[OPE-L:7473] [OPE-L:1008] Re: Marx's Concept of Prices of Production

John R. Ernst (ernst@PIPELINE.COM)
Mon, 31 May 1999 15:43:43

RE: Ted and Andrew's Transformation


I've reproduced you OPE-L1007 at the end of this post. I think
our discussion of their efforts will take us back to other
issues. Let me explain.

I was less than clear when referring to the differences in unit
input and output prices, I wrote:

"Implicit in that difference are changes in productivity or
the real wage."

The differences to which I was referring are the differences present
at the very beginning of the process. Without them, no
others would occur. As I said, you would clearly agree with their
results as they would be the same as yours as long as the analysis
remained focused on sums of money.

I am clear that in periods they describe there is no technical change.
I am simply saying that technical change is already assumed at the
start since input and output prices differ. They assume no further
technical change as they move from period to period. But it seems
to me that the changes in prices of production that occur from
period to period can be traced back to that initial starting
point -- one which assumes albeit implicitly that technical change
has already taken place.

I suppose they might have started from a period in which input and
output prices do not differ. Without technical change or changes in
the real wage the prices would never differ in subsequent periods. Or
they might have introduced technical change after an initial state in
which input and output prices are equal and thus arrived at the period
from which they start. Input and output prices would differ in the
period in which technical change takes place and would differ in at least
the next period as well. The point is that the only way input and output
prices differ can and should be traced back to technical change in
*some prior* period.

Now if you accept that technical change did take place in some period
prior to Andrew and Ted's starting point, you may still disagree with
their effort as changes in prices of production do occur in periods
in which there is no technical change or changes in the real wage.
But then you would be adding the phrase "in any period" to your
4th characteristic

a. a change in the productivity of labor
b. a change in the real wage" (OPE-L 1005)

So now we arrive at the issue of time. Ted and Andrew's effort takes
place over several periods. More and more, I see your work on
transformation as focusing on conditions at a point in time. Indeed,
when you refer to the long run, the conditions you observe at a
point in time are simply projected into the future. How you would
show what happens when technical change takes place is unclear to
me. I suspect that you would start from a point in time in which
the change has already taken place and derive the prices of production.
Those prices would differ from those that prevailed prior to the
change. Hence you would be comparing prices at one point in time
with those at another point in time. They would differ and you
could claim that your procedure does not violate that 4th
characteristic. But any description of the movement from one
set of prices to another becomes impossible. We are forced
to compare one static state with another. The traverse from one state
to the next is lost.

Much of your difference with Ted and Andrew is due to their use
of periods of production. Suppose they started where they do and
only computed prices of production at the end of the very first
period. Would you disagree with their result? To be sure,
input prices may not equal output prices in this case. But
starting from given sums of money capital as you do, they would
arrive at the same output prices as you would. However, I suspect
that you would have problems with the notion that the unit prices of
inputs may not be equal to those of outputs. Why must you add
this condition to the transformation of values into prices of
production? Or, indeed, do you?


Fred's OPE-L 1007 follows:

Thanks to John for his latest comments on Marx's concept of prices of
production. I want to focus this post on just one aspect of our
discussion - whether or not Andrew and Ted's definition of prices of
production is a correct interpretation of Marx's concept.

I have argued that one of the key characteristics of Marx's prices of
production is that they change if and only if productivity or the real
wage changes (the 4th characteristic in my list). There seems to be
general agreement on this point, including by John. I have also argued
that Andrew and Ted's "prices of production" change every period, even
when productivity and the real wage are assumed to remain constant.
Therefore, their interpretation must be a misinterpretation of Marx's
concept of price of production.

John replied:

I do not see Ted and Andrew's bit as a denial of the 4th characteristic
you identified. The real question here is what causes Ted and Andrew's
prices to change from period to period. Clearly, if unit input prices
were always equal to unit output prices, then their results would be the
same as yours. But what gives rise to the difference between input prices
and output prices? Implicit in that difference are changes in
productivity or the real wage. Hence prices of production are changing
for reasons with which Marx and you would agree.

My response:

John, I think you are misunderstanding Andrew and Ted's interpretation.
In their published articles on the transformation problem (the original
Capital and Class article and the later article in Marx and
Non-Equilibrium Economics), they clearly and explicitly assume that
technology and the real wage remain constant. Their numerical examples
explicitly assume constant productivity and a constant real wage. The
same quantities of inputs are consumed each period, the same quantity of
labor is employed (with the same real wage), and the same quantities of
outputs are produced, period after period. They assume "simple
reproduction" of the same quantities of inputs and outputs, period after
period. For example, in their original article (p. 74), they state:

The first circuit of money capital is now completed. For simple
reproduction to occur, each department must replace the precise
quantities of the specific use-values which have been used up
in this period.

And yet their "prices of production" nonetheless continue to change from
period to period, even though productivity and the real wage remain
constant. Their "prices of production" change because their input prices
are not equal to their output prices. This implies that input prices in
the next period must be different from the input prices in the preceding
period; hence output prices in the next period must also change in order
to equalize rates of profit. Input prices are unequal to output prices by
their assumption, not because productivity and the real wage are
implicitly changing. To the contrary, productivity and the real wage are
explicitly held constant.

Please look again at their articles; this is what you will find. I hope
you will agree that there is nothing like this in Marx.

I look forward to further discussion.