At 11:25 10/09/99 -0400, you wrote:
>Paul C wrote in [OPE-L:1173]:
>
> > Some of the surplus in a capitalist society never appears as profit,
> > i.e., surplus value in the circuit m-c-m', but as unproductive costs.
>
>Let's consider this question temporally with the abstraction of "periods
>of production" (yes, yes: I know you don't like this logical device):
>
>Suppose we have m' at the end of period t - 1. As we enter period t,
>capitalists have money from the sale of the commodity output following the
>close of period t - 1. This money can be utilized, of course, for
>individual (unproductive) consumption by capitalists. Or it can be used to
>purchase v, c, or spent unproductively (e.g. on advertising labor). This
>last amount could be considered an "unproductive cost" -- but it has its
>origin in the surplus value which was produced in period t - 1 and
>converted into profit following the sale of the commodity product.
>
>This "unproductive cost" does not then enter the new circuit in m-c-m' in
>period t because it does not either transfer value or create new value.
>Rather, the unproductive expenditures in period t would mean that there
>would be less money left over for investment in c and v in period t + 1.
>
>(Note: I am abstracting from the possibility that certain types
>of unproductive expenditure, e.g. advertising, might have the consequence
>of re-distributing income among the social classes and possibly, thereby,
>leading to a reduction in the real wage).
>
>Other than the use of periods of production (which we know you don't
>approve of), what's wrong with the above?
What is wrong with it is that it is a fantasy that bears
no relation to how business expenditures actually work.
The point is that you are assuming that first profits are made and then
these are used to pay for advertising. The money has to be spent on
advertising as a precondition of an individual firm making the profits. The
situation with a company starting up for the first time ( for which case
time period analysis has some approximation to the truth ) is more like
January Spend $1million on equipment,
January to december spend $500,000 per month on wages and salaries
June to December spend $500,000 per month on advertising, and publicity
July to Following June sell the product, with sales of $1.3Million monthly
Following January half the workforce switched to develop next years model,
but advertising must continue.
At end of first years trading sales are $7.8 million
Amortised value of equipment is $0.6 million
------------
Sum 8.4
Expenditure
Wages $6 million
Publicity $3 million
Equipment purchase $1 million
-----------
Sum 10 million
Loss on first period 1.6 million
The above is a fairly typical sort of balance sheet for
a startup company, making a loss in the first years trading.
In fact it is probably optimistic as the proportionate
losses are much higher ususally.
To establish a firm large sums must be spent on advertising
up front before any revenue comes in.
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