Individual Freedom Newsletter

Individual Freedom

Issue 1

Free

Introduction:

This brief newsletter is suited to support its editor like the original Liberty newsletter by Mr. Benjamin Tucker. This newsletter is in the tradition of Mr. Tucker’s Market Socialist Individualist Anarchism or Mutualism that’s is for a society:

A: With less than 3/4 percent interest charged by Mutual Banks

B: Worker’s are paid their full value by their employers

C: Occupancy and Use is the main form of land ownership that is owing land and charging others to use to live on is much less practiced unless the landlords taken care of the land themselves

D: Change is to come about in a peaceful gradual manner

For more information please see Mr. Tucker’s State Socialism and Anarchism: How Far They Agree Wherein they Differ (1888)


Part 1: How Anyone Can solve the Transformation Problem Part A

Full Article: Solving Marx’s Transformation Problem with Mr. Kliman’s Temporal Single System Interpretation (TSSI) (Revised 7/7/23) by Nicholas Evans

Solving Marx’s Transformation Problem with Mr. Kliman’s Temporal Single System Interpretation (TSSI)

Both Anarchists Mr. Bakunin and Mr. Tucker used Marx’s value theory but being Anarchists they rejected Marx’s big authoritarian government. In place of Marx’s big government Mr. Bakunin would have his collectivist anarchism while Mr. Tucker would have his market socialist or Mutualist anarchism.

Tucker also rejected Marx’s transition to communism as the end goal. Following Proudhon, Tucker instead believed society would transition into an anarchist market socialist or mutualist anarchist society as the end goal through peaceful change and eduction. Following Tucker I also like Marx’s Value Theory but reject Marx’s big government and transition to communism instead preferring the end goals as an anarchist market socialist or mutualist anarchist society.

In Capital Volume 3 Marx set out to demonstrate how values can be transformed into prices of production.

Value of a commodity is the combination of use value which is the physical usefulness of the good and value which is the social importance of the good. Exchange value of the good (in order that is has a purpose for exchange on the market in regards to other commodities, exchange value of a good or service is the particular physical amount of a different good or service in which it can be exchanged) is an aspect of value. A good becomes a commodity when it has use value and value (which exchange value is a part of). The magnitude of value is the current socially necessary labor time required to produce the commodity. Value can be measured in terms of labor time or price.

In a system with perfect competition without monopoly, the value and price of a commodity would approximately match without organic composition of capital.

The value of commodities would differ depending on the socially necessary labor time required to produce them within differing industries. This so called Organic Composition of Capital. If there are more workers than machines in a factory then the organic composition of capital is low. If there is more machines than workers producing a commodity in a factory than the organic composition of capital is high.

Surplus value is only extracted by productive workers. Productive workers produce capital for the capitalist. A capitalist is the owner of a workplace that themselves do not generally work at and that pays their employees a wage that is less than their full value they created. Unproductive workers like janitors, security guards ect do not directly produce capital but keep the workplace working so the productive workers can produce capital. Say each hour of socially necessary labor adds $10 of new value and the worker receives a weekly wage of $200 which meets the standard of social necessity of what they need in order to live. However the worker works an additional 10 hours therefore performing surplus labor of $100 dollars that the capitalist keeps and does not pay the worker. So the worker sells their capacity to work (their labor power) and creates the value of $300 dollars a week but the capitalist which owns the workplace but does not work themselves pays the productive worker the a wage of the value of $200 a week. The $100 dollars that would have been the worker’s is considered exploitation because the worker produced $300 dollars of value but only got paid $200. Marx assumed the worker was actually paid the full value of their labor power because the worker received $200 dollars which is just enough for the worker to survive without hunger or lack of shelter ect. Yet they are exploited because $300 dollars was created by the worker but they were paid the value of $200.

Employers in workplaces that pay their workers their full value, democratically run business (co-ops), and self-employed do not receive surplus value so are forms of non-exploitive market socialism including mutualism.

Surplus value can only be extracted by productive workers and not machines.

The surplus value would vary depending on whether the organic composition of capital was high or low within different industries and hence different rates of capitalist profit.

Marx also believed that profits would equalize throughout all industries economy wide due to capitalist competition.

How would profits equalize despite different organic composition of capitals throughout the economy?

Marx set out to demonstrate that values would transform into the prices of production and yet economy wide value and prices would still approximate and profits would equalize both on an individual level for each department and at an aggregate economy level.

The goal was to demonstrate that surplus value is the source of all capitalist profit while demonstrating at the same time profits would equalize on an individual depart level as well as economy wide. Surplus value is the difference between the value of a commodity and the wage paid to the workers. A wage paid to the worker that is less than the value produced by the worker is considered exploitation. And this theory can only be consistent if value and price approximately match economy wide while also demonstrating the profit rates would equalize.

Marx demonstrates how due to the differing organic composition of capitals the capitalist base their prices not on value but on the prices of production. He does this by first starting with commodities bought at their values than shows how they are priced at their prices of production. The prices of production are the cost price (which is the price of the commodity) plus the average profit. Marx believed capitalists prices their commodities according to the prices of production rather than their values.

Marx did not think value and price would approximately match throughout different industries due to differing organic composition of capitals however he did think value and price would approximately match economy wide.

Marx states:

“[w]e have in fact assumed that prices = values[w]e shall … see in Volume 3 that even in the case of average prices the assumption cannot be made in this very simple manner.” Capital Vol. 1. Chapter 9, Section 2.

“[A]verage prices do not directly coincide with the values of commodities” Capital Vol. I. Last footnote of Chapter 5.

Value and price would however match approximately economy wide through the three equalities:

-Total Surplus Value approximately equals Total Money Profit

-Total Value approximately equals Total Money Price

-Total aggregate Rate of Surplus Value approximately equals Individual and Total Rate of Money Profit

Mr. Bortkiewicz is the only one who set out to prove mathematically the inconsistency of Marx’s transformation of value into prices of production.

Mr. Bortkiewicz created a numerical example based on simple reproduction which means production in the economy is in the same scale without growth. The inputs and outputs therefore are bought and sold at their actual values. Period 1’s constant (machinery, raw materials ect) and variable (wages) capital represent the values of the means of production and means of subsistence. Department 1 produces the means of production. Department 2 produces the workers means of subsistence, and Department 3 produces luxury goods.

The value of each good equals 1 dollar per unit in period 1.

In the following Period 1 chart Department 1 produces 131 units of the means of production just enough to replace the 131 units (Total Value) used up (Total) as constant capital throughout the economy. Department 2 produces 115 units (Total Value) of means of subsistence just enough to replace the 115 units (Total) that workers throughout the economy consumed. Department 3 produces 77 units (Total Value) of luxury goods just enough to replace the 77 units (Total) of surplus value economy wide.

Mr. Bortkiewicz assumed that simple reproduction would take place if input and output prices were equal- that is if the output of Period 1 like the inputs were bought and sold at their values and all three departments would exactly be replaced in Period 2.

However Marx assumed that the outputs of period 1 would be sold at their prices of production instead of at their values. Given the assumptions that inputs were bought at their values rather than their prices of production, inputs and outputs would differ. Mr. Bortkiewicz claimed that this difference would prevent simple reproduction from occurring hence the transformation problem. Also Bortkiewicz claimed unless inputs and outputs are valued the same at the beginning of the production process as at the end each industries sales would fail to coincide.

However using the TSSI method where inputs and outputs can change within the same production period (as it does more often in the real world) and unlike simultaneist theory, the supply equals demand even if the input and output prices of Period 1 are unequal since what is needed for the supplies to equal demands is that the output prices of period 1 equal the input prices of period 2. While in Period 1 inputs are bought at their values, in Period 2 inputs are bought at their prices of production from the end of Period 1. The same amount of means of production (Total C) and means of subsistence (Total V) from Period 1 are employed in Period 2 but with different costs hence the Total C and Total V costs are different in Period 2. With these new prices captialists have revenue in Period 2 left over from the sales of Period 1’s outputs which they spend on luxury goods. Total C, V, and R in Period 2 approximate Period 1’s prices of the outputs (Period 1 P column) of Departments 1, 2, and 3 so the whole social product had been bought and sold at the new changed prices.

In Period 2 Department 1’s sales Dept 2 C + Dept 3C and purchases Dept 1V + 1R are approximately equal. Dept 2’s sales Dept 1V + 3V and purchases 2C + 2R are approximately equal. And Department 3’s sales Dept 1R + 2R and purchases 3C + 3V are approximately equal.

Finally we can see in both Production Periods Total Surplus Value approximately equals Total Money Profit, Total Value approximately equals Total Money Price, and Total aggregate Rate of Surplus Value approximately equals Individual and Total Rate of Money Profit.

The key to the terms and how to create your own transformation chart is found here including the equations to fill out the chart. (The * in the key is times) In the following order fill out D1, D2, and D3 TV column and the sum T of TV column as well as the D1, D2, D3 T first make D1 of TV the same number as C column T, make D2 TV the same number as V column V ect then fill in columns C, V, C+V, S, and TV. Next fill in column S/C+V, then column $, P, $/C+V and finally NV (TL).

The TSSI theorists believe the transformation problem is a non-problem since they believe their solution is what Marx intended therefore demonstrating that Mr. Bortkiewicz used Simultaneist valuation in order to calculate his chart and Simultaneist valuation is something Marx did not use because it ignores socially necessary labor time and the fact that inputs and outputs can be different in the same production period. Marx was also not a physicalist because Marx believed a commodity can decrease or stay the same in value due to the increase of a physical quantity of a commodity, something physicalism does not believe.

For more information on the TSSI in regards to the so called transformation problem please see the excellent book:

Kliman, Andrew. Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency. Lexington Books: New York. 2007.

Appendix:

In regards to value in more detail, there are 3 kinds of value so to speak:

1. substance of value: Use Value vs Exchange Value vs Value in more detail:

Use Value is the physical aspect of value (a good or service do not have but *are* use values) while Value is the social aspect of value. Exchange Value is connected to Value (the social aspect) as a form of value that appears on the surface of society. Exchange Value is a part of Value as a particular form of Value. (in order that is has a purpose for exchange on the market in regards to other commodities, exchange value of a good or service is the particular physical amount of a different good or service in which it can be exchanged) However the two main aspects of value are Use Value and Value (which Exchange Value is a form of) Substance of value is the products of labor. A commodity can be a product or service.

2. magnitude of value: socially necessary labor time which is determined by the average amount of labor currently needed to produce a commodity

3. form of value: magnitude of value and magnitude of price. Value and Price have two distinctions of value that have nothing to do with each other. One distinction is that there are two ways of measuring value money and labor time. Value can be measured in terms of money or value can be measured in terms of labor time. The other distinction is in regards to a firm or industry’s value refers to the sum of value produced within a firm or industry-the value transferred plus the value added- while price refers to the sum of the value received by the firm or industry. Also in regards to a single commodity, value refers to the commodity’s actual value determined by the labor-time needed to produce it, while price refers to the sum of money that the commodity’s owner can receive in exchange for it. Both value and price must be measured in the same units. It makes no sense to say the $7,000 a firm receives for its output is greater or less than the 200 hours of labor needed to produce that output. This shows that the two value and price distinctions are independent of one another.

Images to the article can be found here:
Link here:

https://x.com/nickevans456/s/NickEvans456/status/1677416324320968704


Part 2: How Anyone Can Solve the Transformation Problem Part B

Notes on How Anyone Can Solve Marx’s Transformation Problem Using Mr. Kliman’s Temporal Single System Interpretation by Nicholas Evans

If you are using a smart phone please turn the smart phone sideways to see the mathematical tables accurately.

For more information on the theory behind the transformation problem please see the link at the end of this article.

Formula Key:

Production Period 1

Name Algebra

Capital C

Wages V

Surplus S

Total Value TV= C+V+S

Profit $=(C+V)*Total Rate of Surplus Value (the total rate of surplus value it is the bottom total number of the rate of surplus value column)

Price P= C+V+$

Rate of Surplus S/C+V
Value

Rate of Money $/C+V
Profit

Total Labor or TL(NV) = V+S
New Value

Production Period 2

Name Algebra

Revenue R= P of the previous production. period minus (C+V) of the current

Capital Period 2 C=Period 1 C *Period One P/TV use Period One P/TV of D1 for all C departments in Period Two

Wages Period 2 C=Period 1 V *Period One P/TV Use Period One P/TV of D1 for all V departments in Period Two

Surplus S= Period One TL (NV) - Period 2 V

Total Value TV=C+V+S

Profit Profit $=(C+V)*Total Rate of Surplus Value (the total rate of surplus value it is the bottom total number of the rate of surplus value column)

Price P= C+V+$

Rate of Surplus S/C+V
Value

Rate of Money $/C+V
Profit

How to Make the Tables

Numbers are my own. All numbers are rounded so matched numbers will approximate except the $ column so $/C+V is more accurate.

I randomly chose 94 as the TV total number. Then I used three numbers to total 94 for the TV down and T across columns. D1 is always the same number as total C D2 is always the same number as total V and D3 is always the same number as total S.

Then I fill each C, V, or S column down with numbers equal the individual D column total and I fill each D column across with numbers that equal the individual across column TV number. Afterwards I proceed with the formulas in the Formula Key.

Production Period 1
C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1
D2
D3
T 94

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 41
D2 28
D3 25
T 41 28 25 94

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 41
D2 14 28
D3 11 25
T 41 28 25 94

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 41
D2 14 7 28
D3 11 7 25
T 41 28 25 94

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 11 41
D2 14 7 7 28
D3 11 7 7 25
T 41 28 25 94

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 30 11 41
D2 14 7 21 7 28
D3 11 7 18 7 25
T 41 28 69 25 94

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 30 11 41 37%
D2 14 7 21 7 28 33%
D3 11 7 18 7 25 39%
T 41 28 69 25 94 36%

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 30 11 41 10.8 37%
D2 14 7 21 7 28 7.56 33%
D3 11 7 18 7 25 6.48 39%
T 41 28 69 25 94 24.84 36%

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 30 11 41 10.8 41 37%
D2 14 7 21 7 28 7.56 29 33%
D3 11 7 18 7 25 6.48 25 39%
T 41 28 69 25 94 24.84 95 36%

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 30 11 41 10.8 41 37% 36%
D2 14 7 21 7 28 7.56 29 33% 36%
D3 11 7 18 7 25 6.48 25 39% 36%
T 41 28 69 25 94 24.84 95 36% 36%

C V C+V S TV $ P S/C+V $/C+V TL(NV)
D1 16 14 30 11 41 10.8 41 37% 36% 25
D2 14 7 21 7 28 7.56 29 33% 36% 14
D3 11 7 18 7 25 6.48 25 39% 36% 14
T 41 28 69 25 94 24.84 95 36% 36% 53

Production Period 2 (TL[NV] in Period 1 is the same in period 2)
R C V C+V S TV $ P S/C+V $/C+V
D1 16
D2 14
D3 11
T 41

R C V C+V S TV $ P S/C+V $/C+V
D1 16 14
D2 14 7
D3 11 7
T 41 28

R C V C+V S TV $ P S/C+V $/C+V
D1 16 14 30
D2 14 7 21
D3 11 7 18
T 41 28 69

R C V C+V S TV $ P S/C+V $/C+V
D1 10 16 14 30
D2 9 14 7 21
D3 6 11 7 18
T 25 41 28 69

R C V C+V S TV $ P S/C+V $/C+V
D1 10 16 14 30 11
D2 9 14 7 21 7
D3 6 11 7 18 7
T 25 41 28 69 25

R C V C+V S TV $ P S/C+V $/C+V
D1 10 16 14 30 11 41
D2 9 14 7 21 7 28
D3 6 11 7 18 7 25
T 25 41 28 69 25 94

R C V C+V S TV $ P S/C+V $/C+V
D1 10 16 14 30 11 41 37%
D2 9 14 7 21 7 28 33%
D3 6 11 7 18 7 25 39%
T 25 41 28 69 25 94 36%

R C V C+V S TV $ P S/C+V $/C+V
D1 10 16 14 30 11 41 10.8 37%
D2 9 14 7 21 7 28 7.56 33%
D3 6 11 7 18 7 25 6.48 39%
T 25 41 28 69 25 94 24.84 36%

R C V C+V S TV $ P S/C+V $/C+V
D1 10 16 14 30 11 41 10.8 41 37%
D2 9 14 7 21 7 28 7.56 29 33%
D3 6 11 7 18 7 25 6.48 25 39%
T 25 41 28 69 25 94 24.84 95 36%

R C V C+V S TV $ P S/C+V $/C+V
D1 10 16 14 30 11 41 10.8 41 37% 36%
D2 9 14 7 21 7 28 7.56 29 33% 36%
D3 6 11 7 18 7 25 6.48 25 39% 36%
T 25 41 28 69 25 94 24.84 95 36% 36%

Period 2 Department Sales and Purchases

D1 Sales (C2+C3) 14+11= 25 and Purchases (R1+V1) 10+14=24 approximate
D2 Sales (V1+V3) 14+7= 21 and Purchases (R2+C2) 9+14=23 approximate
D3 Sales (R1+R2) 10+9= 19 and Purchases (C3+V3) 11+7= 18 approximate

For more information please see the article:

Full Article: Solving Marx’s Transformation Problem with Mr. Kliman’s Temporal Single System Interpretation (TSSI) (Revised 7/7/23) by Nicholas Evans

Link here:

https://x.com/nickevans456/s/NickEvans456/status/1677416324320968704