# All Value-Form, No Value-Substance: Comments on Moseley’s New Book, Part 5

by Andrew Kliman

Here is the fifth 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 Moseley’s reply to the fourth installment.

And here is the Excel spreadsheet file that accompanies Part 5.

Here are

the first installment, published on May 11,

the second installment, published on May 12,

the third installment, published on June 6, and

the fourth installment, published on July 14.

1. Fred Moseley says:

After his usual insult, Kliman began his last post as follows:

In Part 4 of this series of comments on his [Moseley’s] new book, I showed that a certain mathematical relation (equation 1) is universally true for any system of prices of production (given two sectors and no fixed capital). In particular, it holds true whether or not the rate of profit is determined by “physical quantities.” Equation 1 therefore holds true for Moseley’s price-of-production system. I then showed that, when taken together, two features of his interpretation—equation 1 and his stipulation that per-unit input and output prices must be equal—imply that the rate of profit is physically determined.

I had argued in my previous post that this argument is invalid because:

Marx’s theory of the rate of profit is not determined by equation (1). Rather, the rate of profit in Marx’s theory is determined independently of equation (1), by the aggregate ratio of S/(C+V) and S is determined by surplus labor (a detailed algebraic summary is in Chapter 2 of my book).

Kliman quoted this sentence and then said:

As I noted in Part 1, regarding identical argumentation contained in his book, “This is irrelevant … [because] the issue here isn’t Marx’s theory, but Moseley’s interpretation”.

This is just evasion of this fundamental point. My interpretation of Marx’s theory was implied in this sentence (I referred to Chapter 2 of my book on my interpretation); it’s just a little tedious to keep repeating “my interpretation of …”. So let me rephrase this sentence as follows: Kliman’s argument is invalid because

my interpretation of Marx’s theory of the rate of profit is NOT determined by equation (1). Rather, my interpretation of the rate of profit in Marx’s theory is determined independently of equation (1), by the aggregate ratio of S/(C+V) and S is determined by surplus labor (a detailed algebraic summary of my interpretation is in Chapter 2 of my book).

Since my interpretation of Marx’s theory of the rate of profit is determined by S/(C+V), independently of (1), the fact that (1) can be converted into (1”) implies nothing about my interpretation of Marx’s theory of the rate of profit; in particular, it does not imply that my interpretation of Marx’s theory of the rate of profit is physically determined.

So I would appreciate a more substantial response to this fundamental point.

In my previous post, I then discussed several examples of labor-saving technological change that showed the difference between my interpretation of Marx’s theory of the rate of profit and Sraffa’s theory of the rate of profit. In the first example, my interpretation of Marx’s theory of the rate of profit declines from 50% to 45% as a result of a reduction of labor by one unit in both sectors.

Kliman then quotes me as follows:

In Sraffa’s theory, on the other hand, … such cost-saving technological change never reduces the rate of profit and increases the rate of profit if the technological change takes place in a basic goods industry. Thus we have two completely different conclusions regarding the all-important question of the effect of labor-saving technological change on the rate of profit.

However, Kliman deceptively left out a key phrase in the ellipses (…) of this quote. The key phrase that is left out is:

as we know from the Okishio Theorem [!!]

And then Kliman argued further:

However, Moseley fails to compute the physicalist (“Sraffian”) rate of profit! He therefore shows that the fall in his rate of profit is “completely different” from—nothing whatever! What kind of proof is this?

But it is not necessary to compute the Sraffian rate of profit in this case. The Okishio Theorem (which Kliman tries to erase from my argument) assures us as a general rule that the Sraffian rate of profit can never fall as a result of labor-cost-reducing technological change.

Then Kliman argued:

Of course, he [Moseley] alleges that the physicalist rate of profit will rise in this example. And he is correct that if cost-saving technological change takes place in a basic goods industry, then the physicalist rate of profit must rise. But he fails to show that the physicalist rate of profit will rise—because he fails to show that the technological change in his example is cost-saving in the relevant sense.

This is another misrepresentation of my argument. I did not allege that the Sraffian rate of profit will rise. I alleged that it would either not change or rise if the technological change takes place in a basic goods industry. But I don’t need the last part in order to show the quantitative difference between my interpretation of Marx’s theory of the rate of profit and Sraffa’s theory. The rate of profit in my interpretation of Marx’s theory falls in this case and Sraffa’s rate of profit does not fall.

Kliman then said:

Whether intentionally or not, Moseley refrains from specifying any per-unit prices or physical quantities.

But this is not true. I intentionally stated in my last post:

Assume that the quantity of output and constant capital remain the same in both sectors. (emphasis added here)

And if output remains the same in both sectors (e.g. 18 instead of declining to 16 as in Kliman’s calculations), then the input-output coefficients will be: a1 = .556; b1 = .056; a2 = .111; and b2 = .500. And we can calculate the physicalist rate of profit according to Kliman’s physicalist equation, and the rate of profit increases to .638! In striking contrast to the decline in the rate of profit according to my “macro-monetary” interpretation of Marx’s theory.

I also discussed in my last post the fundamental reason why my interpretation of Marx’s theory of the rate of profit leads to different quantitative conclusions from Sraffa’s theory:

The key to the explanation of these different conclusions of Sraffa’s theory and [my interpretation of] Marx’s theory is the different roles played by LABOR in the two theories (labor theory of value in [my interpretation of] Marx’s theory vs. no LTV in Sraffa’s theory). In Sraffa’s theory, labor is only a COST, and in this sense the cost of labor is no different from the cost of other inputs. Therefore, labor-cost-saving technological change to produce a given amount of output will never reduce the rate of profit.

In [my interpretation of] Marx’s theory, on the other hand, labor is not only a cost, but is also a producer of value and surplus-value. Therefore, labor-saving technological change not only reduces costs, but also reduces the value and surplus-value produced. (Again this is what is missing in Sraffa’s theory). So the effect of labor-saving technological change on the rate of profit in [my interpretation of] Marx’s theory depends on the net effect of these two opposing intermediate effects. (brackets added)

Kliman’s last post did not respond to this fundamental argument. Surely if my interpretation of Marx’s theory is based on the labor theory of value and surplus-value and Sraffa’s theory is not, then the two theories will come to different conclusions regarding the quantitative determination of the rate of profit, and especially regarding the effects of labor-saving technological change on the rate of profit.

I also discussed in my last post the case of “full automation” which shows very clearly the difference between my interpretation of Marx’s theory of the rate of profit and Sraffa’s theory.

According to Sraffian theory, if there is a physical surplus in this fully automated economy, then there will always be a positive rate of profit, even though there is no labor or surplus labor. Indeed, without labor and labor cost, the rate of profit would be a maximum!

According to [my interpretation of ] Marx’s theory, on the other hand, such an economy would have a zero rate of profit, even though there is a physical surplus. The only source of profit is surplus labor.

And Kliman also did not discuss this clarifying case in his last post either.

So I hope Kliman will respond to these important points in future posts.

Fred Moseley