[OPE-L:1379] Determination of Value, 2

From: Andrew_Kliman (Andrew_Kliman@email.msn.com)
Date: Thu Sep 30 1999 - 12:50:16 EDT

2. "Successivist" and "Mutual" Determination

Naturally enough, Bortkiewicz "corrected" what he believed to be
Marx's error by constraining input prices to equal output prices
(and input values to equal output values). Input prices (and
therefore the value of capital advanced) therefore cannot be
treated as data, magnitudes already determined in the past, as
they were in Marx's account of the transformation (Marx
1981b:265). Because they are forced to equal output prices, the
input prices, too, must be treated as unknown magnitudes to be
determined. The two sets of prices must thus be determined
simultaneously. [2]

(Note [2]: Bortkiewicz had an analogous conception of the
determination of input and output values. Yet if output prices
(production prices) differ from output values, but input figures
must equal output figures, then input prices must also differ from
input values. The cost price of commodities in "price" terms, in
other words, differs from their cost price in "value" terms.
Ramos (1999) demonstrates conclusively that this property of
Bortkiewicz's "correction" is not present in Marx's work.
Instead, Ramos shows, Marx's output prices and values share a
common cost price, which is determined by the price (not value) of
its material elements. This "single-system" property of Marx's
value theory, and its temporal determination of value, are both
needed in order to refute the allegations that it is internally

It is this conception that renders value "redundant," irrelevant
to the determination of prices and profitability. Once the value
of capital advanced becomes a *to-be-determined* magnitude, it can
no longer serve as a *determining factor* of subsequent values and
prices. Instead, a necessary implication of simultaneous valuation
is that the physical configuration of the economy is the sole
proximate determinant of prices and profitability. The value or
price of anything is simply its per-unit cost times its physical
quantity. Hence, once per-unit costs become determined magnitudes,
the only thing left to act as a determinant is the system of
physical quantities.

Bortkiewicz may or may not have recognized that it was this
feature of his model that contradicted Capital's theoretical
conclusions. He was indeed well aware, however, that his
conception of value determination diverged markedly from Marx's.
Bortkiewicz vigorously attacked what he called Marx's
"successivist" conception, in which economic factors are "regarded
as a kind of causal chain, in which each link is determined, in
its composition and its magnitude, only by the preceding links."
Against this, Bortkiewicz hailed the "school led by Léon Walras,"
his mentor and colleague, for propagating a more "realist[ic]"
view of economic relations, in which "the various economic factors
or elements condition each other *mutually*" (Bortkiewicz
1952:24). [3]

(Note [3]: It is noteworthy that, since modern orthodox economics
is likewise rooted in the general equilibrium theory originated by
Walras, both orthodox and mainstream Marxian economics have a
common foundation (see Freeman 1996).)

Given Bortkiewicz's clear recognition that Capital's conception of
valuation was successivist or temporal instead of simultaneous, it
is somewhat surprising that his numerous Marxist (and Sraffian)
followers typically deny this. Thus, although the refutation of
his proof of Marx's error has eliminated the theoretical
requirement to model economic relations simultaneously, they now
defend such models, not as alternatives to Marx's own theory, but
as faithful reproductions of it (see, e.g., Steedman 1977; Wolff
et al. 1984; Naples 1989; Moseley 1993).

The textual warrant for this position is generally the claim that,
according to Marx, the sum of value transferred from means of
production to products is determined by the post-production
*replacement cost* of the means of production. This implies that
input and output prices must be equal. A related argument holds
that Marx conceived of surplus-value or profit as an excess over
the replacement cost of inputs (Naples 1989).

Most of the textual evidence cited to support this position is
negative, a large number of passages in which Marx repudiates an
alternative, *historical cost* conception. According to this
conception, the sum of value transferred from means of production
would be determined by their cost when they were acquired. Marx,
however, seems consistently to have argued that, because value is
determined by socially necessary rather than actual labor-time,
commodities' values, and the value that inputs transfer, are not
determined by the original cost of producing them. They are
instead determined by the cost of reproducing them currently. This
denial of historical cost valuation has been taken as an
affirmation of replacement cost valuation.

Were these the only possible alternatives, such a conclusion would
be valid. Yet a third alternative -- which I will argue was Marx's
own -- does in fact exist. The value transferred from inputs might
depend, not on by their historical cost, nor on their
*post*-production replacement cost, but on their *pre*-production
reproduction cost, the cost of reproducing them when they enter
into the production process. The cost of an input at the *start*
of the current production period (which can clearly differ from
its original cost) is just as much a current cost as is its cost
at the *end* of the period.

The difference between these concepts may appear to be a merely
technical one, or a trivial matter of accounting. Yet crucial
questions of determination are involved. Unlike the
post-production cost concept, the pre-production cost concept
implies that physical quantities are not the sole determinants of
prices and profitability; value is not redundant. If the value
transferred from inputs depends on their pre-production cost, it
is determined before production begins, and this value magnitude
is thus a determinant of the products that emerge subsequently.

Because they are determined in different ways, moreover, temporal
and simultaneous values, and the rates of profit associated with
them, can differ markedly. Table 1 illustrates this in the
simplest way possible, but the differences it exemplifies are
general ones. The economy produces corn by means of seed corn and
living labor, and wages are zero. These assumptions imply that
the value transferred from constant capital = cost price = capital
advanced, and that profit = value added. The profit rate, profit
divided by capital advanced, can thus be measured by the ratio of
value added to value transferred. Quantities of corn, the value
added figures, and year 1's input value are data; other figures
are derived.

                            Table 1
 a b c d e = c+d f g = d/c
      Input Value Value Total Output Profit
Year Value Transferred Added Value Value Rate
---- ----- ----------- ----- ------- ------- -------
 1 $2/qr $40 $8 $48 $2/qr 20%
                20 qrs 24 qrs

 2 $2/qr $40 $5 $45 $1.80/qr 12.5%
Temp. 20 qrs 25 qrs

 2 $1/qr $20 $5 $25 $1/qr 25%
Sim. 20 qrs 25 qrs


Given the input (pre-production) value of $2/qr, the temporal and
simultaneous computations for year 1 yield identical results. In
year 2, productivity rises; a bit more corn is produced, using
less living labor (value added thus falls). Since the end of year
1 is the start of year 2, year 1's post-production value and year
2's pre-production value are the same, $2/qr. Only if the value of
corn is $1/qr, however, will input and output values be equal in
year two, as the replacement cost concept requires. The rise in
productivity thus causes the temporal output value to fall by 10%,
while the simultaneous value falls more sharply, by one-half.

This example also illustrates that simultaneous valuation
contradicts Marx's law of the falling profit rate while temporal
valuation replicates it. As a result of the rise in the technical
composition of capital (the ratio of corn input to living labor)
and in productivity, the temporal profit rate falls, but the
simultaneous rate rises. Such differences between the movements in
the two rates also exist in more complex examples and, given
continuing technological change, they can persist over time (see,
e.g., Kliman 1996).

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