All Value-Form, No Value-Substance: Comments on Moseley’s New Book, Part 13

 
by Andrew Kliman
 
Here is the thirteenth installment of “All Value-Form, No Value-Substance,” the series of comments I’m writing on Fred Moseley’s new book, Money and Totality: A Macro-Monetary Interpretation of Marx’s Logic in Capital and the End of the “Transformation Problem.” It responds to part of Moseley’s reply to the twelfth installment.

Please see the “Miscellaneous” section on the homepage of With Sober Senses for links to previous installments.

Comments

18 Comments on "All Value-Form, No Value-Substance: Comments on Moseley’s New Book, Part 13"

  1. Fred Moseley on Wed, 1st Feb 2017 9:08 am 

    This comment will briefly present my interpretation of Marx’s prices of production as long-run equilibrium prices. And a few questions of clarification for Kliman at the end. Later comments will respond to Kliman’s Part 13.

    Marx’s prices of production are long-run equilibrium prices

    I argue that Marx’s prices of production in Vol. 3 are (or were intended to be) long-run equilibrium prices with the following properties:
    equal rates of profit across industries
    change only if the productivity of labor (or the wage) changes
    function as long-run center of gravity of market prices

    Equilibrium does not mean no change, but means changes only for these specific fundamental causes. So if the productivity of labor and the wage remain constant, then Marx’s prices of production do not change.

    Market prices also depend on the accidental and temporary causes of S and D and thus often change every period. Marx’s theory abstracts from the fluctuations of market prices and focuses instead in prices of production as the center of gravity of these fluctuations which is determined by the “immanent laws” of capital.

    I think the textual evidence to support this interpretation of Marx’s prices of production as long-run equilibrium prices is very strong, which I have documented in a 1999 paper on academia:
    https://www.academia.edu/27678884/Marxs_Concept_of_Prices_of_Production_Long-Run_Center_of_Gravity_Prices
    and summarized in my book (pp. 289-96 and 333-37).

    A few examples:

    “The real inner laws of capitalist production clearly cannot be explained in terms of the interaction of demand and supply …, since these laws are realized in their PURE FORM only when demand and supply cease to operate, i.e. when they coincide. In actual fact, demand and supply never coincide, or, if they do so, it is only by chance and not to be taken into account for scientific purposes; it should be considered as not having happened. Why then does political economy assume that they do coincide? In order to treat the phenomena it deals with in their LAW-LIKE FORM, the form that corresponds to their concept, i.e. to consider them independently of the appearance produced by the movement of demand and supply.” (C.III, p. 291)

    “If supply and demand coincide, the market price of the commodity corresponds to its price of production, i.e. its price is then governed by the INNER LAWS of capitalist production, independent of competition, since fluctuations in supply and demand explain nothing by divergences between market prices and prices of production – divergences which are mutually compensatory, so that over certain longer periods the average market prices are equal to the prices of production. As soon as they coincide, these forces cease to have any effect, they cancel each other out, and the general law of price determination corresponds to price of production in its immediate existence and not only as an average of all price movements, and the price of production, for its part, is governed by the IMMANENT LAWS of the mode of production.” (C.III, pp. 477-78)

    [T]he actual movement of competition lies outside of our plan, and we are only out to present the internal organization of the capitalist mode of production, its IDEAL AVERAGE, as it were.” (C.III, pp. 969-70)

    Marx also said many times that his prices of production are similar to Smith’s and Ricardo’s “natural prices”, which were long-run equilibrium prices or “center of gravity” prices, around which market prices fluctuate over multiple periods of time. Marx’s critique of Smith and Ricardo was NOT that the prices in their theories should not be long-run equilibrium prices, but that they were UNABLE TO EXPLAIN NATURAL PRICES with equal rates of profit and could not explain why and how natural prices differ from values. For example:

    “The price of production includes the average profit. And what we call price of production is in fact the SAME THING that Adam Smith calls “natural price, Ricardo “price of production” of “cost of production”, and the Physiocrats “prix necessaire”, though none of these people explained the difference between price of production and value.” (C.III. p. 300)

    I hope that readers will read the paper cited above and see what you think about the textual evidence to support the interpretation of Marx’s prices of production as long-run equilibrium prices with the three properties listed above.

    The main purpose of Marx’s theory of prices of production was to *answer the main criticism of Ricardo’s labor theory of value* (especially by Malthus and also Torrens) – that the labor theory of value was contradicted by equal rates of profit and was unable to explain long-run equilibrium prices with equal rates of profit. Marx answered this main criticism of the labor theory of value on its own terms. Marx did not argue that long-run equilibrium prices were not important, but he showed how long-run equilibrium prices COULD BE EXPLAINED on the basis of the labor theory of value.

    The long debate over the transformation has generally assumed (correctly in my view) that Marx’s prices of production are long-run equilibrium prices. And the modern critics of Marx’s theory have argued that Marx was NOT ABLE to successfully explain prices of production as long-run equilibrium prices on the basis of the LTV, similar to Malthus’ critique of Ricardo.

    My book is a response to this modern critique of Marx’s theory of prices of production. I argue that, if Marx’s logical method is correctly understood – the determination of the total surplus-value prior to its division into individual parts and the circuit of money capital (M-C …) as the logical framework of Marx’s theory which implies that the initial M is the starting point of the theory and is taken as given – then Marx did SUCCESSFULLY EXPLAIN LONG-RUN EQUILIBRIUM PRICES of the basis of the labor theory of value, and thus there is no transformation problem in Marx’s theory. I rebut the long-standing critique on its own terms, as Marx rebutted Malthus’ criticism on the same terms.

    I think this is a significant victory for your side.

    QUESTIONS OF CLARIFICATION FOR KLIMAN:

    1. What is the equation for the “static equilibrium” prices of production in Section III of Part 13?

    2. What is the equation for the “actual” prices of production?

    3. Would you please make available your Excel worksheet so we can have some Phun?

    Thanks

  2. Andrew Kliman on Wed, 1st Feb 2017 3:02 pm 

    Hi Fred,

    I’m already having phun.

    By popular demand, the spreadsheet is now here:

    http://www.marxisthumanistinitiative.org/wp-content/uploads/2017/02/Centers-of-Nothing.xlsx

    See the Equations! sheet for answers to your 1st 2 questions.

    (The Equations! sheet corrects a couple of errors in the text of that section of Part 13; the computations were right and are not affected by the corrections.)

  3. Andrew Kliman on Wed, 1st Feb 2017 3:12 pm 

    Hi Fred,

    You wrote,

    I argue that Marx’s prices of production in Vol. 3 are (or were intended to be) long-run equilibrium prices with the following properties:
    equal rates of profit across industries
    change only if the productivity of labor (or the wage) changes
    function as long-run center of gravity of market prices

    Don’t forget that, in Part 2 of “All Value-Form, No Value-Substance,” I showed that your prices of production–both sectoral aggregates prices and per-unit prices–do not have the second of these properties. They change even if the “productivity of labor” (or the wage) do not change.

  4. Fred Moseley on Tue, 28th Feb 2017 9:12 am 

    I have been busy with other things, but I would like to get back to the discussion of Part 13.

    But the link given for the Excel spreadsheet doesn’t work. Please fix that. Or send to me directly. thanks.

    Also, I also have two questions about the equations on p. 4 of Part 13:

    1. In the last equation, total price for the period (t+1) = total value for period (t). What is the rationale for that unusual assumption. Usually total price is equated with total value in the same period.

    2. How are r(j) and r(k) determined in the first period, since there is p(t+1) in the numerator?

    Thanks.

  5. Fred Moseley on Tue, 28th Feb 2017 9:19 am 

    Below is my previous comment on Kliman’s Part 2.

    II. Prices of production as long-run center of gravity prices and causes of changes

    This is a reply to Kliman’s second post on my recent book Money and Totality: A Macro-Monetary Interpretation of Marx’s Logic in Capital and the End of the ‘Transformation Problem’. This reply focuses on whether Marx’s concept of prices of production are long-run center of gravity prices around which market prices fluctuate over multiple periods of time and which change only if productivity or the real wage changes (my interpretation) or are short-run prices that continue to change over multiple periods even though productivity and the real wage remain constant and thus cannot function as long-run center of gravity prices (TSSI)

    I argued in my book that Marx’s concept of price of production are long-run center-of-gravity prices, around which actual market prices fluctuate (“gravitate”) from period to period. These long run center of gravity prices are in the classical tradition of Smith and Ricardo, which have three key characteristics: (1) they equalize the rate of profit across industries; (2) they are “centers of gravity” around which actual market prices fluctuate over extended periods of time; and (3) they change if and only if either the productivity of labor changes (due to changes in the technology of production) or (secondarily) if the real wage changes.

    I argued that the TSSI prices of production have the first characteristic, but do not have the other two key characteristics and thus is a misinterpretation of Marx’s concept of prices of production. According to the TSSI, the transformation of values into prices of production in as ongoing process that takes place over multiple periods, even though productivity and the real wage remains the same in all these periods. And since TSSI prices of production change every period, they cannot be “centers of gravity” around which market prices fluctuate over longer periods of time.

    My book presented substantial textual evidence to support my interpretation of both of these other two characteristic of prices of production. For the characteristic of long-run center of gravity prices, Marx repeated a number of times in Theories of Surplus-Value and in Volume 3 of Capital and in letters to Engels that is prices of production were essentially the same as Smith’s and Ricardo’s “natural prices” which were long-run center of gravity prices around which market prices fluctuate (pp. 334-37).

    For the characteristic of “change only if …”, Marx argued in a number of passages, especially in Part 2 of Volume 3, that since prices of production are determined by the equation:
    PPi = (Ci + Vi) + R (Ci + Vi)
    changes in prices of production could be due to a change in Ci or Vi or R, or some combination of these. Marx argued further in these passages (reviewed in my book, pp. 289-96) that changes in Ci or Vi are caused by changes in the productivity of labor, either in final goods industries, or in industries that produce the means of production for these final goods industries. A change of Vi could also be due to a change in the real wage. Marx also argued that a change in R is also caused either by a change in the productivity of labor somewhere in the economy which changes either the composition of capital or the rate of surplus-value. A change in the rate of surplus-value could also be due to a change in the real wage. These discussions of the causes of changes in prices of production seem to imply the conclusion that, if the productivity of labor and the real wage remain constant, then prices of production would also remain constant. Marx does not mention in these passages any other possible cause of changes in prices of production, besides changes in the productivity of labor and/or the real wage. He certainly does not ever mention that Ci and Vi and prices of production might continue to change in successive periods as a result of the ongoing equalization of profit rates and the transformation of values into prices of production, even though productivity and the real wage remain constant (as in the TSSI).

    Kliman doesn’t say anything in his post about the second characteristic of prices of production as long-run center of gravity prices, and thus does not dispute my argument and textual evidence on this important point. Instead, he focuses on the third characteristic of “changes only if …”. He argues that, since I define prices of production as gross annual industry revenue (not unit prices), another possible cause of changes of prices of production defined in this way that was not mentioned in these passages by Marx is simply an increase in the scale of production, since that would increase gross annual industry revenue even though productivity and the real wage remain constant. And he infers from this very slim basis that yet another possible cause of changes in the prices of production not mentioned by Marx is the ongoing multi-period transformation of values into prices of production, even though productivity and the real wage remain constant (as in the TSSI).

    Kliman is correct that my definition of prices of production as “gross annual industry revenue” implies that an increase in the scale of production would increase prices of production defined in this way, even though productivity and the real wage remain constant. However, I argue that this fact does not bolster Kliman’s case that yet another cause of changes of prices of production is the ongoing transformation of values into prices of production.

    I continue to think that “gross annual industry revenue” is the correct definition of prices of production in a general sense, but I now realize more clearly that in Part 2 of Volume 3 Marx analyzed prices of production in a restricted sense, as prices of production per capital of 100. All the industries in Marx’s tables and illustrations in Part 2 have a total capital of 100, with unequal compositions of capital (ratios of constant capital to variable capital). Marx did this in order to emphasize the effect of unequal compositions of capital across industries on the value and surplus-value produced in each industry (Volume 3, pp. 261-62). Therefore, it seems reasonable to assume that in the passages in Part 2 that I reviewed in my book and that discuss the two causes of changes in prices of production, Marx had in mind this restricted sense of prices of production per capital of 100. This restricted definition of prices of production rules out an increase in the scale of production as a cause of changes in restricted prices of production. In this context, it made sense for Marx to state repeatedly that there are only two causes of changes in prices of production – changes in productivity and changes in the real wage – and not to mention an increase in the scale of production (which is not theoretically interesting or important anyway) as a cause of changes in these restricted prices of production.

    Kliman said in concluding his post:
    Hence, if the TSSI misinterprets Marx because it implies that prices of production can change even when technology and the real wage do not, then Moseley misinterprets Marx in the same way.

    I don’t think I misinterpreted Marx’s prices of production fundamentally, but I agree that I did not fully appreciate the significance of Marx’s restricted sense of prices of production (per capital of 100) in Part 2 of Volume 3 and the connection between this restricted sense of prices of production and Marx’s discussions of the two causes of changes in prices of production in Part 2. And I will gladly acknowledge that in increase in the scale of production is another cause of a change in prices of production in the general sense of gross annual industry revenue.

    However, this additional cause of changes in prices of production in the general sense does not contradict Marx’s discussions of only two possible causes in his restricted sense. And it provides no basis for inferring that another cause of changes in prices of production (general or restricted) is the ongoing transformation of values into prices of production, as in the TSSI. There is no hint whatsoever in all of Marx’s writings on the transformation and prices of production that the ongoing transformation is another possible cause of changes in prices of production. No textual evidence is presented in this post or in previous writings to support the TSS interpretation of prices of production as short-run prices that continue to change over multiple periods (even though productivity and the real wage remain constant) and thus cannot function as “centers of gravity” of market prices.

    The most reasonable conclusion seems to be that the TSS interpretation of short-run prices of production is a misinterpretation of Marx’s long-run prices of production.

    CONTINUATION Feb. 28

    I should have included this clarification in my comment on Part 13. In any case, I think my conclusion still stands: there is no textual basis for inferring that another cause of changes in prices of production (general or restricted) is the ongoing equalization (over multiple periods) of the profit rate and transformation of values into prices of production, even if productivity and wages remain constant, as in the TSSI.

  6. Andrew Kliman on Tue, 28th Feb 2017 11:24 pm 

    A reply to Fred Moseley’s comment of Tue, 28th Feb 2017 9:12 am.

    The link is now working. The equations page of the spreadsheet explains the computations in detail, and it fixes minor problems (that don’t affect the conclusions) in equations in Part 13.

    Output prices of period t carry the subscript t + 1. (Input prices carry the subscript t.) With that in mind, and noting that the corrected equations fix errors in the subscripts for outputs, it should be clear that both sides of the total price = total value equation pertain to period t.

    Noting again that the corrected equations fix errors in the subscripts for outputs, period 0′s outputs are data. They and the top equation determine the output-price ratio in period 0. The output-price ratio, the other data, and the total price = total value equation then determine the absolute output prices of period 0. The absolute output prices, the other data, and the rate of profit equations then determine the sectoral rates of profit of period 0.

  7. Fred Moseley on Wed, 8th Mar 2017 5:55 pm 

    In Section III of his Part 13, Kliman attempts to demonstrate that market prices do not fluctuate around static equilibrium prices (that he mistakenly identifies with my interpretation of Marx’s prices of production), but instead fluctuate around TSSI prices of production.

    But, there are two problems with Kliman’s argument. In the first place, Kliman’s static equilibrium (SE) rate of profit that he is uses to calculate his SE prices of production is *not the same as the rate of profit in my interpretation of Marx’s theory*. His SE rate of profit is determined by equating the SE rates of profit for the two sectors and the SE rates of profit for the two sectors do not depend on the labor theory of value in any way. Instead, labor is only a cost in these equations and is not a producer of value. Indeed his SE rates of profit vary inversely with the quantity of labor (Ɩ is in the denominator of the equations for the SE rate of profit).

    In Kliman’s model, the real wage (b) increases at the same rate as the quantity of labor (Ɩ) decreases (4% each period), so that the product bƖ remains the same and the SE rate of profit remains the same. However, if b were to remain constant and Ɩ decrease 4% a year, then the SE rate of profit would steadily increase because labor is only a cost, contrary to Marx’s theory.

    Therefore, whatever conclusions Kliman derives from his model about the SE rate of profit and SE prices of production do not apply to my interpretation of Marx’s theory.

    And even more that that: the second problem with Kliman’s argument is that the TSSI rate of profit that he uses to calculate his TSSI prices of production also does not depend on the labor theory of value in any way; labor (again) is also only a cost in the TSSI equation for the rate of profit and is not a producer of value, contrary (again) to Marx’s theory. The TSSI rate of profit is the average of the two sector rates of profit, and this average rate of profit also varies inversely with quantity of labor (Ɩ is in the denominator of the equation for the average rate of profit).

    So the TSSI rate of profit is similar to the static equilibrium rate of profit – both assume that the rate of profit varies inversely with the quantity of labor employed – and neither has anything to do with Marx’s labor theory of value and surplus-value and the rate of profit.

    I leave tomorrow for a two week trip to Buenos Aires (conference) and Montevideo (talks) and will rejoin the discussion when I return.

  8. Andrew Kliman on Thu, 9th Mar 2017 3:24 pm 

    Fred, this claim of yours is false:

    labor is only a cost in these [static equilibrium] equations and is not a producer of value.

    If you look at the code for p2 in the static equilibrium system, you’ll see that it is

    p2 =

    m(l1x1 + l2x2)
    —————————————————
    (p1/p2)x1 + x2 – (p1/p2)(a1x1 + a2x2)

    Cross-multiplying and rearranging, we get:

    p1x1 + p2x2 = p1(a1x1 + a2x2) + m(l1x1 + l2x2)

    which says that total price equals total value, and the final RHS term is precisely the new value added by living labor.

    So the static equilibrium system does apply to your interpretation, and the above equation is your own total value = total price equation.

    This is all explained at the bottom of the Equations! page of the spreadsheet.

     

    The following claim of yours is also false:

    the TSSI rate of profit that he uses to calculate his TSSI prices of production also does not depend on the labor theory of value in any way; labor (again) is also only a cost in the TSSI equation for the rate of profit and is not a producer of value, contrary (again) to Marx’s theory.

    The temporally determined prices employ the temporal analogue to the above equation; it’s the 4th equation in the system (see the Equations! page).

    Compute the monetary variables in both systems and you’ll see that everything checks out exactly.

    And the sectoral rates of profit fluctuate around the average temporal rate of profit, not around your average rate of profit; the market prices fluctuate around the temporal prices of production, not around your prices of production.

  9. Andrew Kliman on Thu, 9th Mar 2017 4:07 pm 

    I decided to compute the monetary variables myself, so that we can move on. As I said, “everything checks out exactly.” The enhanced Centers of Nothing spreadsheet is here:

    http://www.marxisthumanistinitiative.org/wp-content/uploads/2017/03/Centers-of-Nothing-enhanced-3.9.17.xlsx

  10. Herbert Panzer on Sat, 11th Mar 2017 12:10 pm 

    Andrew,

    I’m trying to understand “Centers-of-Nothing-enhanced-3.9.17.xlsx”. In the sheet you put temporalist calculation and p in=out calculation into opposition. In Kliman/McGlone article
    period 14 (and also 15, 16 etc., I presume) p in=out seems to be compatible with TSSI. So, why is that or what are the conditions for p in=out being allowed and when not?

    When reading this article again I stumbled across this sentence: “(Solely in order to facilitate comparison with `transformation problem”solutions’, we begin
    without any ‘error[s] in the past ; i.e . initial values are equal to the values of means of production and labour-power .)” Does it mean, in period 1 you could have started with cost prices that already diverge from value of bought commodities?

  11. Andrew Kliman on Sat, 11th Mar 2017 3:38 pm 

    A reply to Herbert Panzer’s comment of Sat, 11th Mar 2017 12:10 pm:

    “So … what are the conditions for p in=out being allowed and when not?” It’s allowed when the actual data and temporal value relations generate that result (a zero-probability event). Otherwise, it’s not. In other words, input and output prices may happen to be equal, but we don’t force them to be equal contrary to the facts–or force them to be unequal contrary to the facts.

    We like facts. Facts are our friends.

    “Does it mean, in period 1 you could have started with cost prices that already diverge from value of bought commodities?” Yes. The cost prices are always determined by the actual prices (market prices, monopoly prices, regulated prices, etc., etc.) that currently need to be paid to acquire the inputs.

  12. Herbert Panzer on Sun, 12th Mar 2017 6:53 am 

    Thanks for helpful reply*. Other point. In Vol3 p.264 Marx writes “How these capitals function after the average rate of profit is established, on the assumption of one turnover in the year, …”. This does not sound like average profit rate is changing every period. So, do you not think, your Excel-Sheet
    (20,3%,19,6%) might be a bit out of specification?

    It is also hard to imagine that Marx, while assuming smoothed out average profit rate, does have in mind continually changing determinants of this rate, like labor-saving technological change or wage rate.

    *small side information: in natural science, majority of our work in the lab is about “zero probability events” and facts are our friends, too.

  13. Andrew Kliman on Sun, 12th Mar 2017 1:36 pm 

    A reply to Herbert Panzer’s comment of Sun, 12th Mar 2017 6:53 am.

    In the spreadsheet example, the main source of the fluctuations in the general rate of profit is the fluctuations in sectoral output levels. They change in every period–which I think is quite reasonable–and therefore the general rate of profit changes in every period.

    This is completely consistent with Marx’s concept of the general rate of profit. According to his theory, the rate of profit has to change when output levels change because the composition of the total social capital changes. And nothing in his text says that the general rate of profit is stationary. The passage you cite does not, and 51 pages after it, there’s a whole 60-page Part on the tendential fall in the general rate of profit!

    For this and other reasons, it is not hard for me to imagine that Marx “does have in mind continually changing determinants of this rate [of profit], like labor-saving technological change or wage rate.” Not hard at all.

    But that’s really not the issue. The issue is: given Marx’s concept of the general rate of profit, does that rate change in response to continually changing determinants like labor-saving technological change and the wage rate? The answer is “yes.”

  14. Andrew Kliman on Sun, 12th Mar 2017 2:08 pm 

    Herbert, in re my comment that “In the spreadsheet example, the main source of the fluctuations in the general rate of profit is the fluctuations in sectoral output levels,” I just checked. After removing the transients at the start, we have x1/x2 = 1.014, avg. r = 20.3% in every odd-numbered period, and x1/x2 = 0.986, avg. r = 19.6% in every even-numbered period. For periods 20-199, the regression line is avg. r = -0.04974 + 0.24965(x1/x2) and the R² = 0.99999997.

  15. Herbert Panzer on Mon, 13th Mar 2017 3:50 pm 

    Andrew, I think it’s not so simple. Consider “For all the great changes that constantly occur in the actual rates of profit in particular spheres of production (as we shall later show), a genuine change in the general rate of profit, one not simply brought about by exceptional economic events, is the final
    outcome of a whole series of protracted oscillations, which required a good deal of time before they are consolidated and balanced out to produce a change in the general rate. In all periods shorter than this, therefore, and even then leaving aside fluctuations in market prices, a change in prices of production is always to be explained prima facie by an actual change in commodity values, i.e. by a change in the total sum of labour-time needed to produce the commodities.“ [Vol3 p.266]
    As Marx is assuming one turnover in the year (synchronized/clocked I’d like to add), this is our time unit.
    And change in general rate of profit requires a good deal of these units. As oscillations sometimes compensate each other, sometimes add up, the movement of gen. profit rate may change
    for, let’s say, 13 periods, then stay stationary (approximately, of course, i.e. zero-probability as you say) for 6 periods, then change again for 7 periods, then stay stationary again (but on a lower level, as a consequence of tendential fall) etc. .
    Related one thing you are right: change of determinants can be on a higher frequency then gen. profit rate change. But even such shorter periods are systematically not just one time unit.
    So, overall, this dynamic pattern does not look like your Excel sheet.

  16. Andrew Kliman on Tue, 14th Mar 2017 12:25 pm 

    Herbert Panzer,

    You’re assuming that “protracted oscillations” refers to oscillations of the actual rates of profit, not oscillations of the general rate of profit. Why assume that?

    The text of the passage is fully compatible with my interpretation, in which “protracted oscillations” refers to oscillations of the general rate of profit, and “genuine change in the general rate of profit” refers to a rise or fall in the level of the general rate that isn’t counterbalanced by a subsequent oscillatory fall or rise.

    This interpretation also makes Marx’s text make more sense than your interpretation does, since, as I’ve noted, “According to his theory, the rate of profit has to change when output levels change because the composition of the total social capital changes.”

    “But even such shorter periods are systematically not just one time unit.

    “So, overall, this dynamic pattern does not look like your Excel sheet.”

    Right. If I wanted to produce a realistic model, this would be a problem. But I don’t, so it isn’t.

    The simulation is not a model but an illustration. Its purpose is to illustrate the fact that, when prices trend downward (or upward), a static-equilibrium rate of profit, such as Moseley’s, will not be the center around which actual rates of profit fluctuate. Instead, they will fluctuate around their weighted average.

  17. Herbert Panzer on Wed, 15th Mar 2017 2:52 pm 

    Why assume that? Because, if a change of something-A consolidates and balances into a change of something-B then *-A and *-B are not the same

    I do not know many Marxist and/or economists that are able to differentiate between model and illustration.
    Typically, in the lab you use a model and for presenting conclusions found there you use an illustration. Mixing this is a frequent reason for erroneous conclusions. So, I allege you can maintain your conclusions also related a model, in case being asked.

    Moseley: I’m not that far. But as a potential outlook: have you taken into account the possibility that Moseley is considering not only static-equilibrium rate of profit, but static-equilibrium system state with no change
    of relevant system parameters (like prices) at this state while changes happen in a non-equilibrium state and both states are in sequence and alternating?

  18. MHI on Thu, 16th Mar 2017 8:52 am 

    POSTED AT THE REQUEST OF ANDREW KLIMAN:

    Herbert Panzer,

    The following still doesn’t explain why you assume that Marx’s reference to “protracted oscillations” refers to oscillations of the actual rates of profit, not oscillations of the general rate of profit:

    if a change of something-A consolidates and balances into a change of something-B then *-A and *-B are not the same

    Marx wrote,

    For all the great changes that constantly occur in the actual rates of profit in particular spheres of production (as we shall later show), a genuine change in the general rate of profit, one not simply brought about by exceptional economic events, is the final outcome of a whole series of protracted oscillations, which required a good deal of time before they are consolidated and balanced out to produce a change in the general rate.

    My point is that the text is entirely consistent with my interpretation of it, according to which the protracted oscillations in the general rate of profit are consolidated and balanced out to produce a (genuine) change in the general rate of profit (a change not counterbalanced by subsequent offsetting fluctuations). Here, *-A is the protracted oscillations in the general rate of profit, and *-B is the (genuine) change in the general rate of profit—and they are not the same.

    So, the question remains: why do you assume that “protracted oscillations” refers to oscillations of the actual rates of profit, not oscillations of the general rate of profit?
     
    I have no idea of what this means:

    So, I allege you can maintain your conclusions also related a model, in case being asked.

    In any case, the illustration in question isn’t a model, because it is not intended to depict the actual dynamics of an actual economy. It is simply intended to illustrate the fact that, when prices trend downward (or upward), a static-equilibrium rate of profit, such as Moseley’s, will not be the center around which actual rates of profit fluctuate. Instead, they will fluctuate around their weighted average. The illustration illustrates this, and I think it does so very successfully, even though it’s not a realistic depiction of the actual dynamics of an actual economy.

    It is pointless to criticize an illustration for not doing what it isn’t intended to do and which no one claims that it does. It’s like criticizing a butter knife for being a bad economic model, even though it’s purpose is instead to spread butter on bread and the maker of the butter knife doesn’t claim that it’s an economic model.

     

    have you taken into account the possibility that Moseley is considering not only static-equilibrium rate of profit, but static-equilibrium system state with no change of relevant system parameters (like prices) at this state while changes happen in a non-equilibrium state and both states are in sequence and alternating?

    I don’t understand what “in sequence and alternating” means. In sequence with what? Alternating with what? In any case, the magnitude of the static-equilibrium rate of profit is invariant to the absolute magnitudes of the prices. Only a change in the relative price (p1/p2) will affect the static-equilibrium rate of profit (see Equations page of the spreadsheet). But there isn’t any change in the relative price; it always equals 1 in this example. So I could easily hold the absolute magnitudes of the prices constant (by making one of the prices the numeraire, for instance) and get the exact same results for the static-equilibrium rate of profit. It would still be the center of nothing.

    But Moseley is definitely not considering a stationary-price system (only), since he contends, incorrectly, that his rate of profit is the center around which actual rates of profit fluctuate—not only in a stationary state, but also when there is labor-saving technical change. And when there’s labor-saving technical change, his prices aren’t stationary.







Check here if you do not wish to be added to MHI's mailing list (1-2 mailings per month)

Notify me of followup comments via e-mail. You can also subscribe without commenting.