Value (for Juan, again)
John R. Ernst
ernst at pipeline.com
Wed Nov 15 18:52:12 MST 1995
I have reproduced your prose below. With all the huffing and
and puffing, you seem to be trying to deal with two issues:
1. price changes due to productivity increases.
2. " moral depreciation."
1. In Chapter XII of Book I of CAPITAL, Marx introduces the
idea of technical change and the production of realtive
surplus value with an example. He suggests that the
capitalist who introduces a new technique will generally
reduce his price a bit once production takes place with
the new technique. We, the readers, are given no reason
as to why the capitalist does this. Note that at this point
the capitalist with the new technique is selling at a price
such that the individual value is less than the social value.
Marx then suggests that the process of competition will
eventually drop the price such that the individual value
will be equal to the social value.
I am saying that we, who take Marx seriously, cannot
simply assert that prices will drop due to increases in
productivity. We have to show the how's and why's of those
price decreases. In other words, we have to complete the
task of showing how the "law of value" operates. To simply
assert that it does is to assume that which must be shown.
In your post, you refer to the task of "having to show"
as "just another abstraction." I fail to understand
how you get to this. You seem willing to say that
there is an inverse relation between values and
productivity. I agree. I am saying that adherents to Marx
have to show how that notion brings about not only falls
in prices, but also the crisis itself. If we say that
prices will fall because of competition, we allow those
who claim that Marx's ideas are only valid for a competitive
capitalism and that, with the appearance of more and more
monopolies, Marx's ideas no longer hold.
Of course, you are correct in stating that my original example
had nothing to do with differential ground rent. But I am
glad you brought up the idea. What makes technical change
different in those industries where it is involved? Should the
capitalist be lucky enough to own that portion of the means
of production which appears to earning the rent, he would
seem to earning an abnormally high rate of profit. If he
introduces a new technique, the rate would be higher still.
Why? Because the level of demand for his commodity keeps
the price high enough. (Here I am following Marx's assumption
in Part VI of Book III of CAPITAL that capitals on land which
earns rent are of a lower compostion of capital than the
average.) When we speak of price decreases due to increasing
productivity, we have to talk of demand. But, note, the demand
for commodities produced in one period is generated by the
accumulation of capital itself.
2. "Moral depreciation." When capitalists or their accountants
say that a given piece of fixed capital can be used for some
period of time as capital, they are, indeed, guessing based on
experience how long the fixed capital can be used profitably
by them in the process of production. For Marx, to fully develop
this concept he would have had to work out the relation between
the turnover of fixed capital and the periodicity of crisis. He did
not do this but stated rather explicity that the turnover of fixed
capital would form the material basis for that periodicity. (See
BK II, CAPITAL, p185, Int. Ed.) Must accountants see falling
prices to take into account "moral depreciation"? For me,
that's not a simple question. I'm still working at it, but, right
now, I would say they do not.
P.S. I am not sure your rather graphic language helps your
argument. I think not. Here, the point is not to win or lose
but to discuss the problems and gain clarity.
On Wed, 15 Nov 1995 Juan Inigo <jinigo at inscri.org.ar> said:
>John Ernst writes:
>>Your post reproduced below is simply absurd. You have just
>>defended in our own unique fashion the neo-Ricardian
>>view of value. You do not even know it. You mount
>>some high horse about ideal and abstract and yammer
>>away. Now that I have vented, let's return to basics.
>John's impotence to rationally deal with my arguments let this bad air
>But, is it just that John's mind has farted or is it that his ideas always
>smell like that? Let's see if what he understands for "basics" is not
>another collection of abstract assertions and open negations of reality.
>>1. Note that in example, I asked Jim about, I said nothing
>> about a drop in price. Like Marx, I am unwilling to simply
>> assume that such dramatic drops take place. Thus,
>> I never assumed anything about a fall in price. You did.
>> Why should it fall? Because something called an LTV
>> tells us it will fall? Nonsense. We, adherents to Marx's
>> theory, have to show the how and why of the drop
>> in price takes place as the law of value takes control
>> of matters behind the backs of the producers.
>John wants to have an increase in productivity but not a decrease in
>in the name of ... Marx?! Or is it just in the name of the abstractions he
>wants to adhere to? Let us go step by step.
>In the first place, what are these prices John refers to? Are they prices
>of production? John's own example says they are not, since he has
>completely developed it without including any mediation of total social
>capital in the appropriation of surplus-value. Moreover, he explicitly
>pointed out that he was leaving such mediation out of the point, since, in
>his capitalistic mood, _he_ would directly appropriate the surplus-value
>created by _his_ workers:
>>workers only created $50 in surplus value, I would be
>>short $250 as I gain $50.
>A fortiori, John could not have been referring, for instance, to the
>mediation of the differential ground-rent in the determination of prices
>when productivity changes in the corresponding specific spheres of
>production (Chapter 46, Capital III).
>So John's prices are no less but no more than the expressions of value in
>money. So to go back to basics here means to follow the determinations of
>the value of commodities by the increase in the productivity of labor. And
>this is exactly what I did in my post that makes John's impotence for
>rational arguing explode. Did I resort anywhere in my post to a LTV? No, I
>just followed the path originally opened by Marx by facing the simplest
>form of our general social relation, commodities, and developing what
>specifically concerns the change in productivity in the briefest way that
>fits in the e-mail. And, of course, how and why the increase in the
>productivity of labor has an inverse effect on the unitary value of a
>commodity is not only something that becomes evident from the very first
>step (chapter 1) but that constantly reappears all along Capital from
>I through III.
>If John disagreed with the development I presented in my post, he should
>have pointed out exactly where it was going wrong, or even where it
>disagreed with Marx's. Moreover, if he disagrees with the fact that Marx
>constantly makes explicit the necessary inverse relation between
>productivity and unitary value, John should start by showing how
>productivity and, first of all, value, are determined in the real world
>beyond his fantasies.
>Now, should I tell John: read Marx from the beginning to the end? I don't
>suffer from the necessity to replace what needs to be rationally argued
>with such pedantic assertions.
>"We, adherents to Marx's theory, have to show ...", yes indeed! Just
>>2. You mention the notion of "moral depreciation." The concept
>> itself is rather underdeveloped in Marx. When he does intro-
>> duce the notion in Chapter 15 of Book I of CAPITAL, he
>> notes that capitalists allow for it in determining how long a
>> machine will be of use to them. I will not say that that has
>> nothing to do with technical change, but it is unclear what
>> you are talking about in the case in question as no price
>> change is specified. Thus, if you are going to refer to
>> accountants, you should at least note that they would
>> be concerned about changes in prices. Since we do
>> not have any idea about why there would be a price
>> change in this case, your references to accounting
>> practices seem, at best, premature and, at worst,
>In the first place, I didn't base my reply to John in a "mention" of the
>notion of moral depreciation. I developed in my post, starting from their
>simplest form, the determinations of the increase in the productivity of
>labor that result in what under capitalism takes the concrete shape of
>"moral depreciation." Again, John should have shown where my development
>was mistaken, and where it has departed from Marx's own one. But he can't.
>So he tries to bring everything down to a "notion" that he claims is
>"rather underdeveloped in Marx." On doing so, John presents us with the
>perfect synthesis of his "ideal" abstract method:
>In Section 2 of Chapter 15 (English edition, 13 in the rest I have
>mentioned in my previous post), Marx develops how the introduction of
>machines produces an increase in productivity and thus lowers the prices
>commodities vis a vis simple cooperation and manufacture, by lowering the
>amount of living labor materialized in each unit produced beyond the
>additional amount of dead labor needed to achieve the increase in
>productivity. He advances then into the specifically capitalist
>determinations that limit the introduction of machinery beyond that
>unavoidable condition. So, to claim that Marx faces the question of moral
>depreciation leaving "unclear" or "unspecified" what happens with the
>prices of commodities when productive increases in capitalism, John needs
>not only to abstract from the whole development from Chapter 1 through 12,
>but to abstract from the very Chapter he is supposedly referring to. And
>John has of course to abstract from what follows from this chapter on. In
>Chapter 6 Capital III, "The effect of price fluctuations," Marx follows
>development of his "rather undeveloped" "concept" of moral depreciation to
>the stage where the capacity of capital for valorizing itself starts to
>appear as a purely formal relation between profit and total capital. At
>this point, Marx says:
>"... moral depreciation. ... there arises a similar depreciation due to
>improvements in the methods of reproducing this fixed capital. The value
>the machinery, etc., falls in this case no so much because the machinery
>rapidly crowded out and depreciated to a certain degree by new and more
>productive machinery, etc., but because it can be reproduced more
>Even accountants are specifically taught the facts of moral depreciation
>originated in the increase in productivity in the spheres that produce
>means of production. Of course, they are taught to start from the crude
>appearance that productivity is an attribute not inherent in labor but in
>total capital. So, contrary to John who does "not have any idea about why
>there would be a price change in this case," accountants do know that
>"technological change" makes prices fall. And they do know that when the
>market price of a means of production has fallen bellow the cost once paid
>for it, this fall must be immediately registered on the books. Of course,
>accountants are taught this not just because. They are taught about the
>facts of moral depreciation because they must reflect it in the way needed
>by the operative agents of the individual capitals to properly rule their
>everyday practical action. If any accountant is unfortunate enough not to
>know the facts of moral depreciation, capital teaches them to her/him in a
>further practical way: it "morally depreciates" him/her by throwing
>to the streets as soon as someone discovers that the supposed untouched
>original capital registered on the books has actually vanished without
>notice, since it can be replaced with much cheaper means of production
>thanks to "technological change."
>But economists have a rather different role to play. Only an economist can
>invert the real facts, to negate reality as soon as it does not fit in
>his/her model. So, in the kingdom of ideology, what can all those real
>facts of moral depreciation weight against John's "ideal" method of
>abstracting one real form after the other to make their caricature fit
>his model? It happens that any reference to John's ideal method being
>concerned with real forms and not with abstractions "seem(s), at best,
>premature and, at worst, absurd."
>I will complete my reply later.
>jinigo at inscri.org.ar
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