or
the "existing" capital (circulating capital, pp. 208-08, and fixed
capital, pp. 208-09).
My other passage is from Chapter 7 of Vol. 3 and it seems to
me is a clear and unambiguous statement that the previously
existing capital is retroactively revalued in the case of
technological change. Andrew quoted the first sentence of this
passage:
Fluctuations in the rate of profit that are independent of
changes in either the capital's organic composition or its
absolute magnitude are possible only if the value of the capital
ADVANCED, whatever might be the form - fixed or circulating - RISES
OR FALLS as a result of an increase or decrease in the labor-
time necessary for its reproduction ... (C.III. 237-38;
emphasis added)
I agree that this sentence by itself is ambiguous - it could mean
either a revaluation of new capital or a revaluation of the
existing capital. However, the sentences that follow make it
unmistakably clear that Marx is talking about the revaluation
of the existing capital.
The value of any commodity - and thus also of the
commodities which capital consists of - is determined by the
socially necessary labor-time required for its reproduction. This
reproduction may differ from the conditions of its original
production by taking place under easier or more difficult
circumstances. If the changed circumstances means twice as much
time, or alternatively only half as much, is required for the same
physical capital to be reproduced, then given an unchanged value
of money, THIS CAPITAL, IF IT WAS PREVIOUSLY WORTH $100,
WOULD NOW BE WORTH $200, OR ALTERNATIVELY $50.
(C.III, pp. 237-38; emphasis added)
To repeat: as a result of the increase of productivity, the
capital that was previously worth $100 is now worth $200 or
$50. Could there be a clearer statement of the revaluation of
the existing capital.
It should also be noted that the last sentence of this paragraph
also briefly mentions the case of a change in the value of
money, and states that in this case, as in the case technological
change, the existing capital is revalued. The difference
between these two cases is that revaluation as a result of
technological change may affect the rate of profit, whereas
revaluation as a result of a change in the value of money does
not affect the rate of profit.
Therefore, I conclude, contrary to Andrew's argument, that
these two passages do indeed say that the "advanced" capital
can be revalued as a result of technological change (or a change
in the value of money). "Advanced" capital does not imply
valuation at historical costs, as Andrew has argued.
5. Besides this textual evidence (or lack thereof), Andrew¹s
main argument to support his interpretation of the valuation of
constant capital in terms of historical costs seems to be that the
historical cost interpretation leads to the conclusion of a falling
rate of profit and the current cost interpretation of constant
capital does not lead to this conclusion. Even is this were true -
and I am not sure that it is - this would not be a valid reason to
ignore all the textual evidence to the contrary and conclude
that the historical cost interpretation is more correct.
If the textual evidence were mixed, then perhaps ³conformity
with Marx's results" would be a consideration in selecting the
better interpretation. But the textual evidence is not mixed.
The textual evidence is overwhelmingly on one side (the
current cost interpretation). In every single passage in which
Marx explicitly discussed the valuation of constant capital in
the case of technological change, he stated that constant capital
is revalued to current costs. He never once said that in the case
of technological change constant capital is valued in historical
costs. The only argument on the other side is ³conformity with
Marx's results". In this case, it does not seem reasonable to me
to ignore all the textual evidence to the contrary and conclude
that Marx defined constant capital in historical costs. It seems
to me more reasonable to conclude that Marx's falling rate of
profit may not necessarily follow from his own definition of
constant capital in current costs, for which there is substantial
textual evidence.
I repeat that I think that assuming disequilibrium and the valuation of
constant capital at historical costs may be an appropriate extention
of Marx's theory to more concrete levels of abstraction, but I do not
think that is what Marx was assuming in Capital, which remains at
a very high level of abstraction.
I wonder what other listmembers think about all this. I would
very much appreciate your comments.
Comradely,
Fred