LTV Question

[BobKKKindle$]

As I understand it, Marx believed that the tendency of the rate of profit to decline arose from the fact that Capitalists are preassurised to introduce constant capital into their production process, because doing so will allow them to sell their commodities at a lower price (in accordance with the LTV) such that the ratio of labour to investement falls. However, when other Capitalists do the same, 'equilibrium' is restored such that no Capitalist has an advantage over another, but the rate of profit has fallen due to a rise in the organic composition of Capital (In accordance with the SLTV). Marx then goes on to discuss countervailing trends, etc, etc, ad revolution.

However, one of the assertions made in the argument Marx puts forward is that the Capitalist feels the need to compete. I find this a questionable assertion, because increasingly, at least on a national level, if not in the world economy, markets are dominated by a small number (or even just one) of large conglomerate firms who often abstain from trying to compete and may instead form cartels - and instead charge high prices (perhaps even higher than would be suggested by the LTV due to their market power). I would be interested to hear your thoughts on this - does this mean that the rate of profit may remain constant for a long period of time?

[ComradeRed]

However, when other Capitalists do the same, 'equilibrium' is restored such that no Capitalist has an advantage over another, but the rate of profit has fallen due to a rise in the organic composition of Capital (In accordance with the SLTV). Uh..."SLTV"?

Well, the two options that a capitalist has is: 1) not change the method of production, which would eventually cause them to go out of business, or 2) change the method of production and receive less surplus value.

So, although not every capitalist may be doing it, those doing it would "survive". In my opinion, this is a generalization of the accumulation process.


However, one of the assertions made in the argument Marx puts forward is that the Capitalist feels the need to compete. I find this a questionable assertion, because increasingly, at least on a national level, if not in the world economy, markets are dominated by a small number (or even just one) of large conglomerate firms who often abstain from trying to compete and may instead form cartels - and instead charge high prices (perhaps even higher than would be suggested by the LTV due to their market power). I would be interested to hear your thoughts on this - does this mean that the rate of profit may remain constant for a long period of time? Counter-example: Microsoft.

They didn't feel the need to compete seriously with Apple in the early 2000s. It looked as though Apple would have gone under if not for the i-pod.

No one could have ever conceived in their wildest dreams that Google would emerge to seriously challenge Microsoft. They came out of left field. Microsoft didn't even see it.

This is because Google emerged from the internet boom and was one of the firms that successfully accumulated capital, as opposed to all those nerds in their garage that failed. They essentially consolidated a market before the market had any serious inertia.

Now Microsoft has to be competitive, especially considering that Vista was a flop. Otherwise they really will go out of business. But you couldn't have thought so five years ago. You would have been called crazy for thinking that some internet geeks could have seriously challenged Microsoft.

The times they are a changin'.

[bloody_capitalist_sham]

The inapplicability of the LTV

The LTV is a theory of capitalist production, or generalized commodity production. There are however, commodities bought and sold under capitalism which have a price even though they do not have a value.

"Objects that in themselves are no commodities, such as conscience, honour, &c., are capable of being offered for sale by their holders, and of thus acquiring, through their price, the form of commodities. Hence an object may have a price without having value. The price in that case is imaginary, like certain quantities in mathematics. On the other hand, the imaginary price-form may sometimes conceal either a direct or indirect real value-relation; for instance, the price of uncultivated land, which is without value, because no human labour has been incorporated in it." Capital Volume 1 section 1

[5]

However the socially necessary labour theory of value only becomes inapplicable for uncultivated land when that land can never be productive no matter how much commercial labour is expended on it. Desert sand, gibber plains and icy wastes have very small land values because no commercial labour can be diverted from other uses to be usefully employed. In other cases the price-form will represent the indirect socially necessary labour that could be usefully employed.

* pieces of art (are often one offs which could be explained as an instance of monopoly)

* uncultivated land (which has value, even if there is no labor involved. The value of land is explained by the theory of rent. Both Ricardo and Marx developed theories of land-rent based on the LTV.)
* paper money "The function of gold as coin becomes completely independent of the metallic value of that gold. Therefore things that are relatively without value, such as paper notes, can serve as coins in its place." Capital Vol 1 Part 1 Section 2 [6]
* value of shares (explained similarly like the value of land)


Comrade Red how do we respond to these criticisms?

[BobKKKindle$]

Hey Comrades - a further question deriving from some reading on the tendency of the rate of profit to fall. According to Marx's ideas about Surplus value and rates of profit, any investement undertaken by a Capitalist will be based on an increase in the rate of constant capital to variable capital (also known as an increase in the organic composition of Capital) because this allows for each unit of output to be produced with less labour, thereby allowing for a termporaily lower price (and thus higher profits) for a period of time until other Capitalist's 'catch up'- please correct me if this is an incorrect analysis.

However, it is of course always important to compare what out theories dictate and reality. Contrary to what one would expect according to marx's analysis, production is increasingly changing to methods which are highly labour intensive with hardly any constant capital and are situated in the developed world. Surely according to the LTV, this would mean a change in the exchange ratios such that goods now produced through labour (variable Capital) intensive techniques are now more expensive? (whereas goods are actually getting less intensive for consumers in developed countries)

A possible 'solution' I formulated to this problem is based on the idea that the Capitalist will pay workers what they need to renew their labour power. Because costs of living in developing countries are much lower and workers are less willing to exert preassure on Capitalists through wage demands, in terms of the relative monetary value of a worker's labour power commodities can still be sold cheaply in developed countries - is this the correct solution?

Thanks Comrades.

[ComradeRed]

Contrary to what one would expect according to marx's analysis, production is increasingly changing to methods which are highly labour intensive with hardly any constant capital and are situated in the developed world. Do you have any empirical data to support this conjecture?

Look for some statistics on this to back up your point (it would at the very least make it a stronger point) as opposed to anecdotal evidence ( e.g. "Well, it's plain and clear that it's obviously happening. I see it why don't you?").

[ComradeRed]

These issues don't bother me too much perhaps it's because the labor theory of value is a generalization of the input theory of value...so that means that any input theory of value explanation is also valid here.

Of course if you are one of those "Supply and Demand" Marxists (:lol:) you'll reject everything I say here.

What's really interesting is that the prices for (the majority of) these examples are extraordinarily nonlinear, which is interesting from a mathematical perspective. Just a mathemagician's annotations.

* pieces of art (are often one offs which could be explained as an instance of monopoly) What's interesting here is that no economic theory of value could explain the value of art.

Try "Supply and Demand". Supply is constant (at Q=1), and demand is immeasurable.

So this is a bit of a problem for any theory of value.


* uncultivated land (which has value, even if there is no labor involved. The value of land is explained by the theory of rent. Both Ricardo and Marx developed theories of land-rent based on the LTV.) Here is a gem from Marx's Third Volume of Das Kapital (http://www.marxists.org/archive/marx/works/1894-c3/ch39.htm):

Originally posted by Marx+--> (Marx)When land is sold, it is sold as land yielding rent, and the prospective character of the rent (which is here considered as a product of the soil, but it only seems to be that) does not distinguish the uncultivated from the cultivated land. The price of the uncultivated land, like its rent the price of which represents the contracted form of the latter is quite illusory as long as the land is not actually used. But it is thus determined a priori and is realised as soon as a purchaser is found. Hence, while the actual average rent in a given country is determined by its actual average annual rental and the relation of the latter to the total cultivated area, the price of the uncultivated land is determined by the price of the cultivated land, and is therefore but a reflection of the capital invested in the cultivated land and the results obtained therefrom. Since all land with the exception of the worst yields rent (and this rent, as we shall see under the head of differential rent II, increases with the quantity of capital and corresponding intensity of cultivation), the nominal price of uncultivated plots of land is thus formed, and they thus become commodities, a source of wealth for their owners. ...Land speculation, for instance, in the United States, is based solely on this reflection thrown by capital and labour on uncultivated land. [/b] --emphasis added


Wikipedia
* paper money "The function of gold as coin becomes completely independent of the metallic value of that gold. Therefore things that are relatively without value, such as paper notes, can serve as coins in its place." Capital Vol 1 Part 1 Section 2 [6] This is trivial if you take up the position of adopting the Marx of Capital vol. I who uses the input theory of value.

Hegel help you if you use "Supply and Demand" as it's been debunked empirically with regards to Thatcher's monetaristic practices :lol:

The value per unit money multiplied by the amount of money in circulation has to be equal to the sum of all the value of all other commodities in circulation.

How is the value of money then determined? Well, it's not as though we were always using paper money. When it began, it all ready had a certain value.

The initial value was given, so there was no problem.


* value of shares (explained similarly like the value of land) What's interesting about this question is the answer to it is: nobody knows. Not even the all mighty financial economist :lol:

The initial value of shares is basically the value of the constant capital to be acquired divided by the number of shares issued.

After that, I suspect it's nonlinear fluctuations based on the surplus value, size (i.e. amount of constant and variable capital), and market strength of a given firm.

But no one really knows the answer to this question. That's life.

[bloody_capitalist_sham]

Im not a "supply and demand" Marxist, i just saw it on the LTV's page on wikipedia but there were not responses to those criticisms. so i just needed to have an answer.

Im not knocking LTV, so far as my limited understanding of it will allow, i think its right.

Thank you for taking the time to respond though!!

[ComradeRed]

Originally posted by [email protected] 07, 2007 12:15 pm
Im not a "supply and demand" Marxist, i just saw it on the LTV's page on wikipedia but there were not responses to those criticisms. so i just needed to have an answer.
Nor did I mean to imply that you were a "Supply and Demand" 'Marxist'.

All I was stating was that there are a group of people who call themselves "Marxists" and adopt Supply and Demand, and it is this group that would reject my assessment of such criticisms found on Wikipedia.