All Value-Form, No Value-Substance: Comments on Moseley’s New Book, Part 12

by Andrew Kliman

Here is the twelfth 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.” [Editor’s note, Nov. 7, 2016: the link now takes you to the corrected version of the 12th installment rather than to the original version.] It responds to part of Moseley’s reply to the eleventh installment.

And here is Phun with Physicalism!, the interactive Excel spreadsheet file that accompanies Part 12.

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

Comments

76 Comments on "All Value-Form, No Value-Substance: Comments on Moseley’s New Book, Part 12"

  1. Herbert Panzer on Sat, 12th Nov 2016 10:38 am 

    No, Professor Kliman, it’s not about a Tale of Two Economies. It’s about a tale of one and the same economy and the mere brainchild of a Mr. Sraffa. And it’s a tale about an Andrew K. who has understood a lot related Trafo-Non-Problem but missed a major point in Sraffa criticism.

    Andrew, the consequence is that you are trapped in a box. As some support to get out, please read my last comment related your Part 11.

    On one side, conditions to progress this way are not so bad as you find it ‘reasonable and proper … to “think outside the box” … . This is how things are done in the physical sciences;’ (see page 9 in your Relclaiming-book).

    Well, I’m one of these physical science or STEM guys. Me and colleagues (from Ericsson and other leading telecom manufacturers) have spent years of our lifetime to make stationary models of non-stationary systems in order to design the Universal Mobile Telecommunication System; in other words, the Mobile Internet, where it is obvious that every new second it’s not the same as it was all the time before.. See e.g. paper “Adaptive resource allocation in metropolitan area cellular mobile radio systems” I presented on Vehicular Technology Conference, 1990 IEEE 40th in Orlando.

    So, though the models were really complicated, from their core structure they resemble back coupling models (like pendulum or electrical oscillator), i.e. input = output, that can be described like Ad²x/t² + Bdx/dt + Cx = D(t)
    The same is, what Marx does with capitalist system, see Simple Reproduction Scheme. For a given point in time x is determined. It’s a solution that results from the differential equation system DES. When x is a vector consisting e.g. of price P and physical units U, one may find a relation R(P,U) that binds P and U together. P may then be seen as a function of U and vice versa. However, this is not, were the solution is coming from. It instead comes from DES. Sraffa does not see this. He completely lives in the solution or result world, a 2-dimensional flat world. He lives in flatland (see “Flatland. A Romance of Many Dimensions” from Square/Edwin A. Abbott). However, one cannot understand the system without considering the DES. As can be seen, DES has another dimension: t that indicates that is about a dynamic, processing system taking place in time. Sraffa’s world is simultaneous. The DES is temporal, a 3-dimensional world, but stationary. Andrew, as you (and the rest) do not see what is wrong with Sraffa here, you are also stuck in the flatland box. You cannot/ do not want to imagine a temporal, stationary system that is not flatland/simultaneous. I’m trying what the sphere in Abbott’s books is trying. But I know it’s extremely difficult, if not impossible. Not only from the book, but simply from the fact that this flatland thinking is so fundamentally burned-in into your writing and you are not trained to cope with situations where year-lasting beloved paradigms suddenly collapse – for STEMs normal situations. That’s the bad part in the conditions.
    Not overcoming this would be really fatal. There are so few that at least partially have understood that there is no logical inconsistency in CAPITAL and we cannot afford to waste another 100 years. Good news is that at least Fred M. is in the 3-dimensional world.

    I do bother you with this DES stuff because in Simple Reproduction Scheme (and Bortkiewicz’s scheme being derived from it) t is not formally visible. This comes from the fact that Marx has made what we STEMs call a fixed period clocking (1 year period) of the system. As a consequence, formally the difference between the DES and its solution is obscured.

    The DES determines the solution space (and the solutions as such), i.e. the projection into flatland. Therefore, within this R(P,U) space no divergence is possible, whether you start from monetary or physical units. However, guys in flatland, not knowing about this, can brain-childishly think about a lot of P,U (and thus rate of profit) settings outside of R(P,U) where now you urge Fred M. to prove that this belongs to one and the same economy. Settings, where there is no DES and therefore also no economy. Might be not so easy. Good trick.

  2. Andrew Kliman on Sat, 12th Nov 2016 12:15 pm 

    Herbert Panzer, I understand perfectly well that a dynamical system can have a equilibrium state and that no causal relations can be inferred from the existence of an equilibrium state. I’ve said this for more than 3 decades.

    But that’s NOT what Moseley is saying. Please read what he writes and what I write in RESPONSE to what he writes, instead of trying to insert your point into a discussion to which it isn’t relevant.

    As you probably know, my responses to Moseley always stress that his rate of profit is “quantitatively identical” to the standard physicalist rate of profit, and that, as I wrote in part 12 here, it is determined by physical quantities in the same sense that their rate of profit is. I am NOT trying to infer causal relations from the existence of an equilibrium state.

  3. Andrew Kliman on Sat, 12th Nov 2016 1:13 pm 

    Let me put it very concretely. Herbert.

    Is the following statement in part 12 correct or incorrect?

    “Nothing compels other physicalists to restrict themselves to their “actual” physical coefficients and steer clear of Moseley’s. Any scruffy ruffian can grab hold of the input-output and real-wage coefficients derived from Moseley’s “macro-monetary” data and use them to compute a physicalist rate of profit. The ScruffyRuffian rate of profit will be quantitatively identical to Moseley’s “macro-monetary” rate of profit.”

  4. Herbert Panzer on Thu, 17th Nov 2016 3:56 pm 

    Dear Andrew,

    Great that we have a mutual understanding so far. However, a doubt creeps in about extent of this understanding: “no causal relations can be inferred from the existence of an equilibrium state” – this is not exactly what I’m saying. I’m saying, you can well make an equilibrium state model of a non equilibrium system (e.g. via a DES) that let you learn a lot about causal relations within this system. But you can not learn it when you stay in the solution space R(P,U) of this DES. R(P,U) is Flatland, DES is not. See also swing example in my Part 11 last comment. Sraffanians are in Flatland, Marx & Fred are in DES world.

    Now related your part 12 statement. It’s true, “Nothing compels other physicalists to restrict themselves to their “actual” physical coefficients and steer clear of Moseley’s”. But as they live in Flatland they have no clue about R(P,U). Every pair of settings of R(P,U) denotes one different economy. By accident they may come up with a function P = f(U) that satisfies R(P,U) and thus fits to an economy but nevertheless it’s not an explanation of the monetary figures (namely rate of profit) of this economy. They do not get beyond the Flatland-relation. However, by selecting a U they can make a selection of a specific economy from R(P,U) but still this does not mean that U determines P.
    Missing own creativity for inventing a P=f(U) they may find Fred’s model. Either they study him and learn that this model comprises an explanation; then they have one. Or they simply take the equations, apply an inverse function U = f-1(P) to get the U for their P=f(U); then they still are completely in Flatland. They can make their life still easier by choosing any inverse function and apply f(f-1(P)) to prove that U determines P. This still keeps them in Flatland. No question, whether you take original rate of profit or derive it from f(f-1), the result is always the same.
    However, scruffy ruffy Sraffanians as they are, the probability that they just hit one economy from R(P,U) is negligible. So in general their rate of profit is different.
    Unfortunately, all your phun stuff is limited to the negligible case.

    So long
    Herbert

  5. Andrew Kliman on Fri, 18th Nov 2016 11:01 am 

    Herbert–yes, “But you can not learn [about causal relations] when you stay in the solution space R(P,U) of this DES” is what I meant by “no causal relations can be inferred from the existence of an equilibrium state.”

    The rest of what you’re talking about is just irrelevant to my debate with Moseley. The debate is strictly about–and has always been strictly about–the following: if the input-output and real-wage coefficients are the same, and there is a uniform rate of profit, will Moseley’s rate of profit be equal to the (other) physicalists’ rate of profit?

    He keeps saying no, which is false.

    You keep changing the subject, which is changing the subject.

    You dismiss a counterexample that flatly disproves his EXPLICIT and FREQUENTLY REPEATED claims about labor-saving technological change in non-basic industries as “all your phun stuff … limited to the negligible case.” This just shows that you want are trying to change the subject.

    It’s fine if you want to talk about a different subject, BUT NOT HERE. It confuses people and makes it harder to see that what Moseley is ACTUALLY claiming is just wrong. It also functions, intentionally or not, as a smokescreen or red herring: “A Red Herring is a fallacy in which an irrelevant topic is presented in order to divert attention from the original issue.” http://www.nizkor.org/features/fallacies/red-herring.html

  6. Herbert Panzer on Mon, 21st Nov 2016 5:40 pm 

    Andrew, I treasure the strictness you protect scientific rules (a major reason of physical sciences’ success in contrast to others). However, there are exceptions, .e.g. once a subject’s scope is set too restricted. But in our case I do not have to ask for a waiver. As I have not widened the subject but YOU HAVE NARROWED it.

    You write in Part 12 “What Moseley has admitted here is that (1)…, and (3) this physicalist rate of profit is quantitatively identical to Moseley’s “monetary” rate of profit. SO MOSELEY IS A PHYSICALIST”.

    Your latter conclusion goes far beyond considering whether rate of profit is identical or not. To enable you to understand why your last conclusion is wrong, I have made my comments. They are 100% on the subject. Please read my last comment related your Part 11 – the swing example.

  7. Andrew Kliman on Wed, 23rd Nov 2016 11:23 am 

    No Herbert,

    It doesn’t go beyond. I’m also strict about employing technical terms. This is what I mean by physicalism:

    “physicalism … refers to any approach that draws conclusions about the workings of capitalist economies from models in which the sole proximate determinants of values, relative prices, profits, and the rate of profit are ‘physical quantities’ or, more precisely, technology and real wages. Note that this definition refers to models and the conclusions deduced from them, not to the views of the theorists who employ such models. Also note the term ‘proximate determinants’: proponents of physicalism recognize that technology and real wages are themselves determined by other factors, including factors emphasized by Marx. Their point is that one needs no information other than the physical data in order to determine values, relative prices, and the rate of profit. …

    “The terms physicalism and simultaneism cast a wide net. In addition to Sraffians and pre-Sraffians … encompassed within this net are the NI and SSSIs [including Moseley’s], despite the fact that many of their proponents would wish to emphasize the role of monetary variables rather than physical quantities.”

    Reclaiming Marx’s “Capital”: a refutation of the myth of inconsistency, pp. 76-77, emphasis added.

  8. Herbert Panzer on Wed, 23rd Nov 2016 3:18 pm 

    Ok, Andrew. This takes us a step further. From your citation I learn that rate-of-profit-equality-stuff and physicalist are not synonymous. The latter is the first plus a conclusion, i.e. wider scope. Thankfully you give a condition for this conclusion:
    “Their point is that one needs no information other than the physical data in order to determine values, relative prices, and the rate of profit. …”. The conclusion from ‘rate-of-profit-equality’ to ‘Moseley needs no information other than the physical data’ is what I contest. This is well in the scope of your subject. Despite of your obvious self-immunisation there is a chance to progress once you read my last comment related your Part 11.

  9. Andrew Kliman on Thu, 24th Nov 2016 7:18 am 

    The physical data associated (one-to-one) with Moseley’s “macro-monetary” data are all that is needed to compute other (ScruffyRuffian) physicalists’ equilibrium rate of profit.

    Their equilibrium rate of profit is equal to his.

    Therefore, the physical data associated (one-to-one) with Moseley’s “macro-monetary” data are all that is needed to compute his equilibrium rate of profit.

    Therefore, one needs no information other than the physical data in order to determine Moselev’s equilibrium rate of profit.

    I show this in part 12, pp. 3-4.

    Note: “determine” has other meanings in addition to “compute,” but here it means “compute”–because that is what the other (ScruffyRuffian) physicalists mean when they allege that one needs no information other than the physical data in order to “determine” the rate of profit.

  10. Andrew Kliman on Thu, 24th Nov 2016 7:27 am 

    It is worth noting again, Herbert, that Moseley himself doesn’t make the kinds of arguments that you are making. He understands that the issue is whether their physically-determined rate of profit is equal to his. So he spends his time denying that fact.

  11. Andrew Kliman on Thu, 24th Nov 2016 7:32 am 

    Definition of determine in English …

    … 2.1 Mathematics Specify the value, position, or form of (a mathematical or geometrical object) uniquely.

    https://en.oxforddictionaries.com/definition/determine

  12. Fred Moseley on Thu, 24th Nov 2016 9:15 am 

    Comment on Kliman’s Part 12

    1. Not two economies

    There are not two economies in my arguments and analysis. There is only one economy (a capitalist economy) that is analyzed in different ways. In Marx’s theory, the economy is analyzed in terms of quantities of money capital and labor-time and sequential determination; in Sraffian theory, the *same economy* is analyzed in terms of quantities of physical inputs and outputs and simultaneous determination.

    As I have shown in my “Update” and in previous comments, these *two theories come to different conclusions* regarding the effects on the rate of profit of the following: labor-saving technological change, luxury goods industries (and labor-saving technological change in luxury goods industries), and full automation. Kliman argues that I just assert that the rate of profit in my interpretation is different from the rate of profit in Sraffian theory. But this is not true; I have presented these arguments that prove this point several times.

    For example, in the important case of labor-saving technological change: it is a well-known conclusion of Sraffian theory (the Okishio theorem) that labor-saving technological change will *never reduce the rate of profit*; it will either increase the rate of profit if the technological change takes place in a basic goods industry or it will have no effect on the rate of profit if the technological change takes place in a non-basic goods industry.

    On the other hand, according to Marx’s theory, the effect of labor-saving technological change on the rate of profit depends on the relative rates of increase of the composition of capital and the rate of surplus-value. According to Marx’s theory:
    r = S / C = (S/V) / (C/V)
    (ignoring for simplicity the negligible stock of variable capital in the denominator of the rate of profit).

    Labor-saving technological change will usually increase both the composition of capital and the rate of surplus-value. Therefore, the net effect of labor-saving technological change on the rate of profit depends on the relative rates of increase of the composition of capital and the rate of surplus-value. And of course Marx argued that the composition of capital will usually increase faster than the rate of surplus-value so that the rate of profit will usually fall as a result of labor-saving technological change. However, even if the rate of profit does not fall sometimes, the fact that it *can fall* is contrary to the conclusion of Sraffian theory (the Okishio theorem).

    In Kliman’s example of labor-saving technological change in his Part 1, my monetary rate of profit falls from 50% to 25%. Kliman’s criticism is not that my monetary rate of profit does not fall, but rather than his “physicalist” rate of profit falls equivalently to my monetary rate of profi (and I would add: both of which are contrary to Sraffian theory).

    2. Not two sets of physical I/O coefficients

    Kliman argues that there are two sets of physical I/O coefficients: (1) Sraffian physical I/O coefficients that are taken as given directly in Sraffian theory as the actual physical coefficients and (2) Kliman’s “physicalist” I/O coefficients that are derived from my monetary quantities and monetary rate of profit.

    I have shown in my “Update” and in previous comments that Kliman’s so-called “physicalist” I/O coefficients come to the same conclusions as my monetary quantities regarding the effects of the above factors on the rate of profit and thus come to different conclusions from the actual physical I/O coefficients in Sraffian theory regarding these effects. Therefore, in terms of their effect on the rate of profit, Kliman’s so-called “physicalist” I/O coefficients are really more like monetary I/O coefficients than physical I/O coefficients, because they are derived from monetary quantities and the monetary rate of profit and mirror changes in these monetary variables even if the actual physical I/O coefficients remain the same.

    For example, in Kliman’s example in Part 1, there is labor-saving technological change in Sector 2 and no technological change in Sector 1. The actual physical quantities and physical I/O coefficients in Sector 1 *do not change* (Kliman confirmed this in a subsequent post), but his “physicalist” I/O coefficients for Sector 1 *do change* – because these “physicalist” coefficients are derived from P1 and P1 changes (from 18 to 15), because P1 depends on the monetary rate of profit and the monetary rate of profit changes (from 50% to 25%) due to the technological change in Sector 2.

    In Kliman’s example, the I/O coefficient a1(the quantity of Good 1 to produce a unit of Good 1) is calculated as follows:
    before technological change: a1 = C1/ P1= 10 / 18 = 0.56
    after technological change: a1 = C1/ P1= 10 / 15 = 0.67

    Therefore, Kliman’s “physicalist” I/O coefficient a1 in Sector 1 changes *even though the actual physical I/O coefficients in Sector 1 do not change*. The same thing is true of b1 (the quantity of Good 2 to produce a unit of Good 1), the other “physicalist” I/O coefficient in Sector 1.

    Indeed the same thing is true for the *whole of a multi-sector capitalist economy*! Technological change in one or a few sectors would affect the *rate of profit* for the economy as a whole, which would in turn affect the prices of the outputs (the P’s that depend on r) of *all other sectors* that have not experienced technological change (like Sector 1 in Kliman’s two-sector example); and thus *all* of Kliman’s “physicalist” I/O coefficients in all the other sectors *would change* (since all these coefficients depend on the P’s which depend on r) *even though the actual physical coefficients in those other sectors have not changed*.

    Therefore there are not really two sets of physical I/O coefficients, as Kliman claims. There is only one set of physical I/O coefficients – the actual physical I/O coefficients that are taken as given directly in Sraffian theory. Kliman’s so-called “physicalist” I/O coefficients are pseudo physical I/O coefficients that are derived from monetary quantities and the monetary rate of profit and mirror changes in these monetary variables, *even though the actual physical I/O coefficients do not change*.

    3. Circular reasoning

    Kliman did not respond to the main argument in my “Update” – that his argument that my monetary rate of profit is equal to his “physicalist” rate of profit is based on circular reasoning. So I will review his circular reasoning again in greater detail (assuming again a simple two-sector economy) and hope for a response this time.

    (1) Kliman begins with my interpretation and the determination of “Moseley’s macro- monetary” rate of profit by the aggregate monetary ratio:
    r = S / (C+V).

    (2) The rate of profit that is determined in (1) is then taken as an *exogenous given* in the determination of prices of production by the following equations:
    (C1 + V1) (1 + r) = P1
    (C2 + V2) (1 + r) = P2
    The important point to note here is that P1 and P2 are determined in these equations on the assumption of an *exogenously given r*.

    (3) The monetary quantities (the C’s, V’s and P’s) in these equations are decomposed into unit prices, “physicalist” I/O coefficients, and quantities of output, as follows:
    (p1a1X1 + p2b1X1) (1 + r) = p1X1
    (p1a1X2 + p2b2X1) (1 + r) = p2X2
    The r in this equation is the same as the exogenously given r in the equations in (2).

    (4) Then the “physicalist” I/O coefficients are derived from these decompositions and the assumption that the prices of the inputs are equal to the prices of the outputs. For example, a1:
    C1/P1 = p1a1X1 / p1X1 = a1
    The important point here is that a1 is determined on the assumption of a given P1 and as we saw above, P1 is determined on the assumption of an exogenously given r. Therefore, *a1 depends on an exogenously given r*.

    (5) *Now Kliman’s logic goes in reverse*: Now Kliman’s “physicalist” I/O coefficients are considered *as if they are exogenous givens* in the same equations in (3) and these equations are “solved” simultaneously for r. However, Kliman’s “physicalist” I/O coefficients are *not exogenous givens*; they have been derived from r which is an exogenous given. These “physicalist” I/O coefficients cannot be used to determine the exogenous r from which they are derived.

    Therefore, Kliman’s reasoning is circular: r is taken as an exogenous given in order to “determine” the “physicalist” I/O coefficients and then the “physicalist” I/O coefficients are pretended to be exogenous givens in order to “determine” r from the same set of equations. This is a clear example of circular reasoning – assuming the magnitude of the variable to be determined from the same set of equations.

    Kliman’s circular reasoning in the example of a1 can be expressed symbolically as follows:
    r → P1 → a1 → r
    And similarly for Kliman’s other “physicalist” I/O coefficients.

    And as I showed in my “Update”, if the monetary r *assumed* in the determination of a1 and other “physicalist” I/O coefficients *changes*, then the r *“derived”* from these “physicalist” I/O coefficients will change equivalently as a result of this circular reasoning.

    Kliman argues that the fact that my monetary rate of profit = his “physicalist” rate of profit proves that my monetary rate of profit is determined by physical quantities. But this is not true because Kliman’s “physicalist” rate of profit itself is not determined by actual physical quantities, as is evidenced by: (1) Kliman’s “physicalist” rate of profit results in different conclusions compared to the Sraffian rate of profit which is determined by actual physical quantities and (2) in the case of technological change, Kliman’s “physicalist” I/O coefficients change in all sectors even though the actual “physicalist” I/O coefficients do not change in many sectors. What the equality between my monetary rate of profit and Kliman’s “physicalist” rate of profit proves is that Kliman’s “physicalist” rate of profit is determined by my monetary rate of profit because of his circular reasoning.

    Kliman argued: *“Any scruffy ruffian can grab hold of the input-output coeffieicnts and the real-wage coefficients derived from Moseley’s “macro-monetary” data and use them to compute a physicalist rate of profit that is quantitatively identical to Moseley’s “macro-monetary” rate of profit.”*

    Unfortunately, the scruffy ruffian probably would not realize that Kliman’s “physicalist” I/O coefficients are not really physical coefficients, but are instead derived from monetary quantities and the monetary rate of profit on the basis of the equations in (2) and (3) above and therefore Kliman’s so-called “physicalist” I/O coefficients *cannot be exogenous determinants of a so-called “physicalist” rate of profit* in the same set of equations. The scruffy ruffian would be guilty of circular reasoning, just like Kliman.

    Andrew, please answer this question: isn’t it true that your “physicalist” I/O coefficients have to be determined *independently of r* in order to be determinants of r in these equations?

    4. Labor-saving technological change in luxury goods industries

    I discussed this case in my “Update”. I cited the well-known conclusion that according to Sraffian theory the luxury goods industries have no effect on the rate of profit because luxury goods do not enter into the production of other goods, from which it follows that labor-saving technological change in luxury goods industries has no effect on the rate of profit.

    On the other hand, according to Marx’s theory, labor-saving technological change in luxury goods industries does have an effect on the rate of profit. Recall from the above that the analytical framework for Marx’s theory of the rate of profit is:
    r = S / C = (S/V) / (C/V)
    and thus the net effect of labor-saving technological change in luxury goods industries on the rate of profit depends on the relative rates of increase of the composition of capital and the rate of surplus-value. According to Marx’s theory, luxury goods do not affect the rate of surplus-value (because they are not wage goods), but they do affect the composition of capital. Labor-saving technological change in luxury goods industries increases the composition of capital in those industries and thus increases the composition of capital for the economy as a whole. Therefore, labor-saving technological change in luxury goods industries will reduce the rate of profit, contrary (again) to the conclusion of Sraffian theory.

    Kliman argues that in order to make a comparison between Sraffian theory and my interpretation of Marx’s theory, I have to define technological change and analyze the effect of technological change on the rate of profit in the *same way as in Sraffian theory*, i.e. in terms of *physical quantities*. But that is ridiculous. My main point is that Marx’s theory is a *different theory* from Sraffian theory and Marx analyzed the effects of technological change in terms of its effects on the *monetary ratios* of the composition of capital (C/V) and the rate of surplus-value (S/V) (as summarized above), not in terms of its effects on physical quantities as in Sraffian theory. In order to compare the conclusions of Marx’s theory and Sraffa’s theory concerning the effects of labor-saving technological change on the rate of profit it is certainly permissible to use Marx’s own theory in terms of monetary quantities and the labor theory of value.

    Kliman’s spreadsheet exercise is based on physical quantities and thus is irrelevant to my interpretation of Marx’s theory. I will point out a few ways in which the logic of Kliman’s spreadsheet is completely different from my interpretation of Marx’s theory and thus does not apply to my interpretation.

    The logic of Kliman’s spreadsheet is sometimes difficult to follow because he does not explain how some of the key variables are calculated (e.g. the rate of surplus-value and the amount of surplus-value) and because the equations he does give are expressed in terms of Excel cells, which forces on the reader the tedious task of converting the Excel cells into algebraic variables which is not always easy because the grid lines are covered over. Maybe Kliman is having “phun” with his cat-and-mouse game, but it’s a pain for readers.

    4.1 First of all, Kliman’s *rate of profit* is determined by the equation:

    1 + r = (p1/p2) X1 / (A21 + B21)

    where p1/p2 is the relative unit prices of Goods 1 and 2 (= 1),
    X1 is the quantity of output of Good 1 (= 60),
    A21 is the quantity of Good 2 as an input in the production of Good 1 (=24),
    and B21 is the quantity of Good 2 as a wage good in the production of Good 1 (= 6).

    This equation for the rate of profit is not the same as the Sraffian system of equations in terms of physical quantities, and Kliman does not explain the rationale for this ad hoc equation.

    Since the physical quantities and the relative price ratio in Kliman’s equation for rate of profit do not change as a result of labor-saving technological change in luxury goods industries (Sector 3), Kliman’s rate of profit also does not change as a result of this technological change (= 100% before and after the technological change).

    But this has nothing to do with my interpretation of Marx’s theory, as summarized above, in which the rate of profit depends on the relative rates of increase of the composition of capital and the rate of surplus-value (not on A21 and B21) and the rate of profit falls as a result of labor-saving technological change in luxury goods industries because the composition of capital increases but there is no effect on the rate of surplus-value.

    Furthermore, Kliman’s definition of the rate of profit based on physical quantities is illogical on its own terms. The relative unit price ratio = 1 and thus the numerator in Kliman’s rate of profit equation is a quantity of Good 1 (X1). But the denominator in his rate of profit is a quantity of Good 2 (A21 + B21). Thus the numerator and denominator in Kliman’s rate of profit are in *different physical units* and thus *cannot be compared* and his rate of profit is meaningless.

    4.2 Secondly, Kliman’s *rate of surplus-value* is derived in the opposite way from Marx’s theory. In Marx’s theory, the rate of surplus-value is determined first (= S/V) in Volume 1 and then the rate of profit is determined in Volume 3 by the rate of surplus-value and the composition of capital. As discussed above, the rate of profit is determined in Marx’s theory by:
    r = (S/V) / (C/V)

    Kliman turns Marx’s relation between the rate of surplus-value and the rate of profit on its head. Instead of the rate of profit depending on the rate of surplus-value (and the composition of capital), Kliman calculates the rate of surplus-value from the rate of profit (as determined above in Sections 4.1) and the composition of capital as follows:
    S/V = r (C/V + 1).
    (The 1 is because Kliman includes variable capital in the denominator.) And since r = 1.0, both before and after the technological change, this equation for the rate of surplus-value reduces to:
    S/V = C/V + 1
    In Kliman’s numerical example,
    before technological change, C/V = 1.5 and thus S/V = 2.5.
    after technological change, C/V = 3.25 and thus S/V = 4.25.

    This is why the rate of surplus-value changes in Kliman’s calculations – because his rate of surplus-value is assumed to vary directly with the composition of capital which increases in his example. But this has nothing to do with my interpretation of Marx’s theory, according to which the rate of surplus-value depends on surplus labor and necessary labor, and does not change as a result of labor-saving technological change in luxury goods industries.

    4.3 Finally, the relation between the rate of surplus-value and the *absolute amount of surplus-value* in Kliman’s calculations is also the opposite of Marx’s theory. In Marx’s theory, the absolute amount of surplus-value is determined first (in Chapter 7 of Volume 1) and then the rate of surplus-value is determined as S/V (in Chapter 9). In Kliman’s calculations, on the other hand, the rate of surplus-value is determined first (as above in 4.2) and then the amount of surplus-value is derived from the rate of surplus-value as follows: S = V (S/V). In Kliman’s numerical example:
    before technological change, V = 36, S/V = 2.5, and S = 90
    after technological change, V = 16, S/V = 4.25, and S = 68
    But again, Kliman’s determination of the amount of surplus-value in this opposite way has nothing to do with my interpretation of Marx’s theory of surplus-value.

    Therefore, none of Kliman’s spreadsheet calculations have anything to do with my interpretation of Marx’s theory. They are based on physical quantities and logic that is very different and often the opposite of my interpretation of Marx’s theory. The spreadsheet calculations are a waste of time.

    Conclusion

    So I conclude that Kliman is wrong about by “macro-monetary” interpretation of Marx’s theory – my monetary rate of profit does *not* depend on actual physical quantities. The “physicalist” I/O coefficients in his argument are not really physical coefficients (they change even if the actual physical coefficients do not change) and his argument is based on circular reasoning
    (r → P → a1 → r). And his Excel calculations related to technological change in luxury goods industries have nothing to do with my interpretation.

  13. Fred Moseley on Thu, 24th Nov 2016 9:37 am 

    Reply to Michael Schmidt’s comment

    Michael, sorry for the delay in responding to your comment. I noticed it only a few days ago.

    1. You don’t mention my comparisons between my monetary interpretation of Marx’s theory and the real physical quantities in Sraffa’s theory. I have shown that my interpretation comes to different conclusions from Sraffa’s theory regarding the effects on the rate of profit of labor-saving technological change, luxury goods industries (and labor-saving technological change in luxury goods industries), and full automation. This is very strong evidence that my monetary rate of profit is not determined by actual physical quantities.

    2. You argue, similar to Kliman that because my monetary rate of profit = Kliman’s “physicalist” rate of profit, this equality proves that my monetary rate of profit is determined by physical quantities. But I have shown in my comment on Part 12 that this this equality does not prove that my monetary rate of profit is determined by actual physical quantities, but instead proves that Kliman’s “physicalist” rate of profit is determined by my monetary rate of profit due to his circular reasoning. Kliman’s “physicalist” rate of profit itself is not determined by actual physical quantities, as is evidenced by: (1) Kliman’s “physicalist” rate of profit results in different conclusions compared to the Sraffian rate of profit which is determined by actual physical quantities and (2) in the case of technological change, Kliman’s “physicalist” I/O coefficients change in all industries even though the actual “physicalist” I/O coefficients do not change in many industries.

    3. You discuss the interesting point that in Kliman’s example in Part 1, his “physicalist” I/O coefficient a1 *increases*, which seems to indicate technological *regress* is Sector 1, not technological progress. But this conclusion of increasing a1 is not my conclusion; it is Kliman’s conclusion. Kliman is the one who calculated a1, not me. And my criticism is that a1 is not an actual physical coefficient because it changes (increases in this case) *even though the actual physical quantities in Sector 1 have not changed*. There is no actual technological regression in Sector 1 even though Kliman’s “physicalist” I/O coefficient a1 erroneously makes it appear as if there is regress. The reason Kliman’s a1 increases is that the rate of profit declines due to technological progress in Sector 2, which in turn caused P1 to decrease and thus a1 to increase. But this increase of Kliman’s a1 has nothing to do with technological regress in Sector 1; technology has not changed in Sector 1.

  14. Andrew Kliman on Mon, 28th Nov 2016 9:04 am 

    I don’t have time (yet?) to reply to Fred Moseley’s very long comment on Part 12. There’s just too much that’s wrong with it. For now, I’ll limit myself to answering his direct question to me:

    “Andrew, please answer this question: isn’t it true that your “physicalist” I/O coefficients have to be determined *independently of r* in order to be determinants of r in these equations?”

    Answer: no, it isn’t true. Everything you’ve said for more than two decades about order of determination is irrelevant, as is everything you’ve said in this debate about circularity. You haven’t understood what physicalists actually claim, including what they claim about determination.

    As I wrote in part 12, your “rate of profit is physically determined in the same sense that every other physicalist’s rate of profit is physically determined: the only proximate determinants of [your] rate of profit are physical input-output (and real wage) coefficients. In other words, if we have these coefficients, that is all we need in order to correctly compute Moseley’s rate of profit.”

    Note that this has nothing to do, nothing whatsoever, with order of determination or circularity.

    See also my responses to Herbert of Thurs., Nov. 24, above.

    Let me also point out that your “macro-monetary” aggregate data are themselves obviously determined by physical quantities, in two senses:

    (1) Every “macro-monetary” aggregate is either some per-unit price times some physical quantity or a sum of per-unit prices times physical quantities. E.g., it is not true that 3 machines were bought for $10,000 each because the constant capital is $30,000. It is true that constant capital is $30,000 because 3 machines were bought for $10,000 each.

    (2) The per-unit prices underlying your macro-monetary aggregates are simultaneously determined, and therefore they are determined by physical quantities (and a uniform rate of profit condition): physical quantities –> per-unit prices –> macro-monetary aggregates

  15. Fred Moseley on Thu, 1st Dec 2016 6:34 pm 

    Kliman is treating his “physicalist” I/O coefficients as exogenous givens determined independently of the rate of profit, but his coefficients are NOT exogenous givens determined independently of the rate of profit; his coefficients are *derived from the rate of profit* and the rate of profit is given exogenously in the price of production equations. Therefore Kliman’s “physicalist” I/O coefficients cannot be used to determine the rate of profit by these equations; that would be circular reasoning.

    In functional notation, the dependence of Kliman’s “physicalist” I/O coefficients on the rate of profit can be expressed as:
    a = f (r)
    And he then assumes:
    r = f (a)
    and the circular conclusion is obvious:
    r = f (r)

    I have discussed Kliman’s numerical examples several times to demonstrate his circular reasoning.

    The second point that is wrong with Kliman’s argument is that the “physicalist” I/O coefficients that he calculates from my rate of profit are *not actual physical quantities*, as is evidenced by: (1) in the case of technological change that changes the rate of profit, ALL of his “physicalist” I/O coefficients in ALL industries change *even in industries in which the actual physical quantities do not change* (as discussed in my comments on Part 12), and
    (2) the different conclusions derived from his “physicalist” I/O coefficients compared to Sraffian theory which is based on actual physical I/O coefficients (as discussed in several previous comments).

    Therefore, even if we ignore the circular reasoning in Kliman’s argument, his argument does not prove that my rate of profit is determined by actual physical quantities. In fact, I have presented arguments in several comments (and in my “Update”) that my interpretation of Marx’s theory of the rate of profit results in different conclusions (regarding labor-saving technological change, luxury goods, and full automation) from the rate of profit in Sraffian theory, which is determined by actual physical quantities, and thus my monetary rate of profit is NOT determined by actual physical quantities.

    On your final point: I argue that the “macro-monetary” aggregate variables in Marx’s theory are NOT determined in Marx’s theory by physical quantities.

    Marx’s logic is the following:
    The logical framework of Marx’s theory is the *circuit of money capital*:
    M – C … P … C’ – M’
    (NB: the logical framework of Marx’s theory is NOT a physical I/O matrix as in Sraffian theory). The initial quantity of money capital M at the beginning of the circuit is taken as given (not determined by physical quantities) and used (along with the LTV) to determine M’ and ΔM at the end of the circuit, without a specification of physical quantities. Physical quantities and unit prices play no role in Marx’s macro theory of M’ and ΔM.

    Similarly in Volume 3: the quantities of money capital in the circuit of money capital refer to the capital advanced and recovered in individual industries, and these Mi’s are also taken as given (not derived from physical quantities) and used (along with the general rate of profit determined by the prior macro theory of Volume 1) to determine prices of production in each industry (i.e. how the predetermined total ΔM is distributed across industries according to an equal rate of profit). Prices of production in Marx’s theory are not unit prices; a more descriptive name for Marx’s prices of production would be “gross annual industry revenue” (which enables each industry to recover the capital consumed in that industry and receive the average rate of profit on the capital advanced). Prices of production in Marx’s theory are determined by money costs + average money profit, without specification of physical quantities.

    Marx’s logic as summarized above is clearly sequential determination (not simultaneous determination) in two senses:
    (1) the initial quantities of money capital M and Mi are taken as given in the determination of the aggregate M’ and the individual industry prices of production, and
    (2) the general rate of profit is determined in Volume 1 prior to the determination of prices of production in Volume 3.

    Please see the algebraic summary of my “macro-monetary” interpretation of Marx’s theory in Chapter 2 of my book for further details.

  16. Herbert Panzer on Sun, 4th Dec 2016 11:37 am 

    Andrew, after having let you digest Fred’s reply + one ping-pong, I continue our discussion. 1st to mention: your input related “determine” is again a strong one.

    your said:
    “Note: “determine” has other meanings in addition to “compute,” but here it means “compute”–because that is what the other (ScruffyRuffian) physicalists mean when they allege that one needs no information other than the physical data in order to “determine” the rate of profit.”

    The point is: they have both meanings in mind but are not aware of the differentiation. As long as it is about their equation system that allows them to compute rate of profit, they are at the pure semantic-less side of the mathematical definition you mentioned in your last part. But with awareness of this they would not claim of making surplus value theory (that is full of causal relations, explanations, in one word ‘semantics’) redundant. So from this side they have the “other meanings” in mind.

    Now you, instead of criticising their ambiguity related ‘determine’ pull them down on the pure mathematical level. And this is because you have a ‘special’ understanding of the relationship between semantics and computability.

    Algorithms, mathematical functions and the like get their semantics from the context they are in. Same function can have very different meaning. Functions inside themselves may contain more or less information (like structure) and thus require more or less additional specification to add needed semantics. A good example on how the relation semantics/computability changes, is the creation of an embedded digital system. One starts with informal specification of this system including reference to relevant physical laws and explanations. This is then translated into information-rich formalisation of semantics with amount of non formal semantics specification going down. Formalisation at this stage may already be computable (e.g. complicated DES) but much too resource consuming. So next step is the finding of an algorithm yielding same results but with most of information (i.e. semantic rests) being thrown away.
    Now, where is then the semantics? In the documented system creation process before.
    With models it’s similar: Their semantics lies in the context they were made for and in themselves as a WHOLE. There may be pure mathematically determined results. But for themselves they are meaningless.

    Now, Sraffians do not look at the ongoing capitalist ‘system creation process’ where both monetary AND PHYSICAL UNITS are the results (or are determined in the other, causal meaning). They only look at hypothetical results. And then they invent an artificial semantics BY GROUNDLESS SETTING PHYSICAL UNITS AS THE GIVENS and prices/rate of profit as the parameters to be determined (in their ambiguous sense). This is how bourgeois science goes.

    Andrew, you do not understand this. Having pulled Sraffians down to mere computability level, their artificial semantics is not on your radar screen. For you it’s their equation system ALONE where the problem is.

    your say:
    “Note that this definition refers to models and the conclusions deduced from them, not to the views of the theorists who employ such models.”

    Now, with your definition of ‘determine’ it becomes clear what ‘models and conclusions’ you accept: the ones on mere computability level. That means no conclusions are allowed (even formal logic computations mean nothing when being cut off from their semantics). If in anybodies theory there would be an algorithm X where same Saffrian figures are coming out, this theorist would loose permission to argue. All would be shifted into the private ‘views’ space of this person.

    What I have learnt from your discussion with Fred is that a theorist need not come up with an algorithm X to become guilty. It is sufficient when by injecting one of the most meaningless functions x = f-1(f(x)) (Fred names this circular reasoning) into this theorist’s algorithm, a Saffrian equation can be constructed, regardless how much this person is correctly arguing otherwise. And this injection is possible for every stationary state model.

    Your ‘special’ understanding of the relationship between semantics and computability, if respectively applied in STEM world would severely threaten scientific/engineering progress. But also related ‘Critics of Political Economy’ your ban of thinking is blocking enough.

    Nevertheless, your analytical incisiveness (see ‘determine’) puts you in front of vast majority of Marxists. In case there is hope for CoPE progress then here.

    Andrew, I have written this text one week before. Now, having seen Fred’s last reply, I regard this text as a generalization of it.

  17. Andrew Kliman on Mon, 5th Dec 2016 12:20 pm 

    Fred, I gave you a direct answer to your question to me. You are ignoring my answer and diverting the subject by repeating stuff you’ve already alleged ad nauseum.

    Since I answered you question, please answer mine:

    (1) Isn’t it true that, if we don’t have your “macro-monetary” data, but we do have the physical input-output (and real wage) coefficients associated with them, we have all we need in order to correctly compute your rate of profit?

    (2) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that every “macro-monetary” aggregate is either some per-unit price times some physical quantity or a sum of per-unit prices times physical quantities?

    (3) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that the per-unit prices underlying your macro-monetary aggregates are simultaneously determined, and therefore they are determined by physical quantities (and a uniform rate of profit condition)?

    Let me also point out that you’re absolutely wrong when you allege–as you did here on Nov. 24–that

    (a) “labor-saving technological change in luxury goods industries will reduce the [i.e., Moseley’s] rate of profit, contrary (again) to the conclusion of Sraffian theory”

    but also

    (b) “I [don’t] have to define technological change and analyze the effect of technological change on the rate of profit in the *same way as in Sraffian theory*, i.e. in terms of *physical quantities*.”

    It is OBVIOUSLY false to allege that you obtain a “contrary” conclusion if you and they mean two different things by “technological change.” “X will not alter the rate of profit” and “Y will alter the rate of profit” are not contrary or contradictory statements if X and Y refer to 2 different things.

    Please retract your false allegation that your conclusion is contrary to theirs, and admit that you concur with them that technological change in luxury (non-basic) industries–as they define it–will not alter the rate of profit. Or–better yet–walk away from simultaneism/physicalism.

  18. Andrew Kliman on Mon, 5th Dec 2016 6:53 pm 

    Herbert Panzer, what you say is incorrect: “they have both meanings in mind but are not aware of the differentiation.” “Now you, instead of criticising their ambiguity related ‘determine’….”

    I note that you provide no textual evidence whatsoever in support of these allegations.

    Textual evidence that your allegations are incorrect is contained, for instance, on p. 25 of Steedman’s Marx After Sraffa:

    “If it is said that, e.g., the rate of profit is determined by A, B and C, it is always possible to ask, “Yes, but what determines A, B and C. That question will always be legitimate , in some frame of reference, but it must not be taken to mean that the determination in terms of A, B and C is invalid. Many of the supposed ‘defences’ of Marx again the Sraffa-based critique have amounted to no more than the implicit denial of this simple truth.”

    Instead of providing any evidence, you allege that “But with awareness of this they would not claim of making surplus value theory (that is full of causal relations, explanations, in one word ‘semantics’) redundant.”

    Again, you offer no textual evidence in support of this.

    For evidence that refutes it, see Steedman’s conclusion on p. 202 that “value magnitudes are, at best, redundant in the determination of the rate of profit (and prices of production).” The argument here, and thus the conclusion, are strictly about “determining” in the sense of “specifying the value of.”

    The following is nonsense:

    “Now, with your definition of ‘determine’ it becomes clear what ‘models and conclusions’ you accept: the ones on mere computability level. That means no conclusions are allowed (even formal logic computations mean nothing when being cut off from their semantics). If in anybodies theory there would be an algorithm X where same Saffrian figures are coming out, this theorist would loose permission to argue. All would be shifted into the private ‘views’ space of this person.”

    You have no evidence for this at all. And it isn’t true. I have nothing against non-computable theories and conclusions. What I object to is mendacious bullshit that makes physicalism seem not to be physicalism. It’s all value-form and no value-substance.

    Also, everything Moseley says about how his money magnitudes are given, not derived from physical quantities, is simply false, as I’ve explained. Take, for instance, the following GIVEN “macro-monetary” magnitudes:

    sector C V S W profit P
    —— — — — — —— —
    1 21 3 4 28 6 30
    2 18 6 8 32 6 30
    —— — — — — —— —
    total 39 9 12 60 12 60

    Does Moseley accept that these GIVEN “macro-monetary” numbers for values, surplus-values, average profits, and prices of production are correct? No! That’s because he has not yet verified that the per-unit prices that underlie each and every monetary figure are simultaneously determined.

    But in order to verify this (or disconfirm it), Moseley needs additional information about PHYSICAL QUANTITIES. These physical quantities are GIVENS that he absolutely requires. Without them, he cannot say whether input prices equal output prices. And therefore, in the absence of the GIVEN physical quantities, he just doesn’t have any “macro-monetary” givens at all.

    So his money magnitudes are indeed derived from prior information on physical quantities; and everything he has alleged about my circular reasoning is nonsense.

  19. Herbert Panzer on Sun, 11th Dec 2016 9:17 am 

    Andrew, before I go into more detail, some topics overview:
    a) Sraffian ambiguity related ‘determine’
    I will come to this, including textual evidence.

    b) Your pulling down of ‘determine’ on pure mathematical level
    This is the core part of my mail – regardless whether Sraffians are aware of its ambiguity or not. Unfortunately you do not give any feedback on this.

    c) Rest of you last answer related Moseley

    ad a) Ambiguity related ‘determine’, I give two references as textual evidence:

    i) “If it is said that, e.g., the rate of profit is determined by A, B and C, it is always possible to ask, “Yes, but what determines A, B and C. That question will always be LEGITIMATE , in some frame of reference, but it must not be taken to MEAN that the determination in terms of A, B and C is invalid. Many of the supposed ‘defences’ of Marx again the Sraffa-based critique have amounted to no more than the implicit denial of this simple truth.”

    ii) “value magnitudes are, at best, redundant in the determination of the rate of profit (and prices of production).”
    In i) Steedman considers whether determination is LEGITIMATE and what it MEANs, i.e. has semantics in mind, whereas in ii) “the argument here, and thus the conclusion, are strictly about “determining” in the sense of “specifying the value of.” So, when it is about defending his theory, he appreciates the power of a semantics level argumentation. When it is about rejecting value theory, talking semantics would be killing. So for him, only possibility is falling down on pure computational level.

    At least related Steedman, I was wrong with saying that he is not aware of the differentiation. I.e., one cannot grant him the excuse of a simple scientific-non-awareness-error. He seems to apply his awareness in a deliberate non-scientific-interest way; in other words, he seems to be a bourgeois ideologist. About this I was not conscious about before. Therefore, Andrew, thank you for the help and collaboration (honestly meant).

    In order to deeper understand, what Steedman is doing, let’s consider a planet’s orbit around the sun. Its position follows the relation R: ax²+by²=1. Now, for Kepler it was meaningful to ask, when x is given, what is the position of y. But after Newton’s law of gravitation etc. it is INVALID, because since then it is KNOWN that the relation R in all its part is a RESULT of the whole sun-planet-system dynamics (power balance etc.) and its related semantics. This comprises also that there is no causal (semantic) relationship between x and y, even when you write x=f(y) or y=f(x). The only scientific possibility to get some semantics in again between x and y would be by refuting Newton. Steedman, rather than refuting Marx’s value theory insists on injecting a semantics ‘profit rate = f(physical units)’ at a place where something like this is excluded, as both, monetary and physical quantities are simultaneous results. I.e. i) is an immunisation against criticism of a silly ‘theory’.
    ii) is complementary to i). It’s like saying, now that we know ax²+by²=1 we have all we need. Everything beyond that is redundant (in the best case). Let’s forget Newton.
    i) and ii) together is bourgeois science at its best: creating immunisation for pseudo theories on surface for ideological usage and dissuade others from deeper research.

    ad b) Now, Andrew, instead of criticizing this, you take the position of ii), or half of Steedman’s, but this with full power and seemingly over decades. Where he misuses ‘pure computational level’ to dissuade others, for you this computational level insisting – under the slogan “physicalist” – becomes a ban of thinking.

    Ad my ‘nonsense’: my writing is a ‘cream topping’. You have to read and digest my b) from last mail, i.e. ‘the cake’, before hopefully enjoying the ‘cream topping’.

    ad c) The answer for this lies in the above. Maybe planet example may help, or my ‘flatland’ story where inhabitants consider talks about 3rd dimension as ‘mendacious bullshit’. Or my 1st mail/swing example where I explain that simultaneity and stationarity do not fall in one.

    Considering you, Fred and me as a simple communication system, I’m the interferer. As in all good such systems a crucial ability is the exclusion of interference. For this, at the receiver side rightly filters are established to protect it from unwanted load. From start I do not differentiate myself from all others. What chance is there to not get filtered out? Mostly non. In rare cases (like yours) the receiver opens a small window where he scans for certain ‘codes’ and even responds. It seems now, I have passed your 1st filter. My hope is that over time I can transmit enough code information that you find it worthwhile to devote a bit more time to what I’ve written.

  20. Fred Moseley on Mon, 12th Dec 2016 8:23 pm 

    1. Kliman asked in his comment on Dec. 5:
    “(1) Isn’t it true that, if we don’t have your “macro-monetary” data, but we do have the physical input-output (and real wage) coefficients associated with them, we have all we need in order to correctly compute your rate of profit?”

    But Kliman’s “physicalist” I/O coefficients *cannot be separated logically* from the monetary quantities “associated with them” (i.e. from which the “physicalist” coefficients were derived) because the monetary data *includes the rate of profit*, and thus Kliman’s “physicalist” coefficients are *derived from the rate of profit* and cannot be used to determine the rate of profit; that would clearly be *circular reasoning*.

    In his book (and quoted in his comment of Nov. 23), Kliman made the apparently strong statement that “one needs no information other than the physical data in order to *determine *values, relative prices, and the rate of profit” (emphasis added), where “determine” seems to mean causation However, in a message the next day, Kliman clarified that what he meant by “determined” is *computation* and (by implication) not causation. But computation is a trivial matter compared to a theory of causation. The circular computation of the rate of profit from “physicalist” coefficients – that are themselves determined by the rate of profit – proves nothing about the *causation* of the rate of profit; and in particular does not prove that my monetary rate of profit is *caused* by actual physical quantities. Not only because of the circular reasoning, but also because Kliman’s “physicalist” I/O coefficients are not actual physical I/O coefficients, as I have shown in several posts.

    A simple analogy to Kliman’s circular logic is the following:

    (1) assume x = 10 (as determined independently of y)

    (2) assume y = x – 4 (x is an exogenously determined given)
    = 10 – 4 = 6

    (3) rearrange (2): x = y + 4
    = 6 + 4 = 10 !

    If we ignore (1) and (2), then (3) looks like x depends on y. But if we take (1) and (2) into account, as we should and must in a full analysis of the causal relation between x and y, then we can see that x is determined to begin with independently of y and y depends on x, not the other way around.

    (3) is circular reasoning: x = y + 4
    x = (x – 4) + 4
    x = x !

    Kliman’s argument that “given physical coefficients, we can compute the rate of profit” is analogous to arguing that the only thing that matters is equation (3) – that “with a given y, x can be computed”. But y itself is determined by x, and x is an exogenous given (equations 1 and 2). Therefore, x is *not* determined by y. Similarly, Kliman’s “physicalist” coefficients are themselves determined by my monetary rate of profit which is an exogenous given and which is determined by S/(C+V). Therefore, the rate of profit is not determined by Kliman’s “physicalist” coefficients. Kliman’s equations are more complicated (see my comment of Nov. 24) but the circular reasoning is the same.

    In the same passage from Kliman’s book quoted above, he stated that his “physicalist” I/O coefficients are only “*proximate determinants*” of the rate of profit and these coefficients also depend on other factors. And he attempted to justify his use of “only proximate determinants” to calculate the rate of profit by noting that the proponents of physicalism also acknowledge that the physical coefficients in their system of equations are only the “proximate determinants” of the rate of profit and that these physical coefficients themselves also depend on other factors.

    For example, Steedman has said in his book that the physical quantities depend on “technical and social determinants” (p. 48)

    However, these is a crucial difference between Steedman’s statement (and Sraffian theory in general) and Kliman’s argument: The ultimate determinants of Steedman’s physical coefficients *do not include the rate of profit* that is determined by the Sraffian system of equations. On the other hand, the “ultimate determinants” of Kliman’s “physicalist” quantities *do include the rate of profit*, and thus Kliman’s “ultimate determinants” just go in a circle (as in the simple example above). And Kliman’s “proximate determinants” are not really determinants of the rate of profit at all, but are instead *determined by* the rate of profit, which is an exogenous given.

    2. Kliman also asked in his comment on Dec. 5:
    “2) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that every “macro-monetary” aggregate is either some per-unit price times some physical quantity or a sum of per-unit prices times physical quantities?

    (3) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that the per-unit prices underlying your macro-monetary aggregates are simultaneously determined, and therefore they are determined by physical quantities (and a uniform rate of profit condition)?”

    Marx’s theory of the relation of determination between total money quantities and unit prices is essentially the opposite of Kliman’s. Unit prices are not important in Marx’s theory, but he addressed this question in the “Results” manuscript, Section 1, entitled “*Commodities as Products of Capital*”. Marx’s argued in this section that unit prices are derived from total prices, not the other way around, because commodities in capitalism are *products of capital*, rather than isolated autonomous products. Each individual commodity is analyzed as an *“aliquot part” of the total product of capital* in an industry and thus the unit price of an individual commodity is analyzed as an *aliquot part of the total price* of the total product of capital in that industry.

    Marx discussed an example of the production of 1,200 ells of linen (pp. 957-58). He assumed that the capital invested is £100 (£80 constant capital and £20 variable capital) and surplus-value is also £20, so that the total price of the 1,200 ells of linen produced by a capital of £100 is £120.

    Marx then asked: “*How are we to determine the value of the individual commodity, in this case the ell of linen? *” (p. 957; emphasis added; also in the quotations below unless otherwise noted)

    And Marx’s answer: “*Obviously, by dividing* the total price of the aggregate product by the *number of units* … In the present case then, £120 / 1200 ells. This results in a price of 2s per ell of linen… The price of the individual commodity is determined, then, by expressing its use-value as an *aliquot part of the aggregate product*, and its price as the corresponding *aliquot part of the total value generated by the capital invested*.” (p. 957)

    A few pages later:
    “… the commodity must be thought of very differently from the way in which we conceived of it at the outset of our discussion of the individual independent product – for here it appears as the *product of capital*, as the *aliquot component of capital*, as the *depository of capital* that has valorized itself and hence contains an aliquot part of the surplus-value generated by capital.” (p. 965)

    “… as a depository of the capital invested in it, its sale price should also reflect the fact that it is an *aliquot part of the total product of that capital*.” (p. 967; emphasis in the original)

    “(In the above example, the price of the ell is determined not in isolation, but as an aliquot part of the total product.)” (p. 969)

    So Marx argued that unit prices are derived from total prices, not the other way around, because commodities in capitalism are *products of capital*, rather than isolated autonomous products.

    Marx assumed in these pages that the price of the 1,200 ells of linen = its value (the “Results” draft was written as a transition between Vols. 1 and 2), but the same principle – treating individual commodities as *products of capital* and deriving unit prices from the total industry price by *division* – would also apply after it is explained in Vol. 3 that total industry prices = prices of production. The total industry price of production (i.e. gross annual industry revenue) is determined first and then the unit price is determined by *dividing* the total industry price of production by the number of units of the product.

    This order of determination from the total price of the total product in an industry to the unit price of a single commodity in that industry is consistent with the very important aspect of Marx’s logical method that I have emphasized in my book – that the total price and the total surplus-value of all the commodities produced in the economy as a whole are *determined first* in the Vol. 1 macro theory, and then the total surplus-value is *divided up* in Vol. 3 into individual parts, including the equalization of the profit rate and the determination of the price of production in each industry. Therefore, the order of determination in Marx’s theory is consistently an order of *disaggregation*: from the macro economy-wide totals to the micro individual industry totals to the “super-micro” unit prices.

    3. Kliman continues to assert that, if I want to compare my interpretation of Marx’s theory of the effect of labor-saving technological change in luxury goods industries on the rate of profit with the Sraffian theory of this effect, then my interpretation must have the same definition of technological change (a change of physical quantities) and my analysis of this effect must begin with physical quantities, i.e. the fundamental variables in my interpretation of Marx’s theory of the rate of profit must be physical quantities.

    But this is an absurd requirement – that my interpretation of Marx’s theory of the rate of profit must be based on physical quantities because the Sraffian theory of the rate of profit is based on physical quantities. That is, in order to compare Marx’s theory with Sraffa’s theory, Marx’s theory must be turned into Sraffa’s theory!

    I argue that Marx’s theory of the rate of profit can be summarized by the following equation:
    R = (S/V) / (C/V) where S = m (SL)
    Therefore, according to Marx’s theory, the effect of labor-saving technological change in luxury goods industries depends on its effects on the monetary ratios S/V and C/V. And according to Marx’s theory, labor-saving technological change in luxury goods industries will *increase C/V*, but will have *no effect on S/V* because luxury goods are not wage goods for workers; therefore, according to my interpretation of Marx’s theory, the rate of profit will fall.

    This is a clear-cut unambiguous conclusion and not somewhat indeterminate like the analysis of labor-saving technological change in non-luxury goods industries. In the latter case, the net effect on the rate of profit depends on the *relative rates of increase* of S/V and /C/V and that is a very complicated analysis. But in the case of luxury goods, there is no increase of S/V to offset the increase of C/V, so the rate of profit will always fall.

    This is the way Marx analyzed the effect of labor-saving technological change in luxury goods industries on the rate of profit (see TSV.III. 349-50) and this is the way that I interpret Marx’s theory and Marx’s analysis of this question.

    Andrew, if Marx wanted to compare his theory of the effect of labor-saving technological change in luxury goods industries on the rate of profit with the Sraffian theory of this effect, would you also require that Marx analyze this question in terms of physical quantities and not in terms of the monetary ratios of S/V and C/V? I don’t think Marx would accept this absurd requirement and neither do I. This requirement turns Marx’s theory into Sraffa’s theory and eliminates any possibility of comparison of the two different theories.

    Furthermore, we could ignore the assumption of labor-saving technological change in the luxury goods sector and just consider the luxury goods sector itself and its effect on the rate of profit, so we don’t get hung up on the correct definition and analysis of labor-saving technological change. I discussed this case in my “Update” published on academia.edu on Oct. 3, 2016: (https://www.academia.edu/28908907/Reply_to_Kliman_-Update;

    According to the Sraffian theory of the rate of profit, which is based on physical quantities, the luxury goods sector *has no effect* on the rate of profit because luxury goods do not enter as inputs to production and thus are not costs of production.

    According to my interpretation of Marx’s theory of the rate of profit, which is based on the labor theory of value and surplus-value, the luxury goods sector *does have an effect* on the rate of profit because the composition of capital and the rate of surplus-value in the luxury goods sector are included in the composition of capital and the rate of surplus-value for the economy as a whole, which determines the rate of profit (as discussed above).

    This is another clear example of the differences between my interpretation of Marx’s theory of the rate of profit and the Sraffian theory. Kliman has not commented on this clear example.

  21. Andrew Kliman on Tue, 13th Dec 2016 11:25 am 

    Fred Moseley,

    I gave a direct answer to your question. But you have NOT given a direct answer to any of mine:

    (1) Isn’t it true that, if we don’t have your “macro-monetary” data, but we do have the physical input-output (and real wage) coefficients associated with them, we have all we need in order to correctly compute your rate of profit?

    (2) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that every “macro-monetary” aggregate is either some per-unit price times some physical quantity or a sum of per-unit prices times physical quantities?

    (3) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that the per-unit prices underlying your macro-monetary aggregates are simultaneously determined, and therefore they are determined by physical quantities (and a uniform rate of profit condition)?

    PLEASE DO SO.

  22. Fred Moseley on Thu, 15th Dec 2016 9:51 am 

    I answered these questions in my last comment, but I will briefly answer them again for Andrew’s benefit. And elaborate on the 2nd question.

    (1) Isn’t it true that, if we don’t have your “macro-monetary” data, but we do have the physical input-output (and real wage) coefficients associated with them, we have all we need in order to correctly compute your rate of profit?

    You can *compute* my monetary rate of profit from your “physicalist” I/O coefficients because your “physicalist” coefficients are derived from my monetary rate of profit! But this is just a circular computation that *proves nothing* about the *causation* of my monetary rate of profit and in particular *does not prove* that my rate of profit is *causally determined* by actual physical quantities, both because of circular reasoning and also because your “physicalist” I/O coefficients are not actual physical I/O coefficients.

    Your circular computation is of trivial significance. The significant issue is whether my monetary rate of profit is *causally determined* by actual physical I/O coefficients and the answer is clearly NO.

    (2) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that every “macro-monetary” aggregate is either some per-unit price times some physical quantity or a sum of per-unit prices times physical quantities?

    No, not in my interpretation of Marx’s theory.

    I argue that the logical framework of Marx’s theory is the circuit of money capital:
    M – C … P … C’ – M’.
    I argue further that the initial quantity of money capital M is *taken as given* at the beginning of the circuit and is used (along with the labor theory of value) to determine C’, M’, and ΔM at the end of the circuit. Physical quantities and unit prices are not specified and are not necessary and play no role in Marx’s theory of C’, M’, and ΔM.
    Please see the algebraic summary of my interpretation of Marx’s theory in Chapter 2 of my book.

    One could assume (although not necessary) that the given initial M is itself determined by the product of given unit prices and given physical quantities of inputs. However, please note that in this case the unit prices of the inputs are *taken as given* at the beginning of the circuit, not determined simultaneously with the unit prices of the outputs at the end of the circuit.

    And then the M is used (along with the LTV) to determine C’, M’, and ΔM.

    C’ (= M’) = M + ΔM and ΔM = f (SL)

    C’ is determined in Marx’s theory first at the macro level as the *total price of the total commodity product*; it is *definitely not* determined by the sum of products of unit prices and physical quantities of outputs.

    Furthermore, and more important: ΔM is also determined in Marx’s theory first at the macro level as an *aggregate quantity of money capital*; it is *definitely not* determined by the sum of products of unit prices and physical quantities of outputs. In fact, ΔM is a fraction of the total price of the total product, not the price of a specific part of the total product and thus cannot be decomposed into unit prices and physical quantities.

    And most importantly: the rate of profit is also not determined by multiplying physical quantities and unit prices; nor is the rate of profit determined simultaneously with unit input prices and unit output prices. Instead, the rate of profit is determined by dividing the total ΔM at the end of the circuit of money capital (determined by SL) by the total M advanced at the beginning of the circuit.
    R = ΔM / M = S / C + V)

    So we come to the same conclusion as in #1: the monetary rate of profit in my interpretation of Marx’s theory is *not determined by physical quantities*.

    And we could go further: in Vol. 3, the total ΔM is distributed across industries according to an equal rate of profit which determines industry-level prices of production according to the equation:
    PPi = (Ci + Vi) (1 + R)
    Once again these industry-level prices of production are not determined by multiplying physical quantities and unit prices.
    R is taken as given in this equation, as determined above.

    Then, if one wants to determine the unit prices of the outputs, one could divide the industry-level prices of production by the quantity of output in each industry, as Marx explained in the “Results” (discussed in my previous comment). Thus we can see again that the unit prices of outputs are not determined simultaneously with the unit prices of the inputs (taken as given above).

    (3) Isn’t it true that your “macro-monetary” aggregate data are themselves determined by physical quantities, in the sense that the per-unit prices underlying your macro-monetary aggregates are simultaneously determined, and therefore they are determined by physical quantities (and a uniform rate of profit condition)?

    No, not in my interpretation of Marx’s theory.

    As Marx explained in the “Results”, unit prices of outputs are derived from total prices (£120 / 1,200 ells of linen = 2s per ell) and not the other way around. And as we saw in #2, unit input prices and unit output prices are not determined simultaneously. Unit input prices, if considered at all, are taken as given at the beginning of the circuit of money capital; and unit output prices, if considered at all, are derived from the industry price of production and the quantity of output in the industry at the end of the circuit.

    As Marx put it, individual commodities are analyzed as *“products of capital”* and the unit output prices of individual commodities are analyzed as *“aliquot parts”* of the total price of the total output produced by capital in an industry.

  23. Andrew Kliman on Thu, 15th Dec 2016 11:28 am 

    Fred Moseley,

    Thanks for the answers.

    I like the first part of your answer to (1): “You can *compute* my monetary rate of profit from your “physicalist” I/O coefficients.” I.e., if we don’t have your “macro-monetary” data, but we do have the physical input-output (and real wage) coefficients associated with them, we have all we need in order to correctly compute your rate of profit.

    That is correct.

    It is also correct that

    (a) the physical input-output (and real wage) coefficients associated with your “macro-monetary” data are all one needs in order to correctly compute the standard physicalist (ScruffyRuffian) rate of profit,

    and

    (b) the standard physicalist (ScruffyRuffian) rate of profit computed in this manner–i.e., using the physical input-output (and real wage)coefficients associated with your “macro-monetary” data–is QUANTITATIVELY identical to your rate of profit.

    Right?

    Right.

    This is what I have been arguing all along. This argument is about the fact that the two rates of profit are QUANTITATIVELY identical under the conditions specified above. It is not an argument about causality. It is simply a red herring to introduce causality in this specific context.

    Whether my conclusions here are “of trivial significance” is a matter of opinion. Given that Marx’s rate of profit as understood by the TSSI is not quantitatively identical to the standard physicalist (ScruffyRuffian) rate of profit under the conditions specified above, I happen to think that the fact that your rate of profit IS quantitatively identical to the latter is extremely significant.

    Your answers to questions (2) and (3) are incorrect. To explain why they aren’t correct, I note that the prices of production (P) and associated price rate of profit (π/(C+V)) in the following table are computed in the exact way you describe here:

    Sector…C…V…S..W…π…P…S/(C+V)…π/(C+V)..
    …..1….21…3…4..28…6..30….16.7%…..25.0%…
    …..2….18…6…8..32…6..30….33.3%…..25.0%…
    …total..39…9..12..60..12..60….25.0%…..25.0%…

    but you cannot say whether they are correct or not. You require more information. So the determinants you specify are NOT the only determinants of your prices of production and uniform rate of profit.

  24. Fred Moseley on Fri, 16th Dec 2016 9:37 am 

    Kliman argued in his last comment:
    “This argument is about the fact that the two rates of profit are QUANTITATIVELY identical under the conditions specified above. It is not an argument about causality. It is simply a red herring to introduce causality in this specific context.

    Causality is a red herring! I thought causality was the main thing that economic theory is about. Not arithmetic.

    If we want to analyze (for example) the effect of labor-saving technological change on the rate of profit, then we need a theory of causation of the rate of profit. My interpretation of Marx’s theory of the rate of profit is a different theory of causation from Sraffian theory, and thus the two theories come to different conclusions on this key question. Kliman’s computation comes to the same conclusion as my theory (and different from the conclusion of Sraffian theory which is based on actual physical coefficients) because Kliman’s computation is derived from my monetary theory.

    Kliman claims that it is a significant result that the monetary rate of profit in my interpretation of Marx’s theory (R = S /C+V) is quantitatively the same as the rate of profit derived from his “physicalist” I/O coefficients. But his “physicalist” coefficients are not actual physical coefficients and are themselves derived from my monetary rate of profit and monetary quantities, so his argument is just circular arithmetic and of no significance.

    His argument is similar to:
    (1) assume: x = f (L) = 10
    (2) assume: y = f (x) = x – 4
    (3) then rearrange (2) and “compute” x:
    x = y + 4
    = (x – 4) + 4 = (10 – 4) + 4
    = 10 !
    And then claiming that this is a significant result!
    But this is a completely trivial result. x is assumed to be = 10 and then this assumption is used to compute x = 10.
    Similarly, in Kliman’s computation, my monetary rate of profit is assumed in the derivation of his “physicalist” I/O coefficients and then his “physicalist” I/O coefficients are used to “compute” my monetary rate of profit. An equally trivial result!

    It is like putting a rabbit into a hat and then pulling the rabbit out of the hat and claiming to have done something magical!

    Kliman also argued:
    “Your answers to questions (2) and (3) are incorrect. To explain why they aren’t correct, I note that the prices of production (P) and associated price rate of profit (π/(C+V)) in the following table are computed in the exact way you describe here:
    ..Sector…C…V…S…W…π…P…S/(C+V)…π/(C+V)..
    …..1….21…3…4..28…6..30….16.7%…..25.0%…
    …..2….18…6…8..32…6..30….33.3%…..25.0%…
    …total..39…9..12..60..12..60….25.0%…..25.0%…
    but you cannot say whether they are correct or not. You require more information. So the determinants you specify are NOT the only determinants of your prices of production and uniform rate of profit.”

    Kliman does not specify what he means by “correct”. According to my interpretation, “correct” means that the equilibrium conditions for simple reproduction are satisfied (assuming that Sectors 1 and 2 are the means of production and means of subsistence sectors respectively).

    For example, the equilibrium condition for means of pd is that the total price of the means of pd as inputs = the total price of the means of pd as outputs (Sector 1). In Kliman’s example:
    price of means of pd as inputs = 39
    price of means of pd as output = 30
    So I can easily say that the equilibrium condition is not satisfied and so these numbers are not “correct”.

    Ditto for means of sub:
    price of means of sub as inputs = 9 + 12 = 21
    price of means of sub as output = 30
    Again I can easily say that the equilibrium condition is not satisfied and so these numbers are also not “correct”.

    I don’t need physical quantities to tell whether these numbers are “correct” or not; nor do I need unit prices. The equilibrium conditions are in terms of total monetary quantities, so it is easy to tell whether these conditions are satisfied or not from the given monetary quantities without physical quantities and unit prices.

    And the determinants that I specify (quantities of money capital and labor-time) are fully sufficient to determine the rate of profit and prices of pd, as explained in my previous comment (and in Chapter 2 of my book).

  25. Andrew Kliman on Fri, 16th Dec 2016 1:23 pm 

    Fred Moseley,

    I wrote, ““This argument is about the fact that the two rates of profit are QUANTITATIVELY identical under the conditions specified above. It is not an argument about causality. It is simply a red herring to introduce causality in this specific context.”

    You replied, “Causality is a red herring! I thought causality was the main thing that economic theory is about. Not arithmetic.”

    What part of “this argument” do you not understand? What part of “in this specific context” do you not understand?

    Simple reproduction of course has nothing to do with prices of production. In chapter 9 of Capital, vol. 3, Marx’s text says nothing about simple reproduction, nor do his tables allow one to say anything about it. I’m actually amazed that you made such an elementary mistake.

    The table in my last message is a condensed version of the “macro-monetary” data in the top half of Table 1 in Part 12 of my comments. The price of Sector 1’s output is 30; total capital (constant and variable) spending on Good 1 is 18. The price of Sector 2’s output is 30; total capital (constant and variable) spending on Good 2 is also 30.

    You now have the complete monetary information. But you still cannot say whether the prices of production and associated rate of profit are correct or not. You require more information. So the determinants you specify are NOT the only determinants of your prices of production and uniform rate of profit.

  26. Roel Van de Pol on Mon, 19th Dec 2016 4:38 am 

    A few notes on the Kliman-Moseley debate:

    By admitting the equality between his rate of profit and the physicalist one in this case, Moseley has opened the way to settling the debate and, more importantly, to conceding that his macro-monetary interpretation is physicalist. In the best case this will lead him to abandon simultaneism, but that remains to be seen.

    Kliman claimed that (a) a certain set of I/O coefficients is sufficient to compute the macro-monetary rate of profit and (b) this rate of profit equals the physicalist rate of profit computed from the same I/O coefficients (Kliman’s (a) and (b) from his reply dated Dec 15th). He is right in saying that introducing causality is a red herring here, because he claimed nothing about causality. Moseley has now admitted that claims (a) and (b) are correct, but dismisses their significance in two ways.

    First he the claims these I/O coefficients are somehow not “real”. His reasoning seems to be the following: Moseley takes his *macro-monetary data* as given. To know the I/O coefficients from Moseley’s point of view, we first have to derive them from these macro-monetary data. Only then can we use them inversely to compute the macro-monetary rate of profit. It is supposedly impossible for these I/O coefficients derived from macro-monetary data to equal those of the physicalists, because they don’t know the macro-monetary data. The I/O coefficients derived from his macro-monetary data should thus certainly be different from any other physicalist ones, especially those of the Sraffians. But only one of the two can be “real” (i.e. “really physicalist” in contrast to “not really physicalist” – what this means is unclear). Since he denies being a physicalist, Moseley concludes that the ones derived from his macro-monetary data are only “falsely” physicalist.

    Obviously, it is Moseley’s reasoning that is false. Any physicalist may very well take as given any set of I/O coefficients that happens to equal the I/O coefficients one could derive from any set of macro-monetary data that Moseley takes as given. Moseley has no power over the I/O coefficients that physicalists wish to take as given. These physicalists don’t need any macro-monetary data at all to derive their I/O coefficients from, all they need is a lucky guess. Those physicalists with their lucky guess are coined ScruffyRuffians by Kliman. These ScruffyRuffians, who might have never even heard of Moseley or of any macro-monetary data, take this given set of I/O coefficients and can now compute their typical physicalist rate of profit. The result is identical to the macro-monetary rate of profit in the data from which the same physical I/O coefficients could be derived. The fact that the ScruffyRuffians had their I/O coefficients given merely by chance couldn’t matter less.

    Moseley then does seem to acknowledge this up to a point, but claims this is all meaningless because it does not imply causality and causality is all that matters in the end. As stated above, this is a red herring. However, the fact that Moseley admitted this point is, as Kliman stated, extremely important, because this allows them to take the discussion a step further. With the physicalists, it is clear that physical I/O coefficients and the real wage rate causally determine the rate of profit. With Moseley, this is supposedly not the case. But why then is Moseley’s macro-monetary rate of profit consistently identical to the physicalist one? Unless Moseley can provide a sound answer to this problem, the only fundamental difference between his approach and the physicalist one now seems to be that the physicalists explicitly state that physical quantities causally determine values, while Moseley explicitly denies it.

    The TSSI however comes to a rather different result. It is impossible to derive a set of I/O coefficients from TSSI data and it is impossible to calculate the TSSI rate of profit from I/O coefficients. Since this seems to be the distinguishing feature of the TSSI on this matter, the question arises why this is the case. The answer is simple: because the macro-monetary theory stipulates that output prices and input prices are equal, i.e., is simultaneist, and the TSSI is not. Moseley seems to misunderstand the TSSI critique of any kind of simultaneism, not only his own. The crux of the TSSI critique is precisely that simultaneism turns you into a physicalist whether you want it or not, because your results will be exactly equal to those of the physicalists. The mere possibility to derrive physical quantities from macro-monetary data already affirms this. The only real difference with physicalism is in the words. This is what leads to the TSSI contention that simultaneism is covert physicalism. Covert, precisely because it camouflages the causal relationship, while physicalists embrace it.

    Nevertheless, Moseley is convinced that the fact that he takes his macro-monetary values as given fundamentally distinguishes him from the physicalists, who take I/O coefficients as given. But this is not true: his macro-monetary values are not actually given, because they require the additional condition that input prices equal output prices to be met (this is what Kliman means by “correct” in his two latest replies). For this to hold, information about physical quantities is required – the macro-monetary “givens” are not enough. In his latest comment (Dec 18th), Moseley denies this, stating that his equilibrium condition only demands equilibrium for macro-monetary quanditites, not equality of input-output unit prices. If this is really the case, it would indeed be correct that he does not need information about physical quantities – but he would also have effectively switched camp to the TSSI, which could only be applauded. However, this would directly contradict what he argued in his first reply (Aug 25th) to Kliman’s Part 11 (and elsewhere), where he states that “In the general case (…) long-run equilibrium prices are prices for which *input prices = output prices*”.

    This seem to be a constant in Moseley’s argumentation. Whenever proof emerges that his simultaneism leads to physicalist results, Moseley loosens his simultaneist restrictions and flirts with the TSSI. Whenever he is pointed to the fact that this equals rejecting his own original interpretation, he returns to simultaneism. Moseley has to declare definitively which equilibrium condition he wants to build his interpretation upon. He either is a simultaneist or he isn’t, but he can’t change sides every time the debate doesn’t go his way. Either his interpretation requires only equilibrium in macro-monetary quantities, so his new macro-monetary interpretation (as distinct from what he published in his book) is no different than the TSSI. Or his equilibrium also requires input prices = output prices, so it does need an additional condition, which means his macro-monetary values can not actually be considered given unless I/O coefficients are also given – which would make him a physicalist.

    Despite the camouflage, the causal relationship – physical I/O coefficients and real wages in fact do causally determine macro-monetary data – does not disappear. This is decisively demonstrated by the fact that labor-saving technological changes in the production of luxury goods will not lower the general rate of profit in the macro-monetary interpretation. This proofs that only I/O coefficients and the real wage are determinant, not the macro-monetary data by themselves. Moseley denies this by arguing that his definition for labor-saving technological change is different. But that doesn’t refute anything. Physicalists assert that, when fewer labor inputs are needed to produce the same physical outputs in luxury goods industries, this does not depress the rate of profit. If Moseley wants to refute this claim (as the TSSI succesfully does), he has to show that their conclusion is wrong, given their definition of technological change (fewer labor inputs are needed to produce the same physical outputs), not assert that his definition of technological change is different. If he fails to do so, this demonstrates once again that his macro-monetary interpretation is just physicalism in disguise.

  27. Fred Moseley on Mon, 19th Dec 2016 8:08 am 

    “This argument” is both trivial and circular.

    What do you mean by “correct”?

  28. Andrew Kliman on Mon, 19th Dec 2016 8:47 am 

    “‘This argument’” is both trivial and circular.” That’s a matter of opinion. As I’ve already noted, “Given that Marx’s rate of profit as understood by the TSSI is not quantitatively identical to the standard physicalist (ScruffyRuffian) rate of profit under the conditions specified above, I happen to think that the fact that your rate of profit IS quantitatively identical to the latter is extremely significant.”

    By “correct,” I mean that the numbers in the table are the actual magnitudes of C, V, S, W, π, π/(C+V), and S/(C+V) for the economy in question.

    Can you say whether they are the actual magnitudes for the economy in question in the absence of information on PHYSICAL QUANTITIES that would allow you to compute the simultaneously determined per-unit prices and thereby check whether the per-unit prices underlying the numbers in the table are simultaneously determined? Or do you require additional information about the PHYSICAL QUANTITIES?

  29. Fred Moseley on Thu, 22nd Dec 2016 8:53 am 

    Reply to Kliman (Dec. 16)

    1. Kliman: I wrote, ““This argument is about the fact that the two rates of profit are QUANTITATIVELY identical under the conditions specified above. It is not an argument about causality. It is simply a red herring to introduce causality in this specific context.”

    So you agree that your argument DOES NOT PROVE that my monetary rate of profit is DETERMINED by or CAUSED by your “physicalist” I/O coefficients. Right? That is an important agreement.

    And the reason you can compute my monetary rate of profit from your “physicalist” I/O coefficients is that your “physicalist” coefficients are derived from my monetary rate of profit!

    2. Kliman: Simple reproduction of course has nothing to do with prices of production. In chapter 9 of Capital, vol. 3, Marx’s text says nothing about simple reproduction, nor do his tables allow one to say anything about it. I’m actually amazed that you made such an elementary mistake.

    I certainly agree that Marx did not present his theory of prices of production in Chapter 9 of Vol. 3 in terms of reproduction schemes. But I sometimes adopt the reproduction schemes, not because I think that is what Marx did, but in order to refute the long-standing criticism that Marx’s theory of prices of production does not satisfy the conditions of simple reproduction. I showed in my book (pp. 222-24) that Marx’s theory of prices of production does satisfy the equilibrium conditions of simple reproduction. Bortkiewicz and Sweezy had it backwards – the equilibrium conditions are satisfied for prices of production, but not satisfied for values; but that doesn’t matter because commodities do not exchange at values in the actual capitalist economy.

    And Kliman and McGlone also presented Marx’s theory of prices of production in terms of the reproduction schemes in their papers in 1988, 1995, and 1999. So if I made an “elementary mistake”, then so did Kliman. But in this case, neither one of us made a mistake. Kliman and McGlone stated in their 1995 paper (p. 40) that they adopted the reproduction schemes framework for the same reason I did – to refute the Bortkiewicz-Sweezy criticism.

    And in his 2007 book (p. 149), Kliman had this to say about Bortkiewicz’s simple reproduction:
    “Marx himself did not assume anything about reproduction conditions, but Bortkiewicz’s modification is unexceptionable, since Marx’s solution was meant to hold true universally. It must therefore be viable in the special case of simple reproduction.”

    So it’s OK for Bortkiewicz and Kliman to assume simple reproduction, but an “elementary mistake” for me? Obviously not.

  30. Fred Moseley on Thu, 22nd Dec 2016 9:08 am 

    Reply to Roel Van de Pol (Dec. 19)

    1. Roel: Why are Kliman’s “physicalist” I/O coefficients not real?

    Because they lead to different conclusions from the Sraffian actual physical I/O coefficients which are taken as given directly, not derived from monetary quantities and the monetary rate of profit. And because, in the case of technological change in some industries, ALL of Kliman’s “physicalist” I/O coefficients CHANGE even though technology and the actual physical coefficients have NOT CHANGED in most industries. Clearly, Kliman’s “physicalist” coefficients are not the actual physical quantities.

    2. Roel: Why are Moseley’s macro-monetary rate of profit consistently identical to the physical one” [i.e. Kliman’s “physicalist” rate of profit, not the Sraffian rate of profit] ?

    Because Kliman’s so-called “physicalist” I/O coefficients from which his “physicalist” rate of profit is computed are *themselves consistently computed from my monetary rate of profit*. If you assume r = 25% in the beginning, then the same rate of profit in the same equations will be 25% at the end of his circular arithmetic. The rabbit Kliman takes out of the hat is identical to the one he put in.

    3. Roel: It is not possible to derive I/O coefficients from the TSSI data and it is not possible to calculate the TSSI rate of profit from physical coefficients.

    It is true that Kliman’s circular arithmetic is not possible in the TSSI because the TSSI assumes that unit input prices ≠ unit output prices. But so what? This is still just about computation, not causation.

    The fact that my monetary rate of profit can be computed from Kliman’s pseudo “physicalist” I/O coefficients that were themselves computed from my monetary rate of profit PROVES NOTHING about the CAUSALITY of my monetary rate of profit, and in particular this circular computation does not prove that my monetary rate of profit is DETERMINED by or CAUSED by physical coefficients, as is evidenced by the different conclusions reached regarding my monetary rate of profit and the Sraffian rate of profit (which is determined by physical quantities) with respect to the effect on the rate of profit of labor-saving technological change, etc. The fact that my monetary rate of profit can be COMPUTED in this circular way (by assuming my monetary rate of profit to begin with) is of no significance. It is just an exercise in circular arithmetic.

    Why would one want to compute my monetary rate of profit in this circular way? My monetary rate of profit is known from the beginning as determined exogenously (by S/C+V) and is PRESUPPOSED in the price of production equations and the computation of Kliman’s “physicalist” I/O coefficients. This can be easily seen in Kliman’s numerical examples (especially in Parts 1 and 8). For example, my rate of profit is assumed to be = 25% and this assumed rate of profit is used to compute Kliman’s “physicalist” I/O coefficients, and then these computed “physicalist” coefficients are treated as givens (pretending like the Scruffy Ruffian that we don’t know that these coefficients were determined by my rate of profit) in order to “compute” the “physicalist” rate of profit = 25%. But this is just giving a different name to the same rate of profit – the rate of profit in the price of production equations – which is determined exogenously to these equations.

    Why do we need to compute the rate of profit again in this circular way if we already know the rate of profit?

    4. Roel: What is the “correct” equilibrium condition (input prices = output prices): in terms of total prices or unit prices?

    As I argued in my last comment, the “correct” equilibrium conditions are in terms is total prices not in terms of unit prices. This is also what I meant in my August 25 comment that Roel quoted and what I have always meant (more on my August 25 comment below). Unit prices play no role in my interpretation of Marx’s theory.

    My meaning of “input prices = output prices” is the same as the meaning of Bortkiewicz and Sweezy and almost all the debate over the transformation problem: that the equilibrium conditions of simple reproduction are satisfied; and the equilibrium conditions are in terms of total prices, not unit prices.

    For example, the equilibrium condition for means of production is that the total price as inputs = total price as outputs in the same period. In Bortkiewicz and Sweezy’s famous example, the total price of the means of production as inputs = 400 and the total price of the means of production as outputs = 433, so this equilibrium condition in terms of total prices is not satisfied. Ditto for means of subsistence. No unit prices are specified in their example. So, like Bortkiewicz and Sweezy, I don’t need physical quantities and unit prices in order to determine whether “input prices = output prices” in this macro sense.

    This is also what Kliman and McGlone meant by “input prices = output prices” in their original 1988 paper and in their 1995 and 1999 follow-ups. In their numerical example summarized in Table 1 of the 1988 paper (p. 73), for period 1 the total price of the means of production as inputs = 200 and the total price of the means of production as outputs = 214.19. So they agree with Bortkiewicz and Sweezy that this equilibrium condition is in terms of total prices, and they also agree that this condition is not satisfied, but they argue that this is not a problem:
    “There is thus no reason why the input price of either the means of production or means of subsistence in any period must equal its output price in the same period.” (1988, p. 70; emphasis in the original)
    Again, no unit prices are specified in their table. So again, like Kliman and McGlone, I don’t need physical quantities and unit prices in order to determine whether “input prices = output prices” in this macro sense.

    Kliman and McGlone’s numerical example in their 1988 paper was one of the things I had in mind when I wrote the paragraph in my comment on Part 11 that Roel quoted from. Their numerical example clearly illustrates the main point of my paragraph – that if the MACRO equilibrium conditions (total price as inputs = total price as outputs) are not satisfied, then their “prices of production” will continue to change in subsequent periods until the macro equilibrium conditions are satisfied (period 14 in their example).

    Roel said: “If this is really the case [equilibrium conditions in total prices], it would be correct that he [Moseley] does not need info about physical quantities, but he would also have effectively switched camps to the TSSI.”

    To which I respond:
    1. it really is the case
    2. so I don’t need info about physical quantities
    3. my interpretation is indeed similar to the TSSI in that the equilibrium conditions are in terms of total prices.
    4. but my interpretation is different from the TSSI because I argue that Marx’s theory of prices of production assume that the macro equilibrium conditions are satisfied in period 1 (contrary to Bortkiewicz and Sweezy) and the TSSI assumes that the macro equilibrium conditions are NOT satisfied in period 1 (similar to Bortkiewicz and Sweezy).

    5. Roel: It is decisively demonstrated that labor-saving technological change in luxury goods industries does not reduce the rate of profit in the macro-monetary interpretation.

    My main argument is about the THEORY used to analyze technological change in luxury goods industries (not the definition of technological change) and I argue that my interpretation of Marx’s theory is fundamentally different from Sraffian theory and leads to different conclusions.

    I have argued that Marx’s theory of the rate of profit can be summarized by the following equation:
    R = (S/V) / (C/V) where S = m (SL)
    Therefore, according to Marx’s theory, the effect of labor-saving technological change in luxury goods industries depends on its effects on the monetary ratios S/V and C/V. And according to Marx’s theory, labor-saving technological change in luxury goods industries will *increase C/V*, but will have *no effect on S/V* because luxury goods are not wage goods for workers; therefore, according to my interpretation of Marx’s theory, the rate of profit will fall.

    As I have shown (my comment on Part 12, Nov. 24), Kliman’s Excel exercise is based on a DIFFERENT THEORY from my interpretation of Marx’s theory. In his example, labor-saving technological change in luxury goods industries *increases the rate of surplus-value in all three industries* and that is the reason that the rate of profit does not fall. But that is clearly not Marx’s theory in which the rate of surplus-value is not affected by technological change in luxury goods industries because luxury goods are not wage goods.

    Plus I argued in a recent comment (Dec. 12) that we could ignore the assumption of labor-saving technological change and just consider the luxury goods sector itself and its effect on the rate of profit. According to the Sraffian theory of the rate of profit, which is based on physical quantities, the luxury goods sector *has no effect* on the rate of profit because luxury goods do not enter as inputs to production and thus are not costs of production. On the other hand, according to my interpretation of Marx’s theory of the rate of profit, which is based on the labor theory of value and surplus-value, the luxury goods sector *does have an effect* on the rate of profit because the composition of capital in the luxury goods sector is included in the composition of capital for the economy as a whole, and thus has an inverse effect on the rate of profit according to: R = (S/V / C/V).

    Thus it is definitely not “decisively demonstrated” that labor-saving technological change in luxury goods industries does not reduce the rate of profit in my interpretation. In fact, it is not demonstrated at all. Kliman’s exercise has nothing to do with my interpretation of Marx’s theory and is (as I said in my comment) a “waste of time”.

  31. Fred Moseley on Thu, 22nd Dec 2016 9:35 am 

    Reply to Kliman (Dec. 19)

    1. Kliman: “Given that Marx’s rate of profit as understood by the TSSI is not quantitatively identical to the standard physicalist (ScruffyRuffian) rate of profit under the conditions specified above, I happen to think that the fact that your rate of profit IS quantitatively identical to the latter is extremely significant.”

    It is true that Kliman’s circular arithmetic is not possible in the TSSI because the TSSI assumes that unit input prices ≠ unit output prices. But so what? This is still just about computation, not causation.

    The reason that the two rates of profit are identical is that the two rates of profit are *really only one rate of profit* – the rate of profit in the price of production equations – that is taken as given in the computation of Kliman’s “physicalist” I/O coefficients and then “computed” in circular fashion from Kliman’s “physicalist” coefficients and the same equations:
    rate of profit → “physicalist” I/O coefficients → rate of profit

    2. Kliman: By “correct,” I mean that the numbers in the table are the actual magnitudes of C, V, S, W, π, π/(C+V), and S/(C+V) for the economy in question.
    Can you say whether they are the actual magnitudes for the economy in question in the absence of information on PHYSICAL QUANTITIES that would allow you to compute the simultaneously determined per-unit prices and thereby check whether the per-unit prices underlying the numbers in the table are simultaneously determined? Or do you require additional information about the PHYSICAL QUANTITIES?

    This makes no sense.

    Unit prices play no role in my interpretation of Marx’s theory, and in particular unit prices are not determined simultaneously in my interpretation and not derived from given physical quantities. So there is no reason why I should have to prove that unit prices that are determined simultaneously from given physical quantities are the same as the unit prices “underlying my monetary quantities” (whatever they are).

    According to the long debate of the “transformation problem”, the only requirement that has to be proved is that Marx’s theory of value and surplus-value satisfies the macro equilibrium conditions of simple reproduction. And I have proved that on pp. 222-24 of my book. Nothing has to be proved about unit prices.

  32. Herbert Panzer on Tue, 27th Dec 2016 7:08 am 

    Andrew,

    now, as the debate about simple reproduction and Bortkiewicz is open (Fred’s mail from 22nd Dec 9:08 and before), Andrew, in your refutation (p. 151f 2007 book) you argue that simple
    reproduction requires supplies equal demands only related physical quantities.

    In Marx’s reproduction schemes figures are primarily about monetary figures. So, do you honestly believe that by such a ‘physicalist’ argumentation you can refute the “Myth of Inconsistency” of Marx’s CAPITAL? (A desire we both share, b.t.w.)

    In my view, the first task related Bortkiewicz should be to refute his stupid idea of two systems (value, price) existing simultaneously ( i.e. it’s about a single system – your historical discovery/achievement), however a refutation not mentioned here in chapter 8.5.2.
    And second task is to find a simple reproduction scheme in terms of primarily monetary figures – otherwise Myth of Inconsistency remains open.

    If you would read what I’m trying to explain since quite a while, you would find this 2nd task is doable.

  33. GrahamB on Tue, 27th Dec 2016 8:10 am 

    Andrew, on page 158 of Reclaiming Marx’s Capital – as I understand it – you are converting the I/O physical quantities (number of physical units of MP and CG) and living labour hours in Table 9.1, to the simultaneous Dollar values in Table 9.2. Using a MELT of $3 per hour of living labour. You then say “we find (after some tedious but unimportant algebraic calculations) that the value of each good is $1 per unit.”

    It would be helpful (to me at least) if you could expand on the algebraic calculations you use.

  34. Andrew Kliman on Wed, 28th Dec 2016 1:44 pm 

    Reply to part of Fred Moseley’s comment of Mon, 12th Dec 2016 8:23 pm

     

    Fred, you asked,

    “Andrew, if Marx wanted to compare his theory of the effect of labor-saving technological change in luxury goods industries on the rate of profit with the Sraffian theory of this effect, would you also require that Marx analyze this question in terms of physical quantities and not in terms of the monetary ratios of S/V and C/V?”

    Yes, of course Marx is subject to the same logical requirements to which the rest of us are subject. As I explained to you in my comment of Mon, 5th Dec 2016 12:20 pm,

    “It is OBVIOUSLY false to allege that you obtain a ‘contrary’ conclusion if you and they mean two different things by ‘technological change.’ ‘X will not alter the rate of profit’ and ‘Y will alter the rate of profit’ are not contrary or contradictory statements if X and Y refer to 2 different things.”

    And this applies just as much to Marx as it does to you and to everyone else.

    In other words, if Marx were—God forbid—to make the following argument:

     

    1. The Sraffians say that, if input-output coefficients change in luxury (non-basic) sectors but not any basic sectors, then the uniform economy-wide rate of profit will remain unchanged.

    2. I say that, if C/V changes in luxury (non-basic) sectors but not any basic sectors, and if S/V remains constant in all sectors, then the uniform economy-wide rate of profit will change.

    3. Therefore, my theory and Sraffian theory arrive at contrary conclusions about the effect of labor-saving technological change on the rate of profit.

     
    it would not be logically sound, because premises (1) and (2) are not contraries.

     
     

    However, Marx might instead make the following logically sound argument:
     

    1. The Sraffians say that, if input-output coefficients change in luxury (non-basic) sectors but not any basic sectors, then the uniform economy-wide rate of profit will remain unchanged.

    2. I say that, if C/V changes in luxury (non-basic) sectors but not any basic sectors, and if S/V remains constant in all sectors, then the uniform economy-wide rate of profit will change.

    4. There are cases in which both (a) input-output coefficients change in luxury (non-basic) sectors but not any basic sectors AND (b) C/V changes in luxury (non-basic) sectors but not any basic sectors, and S/V remains constant in all sectors.

    5. Therefore, GIVEN FACT (4), premises (1) and (2) are contraries, and

    3. Therefore, my theory and Sraffian theory arrive at contrary conclusions about the effect of labor-saving technological change on the rate of profit.

     
    Marx could make this logically sound argument. But you can’t, because your interpretation is simultaneist! As I showed in Part 12 of these comments, by means of my Phun with Physicalism! spreadsheet and an accompanying algebraic argument, fact (4) does not hold true on your interpretation. Therefore, (5) doesn’t follow and therefore (3) doesn’t follow.

    In other words, premises (1) and (2) are not contraries, taken by themselves. But when taken together with fact (4), then—and only then—they do become contraries.

     
    You also commented,

    “I don’t think Marx would accept this absurd requirement and neither do I. This requirement turns Marx’s theory into Sraffa’s theory and eliminates any possibility of comparison of the two different theories.”

    It’s not absurd. It’s the most elementary logic. If Marx wouldn’t accept it, he’d be a total doofus.

    And the requirement that statements refer to the same thing in order to be deemed contraries doesn’t turn Marx’s theory into Sraffa’s theory. That’s clear from the fact that (3) is true GIVEN fact (4). GIVEN that fact, the two theories arrive at contrary conclusions about the effect of labor-saving technological change on the rate of profit, so the two theories are distinct.

    It’s also untrue to claim that the requirement that statements refer to the same thing in order to be deemed contraries “eliminates any possibility of comparison of the two different theories.” I’ve just compared them—by introducing fact (4)—and I have shown that they arrive at contrary conclusions.

  35. Andrew Kliman on Wed, 28th Dec 2016 2:50 pm 

    A reply to part of Fred Moseley’s comment of Thu, 22nd Dec 2016 8:53 am
     

    In a comment to him here, on Thu, 15th Dec 2016 11:28 am, I noted:

    “(a) the physical input-output (and real wage) coefficients associated with your “macro-monetary” data are all one needs in order to correctly compute the standard physicalist (ScruffyRuffian) rate of profit,

    and

    (b) the standard physicalist (ScruffyRuffian) rate of profit computed in this manner–i.e., using the physical input-output (and real wage) coefficients associated with your “macro-monetary” data–is QUANTITATIVELY identical to your rate of profit. …

    “This is what I have been arguing all along. This argument is about the fact that the two rates of profit are QUANTITATIVELY identical under the conditions specified above. It is not an argument about causality. It is simply a red herring to introduce causality in this specific context.”

     
    He has responded as follows:

    “So you agree that your argument DOES NOT PROVE that my monetary rate of profit is DETERMINED by or CAUSED by your ‘physicalist’ I/O coefficients. Right? That is an important agreement.

    “And the reason you can compute my monetary rate of profit from your ‘physicalist’ I/O coefficients is that your ‘physicalist’ coefficients are derived from my monetary rate of profit!”
     

    I agree that this specific argument, copied above, proves nothing about causality. It “is about the fact that the two rates of profit are QUANTITATIVELY identical under the conditions specified above. It is not an argument about causality.”

    However, I have another argument which shows that the causal claims you make are false. In addition to “givens in terms of money,” you have to have “givens in terms of input and output price equality” and therefore “givens in terms of physical quantities.” In fact, the “givens in terms of input and output price equality” are logically prior to the “givens in terms of money,” since you refuse to take any old monetary amounts as given when computing prices of production. You will take them as given only if the underlying per-unit prices are equal, and this “given,” together with the monetary quantities for C, V, and prices of production, mean that you implicitly have “givens in terms of physical quantities” as well.
     
     
    He also wrote, “And the reason you can compute my monetary rate of profit from your ‘physicalist’ I/O coefficients is that your ‘physicalist’ coefficients are derived from my monetary rate of profit!”

    Absolutely not!. Your monetary quantities and thus your monetary rate of profit are redundant (to use the technical expression).

    I can

    (1) start from the physical coefficients, any physical coefficients, and use them to compute your uniform rate of profit and the relative prices associated with your sectoral aggregate prices of production. Then,

    (2) normalize the prices such that the total price of the net product equals the monetary expression of the living labor performed.

    And finally, using these normalized prices and the physical coefficients,

    (3) compute your monetary “givens,” including your uniform “monetary” rate of profit.

    But since I already computed your rate of profit in step (1), without reference to your monetary “givens,” it is redundant to compute it a second time; and thus the monetary “givens” themselves are redundant insofar as computation of your uniform rate of profit is concerned.

  36. Andrew Kliman on Wed, 28th Dec 2016 3:57 pm 

    A reply to another part of Fred Moseley’s comment of Thu, 22nd Dec 2016 8:53 am.
     

    On Thu, 15th Dec 2016 11:28 am, I commented to him:

    “I note that the prices of production (P) and associated price rate of profit (π/(C+V)) in the following table are computed in the exact way you describe here:

    Sector…C…V…S..W…π…P…S/(C+V)…π/(C+V)..
    …..1….21…3…4..28…6..30….16.7%…..25.0%…
    …..2….18…6…8..32…6..30….33.3%…..25.0%…
    …total..39…9..12..60..12..60….25.0%…..25.0%…

    but you cannot say whether they are correct or not. You require more information. So the determinants you specify are NOT the only determinants of your prices of production and uniform rate of profit.”

     
    He replied, on Fri, 16th Dec 2016 9:37 am,

    “According to my interpretation, ‘correct’ means that the equilibrium conditions for simple reproduction are satisfied …

    “So I can easily say that the equilibrium condition is not satisfied and so these numbers are not ‘correct’” (emphasis omitted).

     
    Note that I was asking whether the figures in the table are correct according to his interpretation of Marx’s value theory, and he responded that, on his interpretation of Marx’s theory, “the equilibrium conditions for simple reproduction [must be] satisfied.”

     
    So I replied, on Fri, 16th Dec 2016 1:23 pm,

    “Simple reproduction of course has nothing to do with prices of production. In chapter 9 of Capital, vol. 3, Marx’s text says nothing about simple reproduction, nor do his tables allow one to say anything about it. I’m actually amazed that you made such an elementary mistake.”

     

    Although Moseley wrote ““According to my interpretation, ‘correct’ means that the equilibrium conditions for simple reproduction are satisfied,” he now denies that he was discussing prices of production as understood by his interpretation of Marx’s value theory:

    “I sometimes adopt the reproduction schemes, not because I think that is what Marx did, but in order to refute the long-standing criticism that Marx’s theory of prices of production does not satisfy the conditions of simple reproduction. …

    “And Kliman and McGlone also presented Marx’s theory of prices of production in terms of the reproduction schemes in their papers in 1988, 1995, and 1999. So if I made an ‘elementary mistake’, then so did Kliman. But in this case, neither one of us made a mistake. Kliman and McGlone stated in their 1995 paper (p. 40) that they adopted the reproduction schemes framework for the same reason I did – to refute the Bortkiewicz-Sweezy criticism. …

    “So it’s OK for Bortkiewicz and Kliman to assume simple reproduction, but an ‘elementary mistake’ for me? Obviously not.”

     

    Get real.

    Of course it’s OK to “adopt[ ] the reproduction schemes framework … to refute the Bortkiewicz-Sweezy criticism.”

    But it’s NOT OK to say that the prices of production in my table are incorrect because “the equilibrium conditions for simple reproduction [aren’t] satisfied.”

    That’s because my table has nothing whatever to do with the Bortkiewicz-Sweezy criticism. It computes Marx’s prices of production in the exact manner you describe (but, actually, refuse to accept). And my question to you wasn’t about the Bortkiewicz-Sweezy criticism. It was about whether, on your interpretation of Marx’s value theory, the prices of production in the table are correct.

    So, if simple reproduction has nothing to do with prices of production—as you now admit—my question of Mon, 19th Dec 2016 8:47 am remains:

    “By ‘correct,’ I mean that the numbers in the table are the actual magnitudes of C, V, S, W, π, π/(C+V), and S/(C+V) for the economy in question.

    “Can you say whether they are the actual magnitudes for the economy in question in the absence of information on PHYSICAL QUANTITIES that would allow you to compute the simultaneously determined per-unit prices and thereby check whether the per-unit prices underlying the numbers in the table are simultaneously determined? Or do you require additional information about the PHYSICAL QUANTITIES?”

     

    And actually, the same question remains even when we do assume simple reproduction in monetary terms, as Moseley does on p. 224 of his recent book. In a comment here, on Thu, 22nd Dec 2016 9:35 am, he wrote that “the only requirement that has to be proved is that Marx’s theory of value and surplus-value satisfies the macro equilibrium conditions of simple reproduction. And I have proved that on pp. 222-24 of my book. Nothing has to be proved about unit prices.”

    Hmm. I see from your Table 3 on p. 224 that the total C purchased from Department I is $480, and that the price of production of Department I’s output is $480. You specify no physical quantities or per-unit prices. Nonetheless, you have “proved … that Marx’s theory of value and surplus-value satisfies the macro equilibrium conditions of simple reproduction.” And you now say that “nothing has to be proved about unit prices.”

    So I’m free to assume whatever I want about the per-unit input price, and the per-unit output price, of Department I’s product, right?

    Can you say whether the numbers in your Table 3 on p. 224 are correct—i.e., the actual magnitudes for the economy in question–in the absence of information on PHYSICAL QUANTITIES that would allow you to compute the simultaneously determined per-unit prices and thereby check whether the per-unit input and output prices I’ve chosen are simultaneously determined? Or do you require additional information about the PHYSICAL QUANTITIES?

    Gotcha.

  37. Andrew Kliman on Thu, 29th Dec 2016 10:16 pm 

    On simple reproduction and intellectual honesty

    Fred Moseley:

    Your Table 3, on p. 224 of your recent book, assumes that Department I uses its product as an input into its own production.

    However, in one of your attempts to dismiss my demonstrations that your interpretation of Marx’s theory is all value-form and no value-substance, you rejected a demonstration of mine PRECISELY BECAUSE one of my sectors used its own product as an input into its own production.

    In a comment of Thu, 28th Jul 2016 7:36 am, you wrote,

    “this calculation assumes that *Good 1 is an input to its own production* …

    “However, it is *almost never true in the real economy that a good is used as an input to produce itself* (except seeds in agriculture). Therefore, a reduction in the price of a good as output (due to labor-saving technological change) will in general *have no effect on the price of its inputs* (since it is not an input for itself) and will have no effect on the quantity of inputs purchased and used, and thus Kliman’s alternative calculation of a1 makes no sense.

    “… again the equation C1 = (a1)(P1) assumes that *Good 1 is an input to its own production* which is almost never the case.

    “Therefore, Kliman’s about [sic] argument not only ignores my interpretation of Marx’s theory, but is also based on the unrealistic assumption that Good 1 is an input to its own production. [emphasis added; comment is below this post: http://www.marxisthumanistinitiative.org/miscellaneous/all-value-form-no-value-substance-comments-on-moseleys-new-book-part-6.html ]

    I call on you to repudiate–for the sake of intellectual honesty and internal consistency,

    1. your Table 3,

    2. your claim that, in this table, you “proved … that [Moseley’s interpretation of] Marx’s theory of value and surplus-value satisfies the macro equilibrium conditions of simple reproduction,”

    3. Marx’s schemes of simple and expanded reproduction, in which goods are inputs into their own production, since “it is *almost never true in the real economy that a good is used as an input to produce itself* … and thus [Marx’s schemes] make[ ] no sense.”

  38. Andrew Kliman on Sat, 31st Dec 2016 4:35 pm 

    Again on the (lack of) effect of technical change in luxury industries on the uniform rate of profit

    Here’s a more direct proof that Moseley and other physicalists don’t arrive at contrary conclusions about this.

    As I noted in my comment of Wed, 28th Dec 2016 1:44 pm, above, they can arrive at contrary conclusions only if “[t]here are cases in which both (a) input-output coefficients change in luxury (non-basic) sectors but not any basic sectors AND (b) C/V changes in luxury (non-basic) sectors but not any basic sectors, and S/V remains constant in all sectors.” But on Moseley’s interpretation, there aren’t any cases in which both (a) AND (b) hold true.

    Here’s a direct proof that there aren’t any such cases. The proof assumes that there is a single basic (non-luxury) sector. This can also be proven for cases in which there is more than one basic sector, but the proofs are either more tedious or less intuitive (because they refer to known theorems of matrix algebra).
     

    Direct Proof

    We begin by assuming that condition (b) holds true, and then showing that condition (a) cannot also hold true.

    1. Condition (b) stipulates that C/V changes in luxury (non-basic) sectors but not in the basic sectors, and that S/V remains constant in all sectors.

    2. Because C/V changes but S/V does not, the uniform rate of profit changes. Note that the uniform rate of profit has been determined in the exact manner that Moseley stipluates, not on the basis of input-output coefficients.

    3. Because the uniform rate of profit changes, the ratio P/(C + V) changes in the basic sector [since its rate of profit = (P – C – V)/(C + V) = P/(C + V) – 1]. (P is the price of production of its total output.)

    4. Now, even though the rate of profit has already been determined, without reference to input-output coefficients, the following relations hold true by definition:

    P = p[out]*X

    C + V = p[in]*(a + b)X

    where p[in] and p[out] are the per-unit input and output prices of the basic sector’s product, X is its physical output, and (a + b) are it’s input-output coefficients–the physical amounts of its product used as a means of production (a) and as a wage good (b), per unit of physical output.

    5. Thus, in the basic sector,

    P/(C + V) =

    p[out]*X / p[in]*(a + b)X =

    {p[out]/p[in]}*{1/(a + b)}

    6. Since the basic sector’s P/(C + V) changes (see 3), and the basic sector’s P/(C + V) = {p[out]/p[in]}*{1/(a + b)} (see 5), it follows that {p[out]/p[in]}*{1/(a + b)} changes in the basic sector.

    7. Therefore, either {p[out]/p[in]} changes or {1/(a + b)} changes, or both.

    8. But since Moseley stipulates that p[out] = p[in], his {p[out]/p[in]} must always equal 1. It cannot change.

    9. Therefore his {1/(a + b)} changes, which in turn implies that the input-output coefficients of his basic sector must change.

    10. Therefore condition (a) cannot hold true. I.e. there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant.

    Q.E.D.

    Note: It makes no difference whether these input-output coefficients are “actual,” or farkakte, or farblunget, etc. input-output coefficients. This specific proof has nothing to do with whether Moseley’s input-output coefficients, (a + b), are equal to other physicalists’ input-output coefficients. It’s instead a proof that his input-output coefficients cannot remain unchanged in the basic sector if C/V changes while S/V does not.

  39. Roel Van de Pol on Wed, 4th Jan 2017 4:41 am 

    To Moseley:

    “It is true that Kliman’s circular arithmetic is not possible in the TSSI because the TSSI assumes that unit input prices ≠ unit output prices.”

    You just stated that your own interpretation assumes that unit input prices ≠ unit output prices (“equilibrium conditions are in terms of total prices, not unit prices”). But then you state that the TSSI arrives at conclusions contrary to yours because the TSSI assumes that unit input prices ≠ unit output prices? This does not make any sense at all. How could the TSSI possible arrive at a contrary conclusion to yours because it makes the same assumption as yours? Something is very wrong here.

    Clearly, your interpretation does in fact require that unit input prices = unit output prices, while the TSSI does not. You say:

    (a) “my interpretation is different from the TSSI because I argue that (…) prices of production assume that the macro equilibrium conditions are satisfied in period 1”
    (b) “the “correct” equilibrium conditions are in terms is total prices not in terms of unit prices. (…) [T]he equilibrium conditions of simple reproduction are satisfied; and the equilibrium conditions are in terms of total prices”.

    So, put more simply, you are saying (a) prices of production require equilibrium and (b) equilibrium requires equality of total input and output prices and simple reproduction (i.e. not only equilibrium in monetary quantities but also physical reproduction on a constant scale). (a) plus (b) means that according to your interpretation, prices of production only hold in simple reproduction.

    (Although you now seem to sort of take back your words – “I sometimes adopt the reproduction schemes, not because I think that is what Marx did” – you were very clear in other replies)

    This means exactly the same as unit input prices = unit output prices. If prices of production only apply to equilibrium conditions of simple reproduction (reproduction on a constant scale, i.e. total input prices = total output prices and physical inputs = physical outputs), then by definition prices of production require unit input prices = unit output prices. Otherwise the equilibrium condition of simple reproduction cannot be met.

    Please either retract your statement that the TSSI arrives at different conclusions because its unit input prices ≠ unit output prices, retract your statement that your equilibrium condition requires simple reproduction, or admit that your unit input prices = unit output prices.

  40. MHI on Fri, 6th Jan 2017 1:11 pm 

    From Fred Moseley, posted at his request–MHI.

    Replies to Kliman

    1. Kliman quoted me (December 28, 2:50 pm):
    “So you agree that your argument DOES NOT PROVE that my monetary rate of profit is DETERMINED by or CAUSED by your ‘physicalist’ I/O coefficients. Right? That is an important agreement.
    “And the reason you can compute my monetary rate of profit from your ‘physicalist’ I/O coefficients is that your ‘physicalist’ coefficients are derived from my monetary rate of profit!”

    And he replied:
    “I agree that this specific argument, copied above, proves nothing about causality. It “is about the fact that the two rates of profit are QUANTITATIVELY identical under the conditions specified above. It is not an argument about causality.”

    This is a very important clarification. Kliman’s previous writings certainly sounded like an argument about causation. In his book, he had this to say about all single system interpretations except TSSI:
    “…because the SSSIs are simultaneist, their price rate of profit is physically determined… Thus, although the aggregate equalities are preserved, the causal relationships differ markedly from those of Marx’s theory. In the SSSIs, the physical rate of profit determines both the price rate and the value rate. In Marx’s theory, the value rate of profit determines the price rate, and the physical rate plays no role.” (p. 164; emphasis added)

    And 10 pages later, he had this to say about my interpretation:
    “Thus Moseley’s rate of profit is determined by the same technological and real wage coefficients that determine all other simultaneist theories’ rate of profit, and in exactly the same matter. (p. 174; emphasis added)

    He quoted the first passage in Part 1 (p. 2 ) of his comments on my book.

    These passages certainly sound like “determine” means “causal”. There is no hint that “determine” means merely computation and not causation, and “causal” is explicitly stated in the first passage.

    Does this clarified meaning of “determine” mean that the debate between simultaneous determination and temporal determination is only about computation and not about causation? That is certainly not the way I have understood the debate and I think almost everybody else.

    But I am glad that we now agree that Kliman’s argument about my interpretation, repeated in almost all of the 12 parts of his comments on my book, is not an argument about causation. His argument does not prove that the rate of profit in my interpretation of Marx’s theory is determined by or caused by his “physicalist” I/O coeffiecnts alone.

    And we also have seen that the rate of profit in my interpretation of Marx’s theory is also not determined or caused by the actual physical I/O coefficients in Sraffian theory. That is the most important conclusion.

    2. Kliman then said:
    “However, I have another argument which shows that the causal claims you make are false. In addition to “givens in terms of money,” you have to have “givens in terms of input and output price equality” and therefore “givens in terms of physical quantities.” In fact, the “givens in terms of input and output price equality” are logically prior to the “givens in terms of money,” since you refuse to take any old monetary amounts as given when computing prices of production. You will take them as given only if the underlying per-unit prices are equal, and this “given,” together with the monetary quantities for C, V, and prices of production, mean that you implicitly have “givens in terms of physical quantities” as well.” (emphasis in the original)

    But this “another argument” is about a different issue from before. We established above that my monetary rate of profit is not determined (caused) by physical coefficients alone. So I expected Kliman’s “another argument” to be about the same issue and would provide a different argument for why my monetary rate of profit is (really and truly causally) determined by physical coefficients alone. That is supposed to be what makes my interpretation “physicalist”.

    Instead, Kliman’s “another argument” tries to prove that my interpretation must take unit prices as given (and therefore also have to take physical quantities as given) in order to check whether unit input prices = unit output prices for “any old monetary amounts”. But that is a separate issue. There is still no proof that my monetary rate of profit is determined (caused) by physical coefficients alone.

    Furthermore, this “another argument” is not only irrelevant to the original issue, but also invalid on its own terms, for the following reason:

    I argue (and have argued for a long time) that Marx’s theory of prices of production are long-run equilibrium prices (that change only if productivity or the real wage changes). In order to explain these long-run equilibrium prices, Marx assumed that the economy is in long-run equilibrium, i.e. that all commodities exchange at their prices of production, both inputs and outputs. Unit input prices = unit output prices because both are assumed to be equal to the long-run equilibrium unit prices of production. Therefore, I do not have to take specific unit prices as given in order to test whether unit input prices = unit output prices, because this equality follows from the assumption of long-run equilibrium.

    3. Kliman then quoted me again:
    “And the reason you can compute my monetary rate of profit from your ‘physicalist’ I/O coefficients is that *your ‘physicalist’ coefficients are derived from my monetary rate of profit!”* (emphasis mine)

    Kliman replied: “Absolutely not!” (emphasis in the original)

    I have reviewed in some detail in several comments and in my “Update” (https://www.academia.edu/28908907/Reply_to_Kliman_-Update)
    exactly how Kliman’s pseudo “physicalist” I/O coeffieicnts are computed from my monetary rate of profit. Do I have to go over these calculations again?

    To take just one example from Part 1 of Kliman’s comments:

    before technological change:
    my Marxian monetary rate of profit = 50%
    P1 = (C1 + V1)(1 + r) = (10 + 2)(1 + 0.5) = 18
    a1 = C1 / P1 = 10 / 18 = 0.56
    That is: a1 is computed from P1 which is computed from r.

    after technological change:
    my Marxian monetary rate of profit = 25%
    P1 = (C1 + V1)(1 + r) = (10 + 2)(1 + 0.25) = 15
    a1 = C1 / P1 = 10 / 15 = 0.67
    Again: a1 is computed from P1 which is computed from r.
    a1 changes because r changes. a1 varies inversely with r.

    A negative “absolutely not” requires that Kliman show what is wrong with these calculations, which are his own calculations.

    And then Kliman proceeded to argue that my rate of profit can be computed from “any physical coefficients” and thus it is “redundant” to compute my rate of profit from my monetary quantities. But he did not explain how my rate of profit is supposed to be computed from “any physical quantities”, so this “redundancy” argument is a vacuous assertion.

    And, in any case, this vacuous assertion is irrelevant to my claim (quoted by Kliman above) that the “physicalist” I/O coefficients in his arguments are computed from my monetary rate of profit, as the example above clearly shows.

    4. In another comment (Dec. 28, 3:57 pm), Kliman presented a two-sector table of monetary quantities and asked:
    “Can you say whether they are the actual magnitudes for the economy in question in the absence of information on PHYSICAL QUANTITIES that would allow you to compute the simultaneously determined per-unit prices and thereby check whether the per-unit prices underlying the numbers in the table are simultaneously determined? Or do you require additional information about the PHYSICAL QUANTITIES?”

    However, Kliman’s table and Kliman’s question (whether the per-unit prices underlying the numbers in his table are simultaneously determined) are irrelevant to my interpretation of Marx’s theory of the rate of profit and prices of production. As discussed above (#2), my interpretation of Marx’s theory does not start with “any old monetary amounts” made up by Kliman, but instead my interpretation of Marx’s theory assumes that the economy is in long-run equilibrium which means that all commodities exchange at their prices of production which in turn implies that unit input prices = unit output prices.

    Whether or not a particular set of monetary quantities are long-run equilibrium quantities is not a necessary question in my interpretation. If a particular set of monetary quantities are not long-run equilibrium quantities this has no consequence for my interpretation of Marx’s theory, which assumes that all the quantities in the theory are long-run equilibrium prices (= prices of production).

    The same thing is true for the table on p. 224 of my book. This table also assumes long-run equilibrium and therefore implies that input prices = output prices. This table also assumes simple reproduction (in order to response to the Bortkiewicz-Sweezy criticism), so long-run equilibrium also implies that total input prices = total output prices for each department, as we can see from the table.

    So Kliman is not free to choose any unit prices associated with the quantities in my table (as he suggests). The quantities in my table are long-run equilibrium quantities and thus unit input prices = unit output prices.

    5. Kliman’s argued (December 28, 1:45 pm):

    1. The Sraffians say that, if input-output coefficients change in luxury (non-basic) sectors but not any basic sectors, then the uniform economy-wide rate of profit will remain unchanged.
    2. I say that, if C/V changes in luxury (non-basic) sectors but not any basic sectors, and if S/V remains constant in all sectors, then the uniform economy-wide rate of profit will change.
    4. There are cases in which both (a) input-output coefficients change in luxury (non-basic) sectors but not any basic sectors AND (b) C/V changes in luxury (non-basic) sectors but not any basic sectors, and S/V remains constant in all sectors.
    5. Therefore, GIVEN FACT (4), premises (1) and (2) are contraries, and
    3. Therefore, my theory and Sraffian theory arrive at contrary conclusions about the effect of labor-saving technological change on the rate of profit.

    Marx could make this logically sound argument. But you can’t, because your interpretation is simultaneist! As I showed in Part 12 of these comments, by means of my Phun with Physicalism! spreadsheet and an accompanying algebraic argument, fact (4) does not hold true on your interpretation. Therefore, (5) doesn’t follow and therefore (3) doesn’t follow. (emphasis in original)

    Kliman’s (1) and (2) are exactly what I argue.

    Kliman claims that he showed in his “Phun” exercise that the fact (4) does not hold true in my interpretation, but he doesn’t say which part of (4) that he thinks does not hold true. Looking again at his tables, I assume that he means that the rate of surplus-value does not “remain constant in all sectors” because in his exercise the rate of surplus-value increases in all sectors.

    But as I explained in my comment on Nov. 24, the reason the rate of surplus-value increases in his exercise is that the rate of surplus-value is determined in a completely different way from my interpretation. According to my interpretation, labor-saving technological change in wage goods industries increases the rate of surplus-value because it cheapens wage goods and thus reduces variable capital and increases surplus-value. However, labor-saving technological change in luxury goods industries has no effect on the rate of surplus-value because luxury goods are not wage goods.

    Kliman’s exercise determines the rate of surplus-value in a completely different way – not by the productivity of labor in wage goods industries, but instead the rate of surplus-value is assumed to vary directly with the composition of capital (S/V = C/V +1) (it is also assumed the rate of profit is determined in a completely different way and stays the same, as explained in the Nov. 24 comment). And since labor-saving technological change in luxury goods industries increases the composition of capital, it also increases the rate of surplus-value in his exercise.

    Therefore, Kliman’s exercise has nothing to do with my interpretation because his rate of surplus-value is determined in a completely different way and (4) is a fact in my interpretation and therefore (5) and (3) follow.

    On Dec. 31, Kliman posted another comment on labor-saving technological change in luxury goods industries. He did not respond to my previous argument about the rate of surplus-value, but instead presented a completely different from his original argument in his Part 12 and illustrated with his “Phun” exercise.

    According to his original argument (discussed above): my monetary rate of profit does not fall (similar to the Sraffian rate of profit) because the rate of surplus-value increases to offset the increase in the composition of capital; and because the rate of surplus-value increases, condition (2) in his comment of Dec. 28 is violated.

    According to his new argument: condition (1) (renamed as condition (a)) is violated because his “physicalist” I/O coefficients change, and his “physicalist” I/O coefficients change because they depend on my monetary rate of profit, and my monetary rate of profit changes due to labor-saving technological change in luxury goods industries.

    However, this new argument has the same fallacy that I have emphasized since August: Kliman’s “physicalist” I/O coefficients are not actual physical coefficients as in Sraffian theory, but are instead computed from my monetary quantities and monetary rate of profit.

    My original argument in my “Update” was a comparison between my interpretation of Marx’s theory of the rate of profit with Sraffian theory of the rate of profit. I argued that my interpretation comes to a different conclusion compared to Sraffian theory with respect to the question of the effect of labor-saving technological change in luxury goods industries on the rate of profit. (This was Section 1.4 of my paper; the title of Section 1 was “Important differences between my interpretation of Marx’s theory of the rate of profit and the Sraffian theory of the rate of profit.)

    In his Part 12, Kliman’s original argument was also about Sraffian theory and he argued (as we saw above) that the rate of profit in my interpretation also would not fall (similar to Sraffian theory) because the rate of surplus-value would increase and offset the increase in the composition of capital. One of Kliman’s arguments was that, since this was a comparison between my interpretation and Sraffian theory, my analysis of the effects of technological change must adopt the same definition of technological change as Sraffian theory. But (as discussed above), Kliman’s argument is based on a completely different interpretation of the determination of the rate of surplus-value in Marx’s theory from my interpretation and thus his argument does not apply to my interpretation. .

    But Kliman’s new argument is no longer about Sraffian theory, because Kliman’s “physicalist” I/O coefficients are not Sraffian actual physical coefficients, but instead depend on my monetary rate of profit, similar to his previous arguments.

    In his latest comment, Kliman’s “physicalist” I/O coefficients (a and b) change because his coefficients depend on P/(C+V) and this ratio depends on my monetary rate of profit because P depends on my monetary rate of profit. So if my monetary rate of profit changes (due to technological change in luxury goods industries), then his ratio P/C+V) will also change and thus Kliman’s “physicalist” coefficients a and/or b also change.

    Kliman’s “bait and switch” can be seen from a close look at the way he expressed the first of his two conditions. In his original (Dec. 28) argument, condition (1) is stated as: “The Sraffian’s say that, if input-output coefficients change in luxury (non-basic) sectors but not in any basic sectors.” And he expressed my hoped-for conclusion as: “Therefore my theory and Sraffian theory arrive at contrary conclusions …”

    In his new argument, the opening phrase about Sraffians is deleted from condition (a) which starts with: “[if] input-output coefficients change in luxury (non-basic) sectors but not in any basic sectors.” And he states that he aims to present a “more direct proof that Moseley and other physicalists don’t arrive at contrary conclusions …”

    However, my argument is about Sraffian theory and the Sraffian actual physical I/O coefficients do not change as a result of technological change in luxury goods industries and thus condition (1) is not violated for Sraffian theory; and condition (a) in Kliman’s latest comment does not apply to Sraffian theory and therefore has nothing to do with the comparison of my interpretation of monetary rate of profit and the Sraffian rate of profit.

    The logic in Kliman’s latest argument is similar to his two-goods model in his Part 1 (which I have discussed in previous comments), in which technological change in the Good 2 industry reduces the rate of profit, which in turn reduces the price of Good 1, which in turn increases Kliman’s “physicalist” coefficient a1, even though there is no change of actual physical inputs in industry 1. This effect on Good 1 helped me to realize that (according to Kliman’s logic) technological change in any industry will change the rate of profit and thus will change the price of all goods, which in turn will change
    Kliman’s “physicalist” I/O coefficients in all industries, even though the actual physical I/O coefficients (as in Sraffian theory) has not changed in most industries.

    So my original conclusion still stands. This is another important difference between my interpretation of Marx’s theory of the rate of profit and the Sraffian theory of the rate of profit: as a result of technological change in luxury goods industries, my monetary rate of profit will fall and the Sraffian rate of profit will not fall. The fact that Kliman’s pseudo “physicalist” I/O coefficients change (as a result of a change in my monetary rate of profit) is irrelevant to this conclusion.

    6. In another comment (December 29), Kliman argued that my earlier criticism of his two-goods model – that individual goods are seldom inputs to their own production – could also be applied to my table on p. 224 of my book.

    But that is not true. There is a crucial difference between Kliman’s two-goods model and my table: my table consists of aggregate departments (means of production and means of subsistence), not individual goods or individual industries, as in Kliman’s model (Good 1 and Good 2). In Department 1 in my table, some means of production are inputs to produce other means of production, not individual goods as inputs to their own production. Like Marx’s reproduction tables in Vol. 2 and the Bortkiewicz-Sweezy reproduction tables (which is what I was responding to in my table).

    Therefore, Kliman’s criticism does not apply to the aggregate departments in my table in my book and there is nothing to repudiate.

  41. Andrew Kliman on Fri, 6th Jan 2017 3:02 pm 

    Fred Moseley has just tacitly admitted he’s been pulling the wool over our eyes: his prices of production are not determined in the manner he describes–i.e, on the basis of given monetary and labor-time aggregates, irrespective of prior simultaneous determination of per-unit prices on the basis of physical quantities.
     
    First, I’ll document the wool-over-eyes pulling.

     

    On Thu, 15th Dec 2016 11:28 am, I wrote.

    “the prices of production (P) and associated price rate of profit (π/(C+V)) in the following table are computed in the exact way you describe here:
     
    Sector…C…V…S..W…π…P…S/(C+V)…π/(C+V)..
    …..1….21…3…4..28…6..30….16.7%…..25.0%…
    …..2….18…6…8..32…6..30….33.3%…..25.0%…
    …total..39…9..12..60..12..60….25.0%…..25.0%…
     
    but you cannot say whether they are correct or not. You require more information. So the determinants you specify are NOT the only determinants of your prices of production and uniform rate of profit.
     
    (The additional information required is knowledge of whether the per-unit input and output prices are equal, i.e., simultaneously determined.)
     
     
    Moseley replied, on Fri 16th Dec 2016 9:37 am,
     
    “I don’t need physical quantities to tell whether these numbers are “correct” or not; nor do I need unit prices. The equilibrium conditions are in terms of total monetary quantities, so it is easy to tell whether these conditions are satisfied or not from the given monetary quantities without physical quantities and unit prices.
     
    “And the determinants that I specify (quantities of money capital and labor-time) are fully sufficient to determine the rate of profit and prices of pd [production], as explained in my previous comment (and in Chapter 2 of my book)” [emphases altered]
     

     
    And he doubled down on Thu, 22nd Dec 2016 9:35 am:
     
    Unit prices play no role in my interpretation of Marx’s theory, and in particular unit prices are not determined simultaneously in my interpretation and not derived from given physical quantities. So there is no reason why I should have to prove that unit prices that are determined simultaneously from given physical quantities are the same as the unit prices ‘underlying my monetary quantities’ (whatever they are).
     
    … Nothing has to be proved about unit prices. [emphasis added]

     

    On Wed, 28th Dec 2016 3:57 pm, I responded:

    “You specify no physical quantities or per-unit prices. Nonetheless, you have ‘proved … that Marx’s theory of value and surplus-value satisfies the macro equilibrium conditions of simple reproduction.’ And you now say that ‘nothing has to be proved about unit prices.’
     
    “So I’m free to assume whatever I want about the per-unit input price, and the per-unit output price, of Department I’s product, right?”
     
     

    But now we get the tacit admission that he has been pulling the wool over our eyes.
     
    At the end of point 4 of his comment of Fri, 6th Jan 2017 1:11 pm (posted by MHI) Moseley admits that unit prices do play a role in his interpretation. Indeed, the simultaneous determination, and therefore the equality, of per-unit input and output prices is logically prior to his “fully sufficient” quantities of money capital and labor-time. He “does not start with ‘any old monetary amounts’”—i.e., he does not start with given monetary and labor-time aggregates. He actually starts with per-unit input and output prices that are equal (because they’re simultaneously determined on the basis of physical quantities):
     
    “my interpretation of Marx’s theory does not start with ‘any old monetary amounts’ made up by Kliman, but instead my interpretation of Marx’s theory assumes that the economy is in long-run equilibrium which means that all commodities exchange at their prices of production which in turn implies that unit input prices = unit output prices. …
     
    “So Kliman is not free to choose any unit prices associated with the quantities in my table (as he suggests). The quantities in my table are long-run equilibrium quantities and thus unit input prices = unit output prices.”
     
     
    So, even though the prices of production (P) and associated price rate of profit (π/(C+V)) in the table below are computed in the exact way he has described—
     
    Sector…C…V…S..W…π…P…S/(C+V)…π/(C+V)..
    …..1….21…3…4..28…6..30….16.7%…..25.0%…
    …..2….18…6…8..32…6..30….33.3%…..25.0%…
    …total..39…9..12..60..12..60….25.0%…..25.0%…
     
    on the basis of given quantities of money capital (C and V) and the given amounts of new value added by living labor (V + S)—Moseley now tacitly admits that this information is not “fully sufficient” to determine the prices of production (P) and associated price rate of profit (π/(C+V)).

    Instead, the logically prior simultaneous determination of input and output prices is necessary as well:

    p[out] = p[in](A + bl)(1 + r)

    and

    p[out] = p[in]

    (He cannot assume any old input and output prices he makes up. If they aren’t the compatible with the physical quantities, A + bl, the rate of profit, r, will not be equalized.)
     

    I know that this isn’t the story he tells. But that’s because he hasn’t been telling us the whole story.

  42. Roel Van de Pol on Sun, 8th Jan 2017 1:19 pm 

    Further remarks on the Kliman-Moseley debate

    In his latest contribution to this debate on January 4th 2017, Moseley has explicitly admitted that, in his interpretation, prices of production do actually require the equality of unit input prices and unit output prices. In other words, his interpretation is indeed what Kliman calls simultaneist. The importance of this admission cannot be sufficiently stressed, not only because it is the basis of the whole of Kliman’s critique of Moseley’s interpretation, but also because it is in direct contradiction with several of Moseley’s earlier statements, explicitly denying that his interpretation requires the equality of unit input and output prices for prices of production. This shows that Moseley has been unable to fend off the criticism, ultimately contradicting his own statements in an attempt to avoid it. This method can be considered questionable and in any case unscholarly, and calls into question the interest in continuing this debate.

    Kliman (in his contribution of Dec 31st) put forward a solid logical proof of the consequences of this input-output unit price equality. More precisely, Kliman demonstrated that “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant.” As he did in earlier contributions, Moseley countered by pointing to the fact that, in Kliman’s demonstrations, the macro-monetary rate of surplus value changes while there is technological change only in luxury goods industries. This is supposedly not the case in his macro-monetary interpretation, so Kliman’s demonstration would not apply to his theory. As he did before, Moseley also points to the the converse: in Kliman’s demonstration, when there is technological change in luxury goods industries while the rate of surplus value is now indeed assumed to be constant as is the case in the macro-monetary interpretation, I/O coefficients in basic sectors have to change as well. This would then prove that these I/O coefficients are not real physical coefficients, but merely irrelevant numbers derived from the macro-monetary data. Not real, because the idea that technological change in luxury goods industries automatically results in technological change in basic sectors is of course completely absurd.

    But this inconsistency in the macro-monetary interpretation is precisely the whole point of Kliman’s proof! If unit input prices are stipulated to be equal to unit output prices in the macro-monetary interpretation– which they are, as Moseley now openly admitted – then a technological change in luxury goods industries either results in a change in the rate of surplus value, or in a technological change in basic industries. In other words, “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant.” What is particularly curious is that Moseley attempts to challenge this conclusion by asserting the very same thing! Moseley states that, in his interpretation, the rate of surplus value remains constant when I/O coefficients change in luxury goods industries. Kliman demonstrated that, if that is the case, technological change in luxury goods industries necessarily results in a change in I/O coefficients in basic sectors. Both agree that this is absurd, but Moseley claims that this somehow shows that the I/O coefficients are not real! This demonstrates very decisively that he accepts Kliman’s proof but doesn’t grasp its implications. Actually, it shows that Moseley’s stipulation, that his rate of surplus value remains unchanged when I/O coefficients change in luxury goods industries, simply results in absurdity when at the same time input-output unit price equality is assumed. It can only hold if his interpretation accepts that a technological change in luxury goods industries automatically brings about technological change in basic sectors.

    The above shows that the exact same critique holds for Moseley’s macro-monetary interpretation as for all simultaneous single system interpretations Kliman criticized in his 2007 ‘Reclaiming Marx’s Capital’: the only reason that these interpretations can, in certain conditions, seem to arrive at similar conclusions to Marx’s, is because they stipulate certain similar conclusions to hold. In Moseley’s case, this is the stipulation that the rate of surplus value remains constant in the case of technological change in luxury goods industries only. But even if this can seem to correspond to Marx’s theory, the fact that he imposes this arbitrary condition in combination with simultaneism leads to absurd conclusions in certain situations, such as the one that technological change in luxury goods industries automatically brings about technological change elsewhere. Dropping the stipulation would remove that absurdity but, on the other hand, mean that technological change in luxury goods industries affects the rate of surplus value. Both conclusions are contrary to Marx’s.

  43. Fred Moseley on Mon, 9th Jan 2017 8:36 am 

    Replies to Kliman (Jan. 6)

    1. Kliman argues that, because unit input prices = unit output prices in my interpretation, this means that they must be determined simultaneously. But that is not true. Simultaneous determination in not the only reason that unit input and output prices are equal. Another reason is that the economy is assumed to be in long-run equilibrium. No matter how unit prices are determined, if the economy is in long-run equilibrium, then unit input prices = unit output prices. Conversely, if unit input prices ≠ unit output prices, then the economy is not in long-run equilibrium. The inequality between input prices and output prices will cause output prices to continue to change in subsequent periods (even though productivity and the real wage remain constant) until unit input prices = unit output prices.

    So unit input prices = unit output prices in my interpretation because the economy is assumed to be in long-run equilibrium, not because of simultaneous determination.

    2. Kliman wrote:
    He “does not start with ‘any old monetary amounts’”—i.e., he does not start with given monetary and labor-time aggregates. He actually starts with per-unit input and output prices that are equal (because they’re simultaneously determined on the basis of physical quantities). :

    So Kliman argues that my interpretation does not start with “any old monetary quantities”, but instead starts with unit input and output prices that are equal. He is right about the first point, but wrong about the second point.

    He equates “does not start with ‘any old monetary quantities’” with “i.e. he does not start with given monetary and labor-time aggregates”. But the two phrases are not the same. My interpretation does not take as given “any old monetary quantities” but instead takes as given monetary quantities of constant capital and variable capital that are *assumed to be long-run equilibrium quantities* (because the economy is assume to be in long-run equilibrium). The given long-run equilibrium quantities of C and V, along with the LTV, are fully sufficient to determine the total surplus-value, the rate of profit, and prices of production, as I show in Chapter 2 of my book.

    As I have argued, the logical framework of Marx’s theory is the circuit of money capital: M – C … P … C’ – M’, which suggests that the initial givens in Marx’s theory are the quantities of money capital M at the beginning of the circuit. The initial money capital M is taken at the beginning of the circuit in order to explain M’ and ΔM at the end of the circuit. M of course consists of two components – constant capital and variable capital (M=C+V) – which are taken as given in Marx’s theory of M’ and ΔM.

    The logical framework of Marx’s theory is NOT a physical I/O matrix which is used to determined unit prices and the rate of profit (and ΔM is not even a variable!) (as in Sraffian theory).

    Marx’s theory of ΔM assumed that the economy is in long-run equilibrium. Disequilibrium prices that are due to temporary and accidental causes would be a distraction from the main question: the origin and magnitude of ΔM (see the important long footnote at the end of Chapter 5 of Volume 1). The assumption of long-run equilibrium (and implicitly unit input prices = unit output prices) does not convert Marx’s theory of the circuit of money capital (which takes M as given in order to explain M’ and ΔM) into a theory of unit prices determined by given physical quantities (i.e. Sraffian theory). The assumption of long-run equilibrium enables Marx to explain ΔM “in its purity” (C.I. p. 269).

  44. Fred Moseley on Mon, 9th Jan 2017 8:39 am 

    Reply to Roel (Jan 4):

    You misunderstand me on unit input prices ≠ unit output prices. Perhaps I did not make myself clear. I did not argue that unit input prices ≠ unit output prices. Rather I argued that, in the Bortkiewicz-Sweezy type tables of simple reproduction, the equilibrium conditions are in terms of total prices, not unit prices, and unit prices are not specified (including in Kliman and McGlone’s papers). And I argued that these equilibrium conditions in terms of total prices are satisfied for prices of production in my interpretation, thus refuting the Bortkiewicz-Sweezy critique on its own terms.

    If simple reproduction is not assumed, then the total price equilibrium conditions are not satisfied, but if the economy is assumed to be in long-run equilibrium, then unit input prices = unit output prices as I discussed in my last two comments. Unit input prices = unit output prices in my interpretation because the economy is assumed to be in long-run equilibrium, not because they are determined simultaneously.

  45. Fred Moseley on Wed, 11th Jan 2017 9:20 am 

    Reply to Roel on Kliman’s two arguments concerning the effect of technological change in luxury goods industries on the rate of surplus-value and rate of profit. (Jan. 8)

    1. According to Marx’s theory, technological change in luxury goods industries *does not affect the rate of surplus-value* because it does not affect the price of wage goods and hence does not affect variable capital and surplus-value. This is not an “arbitrary condition” (as Roel said), but a straight-forward and widely-recognized conclusion of Marx’s theory of relative surplus-value.

    For example, Marx said in Chapter 12 of Volume 1 of Capital (“The Concept of Relative Surplus-value”:
    “But an increase in the productivity of labour in those branches of industry which supply neither the necessary means of subsistence nor the means by which they are produced *leaves the value of labour-power undisturbed*.” (p. 432)

    And since the value of labor-power is undisturbed, so are variable capital, surplus-value, and the rate of surplus-value also undisturbed.

    And in Volume III of Theories of Surplus-Value:
    “Let us assume that the production time for luixuries is reduced due to machinery … that less labour is required to produce them. *This cannot have the slightest influence on wages*, on the value of labour-power, since these articles do not enter into the consumption of the workers … *Increased productivity in the luxury industries, therefore, has no influence on the rate of surplus-value*… [P]roductivity in the luxury industries cannot reduce the value of labour-power, it cannot produce any relative surplus-value and, in general, cannot product that form of surplus-value which results from the growing productivity of industry as such.” (pp. 349-50)

    Therefore, Kliman’s original argument – that technological change in luxury goods industries increases the rate of surplus-value in order to offset the increase in the composition of capital so that the rate of profit does not fall – is clearly contrary to Marx’s theory and his explicit statements. I don’t think there can be any doubt about that. So Kliman’s first argument is invalid.

    2. Kliman’s second argument assumes that the rate of surplus-value remains constant (that at least is progress), but he argues that technological change in *luxury goods* industries also causes his “physicalist” I/O coefficients in *basic goods* industries to change, and thus also causes his “physicalist” rate of profit to change, which is supposed to be contrary to my conclusion that technological change in luxury goods industries has no effect on the Sraffian rate of profit.

    However, as I explained in my comment on Jan. 4, Kliman’s argument is about different I/O coefficients, and thus is about a different rate of profit than my argument.

    My argument is about actual physical I/O coefficients in Sraffian theory and the Sraffian rate of profit, and these actual physical I/O coefficients in *basic goods* industries *do not change* as a result of technological change in *luxury goods* industries (see Steedman quote below). Kliman’s original argument was also about actual physical I/O coefficients in Sraffian theory, and these actual physical I/O coefficients in *basic goods* industries did not change in his “Phun” exercise.

    But Kliman’s second argument is in terms of his self-defined and idiosyncratic “physicalist” I/O coefficients in *basic goods* industries which *do change* as a result of technological change in *luxury goods* industries. And the reason that Kliman’s “physicalist” I/O coefficients in basic goods industries change is that these coefficients depend on my monetary rate of profit and my monetary rate of profit changes as a result of technological change in luxury goods industries. Since Kliman’s “physicalist” coefficients in basic goods industries change, his “physicalist” rate of profit changes inversely.

    Therefore, Kliman’s second argument is irrelevant to my argument about the actual physical coefficients in Sraffian theory and the Sraffian rate of profit.

    Roel seems to suggest that the reason Kliman’s “physicalist” I/O coefficients in basic goods change is that technological change in luxury goods industries “automatically brings about technological change” in basic goods industries. This assertion is far-fetched and in any case is not the reason Kliman’s “physicalist” I/O coefficients in basic goods industries change. Kliman’s “physicalist” I/O coefficients in basic goods industries change because they depend on my monetary rate of profit and my monetary rate of profit changes as a result of technological change in luxury goods industries. Meanwhile, the Sraffian actual physical I/O coefficients in basic goods industries remain “undisturbed”, and so does the Sraffian rate of profit, which is what my argument is about.

    Ian Steedman had this to say about the effect of luxury goods on the rate of profit in Sraffian theory:
    “The rate of profit depends *only* on the elements of A1+, that is, on the positive elements of the wage bundle and the (direct and indirect) production conditions of those wage goods. The production conditions for commodities h+1, …n [that is, for *luxury* goods] have *no influence on the rate of profit*.” (Steedman 1977, p. 54)

    So my original conclusion still stands. This is another important difference between my interpretation of Marx’s theory of the rate of profit and the Sraffian theory of the rate of profit: as a result of technological change in *luxury goods* industries, my Marxian monetary rate of profit *will fall* and the Sraffian rate of profit *will not fall*. The fact that Kliman’s pseudo “physicalist” I/O coefficients in basic goods industries increase (as a result of a fall in my monetary rate of profit) and thus his “physicalist” rate of profit also falls is just a circular argument and in any case is irrelevant to my argument and my conclusion.

  46. Andrew Kliman on Wed, 11th Jan 2017 5:20 pm 

    Fred, your comment (of Wed, 11th Jan 2017 9:20 am) is ridiculous.

    You tell us something we all (including Roel) know–that technological change in luxury goods industries does not affect the rate of surplus value, according to MARX’S value theory–after which you write this preposterous gem:

    Therefore, Kliman’s original argument – that technological change in luxury goods industries increases the rate of surplus-value in order to offset the increase in the composition of capital so that the rate of profit does not fall – is clearly contrary to Marx’s theory and his explicit statements. I don’t think there can be any doubt about that. So Kliman’s first argument is invalid.

     
    That is complete hogwash. I did not–did not–argue that “technological change in luxury goods industries increases the rate of surplus-value.” And I did not–did not–argue that this is what happens according to MARX’S value theory.

    What I argued is instead that YOUR INTERPRETATION implies that technological change in luxury goods industries increases the rate of surplus-value:

    Labor-saving technological change in luxury industries has no effect on his economy-wide rate of profit. And it does alter the rate of surplus-value. … That’s because Moseley’s rate of profit, just like every other physicalist’s rate of profit, is determined by the physical quantities of the basic (non-luxury) sectors alone. [“All Value-Form, No Value-Substance,” Part 12, pp. 5-6; emphases altered]

     
    Please retract your false allegation against me!

    Since my argument isn’t against Marx, but against your interpretation, the fact that the argument’s conclusion is contrary to Marx doesn’t mean that the argument is “invalid.” It means that your interpretation is the antithesis of his actual theory!

    The reason you wrongly present an argument about your interpretation as if it were an argument about Marx’s own value theory is that you refuse to face the fact that your interpretation isn’t the same thing as his actual theory, but rather its antithesis. It is time to face this fact.
     

    You then refer to “Kliman’s self-defined and idiosyncratic ‘physicalist’ I/O coefficients.” That is hogwash, too. They are your I/O coefficients. They can be derived from your monetary quantities (because you are a simultaneist) and, conversely, your monetary quantities can be derived from your I/O coefficients (plus normalization of relative prices such that the price of the net product equals new value added).

    My I/O coefficients, those pertaining to the TSSI interpretation of Marx’s value theory, aren’t like that at all. They cannot be derived from monetary quantities (because the TSSI is anti- simultaneist) and, conversely, no monetary quantities can be derived from I/O coefficients (plus normalization of relative prices) alone.

    So stop the nonsense. Even though you are very adroit at disguising the fact that your interpretation is physicalism in Marx-ian clothing, they are indeed your I/O coefficients. Yours, not mine.

    I know that you claim that your I/O coefficients aren’t “actual” I/O coefficients, “because they are derived from monetary quantities and the monetary rate of profit and mirror changes in these monetary variables even if the actual physical I/O coefficients remain the same” (Fred Moseley on Thu, 24th Nov 2016 9:15 am). But this is just false. Here’s why.

    First, where in Sraffian theory or other physicalist theory is it stated that I/O coefficients must not be derived from monetary quantities? Nowhere. And in practice, that’s how exactly I/O coefficients are derived–from monetary quantities. So there’s no difference between you and other physicalist in this regard. They do not say that one must begin with physical rather than monetary quantities. They do not even say that they begin with physical quantities. They say, instead, that the physical quantities are the sole proximate determinants of relative prices and the rate of profit, given the uniformity of the rate of profit, in the sense that knowledge of the physical quantities is the only information needed to ascertain the values, and changes in the values, of the relative prices and rate of profit.

    Second, your claim that your I/O coefficients “mirror changes in these monetary variables even if the actual physical I/O coefficients remain the same” is just false. Your supposed evidence is that

    in Kliman’s example in Part 1, there is labor-saving technological change in Sector 2 and no technological change in Sector 1. The actual physical quantities and physical I/O coefficients in Sector 1 *do not change* (Kliman confirmed this in a subsequent post), but his “physicalist” I/O coefficients for Sector 1 *do change* – because these “physicalist” coefficients are derived from P1 and P1 changes (from 18 to 15), because P1 depends on the monetary rate of profit and the monetary rate of profit changes (from 50% to 25%) due to the technological change in Sector 2. [Fred Moseley on Thu, 24th Nov 2016 9:15 am]

     
    But this is completely made up. I’m looking at the example in my Part 1 now. There are no “actual” physical quantities or I/O coefficients that differ from your physical quantities or I/O coefficients in the example—or anywhere else! Given one and the same economy, as I’ve stressed again and again, there can be only one set of physical quantities. Since there is only one set of physical quantities, and since your physical quantities in the example change, it follows that the actual physical quantities and physical I/O coefficients in Sector 1 do change.

    You claim that “Kliman confirmed … in a subsequent post” that the actual physical quantities don’t change. This is ludicrous, since the physical quantities in the example change, and I scoff and have always scoffed at your bogus distinction between your physical quantities and “actual” physical quantities. And you provide absolutely no evidence that I “confirmed” this. Without evidence, how do we know that you’re not misinterpreting me just as you misinterpret Marx?!

    What you are probably referring to is my statement that the fall in the sectoral monetary prices of production from 18 to 15 and 18 to 5 does not represent a fall in physical output from 18 to 15 and 18 to 5. This simply doesn’t mean or imply that the physical quantities don’t change!

     
    You then employ your “not actual I/O coefficients” stratagem in an effort to dismiss my proof of Sat, 31st Dec 2016 4:35 pm. What I showed is that “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant.” Invoking your “not actual I/O coefficients” stratagem, you deny that the input-output coefficients of the basic sector—which do change—are “actual” I/O coefficients. So I’m supposedly no longer comparing your interpretation to Sraffian theory. Ha ha ha.

    Unfortunately for you, this stratagem does nothing to rescue your false allegation that you and the “Sraffians” come to contrary conclusions about the effect of labor-saving technical change in non-basic sectors only. As I pointed out on Wed, 28th Dec 2016 1:44 pm, you and they do not come to contrary conclusions unless there are cases in which both (a) their input-output coefficients change in luxury (non-basic) sectors but not any basic sectors AND (b) your C/V changes in non-basic sectors only while your S/V remains constant in all sectors. Since you are the one making the claim about contrary results, the burden is on you to show that there are such cases. To show that, you need to specify what their input-output coefficients are, for the same case(s) in which your C/V changes in non-basic sectors only while your S/V remains constant in all sectors. In other words, the burden is on you to show that a purported example in which (a) and (b) both hold true is an example of one and the same economy, not two different ones.

    It would surprise no one, nor be important in any way, that one physicalist finds that one economy’s rate of profit remains the same because the I/O coefficients in basic sectors don’t change, while another physicalist finds that a different economy’s rate of profit falls because its “non-actual” I/O coefficients in basic sectors do change, in order to ensure that C/V changes in non-basic sectors only while S/V remains constant in all sectors!!! These are not–are not–contrary conclusions.

     
    It’s time to face the fact that your “not actual I/O coefficients” stratagem is puerile. You claim that

    There are not two economies in my arguments and analysis. There is only one economy (a capitalist economy) that is analyzed in different ways. In Marx’s theory, the economy is analyzed in terms of quantities of money capital and labor-time and sequential determination; in Sraffian theory, the *same economy* is analyzed in terms of quantities of physical inputs and outputs and simultaneous determination. [Thu, 24th Nov 2016 9:15 am]

    Utter drivel. Everything you write tells us that there are two different economies. There is one economy with “actual” I/O coefficients—an actual economy–and then there’s a different economy with “non-actual” I/O coefficients–a non-actual economy. Clearly, an economy that lacks any ACTUAL physical quantities is not an ACTUAL economy! And it’s clearly not the same economy as an actual economy with actual physical quantities. It’s just a bunch of value-form rhetoric without any value substance.

    This whole preposterous line of argument of yours is just a ruse to avoid any direct comparison of your stuff with other physicalists’ stuff. You avoid it like the plague, with one subterfuge after another. In that way, you can pretend that you’re somehow different from them (though the rest of us aren’t fooled). But you cannot–cannot–truthfully maintain that you arrive at any contrary conclusions from them. One physicalist’s conclusions for an actual economy with actual physical quantities is not contrary to another physicalist’s conclusions for a bunch of value-form rhetoric without any value substance or actual physical quantities.

    It’s very easy to prove me wrong: specify sets of actual physical quantities for your economy, before and after a technological change. Go ahead; make my day.

    Either that, or accept that you’re just spouting a bunch of value-form rhetoric without any value substance about a non-actual economy that has no actual physical quantities.
     

    You write, “Kliman’s ‘physicalist’ I/O coefficients in basic goods industries change because they depend on my monetary rate of profit and my monetary rate of profit changes as a result of technological change in luxury goods industries.”

    That is false. Your–not my–physicalist I/O coefficients in basic goods industries don’t change when there is technical change in non-basic sectors only. That is absurd. What changes is the rate of surplus-value, your rate of surplus-value.

    But if you insist on holding the rate of surplus-value constant, then the inevitable consequence is that you’re no longer dealing with a case in which there is technical change in non-basic sectors only. The reason for that is not–is not–that the I/O coefficients in basic goods industries change because they depend on your monetary rate of profit. The reason is that you are a simultaneist. Because, and only because, you are a simultaneist, you cannot keep the rate of surplus-value constant in an economy in which there is technical change in non-basic sectors only.

    When C/V rises but S/V remains constant, the rate of profit changes, which causes all sectors’ aggregate prices of production to change, which implies that all sectors’ per-unit output prices change. And because, and only because, you are a simultaneist, all sectors’ per-unit input prices therefore have to change. The change in the per-unit input prices causes the cost of workers’ means of subsistence to change, and that in turn causes the rate of surplus-value to change. So you cannot keep the rate of surplus-value constant in an economy in which there is technical change in non-basic sectors only.

    Conversely, if you insist that the rate of surplus-value remains constant, then the per-unit input prices of the basic sectors must remain constant, which implies (because you are a simultaneist and therefore a physicalist) that your–not my–physicalist I/O coefficients in basic sectors don’t change (and therefore that the rate of profit doesn’t change).

    You want to disprove this? Then specify sets of actual physical quantities for your economy, before and after a technological change. Go ahead; make my day.

    Either that, or accept that you’re just spouting a bunch of value-form rhetoric without any value substance about a non-actual economy that has no actual physical quantities.

  47. Roel Van de Pol on Thu, 12th Jan 2017 4:02 am 

    To Moseley:

    Anyone who goes back and reads your previous contributions can check for herself what you argued and what you didn’t, and whether or not you made yourself clear on unit prices. For example, when directly asked whether you require equilibrium in total prices or in unit prices, you responded: “equilibrium conditions are in terms is [sic] total prices not in terms of unit prices. (…) Unit prices play no role in my interpretation of Marx’s theory.” Now you affirm that the one implies the other. On the basis of this and other of your statements, I would personally argue that you have repeatedly and profoundly confused this issue. This has of course made it very difficult for Kliman discuss the implications of certain of his key arguments with you, and even harder for others like myself to judge your opinion on those arguments.

    As you have repeatedly explained, your interpretation holds that prices of production require equilibrium. It defines equilibrium as simple reproduction – in other words, physical inputs equal physical outputs and total input price equals total output price. For this, it is necessary that unit input prices equal unit output prices. Hence, in your interpretation, prices of production only exist in simple reproduction and require that unit input prices equal unit output prices. Since your interpretation holds that equilibrium conditions hold for prices of production in period 1, unit input prices = unit output prices for prices of production in period 1. This is now very clear to everyone, so let’s move on.

    Kliman (on Dec 31st) put forward a solid logical proof that demonstrates that these stipulations in your macro-monetary interpretation result in conclusions contrary to Marx’s. Specifically, he demonstrated that “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant.” He did not exempt your equilibrium conditions from this general proof, but rather they are central to it, since it assumes that unit input prices = unit output prices which is a necessary aspect of simple reproduction. Moreover, Kliman did not have to derive any I/O coefficients. His result holds for any possible set of physical coefficients in your equilibrium for which P = p[out]*X and C + V = p[in]*(a + b)X hold. Unless there are some physical coefficients that violate this assumption in your equilibrium, it holds for all physical coefficients that can possibly exist in your equilibrium.

    You choose not to address a single assumption nor a single deduction in Kliman’s proof, you just deny its logical conclusion. I find this curious, to say the least. In your last contribution you demonstrate once more that you accept the proof but simply refuse to accept its implications. Since you exclude a change in the rate of surplus value in the case of technological change in luxury goods industries only, the only alternative for your interpretation is that I/O coefficients in basic industries have to change as well, no matter how “far-fetched”, bizarre, absurd, outlandish or alien this may seem. It may very well contradict Marx and indeed all common sense, but it is nevertheless the logical result of the fact that your interpretation assumes equilibrium and thus unit input prices = unit output prices for prices of production, while at the same time stipulating a constant rate of surplus value in the case of technological change in luxury goods industries only.

    Brief or lengthy expositions about what Marx or Steedman wrote do not undermine this conclusion in any way. Neither does the mere assertion that “Kliman’s” physical coefficients are not real or just derived from your macro-monetary data. You can only refute his proof by either (1) successfully challenging one of its assumptions or deductions, or by (2) specifying “sets of actual physical quantities for your economy, before and after a technological change” that are logically compatible with each other and with sets of your macro-monetary data, but violate Kliman’s demonstration. Until you successfully do so, it has been firmly established that your interpretation is incompatible with Marx’s own conclusions.

    P.S. I am deeply concerned by the way in which you misrepresent my argument about your arbitrary stipulation of a constant rate of surplus value. As Kliman correctly understood, this is an argument about your macro-monetary interpretation, not about Marx’s theory in which of course it is not an arbitrary stipulation but a logical conclusion. The manner in which you responded is downright misleading, ridicules my point of view, and confirms my doubts about the possibility of continuing this discussion in a scholarly manner.

  48. Herbert Panzer on Thu, 12th Jan 2017 6:03 pm 

    To Roel Van de Pol

    at the beginning of your 8th Jan 2017 1:19 pm contribution you state that “…do actually require the equality of unit input prices and unit output prices. In other words, his interpretation is indeed what Kliman calls simultaneist.”
    Instead of following Kliman in this identification, you should better question it, because his identification inputs/outputs-equality == simultaneism == physicalism is in all its parts fundamentally wrong, with fatal consequences.

    a) Refuting the ‘Myth of Inconsistency” of Marx’s CAPITAL?’ requires unavoidably the consideration of ‘simple reproduction’, or in other words, the equilibrium or stationary system state. This means primarily monetary figures but also physical quantities and thus prices input/outputs needs to be the same. These are simple conditions we have to cope with, the question is not what an interpretation needs.
    The task is to come up with a related production price based reproduction scheme. Now Kliman’s wrong identification makes it impossible for him to solve this task, at least not in a reasonable way (see my input from 27th Dec 2016 7:08 am).

    b) Not enough, Kliman is also heavily hindering progress to ‘Reclaiming Marx Capital’. Anybody who comes up with a scheme for a stationary system state, even when limiting this to the primarily relevant monetary figures, will be made guilty of physicalism.
    This is done by exploiting the (at least in natural sciences) well known fact that for a system in stationary state all parameters are fixed and one can therefore make all
    types of meaningful and meaningless calculations. Making meaningless calculations but giving them a bourgeois ideological meaning is the Sraffians’ trick. Kliman – together with his wrong identification above – uses the same principle.

    Let’s see what this means in Fred Moseley case. His model starts from the absolute necessity of considering the economy in stationary state. He solves the task above related the primarily relevant monetary figures (circuit of capital powered by exploitation(rate) ). He is not requiring any physical or price input into his model. But when asked about it, he tells the simple fact that – as the system is in equilibrium state – output prices equal input prices.

    Unlike me, Moseley has not chosen to be a bit offensive. He started with rejecting Kliman’s physicalism charge by pointing at differences between his model and Sraffian assertion, e.g. related technological change in luxury goods.

    Now, Kliman uses stationary system state ‘meaningless calculation’ trick to squeeze physical units and unit prices into Moseley’s model with then switching to ‘causal’ level in order to qualify Moseley as a physicalist, thus making the wrong identification from above ‘real’.
    Since then for months the same loop. After some progress (circular reasoning, causality) now we are back in the loop again. Latest variant:
    “As I noted in my comment of Wed, 28th Dec 2016 1:44 pm, above, they can arrive at contrary conclusions only if “[t]here are cases in which both (a) input-output coefficients change in luxury (non-basic) sectors but not any basic sectors AND (b) C/V changes in luxury (non-basic) sectors but not any basic sectors, and S/V remains constant in all sectors.” But on Moseley’s interpretation, there aren’t any cases in which both (a) AND (b) hold true.”

    Where is it said that physical quantities in basic sectors need be the same before and after technological change in luxury goods? E.g. we have equilibrium state before change, then the change as such together with some adaptations periods also related physical quantities in basic sectors and after that a new equilibrium state.

    Roel, you can find more about the above in the contributions to this discussion from me.

  49. Roel Van de Pol on Fri, 13th Jan 2017 4:30 am 

    To Herbert:

    (a) This is wrong. To refute the myth of inconsistency we have to show that Marx did not think and argue in terms of simple reproduction or equilibrium or stationary states when discussing his prices of production. We have to show that the reason that this myth persists is that some, like Moseley, perpetuate it through the idea that prices of production refer to an equilibrium state. For this, we have to prove that those equilibrium interpretations always results in conclusions contrary to Marx’s, but a temporal (and single-system) interpretation doesn’t. In other words, exactly the opposite of what you propose.
    (b) This is not true. Any TSSI economist can develop a scheme for the equilibrium state of simple reproduction where unit input prices equal unit output prices. This does not make the TSSI results physicalist in the slightest. What matters is what happens to prices of production when something changes.

    In your last paragraph you show that you misinterpret Moseley, Kliman and the whole debate going on here, or in ‘Reclaiming Marx’s Capital’. Moseley can’t have “some adaptations periods” for his prices of production – that’s the whole point! For Moseley, prices of production hold for period 1 and prices of production always refer to an equilibrium state. Which means that, when studying the effects of technological change in luxury goods industries on prices of production, we have to compare the equilibrium prices of production in the period immediately before and in the period immediately after the technological change, and judge whether his conclusions are similar to Marx’s.

  50. Herbert Panzer on Sun, 15th Jan 2017 6:15 am 

    Roel,

    ad a) Simple reproduction is a possible state of capitalist economy. Marx has studied it in extenso. Borkiewicz has used it as the basis for his scheme that created ‘myth of inconsistency’. And now, when introducing the new more specific category ‘production price’, suddenly the question what’s happening in stationary state of economy shall be irrelevant, simply because Marx has not explicitly done it by himself? You may personally believe that this wipes out ‘myth of inconsistency’. But honestly, what do you think about the persuasiveness of this?
    ad b) I suppose you mean unit production prices. In this case please do so. May be I like TSSI.
    ad last §) I repeat my question: where is this said?

  51. Roel Van de Pol on Sun, 15th Jan 2017 9:52 am 

    Herbert:

    a) You misunderstood me. I did not say that simple reproduction or equilibrium is an impossible state of a capitalist economy in Marx (although “imaginable” would be a better term than “possible”, because competition and the search for relative surplus value effectively renders it impossible). What I said was that Marx’s prices of production do not generally refer to equilibrium, and that equilibrium approaches arrive at the conclusion that Marx is inconsistent precisely because they consider equilibrium as the general case for prices of production.

    b) If you refer to the latter part of my sentence, I mean both total and unit prices.
    As for where it is said that equilibrium is perfectly possible for prices of production in the TSSI (as a special and not the general case), you can find an excellent example in Kliman & McGlone “The transformation non-problem and the non-transformation problem”, 1988, where total and unit prices of production converge to equilibrium after in the 14th period.

    For example, to render it more concrete. To study a case in which there is a single technological changes once, equilibrium approaches would say: we have equilibrium prices of production A, technology changes, and now we have equilibrium prices of production B. In this context, it is impossible to refute the myth of inconsistency because it is exactly this context that creates it. The TSSI solution would be: we have prices of production A (equilibrium or not), technology changes, then we have disequilibrium prices of production B, then we have disequilibrium prices of production C etc. … and finally we have equilibrium (unit and total) prices of production N.

    The whole issue is that Moseley considers prices of production to be equilibrium prices by definition.

  52. Roel Van de Pol on Sun, 15th Jan 2017 10:20 am 

    Herbert,

    I’m sorry, I misread your last question. Where is it said that Moseley’s prices of production hold for period 1 and always refer to an equilibrium state? He said exactly this when replying to me on Dec 22nd: “my interpretation is different from the TSSI because I argue that Marx’s theory of prices of production assume that the macro equilibrium conditions are satisfied in period 1 (…) and the TSSI assumes that the macro equilibrium conditions are NOT satisfied in period 1 (…).”

  53. Fred Moseley on Tue, 17th Jan 2017 8:51 am 

    Chapter 17 and our debate

    Chapter 17 of Volume 1 (“Changes of Magnitude in the Price of Labor-Power and in Surplus-value”) is about the effect of technological change on the rate of surplus-value and has direct relevance to our debate, so I took another look.

    In this chapter, Marx analyzed the effects of three main factors on the price of labor-power and surplus-value: the productivity of labor in production of means of subsistence (i.e. wage goods), the length of the working day, and the intensity of labor. Section 1 is about the effects of productivity (i.e. technological change). Marx assumed that productivity in wage goods industries doubles so that the unit price of wage goods is cut in half. And he assumed to begin with that the quantity of wage goods consumed by workers (i.e. the real wage) remains constant, in which case the price of labor-power is also cut in half and the amount of surplus-value increases correspondingly.

    However, Marx continued: *“subsidiary movements may occur”.* (Vintage, p. 658) The *price of labor-power might not fall as far as the price of wage goods* and thus the amount of surplus-value and the rate of surplus-value would increase less. And *how far the price of labor-power falls depends on the class struggle between capitalists and workers.*

    “The amount of this fall, the lowest limit of which is 3 shillings (the new value of labour-power), depends on the relative weight thrown into the scale by the pressure of capital on the one side, and the resistance of the worker on the other.” (p. 659)

    Marx went on to note that the price of labor-power might not fall at all if workers are powerful enough, in which case the amount and rate of surplus-value would not increase at all.

    Therefore, the effect of increased productivity in wage goods industries on the rate of surplus-value depends in part on the class struggle, and Marx’s analysis of this effect *takes as given the price of labor-power (i.e. money wage)* which is the result of class struggle. The resulting price of labor-power implicitly determines the quantity of wage goods consumed by workers, not the other way around! And if the given price of labor-power does not fall all the way to the lower price of wage goods, then the quantity of wage goods consumed by workers would *increase*, not remain constant.

    Essentially the same analysis can be applied to Kliman’s latest argument: that an increase in productivity in *luxury goods industries* reduces the rate of profit and thus reduces the price of wage goods, similar to the effect of increased productivity in wage-goods industries (although much smaller). In the same way, the final effect on the rate of surplus-value depends on *how far the price of labor-power falls*, which in turn depends on the class struggle. If the price of labor-power falls all the way to the new lower price of wage goods, then the quantity of wage goods consumed by workers would remain constant and this scenario would probably produce results similar to Kliman’s.

    However, *“subsidiary movements may occur”*. The price of labor-power might not fall as far as the price of wage goods and thus the amount of surplus-value and the rate of surplus-value would increase less. And the price of labor-power might not fall at all, in which case the amount and rate of surplus-value would not increase at all (similar to Marx’s conclusion). Therefore, the effect of increased productivity in luxury goods industries on the rate of surplus-value also depends in part on the class struggle, and an analysis of this effect (within the framework of Marx’s theory) *should take the price of labor-power (i.e. the money wage) as given* (the result of class struggle), not the real wage. The resulting price of labor-power implicitly determines the quantity of wage goods consumed by workers, not the other way around.

    Actually, I think Kliman’s argument is something new and a contribution. No one that I know of (including Marx) has discussed this possible effect of technological change in luxury goods industries on the rate of surplus-value. Marx was emphatic that such technological change would have no effect on the rate of surplus-value, but he was thinking in terms of the value of commodities (in Vol. 1), not the price of production of commodities.

    But even with this addition, the conclusion of (my interpretation of) Marx’s theory of the effect of technological change in luxury goods industries on the rate of profit is still *different from the conclusion of Sraffian theory.* Sraffian theory concludes that technological change in luxury goods industries *would never reduce the rate of profit.* (My interpretation of) Marx’s theory, on the other hand, concludes that technological change in luxury goods industries *could reduce the rate of profit*, if the price of labor-power does not fall all the way to the new lower price of wage goods, which would mean that the increase in the rate of surplus-value would be less than if the price of labor-power had fallen all the way, and the increase in the rate of surplus-value would be less than the increase in the composition of capital.

    Thus, Chapter 17 provides clear evidence that Marx’s theory takes as given the money price of labor-power, i.e. the money wage, not the the real wage. And because the money wage is taken as given, rather than the real wage, Marx’s theory comes to a different conclusion from Sraffa’s theory concerning the effects of technological change – in both luxury goods industries and wage goods industries – on the rate of profit. If the money wages is *determined by the price of a given quantity of wage goods* (as in Sraffian theory), then a change in the money wage will always = a change in the price of wage goods. However, *if the money wage is taken as given* (determined by class struggle) (as in Marx’s theory and my interpretation of Marx’s theory), then *a change in the money wage might be different from a change in the price of wage goods*, and often will be different, which yields different conclusions regarding the effects of technological change on the rate of surplus-value and the rate of profit.

    At the end of his comment on Jan. 12 Herbert asked the question:
    Where is it said that physical quantities in basic sectors need be the same before and after technological change in luxury goods?

    An answer to Herbert’s question is: Chapter 17 provides a clear example of *changes* in the physical quantity of wage goods consumed by workers as a result of changes in the productivity of labor in wage goods industries (because the price of labor-power falls less than the price of wage goods), and we can extend Marx’s analysis to technological change in luxury goods industries, as outlined above.

  54. Fred Moseley on Tue, 17th Jan 2017 9:02 am 

    Roel stated in his comment of Jan 15 (10:32 am):

    “The whole issue is that Moseley considers prices of production to be equilibrium prices by definition.”

    Exactly right!

    I agree that this is the “whole issue” and I am glad that our discussion has finally reached this point. I will have something more to say about this issue soon. In the meantime, I hope that Roel (and others) would please read my paper on academia on this subject:
    https://www.academia.edu/27678884/Marxs_Concept_of_Prices_of_Production_Long-Run_Center_of_Gravity_Prices
    and let me know what you think about the substantial textual evidence presented in that paper that supports the interpretation that Marx’s concept of prices of production are long-run equilibrium prices, similar to Smith’s and Ricardo’s “natural prices”, that change *only if* productivity or the real wage changes.

  55. Roel Van de Pol on Wed, 18th Jan 2017 12:52 pm 

    In his third intervention in this debate since Kliman put forward his logical proof that the macro- monetary rate of profit cannot change without a change in I/O coefficients in basic industries or a change in the rate of surplus value, Moseley still does not challenge any of its assumptions nor its logical deductions. We can thus arguably “take as given” that he accepts the proof. Other statements in his last intervention confirm this beyond any doubt.

    In this latest contribution, Moseley concedes that Kliman was right all along. He does so without dwelling on it, which is understandable, but it does do him credit that he does so. In short, Moseley argues that technological change in luxury goods industries might impact the real (physical) wage rate if, as a result of the balance of forces in the class struggle, the money wage rate does not fall as much as the price of wage goods does. If, however, the price of labor power would fall in the same proportion as the price of wage goods, “this scenario would probably produce results similar to Kliman’s.” That is, if the price of labor power is assumed to equal the price of wage goods, Moseley’s macro-monetary rate of profit cannot change without a change in the I/O coefficients in basic industries or a change in the rate of surplus value. It can only change “if the price of labor-power does not fall all the way to the new lower price of wage goods”. This is 100% correct. Or in Kliman’s words: “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant.” Case closed.

    This concession is extremely important because it finally settles the core question of the debate so far. Up until now, the terms of the debate assumed that all commodities, including labor power, exchanged at prices of production. To provide a logically consistent interpretation of Marx, exchange at prices of production should result in exactly the same aggregate results as exchange at values. Moseley now conceded that this is not the case for the macro-monetary interpretation. As an alternative, he wants to change the terms of the debate by assuming that labor power does not exchange at its “price of production” (the price of production of wage goods). But by abandoning the assumption of exchange at prices of production, any hope for a refutation of the charge of inconsistency is also abandoned, since the charge is specifically leveled against what are supposed to be Marx’s prices of production. Even if Marx considered “subsidiary movements” to occur, his conclusions should hold true without them – if not, his conclusions are caused by “subsidiary movements” instead of flowing dialectically from exchange at equivalents or at prices of production. When abstraction is made from these “subsidiary movements” and exchange at prices of production is assumed (i.e. when wages are also considered to equal the price of wage goods), Moseley agrees that the macro-monetary interpretation “would probably produce results similar to Kliman’s” – which are not similar to Marx’s. This demonstrates once more that the macro- monetary interpretation cannot provide a consistent interpretation of Marx.

    Unfortunately, rather than living up to his concession and adapting a temporal interpretation, Moseley now sides more or less openly with the physicalist school. A technological change in the luxury goods industry changes his macro-monetary economy-wide rate of profit, not because less value is produced in and transferred from the luxury goods industry, but because the real wage rate changes: “if the given price of labor-power does not fall all the way to the lower price of wage goods, then the quantity of wage goods consumed by workers would *increase*, not remain constant.” And in his interpretation, technological progress in luxury goods industries “*could reduce the rate of profit*, if the price of labor-power does not fall all the way to the new lower price of wage goods [emphasis added].” In other words: the only way in which Moseley’s economy-wide rate of profit can fall in the case of technological progress in luxury goods industries, is if the real wage rate rises. The reason why it rises is irrelevant. Moseley holds that it rises because the money wage rate remains constant. That might be so, but his conclusions are still exactly identical to what the physicalists say. He is wrong in believing that it differs from what Sraffians say. Sraffian theory does not hold that “technological change in luxury goods industries *would never reduce the rate of profit.*” [emphasis added]. It holds that viable technological change, whether in basic industries or in luxury goods industries, can never reduce the rate of profit without a change in the real wage rate, which is exactly what Moseley says. That is the essence of the Okishio theorem.

    All of this means that his macro-monetary data are redundant in exactly the same way that physicalists consider Marx’s value theory redundant: because physical coefficients and the real wage rate suffice to determine the rate of profit. If the macro-monetary interpretation is really an accurate interpretation of what Marx meant, he was clearly inconsistent. Since an interpretation that reproduces all of Marx’s disputed conclusions in a consistent way exists, the more probable conclusion would be that the macro-monetary interpretation is not doesn’t accurately represent what Marx meant.

  56. Andrew Kliman on Thu, 19th Jan 2017 11:28 pm 

    I’ve just published a 13th installment of “All Value-Form, No Value-Substance”:

    http://www.marxisthumanistinitiative.org/miscellaneous/all-value-form-no-value-substance-comments-on-moseleys-new-book-part-13-2.html

    It deals with Fred Moseley’s claim that his input and output prices aren’t simultaneously determined and his claim that Marx’s prices of production are static-equilibrium (“long-run equilibrium”) prices.

  57. Herbert Panzer on Sun, 22nd Jan 2017 10:07 am 

    Roel,

    related Roel Van de Pol on Sun, 15th Jan 2017 10:20 am:
    I said (12th Jan) “Where is it said that physical quantities in basic sectors need be the same before and after technological change in luxury goods?”. When Moseley is talking about
    equilibrium state in you reference, he is not talking about physical quantities.

    related Roel Van de Pol on Wed, 18th Jan 2017 12:52 pm, 1st §:
    this means Klimans ‘prove’ is still disproved.

    Now main point (see Roel Van de Pol on Sun, 15th Jan 2017 9:52 am):
    ad a) Roel, I agree with you that prices of production do not generally refer to equilibrium and
    mostly are only “imaginable” (though as an objectively existing category of capitalism – like value), however the point I’m making is, Marx has analysed capitalism under rarely empirically existing simple reproduction, i.e. stationary conditions, Borkiewicz. hooks on to it. So, how empirically special this case may be, for ‘Reclaiming Capital’ coping with it is the key issue.
    ad b) In Vol 3, Chapter 9 on page (1991 p. 264) where ‘myth of inconsistency’ starts, Marx considers only one period, simple reproduction deals with the repetition of one and the same period, so for refuting the myth one should stay on the same level of refinement of system analysis. Therefore, could you please come up with a single period solution where at least the monetary figures are the same on the input and the output side of this period?
    ( the K&McG article plays on a different level of refinement, considering period-to-period changes, physical units figures, i.e. stuff not relevant for the issue and is otherwise targeting aside. What can be said is that for 1988 it was better than nothing and it had a very relevant positive effect).

  58. Roel Van de Pol on Mon, 23rd Jan 2017 4:43 am 

    Herbert,

    1) When Moseley is talking about his equilibrium state, he is referring to simple reproduction. This means reproduction on a constant scale. This means that physical inputs equal physical outputs, as well as total input prices equal total output prices. Whether Moseley talks about it or not, that is just what simple reproduction means. If he would be denying that (which he isn’t), he would just be changing the definitions here.

    So Kliman’s proof holds. His proof says “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant.” Moseley hasn’t challenged this and has now admitted that it is correct if the price of labor power is assumed to be constant. You do not challenge it either, you just suggest that it’s no problem. That is not the same as refuting the proof.

    2) It is extremely difficult to decipher what you mean by ‘the myth of inconsistency’. In any case, the myth of inconsistency does not exist in one period. I don’t see how it even could. In one period of simple reproduction “equilibrium”, there is nothing to prove and nothing to disprove because nothing changes. The discussion is about what happens in the case of technological change.

    The myth comes into being as soon as changes between two periods – before and after (technological) change – are considered. We have period A, technological change, and then we have period B. What the myth of inconsistency says is that the prices of production in period B do not confirm Marx’s conclusions about the effects of technological change. That is the myth. That is what has to be refuted.

    For simultaneist interpretations (like Moseley’s), prices of production in period A and prices of production in period B are both equilibrium prices. If that is the case, it is true that Marx’s conclusions do not hold. For example, as Moseley admitted, if exchange at these prices of production is assumed (including labor power), technological change in luxury goods industries has no impact on the economy-wide rate of profit.

    For the TSSI, prices of production in period B are not equilibrium prices but average prices at equal rates of profit. All of Marx’s disputed conclusions can be reproduced. There is no inconsistency.

    3) “could you please come up with a single period solution where at least the monetary figures are the same on the input and the output side of this period?”

    See period 14 of the 1988 K&MG article. This period can in principle be repeated endlessly (it is a simple reproduction “equilibrium” situation) until something changes. But again, I don’t see why you require such a period. Nothing can be proven or disproven with one equilibrium period.

    Also: nowhere, not even once, does Marx talk about simple reproduction or reproduction on a constant scale in Vol. III. The only part in his work where he does so is Chapter 20 of Vol. II. When Marx considers only a single period in Vol. III this is not a simple equilibrium period. It’s just one period.

  59. Fred Moseley on Mon, 23rd Jan 2017 8:41 am 

    I want to summarize again Marx’s logic in Chapter 17 of Volume 1 (discussed in my last comment) because I think maybe Roel didn’t pay close enough attention to these details and maybe I wasn’t clear enough. Then I will respond to some of Roel’s comments.

    MARX’S LOGIC IN CHAPTER 17

    1. assumes productivity doubles in wage goods industries

    2. unit price of wage goods (UPWG) cut in half

    3. *price of labor-power (PLP) taken as given*
    determined by class struggle
    assumes ↓PLP

    4. ↓PLP → ↑S → ↑S/V

    5. quantity of wage goods (QWG) determined by:
    QWG = PLP / UPWG

    6. %↓PLP < %↓UPWG → ↑QWG

    Therefore, according to Marx’s logic, the ↑QWG is NOT A DETERMINANT of S/V. Rather, the ↑S/V and ↑QWG are both EFFECTS of ↓UPWG and ↓PLP. If QWG were a determinant of S/V, than an ↑QWG would cause a ↓S/V, not a ↑. Instead, ↑QWG is associated with an ↑S/V (through common causes).

    Please note that this logic is sequential determination, not simultaneous determination.

    MY LOGIC

    The logic of my analysis about technological change in luxury goods industries is essentially the same as Marx’s in Chapter 17, except that there is a different cause of ↓UPWG (step #1) and I also include the rate of profit (step #4).

    1. assume labor-saving technological change in luxury industries
    → ↓ rate of profit (R) due to ↑C/V

    2. → ↓UPPWG (unit price of production of wage goods)

    3. *price of labor-power (PLP) taken as given*
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

    Therefore, again, ↑QWG is NOT A CAUSE of ↑S/V and ↑R. Rather, ↑R and ↑QWG are both EFFECTS of ↓UPPWG and ↓PLP. And ↓UPPWG and ↓PLP are themselves the result of ↓R caused by technological change in luxury industries (step #1). Therefore, ↑QWG is an EFFECT of the initial ↓R, not a cause of ↓R.

    Please note again that this logic is sequential determination, not simultaneous determination.

    DIFFERENT CONCLUSIONS FROM SRAFFIAN THEORY

    My analysis and conclusion are fundamentally different from Sraffian theory. According to Sraffian theory, labor-saving technological change in luxury goods industries has no effect on the rate of profit, because the real wage and I/O coefficients in basic industries are taken as given and constant, and that is the end of the simple story.

    (My interpretation of) Marx’s theory, on the other hand, is more complicated and takes the money wage (PLP) as given rather than the real wage and concludes that technological change in luxury goods industries could reduce the rate of profit, if the price of labor-power does not fall all the way to the new lower unit price of production of wage goods, which would mean that the increase in the rate of surplus-value would be less than if the price of labor-power had fallen all the way, and the increase in the rate of surplus-value would be less than the increase in the composition of capital.

    RESPONSES TO ROEL:

    Kliman argued and Roel quoted: “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant”. And they infer from this that my conclusion is the same as Sraffian theory. In fact, in my analysis of this question (summarized above), both the real wage and the rate of surplus-value increase, but it does not follow from this fact that my conclusion is the same as Sraffian theory, as just explained.

    Roel argued that my interpretation of Marx’s theory is similar to Sraffian theory in the sense that the *only way that the rate of profit can fall in this case is due to an increase in the real wage*. But this is not true. The rate of profit falls according my interpretation in this case due to ↑C/V. And the increase of real wages according to my interpretation in this case is an EFFECT of ↓R, not a cause.

    Roel also argued that the reason why the real wage increases is “irrelevant”. But that is not true either. The reason the real wage increases is relevant because the reason is ↓R [!] due to labor-saving technological change in luxury industries. Therefore the increase in the real wage in this case is an EFFECT of ↓R, not a cause.

  60. Roel Van de Pol on Mon, 23rd Jan 2017 12:44 pm 

    To Moseley:

    Since you continue to divert the attention from the essence, let’s reduce the whole debate to its absolute essence (even at risk of repeating myself ad nauseam):

    1) Marx’s main conclusions are based on the assumption that commodities exchange at their values. To reproduce his main conclusions for prices of production, as I said, “exchange at prices of production should result in exactly the same aggregate results as exchange at values.” For example: labor-saving technological change in luxury goods industries should lower the economy-wide rate of profit in both cases in exactly the same way and by exactly the same amount.
    2) You confirmed that, in the macro-monetary interpretation, the only way that the economy-wide rate of profit can fall in the case of labor-saving technological change in luxury goods industries, is if the real wage rate changes. That is: if the price of labor power is assumed not to equal the price of production of wage goods.
    3) From 1 and 2 follows that the macro-monetary interpretation cannot demonstrate that exchange at values and exchange at prices of production produces the same aggregate results.

    Yes or no?

  61. Andrew Kliman on Mon, 23rd Jan 2017 2:19 pm 

    Hi Fred,

    First of all, you haven’t addressed this comment of mine (on January 11):

    “Fred, your comment (of Wed, 11th Jan 2017 9:20 am) is ridiculous.

    “You tell us something we all (including Roel) know–that technological change in luxury goods industries does not affect the rate of surplus value, according to MARX’S value theory–after which you write this preposterous gem:

    Therefore, Kliman’s original argument – that technological change in luxury goods industries increases the rate of surplus-value in order to offset the increase in the composition of capital so that the rate of profit does not fall – is clearly contrary to Marx’s theory and his explicit statements. I don’t think there can be any doubt about that. So Kliman’s first argument is invalid.

     
    “That is complete hogwash. I did not–did not–argue that “technological change in luxury goods industries increases the rate of surplus-value.” And I did not–did not–argue that this is what happens according to MARX’S value theory.

    “What I argued is instead that YOUR INTERPRETATION implies that technological change in luxury goods industries increases the rate of surplus-value:

    Labor-saving technological change in luxury industries has no effect on his economy-wide rate of profit. And it does alter the rate of surplus-value. … That’s because Moseley’s rate of profit, just like every other physicalist’s rate of profit, is determined by the physical quantities of the basic (non-luxury) sectors alone. [“All Value-Form, No Value-Substance,” Part 12, pp. 5-6; emphases altered]

     
    “Please retract your false allegation against me!”
     
     
    And you haven’t addressed this comment (of January 12) by Roel:

    I am deeply concerned by the way in which you misrepresent my argument about your arbitrary stipulation of a constant rate of surplus value. As Kliman correctly understood, this is an argument about your macro-monetary interpretation, not about Marx’s theory in which of course it is not an arbitrary stipulation but a logical conclusion. The manner in which you responded is downright misleading, ridicules my point of view, and confirms my doubts about the possibility of continuing this discussion in a scholarly manner.

     
    Please address these points! This is a revolutionary Marxist-Humanist publication; it will not be party to the “post-truth,” “alternative facts” world that the “Marxist economists” have abetted if I have anything to say about that!

     
     
    Second, your revised version of your claim that you and the Sraffians come to a “different” conclusion about the effects of labor-saving technological change in luxury goods industries is either (a) just plain false or (b) an extremely deceptive rewriting of history.

    If “different” here means that you and they come to contrary conclusions, as you have repeatedly alleged, your claim continues to be false for the reason I stated on December 5 (12:20 pm):

    It is OBVIOUSLY false to allege that you obtain a “contrary” conclusion if you and they mean two different things by “technological change.” “X will not alter the rate of profit” and “Y will alter the rate of profit” are not contrary or contradictory statements if X and Y refer to 2 different things.

     
    Alternatively, your use of the term “different” might be an extremely deceptive rewriting of history. That is, it might be a retraction of the false claim about “contrary” conclusions that doesn’t seem to be a retraction, but just an inessential change in wording.

    And such a use of the term “different” would cover over the fact that the contrast you’re now making between you and the “Sraffians” is silly, because you and they aren’t talking about the same thing.

    If one person says that you’ll get wet if it rains on you, while another says that you won’t get wet if someone throws confetti at you, they are saying something “different.” And if someone says that the rain in Spain stays mainly on the plain while another says that the problem of the Twentieth Century is the problem of the color-line, they are saying something “different.” But because that is so obvious, it is silly to even point out that the statements are “different”–except if the purpose of pointing this out is to deceive people into thinking that one is saying something profound instead of something silly.
     
     
    Third, your latest response to Roel’s comment of Jan. 18 is incorrect:

    Roel argued that my interpretation of Marx’s theory is similar to Sraffian theory in the sense that the *only way that the rate of profit can fall in this case is due to an increase in the real wage*. But this is not true. The rate of profit falls according my interpretation in this case due to ↑C/V. And the increase of real wages according to my interpretation in this case is an EFFECT of ↓R, not a cause.

     
    Roel is correct: according to your interpretation, the only way that the rate of profit can fall, as a result of technical change in luxury sectors alone, is if there is an increase in the real wage rate.

    This statement of his is true because its contrapositive is true. The contrapositive is: if there is not an increase in the real wage rate, then, according to your interpretation, the rate of profit cannot fall as a result of technical change in luxury sectors alone.

    What you write about the rate of profit falling “due to ↑C/V” is a red herring. It has nothing to do with the truth of Roel’s statement, as I’ve just shown. You cannot disprove his statement unless you disprove its contrapositive. Good luck!

    You then write,

    Roel also argued that the reason why the real wage increases is “irrelevant”. But that is not true either. The reason the real wage increases is relevant because the reason is ↓R [!] due to labor-saving technological change in luxury industries. Therefore the increase in the real wage in this case is an EFFECT of ↓R, not a cause.

     
    No, once again what Roel says is true while what you say is false. What he says is that, according to your interpretation, the rate of profit cannot fall as a result of technical change in luxury sectors alone in the absence of a change in the real wage rate:

    the only way in which Moseley’s economy-wide rate of profit can fall in the case of technological progress in luxury goods industries, is if the real wage rate rises. The reason why it rises is irrelevant. … his conclusions are still exactly identical to what the physicalists say. He is wrong in believing that it differs from what Sraffians say. Sraffian theory does not hold that “technological change in luxury goods industries *would never reduce the rate of profit.*” [emphasis added]. It holds that viable technological change, whether in basic industries or in luxury goods industries, can never reduce the rate of profit without a change in the real wage rate, which is exactly what Moseley says. That is the essence of the Okishio theorem.

     
    That is 100% correct, and no red herring that “the increase in the real wage in this case is an EFFECT of ↓R” can reduce its degree of correctness to even 99.99%. The only way to disprove what Roel says is to demonstrate that, on your interpretation, viable technological change in luxury goods industries can reduce the rate of profit without a change in the real wage rate. Good luck!

  62. Fred Moseley on Thu, 26th Jan 2017 8:50 am 

    Replies to Kliman:

    1. Kliman has argued that in order for me to prove that the conclusion of my interpretation regarding the effect of labor-saving technological change in luxury goods industries on the rate of profit is different from the conclusion of Sraffian theory, there must be one economy in which both the I/O coefficients in the basic goods sector remains constant (Sraffian theory) and the rate of surplus-value remains constant (supposedly my interpretation of Marx’s theory).

    But *I no longer argue that the rate of surplus-value necessarily remains constant* in the event of labor-saving technological change in luxury goods industries, so *this condition is irrelevant*. I argued originally that the rate of surplus-value remains constant because I was following Marx’s own analysis of this question.

    But now I realize as a result of this discussion that Marx’s analysis assumed that commodities exchange at values, and if we extend Marx’s analysis of this question to prices of production, then the results are more complicated and may include an increase in the rate of surplus-value. (my analysis copied below)

    However, it is *still true that my conclusion regarding this question is different from Sraffian theory*. According to Sraffian theory, labor-saving technological change in luxury goods industries has *no effect* on the rate of profit, period, end of story. According to (my interpretation of) Marx’s theory, on the other hand, labor-saving technological change in luxury goods industries *could reduce the rate of profit*, if the price of labor-power does not fall all the way to the new lower unit price of production of wage goods, which would mean that the increase in the rate of surplus-value would be less than if the price of labor-power had fallen all the way, and the increase in the rate of surplus-value would be less than the increase in the composition of capital.

    The fact that the rate of surplus-value may not remain constant does not mean that these two conclusions cannot be compared, nor that my conclusion is not different from the Sraffian conclusion. The previous paragraph states the different conclusions.

    2. Kliman has also repeated his argument (Jan 23) that if I want to compare my conclusion with the Sraffian conclusion, then my interpretation *must have the same meaning of technological change* as the Sraffians.

    But I repeat my reply that my interpretation *does have the same meaning of technological change* – a change of physical quantities. But my interpretation is based on a different theory of the effects of technological change, which comes to different conclusions.

    I have argued that Marx’s theory of the rate of profit can be summarized by the following equation:
    R = (S/V) / (C/V) where S = m (SL)
    Therefore, according to Marx’s theory, the effect of labor-saving technological change in luxury goods industries depends on its effects on the monetary ratios S/V and C/V. Marx himself argued that labor-saving technological change will increase C/V but will have no effect on S/V (because luxury goods are not wage goods) and thus concluded that the rate of profit will always fall. However, Marx assumed exchange at values and thus overlooked the effect of the decline in the rate of profit on the price of production of wage goods (a reduction), which could lead to an increase in the rate of surplus-value (as outlined below). But unless the price of labor-power falls as much as the unit price of production of wage goods, then the increase in the rate of surplus-value will be less than the increase in the composition of capital and the rate of profit will fall, contrary to the Sraffian conclusion. At least a decline in the rate of profit as a result of labor-saving technological change in luxury industries is possible in my interpretation of Marx’s theory; it is not even possible in Sraffian theory, which is based instead on physical quantities.

    The key difference between these two theories is that in my interpretation of Marx’s theory the price of labor power is taken as given (as determined by class struggle) and in Sraffian theory the price of labor power is determined by the price of a given quantity of wage goods.

    MY LOGIC

    1. assume labor-saving technological change in luxury goods industries
    → ↓ rate of profit (R) due to ↑C/V

    2. → ↓UPPWG (unit price of production of wage goods)

    3. price of labor-power (PLP) taken as given
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. (quantity of wage goods) QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

    Therefore, again, ↑QWG is NOT A CAUSE of ↑S/V and ↑R. Rather, ↑R and ↑QWG are both EFFECTS of ↓UPPWG and ↓PLP. And ↓UPPWG and ↓PLP are themselves the result of ↓R caused by technological change in luxury industries (step #1). Therefore, ↑QWG is an EFFECT of the initial ↓R, not a cause of ↓R.

  63. Fred Moseley on Thu, 26th Jan 2017 9:08 am 

    Replies to Roel:

    1. Roel said (Jan. 23):
    1) Marx’s main conclusions are based on the assumption that commodities exchange at their values. To reproduce his main conclusions for prices of production, as I said, “exchange at prices of production should result in exactly the same aggregate results as exchange at values.” For example: labor-saving technological change in luxury goods industries should lower the economy-wide rate of profit in both cases in exactly the same way and by exactly the same amount.
    2) You confirmed that, in the macro-monetary interpretation, the only way that the economy-wide rate of profit can fall in the case of labor-saving technological change in luxury goods industries, is if the real wage rate changes. That is: if the price of labor power is assumed not to equal the price of production of wage goods.
    3) From 1 and 2 follows that the macro-monetary interpretation cannot demonstrate that exchange at values and exchange at prices of production produces the same aggregate results.
    Yes or no?

    No, It is not true that the real wage must remain constant in the analysis of the effect of labor-saving technological change in luxury goods industries in terms of values and prices of production. This is clear from the general transformation of values into prices of production. Variable capital or the price of labor-power is the same for both values and prices of production; but if the unit price of production of wage goods < unit value of wage goods, then the same price of labor-power will purchase a greater quantity of wage goods, as in my analysis of labor-saving technological change in luxury goods industries. The aggregate results that must remain the same in the transformation are the two aggregate equalities in money terms: total price of production = total value and total profit = total surplus-value, and they do remain the same in my interpretation.

    2. Roel also argued that in my interpretation the rate of profit cannot fall without an increase in the real wage, thus suggesting that an increase in the real wage is a CAUSE of the decline in the rate of profit. I have argued instead that the increase in the real wage is an EFFECT of the decline of the rate of profit, not the other way around (argument copied below).

    Kliman argued (Jan. 23) that the “only way to disprove what Roel says is to demonstrate that, on your interpretation, viable technological change in luxury goods industries can reduce the rate of profit without a change in the real wage rate.”

    But that is not possible, not because an increase in the real wage causes the fall in the rate of profit, but because the condition for a fall in the rate of profit:
    %↓PLP < %↓UPPWG
    is also the condition for an increase in the real wage.
    If this condition is not satisfied:
    i.e. if %↓PLP = %↓UPPWG
    then the rate of profit will not fall and the real wage will also not increase.
    But this does not mean that an increase in the real wage causes the fall in the rate of profit. The fall in the rate of profit is caused by originally by an increase in the composition of capital and is not completely offset by an increase in the rate of surplus-value if %↓PLP < %↓UPPWG, and this condition also causes an increase in the real wage.

    Roel and Andrew: how would the TSSI analyze the effect of labor-saving technological change in luxury goods industries on the rate of profit? How would it be different from my analysis? (copied below) Thanks.

    3. Roel has also argued that I “changed the terms of the debate” by assuming that labor-power does not exchange at its price of production (determined by price of production of a given quantity of wage goods). But that is not true either. Labor-power is not a commodity like all other commodities. Labor-power is not produced by capitalist firms and there is no equalization of the profit rate that would determine the “price of production” of labor-power. Instead, the price of labor-power is determined by the class struggle between capitalists and workers over the money wage, and is taken as given in Marx’s analysis of this question. The concept of “equilibrium” does not apply to the unique commodity labor-power because there is no equalization of the profit rate.

    Roel assumes that the “equilibrium price of production” of labor-power is determined by the equilibrium price of production of a given quantity of wage goods (which does not change in this analysis) as in Sraffian theory. In this case, the price of labor power falls all the way to the new lower price of production of wage goods, the increase in the rate of surplus-value is a maximum and there is no increase in the rate of profit. But this complete fall of the price of labor-power to the new lower price of production of wage goods is not automatic and how far it falls depends on the class struggle over the money wage.

    Therefore, I did not “change the terms of the debate. Rather, I insisted (and continue to insist) that the price of labor-power in Marx’ theory is determined by the class struggle over the money wage and is taken as given in this analysis, rather than determined by the equilibrium price of production of a given real wage, as in Sraffian theory.

    MY LOGIC

    1. assume labor-saving technological change in luxury goods industries
    → ↓ rate of profit (R) due to ↑C/V

    2. → ↓UPPWG (unit price of production of wage goods)

    3. price of labor-power (PLP) taken as given
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. (quantity of wage goods) QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

    Therefore, again, ↑QWG is NOT A CAUSE of ↑S/V and ↑R. Rather, ↑R and ↑QWG are both EFFECTS of ↓UPPWG and ↓PLP. And ↓UPPWG and ↓PLP are themselves the result of ↓R caused by technological change in luxury industries (step #1). Therefore, ↑QWG is an EFFECT of the initial ↓R, not a cause of ↓R.

  64. Roel Van de Pol on Wed, 1st Feb 2017 6:32 am 

    I have developed an elaborated critique of Moseley’s method of debate, which the MHI has been so kind as to publish as a separate article here: http://www.marxisthumanistinitiative.org/miscellaneous/moseleys-method-of-debate-a-comment-from-a-belgian-marxist-youth.html .

    Now onto the debate itself.

    To Moseley:

    1. About the order of “determination”

    You have been arguing repeatedly, as far as I know for a little over two decades, that a fundamental feature of Marx’s logic is that “the rate of surplus-value is determined first … then the rate of profit is determined … by the rate of surplus-value and the composition of capital.” As I note in my remarks on your method of debate, this has been your central argument in fending off Kliman’s criticisms. You have even argued that it would be “clearly contrary to Marx’s theory and his explicit statements” to say otherwise, and that you “don’t think there can be any doubt about that.” But now you are arguing that “the increase in the real wage [which causes the change in the rate of surplus-value] in this case is an EFFECT of ↓R [the fall in the rate of profit], not a cause.”

    These two statements are mutually exclusive. Either the rate of surplus value – and thus the real wage rate – is determined first, or the rate of profit is determined first. Which one is it?

    2. About the labor theory of value

    Marx assumed exchange at values and thus overlooked the effect of the decline in the rate of profit on the price of production of wage goods (a reduction), which could lead to an increase in the rate of surplus-value (as outlined below).

    This debate is not about what could happen in the case of certain “subsidiary movements”. It is about what should happen in certain cases if value theory is to be logically consistent. Allow me to elaborate.

    If Marx’s value theory can be roughly summarized as follows:

    (a) the value of a commodity can be divided into C + V + S
    (b) V + S equals new labor
    (c) S gets redistributed through the market so that each sectors tends to get an equal rate of profit = π/(C+V)
    (d) Total π = total S

    then the following should hold true:

    1. Suppose 3 sectors: sector X produces means of production, sector Y produces wage goods and sector Z produces luxury goods
    2. If C rises sector Z, but V and S remain constant in all sectors, total S falls in proportion to total C+V.
    3. S gets redistributed: π/(C+V) falls in all sectors

    So in Marx’s theory, if there is a rise in constant capital invested in luxury production, but no change in V or S anywhere in the economy (so the rate of surplus-value is constant), then the average rate of profit will fall. However, you now repeatedly confirmed that in your interpretation, this is not the case. So your interpretation contradicts his theory. Q.E.D.

    3. About Sraffian theory

    According to Sraffian theory, labor-saving technological change in luxury goods industries has *no effect* on the rate of profit, period, end of story.

    This is a false presentation of what Sraffian theory actually says. As I argued before, Sraffian theory rather “holds that viable technological change, whether in basic industries or in luxury goods industries, can never reduce the rate of profit without a change in the real wage rate, which is exactly what Moseley says. That is the essence of the Okishio theorem.” [emphasis added]

    Of course it is true that the Sraffians infer a causal relationship from this: they argue that it demonstrates that the rate of profit is causally determined by physical coefficients and the real wage rate. You argue that this is not so for your interpretation. However, a discourse is not a proof. You can only prove that your causal determination differs from Sraffian theory if you manage to demonstrate that in your interpretation, contrary to Sraffian theory, the economy-wide rate of profit could change in the case of labor-saving technological change in luxury goods industries without a change in the real wage rate.

    But since you admitted that Kliman’s proof that “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant” holds true, you admitted that this cannot be done in your macro-monetary theory. Hence you cannot possibly prove that your macro-monetary theory produces quantitatively different results than Sraffian theory.

  65. Andrew Kliman on Thu, 2nd Feb 2017 12:49 am 

    On Roel Van de Pol’s comment of Wed, 1st Feb 2017 6:32 am

    “You have been arguing repeatedly … that a fundamental feature of Marx’s logic is that ‘the rate of surplus-value is determined first … then the rate of profit is determined … by the rate of surplus-value and the composition of capital.’ … But now you are arguing that ‘the increase in the real wage [which causes the change in the rate of surplus-value] in this case is an EFFECT of ↓R [the fall in the rate of profit], not a cause.’

    “These two statements are mutually exclusive. Either the rate of surplus value – and thus the real wage rate – is determined first, or the rate of profit is determined first.”

    This is true.

    “in Marx’s theory, if there is a rise in constant capital invested in luxury production, but no change in V or S anywhere in the economy (so the rate of surplus-value is constant), then the average rate of profit will fall. However, you now repeatedly confirmed that in your interpretation, this is not the case. So your interpretation contradicts his theory. Q.E.D.”

    This is true.

    “This is a false presentation of what Sraffian theory actually says. As I argued before, Sraffian theory rather ‘holds that viable technological change, whether in basic industries or in luxury goods industries, can never reduce the rate of profit without a change in the real wage rate, which is exactly what Moseley says. That is the essence of the Okishio theorem.’ [emphasis added]

    This is true.

    “You can only prove that your causal determination differs from Sraffian theory if you manage to demonstrate that in your interpretation, contrary to Sraffian theory, the economy-wide rate of profit could change in the case of labor-saving technological change in luxury goods industries without a change in the real wage rate.

    “But since you admitted that Kliman’s proof that ‘there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant’ holds true, you admitted that this cannot be done in your macro-monetary theory. Hence you cannot possibly prove that your macro-monetary theory produces quantitatively different results than Sraffian theory.”

    This is true.

  66. Andrew Kliman on Thu, 2nd Feb 2017 10:22 am 

    Fred, on Thu, 26th Jan 2017, 8:50 am, you wrote,

    “unless the price of labor-power falls as much as the unit price of production of wage goods, then the increase in the rate of surplus-value will be less than the increase in the composition of capital and the rate of profit will fall, contrary to the Sraffian conclusion.”

     
    And on Thu, 26th Jan 2017, 9:08 am, you wrote:

    “this does not mean that an increase in the real wage causes the fall in the rate of profit. The fall in the rate of profit is caused … originally by an increase in the composition of capital and is not completely offset by an increase in the rate of surplus-value if %↓PLP < %↓UPPWG, and this condition also causes an increase in the real wage."   But the case you are imagining does not exist. The price of labor-power must fall by as much as the unit price of production of wage goods in this case.   You assume that there is a single "price of production of wage goods." It follows that the price of labor-power is equal by definition to the price of production of wage goods times the real wage rate (i.e., the quantity of wage goods per unit of labor-power): (1) PLP = PPWG x RWR You also say that changes in the real wage rate are not a causal determinant here. (They are instead an alleged effect of alleged disproportionate changes in PLP and PPWG.) So RWR remains constant (unless and until there are disproportionate changes in PLP and PPWG). But if RWR remains constant, then it follows from Definition (1) that the percentage changes in PLP and PPWG must be equal. Q.E.D.   Since the price of labor-power falls by as much as the unit price of production of wage goods, the percentage increase in the rate of surplus-value will equal the percentage increase in the composition of capital, and so the rate of profit will remain constant, which is the Sraffian conclusion.

  67. Fred Moseley on Sun, 5th Feb 2017 9:41 am 

    Replies to Kliman (Feb. 2)

    Kliman said:
    “The price of labor-power must fall by as much as the unit price of production of wage goods in this case.”

    Andrew, why do you think that the price of labor-power “MUST” fall as much as the unit price of production of wage goods? According to my interpretation of Marx’s theory, the price of labor-power is TAKEN AS GIVEN as determined by the class struggle between capitalists and workers and thus does not necessarily fall as much as the unit price of production of wage goods.

    Kliman also said:
    “You assume that there is a single “price of production of wage goods.”
    It follows that the price of labor-power is equal by definition to the price of production of wage goods times the real wage rate (i.e., the quantity of wage goods per unit of labor-power):
    (1) PLP = PPWG x RWR
    You also say that changes in the real wage rate are not a causal determinant here. (They are instead an alleged effect of alleged disproportionate changes in PLP and PPWG.)
    So RWR remains constant (unless and until there are disproportionate changes in PLP and PPWG).
    But if RWR remains constant, then it follows from Definition (1) that the percentage changes in PLP and PPWG must be equal.”

    This argument is circular:
    1. RWR remains constant (unless there are disproportionate changes in PLP and PPWG)
    i.e. if there are equal percentage changes in PLP and PPWG, then RWR remains constant.
    2. if RWR remains constant, then the percentage changes of PLP and PPWWG are equal.

    Your argument also assumes that the PLP is determined by the definition (1), i.e. is determined by a given real wage rate, as in Sraffian theory. But my interpretation assumes that the PLP is NOT determined by a given real wage, but is instead TAKEN AS GIVEN as determined by the class struggle. And then you criticize me for coming to the same conclusion as Sraffian theory! Your argument is like a cop planting evidence on innocents. It is precisely because the money wage is taken as given rather than derived from a given real wage that my interpretation of Marx’s theory comes to different conclusions from Sraffian theory.

    A number of other economic theories also take the money wage as given rather than the real wage: Keynes’ theory (this was one of Keynes’ main criticisms of classical theory – that the wage contract is in terms of the money wage, not the real wage), Post-Keynesian theory, theory of the monetary circuit, and the New Interpretation of Marx’s theory. Lipietz argued that taking the real wage as given is like treating wage-laborers as slaves. The NI also assumed that the same money wage is taken as given in the determination of both values and prices of production, as do I.

    Andrew: how would the TSSI analyze the effect of labor-saving technological change in luxury goods industries on the rate of profit (on the assumption that prices = prices of production). How would the TSSI analysis be different from my analysis (copied below)? Thanks.

    MY LOGIC

    1. assume labor-saving technological change in luxury goods industries
    → ↓ rate of profit (R) due to ↑C/V

    2. → ↓UPPWG (unit price of production of wage goods)

    3. price of labor-power (PLP) taken as given
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. (quantity of wage goods) QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

    Therefore, ↑QWG is NOT A CAUSE of ↑S/V and ↑R. Rather, ↑R and ↑QWG are both EFFECTS of ↓UPPWG and ↓PLP. And ↓UPPWG and ↓PLP are themselves the result of ↓R caused by technological change in luxury industries (step #1). Therefore, ↑QWG is an EFFECT of the initial ↓R, not a cause of ↓R.

  68. Fred Moseley on Sun, 5th Feb 2017 9:47 am 

    Reply to Roel (Feb. 1):

    Roel said:
    “1. About the order of “determination”
    You have been arguing repeatedly, as far as I know for a little over two decades, that a fundamental feature of Marx’s logic is that “the rate of surplus-value is determined first … then the rate of profit is determined … by the rate of surplus-value and the composition of capital.” As I note in my remarks on your method of debate, this has been your central argument in fending off Kliman’s criticisms. You have even argued that it would be “clearly contrary to Marx’s theory and his explicit statements” to say otherwise, and that you “don’t think there can be any doubt about that.” But now you are arguing that “the increase in the real wage [which causes the change in the rate of surplus-value] in this case is an EFFECT of ↓R [the fall in the rate of profit], not a cause.”
    These two statements are mutually exclusive. Either the rate of surplus value – and thus the real wage rate – is determined first, or the rate of profit is determined first. Which one is it?”

    These two statements are NOT mutually exclusive.

    Please take another look at the logic of my analysis (copied below).

    In step #4, ↑ S/V is due to ↓V → ↑S, not due to ↑real wage (QWG).
    You say that ↑real wage causes a “change” in the rate of surplus-value. But an increase in the real wage would cause a DECREASE in the rate of surplus-value, not an increase as in step #4.

    Step #4 also has the same logical relation between S/V and R that I have emphasized all along: ↑S/V → ↑R (partial recovery)

    The ↓V in step #4 is itself the effect of the initial ↓R in step# 1. So the initial ↓R causes a counter effect:
    ↓R → ↓UPPWG → ↓V → ↑S/V → ↑R.
    (This would not happen if there is no ↓V.)

    R is still determined by (S/V) / (C/V). The initial ↓R is caused by ↑C/V and there is a partial recovery due to the ↑S/V.

    Roel: how would the TSSI analyze the effect of labor-saving technological change in luxury goods industries on the rate of profit? How would it be different from my analysis? Thanks.

    Roel also said:
    “2. About the labor theory of value
    “So in Marx’s theory, if there is a rise in constant capital invested in luxury production, but no change in V or S anywhere in the economy (so the rate of surplus-value is constant), then the average rate of profit will fall. However, you now repeatedly confirmed that in your interpretation, this is not the case. So your interpretation contradicts his theory.”

    Not true. According to my interpretation, the rate of profit could fall and probably does fall (because %↓PLP < %↓UPPWG ), but the effects are more complicated.

    And my interpretation does not contradict Marx’s theory, but rather EXTENDS Marx’s theory to a more complicated case. Marx’s analysis of the effects of labor-saving technological change in luxury goods industries on the rate of profit assumed that prices = VALUES (including the prices of wage goods) and thus prices did not depend on the rate of profit. My analysis of this question EXTENDS Marx’s theory (thanks to Kliman) to incorporate the more concrete assumption that the prices = prices of production (including the prices of wage goods) and thus does depends on the rate of profit. So the analysis is more complicated and the initial ↓R due to ↑C/V in luxury goods industries (Marx’s analysis stopped there) causes the unit price of production of wage goods to fall, which in turn causes further effects which eventually determines whether or not the rate of profit falls and if so by how much.

    Do you think Marx’s analysis of this more complicated case (with prices of production) would have been different from my analysis? If so, how?

    Roel also said:
    "3. False presentation of Sraffian theory
    This is a false presentation of what Sraffian theory actually says. As I argued before, Sraffian theory rather “holds that viable technological change, whether in basic industries or in luxury goods industries, can never reduce the rate of profit without a change in the real wage rate, which is exactly what Moseley says. That is the essence of the Okishio theorem.” [emphasis added]
    Of course it is true that the Sraffians infer a causal relationship from this: they argue that it demonstrates that the rate of profit is causally determined by physical coefficients and the real wage rate. You argue that this is not so for your interpretation. However, a discourse is not a proof. You can only prove that your causal determination differs from Sraffian theory if you manage to demonstrate that in your interpretation, contrary to Sraffian theory, the economy-wide rate of profit could change in the case of labor-saving technological change in luxury goods industries without a change in the real wage rate.
    But since you admitted that Kliman’s proof that “there are no cases in which, given Moseley’s interpretation, input-output coefficients of the basic sector remain unchanged when the economy-wide C/V changes while the economy-wide S/V remains constant” holds true, you admitted that this cannot be done in your macro-monetary theory. Hence you cannot possibly prove that your macro-monetary theory produces quantitatively different results than Sraffian theory.”

    The issue under discussion is the effect of labor-saving technological change in luxury goods industries on the rate of profit. Sraffian theory analyzes this question on the assumption that the real wage is taken as given and remains constant and concludes that such technological change will have NO EFFECT on the rate of profit. This is not a false presentation of Sraffian theory of this issue.

    My interpretation of Marx’s theory, on the other hand, analyzes this question on the assumption that the money wage (or price of labor-power) is taken as given as determined by class struggle and will probably change as a result of %↓PLP < %↓UPPWG ).

    The conclusion of my analysis is:
    the ultimate effect on the rate of profit depends on the relative proportional decline in the price of labor power and the unit price of wage goods and will fall unless the price of labor power falls as much as the unit price of wage goods.

    This conclusion is different from Sraffian theory.
    A decline in the rate of profit as a result of labor-saving technological change in luxury industries is at least POSSIBLE in my interpretation of Marx’s theory; it is NOT EVEN POSSIBLE in Sraffian theory, which is based instead on given and constant physical quantities.

    Roel interprets Sraffian theory more broadly and argues that Sraffian theory concludes that viable technological change in any sector can cause the rate of profit to fall only if the real wage increases. And he argues that my specific analysis of labor-saving technological change in luxury industries also concludes that the rate of profit can fall only if the real wage increases, similar to the general conclusion of Sraffian theory. However, the rate of profit falls in my analysis, not because of an increase in the real wage, but because of an increase in C/V in luxury goods industries. And the increase in the real wage is an EFFECT of ↓R, not a cause. The increase in the real wage is associated (through the common cause of %↓PLP < %↓UPPWG) with an INCREASE in the rate of surplus-value and the rate of profit, not a decrease.

    My analysis is an extension of Marx’s analysis. It starts with Marx’s conclusion (based on prices = values) that the rate of profit falls due to technological change in luxury industries which increases C/V and extends Marx’s analysis to take into account prices of production and the counter-effects due to the initial ↓R.

    Roel, I hope you would agree that Marx’s causal determination of the effect of technological change in luxury industries on the rate of profit is different from Sraffian causal determination. My causal determination is an extension of Marx’s causal determination. My causal determination starts with Marx’s decline in the rate of profit due to ↑C/V and extends it to take into account prices = prices of production.

    How would your analysis be different?

    MY LOGIC

    1. assume labor-saving technological change in luxury goods industries
    → ↓ rate of profit (R) due to ↑C/V

    2. → ↓UPPWG (unit price of production of wage goods)

    3. price of labor-power (PLP) taken as given
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. (quantity of wage goods) QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

    Therefore, ↑QWG is NOT A CAUSE of ↑S/V and ↑R. Rather, ↑R and ↑QWG are both EFFECTS of ↓UPPWG and ↓PLP. And ↓UPPWG and ↓PLP are themselves the result of ↓R caused by technological change in luxury industries (step #1). Therefore, ↑QWG is an EFFECT of the initial ↓R, not a cause of ↓R.

  69. Andrew Kliman on Sun, 5th Feb 2017 3:07 pm 

    A reply to Fred Moseley’s comment of Sun, 5th Feb 2017, 9:41 am.

     
    Fred, the problem isn’t that my argument is circular. The problem is that your “logic” is all messed up, which prevents you from understanding the point.

    The key problem with your “logic” occurs at the start.

    1. assume labor-saving technological change in luxury goods industries
    → ↓ rate of profit (R) due to ↑C/V

     
    Nope. The deduction is invalid, for two reasons.

    First, there are many determinants of the rate of profit. Technology is only one of them. If you fail to specify which other determinants of the rate of profit change, and how, and which ones remain constant, you cannot deduce that the rate of profit falls.

    Second, your “logic” makes it seem as though the fall in the rate of profit causes a fall in the unit price of production of wage goods:

    2. → ↓UPPWG (unit price of production of wage goods)

     
    This is simply untrue. Prices of commodities are among the determinants of the rate of profit, notwithstanding the fact that you have failed to specify them. Changes in output prices and changes in the rate of profit occur simultaneously, not in succession. And, since you are a simultaneist, changes in your input prices (such as UPPWG) also occur simultaneously with changes in the rate of profit.
     
    Consequently, you are not entitled to continue your “logic” as follows:

    3. price of labor-power (PLP) taken as given
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. (quantity of wage goods) QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

     
    In particular, you aren’t entitled to blithely “assume ↓PLP” as if it were some independent factor here. It isn’t.

    First, just as any change in UPPWG is among the determinants of the change in your rate of profit (since you are a simultaneist), so are any changes in PLP and the real wage rate.

    Second, changes in the magnitude of PLP have to be consistent with the changes, if any, in the magnitudes of UPPWG and the real wage rate. (Note that this statement is true whether or not “PLP is determined by … a given real wage rate.”)

     
    You are entitled to say that when technical change in luxury sectors occurs, it is not accompanied by a fall in the price of labor power. And then you can validly deduce that the rate of profit falls.

    However, since a fall in UPPWG occurs simultaneously with the fall in your rate of profit (since you are a simultaneist), while the price of labor power remains constant, the real wage rate has to rise. And this rise in the real wage rate is not an effect of the fall in your rate of profit; it is one of its causes.

    (To see this, one simply has to assume, to the contrary, that there is no change in the real wage rate prior to the change in the rate of profit. Since the price of labor-power also remains constant, it must be the case that the price of wage goods is constant at well. But in that case, the rate of profit cannot fall.)

  70. Roel Van de Pol on Thu, 9th Feb 2017 4:36 am 

    To Moseley:

    To be completely honest with you, I think all your arguments have already been answered at length in earlier posts and it is useless to repeat them once again. However, I would still like us to go forward in this important debate. But to be able to do so, we need to get rid of some confusion, because I think we might not be fully understanding each others’ reasoning. That might be the reason why we’re arguing in circles. Could you please take a clear position on the following issues so that (Kliman and) I can know for certain what you are defending?

    (1) Do you or do you not accept Kliman’s proof of Dec 31st? If not, which specific aspects of the proof do you challenge and why?
    (2) Can you or can you not provide us with sets of macro-monetary data and physical quantities before and after labor-saving technological change in luxury goods industries? If you can, please do so, so we can compare the results to physicalist results.
    (3) Can you or can you not provide us with sets of macro-monetary data and physical quantities before and after labor-saving technological change, where there is a change in the economy-wide rate of profit but no change in the real wage rate or in the I/O coefficients of basic industries? If you can, please do so, because that would indeed prove that your interpretation produces different results than the Sraffians.
    (4) Ideally, you could provide us with a modified version of Kliman’s “Phun”-spreadsheet that corresponds to your view, so we can see what happens and where it differs from what Kliman claims about your view. But that might be too much to ask.

    Thanks.

  71. Fred Moseley on Thu, 9th Feb 2017 10:44 am 

    Reply to Kliman (Feb. 5)

    One of the main points of my macro-monetary interpretation of Marx’s theory is the macro part: that the total surplus-value and the rate of profit are determined prior to the distribution of surplus-value, including the determination of prices of production. The total surplus-value (ΔM) is determined by the total surplus labor (S = m SL) and the rate of profit is determined by two macroeconomic ratios, the rate of surplus-value and the composition of capital (R = S/V / C/V). The rate of profit is not determined simultaneously with unit prices; the rate of profit is determined by these macroeconomic ratios and micro unit prices play no role in the determination of the rate of profit.

    In the case of technological change in luxury goods industries, C/V increases in luxury goods industries and in the economy as a whole. To begin with there is no ↑S/V, so the rate of profit decreases as a straightforward logical deduction. (step #1 of my analysis; see below)

    Secondly, according to my interpretation of Marx’s theory, prices of production depend in part on the predetermined rate of profit: Pi = (Ci + Vi) (1 + R). Therefore, the decline of the rate of profit caused by ↑C/V due to technological change in luxury goods industries causes the prices of production and unit prices of production of all commodities to decline, including the unit prices of production of wage goods. (step #2)

    From there, the rest of my analysis follows as described.

    Kliman argued that the logic of my analysis is “all messed up” and “invalid” because my interpretation is “simultaneist”; i.e.the rate of profit and unit prices are determined simultaneously on the basis of given physical quantities of inputs and outputs.

    But Kliman has not proved that my interpretation is “simultaneist”. He tried for 12 Parts of his comments to prove that my rate of profit is determined by physical quantities, but he failed because his argument was based on circular reasoning. All he proved was that, if his pseudo “physicalist” I/O coefficients (not actual physical I/O coefficients) are computed from my monetary rate of profit (determined as above), then these “physicalist” coefficients can be used (in circular fashion) to COMPUTE (from the same set of equations) a “physicalist” rate of profit that is = my monetary rate of profit. But this circular computation DOES NOT PROVE that my rate of profit is DETERMINED (in a CAUSAL sense) by physical coefficients and Kliman has admitted as much (Dec. 28, 2:50 pm).

    Therefore, my macro interpretation of the determination of the rate of profit in Marx’s theory by macro ratios is not “simultaneist” (i.e. not determined by physical quantities) and the logic of my analysis of the effect of technological change in luxury goods industries on the rate of profit, based on this macro interpretation of the determination of the rate of profit, is sound and valid.

    MY LOGIC

    1. assume labor-saving technological change in luxury goods industries
    → ↓ rate of profit (R) due to ↑C/V

    2. → ↓UPPWG (unit price of production of wage goods)

    3. price of labor-power (PLP) taken as given
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. (quantity of wage goods) QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

    Therefore, again, ↑QWG is NOT A CAUSE of ↑S/V and ↑R. Rather, ↑R and ↑QWG are both EFFECTS of ↓UPPWG and ↓PLP. And ↓UPPWG and ↓PLP are themselves the result of ↓R caused by technological change in luxury industries (step #1). Therefore, ↑QWG is an EFFECT of the initial ↓R, not a cause of ↓R.

  72. Andrew Kliman on Thu, 9th Feb 2017 5:40 pm 

    Fred, you’ve completely missed my point, intentionally or otherwise.

    The following is incorrect: “Kliman argued that the logic of my analysis is ‘all messed up’ and ‘invalid’ because my interpretation is ‘simultaneist.'”

    I argued that the logic is all messed up and invalid, period: “The problem is that your ‘logic’ is all messed up, which prevents you from understanding the point.”

    Most of what I wrote in support of this judgement, on Sun, 5th Feb 2017, 3:07 pm, has nothing to do with simultaneism, so you can’t escape the force of my critique by claiming once again that you’re not a simultaneist.

    Let me review what I wrote.
     

    I began as follows:

    “The key problem with your ‘logic’ occurs at the start.

    1. assume labor-saving technological change in luxury goods industries
    → ↓ rate of profit (R) due to ↑C/V

     
    “Nope. The deduction is invalid, for two reasons.

    “First, there are many determinants of the rate of profit. Technology is only one of them. If you fail to specify which other determinants of the rate of profit change, and how, and which ones remain constant, you cannot deduce that the rate of profit falls.

    “Second, your ‘logic’ makes it seem as though the fall in the rate of profit causes a fall in the unit price of production of wage goods:

    2. → ↓UPPWG (unit price of production of wage goods)

     
    “This is simply untrue. Prices of commodities are among the determinants of the rate of profit, notwithstanding the fact that you have failed to specify them. Changes in output prices and changes in the rate of profit occur simultaneously, not in succession.”

     
    Thus far, not a word about simultaneism. So points 1 and 2 of your “logic” are all messed up and invalid for reasons that have nothing to do with simultaneism.

    And since the rest of your “logic” depends crucially on these first two points, the whole thing is messed up and invalid, quite apart from your simultaneism. In other words, even were you not a simultaneist, it would be messed up and invalid.

     

    At this point, not before, I raised a point about simultaneism:

    “And, since you are a simultaneist, changes in your input prices (such as UPPWG) also occur simultaneously with changes in the rate of profit.
     
    “Consequently, you are not entitled to continue your ‘logic’ as follows:

    3. price of labor-power (PLP) taken as given
    assume ↓PLP

    4. ↓PLP → ↑S → ↑S/V → ↑R (partial offset to prior decline)

    5. (quantity of wage goods) QWG = PLP / UPPWG

    6. %↓PLP < %↓UPPWG → ↑QWG

     
    “In particular, you aren’t entitled to blithely ‘assume ↓PLP’ as if it were some independent factor here. It isn’t.

    “First, just as any change in UPPWG is among the determinants of the change in your rate of profit (since you are a simultaneist), so are any changes in PLP and the real wage rate.

    “Second, changes in the magnitude of PLP have to be consistent with the changes, if any, in the magnitudes of UPPWG and the real wage rate. (Note that this statement is true whether or not ‘PLP is determined by … a given real wage rate.’)”

     
    Now, if you were not a simultaneist, what would be different is that changes in your input prices (such as UPPWG) would not occur simultaneously with changes in the rate of profit.

    However, you would still not be entitled to blithely “assume ↓PLP” as if it were some independent factor here. That’s because, first, it would still be the case that any changes in PLP and the real wage rate are among the determinants of the change in your rate of profit. And second, it would still be the case that changes in the magnitude of PLP have to be consistent with the changes, if any, in the magnitudes of UPPWG and the real wage rate.

     
    So, as I said, your “logic” is all messed up and invalid, mostly for reasons that have nothing to do with simultaneism.

     
    I’m about to write up the math behind all this, which will further clarify the functional dependencies. I’ll publish it here when I’m done.

  73. Andrew Kliman on Thu, 9th Feb 2017 9:54 pm 

    I noted above that I was “about to write up the math behind all this, which will further clarify the functional dependencies” and that “I’ll publish it here when I’m done.”

    Here it is. I’ve called it “Notes on Moseley’s ‘Logic’ vs. the Real Deal”:

    http://www.marxisthumanistinitiative.org/wp-content/uploads/2017/02/Moseleys-Logic-vs.-the-Real-Deal.pdf

    Although the mathematical manipulations are tedious, they’re actually very simple.

    The key bit is near the end, on p. 5:

    Thus, if

    (i) per-unit input prices have to equal per-unit output prices both before and after a technical change, and

    (ii) there is no change in the technical coefficients of production in the non-luxury-producing Sector 1 , and

    (iii) there is no change in the real wage rate (b),

    then

    (iv) the uniform rate of profit after the technical change in the luxury-producing sector (Sector 2) must be exactly equal to the uniform rate of profit before the technical change.

    This conclusion has been derived from an analysis of the rate of profit that has made no assumption about what determines what. Therefore, Moseley cannot validly object that the analysis has violated the manner in which he theorizes the determination of the rate of profit, the determination of variable capital, the determination of the real wage rate, or the determination of anything else.

    Therefore, his “Logic” cannot get out of the starting gate. It begins by assuming that the technical change in Sector 2 will cause his rate of profit to fall. He then argues that the fall in the rate of profit will lead to a reduction in the price of Good 1, and therefore to a fall in V, etc. Yet we now know that his rate of profit will not fall. Consequently, subsequent changes induced by the fall in the rate of profit–the reduction in the price of Good 1, the fall in V, etc.–cannot occur.

  74. Andrew Kliman on Mon, 13th Feb 2017 10:22 pm 

    And here’s an Addendum to “Notes on Moseley’s ‘Logic’ vs. the Real Deal”

    http://www.marxisthumanistinitiative.org/wp-content/uploads/2017/02/Addendum-to-Notes-on-Moseleys-Logic-vs.-the-Real-Deal-2.13.17.pdf

    The Addendum deals with Moseley’s claim that his rate of profit will fall because the technical change in luxury-producing industries will lead to a rise in the value composition of capital (C/V), while the rate of surplus-value (S/V) will remain unchanged.

    It proves explicitly this claim is false: in fact, S/V will rise by the same percentage that C/V + 1 rises.

  75. Fred Moseley on Fri, 17th Feb 2017 12:00 pm 

    Comment on Kliman’s “Notes on Moseley’s ‘Logic’ vs. the Real Deal”

    The determination of b

    The conclusion of Kliman’s algebra is that r changes only if b and/or a1 of L1 changes. So an appropriate question is: are there reasons to expect that b will change as a result of technical change in luxury goods industries?

    The answer to that question depends on THEORY, and in particular on how b is DETERMINED.

    According to Sraffian theory, b is an exogenous given and does not change in the case of technical change in luxury goods industries, so that is their quick negative answer to the question. And since neither b nor a1 changes, neither does the rate of profit.

    According to my interpretation of Marx’s theory, on the other hand, b is not taken as given but is instead determined by:
    b = PLP / p1L.
    Hence b will change if there are disproportionate changes in PLP and p1. So the question becomes: are there reasons to expect disproportionate changes in PLP and p1 as a result of technical change in luxury goods industries?

    I argue that the answer to that question is yes:

    1. p1 is likely to decline as a result of technical change in luxury goods industries.
    This is true either in my interpretation because ↑C/V → ↓r → ↓p1
    or in Kliman’s Phun example,
    in which p2 (the price of wage goods) declines from 1.0 to 0.67

    2. According to my interpretation, PLP is an independent variable that depends on the balance of power between capitalists and workers. PLP is not determined by b, but instead b is partly determined by PLP. It is possible that PLP would not change at all and it is certainly possible that it will not decline in the same proportion as p1. In these cases, b will increase as a result of technical change in luxury goods industries, contrary to Sraffian theory.

    According to Kliman’s Phun example, on the other hand, b is taken as given and constant (as in Sraffian theory) and PLP is determined by: PLP = b*p2L, and therefore PLP declines in the same proportion as p2. But this conclusion is based on a fundamentally different THEORY of the DETERMINATION of b and thus does not apply to my interpretation of Marx’s theory.

    I emphasize again that the ↑b is not the cause of ↓r. The ↑b is an effect of ↓r → ↓p1 (with PLP constant or decreasing less).
    Kliman has emphasized that his equations imply nothing about determination and that applies to equation (15) in which r is on the LHS and b is on the RHS. The cause of ↓R is %↑C/V > %↑S/V.

    Kliman’s Addendum concludes that if b, a1, and L1 remain unchanged, then S/V and (C/V + 1) must change by the same percentage. But since according to my interpretation b is likely to increase, this implies that %↑S/V < %↑ (C/V +1).

  76. Andrew Kliman on Tue, 7th Mar 2017 1:19 pm 

    A reply to Fred Moseley’s comment of Fri, 17th Feb 2017 12:00 pm:

     
    He wrote,

    The conclusion of Kliman’s algebra is that r changes only if b and/or a1 o[r] L1 changes.”

    No!

    My conclusion is the exact opposite:

    If per-unit input and output prices need not be equal, everything is different. … if there is a change in the technical coefficients of production in the luxury-producing Sector 2 (a2, l2), then the uniform rate of profit after the technical change will be unequal to the uniform rate of profit before the technical change. That is the case even if there is no change in the technical coefficients of production in the non-luxury-producing Sector 1 (a1, l1),, or in the real wage rate (b), or in the other right-hand-side variables.

    The difference between Moseley’s version of my conclusion and my actual conclusion is important because the actual conclusion replicates Marx’s own conclusion. By abandoning simultaneism/physicalism, one can make Marx make sense without all the strained and illogical contortions to which Moseley is subjecting himself (and the rest of us).

     
    Moseley also wrote,

    According to Sraffian theory, b is an exogenous given and does not change in the case of technical change in luxury goods industries, so that is their quick negative answer to the question. And since neither b nor a1 changes, neither does the rate of profit.

    This is untrue, as Roel explained back when:

    Sraffian theory does not hold that “technological change in luxury goods industries *would never reduce the rate of profit.*” [emphasis added]. It holds that viable technological change, whether in basic industries or in luxury goods industries, can never reduce the rate of profit without a change in the real wage rate, which is exactly what Moseley says. That is the essence of the Okishio theorem. [comment of Wed, 18th Jan 2017 12:52 pm]

    Both Moseley and the Sraffians can assume that there’s technological change in luxury-producing industries and that the real wage rate rises at the same time. And given the same technological change and the same rise in the real wage rate, they obtain the exact same change in the rate of profit.

    And both Moseley and the Sraffians can assume, alternatively, that there’s technological change in luxury-producing industries but no change in the real wage rate. (Moseley contends that a change in the real wage rate is “likely,” which implies that it might not change.) And given the same technological change, they both conclude that there is no change in the rate of profit.

    The only difference is that Moseley, unlike the Sraffians, is subjecting himself (and the rest of us) to strained and illogical contortions in order to make it appear—falsely—that his theory replicates Marx’s conclusion that technological change in luxury-producing industries will alter the general rate of profit.

     
    Moseley also wrote,

    According to Kliman’s Phun example, on the other hand, b is taken as given and constant (as in Sraffian theory) and PLP is determined by: PLP = b*p2L, and therefore PLP declines in the same proportion as p2. But this conclusion is based on a fundamentally different THEORY of the DETERMINATION of b and thus does not apply to my interpretation of Marx’s theory.

    The last sentence is false. The conclusion is not based on a “fundamentally different THEORY of the DETERMINATION of b.” It is based on an assumption–not a theory–that there’s technological change in luxury-producing industries but no change in the real wage rate. That assumption is implicit in Moseley’s own “THEORY of the DETERMINATION of b” since, as I noted above, “Moseley contends that a change in the real wage rate is ‘likely,’ which implies that it might not change”!

    The purpose of the assumption is to assess the effect of technological change in luxury-producing industries on the rate of profit, according to Moseley’s theory. There are four relevant cases.

    1. Change in real wage rate, technological change in luxury-producing industries: Moseley’s rate of profit changes

    2. Change in real wage rate, NO technological change in luxury-producing industries: Moseley’s rate of profit changes

    3. No change in real wage rate, technological change in luxury-producing industries: Moseley’s rate of profit doesn’t change

    4. NO change in real wage rate, NO technological change in luxury-producing industries: Moseley’s rate of profit doesn’t change.

    The implications are obvious and incontrovertible. When the real wage rate changes (cases 1 and 2), Moseley’s rate of profit changes, whether or not there is technological change in luxury-producing industries. When the real wage rate doesn’t change (cases 3 and 4), Moseley’s rate of profit doesn’t change, whether or not there is technological change in luxury-producing industries. Therefore, according to his theory, changes in the real wage rate cause changes in the rate of profit, but technological changes in luxury-producing industries do not cause changes in the rate of profit.

     
    Moseley also wrote,

    I emphasize again that the ↑b is not the cause of ↓r. The ↑b is an effect of ↓r → ↓p1 (with PLP constant or decreasing less).

    This is absolutely false. According to his theory, if there is no ↑b, then there is no ↓r — see cases 3 and 4, above. So the ↑b is certainly not an effect of ↓r. It is a necessary condition for a ↓r.

    Furthermore, the bizarre notion that “↑b is an effect of ↓r” is the exact opposite of Marx’s view. After all, in chapter 14 of Capital, vol. 3, he argued that the depression of wages below the value of labor-power is among the “counteracting influences” (my emphasis) on the rate of profit. So is a “rise in the rate of surplus-value.” And so is relative over-population, because it depresses wages.







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