All Value-Form, No Value-Substance: Comments on Moseley’s New Book, Part 9

2 Comments

1. Comment on Kliman’s Part 9

   Full Automation

   My argument regarding full automation is the following (Kliman misinterprets my argument on the bottom of p. 4 in his Part 9):

   1. *Assume an economy with full automation and a physical surplus* (as in Dmitriev, Bortkiewicz , Steedman, et al).

   2. According the Sraffian theory, the *rate of profit will be positive* because of the physical surplus.

   3. According to my interpretation of Marx’s theory, the *rate of profit will be zero* because there is no surplus labor, in spite of the physical surplus.

   4. Therefore, my interpretation of Marx’s theory of the rate of profit is clearly different from Sraffian theory.

   Kliman argues that I *must prove that there can be a physical surplus* if my Marxian rate of profit = 0. But that is not true. It is perfectly permissible to assume an economy with a physical surplus and compare the conclusions of Sraffian theory and my interpretation of Marx’s theory in that case (and also compare Kliman’s “physicalist” rate of profit) (this is the procedure used by Dmitriev, et al). In fact, this seems like a very good way to compare these different theories, since the spotlight is on the absence of labor and its effect on the rate of profit.

   Kliman claims to prove that if my Marxian rate of profit = 0, then there can be no physical surplus. But in fact what he proves in Part 8, pp. 5-6, is that, if my Marxian rate of profit = 0, then his “physicalist” rate of profit also = 0. This does not imply that there is no actual physical surplus measured in physical terms (more on this point below).

   The same argument (if my Marxian rate of profit = 0, then Kliman’s “physicalist” rate of profit = 0) would also apply if an actual physical surplus is assumed along with the same monetary quantities in his table on p. 5 that represent my interpretation. Since his I/O coefficients are derived on pp. 5-6 from these given monetary quantities (e.g. a21 = (C21/P1)(p1/p2)), these derived I/O coefficients would also be the same, and his “physicalist” rate of profit derived from these coefficients would also = 0, in spite of the actual physical surplus.

   However, the Sraffian physical rate of profit would be *positive* if there is an actual physical surplus. Thus, Kliman’s “physicalist” rate of profit is equal to my Marxian monetary rate of profit, but it is not equal to the Sraffian physical rate of profit. These different rates of profit (Kliman’s “physicalist” rate of profit ≠ Sraffian physical rate of profit) must mean that the I/O coefficients that Kliman derives from my monetary quantities and uses to determine his “physicalist” rate of profit must be *different* from the actual physical I/O coefficients that are assumed in Sraffian physical theory.

   Kliman’s argument on full automation is different in his Part 9 (pp. 5-6). He does not derive I/O coefficients from my monetary quantities and use these I/O coefficients to derive his “physicalist” rate of profit; instead he:
   1. defines P = C + V + S
   and the “physicalist” profit (π) = P – (C + V)
   (Kliman calls this profit “physicalist” because input prices are assumed to be equal to output prices, but no physical quantities are specified.)
   2. assumes V = 0 and S = 0 (S = 0 follows only from Marx’s LTV)
   3. deduces that P = C and thus the “physicalist” π = 0.
   4. infers from “physicalist” π = 0 that there is no surplus product.

   But this inference (#4) is not justified by this ad hoc and eclectic argument that depends in part on the LTV, and not at all on actual physical quantities. What Kliman probably has in mind is a “physical surplus” that is *“measured in monetary quantities”*, as he has said in earlier posts. But this “physical surplus measured in monetary quantities” is *not an actual physical surplus measured in physical quantities*, which is what Dmitriev, et al assumed, and what I assumed in my argument summarized above, and what Kliman is required to prove is not possible if my Marxian monetary rate of profit = 0.

   LABOR-SAVING TECHNOLOGICAL CHANGE

   Next consider the case of labor-saving technological change. If we assume labor-saving technological change, then we have the following comparison:

   1. According to Sraffian theory, labor-saving technological change will *never reduce* the rate of profit. (Okishio theorem)

   2. According to my interpretation of Marx’s theory, on the other hand, labor-saving technological change *could reduce* the rate of profit, depending on the relative magnitudes of the intermediate effects on the composition of capital and the rate of surplus-value.

   3. This is yet another important difference between Sraffian theory and my interpretation of Marx’s theory.

   Kliman considered the case of labor-saving technological change in Part 1 of his Comments. He first correctly assumed that labor-saving technological change in his example would reduce my Marxian rate of profit from 50% to 25%. He then derived his I/O coefficients from my monetary quantities (e.g. a1 = C1/P1) and then derived his “physicalist” rate of profit from these I/O coefficients and concluded that his “physicalist” rate of profit would also decrease similarly. Thus Kliman’s “physicalist” rate of profit is again equal to my Marxian monetary rate of profit, but is not equal to the Sraffian physical rate of profit. This must mean again that the I/O coefficients that Kliman derives from my monetary quantities must be *different* from the actual physical I/O coefficients that are assumed in Sraffian theory.

   CONCLUSION

   Thus, in both of these cases, Kliman’s “physicalist” rate of profit is equal to my Marxian monetary rate of profit, but is not equal to the Sraffian physical rate of profit.

   I have come to realize more clearly as a result of this discussion that *because Kliman’s I/O coefficients are derived from my monetary quantities* (e.g. a1 = C1 / P1), his I/O coefficients result in a rate of profit that is the same as my rate of profit derived from monetary quantities and the LTV. However, as the above comparisons with Sraffa’s theory show, this conclusion does not imply that my Marxian monetary rate of profit is determined by actual physical quantities (as in Sraffian theory), but instead implies that Kliman’s “physicalist” rate of profit is *not* determined by actual physical quantities, but is instead determined by the *monetary quantities* from which his I/O coefficients are derived.

   Here is the key point: when Kliman calculates the I/O coefficients from given monetary quantities, my Marxian monetary rate of profit (already determined) is *presumed* in these calculations. In particular, my Marxian monetary rate of profit is *presumed* in the calculation of P1 and P2, which are then used to calculate Kliman’s I/O coefficients, and these derived I/O coefficients are then used to calculate his “physicalist” rate of profit.

   For example, in his case of technological change in Part 1, the rate of profit is *presumed* in the determination of P1 and a1 in the following way:

   before technological change:
   *my Marxian monetary rate of profit r = 50%*
   P1 = (C1 + V1)(1 + r) = (10 + 2)(1 + 0.5) = 18
   a1 = C1 / P1 = 10 / 18 = 0.56
   *Kliman’s “physicalist” rate of profit = 50%*

   after technological change:
   *my Marxian monetary rate of profit r = 25%*
   P1 = (C1 + V1)(1 + r) = (10 + 2)(1 + 0.25) = 15
   a1 = C1 / P1 = 10 / 15 = 0.67
   *Kliman’s “physicalist” rate of profit = 25%*

   Kliman’s “physicalist” rate of profit is calculated from a1 and the other I/O coefficients that are derived from my Marxian monetary rate of profit and monetary magnitudes in the same way, and it obviously follows that *the CALCULATED rate of profit* (Kliman’s “physicalist” rate of profit) *will be equal to the PRESUMED rate of profit* (my Marxian monetary rate of profit): 50% before technological change and 25% after technological change. That is just a matter of *circular arithmetic*. But it does not prove that my Marxian monetary rate of profit is determined by actual physical quantities because no actual physical quantities are included in the argument.

   Note that *a1 increases* from 0.56 to 0.67 even though Kliman affirmed in subsequent discussion that the quantities of actual physical inputs and outputs *have not changed*. This is further obvious evidence that Kliman’s input-output coefficients calculated as shown above from my monetary quantities are not actual physical I/O coefficients.

   I wish I had realized this crucial circularity in Kliman’s arguments earlier in this discussion.

   This point finally was clarified for me while pondering Kliman’s argument related to full automation in Part 8 (that if my Marxian monetary rate of profit = 0, then his “physicalist” rate of profit also = 0) and the numerical example to illustrate it (the numbers clarified the logic of determination):

   In his “general case”:
   *my Marxian monetary rate of profit: r = 11%*
   P1 = (C21 + V21)(1 + r) = (24 + 3)(1 + .11) = 30
   a21 = (C21 / P1)(p1/p2) = 24 / 30 = 0.8 (p1/p2)
   *Kliman’s “physicalist” rate of profit = 11%*

   With full automation:
   *my Marxian monetary rate of profit: r = 0%*
   P1 = (C21 + V21)(1 + r) = (24 + 0)(1 + 0) = 24
   a21 = (C21 / P1)(p1/p2) = 24 / 24 = 1.0 (p1/p2)
   *Kliman’s “physicalist” rate of profit = 0%*

   As before, Kliman’s “physicalist” rate of profit is calculated from a21 and the other I/O coefficients that are derived from my Marxian monetary rate of profit and monetary quantities in the same way, and (sure enough) Kliman’s “physicalist” rate of profit also = 11% in the general case and = 0% with full automation. Therefore, Kliman’s “physicalist” rate of profit is not really “physicalist”; it is really monetary. It is not derived from actual physical quantities (as the Sraffian rate of profit is), but is instead derived from monetary quantities and my Marxian monetary rate of profit and mirrors the latter.

   P.S. LUXURY GOODS

   Finally, consider luxury goods. If we add a luxury goods sector to Kliman’s two sectors and assume that the actual physical I/O coefficients in Sectors 1 and 2 remain the same, then we have the following comparison:

   1. According to Sraffian theory, a luxury goods sector *has no effect* on the rate of profit because luxury goods do not enter into the production of other goods and thus are not costs of production.

   2. According to my interpretation of Marx’s theory, on the other hand, a luxury goods sector generally *will have an effect* on the rate of profit, because the composition of capital and the rate of surplus-value in the luxury goods sector are in general not equal to the average composition of capital and rate of surplus-value.

   3. This is yet another important difference between Sraffian theory and my interpretation of Marx’s theory.

   Andrew, what would your “physicalist” rate of profit be in this case: would a luxury goods sector have an effect on your “physicalist” rate of profit or not? Please explain.

   Reply

2. I have responded here: http://marxisthumanistinitiative.org/miscellaneous/all-value-form-no-value-substance-comments-on-moseleys-new-book-part-10.html

   Reply

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