Keen/Ernst Discussion

John R. Ernst ernst at pipeline.com
Fri Nov 3 19:34:50 MST 1995


Dear Steve,

Ok!  Let's start with the quote from the GRUNDRISSE
and see how we can move our discussion forward.

"It also has to be postulated (which was not done above) that
the use value of the machine significantly greater than its value;
i.e. that its devaluation in the service of production is not
proportional to its increasing effect on production." (p. 383)

The quote can be broken into two sections -- before the
"i.e." and after.

BEFORE

"It also has to be postulated (which was not done above) that
the use value of the machine significantly greater than its value;"

What does this mean?  At first, we could simply say that a
verb is missing.  I would guess that Marx meant to say
that increases in the use value of the machine are greater
than increases in the value of the machine as accumulation
takes place.  That is, granted, at best a guess.  But let's
look at after the "i.e."

AFTER

"i.e. that its devaluation in the service of production is not
proportional to its increasing effect on production." (p. 383)

For me, this means that the increased depreciation charges
as accumulation takes place are exceeded by the increases
in output. Note that I think you are comparing "its
devaluation in the service of production" to the
increases in surplus value or, in your words, surplus.
Concerning this quote, I think you have a good argument
given the numerical example that follows the quote.
_______________________


I still claim that the most interesting part of this
section of the GRUNDRISSE is that Marx himself is
saying that increases in what he calls the technical
composition of capital are not as great as those in
productivity or output per worker.   This is truly a
"Keen" find as it contradicts nearly ever known exposition
of Marx's falling rate of profit.  (I am amazed that on
this list you existence was even continued.  At least, you
were given grief for this scholarship.)

As I think I've said, given this passage* from Marx what
arises is the apparent contradiction between use value
and exchange value in the process of accumulation.  That
is, from the standpoint of use value, increases in output
exceed increases in input.  From the standpoint of exchange
value, increases in input exceed increases in output.  This
is precisely why Marx needs a concept value that can show
this apparent contradiction.  I would maintain that the only
manner that this can be resolved is via crisis itself.

But I will grant you that we, Marxists, have not done this.
Marx himself gave clues as to how the task was to be
accomplished but never got around to actually carrying
it out.

What is interesting is that neo-Ricardians like Steedman
set up a straw man in doing away with Marx.  They define
value in the usual fashion  such that, in their version
of Marx, increases in output exceed increases in input
whether each or measured in terms of values or use values.
They then dismiss values as redundant.  I would agree
that THEIR values are, indeed, redundant, but, as you
know, to derive their values production is not seen as
an activity taking place in real time.

Again, as I have said in previous posts, your interests
as a post-Keynesian and mine as one struggling to under-
stand Marx are similar when it comes to looking at an
economy in which outputs increase faster than inputs,
given a set of constant prices.  For you, this might lead
to investigations of problems concerning effective demand;
for me, it leads to solving the demand problem and to
exploring the problems the solution itself brings into
being.

Where we now seem to agree is that the LTV defined in the
usual way is useless.  This may get us zapped from this
list but we both know the usual way goes nowhere other
than to some rather rigorous demonstrations that Marx was
wrong.  You argue that as this century closes we
need to begin to construct a valuation theory that includes
the possibility of machines creating value.  I disagree.
To be sure, you are free to explore that possibility but,
as I have argued, the dismissal of Marx's LTV despite the
rigor of its mathematics is simplistic.  I think these
simple refutations need to done away with via an argument
and a concept of value that includes production
in real time.
____________________________________

Now let's get to your understanding of what I am trying to
do.  You state:


"If, as you hypothesise, technical change results in a higher
rate of surplus value, while the new technology continues, as
did the old, to simply contribute to production what it loses
in depreciation, then there is an upper limit to the amount of
surplus that can be generated--the total labor time which can
be performed by the population. Once this limit is approached,
the extra surplus squeezed out by new technology will necessarily
be swamped by the increased organic composition of capital, leading
to a decline in the rate of profit. And, as you say, if the
rate of growth of surplus at any stage is less than the rate of
growth of output, then the rate of profit will fall before this
asymptote is approached.

But if, as Marx hypothesises in that example, a machine can add
more to production (its use-value) than it loses in depreciation
(its exchange-value), then surplus is not conserved but increased--
there is no upper limit to surplus creation (or rather, the
surplus that can be generated is a function of technology and
population, rather tha population alone).

This means that the appropriate tools of analysis are no longer
conservative ones, but dissipative. This raises an issue which
I think has troubled you, and makes you believe that some
conservative law is needed to be able to link one time period
to the next.

This is not so. A conservative rule--such as that which applies
in mechanics--provides a very powerful "accounting check" on
such systems; but a dissipative system can still be modelled
dynamically."

Here I claim to be misunderstood and also claim to partially
understand the misunderstanding.

In my 1982 model,the rate of profit falls in a fashion similar
to case B in my last post.  If you will, the surplus product is
growing by leaps and bounds; yet ,as you note, the total
amount of surplus value that can be produced is bounded by
the growth in population as well as by increases in the
rate of surplus value.  Thus, my models, in the spirit of Marx,
encompass what you call tools that are "conservative" when
viewing the accumulation in terms of value and "dissipative"
when tracking the accumulation in material terms.  The
unbridled growth that is possible is held in check by the
capitalistic social form of value.

To be sure, I am not satisfied with what I've done so far.
I represent the value side of accumulation in a Grossmann-
like fashion.  I'd like to work fixed capital into the model
and try to show how its turnover is related to the crisis
itself.  I do think I have given the Grossmann model a new
life by allowing those who use it to see the material side of
production as they speak of value. For now, I intend to stick
with what we now call one-commodity models; but I do think
I'll be explicit about prices.

You mention that you intend to move from a one commodity
model to the multi-sector case.  There's nothing wrong with
that but let me encourage you to toss a bit of fixed capital
in the model and keep it producing from period to period.
That might make pricing things a bit more interesting!
(I've looked at a bit that Schefold did on fixed capital and
saw that as a true neo-Ricardian he can't deal with fixed
capital any better than he can constant capital.)

I am also unclear on where you stand on the notion that
in material terms, outputs increase faster than inputs.
This makes for messing pricing, as you know, but it
is, I think, a possible link between Marx and those
struggling to be post-Keynesians.

Enough for now.  As you can see, it's hard to be more
orthodox about Marx than I am. Thus, it is amusing to
see you attacked by would-be Marxists.  Do not let it
get to you, Steve, as our discussion could well extend
into the next century; their knowledge keeps them in the
last.

Regards,

John




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