Value Theory (1): Simultaneous Paradigm

S Chatterjee schatterjee2001 at SPAMyahoo.com
Thu Mar 1 15:59:00 MST 2001


Value Theory (Part 1): Simultaneous Paradigm

The difference between the Simultaneous and TSS
Paradigms

I have been reading Alan Freeman’s papers and finally
there seems to be some light and progress over the
great confusion on the meaning and calculation of
value. I am not an economist and the notes below are
intended for those common people like us on the
outside who are trying to figure out what the ‘value’
controversy is about. As will be realized, a proper
scientific concept of value is essential. Otherwise,
the concept of surplus value will be thrown into doubt
which has the potential to bring the whole Marxian
structure crashing down. We will start by presenting a
simple numerical example below. This example, adapted
from Freeman’s work, can be understood by anyone and
illustrates the difference between the simultaneous
and TSS concepts of value.

Let C = means of production consumed as constant
capital in one production period, L = quantity of
labor employed (always expressed in hrs), and X be the
output. The economy is assumed to be a market economy
producing a single good (say, grain) and undergoes a
steady technical change, the labor force is constant,
outputs and inputs rise constantly, but outputs rise
faster than inputs. Also, all of the output from one
production period is re-invested in the next
production period (maximum expanded reproduction) and
the laborers do not consume anything (i.e., they live
on air, food and water freely available from Mother
Nature). The rate of profit (ROP) will then be given
by (X – C)/C.

There are three things we should keep in mind:

(1) value  = the quantity of abstract socially
necessary labor time contained in a unit amount of the
commodity (e.g., hr/kg of grain).

(2)Use value = quantity of the commodity (e.g, kg of
grain)

(3)Exchange value = money price of the commodity ($/kg
of grain)

Note that the magnitude of ROP will depend upon the
units used to express C and X (i.e., whether value,
use value, or exchange value is used in the
calculation). For now, let us forget about item (3)
and focus on items (1) and (2). Table 1 below gives
the sequence of production in terms of use values (let
us assume kg to be the unit in order to be concrete).

TABLE 1 (in terms of kg of grain): C together with L
produces X

Period  C (kg)  L(hrs) X(kg)    ROP [(X-C)/C]

1       10      10      12      0.20
2       12      10      15      0.25
3       15      10      20      0.33
4       20      10      28      0.40

Note that the ROP, expressed in use value terms, rises
with time. This feature, which supposedly contradicts
the Marxian law of the falling tendency of the rate of
profit, was seized by economists (many of whom
consider themselves to be Marxists) to point out a
flaw in Marx’s theory. However, let us proceed next to
the calculation of value from the data in Table 1 that
will clear up the confusion. Here, we will encounter
the fundamental difference between the Simultaneous
and TSS interpretations of value. First let us look at
the Simultaneous position.

Simultaneous Interpretation of Value:

Let v be the value of the commodity (i.e., grain).
This is the amount of socially necessary labor time
contained in 1 kg of grain (hr/kg grain). How to
calculate this? This is done by setting up an
equation. For period 1, we have

        10*v1 + 10 = 12*v1

which gives v1 = 10/(12 – 10) = 5 hr/kg. Then the
value of constant capital C in period 1 equals 10 kg*5
hr/kg = 50 hr and that of the output X equals 12 kg* 5
hr/kg = 60 hr.

Note that v1 has been used on both sides of this
equation, i.e., v1 for grain is ASSUMED to be
unchanging throughout the production cycle 1. That is,
the value of grain in input (constant capital C of 10
kg grain) is taken to be the same as the value in the
output (output X of 12 kg grain); i.e., value is
conserved during the production cycle. But this is
unrealistic according to TSS school. Value of a
commodity is constantly changing because of increasing
technological change (productivity) of society. This
is more in line with what Marx thought. In Capital
(Vol. 1), he comments that the price of linen dropped
by half (or something like that) with the advent of
the power loom over the handloom. Because of the new
technology, half the socially necessary labor time was
embodied in a unit quantity of linen than that under
the previous technology, thus causing a decrease in
its value which was reflected in a drop of its price.
Anyway, more on TSS later.

Let us proceed with production period 2. For this
period, the equation for calculating the value of
grain v2 is:

        12*v2 + 10 = 15*v2

which gives v2 = 10/(15-12) = 10/3 = 3.33 hr/kg. In a
similar manner, values for the third and fourth
production periods can be calculated (v3 = 2 hr/kg, v4
= 1.25 hr/kg). Thus, due to increasing productivity,
the value of the commodity grain decreases with time,
i.e., 5, 3.33, 2, and 1.25 hr/kg. Table 1 can be
re-written in terms of hours of socially necessary
abstract labor time. The results are shown in Table 2
below:

TABLE 2 (in terms of hrs of socially necessary
abstract labor time): Simultaneous View

Period  C (hrs) L(hrs)  X(hrs)  ROP [(X-C)/C]

1       50      10      60      0.200
2       40      10      50      0.250
3       30      10      40      0.333
4       25      10      35      0.400

There are two peculiar things to note about Table 2.
First, the ROP calculated by using values in Table 2
is the same as the use-value ROP in Table 1 and it
rises with time. That is why Marx’s law of falling ROP
is wrong according to the Simultaneous view. Second,
total value is not conserved from period to period.
For example, at end of period 1, there is 60 hrs
(embodied in the 12 kg grain output from period 1).
However, only 40 hrs of constant capital (embodied in
grain input of 12 kg) is used at the start of
production period 2. Where did the excess value of 20
hrs go? It disappears according to Simultaneist
school. In other words, the value of grain was 5 hr/kg
at the end of production period 1. But at the
beginning of production period 2, it has suddenly
decreased to 3.33 hr/kg. If this were really true,
then the price of grain (which is tied to its value)
at the end of period 1 will be greater than that at
the beginning of period 2. The question is: how can
grain have two different prices at the same instant of
time? This strange anomaly arises because in the
calculation of value, the different production periods
are de-coupled from one another, i.e., each production
period is treated separately, and so the effects from
one period do not percolate into the next. TSS thus
says this is an absurdity and it all arises from the
wrong concept (and thus calculation) of value used by
the Simultaneist school.

(To be concluded in Part 2)

Sid


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