Market Prices, Average surplus-value and Global Equilibrium
Emilio J. Chaves M.

0.0 Marx Economics Approach

Marx focused his analysis of social injustice on his concept of surplus
value. In order to explain it, he observed what happens inside a
productive group, or enterprise. This means that his approach starts
from micro-economics. Later he expanded the results obtained to the
global aspects of economy, or macro-economics.

0.1    Lets see what he does with a numerical example:

Suppose a company with one owner and 10 employed workers that produce 5
units a month. Each unit is sold at 20 $/u. The total costs are:
V (total salaries) = 40
N (total insumes)  = 25
After this information it is easy to calculate:
Y (Total sellings-income) =    5x20=100
Q (Total cost for the owner) = 40+25 = 65
G (Total Profit) =             100-65 =35
A (Aggregated value) =         40+35 = 75

Marx defines the surplus rate (p) as the relation G/V, profits to
salaries. For this example: p = 35/40

This example taken from real market prices is clear, although it does
not explain how it affects -or is affected by- other demanded
commodities.

Later Marx introduces his concept of value, as an abstraction different
from market prices. He adopts the definition that the value of each
commodity is given by the human creative power of the average social
time employed to build it, according to average context productivity and
practices. Here he starts to have problems:

1. It is impossible to know the labor-value unless he has perfect
knowledge of the context, the average representative commodity, the
average representative technology, the average productivity of a worker,
the average salary paid per unit to a worker, and the real value of the
salary in terms of the representative commodity.

2. Even with that information, he has to explain the way in which his
labor-unit values transform into real world prices. This problem
inspired many books, papers, and debates still not solved, and it is
known as the Transformation Problem.

In spite of the mentioned theoretical problems, Marx concept of surplus
value is very important, because workers exploitation and unfair
distribution exist even if economics can afford without his labor-value
theory, or if the transformation problem is not solved.
Exploitation of labor and unfair distribution are known from everyday
practice and observation of real life. Theories come after reality,
although new theories affect the future.

1.0 But A Global Economy is made of several inter-related sectors.

Marx tried to analyze inter-sectors economies. He made some approaches
based on Quesnays Tables, but the subject was so complicated that he
did not advance all he needed and wanted. The main problem: his premises
of labor-value different from market-value still remained.

Besides this, Marx did not accept several jobs as productive labor, he
rejected Says Law (or balance between what is supplied and demanded)
because he needed umbalance to explain capital crisis. Here, we believe
that he confused the market-balance of the general economy, with the
frequent puntual production umbalances caused by supply shortages,
over-production, technology changes, etc. that occurs in particular
industries and sectors of the economy. This kind of particular umbalance
affects the global economy, but only to create a different-balance from
the global expected one when conditions are normal.

1.1 Example of 3 sectors economy.

Suppose that instead of one sector, we have a 3 sectors economy. This
example is taken from a balanced Leontief Table from a United Nations
paper published in 1956 , where 3 sectors: Agriculture, Industry and
Services. Results in currency, after the end of period are:

          Agriculture Industry Services Total
N=Insumes            25       80       10   115
V=Salaries           40       40       75   155
G=Profits            35       30       55   120
Y=Sales Income      100      150      140   390
A=Aggregated Value   75       70      130   275


Lets calculate the general surplus value of this economic cycle:
p = 120/155= 0.774193548

The last surplus rate value replaced on the next formula, (given without
explanation) is:

a*= (2p+1)/(p+1)
a*= (2x0.774193548 + 1)/( 0.774193548 + 1) = 1.43633636

Now, lets replace the value of a* in the following expression:

( a*-1) x Y = (1.43633636-1) x 275 = 120       (Equal to total profit)

Now replace the value of a* in the next expression:

(2-a*) x Y = (2-1.43633636) x 275 = 155        (Equal to total salaries)

Now multiply the value of a* times Y:

a* x Y =  1.43633636 x 275 = 395           ( Similar to total sales 390)

Now add one total salary plus two total ganances:

155 + 120 + 120 = 395                            (Equal to total sales).

1.2 Commentary

The above calculations are not magic. They result from an analysis of a
Leontief balanced economy between sectors presented in a different
order, which are not shown here but are developed in a paper appart
(Chaves E.J. "Pareto and Alternative Economics", 1997, umpublished).
They just mean, that if we have any number of sectors -as in national
accounts of a country, or in a Leontief matrix in currency values- we
may find the parameter a*, a distribution parameter, from which we can
derive many equilibrium relations. Thus, lets observe that we can
derive it from real market prices, that we did not need to use Marx
labor value theory to explain it, and that we may explain more economics
facts.

1.3     General Conclussions

a.- Even though Marx analysis explains the basic mechanism of
exploitation and accumulation of particular capital owners, they do not
explain the results on a global level.

b.- Leontief Tables and Say's Law are fundamental to develop general
economics relationships and to proppose effective global policies.

c.- If marxism wants to have an ideological and ethical influence in our
time, it must be ready to change several of the premises employed by
Marx. This means that to develop Marx ideas and ideals is not to betray
him. He allways requested to doubt about everything, and 'everything'
includes him if necessary.

d.- Observe that, with this short example that starts from
market-prices, we do not have the problem of converting values into
prices. It just loose any relevance as a problem to be solved.

e.- When Marx worked his models and examples of a 2-sectors economy, he
did not know that the figures should keep some internal relationships of
general balance, therefore the examples conduced to wrong solutions,
interpretations and criticisms.

2.0 Some other errors made by orthodox marxism

In the opinion of this author, errors must be understood to correct
situations or behaviors, but not used to punish others or self-punish
ourselves. Let's see some of them in orthodox-marxist schools:

2.1 The obsession to legislate about matter and spirit

In order to understand social injustice it is not necessary to change
others religion or spiritual beliefs.

2.2 The obsession to legislate about the sense of history

If history is seen as a theleology, and freedom reduced to take the
train of history, conducted by illuminated people, and condemned to
arrive to its final station, then the sense of freedom, imagination,
uncertainty and utopy looses all pertinence. It is better to image an
open history process.

2.3 The obsession to define culture as a by-product of the economics
infra-structure

In many senses our primitive cultures have been an example of wisdom and
balance in their relations among them and with the environment. It has
no sense to believe that an industrial infrastructure, a modern one, or
a sophysticated one, is the basement for a superior culture.

2.4 The obsession for the excluding binary-logics.
There are "other" logics (complementaries, or alternatives) that accept
contradiction without the need of extinguishing one side of the
contradiction by war, by violence or by a "thesis -antithesis-
synthesis" process. In these alternative logics all parts may evolve and
winners do not inherit the right to depredate the looser.

2.5 The problem of communication between marxism and capitalism
If we want a constructive dialogue with the other side, it is necessary
to speak to them in a language that they accept and understand. We may
use market prices without fear, mathematics when needed, econometrics if
precised. The important point is to listen and talk to them in their
language, in a dialogue plein of respect, with level and serenity. (In
spite of the normative-positive bias that neo-liberals use to evade
debates).

2.6 The obsession of loyalty to Marx

#Many times we have been unloyal to Marx, and to ourselves, because we
did not dare to doubt about his ideas when our intuition and experience
so requested.

2.7 The lack of confidence in our own thinking, experience and
sensibility.

If we have own thinking, experience and sensibility, we may be selective
in what we take or leave from other's contributions, and must learn to
trust ourselves when new roads must be taken. This situation has been
particularly serious in thirld world nations.

2.8 The obsession for eternal and perfect trues

If reality change, also our interpretations, theories, and truths can
do. We tend to suffer when our beloved premises, theories and beliefs
quit being certain and eternal, and must learn to enjoy and deal with
the paradoxes and surprises that life will always bring.

2.9 Theories must be put to serve life, not life to serve theories.
Many docens of millions of people lost their life in this century trying
to defend different rival theories. That means that many of those
theories were not at the service of life. If life is the prime value,
then any new theory must be put to serve life, and primarily weak
people, it does not matter what side they are in.

2.10 Economic growing equals progress

During the last decades, evidence has shown that global economics
depends upon the limits of earth and nature, and that we are growing
beyond earth carrying capacity. Both, capitalism and orthodox marxism
practiced this blind belief in eternal growth of output and consumption.

3.0 Final Conclussion

If we want to find a better way to understand and face present threats
to humankind -including neoliberalism, or neo-elitism, or
neo-ultra-conservatism, as you wish to call it-, we must rethink our
phylosophical and ethical conceptions  and our economics premises.
Utopies are needed and have the right to exist, what they do not have is
the right to be naive, neither to be idolized, nor left uncontrolled.

Emilio Chaves - Pasto, may 23/1998