I argued in my Boston paper that Marx's concept of price of production is
a long-run center-of-gravity price, in the precise sense that it has the
following four characteristics:
1. RATES OF PROFIT ARE EQUAL ACROSS INDUSTRIES
as a long-run tendency, not as an actual fact in every period
2. SUPPLY AND DEMAND EQUAL FOR ALL INDUSTRIES
again, as a long-run tendency
3. FUNCTIONS AS LONG-RUN "CENTERS OF GRAVITY" PRICES,
around which actual market prices fluctuate from period to period,
due to supply and demand. In other words, prices of production are
long-run average prices, not the actual prices of any given period.
4. CHANGES IF AND ONLY IF there is:
a. a change in the productivity of labor
b. a change in the real wage
These two are the fundamental structural features that determine the prices
of production of commodities, according to Marx's theory. Prices of
production do not normally change every period. Rather, prices of
production change only from time to time, and only when there is a change
in one of these fundamental structural features, not as a result of superficial
features, such as supply and demand. Marx's major emphasis was on
changes in the productivity of labor as the main cause of changes in prices of
production.
In my Boston paper, I reviewed all of Marx's published writings on his
concept of price of production, from his first writings on this concept in the
1861-63 manuscript to his final published writing on the subject, a letter to
Engels in 1868. This review of Marx's writings provides tons of texual
evidence that the above four characteristics is what Marx meant by his
concept of price of production, consistently and throughout his writings
on the subject.
Andrew said during the discussion in Boston that he agreed with this
formulation of Marx's concept of price of production, i.e. that he agreed
with these four characteristics, including #4, which is my main focus in this
post.
In reading Andrew and Ted's papers, however, one finds evidence to the
contrary. In their original 1998 Capital and Class paper, they wrote:
[Marx's prices of production] are indeed prices that (a) obtain
when supplies and demands are equal, (b) permit each capital to obtain
the same rate of profit, and (c ) form the 'centre' around which
market prices oscillate. As will be seen, however, many *different*
sets of prices can at *different* times fulfill conditions (a) and (b),
EVEN WHEN TECHNOLOGY AND REAL WAGES REMAIN UNCHANGED. (Abstracting
from the process of competition, we will show no market price
oscillations.) (p. 70; capitalized emphasis added)
This passage seems to agree with the first three characteristics of Marx's
concept of price of production listed above, but explicitly rejects the fourth
characteristic. According to their interpretation, prices of production can
change even though there is no change in productivity or the real wage.
Indeed, in the 14-period numerical example that Andrew and Ted present in
their first paper, prices of production change every period, even though it is
explicitly assumed that productivity and the real wage remain constant.
On further investigation, one learns that the reason their prices of
production change every period is the continuation of the process of
equalization of profit rates from period to period (on their assumption
that input prices are NOT = output prices). In effect they have added a
THIRD CAUSE of changes in prices of production not present in Marx's
texts: the ongoing process of equalization of profit rates from period
to period.
There is nothing like this in Marx. Never once in all his writings did Marx
state that prices of production may change due to the ongoing process of
equalization of profit rates. In all the passages in which Marx discussed
possible causes of changes in prices of production (reviewed in detail in my
Boston paper), there are the only two possible causes mentioned: mostly a
change in the productivity of labor, and also secondarily a change in the real
wage.
In their more recent paper in *Marx and Non-Equilibrium Economics*,
Andrew and Ted say essentially the same thing, except that the third
characteristic above (long-run center-of-gravity prices) is deleted from the
definition of prices of production.
Marx's prices of production are EQUILIBRIUM prices in the sense
that (a) permit each capital to achieve the average rate of profit,
and (b) obtain when supplies equal demands. As will shall show,
however, different sets of prices can at different times fulfill
conditions (a) and (b), EVEN WHEN TECHNOLOGY AND REAL WAGES REMAIN
UNCHANGED. (p. 39; emphasis added)
Andrew told us in Boston that he would still agree that prices of production
are long-run center-of-gravity prices, even though the explicit statement of
this third characteristic was omitted from the second paper.
However, my main point is that once again it is explicitly stated that prices
of production change even though technology and the real wage remain
constant, contradicting the fourth characteristic above. In this paper, they
present only a 2-period example, and the prices of production change from
the first period to the second period, even though productivity and the real
wage are assumed constant. If the example were extended for more periods
into the future, according to Andrew and Ted's interpretation and logic,
then prices of production would continue to change every period, even
though productivity and the real wage remain constant, contrary to Marx.
Andrew surprised me in Boston when he stated that he did NOT assume
that productivity and the real wage remain constant. However, it is clear
that, at least in these two published papers, Andrew and Ted DID assume
that productivity and the real wage remain constant, and yet prices of
production continue to change every period, due to the ongoing
equalization of profit rates, contrary to Marx.
So, Andrew now appears to have changed his mind, and is now allowing
productivity and the real wage to change. But this only muddies the water,
and obfuscates the difference between their interpretation and Marx's
concept of price of production. This change of assumption does not alter
the fact that, according to their interpretation, IF productivity and the real
wage were to remain constant (as in their two published papers), then prices
of production would nonetheless continue to change every period, due to a
THIRD CAUSE: the ongoing process of profit rates from period to period.
Again, there is nothing like this in Marx's texts. There is nothing in
Marx like Andrew and Ted's short-run prices that change every period
as a result of the ongoing process of equalization of profit rates,
without a change in the productivity of labor or the real wage. For Marx,
prices of production change if and only if productivity or the real wage
changes. Andrew and Ted's "prices of production" are not the same as
Marx's prices of production.
I look forward to further discussion.
Fred