Trying to understand the difference

There’s been a big debate on my blog about what is the correct way to value capital accumulation when trying to measure the rate of profit in a capitalist economy. This debate has been around a long time, but kicked off again following my generally favourable review of Andrew Kliman’s (AK) new book, The failure of capitalist production (see my posts, Andrew Kliman and The Failure of Capitalist Production, 8 December 2011 and The rate of profit: the devil in the detail, 15 January 2012).  The issues are important for Marxist economists precisely because Marx considered his law of the tendency of the rate of profit to fall as the most important of all the laws of motion of capitalism.  So how you measure the rate of profit is obviously key to reaching any conclusions on what is happening in a capitalist economy.

At the rub of the debate is whether the US rate of profit rose significantly after a trough in 1982 to just before the Great Recession or not.  If it did, then many argue that the Marxist law of profitability played no role as a cause of the biggest slump in capitalism since 1929.  The data from AK’s book show that if you measure the US rate of profit based on historic cost (HC), the perceived rise in the rate since 1982 based on replacement cost (RC) measures disappears.  That’s why this measurement issue would appear to be important.

Marx measured the rate of profit as the surplus value created by the employed workforce in capitalist ventures divided by the cost of the means of production (machinery, plant, raw materials etc) plus the cost of employing the workforce (wages and other benefits paid).  The surplus value is found by deducting the cost of employing the labour force from the overall income realised by the sale of the commodity in the market (so profit equals money realised from sale less money advanced for production, or M’ less M).  And the rate of profit is the profit realised divided by the capital advanced to realise it – or (M’-M)/M).

The big debate centres around whether you should measure the rate of profit on the basis of historic cost (HC) i.e. the original value in money terms of the investment at the beginning of the production cycle or on the basis of replacement costs (RC)  i.e. the current cost at the end of the production cycle of the capital advanced .  How can we distinguish the difference?  I’ll try with a few simple examples of the capitalist reproduction process.

First, let’s assume that there is one capital or capitalist economy, or ‘capital in general’.  At this level of abstraction, there are not ‘many capitals’ competing with each other.  Instead, we are dealing with the total value produced in an economy and the total profit appropriated by capital.  This is exactly the same abstraction that Marx makes in explaining his law of profitability.  So we have one capitalist representing the whole capitalist system.

Let’s say this capitalist starts with some money (M), say M20.  This M20 is equivalent to 20 hours of socially necessary labour time (SNLT), which is the average time it takes to produce a commodity that can be sold or realised on the market.   It does not matter if M is gold, corn or fiat currency, as long as it is the monetary expression of socially necessary labour time (MELT).  The capitalist now advances this M20 as capital to purchase means of production (MP10) and employ a labour force (V10).  Assuming that the rate of surplus value is 100%, then the workforce generates new value of 20 (V10+S10) to make a commodity worth P30 (MP10+V10+S10).  This is sold on the market for M30.  The profit is thus M10 (S10); and the rate of profit is M10 divided by the capital advanced M20, or 50%.

But now let’s say that, before the start of the next production cycle, it becomes possible to increase labour productivity and lower the SNLT by 20% for all the components that are need to make the commodity.  The rate of surplus value at 100% is assumed unchanged.  If we assume that the capitalist lives on air and does not use any of the money realised for a luxury way of life, there is now M30 available for investing in the new cycle.  Assuming all this money is reinvested, then the capitalist now buys physical means of production that would have been valued at MP15 in SNLT but is now valued at MP12 because of the fall in SNLT by 20%.  The capitalist also employs a workforce that would have been valued at V15 but is now valued at V12.  The surplus value created is thus S12 and total value of the commodity produced is now P36 (MP12+V12+S12).   This is sold in the market for M36.

What is the rate of profit now?  On a HC basis, it is M’36 less M30 (i.e. 6) divided by the original money capital advanced (M30), or 20%.   But on a RC basis, the original M20 of advanced capital (AC) is also reduced 20% by the lower SNLT.  The rate of profit on this basis is M36 less M24 (or 12) divided by M24, or 50%, the same as in the first cycle.  There is no change in the rate of profit under RC but it has fallen under HC.  See example 1 in the attached file.

HC vs RC calcs 310112

Supporters of the HC measure of the Marxist rate of profit argue that, as the M30 of AC was advanced, it cannot be altered in value even if the SNLT to produce the commodity in the new production cycle has fallen.  That’s because the original capital advanced was made with money capital and profits are also measured in money capital.  However, supporters of the RC measure argue that the M30 of advanced capital must be devalued as well by the decline in SNLT now available in the new cycle.  So the M30 of AC at the beginning of the production cycle will be revalued at the SNLT now operating up to the end of the production process, or to M24.  In other words, the SNLT sets the value not only of new investment in means of production and labour, but also sets the value of all previously accumulated capital.  The rate of profit thus stays the same at 50%.  The HC measure says the rate of profit will fall, other things being equal, if the value of the product declines. In my view, the latter is exactly what Marx wants to show in the process of capitalist reproduction.

The above example is not realistic, in Marx’s view, because to reduce the SNLT in producing the commodity, which is done by raising the productivity of labour, there must usually be an increase in technology and means of production relative to use of labour.  In other words, there should be an increase in the organic composition of capital, namely the amount of MP will rise relatively to the amount of V. So let’s assume that, in order to reduce the SNLT by 20% in each cycle of production, the organic composition of capital must also rise by 20%.  If I apply this assumption, we find that the rate of profit under both HC and RC falls because of Marx’s law of a rising organic composition of capital applies without any counteracting factors.  BUT the rate of profit is lower under HC (16%) than under RC (45%), because the money capital advanced is unaltered at M30 from the beginning of the cycle of production with HC while it is devalued along with the value of the commodity under RC (to M24).   See example 2 in the attached file.

We can add other examples, where Marx’s counteracting factors against a rise in the rate of profit come into play, namely, by the cheapening of the means of production (or constant capital) leading to a fall in the organic composition of capital; or by a straight rise in the rate of surpus value producing more profit.  In both these cases, with a 20% fall in the SNLT still operating to produce the commodity, we find that the rate of profit still falls with HC, but by not as much as in example 2 without these counteracting factors.  With RC, the rate of profit rises with the application of these counteracting factors.  See examples 3 and 4 in the attached file.

Of course, none of the actual rates of profit in these examples should be taken as realistic.  The aim of these examples is to show that significant differences in the rates of profit will develop between the HC and RC measures.  The rate of profit is measured against advanced capital in money terms.  Under HC, the money capital accumulated from previous cycles is advanced at the beginning of each cycle.  The rate of profit under RC terms will also be based on the advanced capital (AC) BUT the value of this AC is assumed to have been reduced to a new level of SNLT.  So the rate of profit will be measured against a revalued AC.

It is not true that HC measure does not revalue the AC if the SNLT falls.  It does, but only that part created and realised in the new cycle of production.  The historic AC accumulated from previous cycles is not revalued. This measure thus recognises that capitalists have already paid in money capital for past means of production and labour which must go into measuring the rate of profit.  It makes no difference that the MELT falls subsequently.  In contrast, the RC measure assumes that all the accumulated AC must also be revalued at the new SNLT and not just new AC consumed in the current production process.

Which measure you adopt does make a difference. In my examples, the rate of profit under HC falls more than the RC measure when the SNLT falls (example 1) and when the organic composition of capital rises (example 2 as Marx argues would be the usual case).  And it also falls when the means of production is being cheapened and there is a falling organic composition of capital (example 3), while with RC, the rate of profit rises (example  3).  And it still falls under HC when the rate of surplus value rises while it rises with the RC measure (example 4).

Which is more realistic and which is closer to Marx’s view?  Supporters of HC argue that this measure is more realistic as it measures what capitalists get back in money profit in each production cycle against what they have paid in money for the capital advanced, even though the value of current production may have fallen with a fall in the SNLT.  You cannot revalue the money that has already been advanced and converted into means of production and labour power.  The supporters of the RC measure must explain why they want to revalue all the old money capital at the current SNLT when that makes no sense in reality.

Supporters of the RC measure argue that a change in the SNLT must mean revaluing the capital consumed in the production cycle.  This is true, but this is a red herring.  The HC measure allows for the change in the SNLT to affect the additions to advanced capital but not to previous advanced capital.  Advanced capital (AC) differs in definition from the means of production (MP) and labour power (V); it exists in money only, both before and after the production process.  So there is no need to revalue the old AC simultaneously with the capital consumed in production – indeed that would be to fly in the face of reality.

Which measure does Marx agree with?  That is a matter of interpretation.  The supporters of the HC measure say that this is Marx’s view and the only one consistent with all other Marxist categories and equivalents.  They argue that the interpretation that proposes the RC measure is not Marx’s and is also inconsistent with Marx’s other equivalents.  Indeed, as the RC measure is not realistic, it is not a measure of the rate of profit at all, but merely a theoretical figment.

This brings me to depreciation, which was another big issue of the recent debate on my blog.  None of the above discussion on the correct way to measure the rate of profit, given the effect of a changing SNLT, has anything to do with the need to account for the depreciation of the means of production during each production cycle.   HC supporters are not denying that the value of the means of production (MP) will depreciate.  Depreciation is necessary to account for physical wear and tear of machinery and plant and also through moral depreciation caused by new technology making existing equipment obsolete.  But this depreciation is exogenous to measuring the value of that advanced capital as SNLT changes.  Depreciation can take place against the MP measured in HC or RC (indeed, the US official sources do just that, although they only account for physical depreciation).

Anyway, that’s how I see it.

222 Responses to “Trying to understand the difference”

  1. Shane Mage Says:

    This whole discussion leaves aside one very basic point: Marx’s Law is formulated in terms of *value*, not “money.” But the relationship of SNALT (average socially-necessary labor time) to the monetary unit is anything but constant. To relate the [annual] flow of aggregate surplus value to the stock of fixed (circulating being taken as relatively insignificant) capital (the total accumulated surplus value over history less its accumulated *moral* and physical wear and tear) all the monetary aggregates have to be restated in value terms through prior calculation of the labortime-content of the price unit during every period in the flow of time.

    • Cameron Says:

      Money as universal equivalent is an “expression” of value. If SNLT of a commodity decreases so would its corresponding money price.

      Why the general formula of capital is M-C-M’ rather than Value-C-Value’ ?

      • Shane Mage Says:

        That is the *assumption* Marx makes for the need of the initial theoretical grounding. That is, it is at the highest level of abstraction. It has nothing at all to do with the real world in which the labor time expressed by the price-unit is constantly being lessened by increases in the productivity of labor as well as by secular inflation in the price-level of use-values.

  2. GrahamB Says:

    Thanks for the clear exposition but I think it misses out the calculation of unit prices. This is why the (in)famous corn model starts with physical bushels of corn as input and output, and then converts them to input and output total prices using the calculated unit price. This is what Kliman does when he compares the historical and replacement approaches.

    The reason for proceeding like this is that the one thing we can all agree on in this wholly unrealistic model is that the physical output from the end of period 1 is conserved and becomes the input to period 2 (assuming capitalist consumption is zero). Hence, total price has to be worked out using a unit price.

    I think that Kliman incorrectly conflates two issues, (i) the method of calculation of unit price, with (ii) whether the historical or replacement unit price is used. I don’t think – like Kliman implies – that (ii) is more important than (i), whichever camp you fall into.

  3. purple Says:

    Do you believe profitability growth has peaked for this cycle ? S and P profit rates say so.

    • michael roberts Says:

      I think it has for the US. I have dealt with this in previous posts. We dont have sufficient data to draw up a Marxist rate of profit for 2011 yet (although I have made an estimate) but the BEA data for the US show that the corporate profit margin (profit per unit of production) is at a historic high, after the destruction of value from the Great Recession.

      But now employment is picking up a little and corporates are investing a bit more and yet the consumer remains relatively weak. The mass of profit will rise for a while but the rate of profit will fall back for the next few years engendering a new slump. That’s the way I see it.

  4. Shane Mage Says:

    Reproduction coast is an unworkable concept. There is no conceivable market price for a “reproduced” twenty-year old steel mill.

    The mistake in looking at reproduction cost is the vulgar error that capital consists of physical objects. Capital is accumulated surplus-labor, temporarily embodied in physical instruments but then entering the value of the product (and depreciating identically as a capital stock) in proportion to those instruments’ moral and physical wear and tear over any given period in the flow of time.

    • michael roberts Says:

      Shane
      Exactly, I agree. As GrahamB says in another comment, I left out this key ‘physical’ aspect of the story. But it’s crucial in trying to understand the difference.

    • Andrew Kliman Says:

      “The mistake in looking at reproduction cost is the vulgar error that capital consists of physical objects.”

      Yeah. This hits the hail on the head!

      And so we get people (e.g., Deepankar Basu) who say that there are two ways of measuring the CAPITAL that was advanced–the actual amount of money paid for the means of production (historical cost) AND what the means of production are worth now (current cost, replacement cost).

      But there aren’t. There are two measures of the cost of the PHYSICAL OBJECTS, but only one measure of the CAPITAL that was advanced.

      • billj Says:

        Obviously there is only one measure of the capital advanced. But once the capital has been advanced it only exists in the things it has purchased.
        Money capital buys means of production and labour to produce commodities of a higher value than the money advanced. These things have a physical reality.
        Therefore, the value of the money advanced can change, after it has been advanced, as that money no longer exists except in the things it has purchased.

  5. GrahamB Says:

    Just to add. Kliman calculates the unit price of a bushel of corn ($/bushel) and uses it to work out the total price of corn, but then confuses things by also introducing a MELT ($/hr) to convert living labour hours performed to price. His MELT is 1 $/hr and is assumed *constant* over production periods.

    So he’s got two quantities (bushels and labour hours) to convert to money and hence needs two conversion factors – unit price of corn and the MELT. What is the relationship between the two? He ignores the question by setting the MELT to a constant value.

    As it’s a single commodity economy (corn), you can’t have another commodity present (money). All you have is living labour and circulating corn.

    Everything should be converted to hours using a calculated unit value of corn (hr/bushel). As living labour is already in hours, there is only one conversion factor needed, which *is* the MELT (actually the inverse).

    Although Kliman endlessly goes on about simultaneist/temporalist, replacement/historical, etc, what is not made explicit, and may be more important, is that he bases his unit price/value on the *gross* output in a period. But there is a choice and it can be based on *net* output (and the living labour expended in producing it).

    • billj Says:

      Considering Michael’s example, the other critical thing to bear in mind is the difference between the situation for the individual capitalist and the capitalist class as a whole.
      If depreciation transfer value to the product as expected over the given normal life of the machine, then clearly the reduction in the value of the fixed capital stock caused by depreciation does not increase the rate of profit. As the different rates of profit earned in each cycle of production will have been anticipated by the capitalist when they bought the machine in the first place. That’s the situation for the individual capitalist.
      But if that reduction in constant capital represents a change in the cost of capital for the capitalist class as a whole, then the reduction in the price of constant capital will lead to a rising profit rate.

  6. billj Says:

    IMO the “real” rate of profit lies somewhere between the HC and RC valuations.
    Simply because, although capitalists have to sell their output at its current price, and this implies that the value added of their fixed capital stock also changes, (this is what Marx said – the matter of intepretation is pretty overwhelming in this respect) under normal circumstances tradition allows them to guess what the average rate of depreciation will be.
    Therefore under normal circumstances, there is no reason to revalue the HC of their capital, as the depreciation allowed for does so anyway. They are able to book losses or gains against their capital stock, to maximise profitability and have a certain degree of descretion as to how they estimate the value of their assets, the rate of profit etc. But in crises, then the historical value of stock is forcibly revalued to current prices.
    This is a major factor in influencing the business cycle. Therefore, the counterposition of the two positions is a mistake. Neither are wrong in fact, but instead they are telling us different things about the profitability at any given moment.
    By the way the fact that value is incorporated in a physica thing, whether it be means of production or whatever, is axiomatic. If value floats free from any physical representation in things, why would capitalists bother to make anything?
    This is why inflation is important. Notwithstanding depreciation, the HC is generally cheaper than the RC, and therefore, the rate of profit for the HC actually higher not lower, than the RC.
    If AK were correct that it is the book value of the thing, and not the thing that contains its value, then the subjective theory of value has replaced the objective. And we all know where that leads.

  7. H.A. Cox Says:

    There is a certain irony in the arguments of Husson, Dumenil and Jefferies attempting to use Marx to show that the RC should be used to measure the rate of profit as capital is accumulated. I say this because they seem to not even agree with Marx’s theory of FRP. Marx says in so many places that the FRP is the general tendency of capitalist accumulation, and the countertendencies can delay, but not cancel that tendency. Husson clearly disagrees with Marx when he says: ‘But precisely because we are talking about the “same influences” (the productivity of labour), there is no reason a priori to think that the tendency [for the ROP to fall] will systematically outweigh the counter-tendency.’ which contradicts Marx:’The rate of profit could even rise, if a rise in the rate of surplus-value was coupled with a significant reduction in the value of the elements of constant capital, and fixed capital in particular. In practice, however, the rate of profit will fall in the long run, as we have already seen. (Marx, vol 3 1991a: 337) Marx argued that as long as capital accumulates, the dominant tendency is for the rate of profit to fall. I respect their disagreement with Marx, but on such a fundamental disgreement, why pretend that you are defending Marx against Kliman.
    Although Roberts, in his example two, gives an explanation that clearly corresponds to the LTFRP that Marx was arguing for, no commentator has botherd to respond to it. Instead, we get the straw man of whether a change in the price for a capital good, after a producer has already purchased it at a higher price, changes the amount of capital advanced. Well, unless you confuse money with currency or credit money, the capitalist put forfh a sum of money, and expects to get that amount of money back and a profit. How a change in the value of his capital advanced will affect the value realized will depend on his relation to the other purchasers. If the other purchasers-the cheaper ones, are in its industry, he will get to produce the same amount of surplus value-since the machine does not increase the OCC as it is the same machine, just cheaper. But his competitor(s) will get a higher rate of profit because their capital advanced is smaller, and so the surplus value realized will give a higher rate of profit than the guy who paid the higher price. And the social value of each unit with the machines will be lower because the market value for the industries will be lower.
    Marx never denied that a decline in the VCC will increase the rate of profit for an individual firm or industry, but that has nothing direclty to do with Marx’s LTFRP because we do not know why the machine is cheaper. Whether there is overproduction in the machine industry and thus price is below its value, or whether there has been a change in the value (and so a rise in the OCC), these mean a decline in the rate of profit of the machine ‘building’ industry. The net effect for society as a whole is usually a decline in the rate of profit. It will just not be as great because the cheapening of the means of production can raise the ROP for the machine ‘users.’
    Where the fall in the rate of profit asserts itself is when a firm purchases a machine that cost the same, more, or even less, but substantially increases the output with the same amount of labor. (A rise in the OCC-as in Roberts example 2) The others will see their profits disappear and may not even recover the value advanced, because the fall in the value of the individual unit does not even allow the technologically backward firms to sell at a price high enough to recover the money advanced. This is when they learn the price to be paid for being technologically backward. Their capital is devalued, lost, caput.
    The cyclical crises are caused precisely because the backward producers can not even recover tha value advanced-tell them the capital advanced is not what they are concerned about. Their desperate attempt to recover as much of the capital ‘advanced’ as possible leads to increased competition and the lowering of the unit price below even its new value. Thus the fall in the rate of profit leads to competition, not viece versa. This is the ‘direct’ relationship between the fall in the rate of profit and the cyclical crises. These crises are inevitable and recurrent as long as capital accumulates. That capitalist accumulation can also lead to increased debt or credit bubbles etc., as in the current crises, does not detract from the fact that capitalist accumulation has reached a barrier, and must go into crises. This crises can exagerated or amplified, but the crisis is generated in the productive sector-A Failure of Capitalist Production.
    The more interesting question is not whether the ROP fell in the US since 1982, but why it did not fall by a whole lot more. For the answer to that, we need the theory of Imperialism, which tells us how countries with falling profits can prop themselves up by capturing sv in the more easily exploited countries to the South, and China.

    • billj Says:

      But what’s your point? You say;

      “But his competitor(s) will get a higher rate of profit because their capital advanced is smaller, and so the surplus value realized will give a higher rate of profit than the guy who paid the higher price. And the social value of each unit with the machines will be lower because the market value for the industries will be lower.”

      Who would argue with that? Rising productivity can cheapen the cost of constant capital – as Marx pointed out – and so cause the rate of profit to rise.

      “Marx never denied that a decline in the VCC will increase the rate of profit for an individual firm or industry, but that has nothing direclty to do with Marx’s LTFRP because we do not know why the machine is cheaper.”

      Yes it does. If productivity increases faster than the increase in the mass of capital purchased then further accumulation can lower the organic composition of capital and so raise the rate of profit.

      “The net effect for society as a whole is usually a decline in the rate of profit.”

      Not necessarily. There is a tendency for the rate of profit to fall – that is not the same thing as saying it usually falls. That depends on the concrete situation.

      “Where the fall in the rate of profit asserts itself is when a firm purchases a machine that cost the same, more, or even less, but substantially increases the output with the same amount of labor. (A rise in the OCC-as in Roberts example 2) The others will see their profits disappear and may not even recover the value advanced, because the fall in the value of the individual unit does not even allow the technologically backward firms to sell at a price high enough to recover the money advanced. This is when they learn the price to be paid for being technologically backward. Their capital is devalued, lost, caput.”

      Indeed how true. But of course Kliman argues that the original capital expended “can’t be revalued”. Square that circle.

      “The more interesting question is not whether the ROP fell in the US since 1982, but why it did not fall by a whole lot more. For the answer to that, we need the theory of Imperialism, which tells us how countries with falling profits can prop themselves up by capturing sv in the more easily exploited countries to the South, and China.”

      Well indeed. The expansion of world capitalism into the former non-capitalist centrally planned economies, lowered the world organic composition of capital and so raised the rate of profit.

      • Shane Mage Says:

        Why does anyone imagine that either their reproduction cost or the original cost of existing capital goods (in contradistinction to any ongoing debt-obligation undertaken to acquire those goods) has any significance at all to a capitalist’s investment decisions? The universal maxim, taught in every business school, is “let bygones be bygones.” The operative essence of the FTROP is a falling tendency of the actual (and therefore expectable) return on increases in the total social capital (falling marginal efficiency of investment, as Keynes puts it). This historical tendency necessarily makes itself felt whenever the business cycle is in its prosperity phase, which simultaneously and necessarily features an investment boom and a jump in the interest rate paid to finance those investments (for the oligopolistic capitalist firm manifesting itself as a decrease in the “payout-period” that is the practical criterion for investment decisions).

    • GrahamB Says:

      @HA Cox

      Well, there’s obviously many Marxists out there who don’t know their Marx – thank heaven we have AK to put us straight.

      As I’ve tried to explain, you have to consider unit price/value (and the MELT) – look at AK’s core examples of the TSSI, this is what he does, and concludes that a rise in productivity will always cause the rate of profit to fall.

      • billj Says:

        Thank heaven!

      • Andrew Kliman Says:

        “look at AK’s core examples of the TSSI, this is what he does, and concludes that a rise in productivity will always cause the rate of profit to fall.”

        I’ll bet you $10,000 that you can’t find even ONE place where I conclude that a rise in productivity WILL ALWAYS cause the rate of profit to fall.

        I suggest that everyone refrain from accepting anything Graham and Jefferies write. They don’t care whether it’s true or not, and bloody internet anarchy imposes no constraints on their ability to say things that are factually incorrect, again and again and again.

        If there were sanctions against this, and remedies, the discussion would be proceeding very differently, and some progress would be made. The kind of “discussion” that actually exists isn’t one. It’s a propaganda/disinformationcampaign.

      • billj Says:

        More bets. Haven’t we been here before?

      • GrahamB Says:

        It’s internet anarchy.

      • billj Says:

        And who wants anarchy?!

      • GrahamB Says:

        @Andrew Kliman

        There is no “propaganda/disinformation campaign” and I don’t know why you think you have the right to suggest that people should disregard the comments of Bill or myself.

        I want a discussion but that is impossible when you reply like this. If someone disagrees with you, or you believe they are mistaken, why don’t you try to EXPLAIN your position.

        Offering bets is less than helpful.

      • billj Says:

        Exactly. The problem seems to be that AK is unwilling to explain what his position actually is. There seem to be loads of just straightforward logical contradictions in it, but he will not say whether that is so – or indeed how those contradictions can be resolved if they exist.
        For example he says that the original investment can’t be revalued – then measures of it net of depreciation – after its been revalued. How come?
        He concedes that productivity can lower the OCC and so raise the rop – but how can it if the original investment “can’t be revalued”?
        If the real value of the investment is the book price rather than the things it has purchased – how can this be reconciled with the circuit of capital accumulation M-C-M;?
        AKs model suggests that the historic price of the fixed capital stock will be higher than the current price and the rate of profit lower – when in fact the HC is lower and the rate of profit higher – how come?
        If the value of output is the original investment plus labour expended in production then two identical commodities in the same place and same time, but produced by firms with a different OCC will have a different price. How is this possible?
        And so on. Why not just give answers instead of making silly bets?

      • michael roberts Says:

        Bill

        You claim contradictions. I see none. The money value of the original investment cannot be devalued. But the means of production can be. They are not the same thing. There is no contradiction here.

        The means of production can be depreciated morally or physically whether you measure the original capital advanced in historic costs or whether you want to revalue the original capital advanced at replacement cost. There is no contradiction here.

        But perhaps you would answer why you would revalue the money capital advanced at the beginning of the production cycle with the new SNLT value of the commodity at the end of the process? That is the contradiction you have to answer.

        You cannot do that in Marx’s theory. If you do so, in effect you are saying that as long as the physical units produced are the same as before, even if the SNLT to produce those physical units has fallen, there is no change in the rate of profit. That is pure Sraffa not Marx.

        And you cannot do so in reality. The capitalist has spent a certain amount of money capital which must be the denominator in any measure of profitability. You cannot revalue that – whatever happens to the value of the means of production and new value embodied in the commodity produced subsequently. Profitability for a capitalist is measured against the money capital advanced in the real world..

        It is perfectly possible to see a rise in productivity lower the OCC and raise the ROP under the HC measure – see my example 3 and as GrahamB points out. There is no contradiction here.

        The HC of the fixed capital stock is not lower or higher than RC measure of fixed capital stock theoretically. The US BEA data start in 1929 with the HC measure at a lower level. But that is just an arbitrary starter. There is nothing in the subsequent movement of the two measures that would lead you to make any theoretical conclusions about the LEVEL of HC or RC measures. There is no contradiction here.

        I have no idea what you are getting at with your last point. It does not seem relevant. Maybe there is a contradiction here, but I’m making no bets on that.

      • billj Says:

        Ture the money value of the original investment cannot be revalued. But that money value no longer exists once it has been made, as you point out, its value has been transferred to the means of production and labour that it has purchased. Not only can that means of production and labour be revalued, but so can the output that it produces.
        So its a basically meaningless statement to say that the purchase price cannot be revalued, when it has no existence apart from the things that it has purchased.
        In fact to assert that the book value of the investment – exists separately from the thing that it is invested in – breaks the circuit of production, within which value is transferred from money to commodity to more money.
        As I’ve already pointed out, given that custom and practice means that depreciation rates are generally known, under normal circumstances, there is no need to revalue the price of the purchased means of production, except less the value of the depreciation passed over into the product.
        But that is not to say that the means of production cannot be revalued, but only to say that usually they are not. That is not the same thing at all of course.
        We know that in periods when productivity is being revolutionised, such as the ICT revolution, or in crises, or when there is a rapid change in the price of raw materials for other reasons, etc. then the means of production can be revalued.
        Marx illustrates this point literally dozens of times in Capital.
        As Marx pointed out, capitalists have some discretion how rapidly the depreciate their fixed capital. Its book value is to a degree, within certain narrow limits, a matter for them.
        Sraffa is a red herring.
        Commodities have a physical existence. A certain amount of SNLT is required to produce them at any given moment. But we know that their value can vary independently of the quantity of that physical reality. That is the cornerstone of the argument.
        Indeed by insisting that the HC cannot be revalued the AK school separate value, from the thing it is incorporated in, opening the door to a subjective value theory rather than an objective one.
        The capitalist has spent a certain amount of money – and for the individual that will certainly define the rate of profit they experience. But things are different between the individual capitalist and the capitalist class as a whole.
        This explains why Okishio is wrong.
        If the means of production rise in value during a cycle of production. For the individual capitalist who has already bought the means of production, that will represent a windfall profit. But for the capitalist class as a whole, that means of production will be more expensive and so the rate of profit will fall.
        This seems to be the basic confusion of the HC/AK school. They fail to effectively differentiate between the individual capitalist and the class of capitalists.
        If the HC school asserts that the HC is higher than the RC – in theory – but in reality the RC is higher than the HC – then this might not be a contradiction in the HC theory – but it is a contradiction between that theory and reality. The theory inverts the actual relationship that exists. And that means the theory is wrong.

      • michael roberts Says:

        Of course, the money capital advanced M has been turned into means of production and labour power. The commodity produced embodies the value of that plus new value and is realised in the sale of the commodity as M’. Profit must be measured by comparing M’ with M, after the circuit of M to C to M’.

        If the value of the MOP and new value falls (SNLT falls), then the value realised in sale for M’ will be less than if it had not fallen. Thus the profit (M’ less M) will be lower. But if you then say that M must also change because of the change in SNLT, then the effect of falling SNLT disappears and there is no change in profit. There is no ‘break’ in the circuit of production in the way I see it, while revaluing M to match a change in the value of C is turning the circuit backwards in time. And time only goes in one direction.

        None of this is to do with individual capitalists and capitalism as a whole and Okishio’s errors.

        As for the level of HC value versus RC value, I have dealt with this. There is no contradiction.

        Off to bed now, Bill.

      • GrahamB Says:

        Michael

        “The capitalist has spent a certain amount of money capital which must be the denominator in any measure of profitability. You cannot revalue that – whatever happens to the value of the means of production and new value embodied in the commodity produced subsequently.”

        You can’t change the ‘money advanced’ at a moment in time (though the value of the money would change over time), but as Bill says, once it has become means of production things are different.

        In fact AK (allegedly) does accept that once the advanced money has become a different form of value it is not always constant, ie. between purchase and entering production the value of the MOP will change according to the SNLT. The same applies to the commodities produced, they are revalued at any stage between leaving production and being consumed.

        Why can everything be revalued at any time apart from MOP during production? Is this consistent? Value is not embodied labour time but SNLT, hence the magnitude of value is never fixed.

        I wanted to check something from your examples. Everyone agrees that given a rise in productivity the ROP will fall if the OCC increases (and constant RSV), but are you also saying that the ROP will fall without any increase in the OCC? Only a question, don’t call me a Sraffian.

      • michael roberts Says:

        Yes, once capital advanced becomes means of production and labour power, its value can alter according to any change in SNLT. But that change comes AFTER money capital has been advanced. This is the temporal point. The money capital advanced cannot be revalued in hindsight (or simultaneously) because the (SNLT) value of means of production and labour power changes subsequently. The value of the MOP can change and so can the commodity produced BUT when that is realised in money through sale, if the SNLT of the commodity has fallen, M’ will not be as large as it would have been if there had been no change in SNLT. And that M’ must be compared to M (which has not changed) to measure profit. If you revalue M at the new SNLT AS WELL AS (or simultaneously with) MOP and labour power, you fly in the face of reality. In example 1, if you do that, there is no change in the rate of profit. If you do not, the rate of profit does change (fall, in this example).

        But no I’m not saying that you can have a fall in SNLT (and fall in ROP) without a rise in OCC. That is Marx’s law. As I said, example 1 is not realistic. But it shows the difference between temporal and simultaneous approach to value in the production cycle.

        I haven’t called you Sraffian. Off to bed now, Graham.

      • billj Says:

        The money advanced cannot be revalued in hindsight – true. But the stuff that the money has bought can be. Hence the effective value of that money, the current value of the original investment, is not fixed.
        What’s the disagreement?

      • BenP Says:

        “There is no ‘break’ in the circuit of production in the way I see it, while revaluing M to match a change in the value of C is turning the circuit backwards in time. And time only goes in one direction.”

        QED.

      • billj Says:

        Nope. I didn’t say that the original money expended could be revalued. Time only goes in one direction. But the original money no longer exists once it has been spent. As the things it has been spent on can be revalued, the insistence on the involate status of the original M is meaningless.
        AK – from memory – says that the real value of the mop exists not in the thing but in the book price. What’s more he says that this real value is net not gross of depreciation. This is completely wrong and confuses the ideal representation of the thing with the thing itself.
        If you are prepared to say that the M can be revalued each cycle, given that each cycle can, depending on the industry concerned, be seconds or minutes long, you can reasonably say this is simultaneous.
        Further given that all the cycles overlap, even within the same firm, changes in the current SNLT are immediately – give or take a few seconds – transmitted to the price of the output.
        Although, to avoid the accusation of being a “simultaneist” I repeat I do know that the amount of surplus is the difference between the original M and the final M’, and that this takes place in time.

      • michael roberts Says:

        Bill

        Sure, the original money (M) no longer exists as money. But if I am a capitalist I have made my investment to get at least money back and preferably more (M’). So the original M is not ‘meaningless’ to the capitalist.

        AK says no such thing but that’s for him to say. Your memory is faulty. And your metaphysics is too much for me.

        If I keep reducing the time of the cycle, I can get close to simultaneous – but I still dont get there. As you say M’ and M are at different times however short.

        I think we have reached the end and can beg to disagree on good terms.

      • GrahamB Says:

        @BenP

        No. You want to assign a special status to advanced capital in that it cannot be retroactively revalued. But everyone agrees that, for example, a finished product sitting in the warehouse *can* be revalued, if you like, by tuning back the clock. This is the basis of the labour theory of value as SNLT rather than fixed embodied labour time.

      • michael roberts Says:

        Yes, the MOP sitting in the warehouse can be revalued (see my examples) but that’s not the advanced capital in money (M). That M is what it was. And the MOP in the warehouse is only revalued if its value must be depreciated morally or physically going forward (SNLT). The clock still does not go back. Clocks only go back if you physically push them back. And then they don’t tell the right time.

        Ben may want to carry on with you but I’ve got no more in my head, Graham. Thanks for the discussion.

      • billj Says:

        @ Michael

        Again we’re not disagreeing. The individual capitalist will assess their individual rate of profit on the amount of money they have advanced. But the rate of profit for the entire class of capitalists is not based on the money one individual has advanced. What one loses another one gains.
        Metaphysics is neither here nor there – literally!

      • GrahamB Says:

        Ok Michael, I shouldn’t have used ‘retroactive’, a concept that only exists in the temporal approach. But the point still stands about the special status you give to the value of MOP. IIRC, the supporters of TSSI are aware of this issue and have tried to explain it.

        I did make an observation on HC in the case of constant OCC which contradicts Marx’s theory. As far as I can see -and despite the claims – your ROP is a ‘common sense/real world’ approach (which I can see) that is problematic when you try to prove it on the basis of the labour theory of value.

        Thanks for the fraternal discussion.

      • billj Says:

        Just had one more thought. There is no retroactive repricing in the RC approach, for the simple reason that each cycle of money is a different amount of money.
        The money at the end of the cycle M-C-M’ is a different amount of money to that at the beginning.
        If the HC approach amounts to the assertion that the capitalist estimates their rop on the amount of money they have advanced and the surplus is the difference between M-M’. Then fine.
        But it is the case – as it is – that after each cycle the money advanced can change, as it can, or be revalued if you like, then the HC approach does not amount to much.

      • GrahamB Says:

        I think that’s it Bill, at least that’s all I can conclude from these discussions. One is tempted to say ‘so what’ and all the attempts to wrap it up in Marx’s theory is, to coin a phrase, a red herring.

        Ultimately, HC has to be proven without counterposing it to RC or any other method and I don’t think that has been achieved.

        Its appeal is obvious with it’s inherent bias in favour of a falling ROP – that doesn’t make it true.

  8. H.A. Cox Says:

    ‘Well, there’s obviously many Marxists out there who don’t know their Marx – thank heaven we have AK to put us straight.’

    My point was not that Andrew could set us straight, my point was that Husson, and now Jefferies do not even think that the dominant tendency was for the OCC to rise, and for the rate of profit to fall. That they disagree with Marx’s theory is clear from the quote of Marx and Husson. They may be right, but they should not be defending their own interpretation of LTFRP and pretending it is Marx’s. Husson and Jefferies clearly state they disagree with the quote above by Marx.

    “The net effect for society as a whole is usually a decline in the rate of profit.”

    “Not necessarily. There is a tendency for the rate of profit to fall – that is not the same thing as saying it usually falls. That depends on the concrete situation.”
    OK, but first things first. Does the quote above by Marx says that:’In practice, however, the rate of profit will fall in the long run, as we have already seen.’ Marx is quite unambiguously saying that in the long run the rate of profit will fall. Now Marx could be wrong in what he says, but Jefferies must admit that Marx is saying what I am saying–And that Jefferies disagrees with Marx. Which is why I talked about the ‘irony’ of those such as Jefferies who quote Marx even though they disagree with him.

    ‘Yes it does. If productivity increases faster than the increase in the mass of capital ‘purchased’ then further accumulation can lower the organic composition of capital and so raise the rate of profit.’

    This is mindboggling. If productivity increased faster than capital ‘purchased’ were to happen, then there would be massive excess capital that woud have to go find some nice bubble to create. The whole point Marx makes about the falling rate of profit is that capital can only prevent the fall in the ‘mass’ of profit only if accumulation is ‘accelerated-you know a lot of purchasing of capital’ as the ‘rate’ of profit declines. Once labor is enormously exploited, it requires even greater increases in the productivity of labor to prevent the ‘mass’ from declining. What Jefferies describes is disaccumulation, which has nothing to do with Marx’s LTFRP, which is a theory of how capital must accelerate accumulation to avoid the ‘mass’ of surplus value from declining. By the way, it is ‘impossible’ to lower the ‘organic’ composition of capital by increasing the productivity of labor.

    ‘Where the fall in the rate of profit asserts itself is when a firm purchases a machine that cost the same, more, or even less, but substantially increases the output with the same amount of labor. (A rise in the OCC-as in Roberts example 2) The others will see their profits disappear and may not even recover the value advanced, because the fall in the value of the individual unit does not even allow the technologically backward firms to sell at a price high enough to recover the money advanced. This is when they learn the price to be paid for being technologically backward. Their capital is devalued, lost, caput.’

    “Indeed how true. But of course Kliman argues that the original capital expended “can’t be revalued”. Square that circle.”

    Nobody, including Kliman, argues that a ‘crises’ can not cause the capital to be devalued, but, for the capitalist who advanced it, his value advanced remained what it was, and is a loss for him as soon as he tries to sell it. It is the crises that causes the devaluation, by forcing the capitalist to desperately sell commodities below even the new value and to sell the machine at a loss. It is a loss, you know. As long as the capitalist utilizes his higher priced machine, he will calculate his profit on the capital advanced, not the changed value of the machine. And it will because he has a higher priced machine or a technologically disadvantaged machine, that our dear capitalist may not even recoup all tha capital he advanced. It is precisely because the capital advanced by individual capitals can suffer the consequences of technological change if they fail to make them, and why there is such a drive to increase their individual rate of profit, that capitalistm is so dynamic-and prone to disaster.

    • billj Says:

      I don’t disagree with the tendency for the rate of profit to fall.
      How unambiguous do you want me to be?
      But whether the rate of profit is falling at a given moment depends on an empirical study not a theoretical generalisation. Or otherwise why bother working out the rate of profit?
      Kliman says that the investment in the fixed capital stock “can’t be revalued”. Why not take him at his word? If it can’t be revalued then it cannot be revalued. If on the other hand it can be revalued – during crises for example – then why can’t it be revalued at other times?
      In the real world what’s interesting is that the the historical cost of the fixed capital stock is lower than the current cost. So rates of profits estimates based on the real historical cost are higher not lower than those based on current cost.
      That’s because in the real world investment nearly always exceeds depreciation. And although capital is depreciated over a given fixed period, much of it continues to exist even after that depreciation. It adds no more value to production but does represent a claim on total capitalist profit. If century old buildings were required to be rebuilt in the present then they would cost more than they did at their time of construction.
      Paradoxically based on the actual data that measures the real value of the historical fixed capital stock – Kliman’s estimates lead to higher rates of profit than current ones.
      You might find it mind boggling – great – life’s stranger than fiction.

      • michael roberts Says:

        Bill

        Yes, in the US data, the HC measure of fixed assets is at a lower value than the RC measure. That produces a higher LEVEL for the HC measure of the ROP than the RC measure. But the more important issue is the DIRECTION and EXTENT of the movement in the rate of profit over periods of time. On that benchmark, the HC measure of the rate of profit produces a different result to the RC measure and that may be important. The ratio between the two measures of ROP in the US was 1.41 (HC/RC) in 1946 and fell to 1.18 in 1965, then rose again to peak at 1.48 in 1982 before falling back again to 1.21 in 2002. So we can see that there are important variations in the movement of the two measures.

        As I have argued in various papers, my book and various posts, the evidence is conclusive for the US that the ROP has fallen secularly from 1946 to date, however you measure it. What is not agreed is whether it rose or fell from 1982 onwards. My view is that even on HC measures, it rose from 1982 up to 1997 and then has declined since ie. the peak of 1997 has not been surpassed since. That conclusion is backed up by many other authors’ measures BUT not by all. My view has led me to conclude that there is a cyclical movement in the ROP as well as the secular one. That cyclical movement is over 32-36 years with an upphase and downphase that can last 16-18 years in one direction or other (this is all in my book). The rise from 1982 to 1997 covers the so-called ‘neoliberal’ period. The downphase from 1997 to 2014?/2016? covers the ‘long depression’ period.

      • billj Says:

        The reason I think its important to state that based on the actual data – the real valuations of the fixed capital stock – the HC is lower than the RC – is that this is the opposite situation to that claimed by Kliman, based on his abstract models.
        Therefore people need to be aware that if they insist on using the HC – that’s their choice – then it will develop higher rates of profit estimates than based on the RC, in the real world.
        Having said that, both estimates tend to move following a similar pattern in terms of level and direction.Based on various estimates I’ve seen – my own – yours – and others the general pattern appears to be;

        Fall in rate of profit during long boom.
        That becomes a precipitate decine from the mid-1960s onwards and bottoms in the early 1980s
        Since the early 1980s a general upward trend.
        It peaks in 1997, then falls up to the hi-tech bubble
        Then rises again, peaks in 2007, then falls up to the credit crunch slump
        Then rises again until now.
        Where it goes next depends on a few things.
        Eurozone break up could cause it to fall severely.
        Or it could rise into a new cylical upturn.

  9. GrahamB Says:

    @ HA Cox

    So if you don’t agree with AK and HC you contradict Marx – a grand claim if ever I’ve heard one.

    @Michael

    Had a look at your examples:

    1. Example 1 shows an increase in labour productivity with constant OCC and RSV. The HC method will always give a falling ROP and the greater the rise in productivity the futher the ROP will fall.

    2. Example 3, same increase in productivity but offset by the cheapening of constant capital, a lower OCC. If, as in the example, the OCC falls by 20% the HC measured ROP does indeed fall. But lower the OCC by 50% and it rises.

    3. Example 4, same increase in productivity offset by an increase in exploitatation, a higher RSV. With the 50% increase in RSV in the example I get a different result, the HC measured ROP rises (it falls if the increase in RSV is only 20%). Of course my spreadsheet could be wrong but I do get the same results as you for the previous three examples…

    I think it’s difficult to see the impact of changes to the OCC and RSV in numerical examples because it depends on the relative size of the numbers.

    • michael roberts Says:

      Graham
      You are of course right. If you change the assumptions in 3 and 4, then you can find a result where the HC ROP rises in those examples – indeed as it may, although not forever, according to Marx. The examples were meant to show that there will still be a difference between the HC and RC measures, not whether the ROP goes in the same direction or not. The relative size of the numbers won’t change the conclusion that the HC measure will have a downward bias compared to the RC measure if the SNLT is falling. That’s caused by the difference between revaluing the capital advanced at the beginning of the production cycle or not.

      • GrahamB Says:

        Michael
        Yes, though the numbers chosen can mislead. If you had made the the OCC fall by 50% and the RSV rise by 50% in the countervailing examples, the HC measured ROP would change direction. Particularly important as these assumptions come from outside the model – they’re just made up numbers.

        The direction can be significant, in the first example the HC ROP can *never* rise, however much the SNLT falls.

      • GrahamB Says:

        As you and Bill have said, the proof of the pudding is in the real data. IMO, some of the HC adherents have over-stated their case and claims for it.

        No one here disagrees with Marx’s theory. After all, the initial presentation of the TROPF in Vol3 is a rising OCC and a constant RSV (IIRC). The means by which productivity is usually increased – by replacing living labour with dead labour – will tend to outstrip any counteracting tendencies for the capitalist class as a whole.

        But productivity is a double-edged sword even if it is not balanced and there have been significant periods of positive movement in the rate of profit that have to be explained. I don’t think it can solely be ascribed to the dramatic devaluation of capital in a crisis which means, whether you like it or not, that there are times – not necessarily that short -when the countervailing tendencies have dominated.

        Of course, you could explain it away by ensuring that your results show pretty much a secular decline in the ROP – no phases to speak of – but I thing that is wrong.

  10. H.A. Cox Says:

    ‘Kliman says that the investment in the fixed capital stock “can’t be revalued”. Why not take him at his word? If it can’t be revalued then it cannot be revalued. If on the other hand it can be revalued – during crises for example – then why can’t it be revalued at other times?’
    The answer is simple. If I buy a machine for 500, and later someone else gets the same machine for 250, my rate of profit will be based on what I advanced and his on what he advanced.. If, after a crises, I buy the machine for 250, the machine is now devalued and I am advanicng 250. The difference between depreciation and ‘moral’ depreciation is that the commodities sold give back a part of the the capital advanced in the form of money (capital) to replace the wear and tear, whereas ‘moral’ depreciation gives you the right to capture less profit on the money advanced. If the unit price changes significantly , I may not even be able to get all the money I advanced.
    Under competition,If the guy who purchased the same machine as I, but at a lower price (value), is in my industry, he will get a higher return. What will happen is the new social or Market value will allow him to capture more surplus value and the new market value will be lower for each commodity. Since there was no change in the OCC, this is a lowering of the VCC. Since I will have a higher VCC than the guy with the cheaper machine he will get more surplus value and I will get less.
    Here is a guy named Marx giving us an idea about how capitals of different compositions in the same industry would be affected:

    “For commodities of the same sphere of production, the same kind, and approximately the same quality, to be sold at their values, the following two requirements are necessary:
    First, the different individual values must be equalized at one social value, the above-named market value, and this implies competition among producers of the same kind of commodities and, likewise, the existence of a common market in which they offer their articles for sale. For the market-price of identical commodities, each, however, produced under different individual circumstances, to correspond to the market-value and not to deviate from it either by rising above or falling below it, it is necessary that the pressure exerted by different sellers upon one another be sufficient to bring enough commodities to market to fill the social requirements, i.e., a quantity for which society is capable of paying the market-value. ” vol 3, p379

    Since the guy with the cheaper capital has caused the VCC to change, he will get a higher rate of profit than I with my expensive one. However, how much sv one captures also depends on our industry’s relation to the average price of production in society.
    If the guy who buys the machine is not in my industry, then he will affect the market value of his industry, and the overall price of production since he is lowering the value composition in society as a whole. But this HC vs RC debate is getting old. This contribution was made just to show what really happens, and it still does nothing to concretely reveal the relationship between Marx’s LTFRP and the current crisis because this is about a change in the VCC and Marx’s theory of crises is about changes in the OCC, where the capitalist with backward technology are purged and their capital devalued so that accumulation can proceed.

    • billj Says:

      Who would disagree with that? It neatly illustrates the distinction between the individual and the social, which is the basis of my critique of AK.

  11. GrahamB Says:

    Michael

    Thanks for the clarification, perhaps we can now get to the nub of the HC/RC difference, at least the quantitative aspect, and it’s a simple point.

    With HC and all things being equal (i.e. constant OCC and RSV), a rise in productivity will cause the ROP to fall – soley because the value of the product has fallen. This is *not* Marx’s law of the TROPF.

    It’s not good enough to defend it on the basis that it’s unrealistic and then switch away from the model to the ‘common sense’ argument for HC – this is what the capitalist must pay, etc. More importantly, whatever values you plug into the model for OCC and RSV, in all cases the HC measured ROC will be lower than the RC measured ROP. Why this consistent bias? The answer is to be found in the example above, this is the source of the difference between HC and RC.

    This is what I was saying about AK’s *core* TSSI examples that assume no wages (all labour is surplus) and hence OCC and RSV do not exist.

    • billj Says:

      Good point Graham. The Historic model developed by AK is not Marx’s model, which sees the proportion of constant capital increasing relative to variable capital and eventually overwhelming the offsetting tendencies, to produce a falling rate of profit.
      Considering the issue of why in the real world the HC is lower that the RC – the opposite of what AK claims – the reason is simple.
      A certain proportion of means of production retain some use in production even after they have transferred all of their value to the product. That is after they have been fully depreciated, think of buildings, massive means of production, oil refineries etc.
      This small residual in Marx’s terms, has a price but no value. It is akin to his example later in Volume 3, of the waterfall, which derives a rent by providing a capitalist with free power. It enables the capitalist to gain a part of the surplus of other capitalists free, but adds no more value to production itself.
      Over time this means of production increases to the point where it dwarfs the additions to current investment made in the here and now. Hence, if it is valued at its original, historic, purchase price this will be lower than its current replacement cost, and so the rate of profit on the historic cost will be higher than that on the current replacement cost.
      This is the situation in the real world. AKs criticism that the use of RC over HC, is motivated by a desire to see higher profit rates, is completely wrong. And it inverts the actual situation.
      It isn’t difficult to incorporate this into a model of the accumulation process.
      Also from what I remember, AK does not use a model based on the actual purchase price, the real “historic cost”. I think he divides this years profit by last years fixed capital stock. This is not the actual historic fixed capital stock, so much as the out of date fixed capital stock.

      • Shane Mage Says:

        “A certain proportion of means of production retain some use in production even after they have transferred all of their value to the product. ” This is a confusion between bookkeeping and economics. If a factory can still be used (still has economic use-value as capital), the value invested in it has not all been transferred to the product. The tax laws and the accounting conventions used by its owners will have led capital consumption to be overstated–that’s all.

      • billj Says:

        Whether of not that’s true (I don’t think it is), it doesn’t change the point.
        In the real world, the existence of this historic mop means that the HC is lower than the RC and the rate of profit higher.

  12. H.A. Cox Says:

    Who would disagree with that? It neatly illustrates the distinction between the individual and the social, which is the basis of my critique of AK.
    No that is not what you have been arguing, you have been arguing that the more expensive machine would be ‘re-valued’ to the price of the cheaper machine. I am arguing the market value will be lowerd to the ‘average’ composition for the industry. The average is made up of ‘all’ the capital advanced, that is what an average is- the 500 and 250 are added and divided by two. If you re-value the more expensive machine it would be 250. Which would be the new average. That is ‘not’ what marx is arguing in the quote I made about market value. The individual values are ‘averaged’ out of their different value compositions and those below the market value will receive more surplus value in relation to their advanced capitals and those with higher individual value will receive less surplus value in relation to the capital advanced.

    • billj Says:

      No I haven’t.
      I have been arguing that the means of production can be revalued, because at the end of each cycle the new money invested is different from the money originally invested. I didn’t say to what level.
      By conceding the point – that the means of production can be revalued – you have inadvertenly refuted AK, who says that the original investment “can’t revalued”.
      Whether or not the investments are averaged out depends on the business cycle and is in any regard beside the point.

  13. H.A. Cox Says:

    Yes you have and no I haven’t.
    “because at the end of each cycle the new money invested is different from the money originally invested. I didn’t say to what level.’
    What I have not conceded is that the ‘individual’ capital advanced has changed because the money advanced for ‘fixed’ capital can ‘not’ change for this capitalist. The capitalist with the expensive fixed capital has changed a sum of money capital for a machine. If the machine is reduced in value or price after he purchased it, tough for him. If the cheaper machine is purchased in the same industry, this will reduce the average compostition but will not change how much each individual capitalist advanced for the Machine. The lower average composition will benefit the guy with the lower composition with a higher rate of profit and the capitalist with the expensive machine with a lower rate of profit. So I do not concede that the individual capital advanced-if it is fixed capital, can be re-valued, nor does Marx. (I’ll let Kliman defend himself) In every industry there are varying compositions of capital, out of which the average usually rules the market value. That does not change the fact that you have ‘different’ compositions that go into the average composition. They are not revalued, but instead go into forming the market value around which the market price will fluctuate. So, could you maybe agree that I am not conceding on the question of whether fixed capital already purchased can be re-valued.

    And yes you do argue that, for the individual capitalist, his fixed capital can be re-valued. And could you agree that is not what Marx is saying is happening in the quote from chapter 10 of Volume three. Of course, capital value advanced and capital value realized are two different questions.

    ‘Whether or not the investments are averaged out depends on the business cycle and is in any regard beside the point.
    You are blowing smoke with this one. ‘Competition’ (we are at the level of many capitals) within an industry tends to drive market prices towards market value, which will be determined by the average of the many individual values. It has nothing to do with the business cycle. You are confusing the ‘devaluations’ of capital during the business cycle crises, which is when capitals that can not get any profit on capital advanced are re-valued, or better, devalued. For the capitalist who buys this used fixed capital, he will be advancing the fixed capital at the new social price.
    Anyway, we are not analyzing here about what will happen to the Marxian LTFRP, since that is argued from the point of view of capital in general, and is based upon the rise in the OCC. So, when we are interested in the effects of a machine, we are not as interested in the price of the machine so much as the effect said machine will have on ‘increasing’ output per worker. Arguing about the effect of a change in price of a machine is a straw man and does not advance the discussion about the validity of Marx’s LTFRP. Husson thinks that Marx’s LTFRP has little to do with the current crises and disputes the claim that Marx’s LTFRP is the dominant tendency. Whatever you think about that claim, it can not be answered by fruitless debates about whether HC or RC should be used as a means of measuring the empirical rate of profit.

    • billj Says:

      I don’t agree with Husson on that point as I’ve already made clear, why are you repeating it?
      Similarly I’ve also pointed out that neither the HC or the RC are definitatively the denominator. Both tell us different aspects of the truth. In fact, we’re just going round in circles.
      The capital advanced by the individual capitalist cannot change in value. Obviously. i’ve repeated that point numerous times on this thread.
      That capital will be used in the denominator of the rate of profit for that individual capitalist. Obviously. Again.
      But from the moment it is spent, that capital is incorporated in means of production and labour – which can change and that capital produces commodities – which can also change. When those commodities are realised that will produce a new amount of money which is different from the original and therefore, in the next circuit of production the M in the circuit can be different from the original M.
      So far so ordinary.
      As a consequence the value of the original investment can change, and will change in response to altered market conditions.
      You attack me for positions I hold.
      I’m not sure what we’re arguing about.
      Capitals of different compositions can exist. Capitals of different compositions in the same industry can earn different rates of profit. Capitals can be revalued – if they are driven out of business, or if the investors who invested in them write down (or up) their capital.
      Surely that’s obvious? Actually I assume that you would recognise that.
      This has nothing to do with Kliman’s theory that asserts that the original capital cannot be revalued – ever. (Or at least that’s as far as I understand it. His theory is far from clear and he refuses to clarify what he actually thinks. This also applies to the following points. If I’ve got them wrong (I don’t think I have) – he can no doubt explain where, why and how).
      But just to confuse the issue further, he then measures the original capital net of depreciation – that is after it has been revalued. As we know depreciation always takes place at current rates, and reflects the current SNLT. Consequently, the “historic” investment after depreciation reflects current market conditions. There is no wall between HC and RC.
      Worse Kliman says that the value of the investment is not in the means of production, raw materials and labour it has purchased but in the book price. That’s just plain wrong and refutes the circuit of capital M-C-M’.
      What’s more he claims that measuring the rate of profit using the historic measure will be lower than the current measure – when in reality it is the other way around. Kliman’s theory turns the world on its head.

  14. H.A. Cox Says:

    But just to confuse the issue further, he then measures the original capital net of depreciation – that is after it has been revalued. As we know depreciation always takes place at current rates, and reflects the current SNLT.
    Again, I am not trying to defend Kliman, I am trying only to figure out what happens when a capitalist buys a machine at higher price than subsequent competitive purchasers of the machine.
    Perhaps if you would not conflate the two words-depreciation and re-valuation, your argument would not be so confusing. If a machine last ten years, then ten % would have been paid out of the sale of this product, each year, so now the capitalist has 90% in the value of the machine and 10% in money capital in the first year. It would give him no competivive advantage over a new competitor who buys the machine for the same price, because he still has to recoup 10% of the original capital advanced.–his ‘cost’ price will remain the same as for the new competitor. However,it will give a competitor an advantage if he pays a lower price for the machine. The competitor will have a competitive advantage since his cost price will be lower because he advanced less than the guy with the less expensive machine-his cost price is lower This is the difference between depreciation and devaluation: the cost price is not altered with depreciation. If the price of the machine drops for the same machine, then the capitalist with the expensive machine’s rate of profit will still be based on the original capital, not the new lower value of the machine. His value composition has not been reduced by a change in the value of the new machine, but he will get a lower rate of profit than the guy with the cheaper machine. The Market value will have changed, but not the money capital he advanced. It is true that the value of the machine has depreciated, due to wear and tear, and so less value is advanced in the second cycle. But he has recovered the 10% in the form of the money capital. Yet his cost price will still require 10% of the ‘original’ capital-not the newly depreciated capital, so he will still expect ten% on his original capital advanced in the next cycle to recover the total capital advanced. This is bookkeeping, and will be countered by a decline in profit relative to original capital advanced because of the decline in the value of the machine. This distinction is mostly important at a higher level of capital accumulation, because so much capital is borrowed or not created withinin the immediate production process.. You can not tell the capitalist who loaned you the money that the machine declined in price, so you intend only to pay the current price of the machine. Of course, if the capitalist invested its own money in buying the machine, he could count it as a loss and thus suffer the consecuences-write it down as a loss. Or the capitalist could tell his stockholders that they made more profit than they did, based on the lower market value, but it would not change the fact that he really made less profit on the originally advanced capital.
    Again, this is bookkeeping. It really does not tell us anything about Marx’s LTFRP, since it does not investigate the effects changes in the value of commodities, which are due to a rise in the OCC, have upon the total social capital.. However, I think that many who argue against HC are doing so in order to deny the relevance of Marx’s LTFRP to this crisis, and unfortunately that relevance can not be established in this debate over historical cost vs recent cost.

    • billj Says:

      Fair point about being accurate about categories. IMO the point stands whatever terminology one uses – as I think you explain.
      The purchase price of the fixed capital stock can be depreciated or devalued or revalued and often is. Which ever word you use, it refutes AKs theory that the fixed capital stock “can’t be revalued”.
      AK’s theory is not related to Marx’s theory of the falling rate of profit which is based on a rising OCC. In fact, AKs examples often don’t include variable capital at all.
      Like I said, and as I think your example explains, depending on the business cycle the HC and the RC both tell us something about the value of the fixed capital stock.
      Although its worth reminding ourselves that AKs estimates of the rop consistently overestimate it.
      As for the falling rate of profit in this crisis. There is a need to distinguish between the trend and the short term effect. That’s a matter of debate of course. But imo the trend fell precipitately from the mid 1960s bottoming in the early 1980s. It then generally recovered, peaking in 1997 and then again in 2007. The second peak was close to its previous long boom highs.
      But that peak did not last. From around 2007 it began to fall. In a typical end cycle slow down. It then fell very sharply post-Lehmans before recovering also very sharply from Spring 2009 onwards.

    • GrahamB Says:

      Unfortunately, a consequence of using HC is that the ROP can fall without a rise in OCC.

      The quote from Marx that is often used in support of HC comes from Vol3 Ch14 on the Counteracting Influences [to the TROPF]:

      “The rate of profit does not fall because labour becomes less productive, but because it becomes more productive.”

      Of course this is true, but not in the way that is claimed as the sentence comes at the end of a paragraph where Marx is arguing against the idea that the fall in the rate of profit is due to a rise in the rate of wages – nothing more.

  15. Hedlund Says:

    Hi billj. I am still, as per our last conversation, unsure of how you reach this conclusion:

    The purchase price of the fixed capital stock can be depreciated or devalued or revalued and often is. Which ever word you use, it refutes AKs theory that the fixed capital stock “can’t be revalued”.

    It’s not that I disagree that the fixed capital stock can depreciate (good heavens, no), but rather that this fact supports your assertion that this refutes AK’s findings. For one thing, he never claims that the fixed capital stock can’t be revalued. I’ve read the whole book, now, and I did not come across that claim once, nor have I seen him say so in any online discussion. I have seen you and others attribute it to him many a time, but that’s the extent of it (and the cause for some of my confusion).

    Anyway, I’ve been thinking on this and I believe that a concise way to describe the conflict and coherently characterize your two respective positions is thus (hope you don’t mind the abbreviations):

    Billj: CA = FCS
    AK: CA != FCS

    Whereas the latter statement allows AK to make the case that FCS can change without reference to CA, you insist that “[CA] has now disappeared, its value is incorporated in the [FCS]” and that as a result any change to FCS must be judged as a change to CA.

    That is the thing I don’t get. Can you explain why you insist upon this interpretation? Is there a place where Marx is unequivocal about this?

    To hearken back to our last discussion, if a machine can trade for half as much gold now as when you bought it, that doesn’t suddenly revalue the gold, too. A businessman would say, “damn, now I’m out that much gold”; he wouldn’t just shrug his shoulders and decide that he’s no worse off than before because he only spent half as much gold as he spent.

    In a way, I see this as a microcosm of the exact process described by the role of the destruction of capital in restoring profitability. During the revaluation, ongoing business suffers a shock (i.e., the businessman in the above example suffers deficient profits due to having effectively spent too much on the FCS), but future business is more profitable (i.e., replacing parts or buying a new FCS will be a smaller part of total capital advanced).

    Anyway, that’s my main concern, though as a side note I’m a little curious how you can hold the following to be true:

    “Although its worth reminding ourselves that AKs estimates of the rop consistently overestimate it.

    …at the same you say that he did not correctly account for a restoration in the rate of profit in the 80s. How can it be too high and too low at the same time?

    Thanks in advance for your consideration!

    • billj Says:

      AK says it in the previous post – in response to you;

      “Conflation of these two things is the foremost error that physicalists make. It’s one of Jefferies’ bigger mistakes (and that’s saying a lot). He writes, “Kliman’s theory asserts that the fixed capital stock must always be valued at its purchase price.” I say no such thing. I say that the advanced capital can’t be revalued. ”

      https://thenextrecession.wordpress.com/2011/12/08/andrew-kliman-and-the-failure-of-capitalist-production/

      (just go to the page and use the find function on your browser)

      That’s completely wrong and I’m glad that you would appear to disagree with him. The capital advanced can be revalued.
      After the money advanced has been spent, it no longer exists as money, but is incorporated in the physical things it has purchased, vis means of production and labour. That stuff can be depreciated, devalued or revalued, and alongside it so can the current value of the original investment.
      By separating value from the physical stuff it has bought AK opens the door to subjective theories of value. If capitalists were not forced to buy actual stuff to produce commodities, then why bother to buy anything and why bother to produce at all?
      This is physicalism versus idealism, if you want to put it like that.
      Further the issue of “retroactive” revaluation is a red herring.
      For the individual capitalist if the value of their investment falls then they will lose money – their individual rate of profit will be calcuated on the difference between the money they advanced (not net of depreciation) and the money the make.
      But for the capitalist class the means of production are now cheaper, the OCC has fallen and the rate of profit risen.
      This seems to be AKs main mistake a confusion of the individual with the social. Paradoxically its the same mistake as the Okishio theorum. Okishio asks how can the rate of profit fall if every individual capitalist will only introduce a new technology if it raises their individual rate of profit? Its a good question, but fails to account for the social impact of each individual decision on the overall rate of profit.
      The surplus profit yielded by the innovating capitalist, is a transfer of income from all of the other less productive capitalists in the sector. So the overall rate of profit falls, even while it rises for the individual.
      Kliamn of course, disagrees with the Okishio theorum, even if it appears he shares the same methodological flaw.
      Your point about gold is neither here not there. Obviously there is no reason why a revolution in productivity in one sector should necessarily affect the price of gold.
      Finally as I’ve pointed out before, using the HC will result in a higher rate of profit than the RC – as in the real world the HC is lower than the RC and therefore the rate of profit higher.
      But rates of profit using either the HC or RC generally trend together.
      AKs bigger mistake is to use a meausre of “property income” for the mass of profit, which confuses government tax revenues with capitalist profit. The effect of this is to grossly overestimate the rate of profit. But to also conceal the recovery in the rate of profit from the early 1980s. As AKs estimate remains pretty constantly high throughout the period.

    • billj Says:

      Just to illustrate that last point numerically (these are not the exact numbers) from memory AKs estimates of the rop fall from say roughly 25-20% over the last few decades.
      A more accurate estimate would say they have risen from say 4-15%. (with ups and downs along the way)
      So AKs estimates grossly overestimate the general rate of profit, but also conceal the recovery since the early 1980s.
      You can check the exact numbers off Michael Roberts estimates (amongst others) in a previous post on this subject and in AKs book itself.

    • Hedlund Says:

      @billj: thanks for sticking with me this far, but I must still profess puzzlement.

      For instance, here you say:

      That’s completely wrong and I’m glad that you would appear to disagree with him. The capital advanced can be revalued.

      But then later say:

      Obviously there is no reason why a revolution in productivity in one sector should necessarily affect the price of gold.

      If gold happens to be the capital advanced (assuming a metallist system, obviously), and capital advanced can be revalued, then how can you hold the latter statement true?

      After the money advanced has been spent, it no longer exists as money, but is incorporated in the physical things it has purchased, vis means of production and labour.

      I have already quoted you to this extent, and I fully acknowledge that you hold this belief. However, I asked a question that may have been missed, which I will here restate: why? What is your basis for believing that the CA is in any way causally subject to the FCS? Does Marx ever state this clearly anywhere? I am trying to see clear to your point of view, but I’ll need a little help.

      By separating value from the physical stuff it has bought AK opens the door to subjective theories of value. If capitalists were not forced to buy actual stuff to produce commodities, then why bother to buy anything and why bother to produce at all?

      I found myself nonplussed after reading this, as it very much seems like a non-sequitur. Value is embodied in “physical stuff,” but it is not the stuff itself, if we’re discussing Marx; rather, it’s the SNLT. That is value. SNLT is by definition objective (not subjective), social (not individualistic) and abstract (not the physical stuff). There is no room in there for “utility” or any other similar theory to assert itself as value. As such, I am not sure how you can make the above claim.

      [AK mistakenly wonders] how can the rate of profit fall if every individual capitalist will only introduce a new technology if it raises their individual rate of profit? Its a good question, but fails to account for the social impact of each individual decision on the overall rate of profit.

      Can you indicate where he makes this mistake? I do not recall encountering any argument or remark resembling this in his book.

      The surplus profit yielded by the innovating capitalist, is a transfer of income from all of the other less productive capitalists in the sector. So the overall rate of profit falls, even while it rises for the individual.

      This, above, is huge – a very important statement. It is exactly the point I have been trying to make to you in our last few discussions. That “transfer of income” you reference is precisely why I find revaluing the capital advanced so very problematic. The gold paid out still exists, and it could still trade for the same goods it otherwise could (with the exception of the FCS, which underwent moral depreciation). It winds up being exactly as though some capitalists paid more for the FCS than its value, and another less. More of that gold is in the hands of the innovative capitalists. At no point does it need to be revalued in order for everything to make sense. It’s the same factor at play when the opposite occurs: if the FCS value increases after purchase, profit will increase for the relevant production period, then fall afterwards (as replacement costs prove higher and OCC rises accordingly).

      This is why I think AK is correct in arguing that AC != FCS. AC pays for FCS, but they are not the same thing. (Unless, as per my above request, there is a justification for this of which I am not aware.)

      At any rate, now that you’ve said it yourself, I hope my own efforts to make this point will be clearer.

      • billj Says:

        The fact that you mentioned gold separately from the capital advanced would seem to imply it was separate that is different. Obviously if its the same then its the same. Personally I find these one commodity economy examples pointless and misleading.

        The capital advanced includes the FCS but also the money spent on wages and raw materials.

        The value of the thing is separate from its utility. But every commodity is a utility or no one would buy it, therefore, every commodity has a physical existence of one sort or another.

        I was making an analogy with the Okishio theorum – I already said AK didn’t subscribe to that theorum, but his mistake – confusing the individual with the social shares a common method.

        The capital advanced can always been revalued as it consists of certain use values that require a certain amount of SNLT to produce them. That SNLT can change and does change, independently of that usefulness, and therefore so does the value of those use values.

        Capital can be depreciated, revalued or devalued at any time.

        Gold can be revalued too, depending on the SNLT required for its production.

        A certain amount of use values do not have to have a certain amount of exchange value – your insistence that it does paradoxically gets close to Sraffaism.

        The acronyms are not helpful what is AC!?

      • Hedlund Says:

        @billj:

        By “AC” I meant advanced capital but in fact it would be more precise to say I meant advanced money capital. So, assume I actually said AMC.

        Personally I find these one commodity economy examples pointless and misleading.

        I use them because it solidifies the difference in the value of the money capital advanced from that of the capital it purchases. If you would rather I exclude gold, that is fine, but I think it serves an important role that I will return to shortly.

        The value of the thing is separate from its utility. But every commodity is a utility or no one would buy it, therefore, every commodity has a physical existence of one sort or another.

        Yes, but I never argued that a commodity might not be a use-value. Its physical existence is not its value. To assume it is is to conflate use-value with value. All values are use-values; not all use-values are values (i.e., the bounty of nature). Value, defined as SNLT, is therefore objective but abstract. It has no existence apart from the commodities in which it is embodied, but that does not make it less abstract.

        Don’t get me wrong: I’m not claiming value has an independent existence. I am very much a nominalist. As such, a better way to say it might be that value is a quality that is not possessed by all physical things. However, it’s not a tangible quality; it is abstract, and recognizable only in the social realm.

        The capital advanced can always been revalued as it consists of certain use values that require a certain amount of SNLT to produce them. That SNLT can change and does change, independently of that usefulness, and therefore so does the value of those use values.

        And yet this has no bearing on the money-capital advanced. That’s why I hoped my use of gold would clarify; it’s a different capital entirely, and, as the form of value, is is the only one on which profits can be judged. That’s one of Marx’s key arguments that goes back to Aristotle: exchangeability implies equality, which implies commensurability; the source of commensurability is value (SNLT); and the form of value is money. Therefore, profits must be judged by differences in terms of money. The capitalist uses some money, steps back from money and produces commodities, then throws them back out and judges his progress by how much money he has by the end of it. Otherwise, we have no way to judge. This is the critical role of money, and why it is so central to Marx’s analysis.

      • billj Says:

        But Marx says that a change in productivity will almost simultaneously revalue/depreciate existing capital – you say that capital can’t be revalued.
        Think what you like but its not Marxist.

      • Hedlund Says:

        you say that capital can’t be revalued.

        Incorrect. I say that money capital is not retroactively revalued because of the revaluation of the capital it has already been spent on.

        Do you object to this statement? If so, then let us proceed on these terms, without further misquoting.

      • Andrew Kliman Says:

        @ Hedlund:

        “I say that money capital is not retroactively revalued because of the revaluation of the capital it has already been spent on.”

        Since, as Shane notes, capital doesn’t consist of physical objects–it is value in process–I think it might be better to say “revaluation of the means of production.”

        That formulation makes it harder for physicalists to say that you or I or whoever are contradicting ourselves in re whether capital can be retroactively revalued, and harder to use Marx’s statements about retroactive revaluation of existing commodities at their current cost of reproduction as if it were evidence that he said that capital can be retroactively revalued.

        To be precise, it doesn’t make it harder, really–they keep doing it–but it delegitimizes their allegations.

      • billj Says:

        Why should I object – it doesn’t make any difference either way. If you can revalue the fcs then there’s no point to the insistence on the HC valuation.
        AK’s got that right at least.

      • billj Says:

        All it seems to boil down to is that you have discovered that history takes place in the past. What you don’t seem to realise is that the history of the past is written in the present. Hence there is no need to “retroactively” revalue the fixed capital stock in order to revalue it. Revaluing it in the present does just fine.
        The idea that capital “doesn’t consist of physical objects” neatly sums up your idealist method. The confusion consists in the idea that this is Marxism;.

        “The capital value was originally advanced in the money form. The surplus-value on the contrary is, originally, the value of a definite portion of the gross product. If this gross product be sold, converted into money, the capital value regains its original form. From this moment the capital value and the surplus-value are both of them sums of money, and their reconversion into capital takes place in precisely the same way. The one, as well as the other, is laid out by the capitalist in the purchase of commodities that place him in a position to begin afresh the fabrication of his goods, and this time, on an extended scale. ”
        http://www.marxists.org/archive/marx/works/1867-c1/ch24.htm

      • GrahamB Says:

        Its the retroactivists.

      • billj Says:

        Andrew Kliman;
        “Since, as Shane notes, capital doesn’t consist of physical objects–it is value in process–I think it might be better to say “revaluation of the means of production.””

        Marx;

        “Although invisible, the value of iron, linen and corn has actual existence in these very articles: it is ideally made perceptible by their equality with gold, a relation that, so to say, exists only in their own heads.”

        “The value, or in other words, the quantity of human labour contained in a ton of iron, is expressed in imagination by such a quantity of the money-commodity as contains the same amount of labour as the iron. According, therefore, as the measure of value is gold, silver, or copper, the value of the ton of iron will be expressed by very different prices, or will be represented by very different quantities of those metals respectively. ”

        http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm

      • Hedlund Says:

        The idea that capital “doesn’t consist of physical objects” neatly sums up your idealist method.

        I am not sure how you’ve reached this conclusion about anything I’ve said. This is something Marx explains at the very beginning of the very first volume of Capital.

        If capital’s existence is purely physical, and capital is value in motion/process, then the first thing that you have to establish is that value (defined as socially necessary labor time) is purely physical. Can you isolate an atom of SNLT? Does it have mass? If a human grows a tomato and nature grows a tomato, can you break it down to its component parts and point to the portion of the first one that is SNLT?

        You cannot. This is because value is a social relation, and therefore it has no independent physical existence. Referring to a “social substance” that has no direct “physical substance” is hardly at odds with the Marxian approach. Indeed, thank you for including that Marx quote beginning with “Although invisible”; it saves me some elaboration.

        I would also refer here to David Harvey’s excellent series of lectures on Capital volume 1. Here’s a transcription of part of his discussion on chapters 1 and 2:

        He then goes on to say: “(…)let us remember that commodities possess an objective character as values only insofar as they are expressions of an identical social substance, human labour, that their objective character as values is therefore purely social. From this it follows,” he says, “that it can only appear in the social relation between commodity and commodity.”

        Now, this is a little bit strange, in the sense that Marx is saying that the value of a commodity is immaterial. Not an atom of matter enters into the value of a commodity. Marx’s foundational concept – value is immaterial, but objective. This doesn’t fit very well with the image of Marx, right, as someone who kind of is a grubby materialist for who everything has to be sort of fixed and material and if it’s not material then it’s nothing. Here is his fundamental concept of value which is immaterial but objective. And it’s immaterial because it’s a social relation. Can you see social relations? Can you actually have iotas or atoms or molecules of social relationships? You can’t trace them that way, yet we know that social relationships are objective.

        There’s a social relationship between you and I and you could look at what’s going on in the room and say: okay there’s a social relationship between teacher and taught. And you can talk about it and it has objective consequences … but you can’t actually measure it in terms of atoms and movement and you can’t actually find the molecules floating through the air, you know, from my brain into your brain. … It’s not like that. It’s immaterial but objective.

        So Marx is saying: value is immaterial and objective like that, it’s a social relation which becomes objectified in the commodity.

      • billj Says:

        I wasn’t referring to what you said. Why would I?
        I didn’t say it was purely physical. Stop putting words into my mouth.
        Capital is abstract labour incorporated into a physical thing. It consists of physical objects that have been produced by concere labour for exchange on a market. They are valued according to the social average amount of abstract labour they incorporate. Capital therefore, has a physical existence as Marx makes absolutely, unamiguously, clear.
        If it is an ideal measure of a real thing – the labour extracted from the working class during the production process.
        AK says on the other hand that capital “doesn’t consist of physical objects”, that’s quite wrong. It is essentially idealism.

        More to the point we might add, that if AK accepts that the FCS can be revalued – what’s the point of his theory? Revalued according to what standard? Revalued when? Revauled how? Obviously not according to its historic cost price or there would be no point revaluing it.
        Revaluation cannot happen in the past – by definition nothing can – but it can happen in the present, which is funnily enough what we’ve been saying all along.
        So that’s the end of that then.
        Makes you wonder how it took so long to remain where we were at the beginning.

      • Hedlund Says:

        @Billj:

        I wasn’t referring to what you said. Why would I?

        Apologies, I misunderstood. My fault.

      • billj Says:

        No worries I appreciate my response was a little abrupt. So likewise apologies.

      • GrahamB Says:

        It all makes you wonder how so many people got it so wrong – for over 100 years. Anyway:

        (1) The value of a commodity is the SNLT for it’s production.
        (2) The creation of a new use value in production involves the transfer of value:
        value transferred = value of output

        Production is a process that lasts a defined length of time (not quite the same as Hedlund’s “advanced money capital” as this occurs at an instant in time).

        The temporalists agree with (1) but believe there is one exception – constant capital being used in production is not afforded the same status. Why the exception to the LTV?

        Looking at (2), the temporalists say that the value of the input constant capital is fixed at the beginning of the period. This means that the value transferred does not equal the value of the output, because the SNLT must be defined at the end of the period.

      • Hedlund Says:

        @Graham:

        Production is a process that lasts a defined length of time (not quite the same as Hedlund’s “advanced money capital” as this occurs at an instant in time).

        Um, sure? I mean, whereas we exist in a space-time continuum, even advancing money constitutes an action and therefore a process. So, technically, it’s not instant, though I suppose we can abstract it as such without issue.

        The temporalists agree with (1) but believe there is one exception – constant capital being used in production is not afforded the same status. Why the exception to the LTV?

        You’ve lost me. I don’t think I’ve seen anyone claim that constant capital is an exception and therefore possesses a value distinct from its SNLT. Could you give an example?

        Looking at (2), the temporalists say that the value of the input constant capital is fixed at the beginning of the period. This means that the value transferred does not equal the value of the output, because the SNLT must be defined at the end of the period.

        Again, I may need an example to support your claim. The texts I’m reading say otherwise; that is, that valuation occurs through time.

        Page 96 of Reclaiming, for instance, contains this passage: “If the value of a newly produced apple is $0.60 when our input apple is produced, $0.55 when the input apple is sold, and $0.50 when it finally enters into the production of applesauce, then our input apple’s value is also $0.60, $0.55, and $0.50 at these three moments. Moreover, any apples that were harvested at the same time as this input apple, but that still remain in existence after it is turned into applesauce, will continue to be revalued thereafter. If, for example, the value of a newly produced apple is $0.45 when the applesauce is completed, the value of these previously produced apples is $0.45 as well.”

        It then goes on to say that, according to Marx, “the sum of value transferred from inputs to outputs that were produced in the past can change retroactively,” using the example of a change in the price of applesauce because of a change in the price of input apples.

        So, I am not sure it’s ever fair to say that the value of constant capital is fixed.

      • billj Says:

        “So, I am not sure it’s ever fair to say that the value of constant capital is fixed.”

        Agreed, in which case the whole rationale for historic pricing collapses, and its goodbye to the TSSI.

      • Hedlund Says:

        @billj:

        Well, here’s where the key point I keep harping on enters into consideration: the money advanced is not the same as the means of production – and, more to the point, commodity valuation is not the same as measuring profit.

        Let me be absolutely clear: BOTH of those two elements (money and means of production) are capable of changing in value at any time. However, any such changes will occur independently of one another. If we posit that the MoP is in constant flux – let’s say you have a ticker in your office that gives you the minute-by-minute value – the profit you secure from the output may be higher or may be lower as time passes. You won’t know until you hit the point of realization and then compare the money price you fetch for the goods to the money price you spent on the capital.

        The value of money being in flux complicates matters further for an individual capitalist (the final step would be to compare the SNLT represented by the initial sum with that of the final sum), though at the general level this can be safely abstracted away, by Marx’s own admission.

        So we agree that the revaluation of all commodities occurs freely at all times. It’s the manner in which the changes to different capitals relate to one another where we seem to differ. I would definitely be interested to hear any rebuttal you have to my above exposition, as it may be the clearest explanation of the TSSI position (to my understanding of it) that I’ve yet provided.

      • billj Says:

        Obviously the money advanced is not the same as the means of production or the commodities produced – hence the cycle M-C-M’.
        All of those elements can change at any time. And independently of each other. And independently of the physical quantity of output.
        In which case the insistence on the involate nature of the original “M” makes no sense. If it can be revalued, then one can only assume it has been revalued. If it has been revalued then it is no longer the original price. If it is no longer the original price, then there is no point measuring profits against the original price – so there is no point in insisting on the unique status of the historic stock.
        So there’s no point in insisting on the TSSI.
        Money doesn’t really complicate the issue – as Marx makes crystal clear, while abstract labour is an ideal measure – it has physical existence in the objects produced. Money, that is gold, is an objective measure of abstract labour precisely because of its own cost of production;

        “The price or money-form of commodities is, like their form of value generally, a form quite distinct from their palpable bodily form; it is, therefore, a purely ideal or mental form. Although invisible, the value of iron, linen and corn has actual existence in these very articles: it is ideally made perceptible by their equality with gold, a relation that, so to say, exists only in their own heads.”

        “Just as when we estimate the value of any commodity by a definite quantity of the use-value of some other commodity, so in estimating the value of the former in gold, we assume nothing more than that the production of a given quantity of gold costs, at the given period, a given amount of labour. As regards the fluctuations of prices generally, they are subject to the laws of elementary relative value investigated in a former chapter. ”
        http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm

        To conclude what’s we’ve discovered is;

        The existing fixed capital stock can change in value at any time. In Marx’s words “almost simultaneously” with a change in productivity.

        That retroactive revaluation need not occur for revaluation to occur. History is in the past, but the history of the past, that is the written record, is in the present.

        That capital has a physical existence in the things produced by capitalists – including money, which is also a produced commodity.

        That the real value of the historical fixed capital stock is lower than the current value of the fixed capital stock due to what Marx called the “free services” of that capital.

        That measures of the rate of profit based on the historical FCS are therefore, higher than those based on the current FCS.

        The the TSSI is wrong becaue it contradicts all of the above facts.

      • Hedlund Says:

        In which case the insistence on the involate nature of the original “M” makes no sense. If it can be revalued, then one can only assume it has been revalued. If it has been revalued then it is no longer the original price. If it is no longer the original price, then there is no point measuring profits against the original price – so there is no point in insisting on the unique status of the historic stock.

        But there is no “unique status,” that is what I keep saying. These rules apply to all commodities, without exception; it’s the way they interact with one another that I’m discussing.

        Let’s use your train of thought: if “M” can be revalued, then one can only assume it has been revalued. Okay. Let’s say you buy means of production for $1000. Let’s say the value of gold (or any money commodity) doubled, so a mere $500 now contains as much value as $1000 then. Meanwhile, entirely independently of this, the constant capital you purchased suddenly contains only half as much value due to moral depreciation. You hadn’t even had the opportunity to employ them before this happened.

        Assuming that the rate of surplus value is 100%, how would this play out for you? Here’s my attempt in three different cases:

        Under normal circumstances (no value changes): $1000 buys 800C + 200V + 200S = $1200 total. r = 1200 – 1000 = 200, rate of 20%.

        Assuming that the value of gold holds steady, but the MoP are revalued as above: $1000 buys 800C, which is revalued to 400C + 200V + 200S = $800 total. r = 800 – 1000 = -200, rate of -20%.

        With changes to both the value of gold and the value of MoP: $1000 buys 800C, 200V. Due to an increase in the value of gold, the C and V can now only command half as much of it. In other words, they can realize no more than 400C and 100V. Then the C is devalued; the new total is 200C + 100V + 100S. Your output is $400 on an investment of $1000. That $400 commands the same SNLT as $800 at the time the money was spent, which makes it equal to the case with the constant value of money.

        So, in value terms, the change in the value of money makes no difference whatsoever in the outcome. This is what Marx argued in the quote Boffy and I have been passing back and forth. Meanwhile, the revaluation of constant capital has hurt this particular capitalist, though future capitalists will actually realize an increase in profits as a result. This latter point is what the RC PoP focuses on, and it is fully consistent with temporalist measures, too, so long as you acknowledge what is happening to the world outside of the particular capitalist in discussion.

        For my part, having played this out, I realize that I made a mistake earlier: when I indicated that changes in the value of money can hurt individual capitalists, I should have specified that it does so in nominal terms. By value, it makes no difference whatsoever.

        The the TSSI is wrong becaue it contradicts all of the above facts.

        I hope my example, on the contrary, makes it clear that the TSSI contradicts none of the above statements.

      • billj Says:

        But only because the change in money conveniently cancels out the change in the means of production, in the opposite direction by the exactly equal amount.
        How likely is that in the real world?
        The TSSI says that the original “capital cannot be revalued” in AKs original formulation, or in his later one cannot be revalued “retroactively”.
        This is a pointless addition. The re-valuation can take place right now and indeed can only do so, otherwise its not a revaluation.
        Once you concede that the historic or purchase price can be revalued, then there’s no point to the insistence that you must measure it against the thing that you now concede can change.
        And consequently, there’s no point to the TSSI – even if – as you’ve demonstrated above, in certainly unlikely situations its model holds, this is simply one alternative of many possible alternative.

      • Hedlund Says:

        But only because the change in money conveniently cancels out the change in the means of production, in the opposite direction by the exactly equal amount.

        On the contrary, both changes were in the same direction: leading to a decrease in C.

        And consequently, there’s no point to the TSSI – even if – as you’ve demonstrated above, in certainly unlikely situations its model holds, this is simply one alternative of many possible alternative.

        Then does it not fall to an opponent of the TSSI to illustrate a situation in which the model does not hold?

      • billj Says:

        “Let’s use your train of thought: if “M” can be revalued, then one can only assume it has been revalued. Okay. Let’s say you buy means of production for $1000. Let’s say the value of gold (or any money commodity) doubled, so a mere $500 now contains as much value as $1000 then. Meanwhile, entirely independently of this, the constant capital you purchased suddenly contains only half as much value due to moral depreciation. You hadn’t even had the opportunity to employ them before this happened.”

        The “meanwhile” has nothing to do with it, as the movement of money is entirely independent of the movement in the means of production. Consequently, there is no relationship beween the two and no reason why the desired outcome should occur – even if it *can* occur.
        You might as well say, meanwhile it started to rain or the world was hit be a comet or the world was hit by a comet and it started to rain. It simply confuses the example without adding anything.

      • Hedlund Says:

        @billj:

        As much as this may come as a surprise, that was my point.

    • GrahamB Says:

      @Hedlund

      If I understand you correctly, you separate the fixed capital (btw it should be constant capital to include circulating raw materials and intermediate products) from the money advanced to pay for it.
      AC != FCS. I’m guessing you’re a programmer.
      If you like, to ‘fix’ the advanced capital (money).

      I think Bill makes an important point on the level of analysis – many capitals and capital in general. From the point of view of an individual capitalist what you say is obvious and you can calculate a rate of profit based on the advanced money if you wish. You don’t need Marx to do that, just a business and an accountant. This is what I hear time and again but it only applies to the individual.

      If we look at capital in general and the ROP, we need something like the dreaded corn model if we want to look at the magnitude of value. Here, you cannot assume that the money advanced is fixed because the MELT will also fall with rising productivity across the entire economy (it’s capital in general). In a closed system – single commodity, no exchange – production can only be self-financing, unless there is inter-planetary trade… In other words, what matters is the rate of profit in this period, not one based on the money advanced n-periods earlier.

      Assuming rising productivity in our capital in general world, HC is inherently biased towards a falling ROP. I tried to explain this briefly in earlier posts. It’s the flip-side to Okishio. When you translate this to the real world of many capitalists with overlapping cycles of production, I think HC may end-up accentuating the losers over the winners.

      “Can you explain why you insist upon this interpretation? Is there a place where Marx is unequivocal about this?”

      Probably not, but your concept of advanced capital is inextricably linked with historic cost (HC) and the textual evidence is weighted in favour of replacement cost (RC). We’ve been through this before.

      Thanks for the debate.

      • billj Says:

        Marx has a very pertinent discussion of all this here;
        http://www.econlib.org/library/YPDBooks/Marx/mrxCpA24.html#Part%20VII,%20Chapter%2024

        Marx points out that;

        “The development of the productive power of labour reacts also on the original capital already engaged in the process of production.”

        (from p753 in the Penguin)

        “If the productiveness of labour has, during the using up of these instruments of labour, increased (and it developes continually with the uninterrupted advance of science and technology), more efficient and (considering their increased efficiency), cheaper machines, tools, apparatus, &c., replace the old. ”

        “Every introduction of improved methods, therefore, works almost simultaneously on the new capital and on that already in action. ”

        “Of course, this development of productive power is accompanied by a partial depreciation of functioning capital. So far as this depreciation makes itself acutely felt in competition, the burden falls on the labourer, in the increased exploitation of whom the capitalist looks for his indemnification. ”

        “In the same proportion as these instruments of labour serve as product-formers without adding value to the product, i.e., in the same proportion as they, are wholly employed but only partly consumed, they perform, as we saw earlier, the same gratuitous service as the natural forces, water, steam, air, electricity, etc. This gratuitous service of past labour, when seized and filled with a soul by living labour, increases with the advancing stages of accumulation. “

      • Hedlund Says:

        @GrahamB:

        If I understand you correctly, you separate the fixed capital (btw it should be constant capital to include circulating raw materials and intermediate products) from the money advanced to pay for it.
        AC != FCS. I’m guessing you’re a programmer.

        You’re right on both counts. Also, yes, I was referencing the fixed capital stock specifically because it is the one that had been mentioned at the moment, but in fact I do mean all productive capital purchased with money capital. So I guess right on all three counts.

        If we look at capital in general and the ROP, we need something like the dreaded corn model if we want to look at the magnitude of value. Here, you cannot assume that the money advanced is fixed because the MELT will also fall with rising productivity across the entire economy (it’s capital in general).

        I agree that sudden changes in money values can affect the profit of an individual producer. But speaking of the general, economy-wide rate of profit, Marx is clear (see the economic manuscripts of 1861-63) that shifts in the MELT won’t factor in; we must assume it constant. So yes, we’re crossing different angles of analysis, here.

        Thanks for the debate.

        Happy to oblige. I live for this stuff.

  16. Hedlund Says:

    Sorry, I removed a line where I clarified that CA = Capital Advanced and FCS = Fixed Capital Stock. It’s probably obvious, but I’ll err on the side of caution.

  17. Boffy Says:

    Reply To Michael Roberts On The Rate Of Profit

    Michael says that the Falling Rate of Profit is central to Marx’s theory of crisis. In fact, there is no indication that that is the case. The falling rate of profit due to an increase in the organic composition of capital is, to the extent that it is not counteracted by all those factors that Marx outlines, played out over a long period of time. Crises, on the other hand occur at regular intervals. At the time Marx was writing, between 7-11 years. There have been such crises in times when the Rate of profit has been rising as much as when it has been falling. In fact, one of the factors Marx outlines is that it is precisely the ability to make high rates of profit, which encourages unrestrained investment, which leads to a crisis of overproduction. Marx, on the contrary argues that it is crisis, caused by an overproduction of capital, which causes a sudden drop in the rate of profit.

    The fact that Marx did not place any considerable emphasis on a falling rate of profit in this context is shown by his comment in Value, Price And Profit, where he states, “But as to profits, there exists no law which determines their minimum. We cannot say what is the ultimate limit of their decrease. And why cannot we fix that limit? Because, although we can fix the minimum of wages, we cannot fix their maximum.”

    Marx describes a crisis as a crisis of overproduction, that is one in which output cannot be sold at prices which enable the reproduction of the Capital used up. That in itself shows what is wrong with the notion of historic pricing, because as Marx outlines, a central question for the capitalist in determining whether this is the case, is not what was paid for the Capital consumed some time in the past, but what is the cost of replacing it today. It does not matter if I paid £10 per ton for the cotton used up in production, whereas I can now only obtain a Value of £8 per ton in the value of the finished commodity, because if cotton now only costs £8 per ton, that selling price of the finished commodity will still buy sufficient cotton at the new price to replace that used up. That is why in the Chapter The Effect Of Price Fluctuations, Marx repeatedly states that it is the replacement cost of Capital, not just of new, but of existing Capital – that has to be used to calculate the Rate of Profit. For example,

    “Hence, if the price of raw materials rises, and there is a considerable quantity of available finished commodities in the market, no matter what the stage of their manufacture, the value of these commodities rises, thereby enhancing the value of the existing capital.”

    And,

    “It leaps to the eye, particularly in the case of agriculture, that the causes which raise or lower the price of a product, also raise or lower the value of capital, since the latter consists to a large degree of this product, whether as grain, cattle, etc.”

    Also,

    “First, the means of production that make up the constant capital represent only the money belonging to the capitalist (just as the body of the Roman debtor represented the money of his creditor, according to Linguet [Théorie des loix civiles, ou principes fondamentaux de la société, tome II, Londres, 1767, livre V, chapitre XX. — Ed.]) and are related to him alone, while the labourer, who comes in contact with them only in the direct process of production, deals with them as use-values of production only as means of labour and materials of production. Increase or decrease of their value, therefore, has as little bearing on his relations to the capitalist as the circumstance whether he may be working with copper or iron. For that matter, the capitalist likes to view this point differently, as we shall later indicate, whenever the means of production gain in value and thereby reduce his rate of profit.”

    He states that even more clearly in the following Chapter where he writes,

    “ The value of every commodity – thus also of the commodities making up the capital – is determined not by the necessary labour-time contained in it, but by the social labour-time required for its reproduction. This reproduction may take place under unfavourable or under propitious circumstances, distinct from the conditions of original production. If, under altered conditions, it takes double or, conversely, half the time, to reproduce the same material capital, and if the value of money remains unchanged, a capital formerly worth £100 would be worth £200, or £50 respectively. Should this appreciation or depreciation affect all parts of capital uniformly, then the profit would also be accordingly expressed in double, or half, the amount of money.”

    And, the requirements of the Labour Theory of Value make this necessary. If, the output of production is valued according to the current replacement costs of the value used up in production, then that has to be the basis of valuing the Capital consumed on the other side of the equation. If that is not the case then the difference in the equation can only be rectified through a balancing adjustment of the amount of Surplus Value. But, to do so completely undermines the Labour Theory of Value itself, and certainly undermines Marx’s main conclusion from it – that Surplus Value is the product of Labour alone. If the Value of Fixed Capital appreciates during the production process, and this higher value is included in the Value of the output, but no adjustment of the Value of the Fixed Capital is made, then the difference can only be accounted for in a rise in Surplus Value. But, in that case, we have not the Marxist theory, but the bourgeois theory. Surplus Value has risen not due to the productive process, not due to an addition of new Value by Labour, but due to a contribution from Capital!

    Marx sets out why this is wrong, and makes the same argument I have put forward previously distinguishing between Profits – arising from the productive process – and Capital Gains/Losses arising from changes in the Value of Money, or changes in the Value of the Constant Capital.

    In the above Chapter he writes,

    “We proceed in this entire analysis from the assumption that the rise or fall in prices expresses actual fluctuations in value. But since we are here concerned with the effects such price variations have on the rate of profit, it matters little what is at the bottom of them. The present statements apply equally if prices rise or fall under the influence of the credit system, competition, etc., and not on account of fluctuations in value.

    “Since the rate of profit equals the ratio of the excess over the value of the product to the value of the total capital advanced, a rise caused in the rate of profit by a depreciation of the advanced capital would be associated with a loss in the value of capital. Similarly, a drop caused in the rate of profit by an appreciation of the advanced capital might possibly be associated with a gain.”

    So, it is crystal clear from this quote that Marx is talking about changes in the Value of existing Capital, and that he is talking about changes in Value not arising from mere wear and tear. Marx’s statement here about the consequence of this for calculating the Rate of Profit is also clear. He is arguing unambiguously for using the current replacement cost, or else there could not be “ a rise caused in the rate of profit by a depreciation of the advanced capital”! But, this RISE in the rate of profit resulting from a change in the Value of the advanced Capital is accompanied by a CAPITAL loss, as a result of the same change in Value.

    The importance, as Marx argues, for basing the calculation on the current replacement cost rather than historic cost is clear. If the Value of Capital falls then on an historic cost basis this could result in losses, and yet because the replacement cost of that Capital has fallen, it is not just Simple, but Expanded Reproduction, which is possible. That is important because it is not Profit, which is at the centre of Marx’s analysis of Capital, but its nature as self-expanding Value. It is the rate of accumulation that is decisive, and on Marx’s basis of calculating the Rate of Profit on a current replacement cost basis, this is the same as the potential rate of accumulation. As Marx puts it,

    “And the capitalist process of production consists essentially of the production of surplus-value, represented in the surplus-product or that aliquot portion of the produced commodities materialising unpaid labour. It must never be forgotten that the production of this surplus-value — and the reconversion of a portion of it into capital, or the accumulation, forms an integrate part of this production of surplus-value — is the immediate purpose and compelling motive of capitalist production. It will never do, therefore, to represent capitalist production as something which it is not, namely as production whose immediate purpose is enjoyment or the manufacture of the means of enjoyment for the capitalist. This would be overlooking its specific character, which is revealed in all its inner essence.”

    But, Kliman’s concentration on Money Profits, and his method of comparative statics, which views this Money Profit as the goal of Capitalist production in terms of discrete cycles, does precisely what Marx here says will “never do”. The Capitalist does not simply seek a higher rate of Money Profits, but seeks, and is forced to seek by the demands of Competition and Capital Accumulation, to expand the scope of his operation, and the defining feature of that is determined by the cost of replacing, and adding to the Capital he sets in motion – both Constant and Variable Capital.

    Moreover, its clear that for Marx it is the ability to expand the actual Use Values that comprise the Capital, which is important. That is because Capital is driven to accumulate in order to expand, and to expand in order to survive. It is physical expansion, which enables Capital to do that, because of the advantages it receives from economies of scale, the power of a larger Balance Sheet etc. And, Marx makes that clear when he writes that beyond a certain size, a large Capital with a low rate of profit can grow faster than a small Capital with a high rate of profit.

    • michael roberts Says:

      Boffy

      This is hugely long! I hope my blog readers can wade through this treatise – it’s an essay, not a comment. Maybe you need to write a paper and submit as attachment. Then we can all dissect it at leisure. It ain’t easy this way. I’m not going to comment as I have done enough already on these issues. Suffice it to say that your quotes from Marx seem to confirm the very opposite of your conclusions.

    • Hedlund Says:

      @Boffy: I’ll take up your challenge, sure thing.

      Michael says that the Falling Rate of Profit is central to Marx’s theory of crisis. In fact, there is no indication that that is the case. The falling rate of profit due to an increase in the organic composition of capital is, to the extent that it is not counteracted by all those factors that Marx outlines, played out over a long period of time. Crises, on the other hand occur at regular intervals.

      This is something AK addresses early in his book. It is not the fall in profitability that causes crises per se. It is not the proximal cause, but nevertheless it underlies proximal causes such as bouts of overproduction or credit crises that lead to debt deflationary spirals.

      It is not purely the tendential downward motion itself that does it, either, but rather low profitability itself. A low rate of profit increases system-wide fragility; e.g., if the average rate of profit is 6%, a great many more businesses will fail (especially relatively low-profit undertakings) than if the average rate is 30%.

      Even if the rate of profit is rising, if it is low, it will still push the system towards a greater incidence of crisis.

      Of your quotes, the final one (beginning “The value of every commodity…”) appears to be the strongest in support of your claim, so I will examine it more closely. The first thing one should note is that you’ve truncated the quote severely, to devastating effect. Here is the full section. The bit you used is in italics:

      “Fluctuations in the rate of profit may occur irrespective of changes in the organic components of the capital, or of the absolute magnitude of the capital, through a rise or fall in the value of the fixed or circulating advanced capital caused by an increase or a reduction of the working-time required for its reproduction, this increase or reduction taking place independently of the already existing capital. The value of every commodity – thus also of the commodities making up the capital – is determined not by the necessary labour-time contained in it, but by the social labour-time required for its reproduction. This reproduction may take place under unfavourable or under propitious circumstances, distinct from the conditions of original production. If, under altered conditions, it takes double or, conversely, half the time, to reproduce the same material capital, and if the value of money remains unchanged, a capital formerly worth £100 would be worth £200, or £50 respectively. Should this appreciation or depreciation affect all parts of capital uniformly, then the profit would also be accordingly expressed in double, or half, the amount of money. But if it involves a change in the organic composition of the capital, if the ratio of the variable to the constant portion of capital rises or falls, then, other circumstances remaining the same, the rate of profit will rise with a relatively rising variable capital and fall with a relatively falling one. If only the money-value of the advanced capital rises or falls (in consequence of a change in the value of money), then the money-expression of the surplus-value rises, or falls, in the same proportion. The rate of profit remains unchanged.”

      Some highlights:

      -The quote begins by stating that changes in the value of fixed or circulating capital in use can lead to a change in the rate of profit. This is something HC supporters also believe, as I’ve given in various examples. Further, using the RC method, this statement makes no sense at all; changes to the “absolute magnitude” of capital that do not alter the organic composition would be unable to affect the rate of profit, since they would also revalue the basis on which RC profit is measured to a proportional degree. No such contradiction exists if we judge the profit based on the money capital advanced.

      -As per the part I’ve underlined, profit is expressed in an “amount of money.” (!)

      -The boldfaced portions are contextually tied together, as they represent the two options within a conditional hearkening back to the beginning of the paragraph: whether the revaluation affects all parts of capital (constant and variable) uniformly, or it does not and thereby affects the organic composition. In the former case – the one you believed supported you – obviously the mass of profit would change in proportion, and a changing mass of profit judged against the same money capital advanced would alter the rate of profit proportionally. It all fits. On the other hand, the OCC shift hypothetical assumes the ratio changes without changing the value of the fixed and circulating capital. Because there is nothing to cause us to assume the rate of surplus value changes, then an increasing variable portion would lead to an increasing profit.

      -Finally, he concludes by noting that changes to the value of money makes no difference to this.

      In conclusion, I agree with Michael; I don’t think this quote says what you think it says.

      Regarding the latter portion of your argument: you mention that the RC RoP tracks the “potential rate of accumulation.” On the other hand, AK argues in one point of his book that HC profit measures tend to track the rate of accumulation more closely than RC measures, which diverge from it. I assume in this case he’s not referring to “potential” but rather “actual” rates of accumulation. Unfortunately, I don’t have the book with me, so I can’t cite a page number. Still, how do you respond to this?

      Anyway, whereas one of the key elements of Marx’s theory of money is its role as the “form of value,” I still don’t see why measurement of profit in money terms is so problematic to you. This is part of the reason I tend to use gold as money in my own examples; it solidifies this aspect. You have an excellent quote by Marx arguing that profit is not about the “means of enjoyment for the capitalist.” However, he never argues that money is the “form of [the means of enjoyment for the capitalist].” Indeed, only in your arguments have I at any point thus far witnessed anyone supposing that fluctuation of money values plays a role in the process in discussion. For my own arguments, it suffices to assume that the “price list read backwards” is essentially stable.

      According to Marx (as per the quote I include above), it will not do to dismiss it as merely “money illusion.” Ignoring the role of money is the failure of Say, Walras, and many others, but not Marx.

      • Hedlund Says:

        The underline tags didn’t show up, but the part about money that I attempted to underline is the part between the two bold bits.

      • billj Says:

        One of the paradoxical facts about AKs rop estimates is that they grossly overestimate the rate of profit. As a result they bear almost no relationship to the cycle of capital accumulation.
        See page 91 of his book for example.
        According to this graph in 1982 the rate of profit exceeded 32%! That was the absolute bottom of the post war crisis.
        Indeed his favoured property income rop never falls below 22% at any point between 1970 and 2010.
        It makes you wonder why there has ever been a crisis at all?!

      • Hedlund Says:

        When I get home I’ll take a look; I don’t have it with me at present. In fairness, he presents a whole slew of estimates for perusal, some of which drop significantly lower than others (e.g., where he adjusts for MELT and inflation).

      • Boffy Says:

        Hedlund,

        For the sake of brevity I will only deal for now with the most important part of what you have said. I’ll deal with the rest later. The only thing the additional piece of the quote is devastating to is the HC method. In fact, your own example shows why.

        Suppose we have M = 10,000. It is used to buy C 9,000 and V 1,000. There is a rate of Surplus Value equal to 100%. This gives C 9000 + V 1000 + S 1000 = E 11,000, R = 10%. M1 = 11,000.

        Now, we take Marx’s point and assume that a change in productivity affects all elements of Capital equally. We will assume that productivity doubles. This would give:

        C 4500 + V 500 + S 500 = E 5500, R = 10%. as Marx says, the consequence is indeed that the Rate of Profit remains the same as it was before. But, this is indeed devastating to the HC method, isn’t it? Why, because the proponents of the HC method say that M cannot, and does not change! So, if we extend we now have E = 5500, which means that M1 now also equals 5500. So, on the HC method we now have M = 10000 – M1 = 5500. In other words, on the HC method we now have a loss of 4500 of a Rate of Loss equivalent to 45%!!!!

        A rational person would conclude that if in fact we had such a large loss this would mean that the Capital concerned would experience a considerable crisis, manifest in a large contraction of production. But, what is the reality?

        It is that, in fact, because the price of the final commodity reflects the facts that the replacement cost of Capital has fallen, it means that rather than a contraction the Capital is able to expand, which is precisely the point Marx makes in this Chapter in explaining the reasons for using replacement cost as the basis for the calculation. It means that from M1 = 5500, the Capitalist is now able to expand production such as:

        C 4950 + V 550 + S 550 = E 6050.

      • michael roberts Says:

        M1 in the HC measure is NOT 5500. It is 10000 (original M) PLUS s500 (PROFIT) which makes M1 at 10500. There is no loss under HC but a profit. The rate of profit is now 5% not 10% as in the RC measure. See my example 1. That’s the point of difference. Expansion continues with HC M now at 10500 BUT RC M is 5500 in the new cycle.

      • Boffy Says:

        Michael,

        M1 could not possibly be any other than 5500, because that is the current market price! Any firm producing this commodity using the Constant and Variable Capital at the new prices would automatically price the end product at those prices, which would force the4 firms using old Capital to reduce prices accordingly. That is precisely the point that Marx makes in the Chapter on Appreciation, Depreciation and Tie Up of Capital, where he looks at the revaluation of cotton at various stages of the production process. Its also the point he makes about firms not even being able to compete with hand loom manufacturers.

        Previously, you and Kliman have argued that it is not C and V that cannot be revalued but only the original M. But, now you want to argue that C and V cannot be revalued either! That is the only way in which the Value of the final product does not fall to 5500! It means that you are forced to abandon Value categories for the Use Values that make up the Capital!

      • Boffy Says:

        @ Michael. I should also have added that its not just new firms that would force the price down to this level as a consequence of competition. As I’ve stated previously when I worked for a small textile company this was quite common. When I priced up bids for contracts, I NEVER based the price on the cost of the cotton that was in stock, but ALWAYS on the current price, or that I obtained from the supplier if it was going to require a large amount.

        There is no way of either winning contracts if the price is falling, or remaining profitable if it is rising, if you do otherwise. When I was self employed, and ran three different types of buisness, the same thing was true about both stock, and equipment. If you base your prices on trying to recoup the cost you paid for stock or machines in the past, then when prices are falling you will always be undercut. If you do not adequately set aside sufficient funds to cover their replacement when prices are rising, you will find yourself with insufficient Working Capital, which means either contracting your operations, or injecting additional Capital.

      • michael roberts Says:

        Boffy
        Boffy

        You are right about the market price and I must correct myself. Having done that, it does not change the story. A 50% fall in SNLT in your example would indeed be disastrous for the capitalist, having advanced money capital at a previous level. The capitalist would indeed be bust and a major crisis would ensure with such destruction of capital. But is that not where Marx’s law of profitability eventually takes us?

        Your practice of pricing contracts competitively is a no brainer. You can eventually reach a point where your pricing will mean no profit at all if your competitors are more efficent. Your stocks will also lose value accordingly as you can only sell them at the existing prices and you perhaps will take a loss on the original cost. If prices are rising, you certainly need to take into account depreciation before profit. I see no conflict with your work practice and a measure of profit as between what you paid for something in the past and what you can get for it now after working it up into something else or just passing it on.

        The HC measure of profit is between the money price for any good sold less the money originally advanced to pay for the means of production and labour power (M’-M). If the SNLT falls or rises, the value of the components of the commodity will change and money price realised (M’) in the market. But you can’t change the M that the capitalist first had to advance to start the whole thing. So the profit depends on the difference between the money price M’ of the commodity sold (with a changed SNLT) and the historic M advanced. The RC version changes the old M to the new SNLT value unnecessarily.

      • Hedlund Says:

        @Boffy:

        I agree with your figures. Do you not see how, by your own math, a rapid fall in MoP value is good for the system on the whole, but bad for the capitalists who are already invested? Devaluation on that scale would constitute a form of “destruction of capital.” The destruction of capital improves system-wide profits, and capitalists who held on to their money are rewarded with a greater capacity to expand production. However, said destruction also pulls the rug out from under capitalists who have already paid in.

        This is all fully consistent with the Marx quote I examined earlier.

        To take it one further, this sudden devaluation constitutes what might be termed a “shock,” which can ripple out and have other consequences. For instances, capitalists who go under as a result may be unable to service their debts, and those debtors may find themselves in a similar situation, etc.

      • billj Says:

        “Do you not see how, by your own math, a rapid fall in MoP value is good for the system on the whole, but bad for the capitalists who are already invested?”

        I’d be very surprised if he doesn’t see that – its what he’s been arguing all along?!
        Rising productivity devalues the existing fixed capital stock, so reduces the organic composition of capital and raises the rate of profit. This does not happen only in crises but on a daily basis with the introduct of new technology.
        Its exactly what AK has been arguing cannot occur as – according to AK – the FCS can’t be revalued “retroactively”.

      • Boffy Says:

        @ Michael 2nd March. Of course it changes the story! It means that pricing things in historic terms gives a misleading picture. For the reasons Marx set out, it CAN mean that a Capitalist who has laid out a large amount in Fixed Capital that is devalued, finds they cannot compete, and according to Marx this is why they end up being taken over and the Capital (Means of production) revalued accordingly.

        But, there is no reason why that HAS to be the case. In the case Marx sets out in relation to the quote about such Capitalists selling out, it is in relation to a moral depreciation caused by the introduction of a new type of machine. But, in all those cases thst Marx refers to in the Chapter on Appreciation and Depreciation, in relation to Cotton at various stages of the production process (or as I referred to in my my own experience) that is not at all the case.

        If I have laid out £10,000 for a machine, and changes in productivity mean that this machine can now be produced for £5,000 then although, as Marx says I will have made a Capital loss of £5,000, this does not at all change my position in respect of my solvency (unless I borrowed the Money and need to pay it back). Assume the machine has a lifetime of ten years. Previously, I would have had to set aside £1,000 per annum to cover its replacement, and this would have been made available by an equivalent cost passed through into the price of the commodities produced by the machine.

        Now, as the Value of the machine has fallen, and competition ensures that the amount passed through into the price of the commodities falls accordingly, I can only accumulate £500 into this amortisation fund. But, my position is materially unchanged, precisely because over the period of ten years, this £500 p.a. will cover the cost of the replacement machine!

        Consequently, a 50% fall in SNLT is not at all disastrous for the Capitalist. In fact, it could be quite the opposite, because any Money Capital on hand would now buy a greater quantity of means of production, and allow a higher degree of expansion. When Capitalists sought to reduce the value of labour Power, through the abolition of the Corn Laws, it certainly caused no such catastrophe.

      • Boffy Says:

        @ Michael. “A 50% fall in SNLT in your example would indeed be disastrous for the capitalist, having advanced money capital at a previous level. The capitalist would indeed be bust and a major crisis would ensure with such destruction of capital. But is that not where Marx’s law of profitability eventually takes us?”

        In addition to the reasons I’ve set out above as to why this DOES NOT necessarily mean a disaster for the Capitalist, more importantly, as marx points out it certainly does not mean a disaster for Capital.

        ” After machinery, equipment of buildings, and fixed capital in general, attain a certain maturity, so that they remain unaltered for some length of time at least in their basic construction, there arises a similar depreciation due to improvements in the methods of reproducing this fixed capital. The value of the machinery, etc., falls in this case not so much because the machinery is rapidly crowded out and depreciated to a certain degree by new and more productive machinery, etc., but because it can be reproduced more cheaply. This is one of the reasons why large enterprises frequently do not flourish until they pass into other hands, i. e., after their first proprietors have been bankrupted, and their successors, who buy them cheaply, therefore begin from the outset with a smaller outlay of capital.”

        So, even if the particular capitalist makes a Capital loss, even if they have borrowed the Money from the Bank, who now foreclose on the loan, this does not at all change the fact of the existence of the Capital as means of production itself. The Bank could continue production, which is what began to happen with FinanzCapital, or more likely, as marx states above, it could simply sell the business or means of production to another Capitalist who continues production.

        And, because this means that the reality is brought into line with appearance i.e. the real value of the capital/means of production is manifest in what the new owner pays for it, it now is able to operate at the average rate of profit.

      • michael roberts Says:

        My examples refer to capital in general not to many capitals.

  18. Boffy Says:

    Michael,

    Its a pity you are not going to comment as I would be more than interested to see how on Earth you could read those quotes from Marx as supporting calculating the Rate of Profit on the basis of historic pricing!!!

    How on Earth can you read,

    ” The value of every commodity – thus also of the commodities making up the capital – is determined not by the necessary labour-time contained in it, but by the social labour-time required for its reproduction. This reproduction may take place under unfavourable or under propitious circumstances, distinct from the conditions of original production.”

    As NOT being Marx arguing that existing Capital is revalued in accordance with the labour-time now required for its reproduction as opposed to “the conditions of original production.”

    Incidentally, there were so many things wrong with your original comment that my response was going to be longer, but I decided to focus on the most obvious errors. As another example, in your post you write about changes in the Value of the Capital only arising due to changes productivity arising from changes in the Organic Composition of Capital, but Marx specifically rejects that idea. he distinguishes it from the situation in relation to reductions in the Value of Labour Power. Marx writes that it is changes in productivity in general that can bring about a change in the Value of the Capital, irrespective of the Organic Composiotion of the particular Capital.

    But, I take your point. A separate article on my own blog might be needed to deal with all these errors in a more appropriate manner.

  19. Boffy Says:

    @ Michael 26th February. The mistake you are making is viewing things in terms of the objective of the capitalist being the achievement of Money profits, rather than the expansion of Capital. But, as Marx says this is a major error.

    “It will never do, therefore, to represent capitalist production as something which it is not, namely as production whose immediate purpose is enjoyment or the manufacture of the means of enjoyment for the capitalist. This would be overlooking its specific character, which is revealed in all its inner essence.”

    That is the consequence of looking at things in terms of the Circuit from M to M1. It means that you are liable to introduce an error based upon the conflation of two separate things – stock and flow. In particular, it means that you can include as profit, what is in fact Capital Gain, and vice versa.

    It is quite true that the Money handed over to buy Means of production cannot be changed in Value – unless we take into consideration changes in teh Value of Money. But, there can be changes in the Value of the Capital represented in those means of production. But, if the Value of the Fixed or Constant Capital falls, this is not a loss resulting from the productive process, which is what Marx is concerned with in measuring the Rate of Profit, as a measure of the ability of Capital to expand! It is a Capital Loss, which is quite different. It means that were the Capitalist to cease trading at the end of the cycle he would, indeed have ended up with less money than he began with. But, that is only important if you view the purpose of Capitalist production as being to provide the Capitalist with more money at the end of the process than he had at the beginning. If in other words you view the purpose of Capitalist production as being “immediate purpose is enjoyment or the manufacture of the means of enjoyment for the capitalist.”

    But, that is what Marx says we should never do. As soon as you adopt Marx’s analysis based upon continuing production, and production driven by the need to expand and accumulate, this Capital Loss or Gain becomes irrelevant. The question becomes not whether the capitalist ends up with more M at the end than at the beginning, but how much Means of production will this M buy at the current prices compared with what the original M bought at the previous prices! That is precisely Graham’s point about how Kliman skirts over this problem in the single commodity economy.

  20. Boffy Says:

    I should of course add that Marx does in talking about appreciation and depreciation also make the point that if there are general changes in productivity which cheapen both Constant and variable Capital, then this DOES mean that there is a change in the Value of Money. So, where there is a rise in productivity which cheapens the means of production relative to the Money Commodity, there may well be a lower figure for M1 than M, and yet in real terms M1 will still be higher than M i.e. its nominal amount might be less, but its Value will be higher, because it will buy more. In other words, to make a valid comparison it becomes necessary to revalue the original Money too.

    This obviously was a problem that ahd to be addressed in the 1970’s due to high rates of inflation, which seemed to flatter profits.

  21. GrahamB Says:

    @Hedlund

    AK’s applesauce example – in full – illustrates exactly what I said – that for the temporalists the value of constant capital cannot change from the moment it enters the production process, i.e. is not subject to the LTV.

    The passage from his book you quote is of course correct, BUT read on to the end of the section as this is just a prelude to pointing out the EXCEPTION. Apples can change price at any time (agree), as in the quote, except from when they are being used as MOP in the production process (disagree).

    Either you don’t fully understand the implication’s of AK’s approach as he has set it out, or you have a different version based on money advanced.

    • Andrew Kliman Says:

      @ Hedlund,

      You understand my interpretation of Marx, and its implications, quite well. The physicalists continue to refuse to accept the distinction between the value of means of production and the value of capital, and so they “find” and “reveal” nonexistent contradictions in the TSSI–just as they’ve done to Marx, and for the same reason. quite well.

      I suggest that, when they take what we (including Marx) say and then rewrite it in their terms–ones that efface the radical difference between the value of capital and the value of means of production–and then ascribe their version to us, we refrain from falling for the bait. Make them deal with what we say IN THE TERMS IN WHICH WE ACTUALLY SAY IT. Then let them try to find a contradiction–make my day!

      Let’s not forget that GrahamB made a false statement about what I’ve said, and then, when he was called on this, refused to retract the false statement, much less show any remorse. He even had the audacity to say that the victim of the false allegation should explain and defend himself. No way, Jose. The perp bears the burden of proof.

      We can have a genuine dialogue if and when people are supercareful to quote and discuss people’s exact words, and supercareful not to say anything inaccurate about them. AND if they nonetheless happen to screw up, by making an allegation about what someone says that they cannot support, we can have a genuine dialogue if they then promptly undo the harm they have done by retracting the unsupported allegation and showing remorse for having made the unsupported allegation in the first place.

      If these simple and standard norms aren’t adhered to, the “dialogue” is not being conducted in good faith, and what we have is just a disinformation campaign.

      I would LOVE to get Jefferies in a GENUINE dialogue.

      • GrahamB Says:

        This is a blog and as far as I can see people have been trying to have a genuine debate. I’m not going to start checking comments and responding in this manner, as I would then have to look at the statement you have just made.

      • billj Says:

        Andrew Kliman does what he accuses everyone else of – and in this instance too. He’s had loads of opportunities to make himself clear, but declines to do so.
        When he does express and opinion its full of rage. What’s he got to be so angry about?
        Maybe the problem is, that AK seems seems to think that the means of production are not capital;

        “I suggest that, when they take what we (including Marx) say and then rewrite it in their terms–ones that efface the radical difference between the value of capital and the value of means of production”.

        That is quite wrong. Money capital purchases means of production and labour – what Marx calls productive capital – in order to produce more commodities for sale on the market. As Marx puts it;

        “The value advanced by him in money-form has now assumed a bodily form in which it can be incarnated as a value generating surplus-value (in the shape of commodities). In brief, value exists here in the condition or form of productive capital, which has the factor of creating value and surplus-value. ”

        http://www.marxists.org/archive/marx/works/1885-c2/ch01.htm#1

      • Andrew Kliman Says:

        “What’s he got to be so angry about?”

        Willful misrepresentation.

        Refusal to retract unsupported allegations after having been challenged to support them, and after having been unable to do so.

        Lack of remorse for having made unsupported allegations that one cannot support.

        Use of pop psychology in an attempt to turn the tables and make me the problem instead of one’s own unethical behavior.

        Refusal to openly acknowledge what is going in, as in the following: “I declare that I am entitled to misrepresent what others say and write. I declare that, if I do not understand them, that is never my fault, only their fault. They are here to serve me and my needs. So they need to explain themselves to me in terms that I accept and understand, no matter how little homework I’ve done to understand what they say and no matter how uncharitably I read them. I declare that I’m entitled to pop-psychologize and make fun of people who don’t want to be misrepresented. I declare that I never need to retract and apologize for false statements. I declare that I never have to directly address complaints that I behave in an unethical manner, and one that is detrimental to intellectual progress.”

      • GrahamB Says:

        You should stop this offensive ranting.

      • Andrew Kliman Says:

        You should stop the offensive behavior. Then there will be nothing to “rant” (an offensive characterization that blames the victim) about.

        And you should come clean:

        “I declare that I am entitled to misrepresent what others say and write. I declare that, if I do not understand them, that is never my fault, only their fault. They are here to serve me and my needs. So they need to explain themselves to me in terms that I accept and understand, no matter how little homework I’ve done to understand what they say and no matter how uncharitably I read them. I declare that I’m entitled to pop-psychologize and make fun of people who don’t want to be misrepresented. I declare that I never need to retract and apologize for false statements. I declare that I never have to directly address complaints that I behave in an unethical manner, and one that is detrimental to intellectual progress.”

        I note that your response does not retract and apologize for your false statement, and that it does not directly address the complaint that you behave in an unethical manner, and one that is detrimental to intellectual progress.

      • Boffy Says:

        Talking of unsubstantiated accusations. I am still waiting for an apology and retraction from Andrew Kliman for his libellous statement that I have been banned by various websites, that I stalk various websites etc. He has still not provided the details of who his “reliable source” for this libellous statement was, though anyone familiar will probably guess where it comes from.

        But, then given that it seems that $10,000 bets are a common occurrence in the circles he moves in, perhaps he feels making libellours statements is something he can also afford to do.

      • billj Says:

        Should have included the next bit too;

        “Let us call capital in this form P.

        Now the value of P is equal to that of L + MP, it is equal to M exchanged for L and MP. M is the same capital-value as P, only it has a different mode of existence, it is capital-value in the state or form of money — money-capital.”

        http://www.marxists.org/archive/marx/works/1885-c2/ch01.htm#1

      • billj Says:

        Ever thought of looking in the mirror Andrew?

      • GrahamB Says:

        “…detrimental to intellectual progress.”

        That is what your behaviour is achieving.

  22. Hedlund Says:

    @GrahamB:

    I have now re(re)read that passage to its conclusion, most of the way down page 97. I am still not sure what you mean. I don’t see anything amounting to what you have said. Perhaps you can provide some quotations, and walk me through it?

    Either you don’t fully understand the implication’s of AK’s approach as he has set it out, or you have a different version based on money advanced.

    I’ll admit either is possible, so why don’t you show me?

    • GrahamB Says:

      @Hedlund

      Will do when his book is in front of me…busy coding in the day job!

    • Hedlund Says:

      Awesome, dude. What languages?

    • GrahamB Says:

      @Hedlund

      OK, here’s some quotes from p97 of AK’s book – the continuation of the applesauce discussion.

      (Note to Andrew Kliman: All quotes are transcribed from a paper copy of your book. All non-quoted statements are my *opinion*. It’s known as debate in some circles.)

      “As we shall see, Marx also held that the sum of value transferred from inputs to outputs that were produced in the past can change retroactively. Imagine that the price of apples falls, causing the value of applesauce to fall from $3/jar to $2.85/jar. Since the value of a previously produced commodity is determined by the value of new commodities of this kind, a jar of applesauce that was worth $3 when it was produced is now worth only $2.85. It follows that the apples used to produce this applesauce have transferred $0.15 less value to it than they originally transferred.”

      Quite right, existing commodities can be ‘retroactively revalued’. To summarise the applesauce discussion so far, the value of all previously produced commodities can change at any time according to the SNLT. This would have to include MOP prior to the moment they enter the production process and products before they are sold and before they are consumed. So far so good. BTW, the ‘retroactive’ tag adds nothing to this sentence.

      Finally we get to the production of new commodities and the crux of the matter, and it’s in one sentence:

      “Does the sum of value transferred from an input to a newly produced commodity depend upon the input’s price when it enters production, as the TSSI holds, or upon the cost of replacing the input when the new commodity is completed, as the replacement-cost interpretation holds?”

      And just in case the importance of this single statement is over-looked, the section concludes:

      “And as the whole of this book shows, the difference between simultaneous and delayed revaluation is the difference between internal consistency and physicalist conclusions on the one hand, and internal consistency and Marx’s conclusions on the other”

      It is crystal clear to me that the value of MOP used in production is *fixed* at it’s initial value and constitutes an *exception* – despite the use of the word ‘price’ – because it concerns the ‘value transferred’ from the input commodity to the newly produced commodity. This is not about advanced capital or advanced money but the value of MOP.

      Perhaps you are aware of the difficulty here as I think you have accepted that the value of a commodity – including MOP – is never fixed. This may account for the attempt to divorce advanced capital from the value of the MOP.

      • Andrew Kliman Says:

        “Does the sum of value transferred from an input to a newly produced commodity depend upon the input’s price when it enters production, as the TSSI holds, or upon the cost of replacing the input when the new commodity is completed, as the replacement-cost interpretation holds?”

        “This is not about advanced capital or advanced money but the value of MOP.”

        No. It’s about neither. It’s about “the sum of value transferred from an input to a newly produced commodity.”

      • Shane Mage Says:

        ““Does the sum of value transferred from an input to a newly produced commodity depend upon the input’s price when it enters production, as the TSSI holds, or upon the cost of replacing the input when the new commodity is completed, as the replacement-cost interpretation holds?”

        Look. The essential relation is this: a given quantity of surplus-value is capitalized in the form of means of production. Over time it undergoes physical and moral erosion and so transfers value to the social product. The amount of value it transfers is identical to its own depreciation. No accounting formula subjectively adopted by any individual capitalist, or even by all capitalists, changes that identity by a jot or a tittle.

      • Andrew Kliman Says:

        @ Shane,

        You’re right, of course, but the passage in my book (and indeed the book) is about how to interpret Marx’s theory, so all that matters in that context is what his theory is, not what you or my theories are.

      • billj Says:

        “Look. The essential relation is this: a given quantity of surplus-value is capitalized in the form of means of production. Over time it undergoes physical and moral erosion and so transfers value to the social product. The amount of value it transfers is identical to its own depreciation. No accounting formula subjectively adopted by any individual capitalist, or even by all capitalists, changes that identity by a jot or a tittle.”

        That’s right of course and shows why the value of the original money investment can change. Not complicated.

    • Hedlund Says:

      It is crystal clear to me that the value of MOP used in production is *fixed* at it’s initial value and constitutes an *exception* – despite the use of the word ‘price’ – because it concerns the ‘value transferred’ from the input commodity to the newly produced commodity.

      That is not clear to me, though, crystal or otherwise. To my eyes, the quoted passage does not imply fixity. Perhaps it would help to throw the beginning of that paragraph into the gumbo we’ve got going, here:

      “None of this is in dispute, but none of it favors the replacement-cost interpretation either. The controversy between the temporalist and replacement-cost interpretations concerns the valuation of newly produced commodities only, an issue none of the preceding points addresses. The preceding points all reduce to the proposition that the values of previously produced commodities, and the sum of value transferred to them, are determined by the values of newly produced commodities. None of them pertain to how the value of these newly produced commodities is itself determined.” [emphasis his]

      So the first thing to consider is that at this point, the only thing in discussion is newly created commodities. It seems to me that as soon as we even attempt to go far enough to take post-production replacement costs into account, we’re already talking about previously produced commodities.

      If this seems almost trivially narrow a distinction to you, I would direct you to the very next paragraph: “The controversial issue is extremely narrow, and for that reason it may appear trivial. … How can minor delays in revaluation possibly matter?”

      Allow me to try my hand at what I believe is a solid (and maybe even original) way to explain it, using a riff on the example we’re discussing: let’s say that at 1 p.m. an apple is worth $0.50, and at 2 p.m. it’s only worth $0.45. One such apple enters applesauce production at 1 p.m. and by 2 p.m. production is complete. Obviously, some would maintain that $0.45 worth of value was transferred to the sauce, and others (temporalists) would say $0.50 was transferred. I think it could be argued, though, that the first interpretation makes a hidden assumption: namely, that applesauce production continues. If, instead, the batch the workers started to produce at 1 p.m. is the final quantity of applesauce to be produced in the world, then it ceases to matter how much the means of its production cost, because there is no production of which to speak. Apples could fall to $0.01 by 2 p.m., but the value of applesauce would still have an apple-value-constituent, or AVC (since I have to coin a term if I’m ever going to be published), of $0.50 worth of SNLT. Indeed, the absence of production would actually begin to push the price of applesauce upward, as supply dwindles, and applesauce begins to command a scarcity-based rent.

      Had production of applesauce been pursued elsewhere in the economy, then it could easily give the impression that post hoc replacement values are the determining factor. This is because production periods overlap for the various producing capitalists; as one finishes, another begins.

      I don’t think I’ve read anyone using a counterfactual to explain it, as I just did. Hopefully it all makes sense.

      For other defenses of the interpretation, AK spends some time exploring the textual and theoretical backing of it in the rest of the chapter, following the passages we’ve been quoting. (For what it’s worth, I’d rather not transcribe the entire second half of the chapter, if it can be avoided.)

      • Andrew Kliman Says:

        “the first interpretation makes a hidden assumption: namely, that applesauce production continues.”

        This is an EXTREMELY important point.

        Also, it makes the hidden assumption that apple production continues. Let’s see the physicalists tell us how much value is transferred from the apples to the applesauce if there aren’t any produced (picked) apples in existence when the applesauce is completed.

      • billj Says:

        “To my eyes, the quoted passage does not imply fixity. ”

        In which case what’s the point of the theory? if the value of the original money investment can change then the TSSI amounts to nothing.

        “I think it could be argued, though, that the first interpretation makes a hidden assumption: namely, that applesauce production continues.”

        What an outrageous assumption – capitalist production continues!

        Took a long time to get there but it seems like we’ve finally arrived.

      • Boffy Says:

        “Apples could fall to $0.01 by 2 p.m., but the value of applesauce would still have an apple-value-constituent, or AVC (since I have to coin a term if I’m ever going to be published), of $0.50 worth of SNLT. Indeed, the absence of production would actually begin to push the price of applesauce upward, as supply dwindles, and applesauce begins to command a scarcity-based rent.”

        In that case, why would production of apple sauce have ceased. Under such conditions the super profits available would ensure that other suppliers were more than keen to meet the demand, in which case the current SNLT for apples would continue to be relevant, and would push the price of all apple sauce on the market down to it, as Michael has now accepted above!

      • Hedlund Says:

        @billj

        In which case what’s the point of the theory? if the value of the original money investment can change then the TSSI amounts to nothing.

        I’m afraid I don’t understand your argument. Have I not already demonstrated that changes to the value of money are, per Marx, irrelevant to the calculation of the rate of profit?

        @billj & Boffy:

        Obviously, production probably would not cease. Instead, as I said, I suggested what is called a “counterfactual.” The core point, generalized, is thus: If we assume a world in which A is an input to B, in order for the pure replacement cost argument to hold, we’d have to figure out why the price of A would continue to have an effect on the price of B when A no longer serves as an input.

        If it seems obvious that it would not, then that is exactly what I was aiming to achieve. Instead, the last point at which B was a commodity subject to capitalist production was that proposed by the temporalists.

      • Boffy Says:

        Hedlund,

        1. Changes in the Value of Money clearly are important for Marx in determining the real Rate of profit.

        2. Your cessation of production argument fails for several reasons. Firstly, it falls if as Michael argues above, what we are talking about is Capital in General not Many Capitals. You would have to be arguing that Capitalism ceases. Secondly, even were we to accept your rather unrealistic argument, it would mean you have made the same mistake that many bourgeois economists make. That is you would have confused Exchange Value (Price of production) with market price. Its possible given the conditions you set out for the applesauce to have a particular market price that reflects the fact that production has ceased, and so we have monopoly pricing. But, that does not change the fact that the Exchange Value of the Applesauce is determined by the SNLT for its production, which in turn is determined by the reproduction costs of its components.

      • billj Says:

        But changes to the value of the money investment are the thing that TSSI denies, AK says that the capital – meaning the money capital – can’t be revalued he adds “retroactively”, a word which makes no difference to the meaning, as revaluation by definition always happens in the present.
        That’s fundamental element of the TSSI is just basically wrong. Its the mistake which renders the entire construct false.
        Once that capital has been transformed into productive capital – means of production and labour – then it can be revalued. When it is transformed into commodity capital – it can be revalued. When that commodity capital is transformed back into money capital – it can be revalued. If the money capital exists in shares or bonds it can be revalued etc.
        .Obviously if the value of the money investment can change – and it can – you have conceded that nothing is fixed – then there’s no point in a theory that is predicated on the fixity of money investment. A thing that cannot happen.
        Counterfactual examples are fictional.
        And therefore, non-existent.

      • Hedlund Says:

        Once that capital has been transformed into productive capital – means of production and labour – then it can be revalued. When it is transformed into commodity capital – it can be revalued. When that commodity capital is transformed back into money capital – it can be revalued. If the money capital exists in shares or bonds it can be revalued etc.

        And yet, no matter how often these values change, they must ultimately be compared if we are to determine anything like “profit.” Positing a perfect, Heraclitean state of flux does not change that. The only way it discounts anything I’ve said is if you are going as far as to deny that said comparison can even happen, and that there can even BE such a thing as profit. However, I do not think you are doing this.

        Counterfactual examples are fictional.
        And therefore, non-existent.

        Yes. They are products of the subjunctive mood, and therefore fictional, not unlike any of the numerical examples we’ve been throwing around.

        I must say I find your summary dismissal a little distressing and disheartening. Might I ask that you reconsider, and address the argument directly?

      • billj Says:

        The TSSI insists that the value of the original money capital investment can’t be revalued “retroactively”. A meaningless point given that it can be revalued in the here and now.
        If the original money can be revalued – as you concede it can – there is no logical basis for the insistence that estimates for rates of profit must be measured against it.
        And that’s all there is to it.
        I’m sorry if you find that summary – but we’ve expended thousands of words establishing this point. As you concede it, there seems little point in going over it again and again.
        You might nonetheless say that you prefer to use the HC measure of the fixed capital stock, as this tells you something about trends it the rate of profit – I would agree, There’s nothing wrong with using it and it does tell you something.
        But it tells you more if you compare it with valuations based on the current value of the fixed capital stock as well.
        The point is the TSSI insists that this is absolutely wrong and indeed AK implies in his book “unethical”.
        That’s quite wrong too. Its not “unethical” to reject AKs theory and that’s all there is to it.

      • Hedlund Says:

        If the original money can be revalued – as you concede it can – there is no logical basis for the insistence that estimates for rates of profit must be measured against it.

        I have never conceded this. Remember my example above? The $1000 advanced never changed, in ANY of those cases. This is because the amount of SNLT it represented never changed. If you scroll up and look at the three cases I present, you will find that they are all fully consistent with each of the points raised by the Marx quote that Boffy and I were fussing over at the very start of this.

        You might nonetheless say that you prefer to use the HC measure of the fixed capital stock

        I wasn’t using the HC measure of the FCS, but the money advanced. I am sorry that I was apparently unable to convey this point articulately enough to have made an impression.

        I’m sorry if you find that summary – but we’ve expended thousands of words establishing this point. As you concede it, there seems little point in going over it again and again.

        Well, if you have had it with this discussion, then there’s no point in my forcing you to continue. Perhaps we’ll do this again at a later date.

        Until then, I hope life finds you well.

      • billj Says:

        You said that nothing was fixed. If you think that something is fixed, don’t say that nothing is fixed. Now you say that something is fixed, “the money advanced”. Please make up your mind.
        The basic problem is, shared with AK it would appear, that you don’t understand how the circuit of capital accumulation transforms money capital into productive capital and then into commodity capital.
        Suffice it to say; advanced money capital has no existence apart from the stuff it has bought, once it has been spent. Consequently, if the thing the money has been spent on can change in value, so can the value of the money that has been spent. Marx said;

        “M — C represents the conversion of a sum of money into a sum of commodities…These commodities are on the one hand means of production, on the other labour-power…”

        http://www.marxists.org/archive/marx/works/1885-c2/ch01.htm

        A capitalist cannot spend their money twice, if they could then maybe they’d adhere to the TSSI.

      • GrahamB Says:

        AK said:

        “No. It’s about neither. It’s about “the sum of value transferred from an input to a newly produced commodity.”

        That was useful.

        @Hedlund

        I’m fully aware of the distinction that has been made between previously and newly produced commodities. But commodities come into existence at a moment of time – when they acquire a new use value – and a jar of applesauce is a jar of applesauce whether it was produced at this instant, one second or one year previously.

        “Let’s say that at 1 pm an apple is worth $0.50, and at 2 pm it’s only worth $0.45. One such apple enters applesauce production at 1 pm and by 2 pm production is complete. Obviously, some would maintain that $0.45 worth of value was transferred to the sauce, and others (temporalists) would say $0.50 was transferred.”

        The SNLT for the applesauce produced at 2pm can only be based on the value of apples at 2pm, $0.45. Otherwise you are basing the SNLT on some other time, in your case the start of the production process at 1pm.

        “Since the value of a previously produced commodity is determined by the value of new commodities of this kind, a jar of applesauce that was worth $3 when it was produced is now worth only $2.85. It follows that the apples used to produce this applesauce have transferred $0.15 less value to it than they originally transferred.”

        As you agree with this ‘retroactive revaluation’ of a jar of applesauce, I do not see the logical problem with the ‘retroactive revaluation’ of a jar that was produced at any time, including now.

        If you prefer, the value transferred to the applesauce at 14:00:00 can be $0.50 (temporalist – newly produced commodity) and then at 14:00:01 we can agree that the value transferred was actually determined by the SNLT, $0.45 (as it’s now a previously produced commodity).

        [Meant to say earlier, SQL Server developer these days.]

        Michael said:

        “The issue is whether, when you measure the rate of profit, you should do so having revalued M at the SNLT applied at the end of process of production or not.”

        Yes, and the SNLT should be applied at the end, the moment the new commodity comes into existence.

      • Hedlund Says:

        You said that nothing was fixed. If you think that something is fixed, don’t say that nothing is fixed. Now you say that something is fixed, “the money advanced”. Please make up your mind.

        No commodity’s value is fixed. This includes the money commodity. However, the PAST is fixed. We have no way of changing events in the past. You contend that “if [capitalists could spend their money twice] then maybe they’d adhere to the TSSI”; I would instead submit that if they could alter history, then they’d deny the TSSI.

        I never deny that M-C converts money capital into productive capital. I only insist upon the measure of profit being judged based on the M and not on the C. This is, once again, because of the insight Marx gleaned from Aristotle when formulating his theory of money.

      • Hedlund Says:

        @GrahamB: database work, eh? Very nice. These days I don’t look up from Python very much.

        The SNLT for the applesauce produced at 2pm can only be based on the value of apples at 2pm, $0.45. Otherwise you are basing the SNLT on some other time, in your case the start of the production process at 1pm.

        Well, recall again my supposition about production halting. The revaluation of the means of production are only relevant to the output so long as they are means of production, yes? And they can only be means of production while there is production. As I noted, because production occurs as a continuum, it is very easy to suppose that post-hoc revaluation of the MoP will serve to revalue the output.

        The pre-production reproduction cost approach is consistent with the replacement cost in all cases of ongoing (overlapping) production, but it also does not force us to have to explain how this pattern can persist once the two commodities are sundered from causal relation to one another. Indeed, one could probably even invoke Occam’s Razor on the matter, since all the former does is remove an assumption of the latter.

        If you prefer, the value transferred to the applesauce at 14:00:00 can be $0.50 (temporalist – newly produced commodity) and then at 14:00:01 we can agree that the value transferred was actually determined by the SNLT, $0.45 (as it’s now a previously produced commodity).

        This passage is fully consistent with the temporalist view, as long as production continues. Again: This is SUCH a narrow distinction that it can seem downright trivial. But I think I have made a good case for why it’s a distinction worth making.

      • billj Says:

        “However, the PAST is fixed”. Nice thought.
        What happens in the past happens in the past, but the history of the past happens in the present.
        Is there a way of changing events in the past – of course there is – by changing the record of them in the present. History is written by people who are alive.

      • GrahamB Says:

        @Hedlund

        “Well, recall again my supposition about production halting. The revaluation of the means of production are only relevant to the output so long as they are means of production, yes? And they can only be means of production while there is production. As I noted, because production occurs as a continuum, it is very easy to suppose that post-hoc revaluation of the MoP will serve to revalue the output.”

        The assumption of continuing production is the only sensible one that can be made in the analysis of capitalism.

        I don’t think you have addressed the issue of when ‘retroactive revaluation’ is applicable. If it isn’t in this case, you need to explain this exception.

      • Hedlund Says:

        @billj:

        I don’t get where you’re going with this line of thought. Events are fixed. Given preferences, demands, commodities produced, SNLT required for said production, and every other facet constitutes a fixed event. We can’t declare, by fiat, that ten years ago we could produce corn with but a thought and a whisper and then judge present production as terribly inefficient on those grounds.

      • Hedlund Says:

        @GrahamB:

        The assumption of continuing production is the only sensible one that can be made in the analysis of capitalism.

        And indeed it is the one usually made. However, as long as we continue making that assumption, pre-production reproduction values and replacement cost approaches are virtually indistinguishable, save for the fact that only the former yields Marx’s numerical results. I was just trying to provide another means of distinguishing them.

        I don’t think you have addressed the issue of when ‘retroactive revaluation’ is applicable. If it isn’t in this case, you need to explain this exception.

        I am not sure what you’re asking me to explain. Commodities revalued based upon changes to their means of production. I thought we agreed on this.

      • Boffy Says:

        @ Hedlund. “Commodities revalued based upon changes to their means of production. I thought we agreed on this.”

        But, if you agree with this, your whole argument collapses. As Marx states quite explicitly the Capital – both Constant and variable – is itself comprised of commodities.

        “It leaps to the eye, particularly in the case of agriculture, that the causes which raise or lower the price of a product, also raise or lower the value of capital, since the latter consists to a large degree of this product, whether as grain, cattle, etc.”

        So, if you agree that commodities can be retroactively revalued, you have to agree that Capital itself is retroactively revalued.

        It does not matter whether one of those commodities is no longer produced. The fact is that the value of the end commodity will still be determined by the SNLT of the commodities currently required for its production. The fact that the market price may not accord with this does not change anything, any more than market prices always vary from Exchange values and Prices of production due to variations in Supply and demand.

      • GrahamB Says:

        @Hedlund

        Perhaps I’m missing something or not explaining myself. Value transferred is another way of looking at HC/RC and the applesauce example that you raised does this well but I don’t see how you have addressed it (assuming continuing production).

        To repeat myself, I don’t agree with differentiating between “newly produced commodities” and “previously produced commodities” – and the temporalist approach is founded upon it in my view.

        What is the difference between a commodity created *now* and the same commodity created at any time in the past, surely they should both be valued according to the SNLT?

        Either there is a fundamental difference between the valuation of newly and previously produced commodities or there isn’t.

        Or, you may reply that there is no disagreement over using the SNLT to value a commodity, and move the question on to how is the magnitude of SNLT determined. But to do this the temporalists then have to evoke the distinction between previously and newly produced commodities which doesn’t move the question on at all.

      • Hedlund Says:

        To repeat myself, I don’t agree with differentiating between “newly produced commodities” and “previously produced commodities” – and the temporalist approach is founded upon it in my view.

        Well, as I understand it, the temporalist position is actually founded on two separate positions, one concerned with the formation of value in commodities, and another concerned with the determination of profit. To the extent that we’re discussing the former, you are correct: without the distinction between new and previous commodities, nothing distinguishes the temporalist view of value formation from the replacement cost view.

        It may be that the best I can do is to once again direct you to the textual treatment given in pp. 95-101 of Reclaiming. Unfortunately, upon a closer reading, by the time we get to the numerical example appearing on p.102, we’re already moving back towards a discussion of profits and away from commodity value formation at the level of granularity employed in the discussion up to that point. I’ll keep my eyes peeled for other numerical examples straight from the horse’s mouth, but it may be that textual examples are all that delve into this particular contention to a satisfactory degree.

        What is the difference between a commodity created *now* and the same commodity created at any time in the past, surely they should both be valued according to the SNLT?

        Yes. There is no difference between the two in that regard. The only point in distinguishing it, as far as I can tell, is to call into focus the role of the means of production. Widget A’s price will only affect Widget B’s price insofar as A stands in relation to B as means of production. This is not a controversial statement in and of itself. And, continuing along that track, means of production logically presuppose production. If we are in agreement that production continues – that another production period overlaps this one, then changes in the value of the means of production DO revalue previously produced commodities. But this value change is delivered by way of new production.

        If I may, here is a crude (and, worst case scenario, maybe not even helpful) stylized device for visualizing it: a man stands at an old cash register, punching keys and pulling the lever at regular intervals as he prices store inventories. The lever is production: whatever he does at the keys won’t have a concrete consequence until the lever is pulled – but once it is pulled, the values have consequence extending beyond the particular instance at hand.

        Reproduction costs are, in similar fashion, refactored into past commodities with each new production period. New production is what enables reproduction costs to continue to “click,” for reasons pertaining to a) the dependency on the causal relation that I keep referencing, and b) the process discussed by Marx, as highlighted by AK in his book. If we assume a continuum of production (which, as you point out, is the most reasonable thing to assume), then I must once again emphasize that the results of the temporal interpretation of value formation are identical to those of the replacement cost interpretation. Identical.

        I don’t know if this answers your question. It may very well not. However, I believe I have exhausted my capacity to elaborate the point. If at this point I have not said anything that you find especially compelling, then I suppose we’ll just have to agree to disagree, as unsatisfying as any debater may find such terms.

        While it is interesting, every so often, to become absorbed in sussing out new, ever-smaller theoretical contentions, I am just happy that we agree on the important stuff: capital is destroying the world, etc. It can be easy to miss the forest for the trees, sometimes.

      • Boffy Says:

        Hedlund. I don’t think this is right. In Chapter 6, where Marx looks extensively at changes in the SNLT of cotton, he argues that its Value as means of production is revalued at all stages of the production process, from that in stock, to that in the process of being worked up, to that embodied in the final cloth. He does not see it being revalued only on the basis of new production.

        And, I do not think that the two positions are identical. The temporalist position is based on the idea that the Capital employed cannot be revalued apart from depreciation due to wear and tear. That is not what Marx argues.

      • GrahamB Says:

        @Hedlund

        “Well, as I understand it, the temporalist position is actually founded on two separate positions, one concerned with the formation of value in commodities, and another concerned with the determination of profit.”

        I think that is right and on the first position I thought it was a defining difference, but who knows. If it isn’t, you have a theory of profit that isn’t founded on value.

      • Hedlund Says:

        @GrahamB:

        Ooh, I had kind of a flash. Maybe this is a better way to put it: commodity valuation is based on current reproduction costs of the MoP, but what determines the point that we call “current” is production (since, as I said, that is what defines a commodity as MoP) – but not the production of the individual unit; rather, production of that commodity in general.

        So here we’re moving back out from the micro to the macro scale, from the particular to the general. Does that explanation seem any more helpful, in your opinion?

      • Boffy Says:

        Marx’s theory – and i don’t think anyone has ever argued differently on either side of this argument – has NEVER been based on trying to value individual units of any commodity! Of course, Marx DOES distinguish between Value and Exchange Value. His clearest presnetiation of this is in Theories of Surplus Value looking in detail at Rent.

        That is each producer produces commodities that have “Value”. That Value is determined not by SNLT, but by the actual abstract Labour time required for their production. An inefficient firm or farmer produces commodites that have a higher Value than those produced by a more efficient producer, because they require more abstract labour for their production. But, the EXCHANGE VALUE of these commodities is determined as an average of these Values, as they come into a social relation with one another via competition.

        Now, of course, you could do the same thing in relation to individual units of production, so a car coming off the assembly line last thing on a Friday might have a higher Value than one on a Tuesday morning, but that does not, and I don’t think any Marxist has ever claimed it did, change the fact that the Exchange Value/Production price is determined not by this individual calculation, but by the calculation of SNLT for cars of that type in general.

  23. Boffy Says:

    By focussing on Money the HC method moves completely away from Marx’s concern in understanding the laws of Capitalist PRODUCTION. The HC Method of calculating The Rate of Profit is (M1 – M)/M. But, Marx nowhere, and at no time calculates the Rate of profit in this way. And, for good reason. Marx’s concern was to locate the source of profit in the production process, and the exploitation of Labour. That is why he calculates the Rate of profit as S/(C + V) x n – where n is the number of times the Capital turns over on average during a year.

    Given that Marx is concerned with analysing Capitalism as a continuous process of production, that is why he bases C + V not on what was actually paid for them, but on what the current replacement cost (SNLT) is for these commodities, because it is this which determines, how much of these commodities can be bought to ensure that production can continue, it is this which has to be reproduced in the price of the commodities, which are sold to provide the capital for their purchase.

    But, calculating the Rate of Profit on the basis of (M1 – M)/M not only fails to cover this – as Michael has now had to admit in response to my comment above, but it hides the real source of profit that marx was so keen to elaborate. We could have for example, M £10,000 – C £10,000 – C £12,000 – M £12,000, giving a “profit” of £2,000, and Rate of Profit of 20%, without labour even being employed, let alone creating any Surplus Value. All that is required on the HC method is for the market price of the bought Commodities to have risen in the interval! That is not a Theory of Commodity Production, but a Theory of Speculation.

    But, on the same basis if the concern is to see profit in these terms, to view things subjectively from the perspective of the Capitalist, rather than objectively from the perspective of Capital, why not look at the way capitalism actually operates on that basis. Then you will find that such a Theory of Speculation is indeed relevant to the actions of Capitalists. What Capitalists actually spend money on, in the main, is not the purchase of Means of production, but is indeed specualtion in the buying and selling of shares on the secondary markets. One Capitalist buys shares from anotehr Capitalist, because the former thinks the shares will rise, whilst the latter thinks they will fall. The basis of their view is determined by what each thinks the future prospects of the firm will be to make profits. The Share price, and the Capital Value of the firm then rises or falls accordingly. But, then the Capital of the firm is valued not on the basis of its Cost of production, but on the basis of the product of that Capital! In otehr words, we have arrived at a bourgeois theory, where the value of Capital is determined by its Revenue Product.

    • michael roberts Says:

      Boffy

      I corrected myself on the calculation of M1 at the end of the production cycle – that’s all. I did not ‘admit’ that the HC measure of the rate of profit ‘fails to cover’ the process of production and changes in value during the process. M1 less M equals profit. That’s obvious. What matters is how you get from M to M1. Of course, M1 will vary according to changes in the SNLT in the process of production M to C to C1 to M1. Surely, you cannot suggest that in the examples I put out they do not refer to the process of production and changes in SNLT leading to a change eventually in M1. They do show that. The issue is whether, when you measure the rate of profit, you should do so having revalued M at the SNLT applied at the end of process of production or not.

      I wont go further because I do notice that comments (not just yours) are getting up to the length of essays. If you want to carry on – fine – but maybe we all need to take yet another breather on this as we did last time.

      • Boffy Says:

        Profit in Marx’s sense is NOT M1 – M. Nor following from it is the Rate of Profit (M1 – M)/M. The whole point about the example I gave, and which you had to correct yourself over was precisely to demonstrate this point. On the HC method, rather than there being a Profit, there was a Loss, and a Rate of Loss of 45%.

        The whole point is that treating things in terms of M – M1, a whole range of ofther factors can enter the calculation, besides the production of Surplus Value in production. It could simply be that the change between M and M1 is solely due to a Capital Gain or Loss, without any production even taking place.

        By calculating the Rate of profit as Marx does on the basis of S/C + V x n, and by basing the calculation of the Means of production on the current SNLT, this problem is avoided, and a more appropriate measure of potential accumulation is arrived at.

      • Hedlund Says:

        Profit in Marx’s sense is NOT M1 – M. Nor following from it is the Rate of Profit (M1 – M)/M.

        But M = C = v + c, and M’ = C + s = v + c + s

        Thus M1-M = s, and (M1-M)/M becomes s/(v+c), which is the calculation you just provided.

      • Boffy Says:

        Hedlund,

        Clearly Profit in the Marxist sense is not M1 – M, for the reasons I have outlined. Firstly between the two, the Value of Money could have changed. With 20% inflation, then if M1 = 110 and M = 100, then there is not really a profit of 10, but a loss of 10.

        Secondly, there are any number of reasons why M1 might be more or less than M, which have nothing to do with the productive process, and Value relations. As Marx points out, for instance, the Capitalist may be shrewd or incompetent, and so increase his investment or lose his investment for many reasons.

        Thirdly, Even if we hold the Value of Money constant, and assume that the capitalist is of average competence, the Value of the Means of production can be revalued/devalued after they have been purchased, as Marx demonstrates. This is the whole point – the capitalist might make a speculative gain if the value of the means of production rise, without any production occuring, and so without any Surplus value being generated. If he simply sold them at their new higher prices, then M1 would be greater than M, but it would have absolutely nothing to do with the creation of Surplus Value, or Profit in the Marxist sense. That is why Marx distinguishes between a rise in the rate of profit consequent upon a reduction in the Value of those means of production, and the Capital loss experienced as a consequence of the same event!

        “Since the rate of profit equals the ratio of the excess over the value of the product to the value of the total capital advanced, a rise caused in the rate of profit by a depreciation of the advanced capital would be associated with a loss in the value of capital. Similarly, a drop caused in the rate of profit by an appreciation of the advanced capital might possibly be associated with a gain.”

  24. Boffy Says:

    Just to clarify in the example I gave above, the HC method results in a loss of 4500 (The difference between M £10,000, and M1 £5500). Marx’s method, of calculating profit as Surplus Value based upon the SNLT for the Variable Capital employed, gives a profit of 500. It results in the production function – C 4500 + V 500 + S 500 = E 5500, R = 10%.

    It is this, which shows why even at this lower price accumulation is possible, which would be a nonsensical conclusion from the HC method, which suggests that a huge loss was incurred. As Marx says, the fact that the Capitalist makes a trading profit does not change the fact that a Capital Loss is incurred. But a capital Loss, and a Trading Loss are two completely different things.

    • Hedlund Says:

      @Boffy:

      The HC method is what is used by an individual capitalist. That individual capitalist suffered a loss. Capital on the whole gained. That one fellow lost. I don’t know how to make this any clearer.

      There has never been a capitalist who invested $10,000, received $5500 in returns, and reported a profit of 10%, unless he was cooking the books. As I (and others) previously explained, this is nowhere more clear than when the capitalist is investing loaned capital. Though his creditors may be encouraged that he can continue production, they will be none too pleased when he reports 10% profits and they are nevertheless unable to recoup their initial investment.

      Because the HC method reveals ACTUAL rates of profit, and RC reveals POTENTIAL rates of profit, determining a system-wide (average) rate of profit should be based on an aggregation of individual HC profit rates. Otherwise, you’re occupying some abstract realm that can never quite be actualized – the measurement is always just out of reach, supposing a future state that never arrives.

      Also, where does Marx specifically discuss capital loss vs. trading loss? I would be very interested to read this, but I don’t recall ever coming across it.

      • billj Says:

        “The HC method is what is used by an individual capitalist.”

        But as we are discussing the accumulation process for the entire capitalist system. So such a starting point is bound to confuse and indeed does confuse. It is why the parallels with the methodological individualism of neo-classical comparative statistics are so obvious.
        The TSSI is the inversion of the Okishio theorum, but shares the same methodological flaw – it starts from the individual instead of the class. The one off instead of the social type.
        If productivity cheapens the means of production then this raises the rate of profit to the class as a whole – even if it causes the individual capitalist a loss.
        Such rises in productivity will cheapen the already existing fixed capital stock – the physical emodiment of the capitalists original money investment.
        This is denied by the TSSI which asserts (again – I repeat myself) that the capital investment cannot be revalued “retroactively” – (an actual quote from AK somewhere or other in this discussion) and that value has “no physical existence”.
        This is completely wrong and not Marxist or indeed Marxian or indeed what Marx said.
        Marx explains in length that changes in productivity “almost simultaneously” revalue the existing capital stock. That there is no qualitative distinction between the various parts of capital, money capital, productive capital and commodity capital.
        And its tough if the capitalist’s creditors don’t like it that he’s made a loss. Boo-hoo for the creditors but the capitalist cannot pay with money they do not have.

      • Hedlund Says:

        The TSSI is the inversion of the Okishio theorum, but shares the same methodological flaw – it starts from the individual instead of the class. The one off instead of the social type.

        And yet if what we seek is an “average,” as with the rate of profit, we must operate upon a finite and discrete mass of input figures, such as those of each capitalist in the system. If it does not describe this, then it is not an average rate of profit, and therefore tells us nothing of the reality on the ground.

        Marx explains in length that changes in productivity “almost simultaneously” revalue the existing capital stock.

        [A]lmost simultaneously,” you say? Why not just “simultaneously,” one wonders.

        And its tough if the capitalist’s creditors don’t like it that he’s made a loss. Boo-hoo for the creditors but the capitalist cannot pay with money they do not have.

        Except that “boo-hoo for you” is not an acceptable reason for why the capitalist is unable to pay. In the real world, that capitalist will suffer the consequences of his failure to honor his contract. The capitalist did not make positive profits. He therefore did not realize surplus value, which Marx says (in volume 3, chapter 1) is only realized if sale price exceeds cost price. If he claims otherwise, he is lying.

        I don’t think Marx ever directly addresses the role of liars in realizing surplus value.

      • Boffy Says:

        Hedlund,

        Marx sets out why “almost simultaneously” in Chapter 6, because he writes that in practice it will depend upon how much of the given commodity is already in the market. Sometimes he says this will mean that prices move above or below values. The point is the revaluation will happen.

      • Boffy Says:

        @Hedlund. ” I don’t think Marx ever directly addresses the role of liars in realizing surplus value.”

        Actually, he does in Theories of Surplus Value. Marx looks at a range of possible sources of profit – defined as revenue greater than costs – put forward by other economists. One of these is indeed that the particular Capitalist is a better crook than his competitors. But, Marx rejects the idea that profit can be analysed in terms of revenue greater than costs, because there are all these idiosyncratic, and accidental causes why that might be the case.

        In the end, as he says, Profit is merely the Monetary form of Surplus value, and Surplus Value is created only by the exploitation of Labour.

      • billj Says:

        ““Every introduction of improved methods, therefore, works almost simultaneously on the new capital and on that already in action.”

        Why not simultaneously? Because its almost simultaneously.

        “If he claims otherwise, he is lying.”

        Quite right – so what?

        If the capitalist cannot sell his output he will not realise his profits and will go bust. He can lie all he likes but that won’t stop the bailiffs coming round. Tough old world out there.

      • Hedlund Says:

        Why not simultaneously? Because its almost simultaneously.

        Yes, that is exactly what AK says, too.

        If the capitalist cannot sell his output he will not realise his profits and will go bust.

        And you don’t suppose that more and more capitalists going bust might have a negative effect on a measured rate of profit?

      • Boffy Says:

        If as Marx points out, other Capitalists take over that Capital at its new Value then the effect will be to RAISE the average rate of profit, precisely because they will measure that Rate of profit on this new lower Value of Capital!

        If the Capital disappears, because it could not compete because it was morally depreciated due to the introduction of some new machine, then again the effect will be to RAISE the avergae Rate of profit. But, of course, much of the Capital employed as Constant Capital is not Fixed but Circulating Capital. The consequence of falls in its Value are unreservedly good for Capital.

        As Marx puts it,

        “Other conditions being equal, the rate of profit, therefore, falls and rises inversely to the price of raw material.”

      • billj Says:

        “Yes, that is exactly what AK says, too.”

        Where? He certainly hasn’t said it on here and its not like he hasn’t had the chance.

        If AK does think that, then good. But it means that there’s even less point to his theory than I thought. Once you concede that the fixed capital stock can be revalued – this is the only material existence of the money capital that purchased it – then there is no point insisting on the use of the HC as the measure of the fixed capital stock.
        The original money invested no longer exists once it has been invested. The capitalist spends his money capital on productive capital. If the capitalist did not need to do so then capitalism as a mode of production, would not exist.
        That is why it must be insisted that capital has a physical existence. This is why the law of value is objective and not subjective. That’s what the whole of Volume II is about..
        The is a constant flux, change and transition between the three forms of capital – there is no special status for money – no qualitative distinction between any of the forms.
        And of course a whole load of capitalists going bust is just what capitalism needs to restore itself to health. The destruction of capital, lowers the organic composition of capoital and so raises the rate of profit..

      • Hedlund Says:

        Where? He certainly hasn’t said it on here and its not like he hasn’t had the chance.

        I provided some quotes from his book in my discussion with Graham. Though he quite disagrees with “simultaneists,” the temporal position may very well be nicknamed “almost-simultaneism.”

        A brief digression: if there is one point over which I strenuously disagree with AK, it is over the use of epithets like “simultaneist” and “physicalist.” Maybe it’s a handy construct for focusing discussion, but it also has the effect of “othering” the people in question. It makes its targets into a distinct “them” against whom stand a virtuous “us.” It is unhealthy rhetoric and I absolutely object to its use. (Essentially, this is the same point raised by Matthijs Krul in the closing paragraph of his amazon review of Reclaiming Marx’s Capital.)

        And of course a whole load of capitalists going bust is just what capitalism needs to restore itself to health. The destruction of capital, lowers the organic composition of capoital and so raises the rate of profit..

        I agree! I would only suggest that that we specify further: during the period at which people are going bust left and right, this would be indicative of a low rate of profit, which is only able to rise as a result of the devaluation and destruction that is, itself, the predicate of said busts. In other words, the rate of profit dips sharply as capitalists are dealt knockout blows, and then is able to rise in the aftermath. This has been my contention all along, and it is a point on which I think we truthfully have been in agreement all along. It’s just the measurement of that moment of decision (krisis, heh) that makes it seem otherwise.

      • Andrew Kliman Says:

        @ Hedlund,

        What you call epithets are terms used to summarize interpretations, theories, models, and their proponents. They’re precisely defined and they convey information that needs to be conveyed.

        You don’t like them, but you offer no alternative to describe what some interpretations, theories, models, and their proponents have in common. I don’t see how research can proceed without some terms of this sort.

        If you don’t like the terms physicalist, for instance, how would you describe “those whose put forward interpretations of Marx, theories, or models in which physical quantities are the sole proximate determinants of relative prices, profits, and the rate of profit”? It would be ridiculous and slow things down immensely and impede the quest for clear writing to make this statement each time instead of using the shorthand “physicalist.” It’s better to define the term at the outset and then use it, I think.

        What’s the alternative?

        If you want to discuss othering, I’ll be happy to do so. I think we need to start with the Marxist economists othering of Marx and their othering of an interpretation of his value theory that eliminates his alleged logical inconsistencies and their othering of the proponents of this interpretation.

        What Krul said is that if we were more respectful of these people, they might be more willling to admit that they were wrong. I don’t know why he thought he knew that. We started off extremely respectful. It didn’t have anything like the effect he suggested it might have. The effect was othering, suppression, name-calling (e.g., “new orthodox Marxism”–unlike physicalism and simultaneism–this term doesn’t describe the content of any interpretation or theory), hostility, ridicule, and misrepresentation. It is because of these practices, which I do not respect, that I came also to disrespect those who engage in them.

      • billj Says:

        That review is quite false it says;

        “Marx nowhere supports, or physicalism (which means that profit exists as physical surplus)”

        Completely wrong. The process of production produces a physical surplus, that is valued by the SNLT required to produce it. Marx says;

        “On the other hand, the remaining 2/10 ths of the product, or 4 lbs of yarn, represent nothing but the new value of 6s., created during the 12 hours’ spinning process.On the other hand, the remaining 2/10 ths of the product, or 4 lbs of yarn, represent nothing but the new value of 6s., created during the 12 hours’ spinning process.”

        http://www.marxists.org/archive/marx/works/1867-c1/ch09.htm

        It is very irrating when people say “no where does Marx say this or that” when they haven’t bothered to read Marx to find out. Maybe a little more reading and little less pontificating is the way forward.

      • Hedlund Says:

        I really don’t want to discuss the contents of that review outside of the narrow ambit for which I introduced it.

        On a more general note, if you read Reclaiming then I believe you’ll realize you’re taking the reviewer’s statement out of context, which is the distinction between physical goods and the value embodied therein. The “physicalism” he’s referring to is the view that, e.g., 1 hour of SNLT producing 1000 units of corn in one period therefore also produces more value than 1 hour of SNLT in a later period yielding 800 units of corn. It’s the view that value is judged by physical quantities and not embodied social labor, and it’s more a product of the “neo-Ricardian” approach than your own.

      • billj Says:

        AK says that;

        “If you don’t like the terms physicalist, for instance, how would you describe “those whose put forward interpretations of Marx, theories, or models in which physical quantities are the sole proximate determinants of relative prices, profits, and the rate of profit”?”

        But no one says they are the sole proximate determinants. Marx asserted that a physical quantity of surplus embodied the SNLT required for its production. If this is AKs definition of “physicalism”, why does he apply it to people here when it is not appropriate?

        Surplus value is incorporated in a physical surplus. The value of that physical surplus is the SNLT required for its production. That is not physicalism.

      • Boffy Says:

        Hedlund, Marxists are not concerned with how individual Capitalists calculate profit, or even how Capitalists as a whole calculate profits. We know that the way they do that is intended to hide from workers the truth. But, your assertion is actually wrong anyway.

        Capitalists accounts are kept in different books, in particular here one for Capital, and one for Revenue. After the firm has spent money on a piece of Capital equipment it sits on its Capital Ledger. No loss is made on the trading books as a consequence of the Value of that equipment falling. What counts for the capitalist, and for investors in the firm, is not whether the nominal Value of the machine has fallen, but whetehr sufficient revnue can be generated from sales to cover its replacement.

        The same is true of Stock. A firm that starts the Financial Year with 100 lbs of Cotton in Stock worth £1,000, is in the same position at the end of the year if it has 100 lbs of cotton worth £500 due to the price of cotton halving. The firm’s profit does not flow from changes in the price of cotton, but from the exploitation of the labour-Power used to transform this cotton into cloth. If the firm employed 10 workers at the beginning of the year, which worked for 4 hours to reproduce its wages, and 4 hours as Surplus labour, then so long as this remains the case at the end of the year, the Surplus Value/Profit generated remains exactly the same. Its precisely, because it hides this fundamental aspect of Marx’s analysis of the source of profit, that the HC method is so dangerous.

        As marx points out several times in the Chapter dealing with this, no changes in the Value of the Constant Capital can change that basic truth, or the amount of profit generated. Marx is scathing of the bourgeois economists such as Torrens who failed to understand that. The change in the Rate of profit, Marx insists, arises not because the amount of profit changes, but because the Value of the Capital changes!

      • Boffy Says:

        @Hedlund. “Also, where does Marx specifically discuss capital loss vs. trading loss? I would be very interested to read this, but I don’t recall ever coming across it.”

        Here.

        “Since the rate of profit equals the ratio of the excess over the value of the product to the value of the total capital advanced, a rise caused in the rate of profit by a depreciation of the advanced capital would be associated with a loss in the value of capital. Similarly, a drop caused in the rate of profit by an appreciation of the advanced capital might possibly be associated with a gain.”

        Chapter 6

  25. Hedlund Says:

    But no one says they are the sole proximate determinants.

    As I understand it, he argues that the neo-Ricardians do.

    If this is AKs definition of “physicalism”, why does he apply it to people here when it is not appropriate?

    I am led to believe he suggests that others often wind up with results mirroring those of the neo-Ricardians, and then classifies them along similar lines.

    As far as my own opinions on this matter are concerned, it is a can of worms I am happier leaving closed. I refuse to bandy about labels in that way, as I have previously stressed.

    • Andrew Kliman Says:

      @ Hedlund,

      You object to terms like “physicalist” and “simultaneist” when I employ them, then you turn around and use the term “neo-Ricardian.” Those who you describe in this way object to the term.

      In any case, I think you prove my point–some label to describe interpretations, theories, models, and their proponents is unavoidable.

      BTW, I never use the term “neo-Ricardian,” because it is considered offensive.

      • Hedlund Says:

        Well then, consider me informed on the matter. I was not aware anyone took issue with it (indeed, I have seen it employed by Marxians and Post-Keynesians alike, including individuals with various opinions on Sraffa, Steedman, et al), but then I am also not sure of who coined the term, either. As I understood it, the term was no less benign than “Keynesian.”

        My use of quotation marks is obviously a limited defense at best, especially since I got a bit sloppy and forgot them after the first time. Going forward, I will be more careful. Out of curiosity, who did coin the term, and who might find it offensive? Can you provide a little more background on this?

      • Hedlund Says:

        The fact that, apparently, some self-identify with the term “Neo-Ricardian” only adds to the confusion.

  26. Hedlund Says:

    @Andrew Kliman:

    Sorry, I only just saw your reply. The layout of this comments section is designed to make it easy to follow “branches” of discussion, but as soon as a single conversation spreads to several such branches, the opposite becomes the case. At least, this is my experience.

    What you call epithets are terms used to summarize interpretations, theories, models, and their proponents. They’re precisely defined and they convey information that needs to be conveyed.

    Then perhaps the problem lies in their application vis-a-vis a given debate. It is one thing if we want to establish a taxonomy for detached reference. Describing a view as “physicalism” is not objectionable as such, particularly for the sake of research.

    It takes on a different character, however, when one brings it into a debate as a stick: “The physicalists continue to refuse to accept the distinction…”; “Let’s see the physicalists tell us how much value is transferred…”; etc. Suddenly we’re not two equals with differing views resolving them via argumentation, evidence, etc.; we’re one sort of person and another sort of person, entirely, and our distinction is moral. This is a rhetorical game, and a dangerous one at that.

    You don’t like them, but you offer no alternative to describe what some interpretations, theories, models, and their proponents have in common. I don’t see how research can proceed without some terms of this sort.

    “Research” may not be the best word for what we do in these comment boxes. Though I’d like to call it “debate,” it often flies closer to “acrimony.” A common reason for this is that debaters start to view one another as categories.

    If you don’t like the terms physicalist, for instance, how would you describe “those whose put forward interpretations of Marx, theories, or models in which physical quantities are the sole proximate determinants of relative prices, profits, and the rate of profit”? It would be ridiculous and slow things down immensely and impede the quest for clear writing to make this statement each time instead of using the shorthand “physicalist.” It’s better to define the term at the outset and then use it, I think.

    Sure. Again, though, there is a time and a place for it, and I don’t think this is it. Also, it falls to the speaker to be clear: models can be physicalist; people are not. Maybe this seems like a trivial distinction, but I have never seen people respond well to having a label attributed to them without their consent. If we’re determined to adhere to a high standard of discourse, then the terms by which we address others is one of the things we must handle delicately.

    Insofar as the folks here who disagree with the TSSI may evince that tendency, to the extent that you argue that simultaneous valuation leads to physicalist conclusions, none of them disagrees with the definition of value we use, and as such I seriously doubt any would self-identify as “physicalist.” Thus, the task becomes to illustrate how one’s methodology would inevitably lead to conclusions that one rejects on value-theoretical grounds.

    Or, one could run right in and start telling people about their classifications, putting them on the defensive from the get-go and setting the stage for bitter shouting.

    It’s a bit like the difference between a Christian engaging a Muslim in theological and scriptural debate, versus running into a mosque and announcing that all those present are actually worshiping a moon-god and all these “moonists” are going to hell. (To be clear, my point is a general one about people who subscribe to different views; “Christians” in this example don’t represent the TSSI, and I’m not endorsing any fool thing Jack Chick & company say about Islam.)

    If you want to discuss othering, I’ll be happy to do so. I think we need to start with the Marxist economists othering of Marx and their othering of an interpretation of his value theory that eliminates his alleged logical inconsistencies and their othering of the proponents of this interpretation.

    Maybe you are using the term “other” more generally than I am, but I only see it as strictly applicable to people and groups thereof; not interpretations or theories. Insofar as anyone “others” Marx (it feels kind of funny in the case of historical figures but I guess it fits), I would imagine it is not anyone here.

    What Krul said is that if we were more respectful of these people, they might be more willling to admit that they were wrong. I don’t know why he thought he knew that.

    While I cannot speak for him, I think it is probable that it has to do with what history will remember fondly. People just coming to the discussion – or, heck, people doing so a generation from now – may not have insight on every aspect of the discussion to date. They won’t know about the slights, the arcane details of infighting. I think the point is that it’s best not to lead with the foot history would rather forget.

    The effect was othering, suppression, name-calling (e.g., “new orthodox Marxism”–unlike physicalism and simultaneism–this term doesn’t describe the content of any interpretation or theory), hostility, ridicule, and misrepresentation.

    Since I really generally don’t like to lob platitudes, I will let Gandhi do so for me:

    “First they ignore you, then they laugh at you, then they fight you, then you win”; “an eye for an eye makes the whole world go blind.” Two wrongs, etc.

    Prof. Kliman, I have great respect for the work you’ve done and certainly I don’t mean to disparage you. I just believe the debate has taken a questionable tack, and that all parties could benefit from a course adjustment. There’ll always be slings and arrows to contend with, but the best strategy is to maintain the high ground; don’t sink, but force opponents to rise to you. This is how the level of discourse is elevated.

  27. Hedlund Says:

    @Boffy: How did you insert your comment way over there, out of sequence? I can’t respond to it directly. I swear, this place can be like a house of mirrors.

    1. Changes in the Value of Money clearly are important for Marx in determining the real Rate of profit.

    You’re only providing an assertion. Could you explain? It’s not really an argument, otherwise. While not strictly necessary, it might also be helpful to include either a textual exegesis (bearing in mind that you’ll also have to resolve the contradiction stemming from where Marx said that it can be freely abstracted away), or perhaps a critique of my mathematical examples. Have I made an error in my arithmetic?

    2. Your cessation of production argument fails for several reasons. Firstly, it falls if as Michael argues above, what we are talking about is Capital in General not Many Capitals. You would have to be arguing that Capitalism ceases.

    Yes, if we generalize from capitalist production halting in particular, we get capitalist production halting in general. This does not invalidate my point; in fact it makes it all the more concrete, since the revaluation in question is a behavior of capitalist production. Why should we expect it to persist, absent said production?

    Secondly, even were we to accept your rather unrealistic argument, it would mean you have made the same mistake that many bourgeois economists make. That is you would have confused Exchange Value (Price of production) with market price.

    First off, describing the argument as unrealistic adds nothing to the discussion; it is a counterfactual. Obviously I am not describing a state of reality. The point is: is it logically consistent or not? If not, then why not?

    The dual character of a commodity, in its simplest expression, consists of a use value (i.e. the satisfaction of some need) and an exchange value (i.e. the proportions by which it trades for other use values). The price form is a concrete expression of exchange value expressed in terms of money.

    If prices constitute the concrete terms under which commodities trade, then they cannot be something apart from exchange values, since that creates a contradiction; if an exchange value does not describe what a commodity will exchange for, then it is not an exchange value. Surely we can at least agree that the conceptual law of identity must be maintained?

    Insofar as differences exist between prices of production and market prices, this is only observable for a given producer. The price of production of an apple differs from the market price of an apple. However, for all but said producer, the market price is the only price. Further, the constituents of the price of production of said apple are themselves all market prices: labor-power, fertilizer, etc.

    Thus, I am not confusing prices of production with market prices; I merely associate “exchange value” with the latter, rather than the former. Otherwise, the term makes no sense.

    • Boffy Says:

      Hedlund,

      The website puts my comments where it will, I only press the reply button, and submit the comment.

      I’ve set out why the Value of Money is important for Marx in determining the Rate of Profit. That is that with inflation of 20% then if M1 is only 10% greater than M, that is not a real profit, but actually a loss.

      The point of Marxist analysis is to explain Capitalist production. If Capitalist production ceases then we will need a different analysis, and a different set of laws to explain the new reality, so the question of whether to calculate the rate of profit based on replaement costs becomes moot.

      On whether your argument is logical or not in relation to discontinued production is immaterial. Marxism is based on dialectics, and the basis of the dialectic as lenin puts it is – “The truth is always concrete”. So, your argument, which is totally separated from Capitalist reality is by that fact rendered illogical.

      The clearest example of that is in your following statement,

      “If prices constitute the concrete terms under which commodities trade, then they cannot be something apart from exchange values, since that creates a contradiction”.

      But, of course, prices and exchange Values are NOT the same thing. There is only a contradiction if you view things in formalistic terms, not dialectical terms. Commodities only Exchange at their Exchange Values under speific condiitons i.e. under simple commodity production. Under Capitalism, commodities do not exchange at their exchange values, but at market prices, which can and do frequently differ not just from Exchange Values, but also from transformed Exchange Values i.e. prices of production.

      So you are wrong when you say,

      “Further, the constituents of the price of production of said apple are themselves all market prices: labor-power, fertilizer, etc.”, because the price of production is the transformed exchange Value, whereas market prices vary from prices of production due to fluctuations in demand and supply. Precisely because of that the market prices of the inputs to any commodity also differ from their own Price of production.

      Furthermore, your statement,

      “Thus, I am not confusing prices of production with market prices; I merely associate “exchange value” with the latter, rather than the former. Otherwise, the term makes no sense.”

      is not only wrong, but shows a peculiar lack of understanding of Marxist economic theory. Exchange Value is not equivalent to either “market price” or “price of production”, all three are quite distinct categories within Marx’s economic theory.

  28. Hedlund Says:

    @Boffy: once again, I don’t know how you are inserting comments every which where. Could I ask you to please stop that? There are points at which I don’t even rightly know which of my comments you’re disputing, because the spatial placement of most of your comments appears to lack anything resembling rhyme or reason.

    So please – please – if you wish to continue, let us proceed from this point, and nothing above.

    That said, let’s begin:

    Clearly Profit in the Marxist sense is not M1 – M, for the reasons I have outlined. Firstly between the two, the Value of Money could have changed. With 20% inflation, then if M1 = 110 and M = 100, then there is not really a profit of 10, but a loss of 10. …

    Or, for the reasons I have outlined (e.g., the fact that (M’-M)/M is the identity of s/(v+c), the fact that profit is not to be measured in nominal terms, etc.), this doesn’t matter. Or for reasons Marx has expressed. Whichever you prefer. Unless you are willing to actually address the numerical examples I’ve provided (but please put your response down here so I don’t miss it), then I cannot but assume you are expressing some prior conviction that may not even hold relevance to the discussion at hand.

    “Since the rate of profit equals the ratio of the excess over the value of the product to the value of the total capital advanced, a rise caused in the rate of profit by a depreciation of the advanced capital would be associated with a loss in the value of capital. Similarly, a drop caused in the rate of profit by an appreciation of the advanced capital might possibly be associated with a gain.”

    Curious that you would use, as your example of why capital gains and losses should not be considered as changes to profit, a quote in which Marx references a rise or drop “in the rate of profit.” So he distinguishes changes to capital value from surplus value production, but acknowledges that both have an effect on profit. It makes sense, really; why else would there even be a distinction between surplus value and profit? And as a bonus, the paragraph immediately preceding yours:

    “We proceed in this entire analysis from the assumption that the rise or fall in prices expresses actual fluctuations in value. But since we are here concerned with the effects such price variations have on the rate of profit, it matters little what is at the bottom of them. The present statements apply equally if prices rise or fall under the influence of the credit system, competition, etc., and not on account of fluctuations in value.”

    He is literally describing “the effects [that] price variations have on the rate of profit.”

    Hedlund, Marxists are not concerned with how individual Capitalists calculate profit, or even how Capitalists as a whole calculate profits.
    We know that the way they do that is intended to hide from workers the truth. But, your assertion is actually wrong anyway.

    I wish I could respond to this, but by this point, for the reasons given at the top of this comment, I literally have no idea which of my remarks you are claiming is wrong.

    The change in the Rate of profit, Marx insists, arises not because the amount of profit changes, but because the Value of the Capital changes!

    Yes, I know. This really highlights the importance of capital value. In fact, the value of capital plays a determining role in the organic composition of capital, which is indeed the very cause of the tendential fall in the rate of profit, which is a tendency altogether independent of the rate of surplus value.

    If as Marx points out, other Capitalists take over that Capital at its new Value then the effect will be to RAISE the average rate of profit, precisely because they will measure that Rate of profit on this new lower Value of Capital!

    This is exactly (virtually verbatim) what I’ve been saying. I am not crazy about this principle that one of the conditions of a statement being true is that you need to be the one saying it.

    But whatever, as long as we’re on the same page. High five, I guess.

    • Hedlund Says:

      Boffy:

      It does not matter whether one of those commodities is no longer produced. The fact is that the value of the end commodity will still be determined by the SNLT of the commodities currently required for its production.

      How would we know the costs of producing it without production? We can plan all we like, but without making it concrete all we’re doing is guessing, speculating. We can’t predict the future, or what difficulties may arise in the process of starting up production again. We may well over or undershoot our budget. It all requires actualization to say for sure.

      The fact that the market price may not accord with this does not change anything, any more than market prices always vary from Exchange values and Prices of production due to variations in Supply and demand.

      Actually, market prices vary from prices of production for reasons entirely independent of supply and demand (e.g., the difference between the value of labor and labor-power).

      • Boffy Says:

        Hedlund,

        “Actually, market prices vary from prices of production for reasons entirely independent of supply and demand (e.g., the difference between the value of labor and labor-power).”

        Could you explain what you mean by this, particularly your comment re. “the difference between the value of labor and labor-power).”

    • Hedlund Says:

      @Boffy: This is the last reply I am going to make, if you’re going to continue to position your responses way up there. Sifting through dozens of screenlengths for randomly-distributed replies is not a productive use of debate time. I don’t think it’s unreasonable to ask that you meet me halfway on this.

      And, I do not think that the two positions are identical. The temporalist position is based on the idea that the Capital employed cannot be revalued apart from depreciation due to wear and tear.

      As someone who understands the temporalist position well enough to be told as much by one of the best-known exponents of it, I am telling you: “That is rubbish.”

      Hundreds (if not thousands) of words have been written here and in the previous debate to disabuse you of the notion you’re promulgating. If that’s not enough to properly get the point across, then please, at least be kind enough to treat the temporalist position as an “unknown quantity,” rather than just guessing at it.

      • GrahamB Says:

        @Hedlund

        “If that’s not enough to properly get the point across, then please, at least be kind enough to treat the temporalist position as an “unknown quantity,” rather than just guessing at it.”

        Well, no one is “guessing at it” but clarification of the temporalist position on specific points would be helpful but has not been forthcoming. Instead, I have received disparaging responses from one of it’s leading proponents.

        I still cannot reconcile the following statements:

        ““Does the sum of value transferred from an input to a newly produced commodity depend upon the input’s price when it enters production, as the TSSI holds, or upon the cost of replacing the input when the new commodity is completed, as the replacement-cost interpretation holds?”

        “If we assume a continuum of production (which, as you point out, is the most reasonable thing to assume), then I must once again emphasize that the results of the temporal interpretation of value formation are identical to those of the replacement cost interpretation. Identical.”

      • billj Says:

        Marx explains why the TSS is wrong here;

        “It is of no avail to deduce the exchange of more labour against less, from their difference of form, the one being realized, the other living. [4] This is the more absurd as the value of a commodity is determined not by the quantity of labour actually realized in it, but by the quantity of living labour necessary for its production. A commodity represents, say, 6 working-hours. If an invention is made by which it can be produced in 3 hours, the value, even of the commodity already produced, falls by half. It represents now 3 hours of social labour instead of the 6 formerly necessary. It is the quantity of labour required for its production, not the realized form of that labour, by which the amount of the value of a commodity is determined. ”
        http://www.marxists.org/archive/marx/works/1867-c1/ch19.htm

        In the previous chapter he explains how surplus value = surplus product. Goddam physicalist!
        http://www.marxists.org/archive/marx/works/1867-c1/ch18.htm

      • Hedlund Says:

        @GrahamB:

        I still cannot reconcile the following statements:

        Alright, this is helpful. So we have two propositions that strike you as contradictory:

        1) The sum of value transferred from an input to a newly produced commodity depends upon the input’s price when it enters production.

        and

        2) Assuming continuous, overlapping production periods, the outcome of the above proposition is indistinguishable from that in which we suppose that value is transferred upon the completion of the commodity.

        I personally don’t see a contradiction there, so my first impulse is to ask you to “walk me through” your reading of it. But first, a stab at explanation:

        Generally speaking, the buyer of a commodity seeks its use-value, while a seller of a commodity takes advantage of its exchange-value. The former case applies to both a consumer who wishes to eat an apple and a producer who wishes to turn an apple into another commodity – say, sauce or a pie. Thus, the use-value could be consumed in multiple ways, but either way it is consumed. If the utility of a commodity is to serve as the means of production and therefore transfer its value to an output, then it only makes sense that we consider the value transferred when said means are consumed, which is logically and temporally prior to achieving the finished output.

        This is discussed in detail in volume 1. For example, from chapter 8: “If we now consider the case of any instrument of labour during the whole period of its service, from the day of its entry into the workshop, till the day of its banishment into the lumber room, we find that during this period its use-value has been completely consumed, and therefore its exchange-value completely transferred to the product. … It is thus strikingly clear, that means of production never transfer more value to the product than they themselves lose during the labour-process by the destruction of their own use-value.”

        The transfer of value is dependent upon, and concurrent to, the consumption of the use-value. The form of the apple is consumed before it has fully been transmuted into applesauce; sand is consumed prior to the completion of glass.

        But then, we may ask, how do we account for this value in the interim? Is the half-finished product consisting of destroyed input use-values, despite having no immediate utility, still bearing the value of the inputs? Who wants a blob of half-baked glass? This is the key role of labor: valorization. In the formal sense that labor-power is variable capital and thus part of total capital, the whole process is one of self-valorization. “Self-valorisation includes preservation of the preposited value as well as its multiplication.”

        So, proposition 1, perhaps the more controversial of them, fits on those grounds. Proposition 2 is simply acknowledging that the process described in 1 happens continuously. If you are a capitalist who has halted production, and the price of apples falls, it will affect the price of your holdings of applesauce because of the continued production – and therefore bringing into relation apples as means of production to applesauce – of other capitalists. That’s all. If we’ve established 1, then 2 is neither contradictory nor controversial. (Though even if not, as I noted earlier, I am still not sure wherein lies any contradiction.)

        Hope you find this explanation more helpful than the previous ones.

      • Boffy Says:

        Whatever, “one of the best-known exponents” of the temporalist method might have told you, there is still a basic contradiction in the arguments you have been putting forward as Graham has set out.

        Moreover, if those “best known exponents” of the temporalist method continually argue that those who argue the Marxist method based on reproduction costs are wrong for putting forward that argument, do you not think that also conbstitutes something of a contradiction with your own statement that the two positions are identical!

      • Boffy Says:

        “If you are a capitalist who has halted production, and the price of apples falls, it will affect the price of your holdings of applesauce because of the continued production – and therefore bringing into relation apples as means of production to applesauce – of other capitalists.”

        But, it will not change the amount of profit generated, because these changes do not affect the quantity of labour power employed nor the Rate of Surplus Value.

      • billj Says:

        Marx explains why the TSS is wrong here;

        “It is of no avail to deduce the exchange of more labour against less, from their difference of form, the one being realized, the other living. [4] This is the more absurd as the value of a commodity is determined not by the quantity of labour actually realized in it, but by the quantity of living labour necessary for its production. A commodity represents, say, 6 working-hours. If an invention is made by which it can be produced in 3 hours, the value, even of the commodity already produced, falls by half. It represents now 3 hours of social labour instead of the 6 formerly necessary. It is the quantity of labour required for its production, not the realized form of that labour, by which the amount of the value of a commodity is determined. ”
        http://www.marxists.org/archive/marx/works/1867-c1/ch19.htm

        In the previous chapter he explains how surplus value = surplus product. Goddam physicalist!
        http://www.marxists.org/archive/marx/works/1867-c1/ch18.htm

      • billj Says:

        Marx explains why the TSS is wrong here;

        “It is of no avail to deduce the exchange of more labour against less, from their difference of form, the one being realized, the other living. [4] This is the more absurd as the value of a commodity is determined not by the quantity of labour actually realized in it, but by the quantity of living labour necessary for its production. A commodity represents, say, 6 working-hours. If an invention is made by which it can be produced in 3 hours, the value, even of the commodity already produced, falls by half. It represents now 3 hours of social labour instead of the 6 formerly necessary. It is the quantity of labour required for its production, not the realized form of that labour, by which the amount of the value of a commodity is determined. ”
        Volum 1 chapter 19

    • Boffy Says:

      “Or, for the reasons I have outlined (e.g., the fact that (M’-M)/M is the identity of s/(v+c), the fact that profit is not to be measured in nominal terms, etc.), this doesn’t matter.”

      But clearly it DOES matter if the nominal terms you are using are not held constant!

      (M1 – M)/M is not identical to s/(v+c) for the reasons i have set out previously. M here is Money, in order for that identity to hold, it would be necessary for a start to agree to M being revalued alongside the means of production it buys. But, the temporalists, and you have made the same argument previously, though you seem to change your position frequently, say that M cannot be changed, that it is fixed.

      But, even were it not fixed, there are many reasons why M as an actual Monetary amount is not equal to C or V as values. For one thing, as marx points out, the capitalist might simply over or underpay when he buys those things.

      But, likewise, as I have set out several times now, M1 is not equal to c + v + s either in the HC method. For a marxist there can only be s if there is v, because s is a function of v, of the exploitation of labour. But, it is quite clear that under the HC method you could have M £1000 – C 1000 – C1 1100 – M1 – 1100. The only explanation for the additional 100 can then be S of 100. But, without V, where does this S come from? The increase from M to M1 arises not due to c + v +s, but merely from a Capital Gain in the revalutaion of the means of production.

      “Curious that you would use, as your example of why capital gains and losses should not be considered as changes to profit, a quote in which Marx references a rise or drop “in the rate of profit.” So he distinguishes changes to capital value from surplus value production, but acknowledges that both have an effect on profit.”

      But, there is NO effect on profit described here! The amount of profit remains exactly the same as it was before, and has to do, because profit is identical here to Surplus value, and Surplus value is consequent upon the exploitation of Labour. Provided the rate of exploitation remains the same, which marx here assumes it does, then the amount of profit remains CONSTANT.

      The whole point here that Marx is making is that the RATE of profit changes, not because the amount of profit has changed, but because the denominator of the Rate of profit – the advanced Capital – has changed, as a result of its revaluation!

      “I wish I could respond to this, but by this point, for the reasons given at the top of this comment, I literally have no idea which of my remarks you are claiming is wrong.”

      I’m explaining that what is wrong is your assertion that changes in Capital Values are the same as trading losses or profits. They clearly are not.

      “In fact, the value of capital plays a determining role in the organic composition of capital, which is indeed the very cause of the tendential fall in the rate of profit, which is a tendency altogether independent of the rate of surplus value.”

      That is wrong too. The value of capital plays a role in the Value Composition of Capital rather than the OCC. Moreover, the OCC could rise, whilst the ROP Profit rises too, provided the VCC falls. Moreover, the tendency for the ROP to Fall is NOT altogether independent of the rate of Surplus value, and marx says so specifically. The very conditions that can cause a rise in the OCC can also cause a rise in the Rate of Surplus Value, through the creation of Relative Surplus Value! That is one of the powerful ofsetting factors that marx sets out, as to why the Law is only tendential, and not some kind of “Iron law” of the kind some catastrophist economists make out.

  29. Hedlund Says:

    I’ve set out why the Value of Money is important for Marx in determining the Rate of Profit. That is that with inflation of 20% then if M1 is only 10% greater than M, that is not a real profit, but actually a loss.

    I’ve accounted for this in my math – that is, the math I keep referring you to (March 2, 3:00pm comment), and you keep brushing off. I will refer you to it as many times as I need to.

    In that comment, I was able to demonstrate why, as Marx says: “If only the money-value of the advanced capital rises or falls (in consequence of a change in the value of money), then the money-expression of the surplus-value rises, or falls, in the same proportion. The rate of profit remains unchanged.” I believe he said this for a reason, and as such we should not ignore it.

    On whether your argument is logical or not in relation to discontinued production is immaterial. Marxism is based on dialectics, and the basis of the dialectic as lenin puts it is – “The truth is always concrete”.

    I see. You don’t like my argument, so you’ll dismiss it without consideration because it, a counterfactual, does not describe our concrete reality. Similarly, should we not even judge whether physics calculations that assume gravitational acceleration of 4.9m/s^2 are correct, because that is not the Earth’s gravity, and therefore not concrete enough to concern us high-minded dialecticians?

    Commodities only Exchange at their Exchange Values under speific condiitons i.e. under simple commodity production. [lengthy stuff follows over several comments]

    Ah! I am mistaken. I had been associating the phrase “prices of production” with the price of production, which is to say, the total cost to the capitalist, and thus not counting profit (hence my earlier reference to the difference between the values of labor and labor-power). Obviously, this is the kind of error one might make from only having read select chapters and passages of Volume 3 instead of a cover-to-cover treatment. As far as thorough reading goes, I’m only about 1/3 of the way through Volume 2. I would have eventually caught up and rectified this misunderstanding in time, but still, thanks for clarifying this for me in advance.

    However, I find it odd that you state, unequivocally, that “Exchange Value is not equivalent to … ‘price of production’ ” while one day before, you parenthetically described Exchange Value as “price of production.” Which is it?

    Whatever, “one of the best-known exponents” of the temporalist method might have told you, there is still a basic contradiction in the arguments you have been putting forward as Graham has set out.

    Moreover, if those “best known exponents” of the temporalist method continually argue that those who argue the Marxist method based on reproduction costs are wrong for putting forward that argument, do you not think that also conbstitutes something of a contradiction with your own statement that the two positions are identical!

    I get the impression you may resent my “exponent” remark, but all I was saying is that I am apparently able to argue the temporalist position, such as it is. Did not AK express similar complaints with your interpretation of his statements?

    I responded to Graham’s alleged contradiction. Do you have anything to say to my response? If you have not read it (march 6, 5:32 pm), please do so.

    Also, I did not say the two positions are identical; they are very subtly distinguished from one another. Rather, I noted that the two outcomes are identical under typical conditions (i.e. continued production).

    But, it will not change the amount of profit generated, because these changes do not affect the quantity of labour power employed nor the Rate of Surplus Value.

    I think it’s pretty clear that having the value of your fixed stock of salable commodities change can affect your recorded profit, as long as we are judging profit in terms of money value (as we should).

    But clearly it DOES matter if the nominal terms you are using are not held constant!

    Good thing I am not using nominal terms, then!

    (M1 – M)/M is not identical to s/(v+c) for the reasons i have set out previously.

    And it is for the reasons I have set out. I think my reasons are stronger, because your reasons require assumptions that I have never made, e.g., that we are using nominal money measures.

    But, likewise, as I have set out several times now, M1 is not equal to c + v + s either in the HC method. For a marxist there can only be s if there is v, because s is a function of v, of the exploitation of labour. But, it is quite clear that under the HC method you could have M £1000 – C 1000 – C1 1100 – M1 – 1100. The only explanation for the additional 100 can then be S of 100. But, without V, where does this S come from? The increase from M to M1 arises not due to c + v +s, but merely from a Capital Gain in the revalutaion of the means of production.

    This capital gain does affect a capitalist’s rate of profit. You quoted him saying so. It’s one of the reasons why “profit” and “surplus value” are actually two separate things that can move independently of one another. As I previously noted: this separation is how there can even BE a tendential fall in the rate of profit.

    The surplus value is created in commodity form, but it is realized in money form. If it is not realized, then it has no existence. Marx is absolutely clear that if sale price does not exceed cost price, no surplus value is realized. In other words, you don’t even, strictly speaking, get an “s.” In your example, given on March 1 (2:56 pm), you don’t appear to take this into account when you still claim a rate of profit of 10% when capital loss would have clearly rendered the capitalist’s rate of profit much lower for that production period.

    But, there is NO effect on profit described here! The amount of profit remains exactly the same as it was before, and has to do, because profit is identical here to Surplus value, and Surplus value is consequent upon the exploitation of Labour.

    At the aggregate level, absolutely. I am not describing aggregates. Is this what’s causing all the confusion? Boy, won’t we all have egg on our faces!

    That is wrong too. The value of capital plays a role in the Value Composition of Capital rather than the OCC.

    Fine, I meant the value composition, but the point still stands. In volume 1 the terms are basically used interchangeably, anyway.

    Moreover, the tendency for the ROP to Fall is NOT altogether independent of the rate of Surplus value, and marx says so specifically.

    Okay, could you point me to where he says so? Obviously, a rising rate of surplus value can offset a rising constant capital component, but not indefinitely, as there are limits to how much absolute or relative surplus value can be extracted, though no such practical limit exists (so far as I’ve read) concerning the value composition.

    • Boffy Says:

      Hedlund,

      As I say, the problem is that you keep changing your argument, which along with the fact that you have not (on your own admission) read the whole of Capital even once, which makes it difficult to agree basic terms, makes discussion more difficult than it might otherwise be. For example,

      You say that you do not use Money in nominal terms. Yet above in your comment on you say,

      “If the original money can be revalued – as you concede it can – there is no logical basis for the insistence that estimates for rates of profit must be measured against it.”

      “I have never conceded this. Remember my example above? The $1000 advanced never changed, in ANY of those cases.”

      But, if the original money laid out CANNOT be revalued, and there is 20% inflation, then in nominal terms M1 will be 20% higher than M, as a consequence as I said. That is the point that Marx is making in the quote you cite above, which is the opposite of what you are trying to make him say. He is saying that if only Monetary values change due to a change in the Value of Money this cannot be taken as meaning that the rate of profit has really changed!

      The fact is that the temporalists DO work with a nominal money figure. That was the whole point of the argument that we had with Kliman over his single commodity Corn economy. He priced things in Constant £’s, when, in fact it was clear that because of the change in productivity in relation to the production of Corn, the Value of Money had changed significantly!

    • Hedlund Says:

      As I say, the problem is that you keep changing your argument

      It would indeed be difficult to argue with someone who keeps changing their argument. Indeed, it would be unfair of me to expect you to continue, if that were indeed what I am doing. Please note the use of the subjunctive mood in the previous sentence; that is to say, I have yet to change any aspect of my argument. Or at least, I am not aware that I have made changes. If I have indeed done so, then I would hope you would be able to show me exactly where and how I have done this. However, you have yet to provide any example that stands up to scrutiny. Let’s take the one you included in this comment as an example:

      You say that you do not use Money in nominal terms. Yet above in your comment on you say,

      “If the original money can be revalued – as you concede it can – there is no logical basis for the insistence that estimates for rates of profit must be measured against it.”

      “I have never conceded this. Remember my example above? The $1000 advanced never changed, in ANY of those cases.”

      In other words, the two “contradictory” statements are:

      1) I do not calculate money in nominal terms.
      2) The $1000 advanced never changed, in the terms in which it was calculated.

      Now, if we interpret “the terms in which it was calculated” to mean “in nominal terms,” then I will indeed have contradicted myself quite directly. However, this is not the only interpretation of that clause, and I do wish you would give me the benefit of a doubt and try to consider some other ones. For example, here is MY interpretation of my own statement: “The $1000 advanced never changed in terms of value.” This is part of the reason I prefer to use quantities of gold over quantities of dollars; the latter can more easily allow us to lose sight of the fact that this all boils down to value.

      If we read the above with this in mind – differentiating “nominal” and “value” terms as we must – the supposed contradiction vanishes, and we can all enjoy some cake. Now my claim is much more clear: “A capitalist parts with X quantity of money (embodied SNLT) to buy means of production. Following this purchase, the value embodied in a given quantity of money doubles. The means of production are now measured as only half as much money (X/2), and the resultant output will be revalued along similar lines, and therefore will command less money at the point of sale than they otherwise would. BUT, once you correct for the increased value of the money they sell for, this change in the value of money will have had no effect on the rate of profit, as measured against the value advanced.” For the actual equations employed, please refer to this comment.

      As you can see, whatever happens to the value of money, it does not change that the initial investment was X SNLT. Given a 10% rate of profit on the production, can we assume that the capitalist would have been better off holding on to his money than going into production? Sure, there were some lucrative capital gains to be had. But once he goes into production, money value fluctuations cease to play a role in determining the outcome.

      That is the point that Marx is making in the quote you cite above, which is the opposite of what you are trying to make him say.

      I hope you can see, from the above, that this is plainly false.

      I don’t get why it’s so hard for both of us to say A without one insisting the other is actually saying B.

      The fact is that the temporalists DO work with a nominal money figure.

      Maybe we need to clarify the terms of this debate: what will it take for me to convince you that this is wrong? Are there conditions under which you will concede an error? If so, what are they? If not, why not?

    • Boffy Says:

      “I see. You don’t like my argument, so you’ll dismiss it without consideration because it, a counterfactual, does not describe our concrete reality. Similarly, should we not even judge whether physics calculations that assume gravitational acceleration of 4.9m/s^2 are correct, because that is not the Earth’s gravity, and therefore not concrete enough to concern us high-minded dialecticians?”

      If I’m concerning myself with an analysis of the Earth rather than some other planet then no! If I’m analysing peasant production, slave production, or socialist production, or if I’m analysing the behaviour of speculators rather than productive Capitalists than I might want to consider things in terms that do not include continuing Capitalist Production, but I’m analysing Capitalist production!

      “Ah! I am mistaken. I had been associating the phrase “prices of production” with the price of production, which is to say, the total cost to the capitalist, and thus not counting profit (hence my earlier reference to the difference between the values of labor and labor-power)”

      The total Cost to the capitalist is Cost of Production not Price of Production. I still don’t see how this affects your comment about the Value of Labour and of Labour Power, and I’m still waiting for you to explain that comment.

      “However, I find it odd that you state, unequivocally, that “Exchange Value is not equivalent to … ‘price of production’ ” while one day before, you parenthetically described Exchange Value as “price of production.” Which is it?”

      I can’t see anywhere that I have equated Exchange Value with Price of Production other than to say that neither are equal to Market Price or are concerned with individual units of production. Exchange Value is not Price of Production is not Market Price.

      “Also, I did not say the two positions are identical; they are very subtly distinguished from one another. Rather, I noted that the two outcomes are identical under typical conditions (i.e. continued production).”

      Except the outcomes are NOT identical.

    • Boffy Says:

      “I think it’s pretty clear that having the value of your fixed stock of salable commodities change can affect your recorded profit, as long as we are judging profit in terms of money value (as we should).”

      Not according to Marx we shouldn’t! Pretty much all of Chapter 6 is devoted to showing that changes in the Rate of profit from such changes in Values and Prices arise from changes in the Value of Capital as the denominator, not from any change in the volume of profit!

      “They (changes in Value and prices) are to be briefly discussed here if only because they create the impression that not only the rate, but also the amount of profit — which is actually identical with the amount of surplus-value — could increase or decrease independently of the movements of the quantity or rate of surplus-value.” (Cap III Ch 6)

      Marx goes into further detail elsewhere, for example in Theories of Surplus Value to show that the bourgeois economists like Torrens and Ramsay were wrong in trying to identify profit as coming from other sources than the exploitation of Labour. Indeed, that is the central thesis of Marxism. If you now want to argue that the source of profits is not the exploitation of Labour, and is instead a consequecne of changes in the Value of Capital you are stepping completely outside the ambit of Marxism.

      “This capital gain does affect a capitalist’s rate of profit. You quoted him saying so. It’s one of the reasons why “profit” and “surplus value” are actually two separate things that can move independently of one another. As I previously noted: this separation is how there can even BE a tendential fall in the rate of profit.”

      It affects the Rate yes, but not the AMOUNT of Profit. See Marx above for a clear rebuttal of your claim. “but also the amount of profit — which is actually identical with the amount of surplus-value…”

      “At the aggregate level, absolutely. I am not describing aggregates.”.

      I don’t understand what this means. Aggregate level of what?

      “Okay, could you point me to where he says so?”

      Certainly.

      “There must be some counteracting influences at work, which cross and annul the effect of the general law, and which give it merely the characteristic of a tendency, for which reason we have referred to the fall of the general rate of profit as a tendency to fall…” (Something those who fetishise the FROP should take note of)

      “Moreover, it has already been demonstrated — and this constitutes the real secret of the tendency of the rate of profit to fall — that the manipulations to produce relative surplus-value amount, on the whole, to transforming as much as possible of a certain quantity of labour into surplus-value, on the one hand, and employing as little labour as possible in proportion to the invested capital, on the other, so that the same reasons which permit raising the intensity of exploitation rule out exploiting the same quantity of labour as before by the same capital. These are the counteracting tendencies, which, while effecting a rise in the rate of surplus-value, also tend to decrease the mass of surplus-value, and hence the rate of profit produced by a certain capital…”

      “It might be asked whether the factors that check the fall of the rate of profit, but that always hasten its fall in the last analysis, whether these include the temporary, but always recurring, elevations in surplus-value above the general level, which keep occurring now in this and now in that line of production redounding to the benefit of those individual capitalists, who make use of inventions, etc., before these are introduced elsewhere. This question must be answered in the affirmative.”

      And many more besides in Chapter 14, which you will see when you get to it.

      • Boffy Says:

        Here’s the specific quote I was looking for.

        “In relation to employed labour-power the development of the productivity again reveals itself in two ways: First, in the increase of surplus-labour, i.e. , the reduction of the necessary labour-time required for the reproduction of labour-power. (Increase in the Rate of Surplus Value – Boffy)Secondly, in the decrease of the quantity of labour-power (the number of labourers) generally employed to set in motion a given capital (Rising OCC – Boffy).

        The two movements not only go hand in hand, but mutually influence one another and are phenomena in which the same law expresses itself.”

        Chapter 15

    • GrahamB Says:

      @Hedlund

      “Also, I did not say the two positions are identical; they are very subtly distinguished from one another. Rather, I noted that the two outcomes are identical under typical conditions (i.e. continued production).”

      If the results of the RC and HC approaches are different only under exceptional circumstances (i.e. discontinuous production) then the temporalists should just forget it. Or, you believe they are identical under typical circumstances, but this *cannot* be what is being proposed. Here (again) are the two statements:

      “Does the sum of value transferred from an input to a newly produced commodity depend upon the input’s price when it enters production, as the TSSI holds, or upon the cost of replacing the input when the new commodity is completed, as the replacement-cost interpretation holds?”

      “And as the whole of this book shows, the difference between simultaneous and delayed revaluation is the difference between internal consistency and physicalist conclusions on the one hand, and internal consistency and Marx’s conclusions on the other”

      I’m no longer sure what you’re defending.

      • Hedlund Says:

        @Graham:

        If the results of the RC and HC approaches are different only under exceptional circumstances (i.e. discontinuous production) then the temporalists should just forget it.

        I think you’re in danger of going off-track; I am not talking about the results of RC and HC approaches. Historical cost is emphatically not applicable to commodity valuation (which is what we’re discussing). Rather, I’m discussing the difference between “replacement cost” and “pre-production reproduction cost” methods, which is a significantly narrower issue.

        Also, all we can deduce by the above reasoning is that one side should “just forget it,” but not which one.🙂

        Here (again) are the two statements:

        Hang on a second, those two statements are different from the last statements you submitted as contradictory. I don’t think it’s entirely fair to use “again” in this case. In case you did not see it, I provided a detailed response to your previous “reconciliation” comment. Before I move on to this new contention, I must ask: did I manage to satisfy that first one? (Is that why we’ve moved on to another?)

        Regarding this other one… I am not sure what is contradictory. Statement 1: the TSSI says the sum of value transferred from an input to a newly produced commodity depend upon the input’s price when it enters production. Statement 2: the difference between the TSSI and other methods is that one leads to one set of conclusions and the other leads to another. I’ve read it about a dozen times now, trying to figure an angle out that would make them contradict.

        Last time, I was at least able to proffer an explanation while I waited for a response to my request that you walk me through your specific point of collision (which never happened, alas). This time, however, I can do no such thing, and must insist you elaborate further, because I am really at a loss to understand the problem.

        Sorry if that’s not very helpful.

      • GrahamB Says:

        @Hedlund

        I was taking a step back and repeating only the quotes from the book by a leading proponent of the temporalist approach.
        And I was using “RC and HC approaches” only as a shorthand, I am fully aware of the difference between “historic” and “pre-production” cost in the book, in fact I have discussed it several times. The temporalist approach sequentially:

        1. The capitalist purchases the MOP with money, M. This is the historic cost – whether you think it’s nominal money, inflation-adjusted money, ounces of gold or value in labour hours I don’t know but Boffy is correct, the TSSI uses nominal money. Still, lets go on.

        2. In the book, between purchase and entering production the value of MOP (previously produced commodities) can change according to the SNLT. I don’t think this is necessarily the case for all proponents of temporalism.

        3. The period of the production process, C and V to produce S. If you are adamant that this there is no difference between the two approaches in terms of the value transferred to the outputs (newly produced commodities) during production, the statement we’ve been looking at is simply nonsensical. There is no need to look further into it, it’s logically incoherent because of the word “depend”. If the claim is a distinction between “value transferred” and “value”, it is unexplained.

        4. Between completion and sale the value of product (previously produced commodities) can change according to the SNLT. M’ is at sale.

        This is why M/M’ – 1 is *not* the same as S / (V + C), because your money measured ROP is (1) – (4) but the value ROP is based on production (2).

      • GrahamB Says:

        That should be M’/M – 1.

      • GrahamB Says:

        I’ll get it right this time – too rushed:

        This is why M’/M – 1 is *not* the same as S / (V + C), because your money measured ROP is based on stages (1) to (4) but the value ROP is based on production (3).

      • Hedlund Says:

        @GrahamB:

        I was taking a step back and repeating only the quotes from the book by a leading proponent of the temporalist approach.

        Well, okay, but if the quotes no longer have direct relevance to the point you set out to make, it defeats the purpose. It’s like that joke about the man who lost his wallet “over there” but continues to search for it “over here” because the lighting is better.

        On that note, I keep waiting for you to relate a comment back to your original points – or, for that matter, address anything I’ve offered you in response. Every time I reply to you, we move on to another point without comment. I must confess it’s a bit like trying to hold the wind. Did you have any thoughts on anything I’ve said, such as my attempt to resolve the first “contradiction” you posed?

        And I was using “RC and HC approaches” only as a shorthand,

        Perhaps “TSSI” might be a clearer shorthand.

        The temporalist approach sequentially:

        1. The capitalist purchases the MOP with money, M. This is the historic cost – whether you think it’s nominal money, inflation-adjusted money, ounces of gold or value in labour hours I don’t know but Boffy is correct, the TSSI uses nominal money. Still, lets go on.

        So, even if I’m using value in labor hours, I’m using nominal money? Or is it that you’re saying that I am unknowingly breaking ranks with the temporalist position? Of course it is possible, but I will need a bit more to go on than repeated assertion.

        Can you illustrate any point in any temporalist source (not even just limited to AK; expand the field of your search as needed) that agree with the assessment you and Boffy have submitted? So far none of the quoted material has made this claim, but I am open to the possibility that I have missed something.

        It does make one wonder why there is such an insistence on adjusting for the MELT; if the whole point is nominal profit, those references can be excised without altering the text, yes? So why are they even there?

        2. In the book, between purchase and entering production the value of MOP (previously produced commodities) can change according to the SNLT. I don’t think this is necessarily the case for all proponents of temporalism.

        Such as whom?

        3. The period of the production process, C and V to produce S. If you are adamant that this there is no difference between the two approaches in terms of the value transferred to the outputs (newly produced commodities) during production, the statement we’ve been looking at is simply nonsensical.

        There IS a difference in the sense that one way (TSSI) assumes that at 2 p.m. the apple transfers $0.50 to the sauce, and another (RC) assumes $0.45. I only describe them as identical for a given set of assumptions. In this case, that assumption is continuous production, and I make the claim for a very specific reason: in this case, we are only looking at a single example of production.

        In the real world, other producers are making applesauce at the same time. Maybe production periods begin minutes apart from one another, or even seconds. If we assume production is continuous, then by the time the sauce in the example is finished, then it will have been revalued such that to our eyes, it looks as if the RC way had it from the first. However, given our penchant for looking beyond the surface, we can pursue the matter and find an even more plausible explanation: that each time production begins, each time a commodity rendered MoP, it transfers its value in a manner concurrent with its consumption. (I made this point in crystalline terms in a previous comment that, despite my best efforts and repeated linkings, I simply cannot seem to get you to notice.)

        There is a difference between the two approaches, though it can be obscured by given conditions. For a given domain of assumptions, they can be considered identical. Said domain is well-defined.

        This is why M/M’ – 1 is *not* the same as S / (V + C), because your money measured ROP is (1) – (4) but the value ROP is based on production (2).

        I am glad I refreshed and saw your corrections before posting this. I was going to say, “if this is how you believe I calculate it, no wonder you think I am wrong.”

        Anyway, I get that all the value is added in production, but we can’t know for sure how MUCH value was added until it is realized. If we just put all that capital towards making mud pies, then we’re sunk. To our perception, we used X purified and Y prime market topsoil and Z average labor time and therefore judge our holdings as X+Y+Z. To the perception of the market – the true arbiter of these matters – we just pissed a lot of time and resources away, and our holdings are 0.

        Thus, the importance of the (MELT-adjusted) monetary measure.

      • GrahamB Says:

        @Hedlund

        (1) “So, even if I’m using value in labor hours, I’m using nominal money? ”

        Given that all the supporters of temporalism on this blog have repeatedly made the point – with numerous examples – that the key is advanced *money*, I think we can assume it’s not based on the magnitude of value in labour hours.

        As far as I am aware, gold as a commodity and a measure of value is not used in the TSSI.

        What I do know is that the MELT is used to quantify the money that represents an hour of social labour. And the MELT in the TSSI is the economy-wide ratio of the *total money price* of the output to the total labour time value of output.

        (2) “Such as whom?”

        See introduction to this paper by Fred Moseley for different temporalist interpretations of the value of constant capital.

        http://www.mtholyoke.edu/~fmoseley/Working_Papers_PDF/CONCP.pdf

        “In recent years, the TSS interpretation has presented a different view of the determination of constant
        capital – or rather at least two different views. John Ernst (1982) and Alan Freeman (1995) have argued
        that the value of constant capital is determined by the actual historical costs of the means of production,
        so that the value of constant capital in existence is not affected by a change in the value of the means of
        production. Andrew Kliman has presented a more complicated interpretation – that the stock of constant
        capital is determined by the historical costs of the means of production, but the flow of constant capital is
        determined by the value of the means of production at the time these means of production enter the
        production process, i.e. are determined by what Andrew calls the “pre-production current costs.”

        (3) “If we assume production is continuous, then by the time the sauce in the example is finished, then it will have been revalued such that to our eyes, it looks as if the RC way had it from the first. However, given our penchant for looking beyond the surface, we can pursue the matter and find an even more plausible explanation: that each time production begins, each time a commodity rendered MoP, it transfers its value in a manner concurrent with its consumption.”

        You have conceded here the correctness of RC and you can’t wriggle out of it by pretending that your conception of value transfer is somehow deeper than other interpretations and hence better corresponds with reality.

        In your comment that you say I never respond to:

        “If the utility of a commodity is to serve as the means of production and therefore transfer its value to an output, then it only makes sense that we consider the value transferred when said means are consumed, which is logically and temporally prior to achieving the finished output.”

        You’ve conflated the subjective “it only makes sense” with “logically”. It is just as valid to conceptualise the value transferred from the input to output based on the moment of creation of the output at the end of production. Why, because the commodity didn’t exist until that point.

        It also has the *great advantage* of equating the value transferred with the value of the newly produced commodity, given that you have accepted that with continuous production and many capitals (i.e. the real world), the value of the newly produced commodity is determined by the SNLT.

      • Hedlund Says:

        @GrahamB:

        Given that all the supporters of temporalism on this blog have repeatedly made the point – with numerous examples – that the key is advanced *money*, I think we can assume it’s not based on the magnitude of value in labour hours.

        Where it is assumed that the value of money remains constant, there is no need to view it explicitly in value terms. Where it is assumed that the value of money changes, you will note that it becomes necessary to parlay it into SNLT, as I have done.

        So here we have concrete examples that you yourself have acknowledged, but they don’t seem to be doing the trick. I guess I’ve got to put the same question to you that I did to Boffy: under what condition will you concede an error on this point?

        (3)You have conceded here the correctness of RC

        I do appreciate the concept of the “death of the author” and all, but I don’t think it belongs in a debate of this sort. Plus, I am very much still alive and can tell you in plain language that I’ve done no such thing.

        “If the utility of a commodity is to serve as the means of production and therefore transfer its value to an output, then it only makes sense that we consider the value transferred when said means are consumed, which is logically and temporally prior to achieving the finished output.”

        You’ve conflated the subjective “it only makes sense” with “logically”.

        No, the “only makes sense” refers to our choice of conception, in this case founded on the separate notion of what is logical. “Logically” refers specifically to the consumption of the MoP being prior to the output’s creation. You can prove this wrong, if you like, by giving me an example of, say, a pane of glass being finished while a portion its constituent sand remains unmelted.

        It is just as valid to conceptualise the value transferred from the input to output based on the moment of creation of the output at the end of production. Why, because the commodity didn’t exist until that point.

        We can, but this is not Marx’s conceptualization. He says, over and over, that the transfer of value to the output is coincident with the destruction of the input’s use-value (assuming, to be precise, said destruction also causes the loss of its exchange value).

        “This transfer takes place during the conversion of those means into a product, or in other words, during the labour-process.” [read: not after the labor process]

        Also, the reading you suggest does away with the need for this:

        “Since, however, the addition of new value to the subject of his labour, and the preservation of its former value, are two entirely distinct results, produced simultaneously by the labourer, during one operation, it is plain that this two-fold nature of the result can be explained only by the two-fold nature of his labour; at one and the same time, it must in one character create value, and in another character preserve or transfer value.”

        “Preserving” is a key part of valorization that the RC take seems keen to abridge.

        It also has the *great advantage* of equating the value transferred with the value of the newly produced commodity, given that you have accepted that with continuous production and many capitals (i.e. the real world), the value of the newly produced commodity is determined by the SNLT.

        Yes. This is why I view it as a valuable conditional abstraction.

      • GrahamB Says:

        My last comment has been placed at the bottom.

  30. Boffy Says:

    “BUT, once you correct for the increased value of the money they sell for, this change in the value of money will have had no effect on the rate of profit, as measured against the value advanced.”

    But, revaluing the money they sell for to adjust for its increase in Value is NO different than revaluing the original sum of money for the same reason! Yet, I repeat you claimed previously,

    “I have never conceded this. Remember my example above? The $1000 advanced never changed, in ANY of those cases.”

    And, of course it is not true to say that even in the terms in which it was calculated (SNLT) that it does not change. If the Value of Money has doubled then if $1000 originally embodied 1000 hours of SNLT, then today it embodies only 500!

  31. Boffy Says:

    “Maybe we need to clarify the terms of this debate: what will it take for me to convince you that this is wrong?”

    A quote from Kliman stating openly that he does not argue that the original investment cannot be revalued according to its current costs of reproduction!

  32. Hedlund Says:

    If I’m concerning myself with an analysis of the Earth rather than some other planet then no!

    If you are truly concerned with an analysis of Earth’s laws, one key category is their overall purview. Otherwise, we might make a mistake like assuming that all matter in the universe falls towards Earth at the exact same rate of acceleration.

    I still don’t see how this affects your comment about the Value of Labour and of Labour Power, and I’m still waiting for you to explain that comment.

    Apologies, I thought that it would be self-evident. The “cost of production” only counts the cost of labor-power. The “price of production” evidently includes the full value of labor, i.e. surplus value. By conflating these terms, I was effectively off by that much. Does it make sense now?

    I can’t see anywhere that I have equated Exchange Value with Price of Production

    I can help: see here.

    Except the outcomes are NOT identical.

    I guess I’m supposed to just take your word for it, since you haven’t bothered to advance an argument in support of your assertion?

    But, revaluing the money they sell for to adjust for its increase in Value is NO different than revaluing the original sum of money for the same reason!

    On the contrary, there is a yawning gulf between the two. I will demonstrate. Let’s look at two examples: one in which the original money value is held constant despite a subsequent change in money value, and the second in which it is revalued. (100% RSV assumed)

    1 unit of M = 1 hour of SNLT. 1000M buys 800C + 200V. Money value doubles, leaving us with: 400C + 100V. Production yields 400 + 100 + 100 = 600M’. Whereas each unit of M is now 2 hours of SNLT, 600M’ = 1200 in SNLH. Compared against the unchanged initial sum of 1000 SNLH, profit is 200. Rate is 20%.

    By your account, this should be “NO different than revaluing the original sum of money for the same reason.” Let’s see:

    1 unit of M = 1 hour of SNLT. 1000M buys 800C + 200V. Money value doubles, which leaves us with 400C + 100V. Production yields 400 + 100 + 100 = 600M’. Whereas each unit of M is now 2 hours of SNLT, 600M’ = 1200 in SNLH. Compared against the initial sum of 1000M, revalued to 2000 SNLH, we now have 1200 – 2000 = -800, rate of -80%. This is preposterous.

    Of course, it could be that in this example the means of production shouldn’t have been revalued? It seems like you would insist that it should be, yes? But hey, let’s see what happens if we’re treating monetary phenomena as somehow fully sundered from other commodities: after money value doubles we STILL have 800C + 200V + 200S = 1200. The 1200 money units become 2400 SNLH. 2400 – 2000 = 400. rate of profit is 20%.

    So, in the latter case, we still get the same rate of profit, but we’re substituting an adjustment to the value of the money advanced for an adjustment to the value of the means of production. I don’t see this as in any way more intuitive than my way. In fact, it actually strikes me as quite a bit less so, since it requires causality to move in two directions. Time and entropy, alas, are not so flexible. Plus, it changes our terms of SNLT such that SNLT in one period is different from SNLT in another period, which is a bit bizarre; in terms of simple average abstract labor, an hour is always an hour.

    If the Value of Money has doubled then if $1000 originally embodied 1000 hours of SNLT, then today it embodies only 500!

    You got that backwards. If the value of money (i.e. the SNLT embodied in it) doubles, then it would be 2000 hours, not 500.

    A quote from Kliman stating openly that he does not argue that the original investment cannot be revalued according to its current costs of reproduction!

    Let me make sure I understand you correctly: are you saying that you are not arguing against the temporalist position in general, but rather AK in particular? If so, then I fear I may have no place in this dispute.

    Further, it appears that the “conditions under which you will concede an error” consist of AK saying he agrees with you. This may stem from a misunderstanding of my query: the question is not “under what conditions will you concede an error *about being in disagreement with the temporalist position*,” but “under what conditions will you concede an error *about the temporalist interpretation only using nominal money values*.” I can see how I may have been unclear.

    So again, I put the above (last) question to you. What do you say?

    [I just refreshed the screen and saw a couple more comments of yours. Please note that I am not ignoring those; I will just have to respond to them later, as my lunch break is ending.]

    • Hedlund Says:

      @Boffy (part 2)

      “I think it’s pretty clear that having the value of your fixed stock of salable commodities change can affect your recorded profit, as long as we are judging profit in terms of money value (as we should).”

      Not according to Marx we shouldn’t! Pretty much all of Chapter 6 is devoted to showing that changes in the Rate of profit from such changes in Values and Prices arise from changes in the Value of Capital as the denominator, not from any change in the volume of profit!

      Volume of profit? Who said anything about the volume of profit? The changes to commodity values I was referencing had to do with changes in the value of input capital, remember? Apples and applesauce?

      In light of this, the more I reread the above passage, the more it seems like what you are saying is: “Of course Marx disagrees with your assertion of [A]. Instead, Marx CLEARLY states [A].”

      “They (changes in Value and prices) are to be briefly discussed here if only because they create the impression that not only the rate, but also the amount of profit — which is actually identical with the amount of surplus-value — could increase or decrease independently of the movements of the quantity or rate of surplus-value.” (Cap III Ch 6)

      I will knock off two responses at once, here: this and your question about my reference to aggregates. When he says “the amount of profit [is] identical with the amount of surplus-value,” this is one of his “aggregate equalities.” If we are summing a whole economy, it holds. Otherwise, there are value changes all over the place that will be recorded as profits and losses. This is what he’s talking about, yes? So why on earth are you telling me that I’m wrong for saying that an individual capitalist can experience positive or negative profits completely independently of surplus value?

      If you now want to argue that the source of profits is not the exploitation of Labour, and is instead a consequecne of changes in the Value of Capital you are stepping completely outside the ambit of Marxism.

      Duly noted, and agreed (though I am not arguing this).

      It affects the Rate yes, but not the AMOUNT of Profit. See Marx above for a clear rebuttal of your claim. “but also the amount of profit — which is actually identical with the amount of surplus-value…”

      I never referenced an “amount” in the quoted passage. I appreciate that you are trying to be thorough, but sometimes it gives the impression that you’re arguing against things I never said.

      Certainly

      Thanks for the quotation. I do appreciate it. I do have a minor quibble, though: this does not say what I was expecting it to say. That is, I was expecting, as advertised, that it would “specifically” say that “the tendency for the ROP to Fall is NOT altogether independent of the rate of Surplus value,” as per your billing. Instead, the quote explains, as I already understood it, that the law describes a tendency, and that changes in the rate of surplus value can be one source of countertendential motion.

      So far so good, but it didn’t contradict me as such; the tendential fall has to do with the presence of constant capital, yes? Without constant capital, nothing obscures a direct relationship between the rate of surplus value and the rate of profit, right? Thus, the tendency, described by itself, is the result of an increasing value composition, yes?

      Obviously, as you and I and Marx and everyone notes, in the short run, an increase in relative surplus value and similar factors can offset this, but as I noted initially, there are limits to how far this can be pushed, while the growth of constant capital suffers no such limitation. As he notes, the factors in question “check the fall of the rate of profit, but that always hasten its fall in the last analysis.”

      That’s what I was getting at. Not that Profits Must Always Be Downward Outside of Crisis, but that in the long run, the value of capital is the key player in its determination.

  33. GrahamB Says:

    @Hedlund

    I’m sure you’re alive and kicking.

    (1) “Where it is assumed that the value of money changes, you will note that it becomes necessary to parlay it into SNLT, as I have done.”

    But how is the MELT calculated, you didn’t comment on this?

    (2) Here’s the paragraph in full that you quoted from (Vol 1, Ch 8):

    “The labourer adds fresh value to the subject of his labour by expending upon it a given amount of additional labour, no matter what the specific character and utility of that labour may be. On the other hand, the values of the means of production used up in the process are preserved, and present themselves afresh as constituent parts of the value of the product; the values of the cotton and the spindle, for instance, re-appear again in the value of the yarn. The value of the means of production is therefore preserved, by being transferred to the product. This transfer takes place during the conversion of those means into a product, or in other words, during the labour-process. It is brought about by labour; but how?”

    No, Marx does not (“over and over”) support your conceptualisation of value transfer. Who disagrees with the use of “preserve”? Just because it’s in a paragraph along with the words “transfer” and “value” does not make him a temporalist.

    And the last sentence where you added in the bracketed comment:

    “This transfer takes place during the conversion of those means into a product, or in other words, during the labour-process. [read: not after the labour process]”

    Because of the word “during”, I could just as easily replace it with:
    [read: not *before* the labour process]

    (3) From the same chapter:

    “We have seen that the means of production transfer value to the new product, so far only as during the labour-process they lose value in the shape of their old use-value. The maximum loss of value that they can suffer in the process, is plainly limited by the amount of the original value with which they came into the process, or in other words, by the labour-time necessary for their production. Therefore, the means of production can never add more value to the product than they themselves possess independently of the process in which they assist. However useful a given kind of raw material, or a machine, or other means of production may be, though it may cost £150, or, say, 500 days’ labour, yet it cannot, under any circumstances, add to the value of the product more than £150. Its value is determined not by the labour-process into which it enters as a means of production, but by that out of which it has issued as a product. In the labour-process it only serves as a mere use-value, a thing with useful properties, and could not, therefore, transfer any value to the product, unless it possessed such value previously. ”

    A couple of things to note:

    The use of the words “maximum”, “limited” and “more”. Not “must”, as you would have it. Temporalists would say that *exactly* £150 (initial price) is transferred, but that is not what Marx is saying at all.

    “Its value is determined not by the labour-process into which it enters as a means of production, but by that out of which it has issued as a product.”

    That is *not* temporalist!

    (4) You didn’t comment on the differing views of proponents of temporalism.

    • Hedlund Says:

      Graham:

      But how is the MELT calculated, you didn’t comment on this?

      In the example I used, it was not important to show how we got from money to value; only to illustrate that an equivalency exists in some form. Obviously $1 = 1 SNLH is not a reasonable assumption in the current state of the world, but there is nothing that logically excludes it from use in the example. In fact, it is virtually guaranteed that there has been some point in history, however fleeting, in which that equality did hold.

      As for the actual calculation, there are a few ways to go about it. One starts from the basis that total money price = total money value. Since total value in terms of money equals the MELT times the total value in terms of labor-time, then we can deduce that the MELT equals total money price divided by total value in labor hours. For an alternative, Moseley suggested a different approach that I also find helpful.

      No, Marx does not (“over and over”) support your conceptualisation of value transfer. Who disagrees with the use of “preserve”? Just because it’s in a paragraph along with the words “transfer” and “value” does not make him a temporalist.

      I disagree with the first point for reasons already given. I agree with the second: “preserve” being in the same paragraph as “transfer” and “value” does not automatically qualify the author as a temporalist. There’s a bit more to it.

      Because of the word “during”, I could just as easily replace it with:
      [read: not *before* the labour process]

      Then do so. As long as we agree that the transfer occurs during the labor process, the temporalist view holds.

      The use of the words “maximum”, “limited” and “more”. Not “must”, as you would have it.

      The only way it’s a “must” is if the whole of the commodity is used up in the process (e.g., circulating capital). Obviously fixed capital is a bit more gradual.

      Since we’re emphasizing bits of that quote, I would in turn point out the use of “original,” “came,” and “previously.”

      “Its value is determined not by the labour-process into which it enters as a means of production, but by that out of which it has issued as a product.”

      That is *not* temporalist!

      Sure it is! He’s saying that the value of a raw material (an apple) is not determined by the process of production into which it enters (to make apple sauce), but by that which produced it (production of apples). This is what temporalists say. This is what I have been saying, ceaselessly and to no avail.

      (4) You didn’t comment on the differing views of proponents of temporalism.

      It’s an interesting point, but I have not read enough Freeman or Ernst to make a substantive reply. I am of course willing to consider that there may be differences between and among temporalists, though given that Freeman and Kliman have a number of joint publications more recent than 1995, it could be that they’re now closer in their interpretation than they used to be. Again, I really cannot say for sure, at this time. Thanks for bringing it to my attention.

  34. GrahamB Says:

    @Hedlund

    Again from the same chapter:

    “As regards the means of production, what is really consumed is their use-value, and the consumption of this use-value by labour results in the product. There is no consumption of their value, and it would therefore be inaccurate to say that it is reproduced. It is rather preserved; not by reason of any operation it undergoes itself in the process; but because the article in which it originally exists, vanishes, it is true, but vanishes into some other article. Hence, in the value of the product, there is a reappearance of the value of the means of production, but there is, strictly speaking, no reproduction of that value. That which is produced is a new use-value in which the old exchange-value reappears.”

    This I think casts doubt on the attempt to conceptualise and quantify “value transferred”. And what are we left with, it can only be SNLT. That is the point I’m making, value transferred – measured by RC – equates with the SNLT of the produced commodity, the temporalist approach doesn’t.

    You said earlier:

    “Anyway, I get that all the value is added in production, but we can’t know for sure how MUCH value was added until it is realized.”

    Well yes, things have to be bought in the marketplace for the circulation of capital to continue, but the SNLT and value of commodities is not determined by the market of consumers but by the production performed by many competing producers.

    • Hedlund Says:

      @graham:

      This I think casts doubt on the attempt to conceptualise and quantify “value transferred”.

      You’ll have to explain why. He seems to be quite clear, to me, that it is precisely value being “preserved” and “transferred,” and not “reproduced,” “because the article in which it originally exists, vanishes … into some other article.”

      In other words, value is transferred from one thing by its disappearance, and we do not see it again until the valorization process allows it to manifest in another article.

      Let’s say there is a balloon hooked up to a malfunctioning air pump that is causing the amount of air in the balloon to fluctuate. Let’s say you empty your lungs, then suck the air out of a balloon, destroying it in the process. We no longer can get the same sense of the air’s volumetric presence until you expel that air into a different balloon. And though the quantity of air in the first balloon may have been changing, you won’t be able to blow more air into another balloon than you took at the point of emptying the first.

      That is the point I’m making, value transferred – measured by RC – equates with the SNLT of the produced commodity, the temporalist approach doesn’t.

      But it does, and I’ve explained how. We’ve danced this dance already.

  35. GrahamB Says:

    @Hedlund:

    We’re going around in circles now. The temporalist approach is inconsistent with value transferred. We’ll never agree and I don’t think there’s any more I can say so I’ll call it a day on this topic.

    • Hedlund Says:

      @GrahamB:

      Very well. While we didn’t come to an agreement, I have nonetheless appreciated our correspondence.

      (Also, here is a final obligatory statement of disagreement about your second sentence, for what it’s worth.)

      • GrahamB Says:

        “Also, here is a final obligatory statement of disagreement about your second sentence, for what it’s worth.”

        I wouldn’t expect otherwise! Thanks for the debate, no doubt a variant of it will continue here or elsewhere at some point.

      • Hedlund Says:

        Word.

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