Value & Price in Marx's Capital [1] - BY DAVID YAFFE – FROM REVOLUTIONARY COMMUNIST 3/4
'Has Struve, who has managed to
discern the "harmfulness" (sic!) of repeating Marx, failed to notice
the harmfulness of uncritically repeating the fashionable corrections of
fashionable bourgeois "science"?' (Lenin)[2]
Of
all the fashionable 'corrections' of Marx's Capital, nothing has been
performed so often as the transformation of values into prices. From
Bortkiewicz (19O7)[3] to Samuelson (1971)[4], bourgeois 'science' has felt itself
impelled to improve, correct or revise Marx on this question. With Sweezy's
introduction of the Bortkiewicz 'correction' of Marx to the English speaking
world in 1946[5], another round of 'solutions' began.
Although many differ in form from the Bortkiewicz/Sweezy contribution, and some
avoid the more obvious errors, they treat the problem in a more or less similar
way.
Bortkiewicz
was a Ricardian and he went to great lengths to defend Ricardo against Marx's
systematic attack. In his treatment of value and price, and in his 'solution'
to the transformation problem, he is a consistent Ricardian. It is. therefore,
not surprising that with the problem being presented in a Ricardian way, the
appearance of Sraffa's Production of Commodities by Means of Commodities[6] - a thoroughly Ricardian text - has
more recently given a new life to the transformation 'problem'. What all these
Ricardian type solutions have in common is a failure to grasp Marx's method
in'Capital' and little or no understanding of the categories of value and
price. Value and capital cease to have a social significance, to express, in
fetishistic form, social relations under the capitalist mode of production. The
substance of value - abstract human labour - is replaced by its magnitude,
units of labour-time, and capital is simply reduced to dated labour-time
inputs. The social relations, usually introduced by these critics of Marx as
the rate of exploitation, is an empirically 'given' fact or a mathematically,
and presumably sociologically, acceptable explanation of positive profits. It
is given once the bundle of commodities forming the wage paid to the workers
(in embodied labour-time units, of course) and total income are known, A social
process is replaced by technical coefficients and social relations by the
distribution of the production between the social classes.[7]
The
method of Marx, the dialectical representation in Capital, is not a
'"hegelese" form of reasoning'[8] that can simply be discarded as so much
unnecessary ballast, That is why Lenin remarked:
'It is impossible completely to
understand Marx's Capital, and especially the first chapter, without
having thoroughly studied and understood the whole of Hegel's Logic.
Consequently, half a century later, none of the Marxists understood Marx!!'[9]
The
failure to understand Marx's Capital, and especially its first chapter,
does indeed lie at the heart of the matter. The consequences must follow their
inexorable course. It is not just Marx's transformation of values into prices
which has to be 'corrected'. 'We must bury the last iron law of Marxian
political economy - the law of the falling tendency of the. rate of profit.'[10] But that is not all.
The
distinction between productive and unproductive labour must be cast aside as
well, and the Ricardian treatment of 'luxury goods' (Sraffa's non-basics)
necessarily replaces the position of Marx. What we have here is not simply a
'revision' of Marx. It is a complete rejection of Marx's scientific work. It
represents a 'new' bourgeois school of thought - Neo-Ricardianism.[11] It must eventually lead to a reformist
political practice.[12]
This
article will deal primarily with the question of value and price developed in
such a way as to 'solve' the transformation problem. Other questions will be
considered in so far as they are relevant and follow as a by-product of this. I
shall not attempt in any systematic manner to answer criticisms of the other
positions held by Marx. This has been done elsewhere.[13] It has as its precondition an
understanding of the method of Marx and of the categories of value and price.
This will be the aim of this article.
In
Volume 1 of Capital, Marx had assumed that all commodities sold at their
values. At the level of abstraction of Volume 1 of Capital - the
immediate process of production - where capital as such was not distinguished
from individual capital, this creates no difficulties.[14] The general law of capitalist
accumulation was developed on this foundation. But once we attempt to deal with
'the concrete forms which grow out of the movement of capital as a whole'[15] a major difficulty seems to arise, At
this level of abstraction the existence of 'many capitals', and the competition
between capitals, has to be brought into the analysis, The fact of a general
rate of profit, that is, that capitals of equal magnitude, no matter what their
organic compositions, yield equal profits, seems to conflict with the 'law of
value', the determination of the value of commodities by the socially necessary
labour-time to produce them. Marx formulates the problem in terms of the
difficulties facing the Ricardian system as follows:
'The
difficulty arose because capitals of equal magnitude, but of unequal
composition - it is immaterial whether the unequal composition is due to the capitals
containing unequal proportions of constant and variable capital, or of fixed
and circulating capital, or to the unequal period of circulation of the
capitals - set in motion unequal quantities of immediate labour, and therefore
unequal quantities of unpaid labour; consequently they cannot appropriate equal
quantities of surplus-value or surplus product in the process of production,
Hence they cannot yield equal profit if profit is nothing but the surplus-value
calculated on the value of the whole capital advanced, If, however, the
surplus-value were something different from (unpaid) labour, then labour could
after all not be the foundation and measure of the value of commodities,'[16]
Ricardo
merely regards these difficulties (not recognised in their generality by him)
as exceptions to the law of value. The later Ricardians toiled 'painfully to
deduce undeniable empirical phenomena by simple formal abstraction directly
from the general law, or to show by cunning that they were in accordance with
that law'.[17] Marx accused Ricardo of 'forced
abstraction'. Although many regarded Ricardo as 'being too abstract', he did
not carry true abstract thinking far enough, This was because of his inability
when dealing with the value of commodities 'to forget profits, a factor which
confronts him as a result of competition'.[18] Instead of merely postulating a
general rate of profit, Ricardo should have examined how far its existence is
reconcilable with the 'law of value'. He would have found that instead of being
consistent with it, at first sight, it contradicts it. The existence of a
general rate of profit can in fact only be explained by a numher of
intermediary stages, which is very different from merely including it under the
law of value.[19] Marx's transformation of values into
prices of production is such an intermediary stage. The price of production - a
modified form of value - is such an intermediate link.
The
formal aspect of Marx's solution is well known. Marx takes five different
spheres of production and lets the capital in each have a different organic
composition. The rate of exploitation is the same in each sphere. Due to
different organic compositions of capitals invested in the different lines of
production, capitals of equal magnitude put into motion different quantities of
labour and produce different quantities of surplus-value. The rates of profit
existing in the different branches of production are initially very different.
These different rates of profit are equalised by competition to a single
general rate of profit which is the average of all these different rates of
profit.[20] This is brought about by capitals
moving from spheres with a low rate of profit to others which give a higher
rate of profit.
'Through
this incessant outflow and influx, or, briefly, through its (i.e. capital's -
DY] distribution among the various spheres, which depends on how the rates of
profits falls here and rises there, it creates such a ratio of supply and
demand that the average profit in the various spheres of production become the
same, and values are, therefore, converted into prices of production.'[21]
As
a result of this process the capitalists of the different spheres of
production, in selling their commodities at their price of production, do not
secure the surplus value, and consequently the profit, created in their own
sphere by the production of these commodities. They recover money in proportion
to the value of the capital consumed in their production but receive a profit
in proportion to the advanced capital as the aliquot part in the total capital.[22] The price of production, it must be
stressed, is a modified form of value as Marx makes clear. It is the cost price
of a commodity, the quantity of paid labour contained in it, plus a share of
the unpaid labour, of the annual average profit on the total capital invested
in production.[23]
'In Book 1 and 2 we dealt only
with the value of commodities. On the other hand, the cost-price has now been
singled out as part of this value, and on the other the price of production of
commodities has been developed as its converted form.'[24]
In
such a way these particular rates of profit in every sphere of production can
be deduced out of the values of commodities. If this were not the case the
general rate of profit and the price of production of commodities 'would remain
a vague and senseless conception'.[25] Profits are therefore only a
secondary, derivative and transformed form of surp)us-value. Total profit,
which is surplus-value computed differently, can neither grow nor decrease
through this transformation of values into prices of production. What is
modified is not it, but only its distribution among capitals.[26]
So
that,
'the sum of all profits in all
spheres of production must equal the sum of the surplus values, and the sum of
the prices of production of the total social product equal to the sum of its
value.'[27]
Marx's
general points are illustrated in the following arithmetical table. The rate of
surplus value is assumed to be 100%
|
Capitals |
surplus |
used up |
cost price of |
value of |
price of |
rate of |
deviation |
|
|
I |
80c+20v |
20 |
50 |
70 |
90 |
92 |
22% |
+ 2 |
|
II |
70c+30v |
30 |
51 |
81 |
111 |
103 |
22% |
- 8 |
|
III |
60c+40v |
40 |
51 |
91 |
131 |
113 |
22% |
-18 |
|
IV |
85c+15v |
15 |
40 |
55 |
70 |
77 |
22% |
+ 7 |
|
V |
95c+5v |
5 |
10 |
15 |
20 |
37 |
22% |
+17 |
Marx
assumes for each of the five capitals different proportions of constant capital
go into the value of the product. This is what the column 'used up c' indicates
The rate of profit is measured on the total capital advanced.[28] It can be seen that the total value of
the social product is equal to the sum of the prices of production and total
surplus value will be equal to total profits. The commodities exchange at their
prices of production with the existence of a general rate of profit.
It
is important to recognise that this is an intermediate stage in the analysis.
To confuse a price of production with an empirically given price is to make a
fundamental methodological mistake. The price of production is an 'intermediate
link' in the process of explaining the empirically given reality on the basis
of the 'law of value'. Marx did speak of the price of production being the
centre around which the daily market prices fluctuate,[29] but he did not stop his analysis
there. At this stage of the analysis merchant capital has been left out of
consideration[30] and so had banking capital and rent.
Merchant capital, for example, while creating no new value, participates in
levelling surplus value to average profit. The general rate therefore contains
a deduction from surplus value due to merchant's capital, and therefore a
deduction from the profit of industrial capital.[31] Marx indicates very clearly his
method:
'In the course of scientific
analysis, the formation of a general rate of profit appears to result from
industrial capitals and their competition, and is only later corrected.
supplemented, and modified by the intervention of merchant's capital.'[32]
Similar
considerations would be involved with rent and banking capital etc. The process
of analysing the actual intrinsic relations of capitalist production is clearly
a complicated matter[33] and it is only the method adopted by
Marx which can lead to any deep understanding of the real concrete relations. A
necessary stage in this analysis is the transformation of values into prices of
production and surplus value into average profit. The method Marx adopted is
the only one which makes it possible to grasp the fact of a general rate of
profit on the basis of the value analysis developed in Volume 1 of Capital.
'If the limits of value and
surplus-value are given, it is easy so grasp how competition of capitals
transforms values into prices of production and further into mercantile prices,
and surplus-value into average profit. But without these limits, it is
absolutely unintelligible why competition should reduce the general rate of
profit to one level instead of another, eg make it 15% instead of 1500%.
Competition can at best only reduce the general rate of profit to one
level. But it contains no element by which it could determine this level
itself.'[34]
All
the critics, and indeed many ot the sympathisers, of Marx have discovered a
similar source of error in Marx's own illustration of the transformation of
values into prices. In Marx's price scheme the capitalists' outlays on constant
and variable capital are left exactly as they were in the value scheme.[35] The constant capital and variable
capital used up in production are still expressed in value terms while the
outputs are expressed in price terms. Marx, we are told, was not unaware of the
problem as a possible source of error and passages are quoted from Capital
to make the point.[36] The most familiar is the following...
'Since the price of production
may differ from the value of a commodity. it follows that the cost-price of a
commodity containing this price of production of another commodity may also
stand above or below that portion of its total value derived from the value of
the means of prorluction consumed by it. It is necessary to remember this
modified significance of the cost-price, and to bear in mind that there is
always the possibility of an error if the cost-price of a commodity in any
particular sphere is identified with the value of the means of production
consumed by it.' [37]
Marx,
however, leaves the matter there by saying directly after this 'our present
analysis does not necessitate a closer examination of this point'. Sweezy
thinks Marx might have left the matter in a more satisfactory state if he had
lived to rewrite Volume III of Capital.[38] Others merely say that Marx was
'inconsistent'[39] or lacked the mathematical experience
and knowledge to do it.[40]
A
second feature of the 'transformations' of the critics is that they relate the
problem directly to the reproduction schema of Volume II of Capital. In
the case of Bortkiewicz/Sweezy they are only concerned with simple
reproduction. Considering the different levels of abstraction in Volume II and
Volume III of Capital this needs to be justified. As far as I know, none
of the critics have even recognised a problem here. Marx, it will be
remembered, dealt with capitals in different spheres of production. He was
concerned with different capitals engaged in unrelated lines of industry. The
reproduction schema are concerned with the turnover of total social capital,
not with the relation of 'many capitals' to one another through competition.
This point will be taken up in section 3.
Bortkiewicz/Sweezy
deal with the problem in the following way. They divide industry into three
major branches. Department I producing means of production, Department II,
workers' consumption goods (wage goods), and Department III, capitalists'
consumption goods (luxury goods), all having different organic compositions.
Sweezy then shows that, using Marx's method of transformation, the equilibrium
conditions for simple reproduction will break down. He illustrates this in the
following table.[41] The rate of surplus-value is 100%.
|
Department |
Constant |
Variable |
Profit |
Price |
|
I |
250 |
75 |
108 1/3 |
433 1/3 |
|
II |
50 |
75 |
41 2/3 |
166 2/3 |
|
III |
100 |
50 |
50 |
200 |
|
TOTALS |
400 |
200 |
200 |
800 |
The
total quantity of constant capital used up in production is still 400 as for
the value scheme, but the constant capital produced in Department I is now priced
at 433 1/3. A similar consideration applies to the wage bill. Simple
reproduction breaks down and so Marx's method is inconsistent. So to the
alternative solution.
Inputs
are transformed into prices and three equations are obtained with four unknown
quantities which are to be solved for a consistent and unique solution (see
appendix). A fourth equation is introduced.
In
the case of Bortkiewicz/Sweezy this is done by making price equal to value for
the luxury goods Department III. The price of a unit of luxury good (gold) is
equal to its value. Equilibrium is restored but it is found that although total
surplus-value and total profit are equal, total price differs from total value.
Although this contradicts the very essence of Marx's argument, Sweezy is not
perturbed. We are merely told,
'It is important to realise that
no significant theoretical issues are involved in this divergence of total
value from total price. It is simply a question of the unit of account.' [42]
Sweezy's
value and price schema are given below.[43]
|
Department |
Constant |
Variable |
Surplus |
Value |
|
I |
225 |
90 |
60 |
375 |
|
II |
100 |
120 |
80 |
300 |
|
III |
50 |
90 |
60 |
200 |
|
TOTALS |
375 |
300 |
200 |
875 |
|
|
||||
|
Department |
Constant |
Variable |
Profit |
Price |
|
I |
288 |
96 |
96 |
480 |
|
II |
128 |
128 |
64 |
320 |
|
III |
64 |
96 |
40 |
200 |
|
TOTALS |
480 |
320 |
200 |
1000 |
|
(The rate of surplus value is 66%) |
||||
It
will be seen that total price is 1000 units and total value 875 units, this
deviation being due to the unit of account chosen. Bortkiewicz, in his paper,
makes the same point a little more strongly, seeing in it something of much
greater significance.
'Without paying the slightest
regard to the conditions of production of the good serving to measure values
and prices, Marx simply asserts in general terms that total price equals total
value. This assertion is not only unproven, it is false.'[44]
Two
major errors are contained within the Sweezy/Bortkiewicz position. The first is
the failure to understand the nature of money and also treating the money
commodity and luxury goods as one undifferentiated type. The significance of
money price is, therefore, not understood. The second error implicit in the
schema, but general to the Ricardian standpoint, is that changes in the
structure of Department III (luxury goods/non-basics) do not affect the average
rate of profit. Total profit equals total surplus value in this schema as a
consequence of the fact that the goods used as 'value and price measure' belong
to Department III.[45] I shall deal with the former error
here as it is common to all the efforts to 'correct' Marx's transformation of
values into prices of production. The other question will be dealt with in
Section 3.
We
have said earlier that Marx had stated that changes in the mere money
expression of the same vaiues were not at all being considered here (footnote
23). It is also the case, at this stage of the analysis, that the organic
composition of capital in the sphere of production producing the money
commodity - whether it has a lower or higher composition for other commodities
- is of no real importance for our discussion. This is so for two reasons. The
first is that the money commodity as a measure of value does not have a price.
The second is that the category of money is developed on the assumption that
all commodities sell at their values. When Sweezy states that the price of gold
will be greater than its value because of its relatively high organic
composition in his schema,[46] he shows he has not understood Marx's
categories of exchange-value and money.
'The price of the commodity
which serves as a measure of value and hence as money, does not exist at all,
because otherwise, apart from the commodity which serves as money I would need
a second commodity to serve as money - a double measure of values. The relative
value of money is expressed in the innumerable prices of all commodities; for
in each of these prices in which the exchange-value of the commodity is
expressed in money. the exchange-value of money is expressed in the use-value
of the commodity. There can therefore be no talk of a rise or fall in the price
of money.' [47]
Marx
argues that in the study of money it is assumed that commodities are sold at
their value. The concept of money cannot, in fact, be developed on any other
foundation, and price, in its general meaning is value in the form of money. It
is quite immaterial whether a commodity sells at a price above or below its
value, as, in the study of money, we are not concerned with just the
metamorphosis of a certain commodity (C-M-C) but rather the social
interrelation of all these metamorphoses. Gold is therefore regarded, in this
discussion, as the direct incarnation of human labour in the abstract, as
'value in itself'. Price, as the money expression of value, is measured in
physical units, eg ounces of gold, not in labour-time units.[48]
Alhough,
as a commodity, the magnitude of its value is determined by the labour-time
socially necessary for its production, as the money commodity, that labour-time
is directly universal labour-time. 'It becomes a commodity like other
commodities, and at the same time it is not a commodity like other commodities.[49] Money has to be understood in its role
as a measure of value and a standard of price. It is a measure of
value in so far as it is the socially recognised 'incarnation' of human labour.
It is the standard of price inasmuch as it is a fixed weight of metal (say
gold).[50] As Marx clearly put it in attacking
the 'time chitters',
'The first basic illusion of the
time-chitters consists in this, that by annulling the nominal difference
between real value and market value, between exchange-value and price - that
is, by expressing value in units of labour-time itself instead of in a given
objectification of labour-time, say gold or silver - that in so doing they also
remove the real difference and contradiction between price and value...' [51]
Marx
had, in fact, already anticipated Bortkiewicz/Sweezy in his criticism of
Ricardo. Ricardo thought that the organic composition of capital employed in
the production of the money commodity was significant in determining the effect
a rise or fall in the value of gold (due in this case to a rise or fall of
wages) would have on the price of other commodities. Marx said,
'With regard to money
prices this seems wrong. When gold rises or falls in value, from whatever
causes, then it does so to the same extent for all commodities which are
reckoned in gold. Since it thus represents a relatively unchangeable medium
despite its changeability. it is not at all clear how any relative combination
of fixed capital and circulating capital in gold, compared with commodities can
bring about a difference. But this is due to Ricardo's false assumption
that money, in so far as it serves as a medium of circulation, exchanges as a
commodity for commodities.
Commoditites are assessed in
gold before it circulates them.'[52]
Price
as distinct from value is necessarily money price and this means that values
have to be measured as prices on different standard from their own.[53] So that if we return to Sweezy's value
and price schema (p35) the fact that total price (as money price) is greater
than total value is simply a confusion. The two schemas cannot be compared if
the second represents the total sum of money prices. They are incommensurable.
The first is measured in labour-time units, the second in, say, ounces of gold.
The price of production 'system' must have, in fact, the same dimensions as the
value 'system'. That is why we referred to it as a modified form of value. Both
systems can be expressed in terms of money prices.
'Money is already a
representation of value, and presupposes it. As the standard of price money,
for its part, already presupposes the (hypothetical) transformation of the
commodity into money. If the values of all commodities are represented in money
prices, then one can compare them, they are in fact already compared. But for
the value to be represented in price, the value of commodities must have been
expressed previously as money. Money is merely the form in which the values of
commodities appears in the process of circulation.'[54]
Both
of Sweezy's schemas represent values (whether both are expressed in money
commodity units or not). Total price must equal total value, otherwise new
value would have to be created in the process of transformation, an obvious
absurdity.
It
might be argued that this is unfair. The 'unit of account', after all, is not
so important. It represents an 'arbitrary' choice. Sweezy, himself, said that
the divergence of total value from total price 'involved no significant
theoretical issue'[55], But it does, and with Bortkiewicz we
have a clear expression as to what is at issue.
'Price is also, however, like
value, the index (or exponent) of an exchange-relationship, and, again just
like value, represents a purely theoretical structure, although price, ie the
price of production, which is essentially the same as the "natural
price" of the classical economists, represents a higher degree of
approximation to reality than does value. Value calculation means to determine
the exchange relationship according to the Law of Value. Price-calculating
means to determine the same exchange-relationship according to the Law of the
Equal Rate of Profit.'[56]
Price,
just like value, according to Bortkiewicz represents a purely theoretical
structure. But the symbol of labour-time as such is not a purely theoretical
structure. It represents a social relationship under capitalist production.
'It is not money that renders
commodities commensurable. Just the contrary. It it because all commodities, as
values, are realised human labour, and therefore commensurable, that their
values can be measured by one and the same special commodity, and the latter be
converted into the common measure of their values, ie into money. Money as a
measure of value is the phenomenal form that must of necessity be assumed by
that measure of value which is immanent in commodities, labour-time.'[57]
The
'unit of account' is not arbitrary as money under capitalist production. The
fact that money, in certain of its functions, can be replaced by mere symbols
of itself, gives rise, says Marx, to the other mistaken notion, that it is
itself a mere symbol.[58] Marx's criticism of Ricardo equally
applies to Bortkiewicz/Sweezy as it does to all the Neo-Ricardians.
'What Ricardo does not
investigate is the specific form in which labour manifests itself as the common
element of commodities. That is why he does not understand money. That is why
in his work the transformation of commodities into money appears to be
something merely formal. which does not penetrate very deeply into the very
essence of capitalist production.'[59]
It
is incorrect to treat gold, as the money commodity, exactly in the same way as
luxury products, although they share important features in common. However,
gold, as the money commodity, does not have a price of production, while luxury
products do. Further, competition does not affect the gold industry in the same
way as for luxury products - it has a certain independence. Gold producers, in
producing the money commodity, have a social monopoly. It is the only commodity
which cannot be over-produced. The moment it is produced it is already in
exchangeable form. If we regard, with Marx, luxury products as being a
sub-section of Department II (11b), gold, as the money commodity, would require
a separate department of its own.[60]
All
other 'solutions' take as given that inputs have to be changed into prices of
production. Unless we construct some kind of artificial mathematical system
choosing a suitable 'unit of account', in general, the identities of total
value and total price and total surplus-value and total profit will not hold
simultaneously.[61] What all the 'solutions' essentially
amount to is the selection of a definite aggregate of the value system which
remains invariant to the transformation into prices. This type of
'solution' can also be shown to hold for 'n' sector models and is not limited
to the three departments of the Bortkiewicz/Sweezy 'correction'.[62] Further, it can be shown to hold for
expanded as well as simple reproduction.
Bortkiewicz/Sweezy,
it will be remembered, held the unit-value of luxury goods invariant to the
transformation in prices. Winternitz argues that the Bortkiewicz/Sweezy choice
is an arbitrary and unjustified assumption which makes the sum of prices differ
from the sum of values. This assumption is said not to be in the 'spirit' of
the Marxian system. Winternitz, therefore, takes total values equal to total
prices and carries out the transformation on this basis, In these circumstances
total profit does not equal total surplus value (see appendix). The
transformation is, according to Winternitz, equally applicable to the
conditions of expanded reproduction. In such circumstances the functional
relations between the rates of accumulation in the various departments will not
remain unchanged by the transformation.[63]
Meek,
in the usual three sector illustration, chooses to hold the ratio of gross
output to wages constant in the transformation. This is said, for reasons
better known to Meek, to be essential for Marx's standpoint. He also assumes
total surplus value is equal to total profit. In fact, in the general case, the
equalities postulated only hold if the organic composition of capital in
Department II (wage goods industry) is equal to the social average, as Meek
himself points out. The sum of prices, though, will diverge from values[64]. Seton has given a general proof that
the transformation can be 'solved' along the lines so far indicated for an
n-fold sub-division of the economy. He also makes the important point that
'There does not seem to be an objective basis for choosing any particular
variance postulate in preference to all the others, and to that extent the transformation
problem may be said to fall short of complete determinancy.'[65]
Laibman,
recognising this point, has tried to justify choosing one invariance criteria
rather than another. He chooses the rate of exploitation, arguing that 'it
would be unreasonable to have a change in the rate of exploitation - a
parameter reflecting the real forces of the class struggle - forced upon us as
a result of the transformation process. The transformation problem is isolated
by holding constant the real forces determining a given value situation:
technology and the balance of power between capitalists and workers.'[66]
However,
accepting this 'sociological' factor, this 'category' of the relations of
production still means that, in general, total value does not equal total
price, and total surplus value does not equal total profit. Whether workers
'experience' this 'socially tangible factor' or not, there is little
justification for choosing it to the exclusion of the other main factors
usually held invariant in the transformation process. As we shall show later,
this empiricist explanation for the 'invariance' of the rate of exploitation
has little in common with that of Marx.[67]
A
number of attempts have been made to utilise the work of Piero Sraffa in order
to 'solve' the transformation problem. Medio offers the most sophisticated
example of this. He claims to eliminate the last element of indeterminateness
in the transformation problem.[68] What is required, according to Medio,
is to find a numeraire for the system - a commodity or an aggregate of
commodities - whose price is equal to value. Medio finds and constructs a
commodity (actually a composite commodity) - w* commodity which satisfies this
requirement. This is the case if the industries which produce the inputs
utilised in the production of the w* commodity taken as a whole, have the same
organic composition of capital w*, as that for the industry producing the w*
commodity and the same is true for the industries which produce their inputs
and so on without limit. The formal way of constructing the w* commodity is the
same as that for Sraffa's 'Standard commodity'. The set of equations (or
industries) taken in the proportions that produce the Standard commodity is called
the Standard system. And for the Standard system Marx's general postulates for
the transformation of values into prices all hold if the wage is expressed in
terms of the Standard commodity.
Medio
argues that the w* commodity can be used as a 'representative' of the overall
features of the economy with w* being the ratio between the weighted average of
constant capitals and the weighted average of variable capitals of the entire
system measured in value terms. But, and this is the key point, unless the
actual system (economy) is in Standard proportions this numeraire has no more
relevance than any of the other artificial constructions we have already
discussed. It is only another commodity standard of value. The value of
commodities, however, has already an inherent unit of measurement - money
price. In fact Medio, in spite of all protestations to the contrary, has, like
all the Ricardians, not understood the nature and role of money in a capitalist
economy. There is no need to construct an artificial numeraire. 'Commodities',
as Marx put it, 'are assessed in gold before it circulates them'. Medio has
failed to take the problem further in spite of his rather ingenious
construction of a numeraire.[69]
As
the actual system (economy) is not in standard proportions, most of the
theorems Medio concludes with, such as the relation between profits and wages,
have no real significance. Further, as capital accumulates the organic compositions
of capital and the productivity of labour will change and so will his
numeraire. This would not have the same effect as a rise or fall in the value
of the money commodity as we have already explained. The organic composition,
w*, of Medio's commodity numeraire is important in relation to the changing
system.[70] Finally, the clear Ricardian basis of
Medio's analysis lies in his treatment of non-basics/luxury goods. As
non-basics are completely excluded from the role of means of production and do
not contribute to the wage of the workers, they play no role in the Standard
system. They are, therefore, not involved in the determination of the rate of
profit or in the prices of basic commodities. Likewise, the organic composition
of non-basic commodities does not enter in the determination of the 'average'
organic composition of capital, w*.[71] This, as we will show later, conflicts
with the basic Marxian view. What this section suggests is that there is no
real 'solution' to the transformation 'problem', along the lines indicated by
the critics of Marx, which conforms with the basic intention of Marx. The rest
of this article will indicate the methodological basis for accepting Marx's
method of proceeding in the transformation of values into prices as the only
correct one.
Many
of the 'critics' of Marx have regarded the transformation problem as a purely
formal, and unimportant problem.[72] In fact it is an essential stage in
Marx's scientific analysis. To understand what Marx was attempting to do, and
to justify what he did, it is essential to grasp and not to confuse the
different levels of abstraction in the positions put forward in the three
volumes of Capital. We must, therefore, examine the method and
categories of Capital.
Marx
began Capital with an analysis of the most simple social form in which
the product of labour presents itself in capitalist society, the commodity.[73] This is analysed in the form in which
it appears.
It
is seen to be an object of use (a use-value) and a bearer of exchange-value.
Further analysis shows that the common substance that manifests itself in the
exchange-value of commodities whenever they are exchanged is their value - the
expenditure of abstract human labour. Exchange-value is the only form in which
the value of commodities can be expressed under commodity production.[74] The commodity, however, conceals the
contradiction between use-value and exchange-value.[75]
'The commodity is a direct unity
of use-value and exchange-value, that is to say, two opposites. It is therefore
a direct contradiction. The contradiction must unfold as soon as we examine
[the commodity] as a whole in its real relation to other commodities, and not
analyse it, as before now, on the one hand from the standpoint of use-value, on
the other from the standpoint of exchange-value. The real relationship of
commodities to each other, is however, their exchange process.'[76]
The
further development of this contradiction presents itself in the duplication of
the commodity into commodity and money.[77] Marx then goes on to show how implicit
in the money form is the further development to the capital form of value,
value that generates surplus value (value-in- process).[78] Capital is exchange-value posited as
the unity of commodity and money - a contradictory unity. As Marx presents it
in the Grundrisse,
'we have already seen, in the
case of money, how value, having become independent as such - or in the general
form of wealth - is capable of no other motion than a quantitative one; to
increase itself. It is, according to its concept, the quintessence of all use
values; but, since it is always a definite amount of money (here, capital), its
quantitative limit is in contradiction with its quality. It is therefore
inherent in its nature constantly to drive beyond its own barrier.'[79]
Although
the money form of value and capital are 'latent' within the commodity, it is
only under certain objective conditions, and as an outcome of a long historical
process, that this 'latency' is realised.[80] The general historical condition for
this to be the case is that labour power itself - the capacity to labour -
becomes a commodity. There must exist a use-value which has the property of
creating value and is the source of value.[81] This action of labour power not only
reproduces its own value but produces value over and above this - surplus
value.[82] Capital has found confronting it the
use-value adequate to itself.
'As use value labour exists only
for capital, and is itself the use value of capital, ie the mediating activity
by means of which it reproduces and multiplies (verwertet) itself. Capital, as
that which produces and increases its value, is autonomous exchange value
(money) as a process, as the process of its reproduction and self-expansion
(Ververtung)'[83]
The
concept of capital has been developed by a process of dialectical
reconstruction from an analysis of the commodity. What is fundamental to Capital
has been understood independently of any consideration of 'many capitals' or
the action of capitals on one another through competition. The latter will be
analysed after consideration of what they (many capitals) have in common as
capital. As Marx put it in the Grundrisse,
'To the extent that we are
considering it here, as a relation distinct from that of value and money,
capital is capital in general, ie the incarnation of the qualities which
distinguishes value as capital from value as pure value or money. Value, money,
circulation. etc,. prices, etc., are presupposed, as is labour, etc. But we are
still concerned neither with a particular form of capital nor with an
individual capital as distinct from other individual capitals, etc. We are at
present at the process of its becoming. This dialectical process of its
becoming is only the ideal expression of the real movement through which
capital comes into being. The later relations are to be regarded as
developments coming out of this germ (keim). But it is necessary to establish
the specific form in which it is posited at a certain point.
Otherwise confusion arises.'[84]
It
follows that the later form of capital is contained in embryonic form
(Keimform) within the general concept of capital. This means not only the
'civilising' dynamic tendencies of capital but also the latent contradictions which
drive capital beyond its own limits.[85]
What
Marx did in beginning his analysis with the commodity - the simple social form
in which the product of capitalist society presents itself - was to abstract
what is essential to all commodity exchange, and show the underlying social
relationships expressed in fetishistic form by the exchange of commodities.
Marx examines the contradictory forms of appearance of value and their development
to newer, more concrete forms. Moving from the abstract to the concrete - the
scientifically correct method - thought reproduces the concrete in the mind as
concrete.[86] As he wrote to Engels,
'The most abstract
determinations, when more carefully examined, always point to a further
definite concrete basis (of course - since they have been abstracted from it in
these determinations).'[87]
Another
feature of Marx's method is important for our argument. In attempting to show
how the 'law of value' governs the forms of appearances of capitalist society,
Marx, at certain stages of the analysis, points out how decisive contradictions
with the 'law of value' seem to arise. The 'law of value' appears to be in
contradiction with the facts of the real world. This is when Marx moves from
general definitions to more particular explanations. An example of this is in
Volume I of Capital, Part II, when it is necessary to explain a
conclusion Marx has reached which conflict with reality. That is, the
impossibility of the creation of surplus-value on the basis of the exchange of
commodities according to their value. He does this not by throwing out the
earlier definitions but by modifying and developing them. In this case he
introduces the concept of labour power. A similar procedure is adopted in the
case of the transformation of values into prices. On the basis of exchange of
commodities at their values, with different organic compositions of the
capitals producing these commodities, there would be different rates of profit
This contradicts reality, and so again the earlier position is modified and
developed with the category of price of production.[88] In such a way Marx shows, with the
help of mediating links, how the 'forms of appearance' of capitalist society
are connected to their determination by the 'law of value'. It is precisely the
failure of Ricardo and the Neo-Ricardians that they attempt to do this
formally, directly, without the help of such mediating links.
'Money and exchange itself
(circulation) therefore appear only as purely formal elements in (Ricardo's)
economics; and although. according to him, economics is concerned only with
exchange value, profit, etc.. appears there only as a percentage of the share
of the product, which happens just as much on the basis of slavery.
He never investigated the form
of the mediation.'[89]
Whereas
Ricardo wishes to deal, as do the Neo-Ricatdians, immediately with all the
phenomena that contradict the law, Marx only comes to deal with the realm of
'appearance' with the opening of the third volume of Capital.[90] This is after a long, detailed, and
necessary analysis of the immediate process of production in Volume I of Capital
and the circulation of total social capital in Volume II.
Volume
I and II of Capital are concerned with an examination of 'capital in
general' and the special forms of existence of 'capital in general' as fixed
and circulating capital. Competition between capitals must not interfere with
the investigation here. Capital as such is not, therefore, separated from
individual capital.[91] In Volume I we are dealing with the
immediate process of production as such - the production of value and surplus
value and the accumulation of capital in this context. Volume II moves on to
the circulation of total social capital. Here, in the circulation process, the
forms the individual capitals take become important. A capital's time of
circulation limits, generally speaking, its time of production and hence the
process of generating surplus-value.[92] The reproduction schema consider the
importance of these forms - the value component and the use-value components -
for the reproduction and circulation of the aggregate social capital. It should
be remembered, however, that throughout Volume II of Capital.
'that products are exchanged at
their values and also that there is no revolution in the values of the
component parts of productive capital.'[93]
It
is only in Volume III that Marx begins to examine the concrete forms which grow
out of the movements of capital as a whole...
'In their actual movement,
capitals confront each other in such concrete shape for which the form of
capital in the immediate process of production, just as its form in the process
of circulation, appear only as special instances. The various forms of capital,
as evolved in this book, thus approach step by step the form which they assume
on the surface of society, in the action of different capitals on one another,
in competition, and it, the ordinary consciousness of the agents of production
themselves.'[94]
This
really has to be understood. It is of little relevance for Hodgson to remark,
as though he has made an important discovery, that the 'capitalists will
calculate their rate of profit on capital invested in terms of prices, not
values' and that 'the goad to accumulate takes the form of prices as the
capitalists are not aware of, or disposed towards, a calculation in terms of
values'.[95] He, as a Ricardian, wishes to bring in
at the very beginning all the phenomena which apparently contradict the 'law of
value'. For Hodgson it is necessary 'to give the science before the science'.[96] Instead of moving step by step by a
process of increasing concretisation to the 'starting point of the vulgar
conception', Hodgson remains tied to the 'level of appearances' and allows them
to dominate his conception. 'But all science would be superfluous if the
outward appearance and essence of things directly coincided.'[97] Pilling has expressed this important
point particularly well:
'All the manifold links, missing
in Ricardo, have to be established between the outward form of things and their
inner source. For Marx, this was precisely what he had in mind when he
suggested to Kugelmann that the problem was to establish how the law of value
operates. So when the realm of appearances was finally reached, they were not
considered as isolated, disembodied, phenomena, as in the vulgar conception,
nor were they merely counterposed to their source, the law of value, at in
classical economy. They were now grasped as necessary appearances,
contradictory, opposite, manifestations of definite, historically determined
social relations of production.'[98]
It
is precisely the fact that 'in competition everything appears in an inverted
form'[99] that Marx's method of procedure
remains essential for a scientific understanding.
A
scientific analysis of competition is not possible until we have a concept of
'capital in general', that is, of the 'inner nature of capital'. Marx called
competition the 'essential locomotive of bourgeois economy'. It does not,
however, create or establish its laws but merely allows them to be exhibited or
realised ('the inner Nature as external necessity'). Capitalist production
exists in its most 'adequate' form in so far as competition develops. Marx did
say that capital 'cannot exist except in the form of a number of capitals, and
its self-determination thus appeals as these many capitals one with another'.[100] But it is precisely this form of appearance
which is deceptive. For example, it seems as though competition brings about a
fall in the rate of profit. In fact it is a fall in the rate of profit which
calls forth a competitive struggle amongst capitalists, not vice versa.'[101] Only in competition are the inherent
laws of capital, its tendencies realised. But competition does not impose its
laws on capital, laws not already inherent in its movement. In relation to the
formation of the average rate of profit, Marx makes this clear.
'Competition can permanently
depress the rate of profit, only if and in so far as a general and permanent
fall of the rate of profit, having the force of a law, is conceivable prior
to competition and regardless of competition. Competition executes the inner
laws of capital: makes them into compulsory laws towards the individual
capital, but it does not invent them. It realises them [realisiert]. To try and
explain them simply as results of competition therefore means to concede that
one does not understand them.'[102]
Since
total profit is surplus value itself computed differently, it
cannot grow nor decrease through exchange. What is modified with the
introduction of 'many capitals' and the competition between capitals is not total
surplus value but its distribution among the different capitals.[103] On the basis of Marx's method it can
only be understood in this way.
The
Reproduction Schema are concerned with the reproduction and circulation of the
aggregate social capital. They are discussed and must be discussed before the
introduction of 'many capitals'. They are concerned to show how the 'bodily
form' of the commodities produced becomes important in the discussion of the
reproduction of total social capital.
'The reconversion of one portion
of the value of the product into capital and the passing of another portion
into the individual consumption of the capitalist, as well as the working
class, form a movement within the value of the product itself in which the
result of the aggregate capital finds expression; and this movement is not only
a replacement of value, but also a replacement in material and is therefore as.
much bound up with relative proportions of the value-components of the total
social product as with their use-value, their material shape.'[104]
With
the reproduction and circulation of total social capital, the use-value of the
product is significant. Marx did not, as Sweezy argues, exclude use-value as a
category from the field of investigation of political economy.[105] In fact he said the opposite and
argued that it was Ricardo, 'who believes that the bourgeois economy
deals only with exchange-value, and is concerned with use-value only
exoterically'. Use-value, for Marx, plays a role as an economic category.[106] It plays such a role in the
reproduction of total social capital.
In
the discussion of the Reproduction Schema, Marx assumes that all commodities
are sold at their values and no changes in the values of the component parts of
productive capital takes place. This, in fact, excludes the accumulation of
capital, in the proper sense of the term. With accumulation proper, changes in
the organic composition of capital and the productivity of labour occur. In
this sense, the reproduction of the aggregate social capital in Volume II
belongs, correctly, to the circulation process of capital. Now the circulation
and reproduction of capital contains the reproduction of both use-values as
well as values and, therefore, can only be expressed in money prices.
'In the exchange of the
commodity for money, the material and the formal changes coincide; for. in
money, precisely the content itself is part of the economic form. The
transformation of money into commodity is here, however. at the same time
present in the retransformation of capital into the material conditions of production.
The reproduction of a specific use-value takes place, just as well as of value
as such.'[107]
Marx
begins the discussion of simple reproduction by saying that the figures he is
using may indicate millions of marks, francs or pounds sterling.[108] He can say this because all
commodities are exchanged at their values and prices, at this stage of the
analysis, do not diverge from values. We may say that the reproduction schema
are expressed in 'simple prices'[109] as opposed to prices which are the
money expression of transformed values, that is, of prices of production. This
important point has clearly not been understood as the reproduction schema are
usually considered to express only values. In this sense, there is no such thing
as a value schema in those discussions of the transformation problem which
immediately relate the problem to the reproduction of social capital. Both
Sweezy's schema, already discussed, have to be in money prices. So the
insistence of most of the 'critics' that capitalists relate to money prices,
etc., not values, is just another confusion.
Marx
makes the point that if prices diverge from values, this cannot exert any
influence on the movements of the social capital. In this case he must be
speaking of market prices as prices of production have not yet been introduced
into the analysis.[110] In fact, if prices divege from values
due to different organic compositions of capital and equal rates of profit,
then it will affect the movement of social capital. This is clear because the
movement of capitals is involved in the establishing of prices of production.
It would mean a change in the distribution of society's labour time. In this case,
though, it becomes impossible to represent the schema in a formal
(mathematical) way. As the values of the means of production differ from their
cost-prices, and it is the value that is transferred to the product, it becomes
impossible to represent this as a continuous process. Here the dual nature of a
commodity as a use-value and exchange-value prevents a merely quantitative
representation of the process. This is why growth models based on the
reproduction schema are of little relevance for capitalist production. They do
not take into account the dual nature of the commodity, and they misunderstand
the level of abstraction in the discussion of reproduction schema in Capital.
Further, because money has to play a role as money-capital in order that the normal
course of reproduction of capital can take place, the possibilities of
disequilibrium and crisis are inherent in the process of the reproduction of
social capital itself.[111] It is because they ignore the role
money must play in the reproduction schema - it follows from the dual nature of
the commodity - that the kind of growth models mentioned above are essentially
'harmonistic' in character. It should now be seen that Marx was clearly aware
of these problems and that is why it was necessary to illustrate the
transformation of values into prices of production with five different
unrelated capitals.
Under
commodity production the private labour of individuals presents itself as
general social labour, and the relation between people as relations between
things. The values of commodities have a social reality - acquired because they
are embodiments of one social substance, abstract human labour - which can only
manifest itself in the social relation of commodity to commodity, in the act of
exchange.[112] Exchange-value, Marx argues, is only
the phenomenal form of something contained in it, yet distinguishable from it.[113] In order to trace the genesis of the
money-form of value, it was necessary to examine what lay behind the 'form of
appearance' of value as exchange-value. It is, therefore, important not to
confuse the 'form of value' and value. What Marx shows through his analysis of
the commodity is how the concrete labour of the individual must be transformed
into its opposite, abstract labour, and in this form, social labour. Abstract
social labour is found to be the substance of value - it 'creates' value. It is
socially equalised (homogenous) labour in the historical form which it acquires
under commodity production.[114] One of the chief failings of
classical economy, wrote Marx, was that it never succeeded in discovering that
'form of value', under which value becomes exchange-value.
'Even Adam Smith and Ricardo,
the best representatives of the school, treat the form of value as a thing of
no importance, as having no connection with the inherent nature of commodities.
The reason for this is not solely because their attention is entirely absorbed
in the analysis of the magnitude of value. It lies deeper. The value-form of
the product of labour is not only the most abstract, but is also the most
universal form, taken by the product in bourgeois production and stamps that
production as a particular species of social production, and thereby gives it
its special historical character. If then we treat this mode of production as
one eternally fixed by Nature for every state of society, we necessarily
overlook that which is the differentia specifica of the value-form, and
consequently of the commodity-form, and of its further developments,
money-form, capital-form, etc.'[115]
Abstract
labour appears and develops to the extent that production becomes production
for exchange, ie commodity production. The more generalised and widespread is
exchange, the more the concrete labour of the individual takes on the character
of abstract social labour. It is only in the development of the market to a world
market that money has a tendency to develop into world money and abstract
labour into social labour.
'Abstract wealth, value, money,
hence abstract labour, develop in the measure that concrete labour becomes a
totality of different modes of labour embracing the world market...'[116]
Exchange-value
is now shown to be the necessary 'form of appearance' of value - its phenomenal
form under commodity production. Exchange-value cannot be divorced from the
social relations of production - it arises from the concept of value and not
vice versa,
'Our analysis has shown that the
form or expression of the value of a commodity originates in the nature of
value, and not that value and its magnitude originate in the mode of their
expression as exchange-value,'[117]
The
magnitude of value, therefore, also expresses a relation of social production.
That is, the connection between a certain article and the portion of the total
labour time of society required to produce it. The magnitude of the value of a
commodity is measured by the time socially necessary to produce it.
What
I have tried to show so far is how the 'form of appearance' of value is
necessarily related to value as a social relation. To reduce value to its
magnitude ignoring the 'substance of value' and the 'form of value' is
precisely to ignore the social relations of production and the particular
historical character of the mode of production. And this is just what Ricardo
and the Neo-Ricardians then do, by concentrating their investigation on the
magnitude of value. [118] The 'social' relations are usually
introduced, as we have indicated earlier, by an examination of the distribution
of the social product of labour between the different social classes.
It
is because Ricardo and the Neo-Ricardians occupy themselves with labour as the
measure of the magnitude of value that they do not understand the nature of
money.[119] It is because the labour of a private
individual must present itself as abstract (social) labour under capitalist
society that it finds its objectification in the money commodity. It is the
commensurability of commodities as objectified (vergegenstandlichte)
labour-time, that turns gold into money.[120]
'Universal abstract labour-time
is ideally represented in their price in which commodities appear as
commensurable embodiments of the same value-substance differing merely in
quantity.'[121]
It
is now clear why Medio, who attacks the Neo-Ricardians, can end up in the same
camp in utilising the work of Sraffa to 'solve' the transformation problem. He
argues in the following way
'Abstract labour is, by
definition, the substance of value. Since the process of expenditure of
abstract labour takes place over time, the magnitude of value is naturally
measured in terms of abstract labour time. Dimensionally, we have therefore:
value = abstract labour time.'[122]
Medio
has not grasped the nature of abstract labour as social labour, and the
magnitude of value as socially necessary labour time. He has merged together in
a confused way the substance of value and its magnitude. He, therefore, cannot
understand money as objectification of 'universal abstract labour time' -
capitalist society necessarily creates its own 'measure' of value. This
explains why Medio thinks that it is possible to move from the value level to
the price level in a formal logical way[123] - a fault of all Neo-Ricardians.
Finally, this is consistent with his construction of the numeraire[124] to solve the transformation problem
(see above). It comes down to a failure to understand the 'forms of value', and
so money and exchange-value, for Medio, become purely formal elements. [125]
Capital
as 'value in process'. as self-expanding value, necessarily contains within it
the reproduction of capitalist social relations on an extended scale.[126] Marx argues that the tendency to
create the world market is directly given in the concept of capital
itself.[127] If it is remembered that Marx
associated the fullest development of abstract (social) labour with the
creation of the world market it is seen how clearly the concept of capital is a
development of the 'value-form' of the product of labour under commodity
production. Already in the simple forms of exchange-value and of money the
opposition between capital and labour 'latently' exists - the individual
producer is producer of exchange-value and entirely determined by society.[128]
Labour
power exists as a use-value for capital; it is the mediating activity by
means of which capital reproduces and multiplies itself (sich verwertet).[129] It is simply wrong to regard capital
as merely accumulated labour.time. This is to ignore the 'capital-form' of the
product of labour and the underlying social relation that capital expresses.
'When it it said that capital is
"accumulated (realised) labour (properly, objectified
[vergegenstandlichte] labour), which serves as the means for new labour
(production)", then this refers to the simple material of capital, without
regard to the formal character without which it is not capital. This means
nothing more than that capital it - an instrument of production, for, in the
broadest tense, every object. including those furnished purely by nature, eg a
stone, must first be appropriated by some sort of activity before it can
function as an instrument, as means of production.
According. to this, capital
would have existed in all forms of society, and is something altogether
unhistorical.'[130]
Marx
criticised Mill as a Ricardian for defining labour and capital simply as
different forms of labour - the one immediate labour, the other hoarded
labour.[131] In fact this is what all the
Neo-Ricardians tend to do.[132] Inevitably, they must treat the
question of accumulation of capital as a merely formal question. The
contradictions expressed by the dual nature of the commodity, the fact that
concrete labour is transformed into abstract (social) labour under commodity
production, the development of the 'value-form' to the 'capital-form' of the
product are all ignored in their work. They inevitably have to introduce the
antagonism between capital and labour at the level of the distribution of the
social product. Their category, the rate of exploitation is, in spite of Marx's
warning, defined in terms of fractions of the value added to the product.
Indeed, for their work, no concept of value, let alone 'value-form', is
required. Finally, they have no understanding of the category 'variable
capital' and it is to this that we now turn.
It
is remarkable how little the category variable capital has been understood. It
is often confused with the value of the means of subsistence or wage of
the worker.[133] What forms the variable part of
capital is not the labourers' means of subsistence but his labour power in
action.
'The variable capital exists at
first in the hands of the capitalist as money-capital; and it performs the
function of money-capital by his buying labour-power with it. So long as it
persists in his hands in the form of money, it is nothing but a given value
existing in the form of money; hence a constant and not a variable magnitude,
It is variable capital only potentially, owing to its convertibility into
labour-power. It becomes real variable capital only after divesting itself of
its money-form. after being converted into labour-power functioning as a
component part of productive capital in the capitalist process.'[134]
The
capitalist exchanges a definite given magnitude of value for the production and
self-expansion of value. The creation of surplus value arises out of the
consumption of labour power following the exchange of value for value-creating
power, out of the conversion of a constant into a variable magnitude.[135] The variable capital functions as
capital in the hands of the capitalist and as revenue in the hands of the
worker. But it is not the case of variable capital functioning in a dual
capacity, as capital for the capitalist and as revenue for the labourer.
'It is the same money which
exists first in the hands of the capitalist as the money-form of his variable
capital, hence as potential variable capital, and which serves in the hands of
the labourer as an equivalent for sold labour-power as soon as the capitalist
converts it into labour-power. But the fact that the same money serves another
useful purpose in the hands of the seller than the buyer is a phenomenon
peculiar to the purchase and sale of all commodities.'[136]
Therefore,
to confuse variable capital with the revenue, which the worker buys his means
of subsistence to reproduce his labour-power with, is a fundamental mistake.
We
can now directly relate to the question of changing inputs into prices of
production in the transformation of values into prices. To attempt to do this
in the case of variable capital (v) is just to confuse variable capital with
the value of the means of subsistence, Variable capital, in its money form,
represents a definite, given value exchanged for living labour power, ie labour
power in action, variable capital in its productive form. In Marx's discussion
of just the very point the 'critics' consider important - that of the difference
between the price of production and the value of a commodity entering into the
cost-price of other commodities as one of its elements - he argues,
'Variable capital, whatever
difference between value and cost-price [price of production - DY] it may contain,
is replaced by a certain quantity of labour which forms a constituent part of
the value of the new commodity, irrespective of whether its price expresses its
value correctly, or stands above or below its value.'[137]
The
organic composition of capital, the ratio of constant to variable, indicates
the amount of labour power set in motion by a given capital, If the rate of
surplus value is given, it also tells us the mass of surplus value produced by
the workers employed by that capital, In the case of commodities produced by
capitals with the average organic composition of capital, the amount of profit
falling to such capitals will be equal to the surplus value produced when the
commodities exchange at their prices of production. In all profit calculations
we must take a capital of average social composition as the standard to measure
surplus value and average profit, It is of no consequence whether this capital
of average social composition exists or not. Marx regarded it as an ideal
standard, as an average which does not really exist, What is important is that
the capital of average social composition is representative of the total social
capital. It is an abstraction from total social capital. Further, those
capitals of average social composition serve as a practical measure of the rate
of profit no matter whether c and v represent the actual values of the
commodities comprising them or not.
'The quantity of profit falling
to these commodities is equal to the quantity of surplus value contained in
them. For instance, in a capital of the given composition, 80c + 20v, the most
important thing in determining surplus-value is not whether these figures are
expressions of actual values, but how they are related to one another, ie
whether v=1/5 of the total capital, and c=4/5 - Whenever this is the case, the
surplus value produced by v is, as was assumed, equal to the average profit. On
the other hand, since it equals the average profit, the price of production =
cost price plus profit - k+p=k+s; ie in practice is equal to the value of the
commodity'[138]
The
practical result is therefore the same, Marx argues, as it would be if these
commodities sold at their real values. This ideal standard enables Marx to
illustrate the correctness of his approach to the transformation process in
spite of the modified significance of cost-price which the critics of Marx are
so keen to stress. Marx does not change c and v into prices of production
because he treats the different spheres of production as constituent parts of
the social capital. The organic compositions of the capitals in the different
spheres tells us the labour power set in motion by each capital as part of the
labour power set in motion by the total social capital. Each variable capital v
indicates the part of societies' labour time (paid labour), expressed in money
commodity units, necessary to replace it. As each sphere of production
represents a certain capital invested for the purpose of increasing value,
given the rate of exploitation we know the mass of surplus value (unpaid labour
time) produced by the labour power set in motion by each capital, expressed in
money. In the case of constant capital c
'This part of capital...enters
unchanged into the production process and emerges from it unchanged.'[139]
The
average profit is calculated on the average social capital, and with the
formation of prices of production the capitalist recovers money in proportion
to the value of capital consumed in production plus the average profit on the
capital advanced.
The
most generalised form of the circuit of total capital is represented by M-C-M'
and each individual capital is seen to relate to this circuit. What occurs in
the formation of prices of production is a redistribution of the surplus value
(M' minus M) between capitals, brought about by the movement of capitals
between the different spheres of production. This is the only way that the
process can be represented if we bear in mind that capital is a social relation
not a mere quantity. The difficulty arises because of the dual nature of the
commodity as use-value and exchange-value. We must not confuse means of
production and accumulated (objectitied) labour with capital.
'The catch is that if all
capital is objectified labour which serves as means for new production, it is
not the case that obiectified labour which serves as means for new production
is capital. Capital is conceived as a thing, not as a relation.'[140]
Capital
is a process in whose various moments it is always capital. That is why we,
necessarily, must represent the process of transformation in terms of the
movement of capital in its various forms.
When
Marx speaks of the 'modified significance of cost-price' due to the fact that
the price of production of a commodity, entering into the production of a new
commodity, differs from its value, he does not speak of the value of capital
consumed, He speaks of the value of means of production consumed or, in another
place. the value of the commodity, in so far as in the form of constant capital
it becomes an ingredient of the production process.[141] That the cost price of a commodity
produced by an individual capital is not equal to the value of the commodities
consumed in its production does not alter the basic point. We have to regard
the individual capital as part of the total social capital, and for the total
capital they coincide.[142] Capital should, therefore, not be
confused with the means of production and the means of subsistence of the
working class, but has to be regarded as an aliquot part of the total social
capital. For total social capital the circuit is M-C-M' and the total
cost-price is equal to the total value of capital consumed, total value is
equal to total price and total surplus value is equal to total profit. The
movement of individual capitals as part of the total capital does not, and
cannot, change this. What it alters is the distribution of surplus-value, as
well as the use-values (means of production, labour power) between the
different spheres of production - the circuit represented in C-M-C. The
constant capital and variable capital therefore represent the actual capitals
invested in the different spheres of production as shares of the total capital,
and as such remain unchanged in the transformation process.[143] The average rate of profit is the
result of a complex process of redistribution of surplus-value brought about by
the movements of capital. Its limits are determined by the production of value
and surplus value given in the movement of total capital in the immediate
process of production.
Surplus
value is the difference between the time necessary to reproduce the
commodity labour power and the length of the working day. The values of
variable capital and the value of labour power purchased by that capital are
equal. The value of labour power determines the necessary portion of the
workIng day, the paid labour-time, and the unpaid labour-time, the surplus
value. Given the intensity of labour, the rate of exploitation depends on the social
productivity of labour and the length of the working day. The rate of
exploitation depends not on the productivity of labour of the individual branch
in which the worker works, but on the social productivity of labour.
That is, how great a part of the working day is devoted to the reproduction or
production of the value, ie equivalent, of the workers' means of subsistence.
In each particular sphere of production the individual capitalist, as well as
the capitalist class as a whole, take direct part in the exploitation of the
working class by the totality of capital.[144] The direct interest of a capital of
any particular sphere, says Marx, in the exploitation of labourers who are
directly employed by him is confined to making an extra-gain,
'a profit exceeding the average,
either through exceptional overwork, or reduction of the wage below the
average. or through the exceptional productivity of the labour employed.'
For
the transformation of values into prices of production Marx assumes that the
rate of exploitation is the same in all spheres of production. This would
assume competition between workers and a continual migration from one sphere to
another to bring about this equalisation. This general. rate of surplus value -
viewed as a tendency, like all other economic laws - is assumed for the sake of
theoretical simplification. That is, it is assumed that the laws of capitalist
production operate in their pure form.[145] The reasons for assuming the rate of
exploitation invariant in the transformation process are not based on any
spurious 'sociological' proposition - the workers directly experience it, etc.
- but on understanding what capital is. The compulsion to produce surplus value
is deduced from the nature of capital as self-expanding value. It arises from
the exchange of variable capital for labour power - value creating power. The
rate of exploitation expresses this compulsion as the ratio of surplus-value to
variable capital. Its magnitude depends on the social productivity of labour
and the length of the working day, given certain physiological and historical
norms for determining the value of labour power. Each capital participates in
the exploitation of total labour by the totality of capital. At the level of
abstraction involved in the discussion of the transformation of values into
prices. we ignore extra-gains made by capitals due to exceptional
circumstances. Variable capital and surplus-value relate to the direct process
of production. Once this has taken place they are given and, therefore, the rate
of exploitation is given. It cannot change with the circulation and competition
between capitals - it is determined in the process of production.[146] So that it is both justified to
assume the same rate of exploitation in all spheres of production and the
invariance of the rate of exploitation in the transformation process.
The
mass of surplus value is determined, given the rate of surplus value, by the
number of productive workers which capital exploits. The general rate of
profit, which is the total mass of surplus value produced, divided by the total
capital invested, therefore depends on two factors, the organic composition of
total capital and the rate of surplus value.[148] The former is an indicator of the
number of productive workers employed by capital, the latter the ratio of
unpaid to paid labour time. It is now relatively simple to show how changes in
the structure of luxury goods production affect the rate of profit.
Luxury
goods are not part of the consumer necessaries ie means of subsistence of the
working class, nor do they contribute directly or indirectly to the production
of consumer necessaries.[149] Increases of productivity in the
luxury industries therefore cannot reduce the value of consumer necessaries so
cannot produce that form of surplus value which results from the growing
productivity of industry as such.
'It is correct, however, that
productivity in the luxury industries cannot reduce the value of labour power,
it cannot produce any relative surplus value and, in general, cannot produce
that form of surplus value which results from the growing productivity of
industry as such.'[150]
Increased
productivity in the luxury industry cannot, therefore, affect the rate of
profit insofar as it is determined by the rate of surplus value,[151] Luxury production can only influence
the rate of profit insofar as it affects either the amount of surplus value or
the ratio of variable capital to constant capital and to the total capital.[152]
A
rise in the organic composition of capital in the luxury sector will simply
accelerate the tendency of the rate of profit to fall as it cannot increase the
rate of exploitation, and so increase relative surplus value to partially counter
this fall.[153] Accumulation of capital in the luxury
industry increases the mass of surplus value, but it prevents the growing mass
of surplus value from rising sufficiently to partially offset the tendency of
the rate of profit to fall. A growing proportion of capital in the luxury
industry restricts that form of capital which can increase relative surplus
value and so partially offset the tendency of the rate of profit to fall.[154]
The
profits of luxury production enter into the equalisation of the general rate of
profit just as much as that in any other sphere.[155] However the nature of the use-value
has a particular effect in the reproduction process of capital.
The
points we have argued show clearly that it is fundamentally wrong to regard
luxury production as having no overall effect on the rate of profit or on the
accumulation of capital. Theoretically, this amounts to treating only the rate
of surplus value as the important determinant of the rate of profit, ignoring
the organic composition of capital, And this is once again a Ricardian
standpoint:
'(Ricardo) furthermore overlooks
the fact that the rate of profit depends on the amount of surplus-value, and by
no means on the rate of surplus value. when the rate of surplus-value, ie of
surplus-labour, is given, the amount of surplus-value depends on the organic
composition of the capital, that is to say, on the number of workers which a
capital of a given value, for instance £100, employs.'[156]
It
further means looking at the question statistically, ignoring the overall
effects of luxury production on the accumulation of capital through the effect
on the rate of profit, To argue that there is 'too much' luxury production is
to argue this in the context of the formation of the general rate of profit and
the tendency of the rate of profit to fall.[157]
As
those workers who work in the luxury sector are productive workers [158], luxury industries will be involved
in the transformation of simple prices into prices of production. At that level
of abstraction they will be treated as part of productive capital.[159] It is only later that the effect on
the tendency of the rate of profit to fall will be considered,
We
have shown how Marx's representation of the transformation of values into
prices of production is a necessary stage in the process of explaining
capitalist reality as it appears on the surface of society and in the ordinary
conciousness of the agents of production themselves. The price of production is
an 'intermediary link' between the immediate process of production and the
forms of appearance of surplus value as ground rent, profit and interest. Marx
does this in stages. He first deals with the production of value and surplus
value in the direct process of production. When he moves on to consider in
Volume III, profit and the rate of profit - the form in which surplus value presents
itself in view [160] - he takes this process as given,
'When in general we speak about
profit or rate of profit, then surplus-value is supposed to be given.
The influences, therefore, which determine surplus-value have all
operated. This is the pre-supposition.'[161]
Profit
as it first appears is seen as the surplus-value already produced expressed in
relation to the total capital invested. This is explained very clearly in the Grundrisse:
'Profit as we still regard it
here, ie as the profit of capital as such, not of an individual capital at the
expense of another, but rather as the profit of the capitalist class,
concretely expressed, can never be greater than the sum of the surplus value.
As a sum, it is the sum of surplus value, but it is the same sum of values as a
proportion relative to the total value of the capital, instead of to that part
of it whose value really grows, ie is exchanged for living labour. In its
immediate form, profit is nothing but the sum of surplus value expressed
as a proportion of the total value of the capital'.[162]
The
individual capitals participate in the total profit by obtaining a share of
profit in proportion to their share of capital invested as a part of the total
social capital. This is brought about by the movement of capitals and
competition between capitals. It involves a redistribution of surplus value
already produced. This occurs through commodities selling at their prices of
production and not their values. We have justified Marx's method of
transforming values into prices of production by showing the inadequacy of all
other 'solutions', and the correct nature of Marx's solution given an
understanding of his scientific method. We have also indicated how it is only
their empiricist methodology which enables the critics of Marx to avoid
Bortkiewicz's inevitable conclusion that price and profit cannot be deduced
from value and surplus value. This is achieved by introducing a positive rate
of exploitation either at the level of distribution of the social product -
whether this is by asserting its existence as an empirical fact or 'deducing'
it from a mathematical relation - or by regarding it as, in some sense,
'socially tangible' and part of the experience of the working class at the
level of production. This procedure, as we have shown, is not only alien to
Marx's method but quite unnecessary once that method is understood.
In
Capital, Marx moves on to deal with the law of the tendency of the rate
of profit to fall in relation to the profit of industrial (productive) capitals.
He then, and only then, begins to deal with other sections of the capitalist
class who have a claim to a share of the total profits produced - merchant
capital, banking capital and those claiming rent. Continuing in this way we can
deal with the capitalists able to charge prices containing a monopoly content
etc., and so on, In such a way Marx penetrates the veil of appearances of
capitalist society and shows how they relate as necessary appearances to the
determination of social production by the 'law of value'.
The
'law of value' - the determination of the value of commodities by the time
socially necessary to produce them - is reconciled in this way with appearances
which seem at first to contradict it. Marx has shown that as long as
generalised commodity production exists the laws of movement of society remain
determined by the 'law of value'.
Society
remains subjected to the dictates of the 'law of value' as long as the
capitalist mode of production exists.[163] In this way, Marx's Critique of
Political Economy as presented in Capital shows and justifies its
revolutionary significance.
David
Yaffe
September
1974
We
assume that all capital invested is used up in each period of production. We
shall consider three departments of production, Department I producing means of
production, Department II producing means of consumption (wage goods), and
Department III producing 'luxury goods'. With the usual notation we have the
'value' schema
I c1 + v1 + s1 = w1
II c2 + v2 + s2 = w2 (1)
III c3 + v3 +
s3 = w3
Let
us write
c1 + c2 + c3 = C
v1 + v2 +
v3 = V
s1 + s2 +
s3 = S (2)
We
have the following 'price of production' equations. Inputs are changed into
prices of production.
I (xc1 + yv1) (1 + r) = xw1
II (xc2 + yv2)
(1 + r) = yw2 (3)
III (xc3 + yv3)
(1 + r) = zw3
Here
the price of production of a unit of constant capital (product of Department I)
is x times its value,
that of means of consumption y times its value, and that of luxury goods z times its value. The rate of profit is r.
It
can be seen from the equations of Department I and Department II that it is
possible to find a solution for r independent of Department III. We can rewrite I and
II as follows
x(c1 (1+r) - w1) = -y(v2 (1+r) ) (4)
xc2 =
-y(v3 (1+r) - w2) (5)
On
dividing we can obtain a solution for r from an equation of the second degree. This is what
leads to the statement that the structure of Department III has no influence on
the rate of profit. This is a conclusion which is based on a purely 'formal'
understanding of capitalism and which we have shown in the text to be
fundamentally incorrect. From equation (3) we have three equations and four
unknowns. In order to 'solve' the equations we need another equation.
Bortkiewicz/Sweezy take z = 1.
If we do this and add the equations of (3) we obtain
(xC + yV) (1 +r) = xw1 + yw2 + w3 (6)
For
simple reproduction
w1 = C, w2 = V and w3 = S
and
(xC + yV) (1+r) = xC + yV + S
so
that
(xC+vV)r=S
That
is
total profit = total surplus value
Now
total price = xw1 + yw2 + w3 = xC + yV + S
and
total value = C+V+S
So
that in general total price does not equal total value. They are only equal if
xC + yV = C + V
ie
if
C 1-y --- = ---- V x-1
which,
in general, is not the case.
Winternitz starts from equations
(3) and does not assume simple reproduction. He argues that total value = total
price, that is
w1 + w2 + w3 = xw1 + yw2 + zw3 (7)
So
that (7) is Winternitz's fourth equation.
From
equation (1) on adding
C + V + S = w1 + w2 + w3
and
from (6) and (7) we obtain for total profit - (xC + yV)r
= w1 + w2 + w3 xC- yV = C + V + S- xC- yV = C (1-x) + V (1-y) + S
That
is that total profit does not equal total surplus value unless C (1-x) = V
(y-1), which is in general not the
case.
In
conclusion, there exists no general solution for the equations which preserves
the equality of total value and total price, and total surplus value and total
profit, if inputs are changed to prices of production.
If
inputs are not changed into prices of production then there is a unique
solution with the equalities holding (3) would now read
(c1 + v1) (1+r) = xw1 (c2 + v2) (1+r) = yw2 (c3 + v3) (1+r) = zw3
If
total value = total price then on adding equations (8) and from (1)
(C+V) (1+r) = xw1 + yw2 + zw3 = w1 + w2 + w3 = C + V + S ie (C + V) r = S
that
is total surplus value is equal to total profit.
[*]
Following through the development of our position as argued in Revolutionary
Communist 3/4. we now find the use von Bortkiewicz/Sweezy and others make
of Marx's Reproduction Schema quite unacceptable. Our presentation and
criticism of their argument in no way implies that we accept the terms in which
their argument has been presented. Thus, for example, although reference is
made to the 'wage goods' department, we view this concept as completely in
conflict with Marx's method.
[1]
I with to acknowledge the contributions made by members of the Revolutionary
Communist Group to the development of the ideas in this article. I would also
like to thank Michael Williams for his help on many substantial points concerning
Marx's method. This article is a development and clarification of a short note
'Value, Price and the Neo-Ricardians: An Introductory Note' in the Bulletin
of the Conference of Socialist Economists (BCSE) Autumn 1973 p42-47.
[2]
'Uncritical Criticism' in Collected Works Volume 3 p632, Lawrence and
Wishart 1964.
[3]
L von Bortkiewicz, 'On the Correction of Marx's Fundamental Theoretical
Construction in the Third Volume of Capital' in Eugen von Bohm-Bawerk, Karl
Marx and the Close of His System (New York 1949). Originally published in Jahrbuecher
fur Nationaloekonomie und Statistik July 1907. Also 'Value and Price
in the Marxian System' in International Economic Papers, No 2, 1952.
Originally in Archiv fur Sozialwissenschaft und Sozialpolitik,
Volume XXV, 1907.
[4]
P A Samuelson, 'Understanding the Marxian Notion of Exploitation: A Summary of
the So-called Transformation Problem Between Marxian Values and Competitive
Prices' in the Journal of Economic Literature,.June 1971, Volume
IX No 2 p399-431.
[5]
Paul M Sweezy, The Theory of Capitalist Development, Dennis Dobson Ltd.
1946 (1962 ed) p109-130.
[6]
Piero Sraffa, Production of Commodities by Means of Commodities,
Cambridge University Press 1960 (1963 ed).
[7]
See for example, Sweezy op cit p129-130, Ian Steedman, 'Marx on the Rate of
Profit' in BCSE. Winter 1972 p104-109, Geoff Hodgson, 'Marxist
Epistemology and the Transformation Problem' in BCSE Autumn 1973 p47-64,
and 'The Theory of the Falling Rate of Profit' in New Left Review No 84.
March-April 1974, Alfred Medio, 'Profits and Surplus-Value: Appearance and
Reality in Capitalist Production' in A Critique of Economic Theory (ed E
K Hunt and J G Schwartz) p312-346, and David Laibman, 'Values and Prices of
Production: The Political Economy of the Transformation Problem' in Science
and Society, Winter 1973-1974 Volume XXXVII No 4 p404-436. Hodgson and
Steedman make all the major errors outlined in the text. Hodgson explicitly
recognises that Marx rejected the definition of the rate of exploitation given
in his article but does not grasp the significance of this. See Hodgson, 'The
Theory of...' op cit p80. Medio gives the impression that he has avoided the
Neo-Ricardian pitfalls and even criticises the Neo-Ricardian School. But having
done this he commits most of the same blunders. See Medio op cit p330, p331,
p332. Laibman, while attacking the Bortkiewicz/Sweezy 'Solution', nevertheless,
in arguing for the 'invariance' of the rate of exploitation in the
transformation process of values into prices, regards it as 'socially
tangible...part of the relevant experience of a social class' and a 'parameter
reflecting the real forces of the class struggle'. See Laibman op cit p426.
[8]
An unfortunate expression used by Medio op cit p314.
[9]
In 'Philosophical Notebooks' Collected Works Volume 38 p180
[10]
Hodgson op cit p80.
[11]
It is, of course, not really a new School of thought. Most of the positions are
already in Bortkiewicz. See 'Value and Price...' op cit p32 (on 'non-basics'
and 'luxury goods'), p33 and p53 (on the rate of profit). Only an empiricist
methodology saves the other critics of Marx from Bortkiewicz's eventual
conclusion 'we are thus driven to reject Marx's derivation of price and profit
from value and surplus value' op cit p13.
Besides
the articles mentinned so far, John Harrison's 'Productive and Unproductive
Labour in Marx's Political Economy' in BCSE Autumn 1973 p70-82 is a
straightforward rejection of Marx's position. Hodgson's 'Permanent Arms
Economy: A Critique' in International January 1973 Volume 1 no 8 p54-66
accepts Bortkiewicz's view on luxury goods/non-basics. This article is a
confused critique of M Kidron's Western Capitalism Since the War,
Penguin 1970, which actually holds to a similar position, see especially p55.
[12]
See my article 'The Crisis of Profitability: A Critique of the Glyn-Sutcliffe
Thesis' in NLR No 80 p45-62, which shows the reformist implications of a
rejection of Marx's law of the tendency of the rate of profit to fall, See also
Frank Richards, 'The International Socialists and Centrism: The Re-emergence of
Economism' in this issue for a critique of the reformist practice of a group
whose basic theoretical positions are opposed to those developed by Marx in Capital,
M Kidron is one of their leading theoreticians.
[13]
See my article 'The Marxian Theory of Crisis, Capital and the State' in BCSE
Winter 1972 p5-58, reprinted in Economy and Society Volume 2 No
2, May 1973 p 186-232. See also Peter Howell 'Once Again on Productive and
Unproductive Labour' in Revolutionary Communist No 3/4 pp 46-68,
November 1975, for a critique of Harrison's position.
[14]
Grundrisse, Penguin Books 1973, p449, p517;p727, p767. The Grundrisse
is used for citations as it often makes explicit what is implicit in Volume 1 of
Capital. Sweezy is quite wrong when he says that Volume 1 of Capital
assumes equal organic compositions of capital in all branches of production for
the law of value to directly control the prices of commodities. He has not, as
elsewhere in his book, understood Marx's method of analysis. Marx is dealing
with the immediate process of production as such, and at that level of
abstraction Sweezy's problem does not arise. Capital as such is not
differentiated from individual capital. See Sweezy op cit p109.
[15]
Capital Volume III p25 Lawrence and Wishart/Moscow 1962.
[16]
Theories of Surplus Value (TSV) Part III p177 Lawrence and
Wishart, London 1972. Marx's emphasis indicates the importance of the
'difficulty'. See also Capital Volume Ill op cit p155-6.
[17]
TSV Part I p87, Moscow (no date). How much Marx had already anticipated
our own Neo-Ricardians is clear. He spoke of 'crass empiricism' turning into
'false metaphysics'. This is one of the characteristics of all Neo-Ricardian
methodology. The Neo-Ricardians do not confuse surplus value and profit in the
same way as Ricardo but in their treatment of luxury goods they show they
follow a similar line of reasoning to Ricardo. For Marx on Ricardo see TSV
Part II p427, Lawrence and Wishart, London 1969.
[18]
TSV PartII ibid p191 and p437.
[19]
TSV ibid p174 and TSV Part Ill op cit p87. Marx attacks Mill's
solution to the problem in a very precise way:
'Here the contradictions between
the general law and further developments in the concrete circumstances is to be
resolved not by the discovery of the connecting links but by simply
subordinating and immediately adapting the concrete to the abstract' ibid.
Although
the problem is a much more general one for the Neo-Ricardians, they, with their
various models and reproduction schemes, do exactly the same.
[20]
Capital Volume III op cit p155-6.
[21]
ibid p192. The formation of prices of production and this movement of capital
should not be confused with the actual movement of capital seeking higher
profits once the general rate of profit has been formed.
[22]
ibid p157.
[23]
ibid p156 and p163. A price of production is called a 'price' because it
represents a closer approximation to empirical market prices than value. As a
modified form of value, it like value has to be expressed in money in the
process of circulation of commodities. Marx also makes it clear that 'mere
changes in the money expression of the same values are, naturally, not at all
considered here' ibid p164. These points will be discussed more fully below.
[24]
ibid pl6l and p170-1. See also TSV part III op cit p81. It should be
pointed out that in TSV Marx uses the term cost-price for price of
production.
[25]
Capital Volume III op cit p155. See also TSV Part III op cit p83.
[26]
Grundrisse op cit p595 and p760.
[27]
Capital Volume III op cit p17O, p157 and p165. See also Grundrisse
op cit p767
[28]
Capital Volume III op cit p154-5. My table is the same as Marx's on page
155 with an extra column 'used up c' - taken from the table on page 154 - and
in slightly different order. See mathematical appendix for a more general
version.
[29]
ibid p176, In so far as merchant capital it used to reduce circulation time the
matter is more complex. This point was made to me by Makoto Itoh.
[30]
ibid p204.
[31]
ibid p281.
[32]
ibid p282.
[33]
ibid p307. More complex and in a different sense to that put forward by the
mathematical economists who have attempted to reduce Capital to a number
of equations.
[34]
ibid p308. The stages in the analysis necessary berore we arrive at 'the
forms of appearance which serve as the starting point in the vulgar
conception' are clearly indicated by Marx in a letter to Engels, 30th April
1868, in Karl Marx and Frederick Engels Selected Correspondence, Moscow
(no date), p245-250. It is important to note that in the letter and Volume III
of Capital the law of the tendency of the rate of profit to fall - a law
rejected by the Neo-Ricardians - is dealt with before the modifications due to
the existence of merchants' capital. banking capital. etc., the splitting of
capital into profit and interest and rent, are taken into account.
[35]
Sweezy op cit p115. L von Bortkiewicz 'Correction of Marx's Fundamental... op
cit p205. Most of the later work takes this point as given. The only works on
this question which I am aware of that reject this point of view are: I I Rubin
Essays on Marx's Theory of Value (1928) p223-257, Black and Red,
Detroit 1972 (translated from the Russian by Milos Samardzija and Fredy
Perlman), Henryk Grottmann 'Die Wert-Preis Transformation bei Marx und dat
Krisenproblem' (1932) in Aufsatze zur Krisentheorie, Archiv
sozialististitcher Literatur 20, Verlag Neue Kritik, Frankfurt 1971, Paul
Mattick 'Samuelson's "Transformation" of Marxism into Bourgeois
Economics' in Science and Society Fall 1972, Volume XXXVI No 3
p258.273, and S H Mage The Law of the Falling Tendency of the Rate of
Profit, Its Place in the Marxian Theoretical System and Relevance to the
US Economy Columbia University PhD 1963, University Microfilms Inc.,
Ann Arbour, Michigan, especially Appendix A, p234ff.
[36]
Sweezy op cit p115, Steedman op cit p39.
[37]
Capital Volume III op cit p162, see also p2023 and TSV Part III
op cit p167.
[38]
Sweezy op cit p116.
[39]
Steedman op cit p37. Steedman thinks Marx inconsistent even if input prices are
transformed.
[40]
Hodgson 'Marxist Epistemology...' op cit p48. As Marx was fully aware of this
problem before writing the main draft of Volume III of Capital (1865-6)
- he did not 'return' to it, as Sweezy states, in Theories of Surplus Value
- it had already been discussed in TSV (1861-3), there can be no other
explanation for our critics than Marx's mathematical inability to carry out the
transformation with inputs changed into prices of production, The letter to
Engels already cited (1868) does not take this matter further, Marx seemed
quite content with what he had done.
[41]
Sweezy op cit p114. What this has in common with the accumulation of capital
and the continual movement of capitals from one branch to another, which is at
the centre of Marx's problem only Sweezy/Bortkiewicz could say. Of course
simple reproduction will break down under such conditions. Capitals will have
to move between departments to establish prices of production. It is
interesting to note that even in Volume II of Capital all Marx's
examples of simple reproduction assume equal organic compositions of capital.
Perhaps Marx had a little more understanding of the problem than his critics
tend to give him. Marx argued, in fact, that disproportions between fixed and
circulating capital would occur with fixed capital being merely preserved under
conditions of simple reproduction. See Volume II of Capital p469, Moscow
1961.
[42]
Sweezy op cit p122. Sweezy cites Natalie Moszkowska, Das Marxische
System, Berlin 1929, who uses a unit of labour time as the unit of account
in both schemes and this preserves the equality of total value and total price.
He forgets to add that in this case total surplus value does not equal total
profit. See Moskowska op cit p19, where she says that in general 'if total
price = total value, then total profit =/= total surplus value; on the other
hand, if total profit total surplus value, then total price =/= total value'.
[43]
Sweezy op cit p121, The fact that one set of capitalists would need to become
merchant capitalists to fit Sweezy's scheme in order that the right sort of
commodities get in the right place is left out of consideration. This arises
because IIIv is greater than IIs. See Capital Volume II op cit p407,
p408.
[44]
Bortkiewicz 'Value and Price ' op cit p11.
[45]
Bortkiewicz 'Correction of Marx's Fundamental.... op cit p205.
[46]
Sweezy op cit p121,
[47]
Marx TSV Part II op cit p201.
[48]
For a discussion of these points see Capital Volume III op cit p189,
p426, p450, and Capital Volume I op cit p92. Also Grundrisse op
cit p794. Marx says here 'why is labour time, the substance and measure of value,
not at the~same time the measure of prices , See also ibid p801. For an
analysis of gold as the money commodity and its importance for South African
capitalism see Michael Williams 'An Analysis of South African Capitalism -
Neo-Ricardianism or Marxism' forthcoming BCSE Winter 1974/5.
[49]
ibid p152 and pp136-153. The producer of the money commodity exchanges his
product for another commodity without having first sold it, In this it proves
the exception. Capital Volume I op cit p110.
[50]
Capital Volume I op cit p97.
[51]
Grundrisse op cit p138 my emphasis. Marx does not fail to 'separate
rigorously enough the two principles of value and price calculation' as
Bortkiewicz would have it. It is Bortkiewicz who, as a Ricardian, does not
understand the 'real difference and contradiction between price and value'. See
Bortkiewicz 'Value and Price...' op cit p7.
[52]
TSV Part II op cit p200.
[53]
Grundrisse op cit p140.
[54]
Marx TSV Part III op cit p161-2. Kenneth May in 'Value and Price of
Production: A Note on Winternitz's Solution', Economic Journal
December 1948 p596-9 and Laibman op cit p412 make a similar criticism of
Sweezy. The extreme confusion of some of the Neo-Ricardians on this point is
summed up by Hodgson's statement that to say total price is equal to total
value 'denies the possibility of general price inflation'. In fact the matter
is precisely the other way round. We can only explain inflation by accepting
what money is and really has to be, the universal equivalent of exchange value,
Hodgson confuses the content of money with its nominal value. See Hodgson
'Permanent Arms Economy...' op cit p59. Marx's warning proves to be correct
'Thus everything appears reversed in competition', Capital Volume III op
cit p205,
[55]
Sweezy op cit p122. One would still like to know from Sweezy where the extra
gold comes from without the expenditure of additional labour-time no doubt a
point of interest to gold-mining capitalists too.
[56]
Bortkiewicz 'Value and Price...' op cit p6.
[57]
Capital Volume I op cit p94. See also ibid p69 and TSV Part III
p161-2.
[58]
Capital Volume I op cit p90.
[59]
TSV Part III op cit p138, my emphasis.
[60]
For a discussion of this point see Michael Williams op cit. The feature which
it shares with luxury products is that gold, as the money commodity, is
unproductively consumed. As Marx put it; 'Gold and silver as money-commodities
mean circulation costs to society which arise solely out of the social form of
production. They are faux frais of commodity production in general, and
they increase with the development of this production, especially of capitalist
production. They represent a part of the social wealth that must be sacrificed
to the process of circulation.' Capital Volume II op cit p136.
In
so far as gold has the features of a luxury product, changes in the organic
composition of the capitals engaged in its production affect the average rate
of profit. See discussion for luxury goods proper in Section 3 below.
[61]
R L Meek 'Some Notes on the "Transformation Problem"' in Economics
and Ideology and Other Essays, Chapman and Hall Ltd. 1967, p148. See also
Laibman op cit p410-12.
[62]
See for example F Seton 'The "Transformation Problem"' in Review
of Economic Studies Volume 24 1957 p149-160.
[63]
J Winternitz 'Values and Prices: A Solution of the So-called Transformation
Problem' in The Economic Journal 1948 p276-280.
[64]
Meek op cit p153-4.
[65]
Seton op cit p153.
[66]
Laibman op cit p426.
[67]
ibid p426-7. As these processes take place behind the backs of the participants
and it is precisely the 'ultimate money-form of the world of commodities' which
conceals the social relations, what workers 'experiencing' exploitation means
is not very clear. See Marx Capital Volume I op cit p44, p76 and p540.
Marx in fact says that the form of wages makes the actual relation invisible,
ibid.
[68]
Medio op cit p335.
[69]
Medio ibid p332-344. Laibman makes most of the points about the standard system
and the actual system in his article op cit p424 and p429-30. The Marx quote is
from TSV part II op cit p200. For Sraffa's construction of the Standard
Commodity see Sreffa op cit p18-25. It is interesting that when Marx talks
about the 'average composition, he talks of an ideal average, ie an average
that does not really exist, Capital Volume III op cit p170. Medio does
not give the complete quote on this, see Medio op cit p331-2.
[70]
See Marx TSV Part II op cit p200 and discussion on page 36 above. It is
interesting that Medio regards the equalities in most solutions of the
transformation problem, such as total value = total price, as 'some sort of
arbitrary "invariance postulate" ' op cit p335.
[71]
Medio op cit p34O-1. Also Sraffe op cit p25.
[72]
See Meek op cit p152, Steedman op cit p37, and Hodgson 'Marxist Epistemology...'
op cit p63.
[73]
Capital Volume I op cit p35 and 'Comments on Adolf Wagner's 'Lehrbuch
der Polititchen Okonomie" ' in Karl Marx on Value B an ICO
publication 1971 p21.
[74]
Capital Volume I op cit p38.
[75]
TSV part III op cit p88.
[76]
This very clear passage is taken from the first edition of Volume I of Capital.
It was left out of the Third edition. It comes at the end of Chapter 1 and is
an additional paragraph. Taken from Marx-Engels II Studienausgabe Politische
Oekonomie Fischer Bucherei July 1966 p246 (my tanslation). This antagonistic
movement is expressed by the fact that an increased quantity of material wealth
may correspond to a simultaneous fall in the magnitude of its value due to
increased productiveness of labour. Capital Volume I op cit p46.
[77]
TSV part III op cit p88.
[78]
Capital Volume I op cit p154 and TSV Part III op cit p137.
[79]
Grundrisse op cit p270 and also p266.
[80]
Grundrisse op cit p297.
[81]
Capital Volume I op cit p167.
[82]
Capital Volume I op cit p208, Grundrisse op cit p296.
[83]
Grundrisse op cit p305 changed in translation. Nicolaus translates
'Verwertung' incorrectly as realisation throughout the Grundrisse. He
also translates 'Realisierung' as realisation. They, of course, mean something
very different. When a commodity obtains a price, ie is realised in money, then
Marx uses 'realisiert' (ibid p312). If we are speaking of the process of
capital expansion (reproduction of capital requires its expansion ibid p310-11)
then the correct term is 'Verwertung'. The confusion of the two has, in the
past, led to underconsumptionist theories of crisis. The relevant pages in the
German edition Grundrisse der Kritik der Politischen Okonomie, Berlin
1953, are p213, p217-8.
[84]
ibid p310 also see ibid p517.
[85]
ibid p409-lO and p331 and p334. It is not surprising that Hodgson, who rejects
Marx's attempt (an 'arbitrary assumption') to treat the social capital as a
whole (capital in general), argues that the tendency of the organic composition
of capital to rise cannot be deduced from the 'concept of capital'. He also
argues that to start from the definition of capital as 'self expanding
value" is a mere tautology. Marx, on the other hand, made it very clear
that 'Mere self-preservation, non-multiplication of value contradicts the
essence of capital' Grundrisse ibid p310, see also Capital Volume
II op cit p79.
Neither
Marx nor I start from capital as self-expanding value but from an analysis of
the commodity. Utilising the method of Marx one reaches conclusions that appear
as tautologies - may appear as if we had before us an a priori
construction (Capital Volume I op cit p19 - Afterword to second German
edition) - but they are derived by the dialectical method from the starting
point. It is because Hodgson rejects Marx's method - regarding it as a collapse
into Hegelian Idealism - and replaces it by an empiricist and formalistic
methodology that he is forced to reject the law of the tendency of the rate of
profit to fall. See Hodgson 'Marxist Epistemoloyy...' op cit p51, and 'The
Theory of the Falling Rate of Profit' op cit p65.
[86]
Grundrisse op cit p100-1.
[87]
Marx to Engels, April 2nd 1858 in Selected Correspondence op cit p128-9.
[88]
See I I Robin op cit p248-9 for this important point.
[89]
Grundrisse op cit p327, also in ibid p331 and p333.
[90]
See also Geoffrey Pilling 'The Law of Value in Ricardo and Marx' Economy and
Society Volume I No 3 p293.
[91]
Grundrisse op cit p310 and p517.
[92]
Capital Volume II op cit p125 and p130.
[93]
ibid p393, see also p73 and p24.
[94]
Capital Volume III op cit p25.
[95]
'Marxist Epistemology... op cit p51 and Steedman op cit p37. compare the
remarks of these authors with those of Marx, 'Their "mind", their
consciousness, may be completely ignorant of, unaware of the existence of, what
in fact determines the value of their products or their products as values.
They are placed in relationships which determine their thinking but they may
not know it. Anyone can use money as money without necessarily understanding
what money is. He (Bailey - but it could just as well be Hodgson - DY)
transfers the problem into the sphere of consciousness, because his theory has
got stuck.' TSV Part III op cit p163. See also how close Hodgson's
standpoint is to that of Adam Smith's in that he looks at the question from the
standpoint of the individual capitalist, TSV Part II op cit p218-20.
[96]
Marx to Kugelmann July 11th 1568. Marx-Engels Selected Correspondence
op cit p252.
[97]
Capital Volume III op cit p797.
[98]
Pilling op cit p294-5. My emphasis except for 'necessary appearance.
[99]
TSV Part II op cit p217, and Grundrisse op cit p761.
[100]
Grundrisse op cit p414 (my emphasis), also p413, p552 and Capital
Volume I op cit p316. Hodgson in his article merely takes this quote out of
context and does not understand the essential point, see 'Marxist
Epistemology...' op cit p51. This quote indicates how the theory of State
Capitalism of the International Socialists group is fundamentally at odds with
Marx's Capital.
[101]
Capital Volume III op cit p251.
[102]
Grundrisse op cit p751-2.
[103]
ibid p760.
[104]
Capital Volume II op cit p394
[105]
Sweezy op cit p26. Sweezy, throughout his book, which has had more influence
than any other work on Anglo-American Marxists, fails to understand Marx's
method, as we have indicated a number of times in this article. This is only
another example.
[106]
Grundrisse op cit p646-7 and p320.
[107]
ibid p667. See also p741-2.
[108]
Capital Volume II op cit p397. See also ibid p399, where Marx says 'I
say £ solely to indicate that it is value in the form of money'.
[109]
This term was suggested to me by Michael Williams. Once again we see a
fundamental confusion in Hodgson's work, where he argues the 'reproduction
schemes are in value terms only' in 'The Theory of the...' op cit p64.
[11O]
Capital Volume II op cit p393.
[111]
Capital Volume II op cit p495. Also TSV Part II op cit p5l3ff.
[112]
Capital Volume I op cit p73 and TSV Part III op cit p137.
[113}
Capital Volume I op cit p27.
[114]
Concrete labour would not be transformed into abstract (social) labour under a
different mode of production. This it only the case under commodity production.
Under socialism concrete labour would be directly social labour and neither
exchange-value nor 'value' would exist as categories. The form of value has to
be adequate to its content. Although they must be distinguished they cannot be
'torn' apart. Form necessarily grows out of the content, In this we can see
Marx's great debt to Hegel. In a passage in the first edition of Capital
(not in later editions) Marx expressed this very clearly.
'The decisive, crucial point
consists of revealing the necessary internal connection between the form,
substance and magnitude of value, ie expressed conceptually (ideell) to prove
that the form of value arises out of the concept of value.'Capital first
edition op cit p240. (cited in I I Rubin op cit p112 as Kapital I 1867
p34).
For
a discussion on abstract labour, see Rubin op cit chapter 13 and 14.
[115]
Capital Volume I op cit p81.
[116]
TSV Part III op Cit p253.
[117]
Capital Volume I op cit p60.
[118]
A Contribution to the Critique of Political Economy C H Kerr and Co 1904
p69. Also Marx 'Comments on Adolph Wagner's...' op cit p12, and TSV Part
II op cit p164.
[119]
TSV Part II op cit p164, and TSV Part III op cit p137.
[120]
A Contribution to the Critique... op cit p78-9.
[121]
Medio op cit p321.
[123]
ibid.
[124]
Marx connected this point precisely with the failure to understand value, 'The
problem of an "invariable measure of value" was in reality only an
erroneous expression of the search for the concept, the nature, of value
itself...' TSV Part III op cit p134 (slightly corrected translation see Marx-Engels
Werke Dietz Verlag, Berlin 1968 Volume 26 Part III p132). This, in fact,
sums up the position of the whole Sraffian school. It could be argued, in the
case of Sraffa, that his is an attempt to be rid of the concept of value itself
altogether and replace it completely by use-values and technical coefficients -
physical units/labour inputs/bundles of commodities - hence we can understand
the significance of the so-called 'corn' models.
In
this sense this is a degeneration back to the Physiocrats who represented
surplus value in physical units (surplus product of agriculture). For a similar
position and developments of this point see Michael A Lebowitz 'The Current
Crisis of Economic Theory' in Science and Society Volume XXXVII No 4
p385-403. Unfortunately he does not see that Medio has not remained
uninfluenced by this 'development' in modern economic theory.
[125]
See Marx's critique of Ricardo on this point, Grundrisse op cit p333.
[126]
Hodgson states this in terms of the social reletion on an extended scale and
yet never explains why this is the case and what it means, If he regards the
definition of capital as self-expanding value as tautological, or is it just
starting with it that is tautological, it is not clear how he then shows that
the accumulation of capital is the reproduction of the capitalist social
relation on an extended scale. After all a surplus product is produced in other
class societies besides the capitalist one. See Hodgson 'The Theory of...' NLR
op cit p64-5. Much of Hodgson's article consists of assertions of this kind and
yet they are never justified.
[127]
Grundrisse op cit p408, Hodgson would, no doubt, regard this as Marx's
'idealistic method of reasoning' ('The Theory...' op cit p65) but it is in fact
the result of Marx's scientific method, the only 'way in which thought
appropriates the concrete, reproduces it as concrete in our mind' (Grundrisse
op cit p101). To fail to approach the problem in this way means to fall into an
empiricist methodology. That is, to start, as Hodgson puts it with 'social
practice' and 'real processes', whatever this is meant to signify. Marx, as I
have said, began with the commodity, which one supposes is real enough, and
developed the concept of capital from the 'value-form' of the product of labour
under capitalist production. Does Hodgson accept this or not? The rising
organic composition of capital was developed through such a method of procedure
- quite logically from the concept of capital. If Hodgson rejects this - and it
is the method of procedure in Capital - although explained more fully in
the Grundrisse - then he rejects Marx's method. If this is the case then
let him say so. To say that in Capital the idealistic method of reasoning
receives little prominence, is mere subterfuge. The method of the Grundrisse
and Capital are one and the same. See Hodgson op cit p65.
[128]
Grundrisse op cit p248.
[129]
Grundrisse op cit p305 - my translation from Grundrisse der Kritik...
op cit p213.
[130]
Grundrisse op cit p257.
[131]
Marx TSV Part III op cit p98.
[132]
Steedman's article 'Marx on the Rate of Profit' in BCSE Winter 1972
p104-5 is a good example. There is also a clear expression in this article how
exchange, money, etc., are merely treated formally, ibid p108.
[133]
For example Hodgson 'The Theory of the...' NLR op cit p57. Steedman 'The
Transformation Problem Again' op cit p37. There he talks of the 'physical
aspect of variable capital'. See Marx TSV Part III op cit p371 where he
takes up just this confusion.
[134]
Capital Volume II op cit p439.
[135]
ibid p165, p214, p219 and Capital Volume I op cit p209, Bob Rowthorn's
definition of 'variable' in terms of the power of combatants in the production
process was not Marx's intention, as can be seen, See 'Vulgar Economy' Part II
in BCSE Spring 1973 p11 - reprinted in NLR No 86.
[136]
Capital Volume I op cit p439-40.
[137]
TSV Part III op cit p167.
[138]
Capital Volume III op cit p203, and ibid p170, p216.
[139]
TSV Volume III op cit p178.
[140]
See Grundrisse op cit p258. See also p257.
[141]
Capital Volume III op cit p162. TSV Part III op cit p167.
[142]
Capital Volume III op cit p158-9 and p163. This is what Marx was getting
at when he said
'But if we place the sum of the
cost-prices of commodities of an entire country on one side and the sum of its
surplus-values, or profits, on the other, the calculation must evidently be
right.'
[143]
It is because they do not understand this that the critics argue for transforming
inputs into prices of production.
[144]
TSV Part II op cit p405. Capital Volume III op cit p193.
[145]
Capital Volume III op cit p173.
[146]
We assume that all capitals circulate in the same period. In fact differences
ot circulation time, in general, mean differences in production time.
[147]
This position corrects that in the first edition of the article in Revolutionary
Communist 1 p47-48. There, luxury production is called unproductive end it
is incorrectly asserted that luxury production is excluded at the level of
abstraction of the discussion of the formation of prices of production. Luxury
production is productive for capital, but has the particular effect on the rate
of profit as argued in this section. It is necessarily included in the discussion
of the 'transformation' of values into prices of production.
[148]
Capital Volume III op cit p68.
[149]
TSV Part III op cit p43.
[150]
ibid p350.
[151]
ibid p349.
[152]
ibid
[153]
This correct position is exactly the opposite of that argued by Kidron and
others who hold to the theory of the Permanent Arms Economy. It shows how the
International Socialists have completely broken from Marx's analysis of
capitalism.
[154]
For a discussion of this and other questions relating to luxury goods
production see Peter Howell op cit pp 57-68 As explained in the Editorial to Revolutionary
Communist No 3/4, Peter Howell, through his work on Productive and
Unproductive Labour, instigated the discussion which has led to a correction of
our earlier views on luxury production. Part of this new section is taken from
the article 'Inflation, the Crisis and the Post-War Boom' by Paul Bullock and
David Yaffe in Revolutionary Communist No 3/4 p20-21.
[155]
TSV III op cit p350.
[156]
TSV Part II op cit p376.
[157]
See Peter Howell op cit p65.
[158]
Once it is recognised that workers in the luxury goods sector are productive
workers many of the arguments of the Neo-Ricardians are seen to be wrong. See
P. Howell's critique of the absurd position of Kidron and others who argue that
luxury production does not enter into the determination of the rate of profit,
op cit p57-60.
[159]
Grundrisse op cit, p441.
[160]
Capital Volume III op cit p47.
[161]
TSV Part III op cit p228.
[162]
Grundrisse op cit p767. Marx's emphasis.
[163]
Until commodity production exists and has become the dominant mode of
production then the 'law of value' does not exist in the sense used in this
essay. See Marx TSV Part III op cit p73. It ceases to exist in socialist
society. This is quite consistent with Marx's often misunderstood statement in Capital
that the determination of value, in the sense of regulation and distribution of
labour among production groups would still exist - Capital Volume III op
cit p830. Preobrazhensky makes clear the important difference,
'I speak of the law of value as
the spontaneous regulator under the commodity and commodity-capitalist system
of production, that is, of the historically-transient form assumed in exchange
society by the regulation of the economy by labour expenditure. I do not speak
of this regulation in itself. This regulation will exist under planned economy,
too, but will be effected in another way, that is, on the bias of direct
calculation of labour-time.' New Economics OUP 1965 p95.