Marxism without revolution: Capital

Just to say, that I was convinced (not that anyone will be surprised) by Jerry Cohen’s argument in his “The Labour Theory of Value and the Concept of Exploitation” that not only is the LTV false, but the Marxian charge of exploitation is quite independent of its truth or falsity (whatever Marx may have believed about that).

I react negatively to much in this post.

But I’ll agree with this: “The value of capital assets depends on the return they receive, and the latter isn’t uniquely determined (the famous ‘reswitching’ concept being one way of showing this).”

Factor prices cannot reward agents in capitalism for their physical productivity. For the same quantity flows in production can be consistent with vastly different distributions of income. Reswitching shows this.

On a similar topic as the LTV (on which I’m one of the sceptics), I’ve found Aage Sorensen’s analysis of class and exploitation in terms of rents within a market economy quite insightful. For example he argues that super-profits are the result of quasi-rents which accrue to capital as a result of technological innovation and product differentiation. On the other hand, the ability of organised labour to secure rents – which was the basis for secure conditions of employment and thus promoted investment in job-specific human capital – has been massively undermined by successive policies which favour capital. The result is a deskilled and an insecure workforce competing on ‘cost’, like ‘bags of potatoes’ as Sorensen put it. The arms race in credentials in the anglo-american world is a defensive attempt to retain rents amongst the professional middle class. Having said that it does follow a neo-classical framework, which some may find problematic, and it’s very focused on micro-economics.
Here’s a link to a chapter by Sorensen from a book edited by EO Wright

Oh, and a question for those more knowledgeable. Even if there are massive problems with Marxist ‘micro-economics’ (LTV, transformation problem etc. etc.), can there nonetheless be something worth salvaging in Marxian macro? I’m thinking of people along the lines of Andrew Glyn and, going back further, Kalecki.

Torquil, I suggest you familiarize yourself with the period of history beginning at around 10,000 BC and ending at about 1700 AD to better understand John’s point.

More unstable than…seems too grand a formulation, but a lot depends on the time frame under consideration. Late capitalism does seem to exhibit the logic of the cancer cell, as any number of people have noted, and post-war prosperity, from the Wirtschaftswunder at one end to the Great Moderation at the other, is looking more and more anomalous every day.

Ever-increasing growth, and what looks to be the ever-increasing extraction of rents by a decreasing number of people is a problem, no matter whose lens you look through while analyzing it. Do we redefine growth, or do we redefine people? It seems that even in a best-case scenario, we must do a bit of both. Whence cometh the political impulse to do either? That’s the question that’s been haunting me lately, and why I think that Social Democracy, like Marxism, while useful to idealists in setting agendas, is unlikely in its present incarnation to lead us out of the selva oscura.

“It’s obvious either way that the growth of ultra-high income has come at the expense of stagnation for nearly everyone else”

Deeply unconvinced.

We can see two major trends about inequality: increasing in-country inequality and decreasing global inequality.

We can also see one really major change in incomes globally: the hundreds of millions (at least) who have come up out of that $ a day absolute poverty over the past few decades.

Yes, it’s possible to argue about why this has been happening, even whether they are linked (I argue that it is globalisation itself which is a) increasing the ultra-high incomes and b) increasing those of the absolute poor but that’s not my point here) but that a significant perceentage of the worls’ population has climbed out of that absolute poverty means that “stagnation for nearly everyone else” cannot be true.

For some, for many even, but nearly everyone just isn’t true.

“Though not as uninteresting as attempts to justify the existing distribution of income on the basis of marginal productivity theory or Austrian metaphysics.”

Income distribution is caused by some combination of marginal productivity, rent-seeking or credentialling, the unemployment level and the availability of social security. My understanding of Marxism is that *any* employment relation is exploitative, whereas social democrats think that not all capitalistic relations are exploitative. Can you continue to describe what you are theorising as Marxism if you throw exploitation out?

“What does it matter whether the incomes of the top 1 per cent are derived from ownership of capital or from some more complex combination of direct ownership, managerial control and straightforward corruption?…For those engaged in attempts to achieve a better, more equal and more sustainable society, Marx’s theory of value has little to offer. ”

It may matter if Marx’s work is intended to convert those who don’t recognize an obligation to achieve a more equal society. To do that, Marx has to argue that exploitation in a strong sense is the source of inequality, not that capitalism for whatever reason tends toward inequality.

I always thought, in general, that Marx’s work works best as an immanent critique rather than as positive theory–it challenges the liberal and the capitalist to defend the undefended moral position they attach to the given of capitalist economics. What’s that you say Locke? Mixing my labor with an object makes it property? Well, I see your labor theory of property and I raise you the labor theory of value.

We needn’t prove anything about the details, since the burden of proof is elsewhere. We just have to ask: so, capitalist, where does the extra profit magically come from, if not from labor? You can quibble about equations all you want, but the capitalist still needs to prove his ex nihilo creation of value.

…but that a significant perceentage of the worls’ population has climbed out of that absolute poverty means that “stagnation for nearly everyone else” cannot be true.

But those who climbed out of absolute poverty probably weren’t a part of the system anyway. They joined the system, climbed out of absolute poverty, and now their incomes will stagnate.

“Are fascism and Soviet-style state capitalism not species of capitalism?”

Yes

Okay, I suppose with the Soviet system it’s arguable, but fascism? How is it not a capitalism economy, operating under this specific political system?

there having to be a difference. sorry for the typo above.

And Marx’s labor theory of value has little to offer to whom exactly? After all, the theory makes sense of working peoples’ lives who are under pressure to reduce continuously the labor time required to produce each unit (interesting that theorists pooh pooh the labor theory of value when the business literature is obsessed above all else with increasing labor productivity), and are subject through speed up, overpaid overtime, unpaid or back wages, and surveillance to perform ever more labor for the wages that they are paid. Against this we have the fantasies of marginal productivity theory and the static and sterile formalism of Sraffa (prices and profits can be solved as long as we live in a world where the inputs and outputs never change in form or in method of production and the wage is treated as a basket of identical goods or fodder for all workers).

“…but that a significant perceentage of the worls’ population has climbed out of that absolute poverty means that “stagnation for nearly everyone else” cannot be true.

But those who climbed out of absolute poverty probably weren’t a part of the system anyway. They joined the system, climbed out of absolute poverty, and now their incomes will stagnate.”

Nailed it. People coming out of quasi-feudal systems into capitalism proves that capitalism has various and numerous advantages over quasi-feudalism or decrepit hard-line socialism, but it’s much, much harder to find where social democracies took a Hayekian turn and found it to be to the benefit of the great mass of their country.

I think the social form of capital is the most interesting part of Marxist theory. This is where the claims about instability etc really come to the fore. If we view Capital as a set of social relations, then it has dramatically changed while remaining based on the sale of labor power over the past centuries. We have the rise of mercantile empires, industrialization and imperialism, the welfare-state, and neoliberalism all as very distinct social forms, but all capitalist. By contrast the old forms of life were totally distinct: even as they shared the basic division into castes, a Western European monarch was very different from a Chinese Mandarin. Capital is the first society in which everyone is a social equal, in which rich and poor alike have the same rules of behavior

As for Henri vs. Tim, its worth noting that many of the countries now experiencing massive wage growth were always capitalist. The real question is why is this increase in wealth associated with political regression, or why does bourgeois wealth not lead to bourgeois values? The vaunted welfare state of Denmark now is threatening to end the common labor market in Europe, newly wealthy Nigeria does not accept the right to have whatever mutually desired relations behind closed doors, etc.

Tim Worstall wrote: “We can also see one really major change in incomes globally: the hundreds of millions (at least) who have come up out of that $ a day absolute poverty over the past few decades.

Yes, it’s possible to argue about why this has been happening, even whether they are linked (I argue that it is globalisation itself which is a) increasing the ultra-high incomes and b) increasing those of the absolute poor but that’s not my point here) but that a significant perceentage of the worls’ population has climbed out of that absolute poverty means that “stagnation for nearly everyone else” cannot be true.”

As you must know, this reduction in absolute poverty has been concentrated in China, and happened for the most part before the turn to globalization. It was the result of the land reform undertaken after decollectivization, as leading development economist Pranab Bardhan has shown in most recent book.

“Capitalism is more dynamic than any previous society, but also, in its pure form at least, more unstable, and at least as unequal. These features have been amplified, in ways we have yet to fully comprehend, by the explosive financialisation of the last three decades or so.”

This is one of those paragraphs that part of me instinctively agrees with, part strongly disagrees with, and part wants clarification.

I’m not sure it is at least as unequal as many older societies. It might be that my imagination doesn’t really ‘get’ feudalism, but it seems like the royalty/ruling classes were every bit as small, and every bit as far from the lower classes with significantly fewer people in the middle class.

Much more importantly, is it more unstable? I’m not sure exactly what dimension you mean to talk about here. The chance of famine induced starvation [at least non-political] (very real in almost all pre-capitalist societies) pretty much doesn’t exist in modern capitalist societies. The chance of famine ended up being extremely devastating and destabilizing in lots of countries across history. But on the other hand that difference could mostly be technology rather than economic system (better transportation and better farming techniques).

“These features have been amplified, in ways we have yet to fully comprehend, by the explosive financialisation of the last three decades or so.”

Maybe this sentence is really the important one. I’m not sure capitalism in general is more unstable than other systems, but the explosive financialisation certainly seems to have amplified the nasty swing. But I also wonder if a big part of the story is our method of pushing for the great moderation. By trying to stamp out all the wildfires, are we just building up fuel for the inferno–kicking the can down the road? Maybe instead of trying to avoid the instabilities all together, (which seems to be the central banker’s mantra) we should try to design systems that can deal with lots of small and medium instabilities so that we don’t save up the disasters for the end.

I don’t like most of Nozick’s Anarchy, State, and Utopia (or the parts I managed to read a long time ago), but his critique of the LTV is, as I recall, fairly persuasive. Here

Also I basically agree w SAttewell @37.

Compare Nozick’s critique of the labor theory of value with Sweezy’s analysis of the role of demand in Theory of Capitalist Development. It’s not on google books though. That short analysis written in the 1940s disposes of Nozick’s objections.

Zombie alert! Marginal productivity theory is undead on this list. It’s not true that no economists use the labor theory of value; at any rate, it has been proven that the truth of an economic claim is inversely related to the number of economists who believe. it. The transformation problem is not itself the problem of there being a inter-industry variation in average temporal structure, by the way.

I’ve never understood why, if it’s empirically true to say that labor is a major source of value but not the sole source, the claims of labor to production should be diminished either intellectually or ideologically.

Is it just the emotional/psychological lure of monocausal explanations?

‘In the end, the proof of the pudding is in the eating. If the LTV was really superior to marginal productivity theory, at least some economists (say, in China, where it’s still officially approved) would be using it, and the superiority of their analysis would be evident to unbiased observers.’

Yeah…..call me a neo-anti-Sokalian postermodernist if you will but I think I can spot a flaw in that argument.

@StevenAttewell 48
“I’ve never understood why, if it’s empirically true to say that labor is a major source of value but not the sole source, the claims of labor to production should be diminished either intellectually or ideologically.”

From Marx’s point of wiew, labour is the only source of value. Suppose the case of a farm laborer, who work someone’s else land, using the landlord’s tractor:
1) Part of the value can be said to be produced by the worker’s labour.
2) Part of the value is produced by the land, but the land would be there even if it wasn’t owned by the landlord. So the part of the value produced by the land is a “gift of nature” and is not really “value” produced.
3) part of the value is produced by the tractor, but since the tractor itself was built by labour, also this part is produced by labour.

As to fn1, do you have in mind the theories being of positive or of normative interest?

To dismiss MPT as uninteresting from a positive point of view seems to be incorrect. The distribution of income can partly be explained by e.g. the fact that more educated, or more experienced, workers command on average a higher price for their labor on the market. There is of course a lot that remains unexplained. But as a first pass MPT seems useful: for example how do you determine if a group is discriminated against in the labor market if you do not have a counterfactual? How can we determine the rent of someone (e.g. Richard Fuld) if we do not know his MPT? This distinctions seem also important for your project of retaining dynamism and innovation.

How do we determine a marginal product? How do we know what the marginal product of a quantity of capital is if we can’t determine the quantity of capital in the first place? It also does not throw light on matters to understand profit as such in terms of imperfections in competition or information. Profit exists independently of such imperfections in the real world if not in the world general equilibrium models.

@hartal 56

I was arguing with JQ who does not seem to subscribe to the Cambridge’s critique. Barring that critique, MPT seems to do a good job. At least, for example, I find useful Autor and Katz’s chapter in the Handbook of Labor Economics in 1999 (“Changes in the wage structure and earnings inequality”). They tabulate wages according to education, experience, race and gender and they describe the trends in terms of pretty basic supply and demand. The approach, again, does not explain everything but it has some explanatory power.

As to the Cambridge’s critique, I am not familiar with it and so I am not going to defend MPT from it. One thing that I have always wondered though is the following: if capital cannot be aggregated, how can labor be aggregated? There seems to be heterogeneity in labor: some workers are better at certain tasks than others. Even if all workers are homogeneous ex-ante, they go to different schools, accumulate different skills etc. that they end up being different ex-post. So, can’t there be a re-switching problem across different forms of labor as well?

unrelated p.s.: your link above to Bardhan’s book was interesting.

@ StevenAttewell 59
I think that “marxists” (or at least some marxists) don’t see marxism as a movement ideology and marxism as a social science approach as two different things.
As a consequence, the idea that some value comes from “mere ownership of stuff” is seen as a logical error (on the “social science” side) that is caused by the “false consciousness” due to a capitalist cultural superstructure.
Hence conceding the idea that “mere ownership of stuff” creates value is already losing the battle.

I especially like the creative – pomo? avantgarde? dadaist?[3] – approach to labeling/ordering of footnotes[1]. dsquared could learn a thing or five from you, although to fully realize the approach, the footnotes at the bottom of the piece should be neither in the order of appearance of the text nor numeric order.

[2] Footnote 1 appears in paragraph 5, fn 3 in paragraph 7 and fn 2 in paragraph 10.[-3]

[0] This is a zombie footnote.

[7] Of course, careless editing is not one of the possibilities listed, since it’s clearly much more creative.

William Timberman asked, “Do we redefine growth, or do we redefine people?”

Isn’t that what the US judiciary have been doing ever since Santa Clara County v. Southern Pacific Railroad, continuing most recently through the Citizen’s United ruling?

It is not usually possible to specify a marginal product. Ideology requires the supposition that it can be so specified.

dsquared wrote: “Capital can’t be aggregated and aggregate production functions don’t exist, that’s it.”

Nonsense: aggregate production functions exist, as much as any mathematical construct does. I’ll write one down for you:

Y = F(K,L) = A * K^a * L^(1-a).

There it is, in black and white, plain as the nose on your face.

Furthermore, capital can be aggregated in any (toy) economy in which there is no such thing as time, there is such a thing as time but everything that happens is predetermined from the get-go as in (so far as I understand these sorts of things) Calvinist theology, or conditions in the toy economy otherwise satisfy one set of the the necessary and sufficient conditions for exact aggregation.

Whether aggregate capital or aggregate production functions correspond to anything of interest in the world we live in is another question altogether, and it is pretty clear that the notion ends up being logically incoherent, with the results of the reswitching debate being 1 solid piece of reasoning that demonstrated that.

Sorry, ignore second paragraph above. I meant to delete it.

“Marx’s value theory is problematic, to put it mildly, in its own terms, as is shown by the notorious ‘transformation’ problem.”

Others have addressed this from slightly different angles, but that statement is semi-ignorant, if not deliberate neo-classical agnotology. I think the TSS guys have made a convincing case that no such “transformation problem” exists, at least not in the form attributed to Marx, but rather it results from a mis-reading of Marx based on neo-classical premises, whereby neo-classical mistakes are attributed to Marx, thereby “proving” him inconsistent on neo-classical terms. And, of course, if he’s inconsistent, his work can’t be a candidate theory for economic explanation and therefore his deployment of LTV , (which is not the same as Ricardo’s , but rather a critique of the latter), is obviously erroneous and needed be taken “seriously”, (together with its threatening implications). Of course, that Marx’ rendition of LTV is demonstrably consistent and coherent doesn’t eo ipso mean that it is “true” or relevant, only that it is a plausible candidate for consideration, not to be dismissed for interested motives.

A good starting point for engaging with TSS interpretation of Marx’ economic explanatory scheme would be this rather punchy article by Alan Freeman, “If They’re So Rich, Why Ain’t They Smart”. I hope this like works:

http://www.scribd.com/doc/17177438/Freeman-Alan-If-They-Are-So-Rich-Why-Aint-They-Smart

A few more brief comments. Any scheme of economic explanation is going to require a standard of “value” and some basic unit of accounting, (much as, classically, a metaphysical explanation crucially depended on a doctrine of categories). After all, the whole idea of economics and its explanatory aim concerns producing more from less, ceteris partibus, mutatis mutandis, etc., i.e. “economizing”, and the distribution of gains both to optimize collective welfare. Let call the required category for explanation “the principle of least effort”, (almost as a counterpart to the thermodynamic conception of energy as “work”), to be completely neutral. And let’s call the accounting unit the”distribution of efforts”. The point is that objective processes are, in fact, going on, however little we might know of them, and some basic categories must be framed to try and capture cognitively and explain the relevant phenomena. Hence a standard of “value” and a unit of accounting. “Labor-value” is precisely directed at fulfilling that explanatory role. And that “objective” theory of value is not a bug but a feature, compared to neo-classical accounts, at once positivistic, psychologistic, and idealist, which seek to evade any question of “value” by means of a surface account of nominal price formation, (and not a very good plausible one).

And, of course, the whole point of an attempt at an objective, collective theory of “value” is that “value” is shown forth when nominal price formation fails and markets don’t “clear”. Which, er, not only occurs during crises, but also is a regular feature of many markets, (e.g. the labor “market” or the “market” for long-term capital goods investment). Otherwise, by dogmatically assuming market equilibrium clearing through nominal price formation, and by generalizing such an analytic assumption a priori, one is just constructing capitalism as a perpetual motion machine.

Finally, “exploitation” in Marx has a precise “technical” meaning, which is more functional than normative. (The normative core of Marx’ thinking is actually “alienation”, which might be considered even more tenuous a notion than “exploitation” by some or many). It’s the key to explaining the source of profits from surplus-value, the amount of “value” produced by labor-power above the amount required to sustain it or returned to it, which is unique to industrial capitalism and which is the source of its progressive potential and its destructive implication at once. It is labor that activates the whole system of value-production, according to this scheme of explanation, since it is labor that is traded off against capital to maintain production. (AFAICT the only alternative for the “active ingredient” would be knowledge and technology, but a) it’s hard to tell why that should be accounted to the side of capital rather than labor and held for private rather than public benefit and b) it’s hard to make out an account of its development and deployment independent of the relation and struggle between labor and capital). There might be many other ways in which capitalism could be characterized as “exploitative”, since it reduces all social values and processes to monetary terms and means of making a profit, regardless of collective or natural welfare. And, indeed, one of Marx’ leitmotif plaints against capitalism is that it inverts the relation between means and ends and amounts to an endless accumulation of means without end(s). (I think this has Aristotelian roots). Much of this is lodged and buried in his notion of use-value, whereby not just human beings, though especially them, but natural kinds have “ends-in themselves”, which capitalism routinely violates, which is quite distinct from the neo-classical notion of “utility”. (Though there are other “dialectic” uses for “use-value”). But the technical point about Marxian “exploitation” must be confronted head on: what alternative explanation is there for the existence of profits? (And Marx is hardly likely to have missed the obvious answers, at least in the context of his time, such as returns to entrepreneurship, payment for managerial services, allocating “equilibrium” investment, reward for risk, etc., which he knew of and could account for, but which didn’t provide a basic explanation for “surplus-value” and its distributions on a systematic basis). Observing that profits haven’t fallen “empirically” on a secular as opposed to cyclical basis isn’t a sufficient counter, since it amounts to saying that capitalism and it’s exploitative mechanism has persisted through multiple disasters, far beyond the few generations that the historical and technological horizons of Marx allowed him to expect or imagine.

The word “capital” is so poorly defined as to be almost useless. It really should cover the economizing of time and effort in any instance whatsoever, which would then include things like “language” and “science” (after Ernst Mach) and “social institutions”: U.S. Social Security is a form of capital.

(Indeed there are two different forms of economizing that can happen in a bilateral relationship: (1) the gains from specialization and trade, and (2) the common reduction of the transaction (or transformation) costs. Number 2 is the Coasean definition of “institution”. An interesting question is whether a piece of simple “physical capital”, such as a simple hand tool or the Archimedean lever, derives its mechanical advantage, which surely allows an economizing of effort, from a formal configuration that is more like #1 or #2.)

“Capital” is used in Adam Smith to mean something like a result of economizing which is used for further economizing, instead of being consumed and ended. Since “physical capital” can be owned as private property, therefore part of the gain from specialization which is being carried in the exchange value as money, can be extracted: “profit”. That much is evident.

My question (I do not know) is whether Smith and Marx specifically always identified “labor” with workers, as opposed to including under the definition of “labor” the effort which is always necessary to make capital — no matter whose effort it is, even if it is effort by the masters or entrepreneurs to organize the business institution.

Because once you properly subsume the definition of capital under ANY constraint upon reality which channels matter-energy to perform some sort of economizing function, (i.e. define it as Batesonian organismic “information”), you always raise the question of the effort that was necessary to create that particular constraint. It is a self-propagating cycle: constraints are made by prior constraints.

It seems to me that both Smith and Marx have this biological conception in the background, though they would have said it in other terms. In this sense, capital and labor are different versions of the same abstract thing. There is nothing BUT the labor theory of value, although this is not the way that economists currently use the phrase.

Should be Okishio, not Okimoto.

More to the point, once you abandon the idea of revolution, and of a society that divides neatly into workers and capitalists, the labour theory of value simply uninteresting[1]

—

A refreshingly candid admission.

I tend to agree with Louis. This whole series of posts mystifies me, not least because it’s unusual for the level of discussion to be so much higher than that of the post. It reminds me a bit of reading someone like Giddens, or Habermas on a bad day – you grit your teeth and wade through a shallow and tendentious misreading of stuff you actually believe in, thinking it’s bound to get better further on, but realise a few pages later that what you’ve been reading is actually based on the s. and t. m.

IANAE, but I thought I understood the LTV when I read Capital book 1. If we’re going to have a thread on why it has (or hasn’t) been disproved, sign me up.

@Random Lurker

There problem with that analysis, if I can deduce it from your post, is that Marxism, and the Keynesian analysis that follows, requires a steady state – which only exists during periods of extended exhaustion of available knowledge. The opposing view is that change due to innovation and constant adaptation to change is what produces the prosperity that any argument over distribution of wealth depends. Knowledge is available in a static economy but it has no comparative advantage. In an innovating society, there is comparative advantage, but the information cannot be ‘known’ by individuals sufficient to exercise planning.

Small ethnically and culturally homogenous nation states each of which exploit their comparative advantage, can have high taxation and redistribution and still function, despite having natural social classes within them.

That’s what we know so far. That’s all we know. Everything else we come up with ‘breaks’. That’s why the world is moving to a sort of absurdly Pareto-efficient political authoritarian capitalism. So that the scale avantages of empires can be used to concentrate wealth sufficiently to move populations out of agrarianism, while using the motivational and aspirational an calculative advantages of capitalism.

The future is capitalism. The question now, is what trade offs do we make between nations and empires. And the jury is still out.

RandomLurker:

Right. And I’m saying, this is bad ideological work. Ideology is inextricable from morality; even in Marxist political parties, the moral case emerges again and again in speeches, literature, artwork, etc.

Inevitability does not make for the sharpest spur to political action.

Is this comment in moderation like some of my others?

JQ, your objection is already answered by reading Critique of the Gotha Programme.

Walt – people who argue against, also.

@Random Lurker 91

What is the empirical evidence for public monopoly being better than private monopoly? I guess one would have at least to distinguish between sectors (e.g. health vs. cars) and countries with institutions of different quality (e.g. Sweden vs. Greece).

Moreover, why do we have to accept monopoly as a fact of life? Can’t we try to guarantee free entry? That should reduce monopoly power. Being anti-existing businesses (the current monopolist) does not imply being anti-business: one could try to protect future businesses, no?

(One could look at it the other way. People on the right, at least in U.S., tend to be pro-existing businesses: in my view, this is not enough to make them advocates of market competition.)

@StevenAttewell 93

It depends on the minimum efficient scale. In some markets it is pretty large (e.g. water) and so there is usually space only for one firm in the market. In that case you indeed have public utilities.

In other cases, the fixed costs are small relatively to the size of the market. E.g. a car company has high fixed costs but, even if it enjoys some market power (some people like Toyota more than Ford), that power is limited by the offer of other varieties of cars. If the company raises the price too much, people will switch to other car companies. In Krugman’s monopolistic competition model, firms will actually keep entering the market up to the point in which their profit is zero. So fixed costs are not a problem per se.

Moreover, some monopolies that seem unbreakable may turn out to be temporary. Microsoft had, and still has, a huge size of the market. Not surprisingly their products at a certain point began to suck. Then Apple came along and so Microsoft was pushed to produce better products. Depending on how firms compete, in some cases two competitors may go a long way.

I am not saying that we have the solution to all cases of course. The Federal Trade Commission has a lot of hard decisions to do and Industrial Organization in economics is basically devoted to study how competition among firms is affected by various policies in different market structures. But one should distinguish a hard problem from an unsolvable one. Moreover, as I said before, public ownership is not necessarily a panacea either.

JQ @94:

I really think your just off-base there, (and reciting inherited prejudices). “Capital ” Vol. 1 is not an account of Ricardian LTV featuring, (I’m guessing), constant returns to scale, but rather an account of the historical-logical conditions for the emergence and unfolding of an industrial capitalist system, derived from a fundamental account of the commodity-form, (by which it fundamentally distinguishes itself, in myriad ways, from all prior modes-of-production/ways of extracting the surplus-product, in many positive-or-favorable ways, as well as negative-or-unfavorable ways), aimed at not a reiteration of Ricardian LTV, but rather a critique of it, specifically to explain the source of persistent profits, which neither the Smithian, nor the Ricardian accounts could quite deal with (rather than just assume). Further implications then spiral out from those two basic explanatory aims, – and in a sense, the “whole” of the work is already contained in nuce in Vol. 1, but there are still further spiraling implications to be dealt with in Vol. 2 and Vol. 3. What Vol. 1 is not an account of is either a petty producers’ economy, since that would be a marginal phenomenon in a pre-capitalist agrarian mode-of-production, nor a account of industrial capitalist production, assuming “CRS” or , in the jargon, equal sectoral “organic compositions of capital”. since what’s at stake rather is a conceptual level of exposition, not a hypostatized “model”, to render clear the “nature” of surplus-value (and its relation to value-in-general), – and the term just doesn’t include profits, but also items like rents, interest, taxes, etc.,- in order to later deal with further spiraling implications,- which haven’t come up yet in terms of the attributed “CRS” assumptions.

So by the time the “transformation problem” comes up in Vol. 3, having established the basic notion of surplus-value, Marx is actually proposing a complex account of price-formation, given differing inter-sectoral “organic compositions of capital” or capital intensities. What is to be “transformed” are not labor-values into cost-prices of production, but rather both labor-values and money-prices together, under the assumption of equal and differing “OCC”. The neo-classical criticism/mis-reading is a precisely inverted account of the “problem”, since the point is not that “labor-values” need to be converted into cost-prices of production, which being the actually determinative factor renders the LTV redundant and non-explanatory, but rather that cost-prices of production can not be determined without first determining distributions of surplus-value. That is almost common-sensical, but what’s more is that the account implies that, though labor-value is extracted at production sites throughout the economy, the price-and-value formation mechanisms will re-distribute it from labor-intensive sectors to capital-intensive ones. Which is an account of oligopolistic “market power”. And the reason that Marx was so relaxed about the “solution” to the “transformation problem” is that it is based on constant underlying technical change in production processes within and between sectors, such that, though at any given time or period, cost-prices of production are key determinants, their constant change doesn’t suffice to describe or explain the dynamics of the unfolding system “as a whole”. As the defunct maestro put it, “Competition leads to monopoly and monopoly leads to competition”.

So I don’t think your claim that Marx intuited “IRS”, increasing returns to scale, but that has nothing to do with his value theory, rather than being precisely derived from it, holds water. Though there are many other functional, as well as normative, implications to be so derived. But more generally, “value theory”, regardless of whether one accepts Marx’ or prefers some other account, remains an outstanding core question of economic explanation, over against the neo-classical account of nominal prices guaranteeing market-clearing equilibria always and everywhere, (which is just a piece of late 19th century positivism). An “objective” account of “value” remains on the agenda, though the “nature” of economic value might still remain as an enduring secular mystery. (I’d guess that that’s one point on which Robert Vienneau and I might agree).

john c halasz @72
“exploitation” in Marx has a precise “technical” meaning…. It’s the key to explaining the source of profits from surplus-value, the amount of “value” produced by labor-power above the amount required to sustain it or returned to it….

‘Exploitation’ , iirc, is the label Marx attaches to the (supposed) extraction of surplus-value, not the “key to explaining” that extraction. There’s a difference between a label and an explanation. Simply repeating that the source of profit is the difference between “the value of labor-power [i.e. its subsistence requirements] and the value which that labor-power valorizes in the labor-process” does not prove it is true. (Quote is from Capital v.1, Penguin ed., 1976, p.300)

Before we can discuss relative merits of higher wages, it has to be shown that they are possible, and with what effects. In particular, it has to be shown that they will not issue in rising prices that neutralize the gain in nominal wages, and that they won’t come at the expense of total employment. This is exactly what Marx tries to show on the basis of value theoretic reasoning (Value, Price and Profit). Value theoretic reasoning also shows that workers being paid out of the surplus value appropriated from them without equivalent have at the least no good moral reason not to fight collectively for higher wages(Capital I, chs 21-23). Right meets right, and force decides.
*
Marx does not have equations as far as I remembering. The Vol II interdepartmental equilibrium exchange equations are value theoretic in nature, and don’t take into account varying returns to scale. I don’t think there are equations to express Marx’s agreement with Richard Jones’ critique of Ricardian declining returns to scale. So all I can do is drown you in Marx’s words, and in Capital volume 3 in particular he argues that IRS will give the accumulation process greater elasticity. In other words, Marx’s theory is not one-sidedly value theoretic. Use value has a role in his theory, as he himself emphasized in the Notes on the Gotha Program.

On LFC @99:
Marx doesn’t just label the extraction of surplus value as “exploitation”. He gives a historical analysis in Volume 1 of the pressures to reduce wage goods, to reduce labor time in producing commodities, to extend the working day, etc. The theory helps direct attention and explain important elements of concrete empirical concern.

On returns to scale:
I’ve often agreed with this point from Jon Elster, in Making Sense of Marx: Volume 2 is the most boring major work by an important thinker. But if I recall correctly Marx has examples of reproduction schemes where technical progress occurs at differing rates and analyzes what needs to be the case for that to happen smoothly. Anyways, one could always look to Joan Robinson’s analysis of metallic ages or Luigi Pasinetti’s analysis of structural economic dynamics for mathematics. (Writing the equations for Joan Robinson is always good exercise, and there’s literature that does exactly this.) These analyses also concern themselves with how wages must rise along a warranted growth path. Nick L. is correct way back in @8 that there’s good stuff in Kalecki and others.

On taxes:
Sraffa’s distinction between basic and non-basic goods arises from Ricardo’s analysis of tax incidence. Last I looked at an Input-Output matrix for the U.S., every commodity is basic at the level of the industry codes that I had. So maybe the distinction isn’t all that useful empirically.

On Walt @87:
I suppose Walt, like all of us, is incapable of joining many conversations on many topics without doing quite a bit of work. I don’t know why I should care.

I don’t know, Robert, why would you want to pursuade someone who doesn’t already know what you’re talking about? What possible utility could that possibly have? None that I can see.

Anyway, that’s an odd stance for you to take, because on your blog you do explain stuff without saying “read these 3000 pages of literature”. You might give examples that are inspired by a large literature, and you might say “read this 20 page paper, here’s the link”. But do you use the fact that someone hasn’t read literally everything written on the subject to shut down debate? I haven’t seen you do it.

PHB makes a good point. Can you think of one idea from before the internal combustion engine that remains relevant today? No one can.

Though I wish PHB would make numbered list of all of the posts that treat Marx’s theories as infallible. I lost count after zero.

PHB @ 109

Why? Because he concerned himself with certain implications of going forward, as modern corporate lackeys style it, to which virtually no Serious Person at the time had devoted any thought, and which virtually every Serious Person since has maintained were wrong as a matter of principle, without confronting them in detail — except with laws where possible and clubs or guns where not possible.

Why is a workers’ contract with GM not worth the paper it was printed on, yet honoring AIG’s CDS contracts was thought sacred enough to imperil the livelihoods of millions?

Why do we still pay the operators of corporate latifundia out of the public purse to retire land from production, but turn up our noses at the thought of paying extended benefits to unemployed laborers?

Why do we not consider the enclosure movements in Africa and Latin America now being pursued by everyone from Archer Daniels Midland to the government of the PRC to be anything more worrying than — at long last — the capitalist development of the final frontiers of underdevelopment? Why do we subsidize ethanol production from maize?

In asserting that Marx is irrelevant, why do we offer skyscrapers in Shenzhen rather than suicides among the workers at Foxcon as proof?

Does employment in the service sector offer us anything more hopeful — or remunerative — than a career as a Wal*Mart greeter, personal trainer to the stars, or Fox News mouthpiece? Will the only highly compensated jobs in the service sector turn out to be those guarding other people’s wealth, or the state’s security?

Strictly speaking, these are moral and political questions as well as economic ones, and putting it as delicately as possible, modern technocrats don’t have all the answers to them. The relevance (or irrelevance) of Marx has been forced to shelter the last hundred years or so in the academy. Perhaps it’s time to dust him off again and have another look.

was used (AFAIK) to argue that “free markets” are just and equitable.

The internal combustion engine was ‘invented’ in the 13th century. It was being used industrially by 1823.

Can you think of one idea from before the internal combustion engine that remains relevant today?

Last time I checked the wheel still seemed quite popular. Writing has its fans as well I’m told.

Arguments from age alone (either old =good, new=bad; or old =bad, new =good) are quite silly.

One of the problems with the LTV is the supposition that the value produced by labor can all be reduced to a common denominator of basic human labor. Consider a product of human labor: The Sound and The Fury by William Faulkner. Lots of people have put just as much effort in writing great novels as Faulkner did, often with more education; the vast majority have failed miserably. One could not produce such a novel by hiring some large number of mediocre writers to work on it. The output is not just more efficiently produced that the output of other workers of the same type, it is something other workers could not have produced. It cannot be expressed as some product of “general human writing labor”. Some other people have written great novels, but no one else could have written that particular great novel.

Too far from the heart of Capitalism? Consider the “I’m a Mac; I’m a PC” (IAMIAPC) ads. How much labor went to thinking that up? Even if one thought it could be meaningfully quantified, the value of the result is not a function of how hard the people worked on the concept. The concept could have come in a flash of inspiration or produced by tedious trial and error: makes no difference to the value produced. And one could not likely take a larger group of less talented advertisers and aggregate up to an ad of this level. This is not simply productivity; it is labor or one person or (small) group that is not reducible to the general labor of workers of the same type.

OK, one objection is that Marx was talking about commodities and neither novels nor advertising are commodities. This, however, already means that a great deal of the activity of modern capitalism, the creation of brands and associations, is outside Marx’s domain. But this stuff goes into the commodities themselves too. How much work went into the invention of the Nike swoosh? Impossible to say from the result and irrelevant to evaluating it. Did it generate value? If capitalists are making money from appropriating value, it certainly did, as Nike made a fortune off of it. And the swoosh is an intrinsic, perhaps the most important, part of the sneaker. If we are going to define commodities so narrowly as to exclude Nike sneakers, then our analysis will be only tangential to the major work of the modern economy.

Labor is human energy directed to purpose. However, the direction is not necessarily trivial and not necessarily something that can be fully specified by someone other than the laborer. Jobs says “Give me a brilliant and entertaining way to compare my computers favorably to PC’s”, but he doesn’t know specifically how to do this or he wouldn’t be hiring you. Labor always involves both physical energy and mental effort, both sometimes it is almost entirely one or the other. Ditch diggers have to think. How steep can I make the side slope to make it stable? Should I pack in the sides? However, the thinking is very low-level and most people can reach the necessary competence easily. Then it is primarily a matter of strength, stamina, motivation. There may always be subtle quality differences between one person’s work and another’s, but they will not be significant.

The LTV is like Newtonian physics: it is never absolutely true, but within certain parameters, it is quite close, and others completely useless. Assembly-line workers have to keep up with the line and cannot go faster; they needn’t apply their own intelligence, at least not to routine situations; if they are capable of more, the system will not capture this potential. Joe may still tighten his screws a little more snugly than John, but if John meets the minimal standard of competence, this is unlikely to matter. This labor can be reduced to basic human labor because the mental component is trivial. The physical energy component of what Faulkner’s does is the typing, and most people can learn that to a comparable competence, but that is not where the value is. The LTV is useless here. Capitalism, however, has been moving since Marx’s day further into the area of value created by imagination, rather than by physical energy, and most of what is physical energy can be automated anyway. This is not simply a matter of Marx being dated, anymore than for Newton. Newton’s laws of motion were always wrong, but they were close enough for the sort of problems he addressed, and most of the ones he was capable of addressing in his time. Likewise, the LTV was always wrong, but in ways that matter more now than it seemed in Marx’s time, when the future of Capitalism looked like more efficient production of commodities was the whole game.

Nicely done, Martin, and yet…. Do we pay the swoosh design team more than Faulkner because they sell more shoes than he does books? And where was it that I heard that the relation of use-value to exchange value might be a trifle iffy in late capitalism? Wherever it was, I’m inclined to think at this point that an Umwertung aller Werte ought still to be in the offing, if not precisely the one Marx (or Nietzsche) advocated.

@120:

Really, Martin, LTV reduces to monkeys typing Shakespeare? (Though my personal preference is for “Absalom! Absalom!”, followed by “The Light in August”, with TSATF third, as a glorious mess about an inglorious mess, though I can understand why Faulkner himself might have preferred his glorious mess).

But Marx’ deployment of LTV is just as much a critique of it and “labor-values” amount to an accounting fiction within an explanatory scheme. Though the idea that labor both is and might be a “creative” activity is at the core of Marx’ thinking, which is the sort of thing that get’s him accused of “Romanticism”. Though the idea that productive or fruitful self-activity is the mark of the good life is of an Aristotelian vintage, (hence “classical”), and what Marx is envisioning is a transformation of labor from an abject commodity into a life-and-community affirming activity.

But maybe you should have paid attention to that distinction between productive and unproductive labor, which originates with Smith and does derive from Marx. “Creative” ideas about bringing goods to market, to compensated for endemic excess capacity, adds “value” how? Maybe “creativity” might be better directed elsewhere.

Lee Arnold: The problem with economics as it is currently constituted, and what stymies social democrats, is that we have the wrong concepts to cover the entire field of inquiry.

What do you mean by “we”?

john c. halasz: Though the idea that labor both is and might be a “creative” activity is at the core of Marx’ thinking, which is the sort of thing that get’s him accused of “Romanticism”. Though the idea that productive or fruitful self-activity is the mark of the good life is of an Aristotelian vintage, (hence “classical”), and what Marx is envisioning is a transformation of labor from an abject commodity into a life-and-community affirming activity.

This sounds like Alasdair MacIntyre more than Marx. I suppose it can be found in the early Marx that was discovered in the 1950s and 1960s, but I haven’t found it yet in the text.

* rephrased: “mobilize people a lot *better* than concepts of efficiency”

Efficiency has little power to move the hearts of men/women.

If a brand allows for a firm to have market power, then this can add to profitability in two ways: first the brand may expand the market and thus allow for economies of scale and it may interfere with competition, allowing market price to rise above the price of production or untransformed value of the product. I am wearing a fake Rolex by the way.

Wait! You forgot Pranab Bardhan and Anwar Shaikh. You also “forgot” that I mentioned GA Cohen only to compare him unfavorably to Godelier and Sayer. By the way, hartal suggests humorously a (capitalistically) unproductive and unpaid break from one’s job. So yes I have not made a productive contribution.

@ 101 JQ:

“On Increasing Returns to Scale, I agree that Marx recognised the necessity for a theory of IRS, I just don’t see that he got anywhere near producing one in his formal analysis. This is a straightforward mathematical concept, so don’t drown me in words, show me the equations.”

This is at once a bit peevish and supercilious. Words and math are not to be so simplistically opposed, because what matters are the basic explanatory concepts, which must be substantively grasped before the can be adequately formalized. It’s useless, even deleterious, to formalize something, mathematically or other wise, before one has a basic grasp of what it’s about and what is being referred to. Which actually how formalized mathematical economics too often proceeds, producing no end of sophistries. (Really, Walt? Robert Lucas!) Part of the burden of “Capital” is that it is a critique of abstraction and attempts to show how both its own concepts are formed in interaction with the phenomena its referring to, in terms of their contexts of emergence, “justification” and application , and also how certain modes of bad abstraction of necessitated and re-enforced by the operations of the economic system it is studying and criticizing. (Hence the crucial subtitle: “Critique of Bourgeois Political Economy”). That’s part of the reason that Marx adopted the idiom of Hegelian dialectics, though another crucial reason was that it allowed him to express his sense of dynamics, in an era in which, even in physics, it didn’t as yet have a mathematical means of encoding and expression.

AFAIK increasing returns wasn’t mathematically formalized within the “mainstream” until the late 1970’s with Joe Stiglitz et alia, which doesn’t negate that the concept existed long before. (And incidentally, Joe Stiglitz, according to my limited understanding, also did formal work that eviscerated those to classic “welfare theorems” of neo-classical GE theory, by demonstrating that “market failures” are pervasive, if not readily remediated, due to “information asymmetries”. So maybe economists henceforth should cease to claim any expertise as authorities on “social welfare”, as well as being much more open to differing conceptions of functional “efficiency”, other than “Pareto-optimality”). However, Marx can’t be reduced to some singular, simple formal model, (though since the 1960’s a great deal of work and debate has occurred over the formal-rational and mathematical reconstruction of Marx’ economics, though assuming it can be simply extracted from the rest of what is going on in his work), since he deploys a variety of different angles or perspectives, “dialectically” to make his account, and thus a plurality of “models” in the current sense are implied. But increasing-returns qua the growing concentration of capital are definitely a key component of his explanation, even as the further implication that oligopolistic competition destroys the “value” of lesser competing capitals and thus reduces the aggregate “value” capital can’t be captured in a narrow “model” of increasing returns.

But still more to the point is that the basic account is one of long-run dynamic dis-equilibrium, which accompanies the (over-) accumulation of capital and its crisis tendencies. And the math to capture disequilibrium dynamics is still to this day terribly difficult. Equilibrium assumptions leading to comparative statics “results” is far easier and more tractable. But not thereby more “true”. Marx did fiddle with math formulations in his twilight years, given the evidence of his correspondence, but it wasn’t just that Marx was not a brilliant mathematician, or even that the mat really didn’t exist then, but there wasn’t any adequate body of empirical information to apply it to, so the point was moot. But even still, one shouldn’t confuse some formalized model with any actual empirical result, (with the tendency to calibrate the model to the data), and one can still ask whether the model is adequate to its alleged concept as well as its data.

This is not to diss mathematics, only to point to its effective conditions of application, and to reject the opposition between “literary” and formal-mathematical economics, since words are after all the medium in which we formulate and express concepts, whereas math must still be accountable to those concepts, even as the alleged mathematical virtues of precision and clarity, removing all ambiguities, can over-simplify, short-circuit or suppress actual insights, simply because (as yet?) there is no means to formalize them. (Something that has happened often enough).

At any rate, aside from attempts at a formal-rational mathematical reconstruction/translation of Marx’ work, an attempt to handle the complex mathematics of disequilibrium dynamics in building on Marx in a contemporary context can be found here:

http://www.amazon.com/Macrodynamics-Capitalism-Elements-Synthesis-Schumpeter/dp/3642099718/ref=sr_1_1?s=books&ie=UTF8&qid=1309717730&sr=1-1

The Goodwin model mentioned in the description refers to Richard Goodwin, a Hoosier ex-commie who fled Cambridge, MA for Cambridge, East Anglia with the advent of Tail-gunner Joe McCarthy and developed a Marx-inspired formal model of the business cycle and economic growth.

Bianca @ 131 — By “we” I meant everyone. I think economics is a subdivision of ecology and needs a huge adjustment in conceptual apparatus. There are primitive beginnings of it in Smith and Marx, and Alfred Marshall explicitly stated that economics is really biological (and thought mathematics wasn’t really suitable to it.) But to me, the 19th Century was a zenith of polymathic, comprehensive thinking, because knowledge could still be fitted into a library, and a person could still be well-rounded. However, they barely had verbalizable concepts of coevolution, ecology, or the emergence of new patterns, and so their ideas tending in these directions come to an end after the briefest mention. Darwin published only after mid-century, took a long time to sink in, and insofar as evolution was incorporated into social thought, it was fairly simplistic and full of error, not to mention occasionally horrifying. The 20th century exploded into further scientific specializations and fascinating detail and then started finding new limits to logic, analysis, ratiocination, but got bogged down in overall integrative vision, or somehow took the wrong lesson that synthesis is impossible or inadvisable. So I tend to give figures of the 19th century such as Marx a large berth, a free pass, an allowance for the times. I don’t study them much except to chase down a point, but I think they had a full vision. Whereas the people criticizing Marx today are correct on a few analytical points, but otherwise couldn’t think their way out of a paper bag. Name any top economist! It is worse than that: across the scientific spectrum, the current thinkers do not have full vision, partly because they believe they cannot, and partly because specialization has overwhelmed us all, and synthetic thinking is devalued and misunderstood.

I know you’re trying to bait me into saying something that will give you what you perceive to be a good reason to censor or dis-vowel my posts just as you did during the discussion of Branko Milanovic’s findings on inequality. I am sorry that you do not think I have contributed to the quality of the discussion. I look forward to your posts that do so.

I was responding to comments directed at me on the Milanovic thread. You will notice that I try to be more succinct than many who do comment here.

Now your own comments have hardly been constructive. You are the one who name dropped Cohen without mentioning his argument. See #2. Let me do it for you, though it’s late, and it is something I think you should have done.

He seems to be taking the position that because labor can’t be said to have created surplus value–for the value of what it has produced is determined by the labor time necessary to reproduce it, not the labor time actually objectified in it–labor can’t be said to have been paid less value value than it actually created.

That’s where the argument seems to stand at section 6 of the Cohen article that you name and title dropped.

I can’t believe that he put this argument to print–he recognizes that there was criticism of the article version of it, I have the version in Labor, History, Freedom– but I am not surprised that it never seems to have gotten any traction.

Of course the value that labor has created is determined in and through a social process. And it is greater than the value of the wage. The exploitation theory seems intact after Cohen’s argument.

Cohen makes other mistakes. He suggests that Marx chose the term exploitation to make the charge more morally loaded. This is untrue. The word exploitation came to be emotionally charged later. Cohen also says that all goods that have exchange value are commodities. This was not true for Ricardo or Marx.

The next argument about monopoly, ownership is a bit more promising, but that’s it for now.

Hartal wrote:

“Advertising speeds up the turnover of capital and may allow for economies of scale given the expansion of the market through psycho-technics; that is, it is not itself productive of new value but it may allow the production of a greater sum of surplus value, resulting from increased turnover and economies of scale”

This is precisely what the IAMIAPC ads did not and could not do. Apple was getting its ass kicked by the returns to scale on the PC, especially for developers for the platform, as well as network effects, etc. Jobs explicitly recognized that there was no way to reverse this dynamic. The only way the Apple could compete was to charge more than for products with comparable specifications. They were under a lot of pressure to knock this off, as customers concluded that the quality was not sufficient to justify it. The ads did not increase their market share much, certainly not enough to change the economy of scale calculations, but they did help convince the market to tolerate higher prices. Indeed, the price differential between an iMac and a comparable PC increased after that ad campaign. So hold turnover and returns to scale constant, but increase the price. On returns to scale, Mac was doomed.

In any case, my point was that creative labor cannot be reduced to a common denominator of labor power. Marx does hold that value is created by the average labor time necessary to make an item. Capital, chapter 1

“We see then that that which determines the magnitude of the value of any article is the amount of
labour socially necessary, or the labour time socially necessary for its production. Each
individual commodity, in this connexion, is to be considered as an average sample of its class.
Commodities, therefore, in which equal quantities of labour are embodied, or which can be
produced in the same time, have the same value. The value of one commodity is to the value of
any other, as the labour time necessary for the production of the one is to that necessary for the
production of the other. ―As values, all commodities are only definite masses of congealed labour
time.”

See also, Chapter 7

“in every process of creating value, the reduction of skilled labour to
average social labour, e.g., one day of skilled to six days of unskilled labour, is unavoidable.”

Do you suppose that the value of all labor can really be reduced to this? The invention of the Nike swoosh? Value measured by the time it took someone to think it up? Does that include other ideas that were rejected, or only the instant where that particular image appeared? Does it have no value? Then how did it generate profits for the Capitalist? Are not such profits appropriated surplus value? And keep in mind, the result was not just more sneakers sold, but higher prices tolerated.

What about the value of the movie Thor? Was that simply a function of the labor-time necessary on average to produce such films? Has not equal effort – both directly and embodied in deployed technology and artifacts – gone to produce films that did poorly? Did not Blair Witch Project also produce great entertainment value with vastly less investment of time and resources? Where does the value of a film come from? The value of creativity cannot be reduced to a basic function of the time put into it, even by the actual creators, much less by what it would take some average people to do the same thing. For high levels of creativity, average people cannot do it, regardless of training. And even for low levels of creativity, it is not simply a function of time.

Now, to be fair, Marx did recognize that there is a creative component to labor. Capital, Chapter 7

“But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in
imagination before he erects it in reality. At the end of every labour-process, we get a result that
already existed in the imagination of the labourer at its commencement.”

He either just didn’t see that this contradicted the notion that the value created by labor could be reduced to a function of the time socially necessary on average to perform it, or he didn’t recognize the imagining as part of the labor, not as something that pre-existed at its “commencement”. The process of erecting in imagination cannot be reduced to a function of time, and for much modern work, imagining is where the creation of value is; the rest of the work is trivial.

The main form of creativity Marx deals with is innovation to increase productivity and thereby produce relative surplus value. He assumes such happens routinely, but also that the innovations are replicated, so that the surplus value produced is temporary. The IAMIAPC ads cannot be replicated; they have been imitated by at least two companies, Verizon and T-mobile, but those imitations are intrinsically ironic references to the original. Avatar also cannot be replicated, though one can produce similar films. It is not even that Avatar was deeply original – clearly it was far from it – but replication means exact duplication and exact duplication is simply identity. Anything else, no matter how derivative, will require some new creativity. Making films is intrinsically creative. The Nike swoosh cannot be replicated. Many sneaker companies have their own version, but none succeeded in neutralizing Nike’s advantage. If anything, the advantage just faded with time, but this is obsolescence, not the effect of replication that Marx was talking about.

Oops, the italics didn’t come out. The emphasized pharse in the Marx quote was: a
source not only of value, but of more value than it has itself

Two things I missed the first run-through but didn’t want to get lost:

@ 65: “Pump priming on its own will thus not work; nor will quantitative easing. It is also not simply a psychological matter of activating animal spirits.” This seems wrong historically. WWII, for example, was a period of brisk economic recovery without “a rise in the rate of exploitation.” It also sort of proves Quiggan’s point a bit – by this reading, Marx really can’t help guide us in the absence of revolutionary politics.

@ 81: “The dirty secret of the human genome project is that classes are biologically determinant, with some natural rotation. Even if not, the difference in time-preference between the classes appears to be, even with education, immutable.” Not only is this eugenicist dribble, but it’s easily disprovable dribble. Class mobility is incredibly divergent, both comparatively across nations and over time.

Now, William Faulkner and such, I don’t think they are a part of the capitalist mode of production; except, maybe, as something similar to natural resources, land, minerals. Suppose we say that Faulkner writes just because that’s what he does, because he exists; like soil produces wheat (I don’t mean to sound pompous here, just trying to make a point). His writings are then harvested and sold on the marketplace: publishing is an ordinary capitalist enterprise.

Does that sound convincing at all? sophistic?

‘What does it matter whether the incomes of the top 1 per cent are derived from ownership of capital or from some more complex combination of direct ownership, managerial control and straightforward corruption?’

While this is an obviously rhetorical question politically nothing can matter more.

Marxists were never that good IMO at answering the various managerial revolution, new class, convergence, corporatism and state capitalist critiques advanced by Burnham, Djilas, Crosland etc – not least because the answer you gave was inevitably conditioned not by the need to analyse whether there was a new class in western capitalism but by the need to take a political position on ‘actually existing socialist’ states.

And then history seemingly answered that one for us by spectacularly transforming the communist third of the world into the worst forms of robber baron capitalism.

But the question still arises – when we look at the ruling class the very top (i.e Warren Buffett, Bill Gates, Steve Jobs) does indeed derive its wealth and power from owning capital (primarily sticks and shares).

But the rest of the top 1% derive their main incomes not from what they own but from what they do: i.e. from vastly inflated salaries and bonuses (and in some countries the capacity to extort bribes/tribute).

Now while right wing critics of the new class like Burnham saw this as vastly worse than traditional free market capitalism, others like Crosland saw it as progressive – surely managers and technocrats and experts were people one could do business with to reduce the power of capital and redistribute wealth?

Seventy years after the Managerial Revolution and fifty years after the Future of Socialism clearly Burnham was closer to getting it right than Crosland – the new class has in fact redistributed wealth to itself to a degree almost unimaginable.

Now an orthodox Marxist would rightly point out that it doesn’t matter so much where the wealth came from if it gets re-invested in capital – a CEO can’t just spend it all on cocaine and hookers or have great piles of cash lying around his house – so when he ballses up his job (as so many of them do) he retires to become a regular rentier capitalist – and arguably that’s why he went into merchant banking or management in the first place.

The invention of share options and bonuses linked to share prices also went a huge way towards closing any putative gap between the interests of owners and their managers.

But nevertheless the current crisis has exposed a huge problem in late capitalism – the managers of the finance sector’s drive to make personal bonuses from ever riskier financial instruments (calling gambling in derivatives of derivatives ‘investments’ seems a misnomer) ended up funnelling vastly more money into their own pockets than into that of the shareholders (look at the percentage of bank ‘earnings’ that go into bonuses) and had not those special executive committees of the bourgeoisie stepped in those shareholders might literally have lost vast sums when it all went tits up.

And this raises another problem that Classical Marxism has no obvious answer to – when the state effectively gifts the bankers with trillions of dollars raised by selling more national debt to those same bankers WTF is going on?

Given the volumes of debt and liability involved it seems to me that we have indeed passed an important threshold between capitalism and the forms of state monopoly capitalism theorised about by Bukharin 90-odd years ago – albeit driven not by the needs of militarism and imperialism to achieve total mobilisation of resources in wars of survival against similar states but by its very opposite.

So this does seem a good time to revisit the more heterodox variants of Marxism and post-Marxism which did indeed have a lot to say about alternative forms to classical capitalism in which surplus value could be extracted and re-distributed.

Henri @ 152
What if Bertolt Brecht’s lovers produced words because that’s what they do, but he worked hard?

Martin @ 149
The labor is in getting the details right. Workers aren’t paid for having ideas. They’re paid for developing and giving PowerPoint presentations, for writing scripts, for hiring actors, and for dressing sets. There might be some prestige value in outsourcing the “work,” but “if you want it done right, you have to do it yourself.” People who have ideas quickly are favored because they are not paid for it.

The quote Henri provided above, if turned around on itself, might be used to support an argument for the metaphysical necessity of knowledge used by workers’ being owned by their employers. The occasional Coca-Cola or Colonel Sanders aside, there is no more reason to suppose this is the case than such an ideological support could give.

“Knowledge wants to be free” does not logically imply that every high school senior should be allowed to write Linux kernel code (or that I can transfer the knowledge of twenty years in industry to you simply by eating lunch with you every day for one month and then e-mailing you daily for three months). RMS would laugh at you.

a CEO can’t just spend it all on cocaine and hookers

Actually, I believe the correct way to pay for cocaine and hookers is to charge it on a corporate credit card. As described here: http://abcnews.go.com/blotter/Story?id=6813806&page=1

I think you’re being unfair to the pump-priming metaphor; after all, where does it say you’re limited to one pump of the handle?

However, I don’t see how you square stimulus and planning with your earlier claims that it requires both a lowering of the cost of capital and an increase in exploitation.

No objection, here. But I don’t see how that follows from Marx.

Bianca, yes, but mindful execution also has a creative component not reducible to time. For some kinds of work, this is trivial, so the LTV is close enough, but not for software development or, again, film-making. These involve mental operations whose mapping to time is intrinsically variable even for the same person at different times, and certainly for different people.

The question is why Marxists/socialists need to argue the 100% case.

Because otherwise they have to prove exploitation in the specific case at hand. It cannot be asserted categorically.

Henri,

No.

“Like any other property” is ambiguous, but it is something people want, and it does produce value for the capitalist.

As for art and marketing, where is the line with Thor? It’s not just a given from human talent; you need capital to make such a film. Even the original comic would probably not have been produced absent a profit motive. Lee and Kirby would have found something else to do with their talents. Lee wanted to be a serious novelist, but got into comics to pay the bills.

What’s with this Thor thing, should I watch it?

Yes, in the past Hollywood did harvest talent once in a while, but those times are long gone. What they do now, it doesn’t require any talent/creativity whatsoever. It’s all sequels, remakes, made-up celebrities; everything is cooked like a McDonalds burger: this much sex, this much violence, this much sentimentality. It’s a factory.

JQ @138:

I would call what’s in that cited passage arithmetic, not mathematics, in the relevant, (“higher”) sense. Of course, anyone reasoning about economic phenomena is going to be thinking quantitatively, at least in part, about relative magnitudes of both money and goods, (since those are the immediate data that’s already in the domain under scrutiny). And there are going to be some basic mathematical identities forming fundamental constraints on the matter, such as total price must equal total labor-value, etc. (Other bits like C-M-C’/M-C-M’ are just hanly short-hand formulae, not any sort of exact math). But, of course, the same “literary”/conceptual presentation, short on mathematical finesse and exactitude, is to be found not just in Smith and Ricardo, but Marshall. Even the great Lord Keynes, surely a mathematical sophisticate choose a largely verbal presentation, if making reference to mathematical concepts such as “the marginal propensity to invest”, and was somewhat suspicious of becoming completely mathed up. (His work doesn’t reduce to Hick’s IS/LM chart, by any stretch, which Hicks himself later repudiated precisely on long-run business cycle/growth grounds).

Of course, as I said, a lot of work has been done since the 1960’s on the formal-rational and mathematical reconstruction of Marx’ work to bring up to current technical standards, considered as plain economic theory, (though there are many other parts or aspects to it, including a critique of the former). Robert Vennieau is not doubt more expert on all the technical issues and details than I. But what I’m saying, is that Marx won’t reduce to a single overall mathematical model, because Marx is giving a multi-tract account with complex interactions between the different parts or aspects of the general theory and its domain. So you’d more fruitfully reconstruct and apply several different models to capture those dynamic interactions. (Something of the same, of course would apply to Smith, Ricardo, Marshall and Keynes: the reason that they are not simply outmoded by further technical progress, since such works are rich with insights into phenomena, however ambiguously formulated, that still provide a heuristic resource for models and further understanding). Marx, for example doesn’t have a single crisis theory, but more like a family of crisis theories. And, in fact, why all economic crises have some general similarities, they differ in their immediate sources and subsequent courses. If you think that;s insufficiently predictive, well, formal models themselves don’t have such a good predictive record, eh?

I’m not against formal modeling per se. It can produce insights and test for inconsistencies. But it’s not an end-in-itself, nor guaranteed to produce increased understanding. Rather what counts is the full cycle of the contexts of emergence or discovery, and the context of application, and the especially for the 1st and the 3rd, the validity of a formal model is controlled at least implicitly by “substantive” conceptual understanding, which such formalisms encode, (or not). Given the prior assumptions, simplifications and stylized facts involved in formalizing, such models might be formally consistent, but irrelevant or worse. Whereas, just because something is not or not yet so formalized, doesn’t mean it’s invalid or beneath consideration. And as I said, neither the mathematical means, nor the source of empirical data for their application existed in Marx time, even if he’d been a much better mathematician. (Darwin made no use of statistics, then in a relatively primitive state of development, to formulate natural selection, though nowadays parts of the theory such as population genetics are heavily statistical). So Marx instead couched his theory or theories in a dialectic method of concept formation and presentation or exposition. That involves not just a multi-tract approach, highlight shifting perspectives, interactions, and tendencies and a dynamic conception with gathering disequilibria, but what we’d call nowadays mathematically “non-linearity”, (since output is not a simple function of inputs, but exceeds inputs). All of which even today is still quite difficult to express in tractable mathematics. (Marx clearly sees things as in a state of constant flux, but lacks a mathematical notion of stochastic processes by which to express that intuition or insight).

So to return to the particular bone of contention here, I think you’re wrong n your claim that, though Marx espied a tendency to increasing returns/oligopolistic concentration of production, he provided no “model” for it, but rather his model involved only CRS. Rather Marx starts from the classical assumptions of competitive markets exchanging all commodities at equivalent values through equalized profits and thus equilibrium precisely to contest and criticize those very assumptions by rigorously adhering to them. And I think it’s because you refuse to engage with value theory a priori that you fail to grasp the functional role of concept of value as a counterweight to nominal price formation in the explanation offered, which clearly has as one of its main burdens or theses the dynamic tendency to the ever-increasing concentration of capital, transcending “freely” competitive market mechanisms, (which really started to take hold just after his death). If you want to plug in there a formal model of increasing returns, fine and good, but Marx might reply that you’d then also need to provide a formal model of the collateral effects. If technical capital improvements double the productivity of labor and that lowers the cost and increases the quantity of real output actually and potentially, other competing firms are driven out and fewer workers remain employed. But labor-value is held constant per capital, so it hasn’t been increased with increased output, but rather the unit labor-value of output has been halved, even as the value of older competing capitals have been destroyed. So workers must be re-employed in less capital-intensive sectors and losses written down. There’s thus no continuous or linear tendency toward increased capital intensity, but the overall effect is a result of a dynamic process. And that famous “tendential law of the falling rate-of-profit” is couched precisely in value terms. And increasing “mass” of capital value, (though the capital goods sector likewise is rising in productivity), is facing a decreasing “mass” of labor value. One could think of that in aggregate macro terms as the “mass” of labor value being what would be required to sustain full employment at wages sufficient to permanently sustain sufficient AD. (Which is precisely what Marx doesn’t think ultimately possible, due to the rooted asymmetries of capitalism). In the meantime, nominal money profits can still be rising to to rising asset prices from the production boom, even as further opportunities for real investment are diminishing (as a result of their very past success), an profits spill over into financial speculation on paper assets prices, (which, as they rise, offer ever declining yields). (The appearance is an inverted expression of the essence). This is not an entirely implausible description, since it’s part of what happened in the U.S. 1927-1929, or the way the Japanese debacle of the 1990’s was caused by a twin bubble as corporate profits were increasingly feed into speculation on shares and RE.

Such a concept of “value” might appear to be counter-intuitive or unempirical. But it’s not a piece of abstruse 19th century metaphysics, as it’s so often superciliously dismissed. “Value” is “internal” to an economic system at any point in time as the set of relations and ratios of exchange endogenous to that system and, as i already said, the usefulness of the concept is shown forth precisely when nominal prices and values diverge and nominal price adjustments don’t “clear”. “Value” doesn’t exist outside such a system, but equally the assumption that there is always and everywhere a set of price/quantity adjustments determined simultaneously through some equations that guarantee that all markets clear simultaneously with respect to each other is false, (as opposed to price-quantity adjustments sometimes being sometimes a useful analytic device). But I think some value theory is needed for economic explanation, since for one thing, money itself is something basic to be explained, rather than just assumed. And if money is the universal equivalent in exchange, why does money itself have a price, i.e. interest rate. I’m not saying that they can’t be readily explained, but just that the explanation can’t be tautologous. And the explanatory and the practicable, though not entirely unrelated are distinct “moments”, so saying, e.g., drop the interest rate to 1% and you’ll spark a recovery amounts to just a reductively instrumentalistic conflation. Further, “value” becomes “labor-value”, because it provides for an explanation of profits, (which otherwise the conditions of equal exchange an competition would attrite away). Do you have a better alternative explanation, rather than assuming what needs to be explained? But labor-values are already “alienated”, they are extracted/abstracted by the dynamics of the system, rather than being directly produced by workers, and they pursue their vicissitudes independently from them. Still there is some reason, both normatively and functionally, for evoking labor as the source and standard of “value”, along the lines of “principle of least effort” at the heart of economic explanations of “efficiency”.

Finally, two last brief comments, before I leave off my screed. When Marx deals with the crucial role of the system of credit and finance in Vol. 3, he develops a prescient sketch of “fictitious capital”. It’s hard not to think of the recent credit-and-housing bubble in the U.S. and the open-air Ponzi market in structured securitizations, especially CDOs, without thinking of such fictitious capital. But financialization of the production system is not just a phenomenon of the last 30 years, though it’s growing extent nowadays is unprecedented. And I think that goes hand in hand with MNC globalization, just as it follows on the collapse of Bretton Woods, which sought to limit free global flows of financial capital and prevent the corresponding problem of CA imbalances. I think Marx is heuristically more relevant than ever on such global expansion of capital.

The other comment is that the question of what remains of relevance in Marx and what is “dead” is itself raised to relevance here not because of the failure and “death” of communism, whatever responsibility one wishes to attribute to Marx for that sad and tragic adventure, but rather because of the failure and impending “death” of social democracy, the reformist way, partly indebted to Marx thought also, rather than the revolutionary road. So perhaps some reflection might be in order not just on what Marx got wrong, but also on what he might have gotten right concerning the limits to both capitalism and its reform.

Martin Bento @147:

I’ve already gone on too long, but maybe I owe a brief reply. You’re basically just asserting marginalist criteria and the rather trivial diamond/water paradox in particular, and cherry-picking considerably, to boot. Suffice it to say, that Marxian use-value is not the same as utility-preferences, and that Marx is fully aware that there are luxury goods markets and a market for Old Master paintings. (Do the notions of scarcity rents and positional goods ring a bell?) But if you really want to base your case on the creative genius of admen and their individual uniqueness and the “value” created by branding, so that sneakers that cost $10 to produce, retail for $100, and we are graced with an endless stream of Hollywood blockbusters, well, res ispa loquitur, aside from these being relatively “superstructural” issues. (A more general explanation for advertizing is that oligopolies, for a number of reasons, always maintain more productive capacity than they can sell, so if they can sell more, then they lower their unit costs and increase revenues and profits, to which degree it is “value- adding” for them, though far less so socially). I’ll just refer you once again to Smith’s rather invidious distinction between productive and unproductive,- (which is not the same as unnecessary),- labor, for you to reflect on the rather obvious reasons for it. Though I personally find your condescending and dismissive attitude toward those anonymous minions who produce the overwhelming mass of the necessaries of life, in favor of the individuation of the “creative” ones, elitist and ideological.

However, “Marx needs the LTV because he wants to argue that Capitalism is necessarily exploitative, not just sometimes or generally” @165 is just plain wrong. No, Marx deploys LTV in order to explain the source of surplus-value, given the equivalent exchange of all commodities, including capital goods and wage-labor, as classically postulated, (which then gets distributed as profits, as well as, rents, interest, taxes, etc.), and thereby to explain the vicissitudes and dynamics of the capitalist system as driven by the (or its) need for the expanded re-production of value, in order to re-produce surplus-value and maintain the valorization of capital through the rate-of-profit, which is a “contradiction-“ridden and crisis-prone process. “Exploitation” has a precise “technical” and functional meaning here in context, not the liberal-moralistic meaning that you wish to disparage and deny, due to either the threat to your pay-check, your status cohort, or your amour-propre. Though I’d be willing to agree with Robert’s suggestion above, that it be referred to as Marxian theory of value rather than Marx’ LTV, since such “labor-values” are extracted/abstracted by the operations of competition and the commodification of labor therein, even if that directly occurs outside of market circulation at various production sites, rather than directly resulting from the agency or intentions of workers, and it’s the subsequent dynamics that ensue that’s the main point. If you prefer an alternative explanation, I’m all ears.

However, I did say above, that though I think some objective account of “value” is needed for economic explanation, qua both standard of value and unit of account, a possible alternative could be the role of knowledge and technology in increasing productive surpluses, though that would be hard to make out. Simply relabeling knowledge and skill as “human capital” (which began with Gary Becker?) or appealing to educational credentials, (which might just be an empty signaling function), won’t do, because there’s no reason that a) knowledge and skill, which must be laboriously acquired should be accounted to capital rather than labor, b) knowledge, to be faux-naif, is supposed to be a universal and public function, not private property, and c) there’s no good reason why the range of technical possibilities, (which are opened up, but not determined by scientific research), should be selected and developed by the interest in private profit rather than public and collective benefit, in accordance with human and natural ends, rather than increased capital accumulation.

And I also stated above that nonetheless “economic value” might remain a great secular mystery, because it involves what human beings need, want and desire, which can’t be reduced or predicted by mere economic theory, but involves irreducible elements of cultural (self)-interpretation, (which, of course, can be subjected to considerable ideological manipulation). But it should be, at least, clear that it’s not a matter of fictitious “consumer sovereignty” driving the system, but rather needs, wants and desires are constrained by and imprinted upon by the basic constraints of the production system. Can one need, want, or desire what the prevailing system can’t produce? Yes, and no, to be illegitimately contradictory, since, yes, one is inevitably subjected to the constraints it imposes in forming one’s individuated “identity”, depending on one’s place and position within that system, which as much “produces” as is produced by its agents, but, no, because one can sense needs, wants and desires that the prevailing system and its social relations don’t fulfill, such that one can readily have unfulfilled desires and needs, but not their satisfaction, at least without considerable “work” and deferment.

“For dialectical philosophy nothing is final, absolute, sacred. It reveals the transitory character of everything and in everything; nothing can endure before it except the uninterrupted process of becoming and of passing away, of endless ascendancy from the lower to the higher.”

Fredrick Engels
The End of Classical German Philosophy
http://www.marxists.org/glossary/terms/d/i.htm

For me the most interesting part of Marxism was always the idea of thesis, antithesis and synthesis. [Admittedly, even with an undergraduate degree in philosophy and an interest in economics, I am very much a dilettante.]

Applying this idea to socialism and capitalism would be the way I would take things.

Although I would not devalue ideas older than I am, I would question why folks ignore so much that has happened in the last ten years, much less since world war two. Without capital my labor is useless. Even with capital, without ideas my labor is not particularly valuable.

Personally, I have begun thinking of Social Entrepreneurship as the synthesis that might take society beyond the problems of both socialism and capitalism.

@engels [179] Thanks for responding.

Without capital my labor is useless

Without saying grace no-one can eat.

My statement is (meant to be) descriptive; yours is normative (one assumes.)

the college boy who stumbles into the LTV doesn’t usually get it. There’s a …social-historical context to the LTV, from Locke, to Smith, to Ricardo, etc. What was Locke attempting to do with his LTV?? He was attempting to give the tenants and workers the right to their own work, not just as payment to the estate holders but as property. Marx himself doesn’t always seem to get that (and/or..modified it) point re the individual’s product of his own laboring. Locke wanted an agrarian-mercantilist sort of dismantling of the royal estates…not Hegelian statism. So it’s not that Marx’s LTV was wrong, but that all of his add ons ….muck up the original, simple concept (tho marxist would probably call that utopian or some such)

Phil, maybe you could say why you find the labor theory of value convincing?

Because all of the Top Men in our Capitalist system believe it? And – more to the point – only seem to disbelieve it when it’s to their advantage to do so?

But, for those who believe the LTV is bunk, I’d welcome an explanation of where and how it fails, preferably written for an audience of non-economists.

I guess the thing to ask is where the worth of the tools that are used to make the shirts came from, who it was who built the place where the shirts are made, and so on.

Question: how does the LTV handle money creation ? I.E, when the bank gives a loan and creates money, doesn’t that represent capital that didn’t go anywhere near the labor process?

If you’ve got an alternative theory to LTV, John, by all means, let’s hear it. But so far there doesn’t seem to be anything else other than the “value is what someone is willing pay” nonsense that seems to be rather, er, selectively applied. Even by it’s proponents.

I think what’s happening here is that Quiggin and others are being amazed discover the existence of generations of academics that take Marx seriously and can be read while de-emphasizing or abstracting from the last of Marx’s theses on Feuerbach.

I get the sense that a lot of people would like to think of Marx in the same way they do Freud – interesting guy, asked the right questions, got the ball rolling . . . but essentially wrong on every point. When of course that’s not true at all. There’s also a bit of that fear of contamination, that sense that if one says that Marx was the slightest bit right on any particular one will be disbarred and forbidden to practice being a Very Serious Person for life.

As for why no revolution, the original question asked way up thread? Simple – and obvious: Marx did not anticipate the rise of modern suburbia. It’s a lot harder to rise up and oppose The Man when you’re diluted across x thousands of square miles of countryside. And when you’re further isolated by air conditioning and big screen TV to boot.

SOV, I don’t have an alternative value theory – as I said in the OP, I think value theories of all kinds are uninteresting.

John, I didn’t ask for an alternative value theory – as I quite clearly said in the OP. I asked for an alternative theory, period. And while it may be your opinion that value theories are uninteresting[1], it is also a fact that theories of the type that espouse “value is just what someone will pay for something” have been proven to be more or less nonsense – and non-universally applied nonsense at that.

So what’s left? Or are you just engaging in idle criticism with no thought of coming up with an alternative that better explains the facts?

[1]And as always, it’s interesting that bankster types resort to a Marxian analysis to explain their outsized compensation packages.

1000 Names of Vishnu [182]

the college boy who stumbles into the LTV doesn’t usually get it.

Really, Vishnu? Other than a few exceptions, I’d be surprised if there is anyone but (former) college boys (and college women) posting on this site.

LTV is not hard to understand.  Many of us just find other parts of Marx more interesting than something that (at least as economic theory) seemed fairly well refuted 100 years before we were required to argue about it in economics classes. (In my case, the 70s.)

Since I don’t mind being schooled, even though I’m getting close to as old as dirt, I’m happy to read what folks are saying about LTV on this blog…if that’s the part of Marx that the intelligent folks of Crooked Timber insist on arguing about.

What I’ve read so far in these posts, however, shows a distinct lack of understanding of the complexities of economics.

We live in an age where someone saves some (admittedly A LOT] of their money, finds someone who knows how to do amazing things with electronic 1s and 0s, and they end up employing thousands of people to make things [including such insubstantial things as web pages] that hundreds of millions of people will spend their money to purchase.

Yet, the argument about LTV here revolves around whether there is more than stuff, labor and time in the value of a shirt (or a barrel of wine, or an ox or wheat.)

No disrespect intended to the folks involved in these arguments. There are many intelligent things said on each side.  It’s just that none of it does a very good job of explaining why my Arrow shirts bought at Kohls are worth so much less than whatever shirts Nordstroms sells, much less why Google is worth so much more than Yahoo (or Facebook vs. MySpace, iphone vs. Samsung, etc., etc.)

On the other hand, as a political or moral philosophy, I agree with StevenAttewell, who agrees with Platonist: “the labor theory of value has value as a moral argument, and always had.” Many capitalists do exploit labor in the sense that they pay laborers as little as they can get away with.

Phil, you really don’t need to know about the “transformation problem” (I wasted enough time on this in the 1980s). It is basically an attempt to deal with the fact that Marx’s assumptions about the relationship between labour inputs and prices break down once you have an economy where different industries have different levels of capital intensity. And to ask where value “comes from” is really to start in the wrong place, as if value is a _thing_ that needs to be created. Workers, through their labour, create the commodities that are traded in the market and the owners of capital (who don’t create, at least not in their capacity as owners) appropriate the stuff the workers have created and sell it at a profit. All of those claims are defensible (to the extent that they are) quite independently of the LTV (which is the point of the Cohen article that hartal neither likes nor understands). The LTV is both irrelevant to the charge of exploitation and irrelevant to the understanding of how real economies function, so it is best left in the archives, where it belongs.

Henri, among superhero movies, I would say Thor is about average. If you like that sort of thing, maybe see it, but it sounds like you wouldn’t, so don’t. I deliberately picked an unexceptional example to contrast with Faulkner and show that I am running a gamut of levels of creativity here from As I Lay Dying to the swoosh.

William and Henri, You guys are setting seriously too high a threshold for what you will accept as “creativity” for the purpose of my argument. All that is needed as a definition is this:

“A mental operation that produces value, such that the magnitude of that value cannot be calculated either as a function of the time spent performing it, nor as the average time socially necessary to perform it”

It’s not obvious that there are many value-producing mental operations that fall outside this. Simple mathematics, perhaps, but calculators and computers do that so much better than humans anyway. Some of accounting, I suppose. But you don’t have to get to the level of art for the ages before you fall under this definition.

Let’s look inside those rolling credits for Thor. Someone composed the music (usually it’s just one person). How shall we determine the value of that music? By its effectiveness in the film? Perhaps by some set of aesthetic standards applied to music as such? Certainly not by asking how long the composer worked on it, much less how long it generally takes composers to produce such a quantity of music. And in this respect, it is no different from music produced by Luciano Berio, Duke Ellington, Robert Johnson, or whomever you would accept as “good” music. Now, one could say that the first two criteria measure the use value of the music and the last two the exchange value (insisting that the movie may have no value even though it made money is an assessment of use value, but the money it made is a function of exchange value regardless), The problem is that whatever portion of the money Thor made that can be attributed to the music cannot be attributed to the quantity of human labor socially necessary to produce that music; the latter is unquantifiable. And this is true of the movie as a whole too. The proof is that movies with comparable inputs, using comparable quantities of labor from comparably-skilled people, and of a comparable nature, can vary enormously in how much money they make..

If your objection is that Thor and fashionable sneakers are intrinsically unimportant (although I don’t see where “importance” figures into Marx’s theory), what about software? This is important, right? It is essential to much of our biomedical technology, to basic scientific research, to the site we are posting on right now and the devices we use to interact with it, it is a significant part of economic activity and significant driver of general productivity. Have you heard of the Mythical Man-Month? It is a classic study of programmer productivity, 36 years old. The thesis is that programmer productivity cannot be aggregated in a linear fashion, which would have to be possible were it a simple function of time, as in Marx. Perfectly competent programmers can actually have negative productivity in groups by generating more coordinational overhead than the value of their contribution. There are also dramatic differences in productivity between individuals – the productivity differential between a top-notch and average programmer, if we measure by time, is a factor of five to ten, and it is not a result of a greater quantity of code, but of a greater quality. For Marx, differences in individual productivity are modest enough to average out in groups so that they do not matter, and this is essential to making the average the determination of value. How could such a thing be possible for order of magnitude differences, especially when productivity maximalisation is achieved by keeping the group as small as possible?

And, of course, Marx’s version of the LTV is, in a sense, recursive: the capital goods too are the result of labor. This film has lots of computer-generated special effects. The intellectual labor of Alan Turing and John Von Neumann is embodied in those computers. Were those men uncreative? Is the value of Turing’s theories a function of how long it would have taken an average person, or even a person of Turing’s education, to come up with them? That’s just not happening.

William, if we stick to discussions of herring, we’re not going to get at what is unique about contemporary capitalism, and have only a very blindered notion of how it works.

SOV,

All the top capitalists believe in the Marxian LTV? News to me. Who? Gates? Buffett? Welch? Maybe you mean the people these guys listen to? Drucker? I’ve read a lot of Drucker, and I don’t buy it. Got cite?

@Martin Bento 206
However, most guys with a lot of money usually justify their wealth through a sort of reverse application of a LTV:
1) I have a lot of money, whereas Tom has not;
2) I acquired my money through the market, that as everybody knows is just and prizes creativity, hard labor etc. [implicit sort of LTV];
3) Hence the fact that I’m rich is the proof that I produced a lot of “value”;
4) And the fact that Tom is poor is the proof that he didn’t produce “value”, hence he is a bad guy, cause of his own problems and parasite of society;
5) Thus I should be even richer, and Tom even poorer, and any redistributive idea is a crime against God and everything that is sacred.

“I acquired my money through the market, that as everybody knows is just and prizes creativity, hard labor etc. [implicit sort of LTV];”

“sort of” is doing an absurd amount of work there. Claiming the market is just is not Marxist, as Marx denies this. Saying the market prizes creativity is not Marxist, as Marx holds that reutrns to creativity are merely temporary as sources of value. Hard laborr is the only part of that remotely to the point, but even that doesn’t cut it. Marx does not say the market rewards hard labor. The notion that anyone who argues that they in some sense have earned their pay is a Marxist is preposterous: virtually everyone argues this.

A most interesting and educative thread. From this amateur’s perspective, there would seem to be only three ways of getting wealth – finding it, making it, and taking it. Neither Marx nor orthodox economics seem terribly interested in found wealth. Marx looks at both making and taking; the alternatives seem to want to paint taking out of the picture.

@Martin Bento 211
At best of my understanding:

– with tegard to point 3: Marx says that “stuff” is created by labor, meaning real labor and not abstract labor, for example:
The t-shirt I’m wearing has been created by the very non-abstract labor of some chinese guy named Joe Sixpack Lee. Thus by buying that t-shirt I enter in a very real, very material social relation whith JSL, but I don’t realize it because it is unobvious. This is the theory of “commodity fetishism”, not hte LTV.
The LTV is a theory by Ricardo, used and expanded by Marx, that says that “at equilibrium” the actual price of stuff is proportional to the amount of abstract labour put in, because of the law of offer and demand (see my comment n.79). Thus if the amount of abstract average work needed to create my t-shirt is 5 hours, but JSL is a fast and skilled worker and just needed 3h to make it, I will still pay proportional to 5h of work. If every t-shirt maker became as skilled as JSL then the price of t-shirts would fall.
The two theories, “commodity fetishism” and LTV, are two different theories and I think that you are mixing those up in your arguments.

– with regard to the other points: I think that if you see the LTV as an equilibrium theory of prices, and not as the idea that the price of item X is/should be proportional to the amount of actual work put in the item, many of your objection become less stringent.
Also, I believe that you don’t take in account a lot of labour that goes through distribuition, that is actually necessarious to sell stuff to enough customers, such as space from retailers (paid by higer margins to retailers), advertisements (that also need all the phisical labor to keep TV emitters working) etc.
If you take in account this labour, I think you will see that the “swoosh” is not valuable because it is the creation of a very gifted graphic, but because it has been turned into a cultural icon by a lot of labor and capital (which is still labor). The same goes for Thor imho.

If it wasn’t obvious, LRV was meant to be LTV in my 215.

My dear Chris the Cohen article that you recommended has two parts–a critique of the LTV and an attempt to make coherent the charge of exploitation without it. I restated Cohen’s critique. You say I don’t understand it; what I don’t understand is why he thought the critique had any force at all. Interestingly you don’t restate it or try to defend it. Good move.

RandomLurker – but where did these claims on labor come from? Normally, they come from labor – shoes are made, sold for money, money buys things. But with credit creation, claims on labor come into existence with the push of a key – and they certainly have exchange value, if not use value.

Overall, I think we’ve hit an impasse here. The folks who believe in LTV don’t seem to be going anywhere, neither do the folks who don’t, and no one’s yet explained how it’s of any political use.

Phil
Quickly on this transformation problem (by the way your book looks very interesting).

Let’s begin with the assumption that the working class is a collective subject and the industrial capitalist class one too.Let’s abstract from all other relations. Then we can look at the total value and total surplus value produced. These two magnitudes will be monetarily expressed as total price of the produced commodities and total profits.

Marx then asks how the capitalists will lay their claims to the total surplus value, monetarily expressed.

Marx says that the effect of competition, which is a complex process of output and price adjustments by individual firms, will be such that capitalists in each industry or branch will tend to make the same rate of profit.

Well this will mean that industries that use a lot more labor relative to means of production and raw materials will have the same return as industries that are more capital intensive.

Wait! If surplus value is unpaid labor time, then there should be more surplus value and thus more profit and thus a higher rate of profit in the industries that employ relatively more labor than those that are more capital intensive.

The very averaging of the rate of profit across industries seems, on the surface, to be a huge blow to the labor theory of value.

But Marx’s labor theory of value is a macroeconomic theory. It explains the total surplus value that the capitalists have to distribute among themselves; Marx actually emphasizes that the distribution of surplus value will obscure that it represents the unpaid working time of the working class as a whole. That is why he thinks science is necessary.

There is obviously a political implication to what Marx has disclosed. Workers should not think of their exploitation in terms of the firm or industry in which they work. The exploitation of the working class is a social and collective process. There is a material basis for worker solidarity for they are exploited as a class.

Now there are at least two major criticisms of Marx’s theory of the dissimulation which the distribution of surplus value engenders.

One is that Marx himself has granted that relative prices are not determined by labor values and thus himself abandoned it. Why is that? Well if industries that are capital intensive are to get the same rate of profit as those that are labor intensive they will have to be able to sell their commodities at prices above their values; and if industries that are to get no more than the average rate of profit, their goods will have to sell at less than their values. So one objection is that the labor theory of value has been compromised by its failure to account directly for relative prices.

The second criticism is to accept what Marx wants to do, and sets the condition of his problem this way. Marx says that the distribution of surplus value will move the prices of some industries above value and the prices of other industries below value. All this will do is distribute a fixed some of surplus value. But once Marx admits that the prices of the produced commodities have to be transformed, he has no reason for denying that the capitalists must have also purchased the “inputs” to the production process at prices that weren’t proportional to values. Yet any and all attempts to show what these prices paid for the inputs and outputs are end up changing the mass of surplus value that was supposed to be distributed among the capitalists through competition, and that change in the magnitude of the total surplus value raises questions about whether total profits are really nothing other a fixed sum of surplus value, redistributed among capitalists to allow them to achieve a uniform rate of profit.

Now how to respond to the second criticism. There are many ways.

1. If there is no vector of equilibrium prices, so what? Capitalism is never in equilibrium anyway. Michele Naples

2. If one tries to determine that vector of equilibrium prices through a fixed point iteration, he will see that the apparent change in the magnitude of total surplus value is only nominal. Anwar Shaikh and Jacques Gouverneur.

3, It’s possible to maintain the equality of total surplus value and total profit if we understand that the value of the consumed means of production and the raw materials that reappear in the produced commodities is given by the value of the money required to have purchased them. Rick Wolff, Fred Moseley and Andrew Kliman.

4. It’s not true that Marx’s examples failed to begin with the prices that would have been found on the market (this one hundred year old criticism is simply false), and Marx never admitted that he failed to transform the inputs from values to prices. What he said is that we can never be sure from the prices paid for raw materials and means of production what their value actually is, and his assumption in his transformation tables that the value of the consumed means of production that reappears in the produced commodities was proportional to the market prices recorded in his tables is mistaken. But we don’t need to be certain about what the value transferred was to see how exploitation works at a macro-economic level. In other words, the error in his tables has no bearing on how the process of distribution and dissimulation works. It’s a statement of the power of anti-Marxian ideology that this trivial criticism came to be treated as decisive and final.

William, sorry if I seemed humorless, but I was responding to you and Henri at the same time, and he seemed to be making the same claim more seriously.

Geo if you have a point to make make it. The people here sympathetic to Marx are making an effort to explain their positions. You should reciprocate with well-thought-out criticisms (the idea Marx wrongly thought that value is a thing that working class creates barely qualifies). I am not going to reconstruct one of the many criticisms that you could be getting at or want to get at. Please state it.

and no one’s yet explained how it’s of any political use

!!!

At the most timidly reformist end of Left politics, the LTV provides a coherent and compelling explanation of exactly why your boss wants to cut your wages, and exactly why you’re correct to resist. At the revolutionary extreme, workerism was (is) precisely about “proletarian self-valorisation” – restoring the value workers produce to the workers, by asserting direct control over the working process and ultimately over capital. Quoting myself:

“The workerists advocated organising in support of immediate demands, with the longer-term aim of decoupling wages from productivity. Their programme was encapsulated in the slogans ‘EÌ€ ora, eÌ€ ora potere a chi lavora!’ (‘Power to the workers!’) and ‘PiuÌ€ salario, meno lavoro!’ (‘More pay, less work!’); these coherently workerist demands had considerable appeal on the factory floor, and would long outlast their immediate context. The slogan ‘from the factory to society’ gained currency; the movement demanded a flat-rate ‘social wage’ to be paid to all, in the factory or outside.”

It all sounds a tad metaphysical to me, I’m afraid. Are you sure that the joke in “Marx’s send-up of bourgeois society” doesn’t wind up being on Marxists?

What’s metaphysical about it? Again do me the courtesy of making an argument.

What’s metaphysical about it? Again do me the courtesy of making an argument

I hate to be discourteous, but I think I’ll have to decline. I could make nothing of your explanation, but if others can, I suppose I ought to let the conversation proceed unhindered by tiresome and uncomprehending objections on my part.

geo:

People ask about “value” all the time. What’s the value of a CDO? What’s the value of the U.S.$? What’s the value of a good restaurant meal? What’s the value of my working day? In doing so, they’re not just asking about worth or merit, nor calculating individual opportunity cost. They’re sussing out the suspicion that price can differ from “value”, (sometimes drastically).

LTV can be stated quite simply: workers produce more than they consume, (than their wages will allow), and that productive surplus then shows up as the savings and investment of capitalists (and their confederates and acolytes). That’s pretty close to readily observable fact, not a “metaphysical” claim. What follows out from that in terms of the re-investment of profits, the accumulation of capital, the distribution of incomes and formation of aggregate demand and thus the dynamics of the economic system is the functional point of value-theory.

The question you are seemingly asking is the choice of “numaire”, as a standard of value/unit of account. In fact, in the formal reconstruction of Marxian economics, an interesting result was achieved: Marxian LTV was shown to be formally consistent, such that the basic result holds that the system produces more labor output than labor input, when labor is chosen as numaire. But if one replaces labor with, say, corn, formally the same system produces more corn output than corn input. An ambiguious result! Still there are some good reasons, both functional and normative, why labor should be chosen as numaire, if not entirely dispositive. Labor and not, say, corn or machinery, is the only thing that can activate an economic system, while also constituting its final demand and directing its ends.

Can labor-values be measured? Yes, there is a literature on the issue, though it concerns aggregates and not individual prices. Which is the point of the theory to begin with; it makes little sense to ask about the labor-value of an individual item, say, a sneaker, since SNAALT is a stochastic concept, just like other concepts in bourgeois economics. (Obviously, there are far fewer economists working in Marxian lines, so the literature is far less extensive then conventional “empirical” econometrics.)

But I really don’t believe you’re such a positivist, geo. Surely, you’d acknowledge that a concept can be inferred from evidence, without being direct manifested in the evidence? And if you want to render a concept in a theory fully “operationalized”, then that depends on other concepts in the theory maintaining “substantive” positions, else you just are constructing a Rube Goldberg apparatus, not contributing to understanding something.

@john c halasz

But value is contextual surely? Toilet roll is generally available and we tend to take it for granted. It’s still a very refined product. If there were only one pack left in the world, how much would it be worth?

@all

I’ve struggled to follow some of the argumentation in this thread. I’d always felt I had an answer to the LTV issue even though I’m not all that knowledgeable about economics, even if it was only of the crib sheet variety.

So here’s my uneducated opinion: market value is descriptive but labour theory value is prescriptive. Some compulsion must exist to make the former equal the latter, otherwise the classic soviet phenomenon of supermarkets with watermelons and hammers but no other products arises. That’s to say, if the price drops below the black market price, the shelves clear out but if something is cheaper on the black market it stays unsold in shops.

Is this simplistic somehow?

If nothing else, and no offense intended, halasz/hartal’s arguments in this thread show how incredibly technical, jargon-riddled, and abstract the drive to establish the academic proof is. Not the thing to get people politically engaged.

:

Really? This is “jargon-riddled”:

LTV can be stated quite simply: workers produce more than they consume, (than their wages will allow), and that productive surplus then shows up as the savings and investment of capitalists (and their confederates and acolytes).

I sure don’t see it. What I do see is that some posters are demanding an intellectual accounting of the LTV. Nothing wrong with that. But then other people – I won’t say who – are then complaining that the account is “jargon-riddled”. Iow, a Mutt and Jeff routine with the guy trying to explain the theory caught in the middle and unable to satisfy both parties are once.

Feh. Deal me out of this hand.

Oh, and Martin? You get the LTV every time some overpaid shmoe claims that he’s worth every penny because of value added by the application of his uber-skills. You also know the fix is in when said shmoe will – without missing a beat – explain that other people are poorly paid, regardless of their skills or efforts, because the value of something is just what someone will pay for it.

It would appear that in this, as in so many other things, it’s Socialism in one incarnation or another for me, Capitalism for thee. Yes, even down to economic theorizing; Capitalist economics only applies to nonelite ;-)

Ideological argument has to be based on science, otherwise it’s a religious belief. Or demagoguery. “most value comes from labor/labor’s wages are below their reward/the claims of labor are morally superior from those of capital” – why, and what does it even mean?

None of the examples you cite require an academic proof that all value comes from labor as opposed to a moral/ideological argument that most value comes from labor/labor’s wages are below their reward/the claims of labor are morally superior from those of capital.

“Academic proof” is raising the stakes a bit. My take on ‘moral argument’ is what I said back at #201 – the great thing about Marxism is that “capitalists exploit workers” is a descriptive as well as a normative statement. Exploitation arises out of the way the system works, and can’t not arise (or not without some strong counter-pressure). Which is why (for me at least) it’s hard to conceive of Marxism without holding open the possibility of the replacement of capitalism by something better.

geo at 235

You ask in what units value is measured. That is a different question from what value is. As Marx analyzes exchange he notes that value is not measured directly (I’m not talking about how theorists may estimate value by way of input-output analysis, but how value is measured in society according to Marx).

Things don’t come into the market with a stamp of labor hours on them. The value that they have–and they don’t have value unless they prove to have been part of social labor; and they can only prove that by having been exchanged–is re-presented in exchange by a certain physical quantity of the use value that serves as the universal equivalent. We know the value of linen by the number of coats that it can sell for. Value is expressed as its opposite, as a physical quantity of a use value.

Marx’s finds the mode of expression of value curious. He also notes that the misrepresentation of value is inherent to this mode of expression.

Now if you don’t want to make sense of what I wrote, it simply means that you never wanted to take time to read the first couple of chapters of Capital.

Yet for good reason Marx is quite interested in the peculiarities of this universal equivalent. It is how he introduces money into his system, and explains why money has the properties that could make it an object of hoarding, of a special one-sided demand that can yield a general glut. Marx is a theorist of catastrophe.

This is my first answer to your question of the unit in terms of which value is measured. If you take the time to reflect on what you read in Marx’s Capital, you will see that I am not being obscure or metaphysical. It is a difficult idea but money is a mysterious thing.

Now of course we have disagreement about retroducing the law of value that in mediated form accounts for the observable economic phenomena. But I have two comments here.

Before we can give empirical grounds for sustaining this retroduction, we have to see whether Marx’s hypothesis about the mediated form in and through which the law of value asserts itself is even coherent. There is a charge of illogic about Marx’s transformation procedure. I have argued that the logical critique is quite weak.

But that does not vindicate Marx’s value theory. It only shows that it can be considered as a theory.

I would say, secondly, that the movements of prices, the sharpness of the battles over the political regulation of the working day, and the catastrophes that capitalist development has visited upon us all can be explained on the basis of the law of value. It is simply the best theory we still have of capitalist dynamics.

@john c. halasz

The toilet paper example was only half in jest. Think of the social status possession of the last pack of triple-ply extra soft quilted T/P in the world… It’s not to be underestimated. How much would Bill Gates be willing to shell out?

The question of the value of toilet paper is distorted by its normally low price. There’s nothing manufacturers can do to raise that price to something approaching its practical value.

Another example is the computer chip. When one is bought, the purchaser gets the product of thousands (at least) of expired patents and colossal research investment, much of it driven by the military on non-commercial terms in the 50s and 60s. Of course the original researchers benefited from scientific research that couldn’t be commercially replicated at any price as you can’t hire a Bohr or a Heisenberg off the street.

Even Sweezy did not understand the central importance of money to Marx’s value theory which has been MISUNDERSTOOD as primarily a microeconomic theory of exchange ratios.

So… another reason to take Marx’s value theory or understanding of social abstract labor seriously–and one that few Marxists have understood– is the account that it gives of the nature of money– an account that was able to take money seriously just as the Smithean critique of mercantilism had reduced gold to just another commodity and thus explain why it alone would be panted after in times of crisis.

Marx begins with the value theoretic explanation of commensuration as rooted in labor to disclose the social nature of this labor primarily for the purpose not of explaining exchange ratios but of showing that this social labor comes to be represented alone by a single commodity that facilitates exchange only to later sabotage it.

Again then state in your words what you think Marx’s analysis of the value form and money form is.

We can think perhaps too easily of a thing having length independent of the measurement that we make of it. It’s trickier with value. What does it mean for a thing to have value? It means that it represents some part of social labor time. Well unless someone is willing to exchange something for it, then it will not have had value.

So value goes from potentiality to actuality only by means of exchange. Value only exists by means of “measurement”, leaving aside any facile analogies to quantum mechanics. So it’s not only that value is a dynamic social magnitude unlike length; it does not have the same claim to pre-existence to measurement that length seems to have (that length is pre-existent has been questioned by Simmel and others).

Marx notes that we don’t (and can’t) know how much social labor time a commodity represents by a stamp but only by way of exchange for a physical quantity of the use value that serves as the universal equivalent.

So value is measured in (though necessarily mis-represnted by) physical units of the use value gold (or its paper representation).

Now in virtue of the exclusive representation of what does gold come to have the position of universal equivalent and thus have a monopoly on direct exchangeability.

Marx is arguing that gold is not just any other commodity as Adam Smith argued in his critique of mercantilism. Gold alone directly represents social labor time. His value theory is integrated with his theory of money. Quiggin should marvel at the accomplishment.

Even if paper representations of gold come unhinged from it, it is still in virtue of its monopoly of direct representation of social labor that money has the social powers that it does have.

Money is not any other object; its expansion is the point of capital. And in times of crisis all is sold for its possession.

Marx’s value theory provides an account of why money has these unique characteristics.

That’s more than Walrasian and Sraffian economics can say.

O.K. So maybe our dear mutual friend, Martin Bento, deserves, -(somehow, obscurely),- a response.

Of course, Martin is a Platonist. Ideas are timeless/eternal and descend from the heavens to grace us with their superior value-adding, productivity-enhancing virtue. Ergo, mere labor-time can have nothing to do with the “creation” of value, since no amount of time can produce such miraculous novelty. (The “swoosh”, despite of the fact that it has been explained that such relatively epiphenomenal devices are value-realizing rather than value-adding, is cited as a refuting instance to LTV). Apparently, differential success in the market-place accords the laurels of “value” , which is the exception which proves the rule. (Since the post hoc/prompter hoc fallacy has been rescinded, and survivorship bias saves the whole crew). But a) it never occurs to him that Marx made plentiful “observations”,- (since that is the only epistemic criterion that he can conceive),- quite sardonically, about the difference between the literary value of masterpieces and the economic value of pot-boilers, which MB wishes to raise as a point of objection to LTV. Just why does he think that Marx failed to notice his cherished “observation”? (Milton and the bees is surely the most famous one, which just as surely contains a sardonic allusion to Mandeville). And b) particular instances don’t invalidate a general rule. Does MB think that the “law of one price”, (a neo-classical saw), is automatically invalidated by contrary instances, whether small, (e.g. super-market specials), or large, (e.g. the difference between WTI and Brent),? No, persisting discrepancies usually are thought to require investigation, given the “law” in question is not being “observed”. Why is LTV any different? And why are his alleged counter-examples, based on the “creativity” of the “new class”, any different from the same-old/same-old? Or IOW hasn’t MB just raised an “objection” which misunderstands the the domain at which the explanation is directed, while both expecting that explanation to “work” for adventitious examples it wasn’t designed for or directed at, and assuming that those cherry-picked examples, relying on a quite similarly stochastic frame-work, could constitute cases that refute any “law of averages”?

Is MB quite unfamiliar with the case of simultaneous, independent discovery, which turns out, contrary to a few illustrious instances, to be quite and extensively common in the fields of science and technology? And how does that happen, independently from the system of social labor that provides its context? But, then again, given a range of scientifically and technically available possibilities, who or what decides on the choices or selections for their development? The “creative” ones, independently of socio-economic power? And if those uncreative workers, who just follow orders but know the actual production process best, devise improvements to that production process, who do you think is likely to benefit from such enhanced productivity? And to what public good is it to be distributed? Why is all this to be accorded to the credit of basically speculative capital and why should “we” trust its “instincts”?

So maybe Martin just hasn’t adjusted himself to the topic at hand and prefers to denigrate and dismiss it, in the name of his own august individuation. But this is just sheer travesty:

“Halazs and SOV have both suggested that people shouldn’t attack Marx’s LTV unless they can give a better account of value. Why not? Once there was a practice called “phrenology” that claimed to identify intelligence and other mental and emotional attributes based on dimensions of the skull. The scientists who attacked this idea did not necessarily have a better way of discerning such things beyond the conventions ones of observation and measurement. This didn’t matter a whit. Wisdom starts with admitting what you don’t know. Purely destructive criticism is perfectly legitimate. If Marx is wrong, we should say so regardless of whether we know what the right answer is.”

Er, yes, the rational/explanatory content of Marx’ work is no better than phrenology. It doesn’t occur to MB that the same crude empiricism of ” the conventions of observation and measurement” are the very ones that gave rise to phrenology, so obviously the cure is a re-iteration of the same. (I don’t suppose he’s aware of the conclusion that “self-consciousness is a skull-bone”, but Marx assuredly was). Or that such ad hoc observation can be exercised by many others, without regard to name, rank, or serial number, but “serious” theories are meant to discipline such effects. (Without regard to fear or favor or class or caste status). But really, pulleasees, is there some sort of mechanism or causal force that could guarantee continuous and linear “progress”, and thereby, via technology and science, provide for the superior perspective of current and future generations, if not their moral improvement, which thereby obligates such a forgetfulness of the historical past? Does it not occur to MB that there can be a regression, as well as, a progression in knowledge, collectively, just as much individually, and current “knowledge” must stand a test of time, (which obviously can’t be the test that labor stands)? Does he think that rat-ex, micro-founded macro is really an advance rather than a regression, with respect to the “discovery” that there’s such a thing as “macro-economics”, though it might not have been such a new discovery after all?

I have no objection to MB’s invocation of “destructive criticism”,- ( as in the de-struction of the history of Western ontology, eh?),- since, after all, one must clear out the bramble to let new growth occur. I just doubt that he’s achieved any such thing here, rather than “destructively” asserted reigning orthodoxy. Has MB heard of or paid any attention to the “Cambridge Capital Controversy”? If he had, then he would know that the marginalist account of value that he’s at least implicitly internalized as part of his moral-intellectual equipment, has already been effectively “destroyed”. It showed that marginalist analysis doesn’t systematically generalize. In particular, that J.B.Bates fairy-tale about returns to “factors-of-production” depending on their marginal productivity doesn’t work out. Now that’s destructive criticism! Some on the MA/U.S. side, the more honest ones, admitted defeat, but nonetheless maintained the defeated neo-classical theorem as a sort of kludge. But how did that work out? Rat-ex?

There’s really no need to tie political liberalism to economic liberalism, despite their historical association. Nor even to associate economic liberalism with marginalist thinking. But some habits are hard to break and perhaps the mere association indicates “deeper” connections than are ostensibly laid claim to.

Geo, within the LTV approach value has to be measured in hours of labor.

@Martin Bento 259

So the LTV is just a generalization?
The LTV is an “equilibrium theory”[1]; as a consequence, since the market is almost never at equilibrium, there will almost always be lot of exceptions.

And so are its implications?
What “implications” are you speaking of? The LTV was a theory of Ricardo who was, as far as I know, a fairly right-wing, pro capitalist guy. The LTV never states that workers “should” be paid more, since it is a descriptive theory, not a normative one. In facts, as far as it was used for “political” purposes, it was used AGAINST socialism, since it implied that capitalism was in reality quite “just”.

[1] For some reason that I don’t fully understand, many people believe that the LTV consists in the idea that labor produces “value”, and that, summing all the value produced this way through the chain of production, you have the price (or value) of the final product. This is NOT the LTV: see my comment n.79

OK we all have other things to do, and Robert has linked to his technical analysis which I am going to read. So I am going to sign off with these last words.
I admire what John Quiggin has done, writing a lucid critique of some of important undead theories of economists at a time when we need to free our thinking from dogma. I also appreciate that he has put forth a set of reforms, and shown them not to be odds at with what the best economic science has shown.
If John Quiggin has no interest in Marx, then we are all the better for it because we need a plurality of voices, and for the positions that he represents, one can hardly imagine a more lucid one.
I do think that another voice that we need to hear is Marx’s (along with Hilferding, Grossman, Sweezy, Foley and the revisionist Desai and they are every bit as analytically sharp as Quiggin). I have tried to show why Marx is not dead or undead but part of living conversation that we need to have in the wake of the catastrophes yet to come, and I have been annoyed by the snide and juvenile criticisms made of me by Geo and Chris who censored me on the Milanovic thread though I was one of the few people who had the read the book cover to cover. I have my explanations for their behavior, which I shall keep to myself

Geo, sure, socially necessary, why do you feel it’s so different? Labor of workers producing commodities, to be exchanged for other commodities. What’s so complicated here?

@Progressive Libertarian 261
I think that Marx’s opinion about the “wear and tear” of the capitalist is something like it:
Profit to the capitalist could be disaggregated in a part that is a sort of wage-like compensation of labor (that could be deduced as a comparison to actual wages in similar occupations) and “true” profits (that part that could be considered to be just a rent on anticipated capital), but since he refers mainly to “big” capitalists, the rent part dwarfs the wage-like part.

Henri: What’s so complicated here?

Vide hartal @ 231, 248, and 254 and jch @238. If you find all that uncomplicated, I salute you.

I think you’re over-complicating this, Martin. Google search is hardly a commodity, swoosh is definitely not a commodity, they have no exchange-values, they are merely ways to to facilitate the exchange. Commodities are tangible, mass-produced goods.

SOV, so Jamie Dimon and Jack Welch are claiming that their salaries are justified because those salaries are of value equal to that of the average labor time socially necessary to do what they do? Seriously?

I call bad faith and poor loser. Really Martin, is it really worth the bad rep you’re getting when you carry on this way?

Saying that the LVT is true, because some people are overpaid, dammit – and don’t even admit they’re overpaid! and others underpaid is tablethumping, not argument.

And yet more bad faith. Martin, you never had any intention of updating your beliefs on the subject did you? I know that you know you’re flatly lying about what people have said.

As always, I’ll cheerfully retract whenever you can quote where I’ve said any such thing, as opposed to – let me see – “You get the LTV every time some overpaid shmoe claims that he’s worth every penny because of value added by the application of his uber-skills.” Go to it ;-)

Yeah, I found Walt’s comment thoroughly puzzling, (since among other things, he claimed that JQ had referenced constant production co-efficients rather than constant-returns-to-scale, “CRS”, which I thought was part of what we’re ostensibly arguing about). Sraffa is all about constructing a model, step-by-step, with N-sectors and N-techniques-of-production and then asking which choices of such techniques are most cost-effective or cost-reducing, given that different sectors mutually produce for and condition each other. Has Walt never heard of a reproduction-schema? (The idea is not new; it was invented by the Physiocrats). And I’ve been trying to make the case that Marx’ LTV is actually a prescient and complex account of the effects of technical change in the on-going trade-off between labor and capital, (one of the prime effects of which is increasing concentration of capital/returns-to-scale), and the effects of that on “value”. I fail to see how constant production co-efficients could be part of or required by that sort of account. Folks, Marx lays great stress upon “free” commodified labor in his account not just because, whereas, in prior modes-of-production the expropriation of productive surpluses/exploitation of labor was direct, whereas in capitalism it has become indirect and therefore occluded, but also because, if the equalization of the rate-of-profit, which assured alleged optimality of output, is to occur, then not just capital investment, but labor too will have to be constantly shifted between sectors. How that would entail constant production co-efficients is beyond my limited comprehension, since why should resource inputs be somehow different from capital and labor inputs?

And Marx himself was tremendously ambivalent about the advent of industrial capitalism, since it “revolutionizes” the world and results in unprecedented technical innovation and increases in material output. But he also thinks that process not only has its imbalances and instabilities, but it’s historical limits and will result at some point in its supersession. (It’s actually that notion of “inevitable” Aufhebung that’s questionable and maybe the better entry point into criticism of Marx than LTV, though that’s be part of the ongoing debate in “continental” philosophy for nearly a century now). But in the meantime, no one, least of all Marx, is denying that capitalism and capitalists possess certain functional “virtues”. Capitalist do organize production-processes, (“the relations-of-production”), and to the extent that they do so effectively, part of profit is payment for managerial services. More importantly, the re-investment of profits is what maintains the equalization of the rate-of-profit and thereby the optimalization of output and the increase in collective wealth. But it’s when that process goes off its rails and profits cease to become an approximate measure of real productive surpluses, that those functional “virtues” turn into collectively deleterious “vices”. The “forces-of-production”, i.e. the work-force and its accrued, available technical means-of-production, become fettered by the formerly “progressive” relations-of-production and a new mode of developing human and technical potentials must be found.

Henri, as I said at the outset, one could object to my analysis on the basis that Marx was talking about commodities and some or all (depending on the narrowness of your definition) of my examples are not commodities. But what follows from this?

So if Marx’s analysis is a good general theory of capitalism, and, according to that analysis, only commodities – tangible, mass-produced goods in your definition = have exchange value, then all goods that are not commodities in this sense, not tangible for example, have no value? Software, no value? Movies, no value? Formulas for drugs, no value? Patented gene sequences, no value? All these things are merely facilitators of trade, none are goods in their own right? If Marxism is just a theory of commodities, it can tell us a lot about the economy of thumbtacks and windshield wipers, but it will have nothing to say about the areas where the much of the big money is being made and the technologies and related social structures that are rapidly changing our world. And if no one can build a bridge from shoelaces and cement to Google and genomes, it is not the beginning of one either.

Should be “It’s *not* that a CEO has an idea.”

Robert, you’re right on one thing. I am a vulgar motherfucker, which allows me to say that you are an asshole. I’m sorry I have ever engaged with you, since in every interaction, you are invariably an asshole. We’ve been through several rounds of this, on several different websites, where I make a polite point, and then you’re a big dick about it, even when you’re wrong.

And what are you talking about? You don’t even understand your own example. How can you have “dated labor” if there are no dates? I’m not even trying to make a big point there, just trying to make sense of the differences between TSSI and Sraffa.

And you’ve completely failed to understand the New Palgrave article, even though I know you’ve read it because the only reasonI read it was because you cited it on your blog. Apparently I take the shit the comes out of your mouth more seriously than you do. Samuelson gives a list of references to counterexamples to the existence of Sraffa’s standard commodity when you relax various assumptions, such as more than one primary input, and alternate techniques to produce the same good. Apparently while the rest of us are supposed to be familiar with the literature, this rule is optional for you.

The prior comment was directed at @281. Now on to @282.

My understanding, limited as it may be, of what Sraffa was up to was that he was constructing a highly abstract formal account of an industrial production economy on neo-Ricardian grounds, substituting technical co-efficients of production for labor-values, in order to re-raise the core question of the “nature” of economic “value”,- without pretending to answer it,- and to criticize and undermine the systematic generalization of marginal analysis and show how it just doesn’t work. The abstract model is static, but it’s meant to suggest the need for a more dynamic account. His progeny, as it were, are to be found in the “post-Keynesian” branch of economics, a ghetto where the few remaining Marxian economists are also to be found. Obviously not dressed for success.

So why does JQ say that theories of value are “uninteresting”. Is it because he doesn’t have one, relying on kludges for any explanatory “force” and effectiveness, or because he thinks the matter is fundamentally irresolvable, ( and thereby epistemically embarrassing, to be declared “metaphysical”), or is it because he doesn’t know what the formal-rational discipline of economics,- (it would obviously be to much to call it a “science”),- is for, what is fundamental project is, since it all too routinely fails to answer its own basic question or implement effective “solutions”?

John Halasz: I have indeed heard of the reproduction schema of physiocrats. Does that allow for choice of techniques to produce the same good? I thought it was a pure input-output model, where there are multiple sectors to the economy, but that there is a unique constant-coefficient technology for each output good.

According to Samuelson’s New Palgrave article, Sraffa’s standard commodity doesn’t exist for general constant returns to scale technologies — there are explicit counterexamples. It does exist for constant coefficients plus some other condtions (single primary factor, no joint production, etc.). If you allow alternate techniques for the same good, then it may or may not exist. Researchers hoped to show that for “interesting” cases the standard commodity does indeed exist, but apparently not successfully.

The rest of your comment gets to the root of the question: can Marx’s ideas be captured by Marx’s formalism? The two interpretations of the formalism I mention don’t capture his ideas (I don’t think). Is there an interpretation that does? It’s not clear that there is, which is why people sometimes argue for rejecting the formalism, even if we keep the ideas.

@289:

I don’t think the current crisis is over, by any means. I’ve all along been expecting a long stagnation, (though I admit I was wrong about expected stagflation, due to having failed to pay attention to my Austrian friends about the strength of deflationary pressures), but the prevailing economic techno-structure doesn’t look good, even as the corresponding politics are terrible. I’ve forgotten my Leninist Russian, since I never had it, so I’ll resort to the old Latin tag: cui bono?

Random lurker, I agree that one can accept the LTV without accepting the normative positions of Marx. But the Marxist argument you gave did reach a normative conclusion, if we assume “it is unethical” means “it should not happen”, and, as I argued, that argument implicitly invoked the LTV.

OK, exchange value is price at equilibrium, but equilibrium is achieved fleetingly if at all. So price does not directly reflect value. Which is precisely what I said. And Marx did not define capitalist exploitation in terms of price, because it did not reliably reflect value. I don’t see what you’re arguing with.

On the swoosh, I don’t see how one could reach that conclusion other than by stipulation.