#### The standard of price function and fall in the value of money for GOLD

Engin Yılmaz

Hello everyone

1- Could you explain the standard of price function of the gold ? (Capital I Chapter 3: Money, Or the Circulation of Commodities)

2-A general rise in the prices of commodities can result only, either from a rise in their values – the value of money remaining constant – or from a fall in the value of money, the values of commodities remaining constant.(Capital I Chapter 3: Money, Or the Circulation of Commodities)

Could you explain this frase?  What is exactly fall in the value of money in terms of the gold

I try to explain
1 ton Iron= 10 gold coin
Iron's price increases if more labour is needed for producing the iron or Iron's price increases if less labour is enough for producing same amount gold.

Sincerely
Engin YILMAZ

anthonyboynton@...

1- Could you explain the standard of price function of the gold ? (Capital I Chapter 3: Money, Or the Circulation of Commodities)

Marx answers your question at the beginning of Section one of this chapter,

“The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold, the equivalent commodity par excellence, become money.

“It is not money that renders commodities commensurable. Just the contrary. It is because all commodities, as values, are realized human labor, and therefore commensurable, that their values can be measured by one and the same special commodity, and the latter be converted into the common measure of their values, i.e., into money. Money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labor-time.

The expression of the value of a commodity in gold — x commodity A = y money-commodity — is its money-form or price. A single equation, such as 1 ton of iron = 2 ounces of gold, now suffices to express the value of the iron in a socially valid manner. There is no longer any need for this equation to figure as a link in the chain of equations that express the values of all other commodities, because the equivalent commodity, gold, now has the character of money. The general form of relative value has resumed its original shape of simple or isolated relative value. On the other hand, the expanded expression of relative value, the endless series of equations, has now become the form peculiar to the relative value of the money-commodity. The series itself, too, is now given, and has social recognition in the prices of actual commodities. We have only to read the quotations of a price-list backwards, to find the magnitude of the value of money expressed in all sorts of commodities. But money itself has no price. In order to put it on an equal footing with all other commodities in this respect, we should be obliged to equate it to itself as its own equivalent.”

However, Marx’s answer was based on the empirical reality of the late 19th century when gold and silver were the money commodities. Increasingly from that time until Richard Nixon took the US dollar off of the gold standard in 1971, gold and silver money was replaced by fiat money. At first this was in the form of paper money and coins made of metals other than gold and silver, and then increasingly by checking accounts and credit and debit cards. Today a very large proportion of fiat money is electronic.

Empirically, it appears, there is no money commodity today. Some argue, that gold remains the money commodity only hidden behind the screen of fiat money. Others argue that the value of money is determined by the relation of the taxes collected by the state issuing the currency and its GDP or some other such ratio.

IMHO this problem is one reason Marx’s value theory has fallen out of favor among people who still call themselves Marxists.

I don’t think the problem is really so huge, but it has yet to be addressed in a way that achieves any sort of agreement among Marxists that I know of.

2-A general rise in the prices of commodities can result only, either from a rise in their values – the value of money remaining constant – or from a fall in the value of money, the values of commodities remaining constant.(Capital I Chapter 3: Money, Or the Circulation of Commodities)

Could you explain this phrase?  What is exactly fall in the value of money in terms of the gold?

I try to explain

1 ton Iron= 10 gold coin

Iron's price increases if more labor is needed for producing the iron or Iron's price increases if less labor is enough for producing same amount gold.

Your answer is basically correct, but the exchange values of iron and gold are essentially averages, i.e. the average amount of labor required to produce a ton or iron or 10 gold coins in your example. Marx calls these averages abstract labor.

Anthony

Frederick Harris

Engin Yılmaz
Mar 8

Hello everyone

1- Could you explain the standard of price function of the gold ? (Capital I Chapter 3: Money, Or the Circulation of Commodities)

anthonyboynton@...
Mar 14

1- Could you explain the standard of price function of the gold ? (Capital I Chapter 3: Money, Or the Circulation of Commodities)

Marx answers your question at the beginning of Section one of this chapter,

“The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold, the equivalent commodity par excellence, become money.

“It is not money that renders commodities commensurable. Just the contrary. It is because all commodities, as values, are realized human labor, and therefore commensurable, that their values can be measured by one and the same special commodity, and the latter be converted into the common measure of their values, i.e., into money. Money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labor-time.

The expression of the value of a commodity in gold — x commodity A = y money-commodity — is its money-form or price. A single equation, such as 1 ton of iron = 2 ounces of gold, now suffices to express the value of the iron in a socially valid manner. There is no longer any need for this equation to figure as a link in the chain of equations that express the values of all other commodities, because the equivalent commodity, gold, now has the character of money. The general form of relative value has resumed its original shape of simple or isolated relative value. On the other hand, the expanded expression of relative value, the endless series of equations, has now become the form peculiar to the relative value of the money-commodity. The series itself, too, is now given, and has social recognition in the prices of actual commodities. We have only to read the quotations of a price-list backwards, to find the magnitude of the value of money expressed in all sorts of commodities. But money itself has no price. In order to put it on an equal footing with all other commodities in this respect, we should be obliged to equate it to itself as its own equivalent.”

I have always found the difference between the measure of value and the standard of price somewhat confusing. However, I believe that Anthony's characterization is referring to the measure of value and not to the standard of price. His quotation is drawn from chapter three of Capital, volume 1, with the section title "The Measure of Values." Within that section, Marx distinguishes between money as the measure of values and the standard of price. All of Anthony's quotes pertain to money as a measure of value and not to money as a standard of price. Further quotes from that section substantiate this:

"
The price or money-form of commodities is, like their form of value generally, quite distinct from their palpable and real bodily form; it is therefore a purely ideal or notional form. Although invisible, the value of iron, linen and corn exists in these very articles: it is signified through their equality with gold, even though this relation with gold exists only in their heads, so to speak. The guardian of the commodities must therefore lend them his tongue,or hang a ticket on them, in order to communicate their prices to the outside world. Since the expression of the value of commodities in gold is a purely ideal act,* we may use purely imaginaryideal gold to perform this operation. Every owner of commodities knows that he is nowhere near turning them into gold when he has given their value the form of a price or of imaginary gold, and that it does not require the tiniest particle of real gold to give a valuation in gold of millions of pounds' worth of commodities. In its function as measure of value, money therefore serves only in an imaginary or ideal capacity. This circumstance has given rise to the wildest theories. But, although the money that performs the functions of a measure of value is only imaginitry, the price depends entirely on the actual substance that is money. The value, i.e. the quantity of human labour, which is containe& in a ton of iron is expressed by an imaginary quantity of the money commodity which contains the same amount of labour as the iron. Therefore, according to whether it is gold, silver or copper which is serving as the measure of value, the value of the ton of.iron will be expressed by very different prices, or will be represented by very different quantities of those metals.
...

Commodities with definite prices all appear in this form: a commodity A= x gold; b commodity B = y gold; c commodity C = z gold, etc., where a, b, c represent definite quantities of the commodities A, B, C and x, y, z definite quantities of gold. The values of these commodities are therefore changed into imaginary quantities of gold of different magnitudes. Hence, in spite of the confusing variety of the commodities themselves, their values become magnitudes of the same denomination, gold-magnitudes. As such, they are now capable of being compared with each other and measured, and the course of development produces the need to compare them, for technical reasons, with some fixed quantity of gold as their unit of measurement. This unit, by subsequent division into aliquot parts, becomes itself the standard of measurement. Before they become money, gold, silver and copper already possess such standards in their weights, so that, for example, a pound, which serves as a unit of measurement, canon the one hand be divided into ounces, and on the other hand be combined with others to make up hundredweights. It is owing to this that, in all metallic currencies, the names given to the standards of money or of price were originally taken from the preexisting names of the standards of weight.

As measure of value, and as standard of price, money performs two quite different functions. It is the measure of value as the social incarnation of human labour; it is the standard of price as a quantity of metal with a fixed weight. As the. measure of value it serves to convert the values of all the manifold commodities into prices, into imaginary quantities of gold; as the standard of price it measures those quantities of gold. The measure of values measures commodities considered as values; the standard of price measures, on the contrary, quantities of gold by a unit quantity of gold, not the value of one quantity of gold by the weight of another. For the standard of price, a certain weight of gold must be fixed as the unit of measurement. In this case, as in all cases where quantities of the same denomination are to be measured, the stability of the measurement is of decisive importance. Hence the less the unit of measurement (here a quantity of gold) is subject to variation, the better the standard of price fulfils its office. But gold can serve as a measure of value only because it is itself a product of labour, and therefore potentially variable in value.

It is, first of all, quite clear that a change in the value of gold in no way impairs its function as a standard of price. No matter how the value of gold varies, different quantities of gold always remain in the same value-relation to each other. If the value of gold fell by 1,000 per cent, 12 ounces of gold would continue to have twelve times the value of one ounce of gold, and when we are dealing with prices we are only concerned with the relation between different quantities of gold. Since, on the other hand, an ounce of gold undergoes no change in weight when its value rises or falls, no change can take place in the weight of its aliquot parts. Thus gold always renders the same service as a fixed measure of price, however much its value may vary. Moreover, a change in the value of gold does not prevent it from fulfilling its function as measure of value. The change affects all commodities simultaneously, and therefore, other things being equal, leaves the mutual relations between their values unaltered, although those values are now all expressed in higher or lower gold-prices than before."

Micael Heinrich's characterization seems to clarify the distinction (from How to Read Marx's Capital: Commentary and Explanations on the Beginning Chapters):

"
C) MEASURE OF VALUES AND STANDARD OF PRICES (191 TO SECOND PARAGRAPH 195)

Commodities represent their values in specific quantities of gold (if gold is the money commodity); in that way, gold serves as the measure of values. For their part, the amounts of gold also must be measured. The measuring is done with multiples of a specific weight of gold. This gold weight becomes  the measure of prices. The measuring of values and the measuring of prices are two completely different functions of money: ...

The difference between these two functions becomes clearer as they become more fully specified: as the measure of prices, the unit of measurement has to be fixed, so that the proportions don’t change. That is to say, “a handful of gold” is not an appropriate unit of measurement. Instead, it should be one gram or one ounce, which constantly expresses the same amount of gold.

As the measure of values, however, gold’s value is indeed mutable. That is, over the course of time, a gram of gold can be the “social incarnation” of different amounts of abstract human labor. In the paragraphs that follow, Marx discusses the effects of the measure of values’ mutability.

A change in the money commodity’s value does not affect the unit of measurement of prices: twelve ounces of gold still possess twelve times as much value as one ounce, despite changes in the gold’s value. (Marx’s reference to a decline in the value of gold by “1,000 per cent” on page 192 is an error. If gold’s value declined by more than 100 percent, it would be negative. What he probably means is a decline to 1/1000 of the previous value.)

Nor does a change in the money commodity’s value inhibit its function as
the measure of values, since changes in its value simultaneously affect all commodities. When Marx mentions “the laws of the simple relative expression of value which we developed in an earlier chapter” (193) he is referring to what was presented in chapter 1 under the heading “The Quantitative Determinacy of the Relative Form of Value” (144–46). There we saw the effects of changes in values of both the commodity in the relative form of value and the commodity in the equivalent form. Marx repeats some of the results of that investigation in chapter 3 on page 193.

However, the claim that changes in the money commodity’s value do not interfere with money’s measuring function is only valid when comparing the simultaneous values of different commodities. If we consider measurements that have occurred at different points in time, then a change in the money commodity’s value during the interim would mean that the measurements of value can no longer be directly compared. In these cases, commensurability depends on correctly calculating the changes in the money commodity’s value."

The standard of price seems to be an internal relation between physical units of gold (or any other physical object treated as the incarnation of abstract human labour). It may also be related to the process of exchange and the circulation of commodities (which is not identical with the need to express the products of abstract labour in another commodity ideally since the social process of production of human life in a capitalist society is not social in its immediate form--the labour performed by brewery workers in a capitalist factory is not social as it is being performed but only becomes actually social through the process of exchange).
Engin Yılmaz
Mar 8

2-A general rise in the prices of commodities can result only, either from a rise in their values – the value of money remaining constant – or from a fall in the value of money, the values of commodities remaining constant.(Capital I Chapter 3: Money, Or the Circulation of Commodities)

Could you explain this frase?  What is exactly fall in the value of money in terms of the gold

I try to explain
1 ton Iron= 10 gold coin
Iron's price increases if more labour is needed for producing the iron or Iron's price increases if less labour is enough for producing same amount gold.

Your answer is basically correct, but the exchange values of iron and gold are essentially averages, i.e. the average amount of labor required to produce a ton or iron or 10 gold coins in your example. Marx calls these averages abstract labor.

I remember, vaguely, reading a critique of Marx concerning the concept of average. What is meant by "average": mode, mean or mathematical average (summation of units divided by the number of units)? Marx's answer to such a criticism may or may not depend on the relation of supply to demand: whether s=d, s>d or s<d--but I have not really studied this issue in any depth (Marx seems to be doing something to that effect in volume three of Capital). Perhaps others can provide an answer--without going beyond simple algebra?

Fred

anthonyboynton@...

Thanks Fred: Engin had quoted Capital I Chapter 3: Money, Or the Circulation of Commodities, so I included a more extensive version of the same quote. It is true that it does not really address the price form of value in any detail, and that I did not either. Marx does not attempt an extensive discussion of value vs. prices in Volume 1 of Capital. In fact, his most extensive effort on the topic was published posthumously in Volume 3 as edited by Engels. His efforts there led to the famous debate over what is now called the Transformation problem which I alluded to indirectly in my comments. Here is an introduction to the transformation problem https://en.wikipedia.org/wiki/Transformation_problem

And here is an introduction to the "Temporal Single System Solution" which I think is the best work done yet on this problem https://en.wikipedia.org/wiki/Temporal_single-system_interpretation

If you are interested, we could start a new threat on the transformation problem.

Anthony

Frederick Harris

Anthony wrote:
His efforts there led to the famous debate over what is now called the Transformation problem which I alluded to indirectly in my comments. Here is an introduction to the transformation problem https://en.wikipedia.org/wiki/Transformation_problem

And here is an introduction to the "Temporal Single System Solution" which I think is the best work done yet on this problem https://en.wikipedia.org/wiki/Temporal_single-system_interpretation

If you are interested, we could start a new threat on the transformation problem.
I have heard of the transformation problem and the TSSI. However, I lack the mathematical background to appreciate the nuances of the issue. Nonetheless, my interest in the transformation problem is political--which is unfortunately insufficiently emphasized in the debate--or rather often gets lost. The issue relates to the distinction between the production of surplus value and its distribution--which further obscures the source of profit in the exploitation of workers--a further source of capital fetishism. This is relevant for understanding why workers do not clearly perceive themselves as being exploited--if they did, they might do something about it.

The transformation problem should be linked to empirical studies and not just be a theoretical problem in itself; too often, theory is developed without any connection to more concrete political issues. How to do this is itself a problem that should be discussed. When calculating the rate of exploitation of particular companies, for example, I have been aware that the profit used in annual reports may be derived, in part, from the exploitation of other workers; similarly, some of the surplus value produced by the workers of the specific company may be transferred to other companies. I am unsure how this is done in practice, or how to take this into account when calcuating the rate of exploitaiton of specific workers working for specific companies. I did start to take this into acount when I tried to calculate the rate of exploitation of General Motors workers by excluding from the calculation profit derived from joint ventures, if I remember correctly. However, from the lack of commentary or suggestions for improving the calculations, no one seems interested in engaging in pursuing such empirical issues, as far as I can see. The consequence, as far as I can see, is that social reofrmists or social democrats (the so-called left), at least in Canada, have had a monopoly of "concern" for the workers--while excluding any political consideration of the exploitation of workers and what it means politically (such as that related to collective bargaining, unions and "fair contracts").

I admit that, at some point in addressing the issue, theoretical considerations may take temporary priority--to work out more fully for example how the transformation occurs and how to calculate it more accurately (my far from adequate understanding of scientific methodology still sees that science, ultimately, must have empirical consequences and implications--otherwise, it can become merely imaginary; John Dewey saw that clearly enough (such as in his Logic: The Theory of Inquiry). However, such theoretical considerations need to be linked to both empirical conditions and practical issues--theory for its own sake is a sign of academic Marxism.

Perhaps you and others can elaborate how to transform the transformation problem into a more politically worthwhile project?

Fred

Charlie

On Wed, Mar 15, 2023 at 03:26 PM, Frederick Harris wrote:
When calculating the rate of exploitation of particular companies,...

Here is an analysis of Vijay Prashad's political misuse of a rate-of-exploitation calculation. Prashad tries to shift the exploitation of workers in China from the local capitalists onto Apple: "Apple’s Profits and Foxconn Workers’ Wages" at

Joseph Green

With regard to the notorious transformation problem, I append reference to an article of mine which restores Marx's original emphasis that marketplace measures, whether expressed in dollars or in value, are non-natural and are not rational forms of economic calculation. In particular, Marxism holds that pricing according to value does not solve the problems of capitalism, but explains these problems. And seeking to modify value to make it environmally-sound is a fruitless endeavor.
-- Joseph Green
On the non-naturalness of value:
A defense of Marx and Engels on the transformation problem (pt 1)
Full text at http://www.communistvoice.org/45cTransformation-preface.html

This article corrects a defect in the mathematical side of Marx's discussion of the transformation problem and modifies certain of the formulas he gave. In doing so, it doesn't undermine, but strengthens the case for Marx and Engels' overall view of the transformation process. Among other things, those mathematical results of the past, which have been taken as refuting Marx, turn out to be in line with the labor theory of value.

Most activists haven't paid much attention to the controversy over the transformation problem. It has appeared to them as an obscure secondary issue. And in fact, this common sense attitude is quite reasonable. The basic proof of the law of value lies in the repeated verification of the basic features of capitalism that it explains, not in the precise calculation of prices of production. Moreover, most of the literature on the transformation problem hasn't been very enlightening.

This article too will have some dry and technical matters. But I hope to express the main modification needed of Marx's calculations with regard to the transformation process briefly and clearly. And I will also seek to connect the transformation problem to some present-day issues of importance in their own right:

• The persistence of the basic laws of capitalism despite their continually varying forms.
• The refutation of "true cost" pricing.
• The "vagueness", and what Marx regarded as the "non-natural" nature, of all marketplace measures, whether financial or value.

Preface

Introductory material

-- Some preliminaries

-- Adam Smith's and David Ricardo's transformation problems

-- Marx and the transformation process

-- The helper formulas for the transformation process

-- Mathematical difficulties

An overlooked feature of value

--The money/value relationship and individual products

--The relation of the total profits to the total surplus value

--The rate of profit

--The modified helper formulas

--Caveats

Relation to some past results on the transformation problem

--The Bortkiewicz-Sweezy results

--Funny money, or the search for the golden numeraire

--The so-called "new solution"

--Anwar Shaikh and the transfer between two circuits of capital

The vagueness and indeterminacy of money

--Inflation

--The index problem

--The aggregation problem

--The Cambridge capital controversy

-- Marx, the aggregation problem, and value as "non-natural"

-- A social and non-natural category is still a real category

--Money illusion and value

--True-value pricing and the non-natural nature of value <>

Joseph Green

On the non-naturalness of value:
A defense of Marx and Engels on the transformation problem (pt 1)

Full text at
http://www.communistvoice.org/45cTransformation-preface.html

Competition between capitalist producers producing similar products will tend to produce similar prices for similar products. But, given a price, if the production of the product concerned allows the capitalist producers to produce at a rate of profit greater than elsewhere in the economy then capital will tend (tend) to move into the production of that product, increasing its supply relative to demand, lowering the profit produced. Conversely, if the production of a given product results in a profit below that that could be produced elsewhere, capital will tend to move out of the production of that product. That is how profits tend to be equalised. This is what Marx suggests in chapter 10 of Capital volume three.

As far as I see it, he 'transformation' invovled here is not an actual, real transformation that occurs in the economy, where by actual values are transformed into prices of production, but a 'transformation' in the level of abstraction of the analysis incurred by taking into account that accounting for (1) competition between capitals within sectors of production and (2) competition within capital across sectors means that prices that commodities tend (tend) to sell at are those that allow capitals to produce an average profit.

I really don't think there is more to the so-called 'transformation problem' than this, that there is really no 'transformation' to speak of, and neither is there a 'problem' as such. The really interesting question is the one originally raised, as to the nature of modern money. That, as Marxists, I think we really need to start to come up with answers to, and I look forward to seeing what people think.

Michael Meeropol

apologies if this is too simple minded to make much sense --

It seems to me that the problem created by the equalization of profit rates across firms and industries which is a TENDENCY of the competitive stage of capitalism that was Marx's laboratory of course (the advent of "monopoly capitalism" produces changes of course --- which has been debated for probably 100 years already!) meanw that because prices of production diverge from "values" as per the socially necessary labor time to produce different commodities, the rate of surplus value is NOT equalized and THEREFORE "values" no longer "determine" prices ---

The so-called transformation problem solutions (starting with Bortkiewicz] were attempts to show that in fact values could still (somehow) determine prices despite the fact that profit equalization required that prices of productioin "diverge" from values ---

I have NEVER understood these issues --- there I confess that --- but instead have been willing to focus on the overall MACROeconomic idea of surplus value (or in the Baran - Sweezy analysis "surplus" --- which I iknow is not the same but it is connected!) as determined by the "push and pull" at the point of production --- which of course is the KEY to the dynamic of capitalism.

All comrades are invited to help me become a bit more sophisticated ...

On Thu, Mar 16, 2023 at 10:50 AM Ed George <edgeorge1963@...> wrote:
Competition between capitalist producers producing similar products will tend to produce similar prices for similar products. But, given a price, if the production of the product concerned allows the capitalist producers to produce at a rate of profit greater than elsewhere in the economy then capital will tend (tend) to move into the production of that product, increasing its supply relative to demand, lowering the profit produced. Conversely, if the production of a given product results in a profit below that that could be produced elsewhere, capital will tend to move out of the production of that product. That is how profits tend to be equalised. This is what Marx suggests in chapter 10 of Capital volume three.

As far as I see it, he 'transformation' invovled here is not an actual, real transformation that occurs in the economy, where by actual values are transformed into prices of production, but a 'transformation' in the level of abstraction of the analysis incurred by taking into account that accounting for (1) competition between capitals within sectors of production and (2) competition within capital across sectors means that prices that commodities tend (tend) to sell at are those that allow capitals to produce an average profit.

I  really don't think there is more to the so-called 'transformation problem' than this, that there is really no 'transformation' to speak of, and neither is there a 'problem' as such. The really interesting question is the one originally raised, as to the nature of modern money. That, as Marxists, I think we really need to start to come up with answers to, and I look forward to seeing what people think.

Frederick Harris

On Thu, Mar 16, 2023 at 10:50 AM, Ed George wrote:
Competition between capitalist producers producing similar products will tend to produce similar prices for similar products. But, given a price, if the production of the product concerned allows the capitalist producers to produce at a rate of profit greater than elsewhere in the economy then capital will tend (tend) to move into the production of that product, increasing its supply relative to demand, lowering the profit produced. Conversely, if the production of a given product results in a profit below that that could be produced elsewhere, capital will tend to move out of the production of that product. That is how profits tend to be equalised. This is what Marx suggests in chapter 10 of Capital volume three.

As far as I see it, he 'transformation' invovled here is not an actual, real transformation that occurs in the economy, where by actual values are transformed into prices of production, but a 'transformation' in the level of abstraction of the analysis incurred by taking into account that accounting for (1) competition between capitals within sectors of production and (2) competition within capital across sectors means that prices that commodities tend (tend) to sell at are those that allow capitals to produce an average profit.

I really don't think there is more to the so-called 'transformation problem' than this, that there is really no 'transformation' to speak of, and neither is there a 'problem' as such.
I have a hard time accepting such a view. In the introduction to the Grundrisse, Marx refers to interrelations between production, exchange, distribution and consumption. Distribution relations (at least of surplus value) in the narrower sense seem to be taken up in volume three of Capital ((which I only read once long ago, so I really have not engaged with the issue for a long time). Ed does not mention differences in the composition of capital as playing a role in having production prices (distribution of surplus value) vary from value (a production concept). How does competition between capitals (and within capitals) with different compositions of capital establish production prices without a redistribution of surplus value? Is there then a coincidence of the production of surplus value and its distribution? Or is the distribution merely conceptual? Or does the movement of capital into and out of production, which affects the relation of supply to demand and thereby prices, automatically result in the redistrubtion of surplus value? If so, can Ed explain in more detail, in relation to differences in compositions of capital, how this is so?

In any case, the issue, politically, is that there is a divergence between the production of surplus value and the distribution of surplus value so that, on the one hand, the immediat exploitaiton of workers by a particular employer does not coincide with the amount of profit obtained by that employer (with the exception of capitals with the average composition of capital). The source of surplus value is fthereby further obsdured. On the other hand, it also shows the class nature of exploitaiton as the total production of surplus value produced by workers is distributed to capitalists according to the relative size and composition of their capital.

Ed:
"The really interesting question is the one originally raised, as to the nature of modern money. That, as Marxists, I think we really need to start to come up with answers to, and I look forward to seeing what people think."

I have little to say here. I tried to understand Perry Mehrling's views on shadow money, but with little success (he has a free course online). One of his ideas is that what is money at one level can be credit at another level; money and credit are not mutually exclusive categories. He is undoubtedly a bourgeois economist--but that hardly makes some of his ideas wrong.

I still have a very inadequate understanding of even the basic nature of derivatives, puts, calls, and nothing really about hedge funds. I have read an article by Dick Bryan, Michael Rafferty and Neil Ackland on derivatives and have skimmed through Bryan and Rafferty's book, but the nature of derivatives escapes me. I probably need to work out many examples. Any suggestions of articles, workbooks or books on the subject?

In response to Fred, and the 'the composition of capital ... playing a role in having production prices (distribution of surplus value) vary from value (a production concept)'. I think Marx already explained this. If commodities of a similar type and quality sell at a price that allows the producer producing under socially-necessary conditions to reap an average profit (I emphasise again that these are tendencies; the whole system is in constant flux and is adjusting itself to an emergent centre of oscillation which itself is constantly changing) then if commodities of different types are produced under conditions in which the value composition of capital is different then those commodities where the value composition is above the social average (i.e. more constant capital to variable) then their price of production - cost price plus average profit - will be higher than their social value (otherwise they wouldn't realise an average profit), and in the case of the commodities whose value composition is lower than the social average the price of production will be lower. So it commodities do sell at prices at which an average profit is garnered then, yes, there is a distribution of surplus-value amongst capitalists, but, importantly, a distribution independent of either their will or knowledge.

This is how I understand what Marx seems to be saying in chapter ten of volume three (chapter nine is not much more than a throat clearing exercise in my opinion, and people get too fixated on it). The best short description of all this is a passage in section six (the section on rent), and I'll append it at the end of this. It's as clear as one could wish.

I do very much agree with what Fred says when he says 'the issue, politically, is that there is a divergence between the production of surplus value and the distribution of surplus value so that, on the one hand, the immediate exploitaiton of workers by a particular employer does not coincide with the amount of profit obtained by that employer (with the exception of capitals with the average composition of capital). The source of surplus value is thereby further obscured. On the other hand, it also shows the class nature of exploitation as the total production of surplus value produced by workers is distributed to capitalists according to the relative size and composition of their capital.' (I corrected the typos.) Exactly. This is very well put, and it explains exactly why it is impossible to understand capitalist production and reproduction without a conception of *class*. Exploitation is social, not individual; and it is in the nature of the capitalist mode of production to obscure this.

I also agree very much with Fred's point that there should be a political (by which I understand practical) purpose to all this. I think some Marxists have had a tendency to discuss issues like, for example, the transformation problem, without keeping this in mind. In their defence, it has been the anti-Marxists that have raised the issue, and the defenders of Marx's theory have acted under good motives, but the issue can often be something of a distraction (which is in part why the anti-Marxists focus in on it, I think).

So, with that in mind, in the context of the parallel discussion that seems to be occuring around the rate of exploitation (both between different firms and across different countries), there seems to be significant differences amongst Marxists about how you would measure both the value composition of capital and the rate of profit specifically arising from how you would deal with the depreciation/valuation of fixed capital. This seems to me a significant and practical issue and I would be very interested in how other people see it.

This then loops back to the question of money, because once you start talking about the amortisation of fixed capital then you're talking about depreciation funds, hoards and credit, and I would really like to see more discussion of these matters, especially in the context of the points Anthony made earlier.

* * *

Here's the passage from part six of volume three (pp. 895-6 of the Penguin/Fowkes edition):

'The prices of production arise from an adjustment of commodity values under which, after the reimbursement. of the respective capital values consumed in the various spheres of production, the total surplus-value is distributed not in the proportion in which it is produced in the individual spheres of production, and hence contained in their product, but rather in proportion to the size of the capitals advanced. It is only in this way that an average profit arises, and a production price for commodities can be arrived at, the characteristic element of which is this average profit. It is the constant tendency of capitals to bring about, by competition, this adjustment in the distribution of the surplus-value that the total capital produces, and to overcome all obstacles towards it. It is therefore their tendency only to tolerate such surplus profits as arise, under whatever circumstances, not from the difference between the values of commodities and their prices of production, but rather from the general price of production governing the market and the individual production prices differing from this; surplus profits which therefore do not arise between two different spheres of production but rather within each sphere of production, so that they do not affect the general production prices of the different spheres, i.e. the general rate of profit, but rather presuppose both the transformation of value into price of production and the general rate of profit. This presupposition, however, depends as already explained on the continuously changing proportionate distribution of the total social capital between the various spheres of production; on a continuous immigration and emigration of capitals; on their transferability from one sphere to another; in short, on their free movement between these various spheres of production as so many available fields of investment for the independent parts of the total social capital. It is assumed in this connection that no barriers, or at least only accidental and temporary ones, prevent the competition of capitals—e.g. in a sphere of production where the value of commodities stands above their price of production or where the surplus-value produced stands above the average profit—from reducing value to price of production and thereby distributing the extra surplus-value of this sphere of production between all spheres exploited by capital in due proportion.’

* * *

Walter Daum

I agree with Ed George that there is really no transformation and no real problem. In fact, I believe Marx says as much:

“As soon as capitalist production reaches a certain level of development, the equalization of the different rates of profit in individual spheres to general rate of profit no longer proceeds solely through the play of attraction and repulsion, by which market-prices attract or repel capital. After average prices, and their corresponding market-prices, become stable for a time it reaches the consciousness of the individual capitalists that this equalisation balances definite differences, so that they include these in their mutual calculations. The differences exist in the mind of the capitalists and are taken into account as grounds for compensating.”
– Capital III, Chapter 12.3, “The Capitalist’s Grounds for Compensating.”

Anthony Boynton

Kliman et al. argue that the transformation problem is based on a misreading of Marx. In any case, the transformation problem was a purely formal problem in Marx's ideal model of capitalism. Empirically, price formation has always been much messier than in the model. Go to any flea market and you will see for yourselves what I am talking about. Marx's model is an abstract social formation in which the only mode of production is the capitalist mode of production based on wage labor within competitive markets for all commodities and services. As other modes of production have been subsumed and/or marginalized by the capitalist mode of production, price formation has come closer and closer to Marx's model. The temporal single system solution simply clarifies the misreading that led to the problem in the first place.

Anthony

On Fri, Mar 17, 2023 at 8:50 AM Walter Daum via groups.io <foxcave=verizon.net@groups.io> wrote:
I agree with Ed George that there is really no transformation and no real problem. In fact, I believe Marx says as much:

“As soon as capitalist production reaches a certain level of development, the equalization of the different rates of profit in individual spheres to general rate of profit no longer proceeds solely through the play of attraction and repulsion, by which market-prices attract or repel capital. After average prices, and their corresponding market-prices, become stable for a time it reaches the consciousness of the individual capitalists that this equalisation balances definite differences, so that they include these in their mutual calculations. The differences exist in the mind of the capitalists and are taken into account as grounds for compensating.”
– Capital III, Chapter 12.3, “The Capitalist’s Grounds for Compensating.”

Frederick Harris

Anthony wrote:

Kliman et al. argue that the transformation problem is based on a misreading of Marx. In any case, the transformation problem was a purely formal problem in Marx's ideal model of capitalism. Empirically, price formation has always been much messier than in the model. Go to any flea market and you will see for yourselves what I am talking about. Marx's model is an abstract social formation in which the only mode of production is the capitalist mode of production based on wage labor within competitive markets for all commodities and services. As other modes of production have been subsumed and/or marginalized by the capitalist mode of production, price formation has come closer and closer to Marx's model. The temporal single system solution simply clarifies the misreading that led to the problem in the first place.

Would you be able to elaborate, in a simple fashion, how Kliman's model addresses how the distribution of surplus value produced affects the rate of exchange of output? I remember that Kliman criticizes the treatment of the transformation of values simultaneously. If I remember correctly, he argues that it is necessary to consider the transformation in terms of linear time. Is this correct and, if so, how does this relate to different compositions of capital, the redistribution of surplus value, the non-identity of surplus value and profit and the obscuring of the source of surplus value through the exploitaiton of workers?

Fred

I'd read Kliman himself; I'd read pp. 139-174 of Reclaiming Marx's Capital for the clearest presentation of what he thinks. (Look in libcom if you don't have it.)

Frederick Harris

I'd read Kliman himself; I'd read pp. 139-174 of Reclaiming Marx's Capital for the clearest presentation of what he thinks. (Look in libcom if you don't have it.)
I wrote, earlier:
I have heard of the transformation problem and the TSSI. However, I lack the mathematical background to appreciate the nuances of the issue. Nonetheless, my interest in the transformation problem is political--which is unfortunately insufficiently emphasized in the debate--or rather often gets lost. The issue relates to the distinction between the production of surplus value and its distribution--which further obscures the source of profit in the exploitation of workers--a further source of capital fetishism. This is relevant for understanding why workers do not clearly perceive themselves as being exploited--if they did, they might do something about it.

I implied that I had read Kliman--but did not really grasp the argument all that well, given my own limitations in mathematics. Some of the mathematics is not formidable, it is true, but I did not find it easy going.

I was hoping that someone would provide more insight into his views without my having to try to understand him once trying to understand his views. I guess I will try to understand it by myself. But again, for political reasons. The issue for me is that the source of surplus value is obscured because of a difference between the production of surplus value and its distribution.

Fred

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