Marx and the GDP

[ar734]

I came across this sentence in Capital, Vol III, Chap 9:

"...The aggregate price of the commodities [produced in an economy]..would therefore equal their aggregate value, i.e. the sum of the cost-prices plus the sum of the surplus-values, or profits...And in the same way the sum of the prices of production of all commodities produced in society--the totality of all branches of production--is equal to the sum of their values.

It seems to me that the last sentence is a perfect description of the the way the Gross Domestic Product (at least the total value of goods and services consumed) is determined. The total value of all goods and services produced (consumed) is equal to the sum of all prices of production (of all prices.)

Any ideas on this?

[Die Neue Zeit]

Only goods consumed count. Goods produced but not consumed don't count.

I think he's talking about an intermediate stage before taking consumption into account. Also, there's productive consumption and unproductive consumption (excessive advertising).

[ar734]

Only goods consumed count. Goods produced but not consumed don't count.

I think he's talking about an intermediate stage before taking consumption into account. Also, there's productive consumption and unproductive consumption (excessive advertising).

But wouldn't the value of goods produced or consumed be the same? In other words, $10 of bread consumed or purchased would equal $10 of bread produced. The fact that something is consumed can't add value, surely?

Also, why would capitalist economists value all "production" in a society by determining the value of all "consumption?"

thank you for the comment.

[Die Neue Zeit]

Yes it would, but because of this there's a greater amount floating around.

I forgot to add this to my reply above, but think about the difference between Cost of Goods Manufactured, on the one hand, and Cost of Goods Sold on the other. The former consists of costs pertaining to direct (production) materials, direct labour, and manufacturing overhead, and these costs have not yet been expensed. The latter pertains only to those units that have been sold, and the associated costs would have been expensed at point of sale.

[ar734]

Yes it would, but because of this there's a greater amount floating around.

I forgot to add this to my reply above, but think about the difference between Cost of Goods Manufactured, on the one hand, and Cost of Goods Sold on the other. The former consists of costs pertaining to direct (production) materials, direct labour, and manufacturing overhead, and these costs have not yet been expensed. The latter pertains only to those units that have been sold, and the associated costs would have been expensed at point of sale.

Expensed costs and unexpensed costs. Did Marx discuss this distinction? I am still fascinated with the idea of a Gross Domestic Product: the value of all goods and services "produced." I understand that it is goods and services consumed and that there are still some floating around. But, mainstream economists (I like Marx's phrase "vulgar economists) swear by the GDP as an indicator of the gross value of the economy (including govt spending, etc.)

Is GDP an irrelevant concept, for socialists?

also, costs of production, materials direct labor, overhead, doesn't this include the surplus-value? Perhaps not for individual goods and services, but for the total value of goods and services produced?

[Die Neue Zeit]

FYI, the old Soviet bloc had different measures for economic output (http://en.wikipedia.org/wiki/Material_Product_System), Gross Material Product and Net Material Product (http://en.wikipedia.org/wiki/Net_material_product): The value added by the productive sectors before deduction of depreciation. GMP excludes the value of services in the nonproductive sectors such as defense, public administration, finance, education, health, and housing. Also known as social product.

The question then becomes: What is productive work? (http://www.revleft.com/vb/real-austerity-ancient-t148741/index.html?t=148741) Contrast the public school teacher and the private arms manufacturer.

[ar734]

The question then becomes: What is productive work?[/URL] Contrast the public school teacher and the private arms manufacturer.

The public school teacher would be productive at all times; the arms manufacturer would be productive when 50 German tank divisions are closing in on Leningrad. The dominant mythology in the U.S. is that Reagan's military spending (non-productive) caused the collapse of the USSR because the socialist system could not match that spending; that Reagan did with dollar bills what Hitler could not achieve with tanks, starvation and 20 million slaughtered Soviet people.

If after WW II the Soviets counted arms manufacture as non-productive work, and 25% of their GDP was military spending, then they would have to conclude that fully a fourth of their economy was non-performing or counter-performing.

Are there any Soviet-era economists who were saying that the West was spending them into defeat? I personally think there are other reasons for the collapse, but there must be some Soviet economists who have looked at the question; maybe not.

[Die Neue Zeit]

It wasn't the military spending. One of the various reasons was the price of oil. The Brezhnev regime tinkered with the possibility of turning the Soviet Union into an oil and gas state, if indeed manufacturing was stagnating, and some diplomatic maneuvering between the US and Saudi Arabia depressed oil prices so that this strategy could not be pursued.

However, turning into an oil and gas state usually becomes a long-term curse, as we are witnessing in Russia today.