Saturday, 30 November 2024

Michael Roberts' Fundamental Errors, IV - The Transformation of Values Into Prices - Part 1 of 2

Roberts says,

“total value equals total prices of production in the aggregate after the redistribution of value between capitals; and so total surplus value will also equal total profit, interest and rent.”

In Capital III, Marx flatly denies this conclusion. Indeed, its impossible, as Marx sets out.  For one thing, interest, rent and taxes are deductions from profit, not something in addition to it!  Had he said, profit of enterprise, rather than profit, then, at least that part of his error would have been avoided, but not the rest.

Total value, does, indeed, equal total prices of production, but, its, then, impossible for total surplus value to equal total profits after the redistribution, and determination of prices of production. The formation of prices of production, means that prices diverge from values, and so the value of wage goods will differ from their prices. But, workers, wages are based on the prices they must pay for those wage goods not the value of those wage goods. If the price of wage goods, is, then, higher than their value, wages would have to rise, meaning that the rate of surplus value would fall, and total profits would fall, i.e. would be less than the amount of surplus value, prior to the formation of prices of production. It is also why the rate of profit, based on prices of production cannot be equal to the rate of profit based upon values.

“Suppose, the average composition is 80c + 20v. Now, it is possible that in the actual capitals of this composition 80c may be greater or smaller than the value of c, i.e., the constant capital, because this c may be made up of commodities whose price of production differs from their value. In the same way, 20v might diverge from its value if the consumption of the wage includes commodities whose price of production diverges from their value; in which case the labourer would work a longer, or shorter, time to buy them back (to replace them) and would thus perform more, or less, necessary labour than would be required if the price of production of such necessities of life coincided with their value.”

(Capital III, Chapter 12)

Of course, Roberts, as a supporter of the TSSI, can't agree with Marx's conclusion, here, because it means accepting that the prices of inputs (whether of means of production or variable-capital/wages) are determined/transformed simultaneously with output prices. The only way that total profits could equal total surplus value, is if there were no individual divergences between values and prices of production, but that would require that every capital had the same organic composition, and rate of turnover, in which case there would be no need to transform values into prices of production.

So, as Marx describes, if, in aggregate, the constituents of the variable-capital (wage goods) have a higher price of production than their value, this means that, in terms of the total social capital, the part representing variable-capital, rises. A greater part of the total output must go to wages, and consequently less to profit. So, the total profit falls, and is not equal to surplus value. If, in aggregate, the constituents of the variable-capital (wage goods) have a lower price of production than their value, the opposite would be the case. Wages would be lower than the value of labour-power, and profits would be greater than surplus value. Which of these conditions applies, depends upon whether, in aggregate, the commodities that constitute the variable-capital have a higher than average, or lower than average organic composition of capital, and whether, in aggregate they have a higher or lower than average rate of turnover of capital, and the extent to which these two factors act to counteract, or to reinforce each other.

The total new value created by labour is unchanged, and it is only the different distribution of this new value between wages and profits that is affected. Similarly, as I have set out elsewhere, if total values equal total prices of production, which they do, then c + v + s, is likewise, equal in aggregate, and because v + s, remains constant, c must also be constant. It is only that c + v, then varies, as a result of the variation of v, within v + s. If v rises, and consequently s, falls, then not only will c + v rise, but also, s/v falls, i.e. the rate of surplus value, and s/(c +v) falls, meaning a fall in the rate of profit. The opposite would apply if v were to fall, on the basis of prices of production, as against values. Given Marx's theory, and his analysis that the organic composition of capital, and rate of turnover varies from one sphere to another, so that the annual rate of profit is higher in those spheres where the organic composition of capital is lower than average, or where the rate of turnover is higher than average, and vice versa, it is impossible for the mass of profit, following transformation, to equal the mass of surplus value, prior to transformation, and similarly, for the rate of surplus value, or rate of profit to be the same.


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