Re: FW: question on economics

[Rakesh Bhandari <rakeshb@xxxxxxxxxxxx>]

> I received the following question, the answer to which may be of interest:
>
> > I am having trouble understanding Marx's labor theory of value. Is it true
> that prices reflect the law of value because prices tend in the long term to
> stay a certain price for some time relativly interupted by laws of supply
> and demand ?(as Mandel says for example) From What i heard, prices cant
> reflect labor inputs because a soda pop for example costs almost nothing to
> build and costs 50 cents to sell which is acourse a high markup from the
> costs of production. however Marxits say that the commodity prices reflect
> the value of the imputs put in them. Who is right ?<

1. Are Ricardo's cost prices and Marx's prices of production long
term centers of gravity or equilibrium prices, as for example argued
in Robert Paul Wolff's important *Understanding Marx*? I would argue
not. Ricardo himself pointed out that techno organization change had
become a daily occurence. From my perspective, Marx's prices of
production are best understood not as centers of gravity but as
counterfactual prices: what prices in any one period would have been
had demand equalled supply and the profit rate equalized.

I would therefore reject a quasi-Hegelian emananistic or
essentialistic logic by which the price of production is the inner
necessity and market price merely an outer contigency. This
epistemo-logic is more than a copy theory of knowledge; it is an
identity logic in that the claim here is that the more capitalism
develops and eliminates residues of earlier economic
conditions--i.e., the more capital and labor mobility are
achieved--the more does the approximation (market prices) approach
the pure form (prices of production). I would recommend some Kantian
skepticism here so that we remain aware of the one-sidedness in any
relation between the concept and the conceived.

Any equalisation of the profit rate after all is continously
disrupted by the search for extra surplus value that drives the whole
system forward.

2. Ricardo argued that the law of value best explained the change in
relative prices over time rather than exchange ratios at one point.
Marx found this reasonable, and there is complicated statistical work
which now demonstrates the strength of the relationship.

Malthus argued that as a theory of exchange ratios, the law of value
failed: as capitalism developed, the compositions and the turnover
times of the various capitals would ever vary while there was an
observable tendency for the rate of profit to equalize. But an
equalized profit rate would then contradict the labor theory of value.

Marx brilliantly inverts the criticism: he attempts to show that not
only does the formation of the average rate of profit not contradict
the law of value, it becomes the form in and through which the law of
value asserts itself.

3. Marx's solution then is said to suffer from the transformation
problem. Critics have tried to show that Marx's solution cannot hold
in much the same way that 2 + 2 cannot equal 5. If interested, I
would be happy to discuss why there are faulty assumptions in this
logical criticism, e.g., Marx's inputs are in values, there should be
two invariance conditions (total value=total price, total surplus
value=total profit).

The point here is that Marx's critics have hoped to show that his
theory of value self destructs due to *logical contradiction* as a
way of hoping to divert us from what Marx illuminated as  *real
contradictions* which include but exceed the neo Ricardian obsession
with the distribution of income.

Economists, progressive ones included, have been trying either to
dispense with the Marxian revolution or put it back in the classical
box.

Rakesh