[OPE-L:7184] [OPE-L:702] Re: Market Values and Market Prices

Gerald Levy (glevy@pratt.edu)
Thu, 18 Mar 1999 21:02:45 -0500 (EST)

John writes in [OPE-L:699]:

> <snip> Why try to arrive at equal rates
> of profit at all? It might be interesting if we were studying an economy
> in which there is no fixed capital but those days have been over for some
> time.

True enough, but "those days" were over in Marx's day. In fact, those days
never existed. I.e. there has never been a period of capitalist history in
which there has been no fixed capital. It has always been a simplifying
assumption rather than a statement about capitalist reality. As a
simplifying assumption, it might be useful in certain contexts (Marx
clearly thought so). The problem is when we remain trapped by our own
assumptions and refuse to take the next step and consider the variables
that we either held constant or assumed away at a prior level of analysis.

> First, equal rates of profit are a "theoretical *possibility*" only by
> chance. That is, given that any rate of profit is possible, it too
> is possible. There is no tendency for capitalists to shift their
> capital investments on the basis of rates of profit.

I would say, rather, that any tendency to shift their capital investments
must take into account that they recognize that capital exists as both a
"flow" and a "stock". Clearly, they are not so foolhardy as to base their
investment decisions under the presumption that all of their capital
exists in the form of money capital.

> Second, my only reason for starting from a position in which the rates
> of return are equal is based upon the equality of prices of production
> in Marx's transformation procedure. He moved from values to prices of
> production. I'm suggesting attempt the value picture by starting with
> prices of production based upon equal rates of return.

Well, I have my reservations about this procedure. But, I guess, there's
no harm in provisionally adopting that starting point and seeing where
that takes us. Perhaps we could consider it a "thought experiment" (just
don't assume v = 0! :-)).

> Third, I do not think it follows that since the rates of return are
> equal, the system is in equilibrium.

Agreed. Moreover, even if the system were in equilibrium, there is no
reason to think that it would stay in equilibrium. I guess I view a
state of equilibrium in this context more as a) a special case; and b) a
frame of reference. I.e. how do we know that we are not in equilibrium
unless we have specified what would constitute an equilibrium situation?
Thus, to say that equilibrium is a formal, abstract possibility is very
different from suggesting that the system is in equilibrium or tends
towards equilibrium.

> More important, if we push on from Marx's Part II of Vol. 3 with
> the idea that the profit rates are equal or tend to equality, we
> are read Marx's efforts in Part 3 as though fixed capital need not
> be present for the rate of profit to fall. We thus "abstract from"
> Marx's notion that his FRP begins to occur in the period of modern
> industry and is not present in that of manufacture. With that
> abstraction, it seems almost logical to conclude that the use values
> used as inputs have the same unit values or prices as outputs.
> But with technical change, the valuation of, say, an x-year old
> has different value as an input than it does as an output. Unlike
> circulating constant capital, however, its valuation is clearly
> based upon profitability. For example, if 10 apples can be used
> to produce 12 apples in one period and 15 in the next, assuming
> that apples are the only inputs, many would say that the rate
> of profit has increased in terms of apples. With technical
> change and fixed capital, this type of comparison is impossible.
> The new and better machine produced in some period of production
> may not be present as an input in that period. Yet, its very
> presence effects the valuation of the older machines still
> existing at the end of the period. The simultaneous valuation of
> inputs and outputs is now impossible.

Even if your conclusion was the case, it would still have to be
demonstrated that some alternative treatment that considers fixed
capital is both possible and a logical consequence of the capital-form.

In solidarity, Jerry