Keen/Ernst Discussion

jones/bhandari djones at
Wed Oct 18 04:48:52 MDT 1995

Steve wrote:
>Marx's example pertains to two competing firms within the
>one industry at the one time, one using "labor-intensive"
>technology, the other, "capital intensive". In this sense
>it pertains to technical change over time, rather than to
>cross-industry comparisons. But is there anything
>illegitimate in extending it to the cross-industry case,
>at the one point of time? I would argue not, because there
>is no social process countenanced my Marx that would lead
>to equalisation of the rates of surplus value (since
>capitalist competition equalises rates of profit, while
>workers concern is with being paid their value, not how
>much surplus value is extracted from them).
>But if it is not a constant across all industries, and if in
>fact the rate of surplus value is higher in industries
>with a higher organic composition of capital, then there
>is no transformation problem! Sectors with higher organic
>compositions of capital have higher rates of surplus value,
>and the effect of varying c/(c+v) ratios has no necessary
>impact on the rate of profit s/(c+v).
>Both the "oomph" and the agony of the LTV rest on this
>relation of s to v, and the presumption that the ratio
>s/v is independent of the ratio c/(c+v), both "statically"--
>across sectors at the same point of time--and dynamically--
>over time within the same sector. If those presumptions
>are true, then you get the tendency for the rate of
>profit to fall, and the primacy of values over prices
>(along with the need to transform one to the other).

Steve, I apologize if my partial answer to your post is non-responsive.

Marx's *assumption* of a uniform rate of surplus value only makes it easier
to determine the total mass of surplus value from which the average rate of
profit will be formed.  One of the purposes of this exercise is not to
provide a price theory but to demonstrate a complex and mystifying
relationship between the forms of appearance and substance--in this
specific case, that due the tendency towards the average rate of profit,
prices must diverge from values. It is of course true that varying rates of
exploitation would make it much more tedious to calculate from a given
model what the total mass of surplus value and thus the average rate of
profit would be, but I don't understand it as Marx's intent to go any
further towards a theory of a prices as they actually appear in everyday
bourgeois life. From a model--which assumes a constant rate of
exploitation--Marx has already demonstrated that the law of value cannot
rule directly in bourgeois society.  He has already shown that it is
mediated by the average rate of profit.

Also if we take Marx's example as pertaining to technical change over
time--instead of cross-industry comparisons--then Marx has already opened
up the question to what extent the rate of exploitation must rise and/or
how much new labor must be brought in via new low OCC branches (with
sufficiently high rates of exploitation!) in order to increase the total
mass of surplus value and stave off the falling profit rate.

I understand Marx as not as interested in price theory as such "systemic"
phenomena as including the following: mediation (via average rate of
profit), the long-term contradictions between labor and capital (increasing
rate of exploitation), and the expansive nature of capital (new low OCC

Please correct me if I am wrong.  But don't take the strawman I have
provided you with to dismiss the general argument.  See chapter four of
*Mattick's Marx and Keynes: the limits of the mixed economy*  "Value and

I have been privately informed that Mattick's value theory is not
sufficiently dynamic in the light of the recent advances of Ernst, Kliman,
Freeman.  To the criticism of Mattick, one should note that his last book
Marxism: Last Refuge of the Bourgeoisie? is very dynamic-- see pp. 91ff.

Rakesh Bhandari

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