From: "John R. Ernst" <ernst-AT-pipeline.com>
Date: Fri, 1 Dec 1995 00:26:46 -0500
Subject: Terms


Jim,  
 
Let me go back to the relevant sections of the post 
that you called into question and comment on the 
numbers. 
 
 
John said: 
 
What does this say?  If a capitalist is currently investing 
100 in fixed capital, 90 in raw materials, and 100 in  
variable capital and the fixed capital is to be depreciated 
over 10 periods, then with a depreciation charge of 10 
and an assumed rate of surplus value of 100%, we have 
 
   c(1)+c(2)+ v +  s  =  w 
      
   10 + 90 + 100+ 100 = 300 
 
[Here c(1) is the depreciation allowance, c(2) the  
 value of the raw materials,v the variable capital, 
 s the surplus value, and w the total value.] 
 
John now says: 
 
In the above I assumed an initial state of a capitalist 
prior to any innovation. 
 
 
John said: 
 
Now, let's assume a new technique becomes available with 
assumptions that correspond to the description of  
technical change that Marx states above.  The productivity 
of the given work force is to increase by a factor of 
10, the outlay in raw materials will increase by that  
same factor,  but the investment in fixed capital will 
not increase by that factor but something less, let's  
say 8.  We could then write 
    
 
   80 + 900 + 100 + x  = 3000 (assuming constant prices) 
  
or  
since x=1920 
 
   c(1)+c(2)+   v +    s  =  w 
    
   80  + 900 + 100 + 1920 = 3000  
 
 
John says: 
Ok.  Where do these "new" numbers come from? 
 
a. The "80" -- I assumed an increase in the fixed capital 
   of 8 fold with the 10 fold increase in productivity. 
   Hence, as we had "10" in the initial state for  
   depreciation, now we have 80. 
b. The "900" -- I assumed an increase in productivity of  
   10 fold, hence there is a 10 fold increase in raw 
   materials and thus we move from the '90' of the initial 
   state to "900" here. 
c. The "100"  -- I assumed no change in prices nor in the 
   variable capital used to purchase the labor-power. 
 
d.  The "1920"  -- skip for a moment. 
 
e.  The "3000"  -- Since there is a ten fold increase in  
    output with no change in prices the output of the  
    capitalist is now priced at "3000" since that is 10 
    times 300. 
f.  Back to the "1920"  The sum of the prices of the inputs 
    is 1180, the output priced like this is 3000.  The  
    1920 is 3000-1180=1920.   This is a great deal of  
    super profit.  Clearly, here the social value of the  
    output is greater than the individual value of that 
    same output. Indeed, if we want to find the individual 
    value of this output we would write: 
 
    80  + 900 + 100 + 100 = 1180 
 
But, rather than move directly to the individual value I went 
through the steps Marx does in the passage I quoted. 
 
John said: 
 
Let me see if I have it.  We'll assume that the total 
output is, initially, priced at 2000.  
and then we can write 
 
   c(1)+c(2)+   v +    s  =  w 
 
    80  + 900 + 100 + 920 = 2000 
 
 
John says: 
Here I assumed that the capitalist reduced the price of 
his commodity so that he is selling at a price such that 
the social value is greater than the individual value. 
(2000 compared to 1180) 
 
 
John said: 
But, eventually, the social value falls to the  
individual value and we have 
 
   c(1)+c(2)+   v +    s  =  w 
 
    80  + 900 + 100 + 100 = 1180 
 
which would indicate a FRP with a constant rate of  
surplus value.    
 
John says: 
If the same laborers add the same living labor as 
before (100+100), when the price falls to the  
individual value the 100+100 or 200 are added to 
the 80+980 to give 1180. 
 
 
Jim, I think I am following Marx's steps in presenting 
an example of capitalist innovation. 
 
Step 1  An initial state. 
 
Step 2  Innovation.  If the greater output is priced as 
        in Step 1, huge super profits are earned and 
        the social value is much greater than the  
        individual value. 
Step 3  Market share.  To market this greater quantity 
        of output, the capitalist reduces the price 
        of his commodities a bit so that all can be  
        sold.  The social value of his commodity is  
        still greater than the individual value. 
Step 4  The social value falls due to competition such that 
        the individual value is equal to the social value. 
 
 
That's all I did, nothing fancy;  in the past, I've been  
accused of teaching "textbook Marxism" for presenting this 
to a class of students.  Maybe if there is still unclarity  
about the numbers, you can tell me how we differ in terms of 
the "Steps 1-4".   Hopefully, this clears up the matter.  If  
not, let's keep trying.   
 
Regards, 
 
John 
 
 


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