Marxism without revolution: Capital

by John Quiggin on July 1, 2011

I’ve been writing series of posts examining the question – what is left of Marxism, as a way to understand the world, and as a way to change it, once it is accepted that capitalism is not going to be overthrown by a working class revolution. The first was about class and the second about crisis. Now for the final instalment: capital.

By the way, the first post got translated into Spanish, here. It’s one of the things that I still find stunning about the Internet that things like this can happen.

First there is Capital, the book,, and the value theory which is its main focus. Marx’s value theory is problematic, to put it mildly, in its own terms, as is shown by the notorious ‘transformation’ problem. But as long as Marx’s value theory formed the theoretical basis for a revolutionary workers movement, tthis and other problems was something that could be left for later resolution.

As the theoretical basis for a proletarian revolution, Marx’s value theory had some obvious merits. Given its central claims, that the return to capital arises from exploitation (scientifically derived as the expropriation of surplus value) and that the declining rate of profit means that the intensity of exploitation must increase, we are led to the conclusion that revolution is inevitable. The claim about the declining rate of profit (not specific to Marx – most of the classical economists also saw the rate of profit declining) hasn’t turned out to be true, at least not in a sense that requires steadily increasing exploitation or brings the system ever-closer to collapse.

Marx’s theory of value remains as unsatisfactory as ever, and the attempt by Sraffa to revive Ricardian economics, only showed up more problems. 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]. 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? It’s obvious either way that the growth of ultra-high income has come at the expense of stagnation for nearly everyone else (as discussed in the post on class, and in Zombie Economics, most of which is online here.

For those engaged in attempts to achieve a better, more equal and more sustainable society, Marx’s theory of value has little to offer. What can it tell us, for example, about the relative merits of trying to promote equality through higher minimum wages, through more progressive taxation or through expansion of public ownership? But, in the Communist Manifesto and elsewhere Marx had a lot to say about capital and capitalism that was, and remains, both interesting and insightful.

Most importantly, capital is not just an aggregate of machines, buildings, trading stock and so on[3]. It is a social relation, and gives rise to a kind of society quite different from previous societies where power over land was the core relation.

And, whereas Capital is generally concerned with a fixed-proportions, constant returns to scale economy, Marx, when not doing formal economic theory, was among the first to realise that capitalism is not about constant returns to scale. Marx saw the crucial importance of economies of size in permitting large capitalists to drive out smaller competitors. The dynamic pushing towards ever greater concentration is in inherent in the capitalist mode of production. By contrast, while earlier societies saw huge inequality in control over the means of production, that did not reflect the superior productivity of latifundia – quite the opposite. Rather this inequality was produced, and had to be maintained by, military power.

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. Of the books I’ve read recently, I found The Enigma of Capital to be the most useful on this.

The problem for social democrats is to keep the dynamism and innovation[2] while delivering more stable and sustainable, and less unjust outcomes. I’m planning to write yet more about this, but in the meantime, it’s open for comment.

fn1. Though not as uninteresting as attempts to justify the existing distribution of income on the basis of marginal productivity theory or Austrian metaphysics.

fn2. In important respects, particularly as regards the public good of pure research, social democracy can promise innovation that would not arise under either pure capitalism or central planning. The Internet is perhaps the most striking recent example.

fn3. Not to mention the fact that the aggregation is highly problematic, as the Cambridge controversy of the 1950s and 1960s showed. 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). BTW, commenters are free to point out that I’ve misrepresented the core of the controversy here. I’ve never worried much about the details, having never believed in capital as a meaningful aggregate value.

{ 293 comments… read them below or add one }

1

Tim 07.01.11 at 10:34 am

Thanks for this series of very interesting posts.

On the labour theory of value, though, I have to dissent from your interpretation. It is (pretty) widely acknowledged now in Marx scholarship that Marx’s theory of value is not just taken over from Ricardo, but it something altogether different, which is not primarily concerned with the derivation of prices from labour values. It is a theory about why the products of labour take the form of “valuable” things at all. The early Soviet economist Rubin is a very good place to start for this interpretation of Marx’s LTV. His whole book is online, too: http://www.marxists.org/archive/rubin/value/index.htm

2

Chris Bertram 07.01.11 at 10:53 am

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).

3

JAH 07.01.11 at 11:23 am

Marx’s theory of value remains as unsatisfactory as ever

I suggest you read “Reclaiming Marx’s Capital: A Refutation of the Myth of Inconsistency” by Andrew Kliman.

4

Robert 07.01.11 at 11:28 am

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.

5

belle le triste 07.01.11 at 11:31 am

I suggest you summarise the argument for us, JAH, as you’ve analysed it and been convinced. “I read a book that proves you all wrong” is only ever the opening sentence of a useful contribution.

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Nick L 07.01.11 at 11:48 am

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

7

Z 07.01.11 at 11:50 am

An interesting point raised by Marx, and still pretty much very problematic at least on political terms is the following: if the revenue one can extract from capital gravitates around 6% (as it tends to do, empirically) and if growth gravitates around 2% (as it empirically does at the technological frontier), then in the long run, capital revenue will dwarf labour revenue, and in particular inherited capital will determine the social trajectory of individuals, in direct contradiction with the usual understanding of the ideal democratic and meritocratic society. Of course Marx presupposed 0% growth, but that doesn’t change the the logical structure of the argument

T.Piketty (and his co-authors) have observed that this is indeed what is happening under normal circumstances, but that this does not describe the evolution of capitalism throughout the 20th century only because the two world war destroyed so much capital, resetting the clocks for a few decades.

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?

In light of the above, I guess it does matter insofar as it is easier to transfer directly ownership to its children than to transfer the complex combinations you allude to.

8

Nick L 07.01.11 at 11:51 am

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.

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Torquil macneil 07.01.11 at 12:14 pm

Capitalism is more unstable than any previous form of society? That doesn’t seem plausible on the face of it. What makes you say so? Soviet style communism seems to be just one counter example and I don’t think any fascist societies have shown the sort of stability that most capitalist ones have.

10

Walt 07.01.11 at 12:23 pm

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.

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Torquil macneil 07.01.11 at 12:48 pm

Walt, every society in the period has proven more stable than capitalist societies? Really? How can you make such a claim when we have seen non-capitalist societies crumble or collapse (fascist and communist especially) in the recent past leaving capitalism standing? And maybe it will stand for 1,000 years, who knows? I suspect that JQ mistyped ‘any’ in place of ‘many’ or he has a standard for ‘pure form’ capitalism that would exclude most of the states that we consider to be capitalist today, but it IS a big claim as it stands.

12

William Timberman 07.01.11 at 12:52 pm

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.

13

The Raven 07.01.11 at 1:04 pm

The centralization characteristic of capitalism seems to be a property of the technological nature of industrial production. Capitalist production depended on (1) easy access to a source of energy (2) easy access to a transportation network, (3) a large expensive industrial plant, and (4) a large concentrated workforce to operate the plant. As time has gone by, this is less and less the case, and with the arrival of information technology and the overloading of the world’s available energy, it is being transformed.

It is too early to say what the new form(s?) of production will be be. In the long term, certainly, they will not be powered by fossil fuels and that change is only beginning. But the large concentrated workforce and the geographic centralization are no longer required and, for many purposes, the large industrial plant is not required either: smaller, general-purpose facilities are sufficient. The advantages of the division of labor are for many purposes over, if they were ever as important as Smith thought.

I will venture a guess that future systems will focus on (1) industrial production of general-purpose, rather than special purpose, technology, like LCD panels (the factories used for those things are huge), (2) small-scale production of most material culture, (3) information technology and services, and (4) local production of the necessities of life like buildings and food. Another revolution is in the offing: an environmental revolution, and this will occur alongside the transformation of production. The social relations that will grow up alongside these twin giants are not clear to me.

14

Tim Worstall 07.01.11 at 1:12 pm

“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.

15

Walt 07.01.11 at 1:12 pm

Torquil, what does the word “previous” mean to you? Or do fascism and communism predate capitalism?

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Gaspard 07.01.11 at 1:27 pm

“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?

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Torquil macneil 07.01.11 at 1:33 pm

“Torquil, what does the word “previous” mean to you? Or do fascism and communism predate capitalism?”

It means something like ‘before this time or incidence’. You take JQ to mean ‘any society previous to 1700’ but I don’t think it is obvious that is what he meant. Even if he did, it seems bold. Capitalism is still thriving and may endure for thousands of years. Many early societies presumably collapsed before they were ever recorded, and some that we know about that left deep archaeological records may only have existed for theree or four hundred years.

18

Platonist 07.01.11 at 1:34 pm

“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.

19

Henri Vieuxtemps 07.01.11 at 1:57 pm

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

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Henri Vieuxtemps 07.01.11 at 2:04 pm

…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.

21

Torquil macneil 07.01.11 at 2:12 pm

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

No.

22

bob mcmanus 07.01.11 at 2:19 pm

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

Yes

23

Tom Bach 07.01.11 at 2:27 pm

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

Maybe.

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Henri Vieuxtemps 07.01.11 at 2:35 pm

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?

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hartal 07.01.11 at 2:46 pm

I’ll attend to the logical problems later, but it’s surprising that Quiggin’s assumption that Marx does not pass an essentially Walrasian test due to the so-called transformation problem (by the way, Marx did not in fact leave the inputs in the form of values or simple prices–100 years of criticism since von Bortkiewicz has that wrong; there is no reason that those inputs would have to be transformed into the same prices of production of the output to meet the Walrasian test of static equilibrium; even if that was stipulated, Shaikh has shown through a fixed point iteration that there is no real contraction between those transformed prices and values) excuses him (Quiggin) from even checking the labor theory of value in empirical terms.
Yet Desai writes: “The surprising this is that despite these logical problems, empirically the theory stands up very well. If you calculate labor values using input-output tables, and compare them to prices for a representative list of products, prices are not proportional to values, but the divergence between price and value is very small, and goes exactly in the direction that Marx predicted…So the price-value correlation is close and stable across time. If values fall, so do prices, and they do so equiproportionately (i.e. with unit elasticity). So despite all the fuss, the empirical results support Marx.” (Marx’s Revenge, p. 64)
The empirical results also support Marx’s deduction of their having to be a difference between the labor content of the wage basket and the labor time performed.

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hartal 07.01.11 at 2:46 pm

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

27

hartal 07.01.11 at 3:01 pm

Quiggin also succumbs to the rational expectations models that he so lucidly critiques elsewhere. But we need to inquire into the rise in real earnings that accompanied the stock market boom. Of course economists of whom Quiggin is critical took that as proof that the boom was “rational”. But as Akerlof and Shiller point out, economists “rarely consider the possibility that the earnings rise is just another temporary manifestation of the stock market rise.” p. 136 Now that the speculative run in asset prices has ended violently and the stimulus is tapering off, we find that “cash flow from current operations fell in the first quarter. The most recent measure of orders for nondefense capital goods signaled a decline in business investment.” (Martin Feldstein)

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hartal 07.01.11 at 3:10 pm

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).

29

Klavierstücke 07.01.11 at 3:15 pm

“Do we redefine growth, or do we redefine people?”

IMHO, Marx had this part right: the problem is that for so many millenia, the problem for human societies was basically that of survival and enough production of basic goods. So “growth” was more obvious – even if socieities had enough food/water/shelter/buildings/etc., there was always the future to worry about, which was a) much less certain and b) much less easy to control. Having now (global warming and distribution of those goods aside) in the “first world” solved many of those problems we now have had larger and larger groups of people who come at the world with the “How am I gonna make money” mindset, which is a rentier sort of mindset. Not that they’re evil, necessarily, but it’s just the circumstances.

I remember a thread on CT where Myles was pointing out the upside of this circumstance; that, now, we have the luxury of having full-time yoga instructors or whatever, because we’ve solved basic production problems. We can all be boutique shop entrepreneurs now. Unfortunately, the problem is, we’re not all cut out for that but we all still need to extract money.

30

dictateursanguinaire 07.01.11 at 3:32 pm

“…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.

31

dsquared 07.01.11 at 3:44 pm

Not to mention the fact that the aggregation is highly problematic, as the Cambridge controversy of the 1950s and 1960s showed

It’s not problematic. Capital can’t be aggregated and aggregate production functions don’t exist, that’s it. It’s (literally) no more problematic than squaring the circle is highly problematic.

32

Watson Ladd 07.01.11 at 3:44 pm

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.

33

J. Otto Pohl 07.01.11 at 4:11 pm

I do not want to get into to a semantic debate, but the USSR was not state capitalist. It was also not a workers’ state deformed or otherwise. The economic commissariats did not function like state owned firms in countries like France or Norway. Rather the USSR was a centrally planned administrative command economy. State capitalism in my mind functions like other forms of capitalism except that the government owns the firms. This was not the case in the USSR. There the absence of market mechanisms to regulate supply and allocation meant that technocrats had to administer these functions by political decrees.

34

hartal 07.01.11 at 4:22 pm

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.

35

Henri Vieuxtemps 07.01.11 at 4:28 pm

Otto, I do agree that calling it a variety of capitalism is a stretch. They did, however, have something called “Khozraschyot” there.

36

Sebastian 07.01.11 at 4:48 pm

“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.

37

StevenAttewell 07.01.11 at 4:57 pm

Like Platonist, I think the labor theory of value has value as a moral argument, and always had. As a grounds for opposition to exploitation, it’s pretty universal – Smith and Locke are tied into it, labor republicans and Populists who could never have accepted Marxism accepted it, and I think it’s still out there going strong in people’s conventional wisdom.

The only thing is that it requires ditching the label of “scientific” socialism. Which I don’t see as much of a sacrifice – Marxism’s track record as a science has been less than good over the years, and even when Marxists analysis was synching up with events, the moral case was always a better draw than some theoretical demonstration. And why should it be scientific? No ideology is scientific, nor should they be.

38

LFC 07.01.11 at 7:09 pm

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

39

hartal 07.01.11 at 7:09 pm

If I understand Max Adler: once we abandon the assumption that causal relations are necessarily mechanical, it becomes possible to understand the causal necessity of socialism that Marx disclosed through his scientific sociological work as realized only and in through the ethical consciousness of a class for itself. That socialism is both necessary and justified (as necessary because it is justified and justified because it is necessary) is an interesting claim. I am not sure whether it’s tenable, but the claim stands in interesting relation to positivism, and Adler and the Austro Marxists were doubtless whom Popper had in mind in his critique of historicism.

40

LFC 07.01.11 at 7:11 pm

Also I basically agree w SAttewell @37.

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John Quiggin 07.01.11 at 7:12 pm

@DD Squaring the circle (that is, finding a mathematical formula for pi ) is easy. Here are a bunch of infinite expansions

http://pballew.blogspot.com/2009/05/eulers-infinite-expansion-of-pi-with.html

It’s just that, because pi is transcendental, none of them can represent a construction with straight-edge and compass. The analogy with capital as an aggregate works pretty well.

42

hartal 07.01.11 at 7:22 pm

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.

43

hartal 07.01.11 at 7:40 pm

William Byers has recently suggested, playfully, that we understand pi as connecting lines and circles, the linear and cyclical conception of time, interval timing and circadian rhythms, the arrow of time and the cycles of life. C=pi x d. It’s a qualitative understanding of a number, a hint at the curious world of the Pythagoreans. A metaphoric understanding of a number which connects two opposed aspects of our one and the same existence. Nothing to do with the topic at hand of course.

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John Quiggin 07.01.11 at 7:46 pm

Empirically, the labor theory of value has to be a fair approximation, because labor and land (including natural resources) are the only primary* factors, and labor is much more important than land. Ricardo put forward this defence two centuries ago (the so-called 93 per cent labor theory of value. It wasn’t much more convincing then than now but it sufficed in the absence of any alternative until marginal productivity theory came along.

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.

* Capital is as Marx put it, ‘congealed’, time-dated labor, so there’s a subtle but fundamental problem in valuing the time taken for production, as the C19 critics of Marx pointed out. The return to capital reappears in the relative prices of differently dated labor, and the transformation problem re-emerges.

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StevenAttewell 07.01.11 at 7:49 pm

hartal – “If I understand Max Adler: once we abandon the assumption that causal relations are necessarily mechanical, it becomes possible to understand the causal necessity of socialism that Marx disclosed through his scientific sociological work as realized only and in through the ethical consciousness of a class for itself.”

What makes that analysis scientific though? If we’re in the business of avoiding pitfalls, scienceism has to be up there with historicism. Human beings are not particles, so why should ideology desire the status of physics?

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hartal 07.01.11 at 7:53 pm

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.

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hartal 07.01.11 at 7:55 pm

At the subatomic level causality does not operate in a mechanical fashion; it does not work that way at a social level either.

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StevenAttewell 07.01.11 at 7:57 pm

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?

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StevenAttewell 07.01.11 at 7:58 pm

Hartal – that didn’t answer the question. Why does socialism need to be a science?

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Hidari 07.01.11 at 8:41 pm

‘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.

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Henri Vieuxtemps 07.01.11 at 9:08 pm

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?

Yes, but perhaps the plutocratic nature of capitalist societies is derived from ownership of capital. The same way as it was derived from fiefdom before that.

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Random Lurker 07.01.11 at 10:44 pm

@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.

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hartal 07.01.11 at 11:07 pm

“Part of the value is produced by the land”—what Marx believed according to Random Lurker!. Marx clearly says that wealth, not value, is produced by nature and labor.

Steve, you never answered my question–why can’t social theory be scientific? And you never said what other than labor can increase the total value in circulation? Land? Machines? Perhaps entrepreneurship. Samuel Hollander emphasizes that; of course Marx’s explains why technological first movers do in fact enjoy extra surplus value. He also has a theory of why capital itself being a source of new value is a practical or objective illusion. Of course that speaks for the need of science–appearance and essence do not coincide. There are social equivalents to the sun objectively appearing to circle the earth. Marx’s science is a Galilean empiricism. Even G.A. Cohen understood that (Amartya Sen attributes the theory of objective illusion to GA Cohen), but the point was stated before Cohen by Maurice Godelier and Derek Sayer.

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Tom 07.01.11 at 11:10 pm

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.

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Tom 07.01.11 at 11:11 pm

Edit: “How can we determine the rent of someone (e.g. Richard Fuld) if we do not know his marginal product?”

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hartal 07.01.11 at 11:20 pm

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.

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Random Lurker 07.01.11 at 11:30 pm

@hartal 53
That’s an interesting remark.
What do you mean by “wealth, not value”?
When I said value, I meant exchange value (as opposed to use value). Is this the distinction you mean?

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Tom 07.01.11 at 11:35 pm

@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.

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StevenAttewell 07.02.11 at 12:08 am

RandomLurker – “From Marx’s point of wiew, labour is the only source of value.” I know that. What I am asking is why Marx and others believe that the “only” is important enough to spend time fighting about.

Let us take the 93% case mentioned above. Or even 50%. A parent only provides 50% of the DNA of their child, but that doesn’t lead us to conclude that their rights in the child are less important than they would be if someone implanted themselves with a cloned embryo of their own DNA.

hartal – you didn’t ask the question, but anyway…social theory can be scientific to an extent (it’s limited by its inability to do full-scale experiments, etc.), but I think we’re arguing past each-other. I’m talking about Marxist socialism as a movement ideology, and asking why it needs to be scientific; you’re talking about Marxist theory as sociology/economics, which I am not as concerned with.

As for what can be capital other than labor, I’m not sure. What I am interested in is whether, if labor was a major source of value but not the sole source, why that would degrade it’s claim, morally or ideologically, on the product.

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Random Lurker 07.02.11 at 12:37 am

@ 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.

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Colin Danby 07.02.11 at 12:38 am

John’s claim that the LTV is the “main focus” of _Capital_ is seriously mistaken. It provides a framework, but even in that sense it’s more assumed than expounded — would we claim that the LTV is the “main focus” of Smith’s _Wealth of Nations_ or Ricardo’s writings, both of which also rely on it? What we get in _Capital_ is discussion of economic history, growth, and crisis, over three volumes. Beating the dead horse of the LTV instead of engaging that material is pretty lazy blogging.

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marcel 07.02.11 at 1:09 am

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.

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StevenAttewell 07.02.11 at 1:11 am

RandomLurker – I see ““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 problematic position that should be interrogated. Why should ideologies be scientific, when ideologies are, according to the Geertzian model, frameworks of value systems?

I don’t get why it is necessary to say that capitalism is inevitably doomed when you could say it’s immoral.

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marcel 07.02.11 at 1:14 am

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?

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hartal 07.02.11 at 1:17 am

Through working out the implications of the law of value Marx not only predicts the business cycle but specifies the conditions required for an upswing in production, namely the reduction of capital costs and a rise in the rate of exploitation. 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. The labor theory of value also finds empirical support in its explanation and prediction of antagonisms within the abode of production and in the movement of prices.

It should also be noted that Marx did not set out to prove the labor theory of value. He was interested in examining more clearly the nature of the labor in terms of which qualitatively different use values are commensurated in exchange and in why such an exchange there was not only identity in terms of value but also opposition in the sense that one commodity alone had become money, i.e. had come to monopolize direct exchangeability.

Marx’s labor theory of value thus has quantitative and qualitative aspects, i.e. specifying the nature of labor commensurated in exchange and explaining the development of the value form into the dazzling money form.

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hartal 07.02.11 at 1:19 am

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

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Watson Ladd 07.02.11 at 1:47 am

@hartal: It is possible to specify a marginal product, indeed there are vast amounts of knowledge on how to calculate it. It’s just a derivative or my expectation of what a bit more of x would let me do. Gosplan was very good at figuring these out, though not good enough it turned out. The problem is not that neoclassical economics is in any sense “wrong” so much as it ignores the deeper questions of what it means that we are linked through labor exchange as opposed to traditional relations. (Ignoring the normative claims about freedom that are commonly associated with it) Marxism is much deeper then just economics.

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marcel 07.02.11 at 1:50 am

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.

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LFC 07.02.11 at 1:59 am

Compare Nozick’s critique of the labor theory of value with Sweezy’s analysis of the role of demand in Theory of Capitalist Development. … That short analysis written in the 1940s disposes of Nozick’s objections.

Well, Nozick if he were still around would presumably not agree (he references Sweezy on p.258). Not having read Theory of Capitalist Development and being somewhat out of depth here, I really can’t say. I just think there are problems with the idea of socially necessary labor time as Marx defines it and with the notion that ‘unpaid’ labor (i.e., the portion of the working day in excess of socially necessary labor time) is the sole source of profit. To go further would doubtless be reinventing the wheel, so I won’t.

ISTM one implication of Marx’s LTV is that profit (‘surplus value’) goes up when average labor productivity rises, b/c then the amount of socially necessary labor time required to produce the means of subsistence (or its equivalent) goes down, leaving more time in the working day for ‘unpaid’ labor (the source of profit). But if empirically profits do not always rise in tandem with increases in average productivity (holding other relevant factors, e.g. mechanization, constant), then this would seem to be a problem for the LTV.

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LFC 07.02.11 at 2:00 am

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

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marcel 07.02.11 at 2:19 am

Tom wrote: “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?”

It’s been awhile since I reviewed the Cambridge controversies (this is a good book on the topic), but IIRC, the basic issue is the following.

1) Aggregating either labor or capital can be aggregated based on the value of what they contribute to output (i.e., marginal productivity theory).

2) Because labor is rented, temporarily hired for a short period of time, the value of its contribution to output (for that short period of time) can be estimated well enough that we pretend it is known for certain. We look at all different types of labor, each hired for the use in which its marginal contribution is greatest, value it, and create an aggregate.

3) Capital is owned by someone, bought, so valued, based on what it will produce over an extended period of time. Calculating its value, and therefore how much capital there is in aggregate, requires a net present value calculation and therefore an interest rate or set of interest rates for each period over the course of the life of the piece of capital.

4) The debaters in Cambridge, MA (primarily Samuelson and Solow but they were standing in for pretty much the mainstream of US economics back then) argued that the choice of the interest rate did not matter, that 2 different quantities of aggregate capital were pretty much invariant in relative size.

5) The debaters in Cambridge, UK (primarily Joan Robinson using an example developed by someone whose name I do not recall) showed that this was not so, that the value of the interest rate could change the relative values of different types of capital, making one more valuable, and thus assigned a greater size, at one value of the interest rate, and less valuable, and thus assigned a lesser size, at another value of the interest rate.

IIRC, if capital did not exist for long periods of time, if it depreciated entirely away in the same short period that we use for valuing labor, this problem would not arise because we would not need to use an interest rate to calculate its value.

I’ve left out much, & have the feeling that I may also have butchered much. I hope not, and hope that if so, someone who is currently more familiar with this will correct this.

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john c. halasz 07.02.11 at 2:26 am

“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.

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kievite 07.02.11 at 4:29 am

We can criticize Marx for this and that but there are a couple of general points that suggest that his approach to analyse of capitalism still has both theoretical and practical value.

1. For the more then hundred years old book Capital proved to be remarkably resilient to aging. And Marx theory is still the best to analyse the shortcoming of neoclassical economics.

2. The USSR which for some reason is considered by many to be a socialist or even communist state was in essence one large badly managed diversified corporation with a company store ;-). Similarities like internal “cost centers”, completely absurd level of bureaucracy made former Soviet engineers instantly at home in Western multinationals. The recent drive for centralization of IT in large multinationals looks completely Soviet both in style and substance. Outsourcing was also practiced in the Soviet Union as labour of periphery was cheaper in in large European cities.

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Lee A. Arnold 07.02.11 at 4:37 am

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.

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Robert 07.02.11 at 7:20 am

On marcel @71:

Joan Robinson, in Cambridge, UK, talked about the Ruth Cohen case, a private joke. She wanted to acknowledge the idea was not originally hers. Piero Sraffa wouldn’t let her acknowledge him at this point in the 1950s – his ideas had not yet been published except as notes in Ricardo’s collected works. So they picked a third person in Cambridge to name it after.

The problems most definitely apply to the case in which all capital is circulating capital, used up in a single period of production. Much of the literature consists of articles in which issues arising for fixed capital are put aside for ease of exposition.

The controversies are not adequately summarized by saying it’s all about whether capital can be aggregated. (Labor does not need to be aggregated.) I like to say that equilibrium prices are not scarcity indices. No coherent justification is available for the claim, for instance, that firms would be inclined to hire more labor if wages were lower.

On JCH @72 and the LTV more generally:

I’m not convinced by the TSS. Anyways, consider, e.g., Duncan Foley’s work on the Monetary Expression of Labor Time (MELT) or Sraffa’s analysis of the standard commodity. In either case, all Marx’s invariants hold. The transformation is solved and the formal analysis points to the V. 1, Ch. 1 discussion of money, commeasurability of commodities, and the fetishism of commodities. One can also look to Morishima’s exposition of Okimoto’s fundamental Marxian theorem.

On CD @61:

I agree. Much of Quiggin’s post has nothing to do with the text of Capital.

On Nozick:

His comments in AS&U on price theory, marginal productivity, etc. are ignorant and incompetent. He even has a footnote acknowledging he does not know about Cambridge Capital Controversies.

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Robert 07.02.11 at 7:34 am

Should be Okishio, not Okimoto.

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Random Lurker 07.02.11 at 10:10 am

@ StevenAttewell 63

But in Marx’s opinion, capitalism isn’t immoral in itself.
It is instead very moral as long as it is a productive and functional system, but at some point it reachs its limits, cannot function properly, and destroys more that it creates.
At this point, it should be replaced by a new system, which for Marx was “socialism”.
Hence capitalism becomes immoral only when it is doomed, or in fact a zombie superstructure:
For example we already live in a world with strong statal intervention in the economy, but where the state choses to intervene not directly, but by stimulating (subsidizing) private capitalists so that the economy desn’t crash. In this instance, “capitalism” is a zombie cultural superstructure on an already somehow “socialist” base, and the superstructure has negative effects: bailing out banks instead of nationalising them, pump-printing money for the financial market but not for local governments (like Greece, but also big problems for local entities in Italy and for what I know in the USA) etc.

In this sense, I think that the LTV is not a normative assertion (“workers produced everything, give everything back to the workers”) but rather an equilibrium theory of prices (in my opinion still rather meaningful) that helps explain why capitalism “can’t work” (athough apparently it is still working).

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Louis Proyect 07.02.11 at 12:26 pm

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.

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Random Lurker 07.02.11 at 1:07 pm

Since this thread is slowly drifting towards a thread about the labour theory of value, I think that a discussion about the LTV itself is not too OT.
IMHO there are mayor misunderstandings about the LTV: the LTV proper is not a metaphisical idea about what constitutes “value” but a macroeconomic theory about pricing.
According to the LTV:
1) prices depend on offer and demand
2) offer depends on prices of production, that are in pratice just the amount of aggregate labor needed to produce the item
3) demands depends on the “use value” (perceived utility) of the item, and on the scarcity of the item itself (the scarcer the item, the higer the price).
4) If the demand for one item is high, the price of the item is high, more people will try to produce that item
5) thus the item will become less scarce, and the price will fall
6) 4 and 5 can be applied in reverse for items with low demand and low prices
7) the market at large will reach an equilibrium only when all items are more or less equally profitable
8) which means that their prices will be more or less proportional to their production costs, which means that relative price of stuff is proportional to the quantity of labor (expressed as labour time at average intensity) needed to produce each item.
9) the “use value” of the item thus influences the quantity of items produced, but not the price of the item itself.

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Phil 07.02.11 at 2:41 pm

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.

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Curt Doolittle 07.02.11 at 3:37 pm

I’m not really sure why anyone really bothers with Marx any longer. The classical liberal tradition is more fruitful ground for furthering society, and in economics and political economy Marx is discredited. That said:

1) A “stable equal society” can consist of and only consist of “a small ethnically, linquisticially and culturally homogenous nation state.” Status cues within and across classes, races and cultures guarantee that only people with the same complex suite of values will be charitable to one another. (This is just data and logic. It’s in the data. Don’t bother arguing about it.) Social Status controls access to mates and access to opportunities.

2) A “stable equal prosperous society” requires that a body politic be competitive in it’s use of comparative advantage. Economic calculation to make use of comparative advantage requires property rights, prices, money, banking, and accounting. (This is simply both logically obvious, scientifically demonstrable, and universally demonstrated by the data. The verdict is in: prosperity=property rights because property rights = experimentation and adaptation.)

3) There is no evidence that proletarian rule would be anything other than the worst possible structure of society. Instead, the question should be asked as “What set of institutions will help the different social classes cooperate given that they have different propensities and abilities?” In other words, what set of institutions assist classes in being Pareto Efficient. (Improving some without harming any.)

There will always be social classes. 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.

4) Stability is a chimera. Stability = Stagnation = Poverty. Instead the question is “What system allows for the most utilitarian rotation of elites such that capital is consistently accumulated in society rather than wasted and destroyed by revolution?” Only capitalism allows for meritocratic rotation of the elites because the only ‘service’ to one’s fellows that is empirically demonstrable is service via the market.

5) And is stability desirable? The most stable society is an expansionist, militaristic, republican slave society. That’s what history shows us. History also shows us that individual property rights are necessary for prosperity, and that political rights are irrelevant as long as people have property rights.

The most stable society in modern history is England, which has not had a revolution in 350 years. And arguably, given that its revolution was relatively bloodless, then we can extend the culture back for a thousand years.

The USA by contrast is an outlier, because it consists of a newly conquered continent that has not yet fragmented into regional cultures and states – although that process is occurring rapidly at present.

England was stable because it had houses of government for different social classes. Arguably the mistake that was made was not to create a ‘house of proletarians’ and to divide up the houses further, rather than sacrifice the house of commons away from the merchants to the proletariat.

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Curt Doolittle 07.02.11 at 3:46 pm

@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.

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engels 07.02.11 at 7:59 pm

What Phil said.

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StevenAttewell 07.02.11 at 8:15 pm

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.

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John Quiggin 07.02.11 at 8:54 pm

Obviously the LTV has lots more fans than I would have expected. But we are approaching 100 comments, and no one has responded to my central point that, correct or not, it is uninteresting once you abandon the idea of revolution. I wrote:

For those engaged in attempts to achieve a better, more equal and more sustainable society, Marx’s theory of value has little to offer. What can it tell us, for example, about the relative merits of trying to promote equality through higher minimum wages, through more progressive taxation or through expansion of public ownership?

Can anyone point me to work showing that I’m wrong about this?

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Robert 07.02.11 at 9:36 pm

Is this comment in moderation like some of my others?

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Walt 07.02.11 at 9:48 pm

People who argue in favor of Marxist economics frequently use an argument style that to me makes them sound like cranks. The argument is generally of the form a) your objection is already answered by reading some three thousand page tome written sometime in the last 120 years, and b) how stupid you are for not having already read it. This style doesn’t affect the truth value of Marxist economics, but it sure makes it a lot harder for me to assess it.

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Henri Vieuxtemps 07.02.11 at 9:53 pm

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

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Walt 07.02.11 at 9:58 pm

I hasten to add that there are clear examples that avoid this argument style, such as Random Lurker @79.

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Phil 07.02.11 at 10:23 pm

Walt – people who argue against, also.

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Random Lurker 07.02.11 at 11:08 pm

@ John Quiggin 85
I think that Marx’s theory of value would point to increased public ownership because IMHO (contrary to what you stated in the post) it implies that “capitalism” tends to monopoly because of increasing returns to scale. If you have to accept a monopoly, public monopoly seems better than private monopoly (I have problems to point you to some specifical work, it seems to me that it is a general concept in Marx’s economic writings).

StevenAttewell 84
Maybe you are right, but I think that ifsomeone wants to make a moral point, he/she has also to substain it by some theory so that his/her objections seem workable and not just rants.

@Curt Doolittle 82
There are many points on which I disagree with you, but to be short, I think that our society is already much less capitalist than it seems: for example many services that are today performed by privates, that are anyway supposed to be necessarious so that when privates fail the state has to come in (such as banking, health care, education and others). So in my opinion we are already living in an halfway “socialist” world, but we don’t have the cultural skills (superstructure) to treat it this way, and so we return to “capitalistic” concepts and try to pretend that all this doesn’t happen and treat all this economic activity as private.

@Walt 89
Thanks!

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Tom 07.03.11 at 12:25 am

@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.)

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StevenAttewell 07.03.11 at 12:34 am

How do you guarantee against economies of scope and scale? Or against fixed costs?

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John Quiggin 07.03.11 at 12:44 am

@RL I agree that Marx stresses (what is now called) increasing returns to scale, and that IRS implies a strong case for public ownership.

But, I’m puzzled by your assertion that Marx’s value theory (as opposed to Marx’s general thinking) incorporates increasing returns to scale (though Google suggests that this, like everything else, is the subject of confused and confusing debate).

The model in Capital is a Ricardian fixed-proportions CRS model in which firms aren’t even present – everything is in terms of phrases like “the labour required to produce a coat”, which isn’t meaningful except in a fixed-proportions CRS world. The analysis is undertaken at the industry level, which can only be done if the technology is fixed-proportions CRS.

To restate my view in the original post, very much strengthened by this comments thread, paying attention to Marx’s formal economic theory is a waste of time and intellectual capacity. None of what is interesting in Marx found its way into his theory of value.

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John Quiggin 07.03.11 at 12:45 am

Henri V @88 wins the thread!

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Tom 07.03.11 at 1:18 am

@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.

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hartal 07.03.11 at 2:39 am

OK take minimum wage laws or raising wage floors. Has John Quiggin not read Value, Price and Profit? This discussion is getting stranger by the moment. See the robust defense in value theoretic terms of wage increases from which the living wage advocates could still learn a thing or two.
Returns to scale? See Marx’s acceptance of Jones’ critique of Ricardo’s theory of declining returns. Marx does not have a one-sided value theory; this is part of his criticism of Ricardo’s abstraction. He always looks at the use value or physical quantity side of accumulation; and in many places (but especially Capital, 3) he recognizes rising returns to scale in use value or physical quantity terms. He then integrates that with an analysis of how it impacts accumulation in value terms.

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john c. halasz 07.03.11 at 2:43 am

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).

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Giampiero Campa 07.03.11 at 4:30 am

The claim about the declining rate of profit (not specific to Marx – most of the classical economists also saw the rate of profit declining) hasn’t turned out to be true, at least not in a sense that requires steadily increasing exploitation or brings the system ever-closer to collapse.

One could argue, though, that there is a steadily increasing exploitation or the planet’s resources. The price of many of these resources is bounded to raise way up as they become scarcer, this will probably happen around the middle of this century. The fact that it has not happened s far does not mean that mindless resource usage can go on forever.

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LFC 07.03.11 at 4:40 am

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)

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John Quiggin 07.03.11 at 5:18 am

@hartal You’ve missed my point completely. I’m not asking whether Marx favored higher wages, progressive income taxation or public ownership (that’s all in the Communist Manifesto) but to repeat myself with added emphasis “What can it tell us, for example, about the relative merits of trying to promote equality through higher minimum wages, through more progressive taxation or through expansion of public ownership? “.

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.

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hartal 07.03.11 at 6:07 am

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.

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hartal 07.03.11 at 6:39 am

I will read this at some point, but not today or tomorrow

Japan and the World Economy
Volume 10, Issue 3, 1 July 1998, Pages 253-263

Marx, economies of scale, and the falling rate of profit

Takashi Negishi*
Department of International Economics, Aoyama Gakuin University, 4-4-25 Sibuya Tokyo 150 Japan

Abstract
The Shibata–Okishio theorem, which denied Marx’s law of falling rate of profit, was demonstrated by the use of the Lausanne School model based on the assumptions of constant returns to scale and perfect competition, which Marx did not assume. The competition among capitalists which Marx described is a world of economies of scale and imperfect competition. The model to be used should, therefore, be either Cournot’s model of oligopoly or Chamberlin’s model of monopolistic competition, both of which, unlike the Lausanne model, can deal with economies of scale.
Author Keywords: Marx; Scale economy; Rate of profit; Imperfect competition

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Robert 07.03.11 at 6:49 am

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.

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hartal 07.03.11 at 7:12 am

Robert,
As to vol 2 here are a few salient points as I doze off.
1. it shows the possibility of expanded reproduction without a permanent underconsumption problem. Naive underconsumptionism is still the dominant ideology of the left.
2. the importance of the gold sector in expanded reproduction intimates the need for a credit sector that can play the same function, and thus throws light on the necessity of credit
3. it isolates the difficulties that firms will have in both realizing the value and finding on the market the quantity of use values required for their individual expanded reproduction. This shows of course that Marx is as concerned with value and use value. The reproduction schema can thus be used to show why the reproduction of capital will be shot through with disturbances.
4. in showing the possibility of the reproduction of capital, the Vol II analysis underwrites the analysis of the capital-labor relation as an ongoing relation that becomes over time opposite in content to its “free exchange” form (chs 21-23 Capital volume I). This is one of the most important dialectical inversions that Marx demonstrates.
5. the early parts of volume 2 introduce the different circuits of capital and discuss turnover. Both are rich in implications. See for example Duncan Foley’s diagram of the reproduction of capital in terms of financing, production and commercial lags in his Understanding Capital (I am sure that you know it). I think this is one of the best diagrams of the movement of capital that I have ever seen, and it is entirely faithful to the Marx of Capital, vol 2.

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Walt 07.03.11 at 7:50 am

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.

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Walt 07.03.11 at 7:58 am

I mean, Stokey and Lucas’ “Recursive Methods in Economic Dynamics” is the foundation for modern mainstream macroeconomics. And yet, if I told you that your objection to whatever was answered there, with no further elaboration, you would have every right to wonder if I was bullshitting you.

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John Quiggin 07.03.11 at 11:54 am

“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.”

“And, whereas [the value theory in] Capital is generally concerned with a fixed-proportions, constant returns to scale economy, Marx, when not doing formal economic theory, was among the first to realise that capitalism is not about constant returns to scale.”

We seem to be in furious agreement.

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PHB 07.03.11 at 12:19 pm

Why on earth would anyone imagine that the economic theories of a man who died before the invention of the internal combustion engine would be relevant today, let alone infallible?

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Platonist 07.03.11 at 1:12 pm

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.

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engels 07.03.11 at 1:45 pm

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

Personally, I’d struggle to think of one from before the invention of the iPad.

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William Timberman 07.03.11 at 1:53 pm

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.

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Random Lurker 07.03.11 at 3:23 pm

@John Quiggin 94
I think that we had a mysunderstanding, I think that:
1) the “Labor Theory of Value” is a theory of pricing, not a theory of value in the sense you seem to imply, even if it’s name it is called “theory of value”. Also, while Marx uses the LTV, it is Ricardo’s theory, not Marx’s, and it was used (AFAIK) that “free markets” are just and equitable.
2) I think that a “theory of value” is a theory that relates to the production of “use value”. In this sense, Marx’s “theory of value” is simply that an increasing differentiation and specialization of labor produces more “stuff” (use value), and that mechanization is a part of this process. In facts, he needs this concept because he wants to prove that, even if the LTV was true, the “free markets” would evolve in a “capitalist system” based on exploitation (“free markets” and “capitalism” are not the same concept).
3) The logical consequence of this process, which is anyway also stated somewere in the Capital, is that technological progress goes hand in hand with increasing scale of production, which is IMHO a very strong way to assert increasing returns to scale.

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Random Lurker 07.03.11 at 3:24 pm

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

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Random Lurker 07.03.11 at 3:53 pm

Example:
In T1 there is a world where there are a lot of shoemakers (artisans). They make a pair of shoes in 10h, and since the “price” of 1h of work is 10$, they usually sell the pair of shoes at 100$. This is a “free market” but non-capitalist system.

in T2 someone invents fordism and creates a manifacture where 10 guys cooperate to built shoes, but since everyone is specialized a pair of shoes needs only 5h of work.
When this manifacturing system gets widespread, the price of shoes falls, because there are a lot of shoes on the market. According to the LTV, it falls to 50$ (proportional to the labor time needed); “artisan” shoemakers are simply priced out of the market and either -a) are employed as workers in some manifacture -b) change job -c) become unemployed.
In T2 we have a capitalist world, since the manifacture is usually owned by some guy, called capitalist, who “exploits” the workers.

In T3 technology evolved a lot and we have a few megacorporations who build shoes on mass scale, one part in India, the other in Minnesota, etc. Workers are no more small groups but “armies” and the productivity is such that a pair of shoes only costs 3$. However this is possible only because the scale of production is such that “competition” in the sense that existed in T2 does not exist anymore. For example in T2 one very lucky/hardworking guy could crate a manifacture from scratch, but in T3 this is no more possible. In T3 whe have “late stage” capitalism, where production would be better organized by a “socialist” logic, but the logical/cultural fiction of “free market” and “competition” is mantained.

T3 is obviously a better world than T2, because more stuff (“use value”) is produced, but the “exchange value” of the stuff felt down, thus creating the illusion of 0 growth when you look to the equations.

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Hidari 07.03.11 at 3:54 pm

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

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Henri Vieuxtemps 07.03.11 at 3:58 pm

More to the point, I think, it’s that from the marxist point of view the question (re: min wage, taxation, and so on) is meaningless, in the ‘cart before the horse’ sort of way:

Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labor power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?

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CharlieMcMenamin 07.03.11 at 4:49 pm

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.

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bianca steele 07.03.11 at 5:12 pm

Re @115 T3: If this is the case, we being in late capitalism the most important task the left has is clearly to educate people who think there are still being enterprises created without central direction and think the fact that we talk about this matters, obviously.

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Martin Bento 07.03.11 at 6:51 pm

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.

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Lee A. Arnold 07.03.11 at 7:11 pm

I think that social democrats would start to get results if they asked the following question: what is accomplished, or what work is performed, by higher minimum wages, by more progressive taxation or by expansion of public ownership? Or to put it the other way: what effort is saved or economized by these things?

Not what is fair, or what is just; but what is economized.

These things all have economizing functions. That is really why we consider them in the first place. It is the same thing as a technological innovation, such as a dishwasher or a computer, having economizing functions, and just as the market institutions of price, private property, the use of money, and contract law have economizing functions. The economizings inhere at different levels, that is all. Innovations and institutions are varieties of the same thing: this thing ought to have a word-name, but it does not. Contemporary economics ought to have recognized all of this by now.

“Liberty” itself has an economizing function, although the Enlightenment writers didn’t think of it that way. After all, liberty makes it easier to do some kinds of things: to speak and have conversation, to find things out, to direct the disposal of property, to make private economic decisions. If liberty were not economizing, we wouldn’t value it.

“Fairness” has an economizing function for at least two different reasons: (1) if people can’t perform in the system, then they cannot add their own comparative advantage, so the total pie is reduced for everybody (even the richest); and (2) because otherwise people won’t buy into the norms of the system, and then the set of norms and expectations comes into question, which slows down the traffic, and again, reduces the size of the total pie over time.

I think economists stumble because economizing is NOT essentially arithmetical or mathematical, as we can see from the social “values” of liberty, fairness, income support, or what have you. Economists have been misled into “mathing it up” not simply due to the example of physics, a successful science, but also because in some cases economizing has numerical correlates in the change of a ratio or proportion, or it is exchange-valued in a private transaction by money, which of course is numerical. So it appears, falsely, that there ought to be a deep-seated equation to cover economizing, and “capital” should have a clear, concise and numerical definition, and so on.

The idea that economics should be mathematical is like a version of the fallacy of misplaced concreteness, however tempting it has appeared.

Economizing is more like the biological pattern of a starfish or a sea anemone. It is a pattern in which a center (and there are innumerable centers, of endless sorts and sizes) is able to reduce the effort or cost of a transformation or transaction between two poles at its periphery. It is a triangulation: a central context over a bilateral distinction or relationship. Economizing is identical to the concept of “concept”. Things get slightly more hard-wired toward this center, and it becomes habitual or addictive as the case may be. It is not mathematical; it stands alongside mathematics; mathematics as an economizing language is a subset of it.

What is going to have to happen is to discard the language of “capital” and “labor”, and to substitute the biological/social language of “contexts” over “distinctions”. Wittgenstein’s Philosophical Investigations started the ball rolling, and Gregory Bateson added the insight that organisms get hardwired toward the center in order to preserve flexibility at the skin or periphery, calling it an “economics of flexibility”.

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.

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William Timberman 07.03.11 at 7:13 pm

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.

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ScentOfViolets 07.03.11 at 7:31 pm

And here I thought the chief impact of the LTV was to justify the munificent compensation of CEO’s, bankers/finaciers, and other Galtian movers and shakers of the modern world ;-)

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john c. halasz 07.03.11 at 8:10 pm

@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.

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StevenAttewell 07.03.11 at 8:16 pm

” I think that social democrats would start to get results if they asked the following question: what is accomplished, or what work is performed, by higher minimum wages, by more progressive taxation or by expansion of public ownership? Or to put it the other way: what effort is saved or economized by these things?”

Erm…why? Politically, concepts of fairness mobilize people a lot faster than concepts of efficiency. People don’t care about process, they care about results.

126

bianca steele 07.03.11 at 8:27 pm

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.

127

Lee A. Arnold 07.03.11 at 9:12 pm

Steven Attewill #125: “Erm…why? Politically, concepts of fairness mobilize people a lot faster than concepts of efficiency. People don’t care about process, they care about results.”

Those results don’t seem to last long, since we keep refighting the same battle. Indeed in the U.S. we are yet defending the vestiges of Roosevelt’s New Deal. I am not so sure about your first premise, either. I see no relation between speed of political mobilization and long-term policy effectiveness, while on the other hand, almost everyone I meet appears to think that the market system has some virtues of efficiency whatever its obvious flaws in distribution.

Bianca Steele #125: “What do you mean by ‘we’?”

Since in #119 you used the phrase “late capitalism”, you are officially included in “we”.

128

StevenAttewell 07.03.11 at 9:27 pm

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

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

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hartal 07.03.11 at 9:29 pm

Martin,
Simply, have you checked the price of a paperback classic?
*
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; the costs of advertising can be covered out of the increased surplus value the production of which it makes possible. (To the extent that advertising creates needs or ‘educates’ consumers, it does not fit well with the neoclassical economic conception of the exogenous consumer, but advertising easily finds a place in Marx’s analysis of the circuit of capital, driven not by consumer preferences but the expansion of value. )

Of course advertising costs can also burden an industry. You can see better on your toes at a sporting event but not if everyone else stands on their toes too–fallacy of composition. Advertising covers its own costs if it gives you bigger market share, but if every competitor is paying for it, almost of all the benefits will go to the advertisers. To reduce advertising and other costs the industry is consolidated and profitability potentially improved.

*
On other points in the discussion we do need to look at how economies of scale do in fact work in Marx’s analysis of concentration and centralization in Capital, vol 1.

As for the undead marginal productivity theory, one can find interesting criticisms in Duncan Foley’s Adam’s Fallacy, David Ellerman’s work, the New School Economics website on marginal productivity, and an essay by Tim Bending recommended at Robert’s website. It’s a zombie theory. Really surprised to see John Quiggin not treat it as such.

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hartal 07.03.11 at 9:33 pm

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.

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bianca steele 07.03.11 at 10:02 pm

Lee Arnold @ 127
Actually, I don’t totally grok “late capitalism.” But if I become fluent in the language of academic Marxism, will I qualify to have the right wrong ideas? And where are you from anyway, if you’re (as you seem to be) claiming the use of the term “late capitalism” for academic economics?

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John Quiggin 07.03.11 at 10:08 pm

“Late capitalism” has always struck me as a prime example of wishful/teleological thinking. I’d assumed that it dated back 40 years or so, to Ernest Mandel, but Wikipedia says it was first used by Sombart in 1902. Either way, at this point, it’s more reasonable to call what we have now “capitalism”, and use “early capitalism” for the C19 version.

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Chris Bertram 07.03.11 at 10:11 pm

A list of some of the names dropped by hartal in this thread:

bq. von Bortkiewicz, Desai, Akerlof, Shiller, Martin Feldstein, Max Adler, Popper, Nozick, Sweezy, William Byers, Samuel Hollander, Amartya Sen, Maurice Godelier, Derek Sayer, Takashi Negishi, Shibata, Okishio, The Lausanne School, Cournot, Chamberlin, Duncan Foley, David Ellerman, Tim Bending

Very impressive I’m sure, but not a very productive contribution.

134

hartal 07.03.11 at 10:34 pm

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.

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hartal 07.03.11 at 10:45 pm

I also mentioned Hilferding, Minsky, Stiglitz, Stiglitz and Bilmes, Mattick, Sr, Cowen, Kuehl, Glover, Harold James and Sumner Slichter on the previous post on Marx.

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john c. halasz 07.03.11 at 10:52 pm

@ 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.

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john c. halasz 07.03.11 at 11:09 pm

@126 Bianca:

MacIntyre had been a Marxist, so it’s no surprise that be found his way out by converting to Aristotle and Thomism, since there’s a lot of Aristotle embedded in Marx, as well as Hegel.

@133:

FWIW I recognized, with differing weights, most all those names except maybe 4 or 5.

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John Quiggin 07.03.11 at 11:19 pm

This seems to suggest that Marx didn’t do maths, except in his “twilight years”. But that’s wrong. Volume 1 of Capital is essentially mathematical, even if the math is very simple. For example, and crucially to the topic of the present post, we have

The capital C is made up of two components, one, the sum of money c laid out upon the means of production, and the other, the sum of money v expended upon the labour-power; c represents the portion that has become constant capital, and v the portion that has become variable capital. At first then, C = c + v: for example, if £500 is the capital advanced, its components may be such that the £500 = £410 const. + £90 var. When the process of production is finished, we get a commodity whose value = (c + v) + s, where s is the surplus-value; or taking our former figures, the value of this commodity may be (£410 const. + £90 var.) + £90 surpl. The original capital has now changed from C to C’, from £500 to £590. The difference is s or a surplus value of £90. Since the value of the constituent elements of the product is equal to the value of the advanced capital, it is mere tautology to say, that the excess of the value of the product over the value of its constituent elements, is equal to the expansion of the capital advanced or to the surplus-value produced.

and Marx goes on to state the rate of exploitation as s/v.

My point in the OP is precisely that this model is uninteresting, while the kind of work to which you refer, starting from Marx’s ideas about IRS rather than his unsuccessful formalisation of LTV is (or at least sounds) interesting.

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hartal 07.03.11 at 11:36 pm

So Marx providing a solution to a unanswered puzzle of classical economics (surplus value or the increase in the value in circulation had to have originated in circulation but, given the assumptions of classical economics, it could not originated in circulation) is uninteresting…

Marx explaining why only part of the capital investment is variable and providing a measure for understanding the nature of the working day endured by workers is boring…

Could it be that we should look a little more carefully at what makes things interesting or boring….

140

Lee A. Arnold 07.04.11 at 2:48 am

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.

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Chris Bertram 07.04.11 at 7:05 am

Yes, hartal, but you seem to be missing the point, which is that long lists of thinkers that display how erudite you think you are, don’t in fact contribute to the quality of discussion.

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hartal 07.04.11 at 7:15 am

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.

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Chris Bertram 07.04.11 at 7:34 am

hartal: no I’m trying to persuade you to comment in a different and more constructive manner (and I lack to power to disemvowel you in a comments to one of John’s threads, even if I wanted to, so your speculations are unfounded). IIRC, I asked you to limit the number of your comments in the Milanovic thread and you simply ignored that request, that’s why action was taken, not because of the content of your comments.

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hartal 07.04.11 at 8:22 am

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.

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Chris Bertram 07.04.11 at 9:22 am

No, hartal, the reason I didn’t summarise it was that I judged that to do so would would require an excessively long comment which would be a diversion from constructive discussion of John’s original post. As a fellow member of the CT collective, I just wanted to indicate to John my own take on the subject, as briefly as possible. As for your own intentions, these seem to be (a) to impress us all with how clever and erudite you are and (b) to tell us all that Marxian value theory is alive, kicking, and and relevant to the understanding of contemporary capitalism. I’ve got no interest in (a) – and I suspect I’m not alone in that – and you’ve totally failed with respect to (b).

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Martin Bento 07.04.11 at 9:48 am

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.

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Martin Bento 07.04.11 at 10:09 am

Halasz,

No monkeys typing here, I specifically said “directed to purpose”, and Marx said it too (Capital, Chapter 7, “The labour-process, resolved as above into its simple elementary factors, is human action with a
view to the production of use-values”). Marx did say the value of the products of human labor was reducible to a common denominator, based on the average labor time socially necessary to produce them (see quote in previous comment). Such an average is meaningless for creative work, and almost all work is at least slightly creative, and all technology (and therefore all capital goods) has previous creative work embodied in it.

As for productive and unproductive labor, productive labor produces use-values. Use-values are things that satisfy human wants, regardless of the origin of the want (Capital, first page: A commodity is, in the first place, an object outside us, a thing that by its properties satisfies
human wants of some sort or another. The nature of such wants, whether, for instance, they spring
from the stomach or from fancy, makes no difference). Some humans want Nike swooshes on their clothes. Doesn’t matter why. That’s use-value.

Then this:

“‘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. ”

Certainly, it does not, but are you saying that Marx did not believe that extraction of surplus-value was the basis for profit? If not, what do you mean “supposed”? And what are you saying?

As for Marx as a critic of the LTV, OK, I’ll bite. Here is a quote from Capital that support the notion that Marx believed Capitalist profit came from appropriating surplus-value created by labor.

“The fact that half a day‘s labour is necessary to keep the labourer
alive during 24 hours, does not in any way prevent him from working a whole day. Therefore, the
value of labour-power, and the value which that labour-power creates in the labour-process, are
two entirely different magnitudes; and this difference of the two values was what the capitalist
had in view, when he was purchasing the labour-power. The useful qualities that labour-power
possesses, and by virtue of which it makes yarn or boots, were to him nothing more than a
conditio sine qua non; for in order to create value, labour must be expended in a useful manner.
What really influenced him was the specific use-value which this commodity possesses of being a
source not only of value, but of more value than it has itself. This is the special service that the
capitalist expects from labour-power, and in this transaction he acts in accordance with the
eternal law of the exchange of commodities.” Chapter 7, emphasis in original

Where are the quotes showing that Marx was actually critical of this view? Not nit-picking over formulations and details, of course, but believing this model was fundamentally wrong or inadequate in some way, “an accounting fiction within an explanatory scheme”.

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Martin Bento 07.04.11 at 10:11 am

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

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Martin Bento 07.04.11 at 10:11 am

William, I think the answer would be, yes, we do pay the swooshers more. I guess you really mean ”should we?” This gets into the complicated matter of determining how creative work should be compensated. Certainly, I think Faulkner’s work more valuable, but the market does not. I do have some ideas along this line, but I think they would be too off-topic here. Suffice it to say, I think the big threat to Capitalism now is the problematic nature of informational goods. Specifically, that there is no natural scarcity once created, so a conventional market makes no sense. Provided a reasonable answer to the question of what to fund can be found, publicly funding intellectual and creative work and letting it circulate freely would be much, more efficient, and would constitute socialism, at least for informational goods, which are increasingly where the action is.

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StevenAttewell 07.04.11 at 11:18 am

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.

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Henri Vieuxtemps 07.04.11 at 12:06 pm

The ‘swoosh’ thing (branding, advertisement) – isn’t it merely a manifestation of what he calls “commodity fetishism”? It doesn’t add any value, but it does create a new social relation.

And the only reason you can profit from it is the IP law. Crucifix is also a special symbol, but since it doesn’t belong to Nike they can’t make any money by printing it on their shoes…

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Henri Vieuxtemps 07.04.11 at 12:22 pm

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?

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Robert 07.04.11 at 12:42 pm

I’m more happy talking about “Marx’s theory of value” than about “the” LTV. Marx was critical of previous formulations of the LTV, such as of Ricardo’s. Simultaneously, Marx developed and extended the LTV. You can see both on almost any page of The Theories of Surplus Value, the so-called Volume 4 of Capital. Or click on my name above for a transcription of a letter form Marx to Engels. Marx was particularly proud of his introduction of the distinction between “labor” and “labor power”.

I thank hartal for reminding me of Foley’s insightful model of the circuits of capital. I think the point of the models in Volume 2 is to show where, for example, the realization of surplus value can go wrong. I’m inclined to formulate models of expanded reproduction in terms of prices of production. I like the traditions of Kaldor, Kalecki, and Robinson. I wish I knew more about contemporary “circuitists” schools.

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Roger 07.04.11 at 1:07 pm

‘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.

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William Timberman 07.04.11 at 1:49 pm

MB @ 149

Your remind me that I should never, ever consider a CT thread done and dusted until it’s been absent from the Recent Comments column for at least 48 hours. This one has stayed warm much longer than I expected, largely due to some really clever contributions at the end, yours included.

Suffice it to say, I think the big threat to Capitalism now is the problematic nature of informational goods.

An interesting take on our post-McLuhan, post-Internet cultural ferments, which are clearly bothering not only our contemporary Faulkners, but more than a few of our contemporary David Broders as well. And you may be right…something really startling — other than blogistan — may yet come of it.

Whether you’re right or not, I still think that the big threat to Capitalism is more likely to come from its idiot current custodians. Maybe we should all be looking for our own little Lindisfarne, as Chris Hedges suggests. (When I remember what happened to the original, though, I suspect that putting on a camo suit and staying put might be a better bet.)

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bianca steele 07.04.11 at 1:55 pm

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.

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William Timberman 07.04.11 at 2:11 pm

Roger @ 154

Spot on. This is the transvaluation of all (capitalist) values that worries me the most. Finding a political crowbar appropriate to the new relations of production — and consumption, and ideological conviction — is the conundrum of the day. And I’m sorry, but saving Social Democracy looks to be a stopgap at best. It’s far more likely, I think, to end in tears for anyone who, ignoring the evidence you cite, continues to ponder the imponderable — such as how to pressure President Obama to be less like Herbert Hoover, and more like FDR. Gakh!

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Henri Vieuxtemps 07.04.11 at 2:26 pm

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

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hartal 07.04.11 at 3:36 pm

StevenAttewell 07.04.11 at 11:18 am
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.
____________

Yes, you make an important point here, Steven. In short, debt-financed job creation programs should not be defended in terms of pump-priming; that is, public spending will not necessarily stimulate private investment as the result of the stimulus it gives to private consumption. The system has not fallen into an unstable equilibrium which merely needs an injection of new spending to push it back on track. It’s exactly because unemployment has become stable that repeated shoves and not just a single shove, coupled with new forms of planning, are required to move the economic machine back up to full employment.

Krugman is certain that we can do something this big without offending the confidence fairies. I think we should certainly try because unemployment is intolerable and interest rates are low, but I think we should push for this while preparing for the possibility that the fairies will exact a mean revenge.

At any rate, the theory of the multiplier can be defended without the pump-priming thesis, that is the thesis i that “temporary injections of government spending would set the wheels of private enterprise in motion and, once private enterprise was back on its feet, the government expenditures could be withdrawn without causing any relapse in economic activity.” The Economics of John Maynard Keynes , p. 126 (Professor Quiggan should remember that some of the most lucid post war Keynesians Dillard, Lawrence Klein, and Hyman Minsky all took or had taken their Marx very seriously).

The pump priming thesis as summarized here by Dudley Dillard is exactly the mistake that Keynes and FDR took some time to overcome. And it is the mistake that Obama already made. I don’t think Professors Quiggan, DeLong or Krugman have pinpointed the problem. It’s the mistake of the pump priming thesis.

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StevenAttewell 07.04.11 at 4:49 pm

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.

161

hartal 07.04.11 at 4:59 pm

Labor sets the conditions under which capital gets to restructure for profitability. It puts a floor on unemployment and thus limits the rate of exploitation. It forces the government to borrow to create public jobs and tax capital over the long term to stabilize today the system economically and morally from which it has benefited so handsomely. If capital will not invest out of fear of growing government involvement and future taxes (this is not quite Barro’s Ricardian equivalence), then government doubles down and carries out a more than somewhat comprehensive socialization of investment.

162

StevenAttewell 07.04.11 at 6:16 pm

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

163

Martin Bento 07.04.11 at 6:44 pm

Henri, yes, the exploitation of the swoosh requires IP law, but Capitalism generally requires property law generally, so this seems to me simply a special instance. The commodity fetish refers to the notion that exchange value appears to be related to the attributes of the commodity, but, for Marx, is not. For Marx, it is a function of the average socially necessary labor to produce the commodity. Since, as I am arguing “average socially-necessary labor” is a nonsensical concept in this context, this does not apply. As for Faulkner, OK, what about Thor? The commercial film industry is a Capitalist entity, is it not? But the values of what it produces are not reducible to the “average socially necessary labor” that went into producing them.

164

Martin Bento 07.04.11 at 6:48 pm

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.

165

Martin Bento 07.04.11 at 6:53 pm

Steven,

“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.”

Marx needs the LTV because he wants to argue that Capitalism is necessarily exploitative, not just sometimes or generally. If labor does not produce all of the value of the commodities, then it is not necessarily exploitative (in Marx’s sense, taking value without compensation) for the Capitalist to pay them less than the full revenue from the sale of the commodities. It could be, but one would have to look at specifics.

166

StevenAttewell 07.04.11 at 7:10 pm

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

167

William Timberman 07.04.11 at 7:29 pm

StevenAttewell @ 166

Absent the 100% case, you need a social contract enforceable on capitalists and their running dogs. Historically, in lieu of any such thing, what you’ve gotten is either flim-flam or force. We thought — at least here in the U.S. some tender souls among us hoped — that European social democrats might have found a way out of the wilderness. Who still thinks that now, after all the unfortunate events of recent years?

168

Martin Bento 07.04.11 at 7:29 pm

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

169

Henri Vieuxtemps 07.04.11 at 7:30 pm

Martin, yeah, I kinda did realize that my interpretation of “commodity fetishism” is not exactly marxist. But still, what I wrote there seems (to me) superficially/intuitively right. And I think the idea that the ‘swoosh’ is a property like any other property, with a value of its own, is a bit of a stretch on your part. It’s a quasi-religious phenomenon. And as such it’s not an element of capitalism.

What about Thor? I haven’t seen it. So, there is art, and that’s like a gift of nature, and then there is marketing. They hypnotize you to give them your money. It doesn’t mean anything.

…will you buy any of this?

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Martin Bento 07.04.11 at 7:59 pm

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.

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William Timberman 07.04.11 at 8:21 pm

One thing Thor is not is ars gratia artis. Contrast the constant and variable capital represented in the 15 minute rolling credits of the avarage summer blockbuster with that congealed in Sonny Terry’s harp, and you have to wonder if we wouldn’t be better off sticking to discussions of merchantable herring.

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Henri Vieuxtemps 07.04.11 at 8:26 pm

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.

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ScentOfViolets 07.04.11 at 8:55 pm

Marx needs the LTV because he wants to argue that Capitalism is necessarily exploitative, not just sometimes or generally. If labor does not produce all of the value of the commodities, then it is not necessarily exploitative (in Marx’s sense, taking value without compensation) for the Capitalist to pay them less than the full revenue from the sale of the commodities.

So then why do Capitalists use the LTV as often as they do? If somewhat selectively, of course.

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john c. halasz 07.04.11 at 10:43 pm

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.

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StevenAttewell 07.05.11 at 12:54 am

William Timberman – you need a social contract in any case, whether 100%, 93%, or 50%. The “100% case” is still a claim, and although it’s been denied here, that claim operates as a moral claim politically. Virtually no one votes Socialist because it’s more efficient.

Martin Bento – I don’t see anything wrong with having to prove the specific case as an intellectual exercise – I think it might actually improve Marxism as a social theory if it did that kind of empirical work.

As a political philosophy, I don’t see a problem with saying: labor is *more* valuable than other forms of property, that it has claims that should be treated as morally superior to those who never “toiled to earn.”

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john c. halasz 07.05.11 at 1:55 am

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.

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Phil 07.05.11 at 8:04 am

relabeling knowledge and skill as “human capital” (which began with Gary Becker?)

Dunno, but it seems deeply wrong. (Almost as wrong as Putnam’s version of ‘social’/’cultural’ capital, which seems to have eclipsed Bourdieu’s original and much less problematic formulation.) If it enables other people’s labour and is increased by the profit on what they produce, it’s capital.

Chris – what’s your issue with hartal? He’s by no means the snottiest commenter on this thread, and he’s certainly not the only namedropper. And personally I’d be glad of a brief summary of Cohen’s critique of the LTV. (I’ve never seen a critique of the LTV that I found persuasive, but if anyone could do it I’m sure he could.)

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Progressive Libertarian 07.05.11 at 2:57 pm

“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.

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engels 07.05.11 at 3:30 pm

Without capital my labor is useless

Without saying grace no-one can eat.

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Progressive Libertarian 07.05.11 at 3:45 pm

@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.)

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Walt 07.05.11 at 3:57 pm

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

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1000 Names of Vishnu 07.05.11 at 4:37 pm

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)

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Donald Johnson 07.05.11 at 5:10 pm

“he’s certainly not the only namedropper.”

Besides, for some of the more ignorant lurkers (pointing to myself), even namedropping can be a little bit educational.

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ScentOfViolets 07.05.11 at 5:46 pm

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?

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Phil 07.05.11 at 6:03 pm

Walt: things you buy – say, shirts – cost you far more than the cost of the stuff that goes to make them. That is to say, shirts are worth more than the cloth they are made of – or at least, they should be! So where has the worth that things have come from? Some of the worth of a shirt comes from the folk who made up their minds to make shirts in the first place – the ones who own the place where the shirts are made and the tools that are used to make them. Most of it, though, comes from the folk who do the work: they are the ones who take the cloth and make a shirt from it, when you get right down to it. This means that most of the cash which the shirts fetch when they are sold is due to them; as it is, though, most of it goes to the folk they work for. So folk who work stay poor, while the ones who own the means of work get rich. And this is what is wrong with the world.

(Written several years ago for a New Statesman competition.)

The story of the elves and the shoemaker sums up my understanding of capitalist production relations fairly concisely. Capital employs workers, sources of labour – an asset which is renewed daily, but also needs to be sold daily. Labour added to raw materials makes commodities, which the capitalist sells. In good times the commodities make a profit (relative to the cost of raw materials and labour), which accrues to the capitalist; in bad times there’s no profit, so the capitalist reduces costs by making the workers do more work for less pay (also known as ‘increasing productivity’). Either way the exchange value of the commodities exceeds that of the raw materials; the extra value has been added by labour.

This is a single-firm model, and a fairly simple one at that, but it does seem to describe quite a lot about how actual single firms work. And, I would suggest, the brick-like qualities of bricks have a lot to do with the wall-like qualities of walls.

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Phil 07.05.11 at 6:05 pm

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.

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Henri Vieuxtemps 07.05.11 at 7:13 pm

Some of the worth of a shirt comes from the folk who made up their minds to make shirts in the first place – the ones who own the place where the shirts are made and the tools that are used to make them.

I’m not an expert (obviously), but I have the impression that once you make this statement, you’re already in the Austrian School territory, and an opponent of the labor theory of value.

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Phil 07.05.11 at 7:59 pm

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.

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Henri Vieuxtemps 07.05.11 at 8:04 pm

It was all created by labor.

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StevenAttewell 07.05.11 at 8:14 pm

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?

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John Quiggin 07.05.11 at 10:43 pm

The obvious problems for LTV are
1. Value of land, including natural resources of all kinds
2. More critically, for the Marxist case, value of time. To take the shirt example, a retailer maintains a trading stock of shirts. Unless their price includes a return on the money tied up in the trading stock, they will go out of business. The problem for LTV is to account for this in a consistent fashion – this is at the core of the ‘transformation’ problem
3. As mentioned above, economies of firm size are problematic for any kind of value theory

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ScentOfViolets 07.05.11 at 11:11 pm

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.

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Robert 07.05.11 at 11:59 pm

I can agree with a lot that JCH writes, e.g., @174. In particular, I agree that a formalization of Capital will end up with many models, not just one. And there’s lots of academic literature on this.

Steven Attewell asks about “Interest-Bearing Capital as the Superficial Form of the Capital Relation”. That’s a volume 3 issue. In fact, I’ve quoted the title of Chapter 24 in Volume 3, not @190. I haven’t read all of volume 3, but I did skip ahead to chapter 50, “The Illusion Created by Competition”. I wish those writing about Marx did not make it so obvious that they are totally unaware of the architectonic structure of Capital.

Marx has a large typology for capital. In volume 1, he distinguishes between constant and variable capital. He points out this differs from the classical distinction between fixed and circulating capital.

In volume 2, he distinguishes among money, productive, and commodity capital, all of which are forms industrial capital takes on in the course of the circuit:

M – C ( = MP + LP ) … P … C’ – M’

In volume 3, he discusses commercial capital, which includes, as I understand it, both industrial and money-dealing capital.

Anyways, for Marx, surplus value is generated by labor in production. But that surplus value is distributed to many forms of capital and to ground rent. The analysis of this distribution follows on from the transformation problem. I have already mentioned three ways (or interpretations) @75 of solving the transformation problem.

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 do not find most of hartal’s authorities obscure.) Even if you want to change the world without a violent revolution, you can find some over the decades reading Marx as advocating social democracy. Is Shlomo Avineri’s work still referenced?

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ScentOfViolets 07.06.11 at 1:18 am

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.

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hartal 07.06.11 at 2:15 am

John Quiggin writes:
“2. More critically, for the Marxist case, value of time. To take the
shirt example, a retailer maintains a trading stock of shirts. Unless
their price includes a return on the money tied up in the trading stock,
they will go out of business. The problem for LTV is to account for this
in a consistent fashion – this is at the core of the ‘transformation’
problem”
_______

This is not a difficulty Marx overlooked; it was one that his method made him emphasize, since he wanted to explain why, given his Galilean empiricism, market appearances obscured the regulation of economic phenomena by value.

“Take this passage from the Grundrisse:

Difference in return. Interruption of the production process (or rather its failure to coincide with the labour process). Total duration of the production process. (Agriculture. Hodgskin.) Unequal periods of production

The difference in the return, in so far as it depends on the phase of the circulation process which coincides with the direct production process, depends not only on the longer or shorter labour time required to complete the article (e.g. canal building etc.), but also, in certain branches of industry — agriculture — on the interruptions of the work which are due to the nature of the work itself, where on the one hand the capital lies fallow, and, on the other, labour stands still. Thus the example given by A. Smith, that wheat is a crop taking 1 year, the ox a crop taking 5 years, etc. [29] Therefore 5 years of labour are employed on the latter, only 1 on the former. Little labour is employed e.g. on cattle raised on pasture. At the same time, in agriculture, the labour applied e.g. during the winter is also little. In agriculture (and to a greater or lesser degree in many another branch of production) there are interruptions given by the conditions of the production process itself, pauses in labour time, which must be begun anew at the given point in order to continue or to complete the process; the constancy of the production process here does not coincide with the continuity of the labour process. This is one moment of the difference. Secondly: the product generally requires a longer time to be completed, to be put into its finished state; this is the total duration of the production process, regardless of whether interruptions take place in the operations of labour or not; the different duration of the production phase generally. Thirdly: after the product is finished, it may be necessary for it to lie idle for some time, during which it needs relatively little labour, in order to be left in the care of natural processes, e.g. wine. (This will be, conceptually, approximately the same case as I.) Fourthly: a longer time to be brought to market, because destined for a more distant market. (This coincides conceptually with case II.) Fifthly: The shorter or longer period of the total return of a capital (its total reproduction), in so far as it is determined by the relation of fixed capital and circulating capital, is concerned obviously not with the immediate production process and its duration, but rather takes its character from circulation. The total capital’s period of reproduction is determined by the total process, circulation included.”

The point is easier to understand with the hoary example of wine. Say with Boehm-Bawerk that wine is worth 1000 francs at Bordeaux at the end of a crop. It has little quality, it has not matured. Let the capitalist pay the worker 1000 francs, the full working time. There is no surplus value at all. Yet in 20 years that beautiful flavor is worth 10,000 francs. The profit seemingly cannot be explained by surplus value for there never was any. Value appears to be a function of time.

Marx’s response to this has been well understood for over one hundred years. Samuel Hollander recently wrote:

“Now Marx did not perceive ‘fallow’ capital, illustrated by the test case of maturing wine—the third case above, to be an exception to the general rule of ‘exchange value.’ Differences in the return on capital would indeed compensate for differential time periods from product to product—relative prices would adjust appropriately to accommodate the differential—but interest is a ‘secondary’ or ‘derived’ from of surplus value, *and—taking an aggregative view—surplus value itself is solely generated by labor…It was, in brief, Marx’s contention that ‘the method of calculating the capitals’ respective shares in surplus value not only on the basis of the surplus labor time which they have achieved, but also in accordance with the length of time during which their capital has been working as such, ie., has lain fallow, gone through the phase of devaluation—does not in the least affect the total amount of surplus value which they have to distribute among themselves’. P. 256-7

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John Quiggin 07.06.11 at 2:37 am

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

Hartal, I didn’t mean to suggest that Marx ignored the problem, merely that he never solved it.

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hartal 07.06.11 at 2:39 am

Now that we agree that he proposed a solution, what’s wrong with it? Bohm Bawerk critiqued it even on the assumption that it was complete; von Bortkiewicz thought his solution was incomplete (Sweezy thought vB’s more complete answer actually vindicated Marx; needless to say, Samuelson did not agree).

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ScentOfViolets 07.06.11 at 3:12 am

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.

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john c. halasz 07.06.11 at 4:08 am

Oops! I just realized That in the 3rd paragraph of @174 I omitted the thought of “context of justification”, which made hash of what I was saying, in addition to getting the math wrong! Apologies. I hope the other typos, gaffes and solecisms can be readily compensated for.

But once we’re on the topic of ‘contexts of justification”, I find that context in the mainstream of economics awfully fishy. It too frequently seems to rely on a narrowly enforced set of abstract deductive theoretic presuppositions directed at the maintenance of consensus, and on the prestige of its interlocutors. There are many other faults, “empirically” speaking, but I’ll just leave it off by saying that it resembles more a parody of “mathematical” science than the real thing.

JQ @191:

Whaa?

!) Ricardo provided the theory of land (or resource) rents, as well as a version of LTV. Do you think Marx ignored that or failed to integrate it? Whatever the fertility oft the land or the accessibility and extent of its mineral resources, etc., it is only “activated” by labor, which digs it out of the ground,- ( and by capital, too, but that just brings it back to center stage). The differential productivity provided by land/natural resources is expressed economically by ground rents, which derive from the distributions of surplus-value. Again, nothing has “value” outside of the economic system of which it is a part, or into which it is incorporated.

2) I fail to see why you think this is relevant to the “transformation problem”. But rather than going Hartal’s route, I point you to something mentioned above: Duncan Foley discussion of different circuits of capital in Marx. One of which is obviously merchant capital. All value is “created” in production. Wholesale/retail functions just bring it to market; they realize value and don’t produce it. Perhaps you’ve just missed the whole point of the “transformation problem”, as I stated it above: cost-prices of production can;t be determined without first determining the distributions of surplus-value involved. Which means, simply that industrial or agricultural capital basically pays some of its share to merchant capital to bring it to markets, (sometimes quite literally). There’s no problem here that Marx would have missed. He went into elaborate, even pedantic detail in tracking these sorts of matters down. He even explored the difference between piece-work and hourly wages.

3) You can assert this, but you haven’t elaborated. In fact, you claimed that there was no “model” for such a thing in Marx, when it seems you haven’t bothered to engage enough to look. Do you think “transaction costs” models are up to the task? And have you considered the possibility that a “theory of value” might just as well be a theory about the transformations of value, especially when considerations of “firm size” come into consideration?

@196:

“as I said in the OP, I think value theories of all kinds are uninteresting.” Why? One what grounds are they declared “uninteresting”? Neo-classical economic positivism? Crude empiricism? Unreflective utilitarianism? How is a formal-rational discipline/discourse on economics to take place without considering basic questions of value? What explanatory “force” would it then have? What would would prevent it from reducing to spaghettios, to a hodge-podge of sophistries on behalf of the economically powerful?

I’m not saying that Marx is the last word on economic “value”. There’s lot’s he couldn’t conceive of. Perhaps there should be a plurality of standards of “value”, such as resource efficiency, productive efficiency, market efficiency, consumption efficiency, etc. But maybe he’s the first, full-fledged word, which intellectual honesty shouldn’t deny.

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Progressive Libertarian 07.06.11 at 4:38 am

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.

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Phil 07.06.11 at 8:06 am

Many capitalists do exploit labor in the sense that they pay laborers as little as they can get away with.

All capitalists are in the structural position of exploiting labour by paying the workers who produce their wealth as little as they can. The point of the LTV is that it’s both a critique and a description.

As for how the LTV fails, I’m genuinely confused. (Nobody seems to be suggesting that value comes from anywhere else, for one thing.) The transformation problem seems to play a big part here – could someone summarise it without using algebra?

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Chris Bertram 07.06.11 at 8:17 am

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.

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Random Lurker 07.06.11 at 8:19 am

@ StevenAttewell 190
In my opinion, it is possible to see credit creation in a LTV as a claim on future labor:
I think that the simpliest way to see the LTV is the idea that when you buy stuff (eg., a chinese made t-shirt), you are actually just retroactively paying the chinese worker’s wage. In this sense, your economic choice of buyng a t-shirt is a differed social relation with that chinese guy, even if you are not aware of that usually (commodity fetishism).
As a consequence, all economic relationship can be seen as a differed social relation between actors.
If I loan 100$ to you, I enter very clearly in a social relation with you, where you have to give me back 100$+interst in “abstract labor” (money).
Note that, since credit usually implies interest, credit is necessariously a form of capital (money that is intended to generate more money), but while “phisical capital” is usually the result of past labor, credit is really (a claim on) future labor.
Thus, if the total leverage in a society increases, the claims on future labor increase indefinitely. However, while principal may be rolled over, interest must be serviced, which in pratice means paid for by actual labor (which is thus not compensated); when the actual labor required to service interest exceeds the quantity of labor that can be provided without compensation a “Minsky moment” happens.

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Martin Bento 07.06.11 at 8:39 am

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.

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Martin Bento 07.06.11 at 9:01 am

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

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Martin Bento 07.06.11 at 9:14 am

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?

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Random Lurker 07.06.11 at 9:18 am

@Martin Bento 204
I think that you are mixing three separated (though related) concepts:
1) the LTV proper is actually an equilibrium theory of prices (theorized by Ricardo); thus the LTV states that the price of a book [phisical book] depends, “at equilibrium”, in a capitalist/free market world, on the quantity of labor needed to produce the same book. This means that, for example, a good book by Faulkner is likely to cost the same than a crappy book by another writer (but that, because of the higer “use value”, more Faulkner books would be produced). In facts, this is more or less what happens in reality; the same goes for Thor: you don’t pay more to see “better” movies, usually the price of a thicket is the same for all movies (since for movies most of the labor is in the distribution and is the same for all movies).

2) The idea that some labor creates things that are more valuable than other labor; but his refers to the “use value”, not to the “exchange value”: hence you are not really criticizing the LTV, unless you mean that the price of something is a function of its “use value”, something that the LTV negates (at equilibrium).

3) The “metaphisical” idea that all “value” is created by labor, which has strong political and moral undertones – but this is something very different from the LTV (since the idea that everithyng is created by labor doesn’t mean that the price of everithyng is usually, in the current world and not in some sort of socialist utopia, proportional to the amount of labor needed to produce it).

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Random Lurker 07.06.11 at 9:26 am

@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.

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Martin Bento 07.06.11 at 9:28 am

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.

And, SOV, suburbs? Seriously? Marx’s theory encompasses all of history, with its enormous variety of social forms, but is so brittle that slightly more disbursed housing throws the whole thing to hell?

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Martin Bento 07.06.11 at 9:33 am

“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.

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Martin Bento 07.06.11 at 9:53 am

RL

1) But this isn’t true at all for highly informational goods. Books by Faulkner do not sell as well as books much easier to write, but most books that are written, often with great effort, are not published at all. Even within the realm of Faulkner, he spent a long time on A Fable and six weeks on As I Lay Dying; the latter is generally considered a better novel.

As for Thor movies, I think they are mostly distributed digitally now, which means there is very little labor involved. Even when it is guys hauling film reels around, there is very little labor per reel, as one can fit a huge number of reels in a truck. And the LTV applies to capital goods as well, so one has to count the labor that went into all the computers and sets used to make the movie, mining the raw materials for those sets, and so on. No way is the majority of the labor in distribution, not a couple of orders of magnitude.

2) No, the idea is that the exchange value, as expressed in the profit to the capitalist, is not a function of the time put in. You’ll notice that others have attacked me for using examples like Thor and Mac ads, saying these things have little “real” value. *That* is an assertion about use value. I am asserting their value based on what they draw in exchange. Nike made money off the swoosh, therefore the swoosh has value. That is not an assertion about use value, but about exchange value.

3) IF the LTV does not mean that all exchange value is created by labor, as measured by the average labor time socially necessary to create that value (regardless of whether one wants to call this idea metaphysical), what does it mean?

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Peter T 07.06.11 at 9:54 am

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.

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Henri Vieuxtemps 07.06.11 at 10:22 am

Martin, I’m well aware of The Mythical Man-Month. It’s about efficiency, better ways to organize production. There’s also an ongoing effort (almost completed now, IMO) starting, probably, with Dijkstra in the 60s, to remove as much as possible any elements of craftsmanship from this particular industry and make it as routine as conveyor-belt assembly. Same as with movie-making and everything else. That’s technological progress, specialization, increased division of labor, all that stuff. That’s what makes capitalism possible.

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Random Lurker 07.06.11 at 10:47 am

@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.

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William Timberman 07.06.11 at 12:22 pm

Martin @ 204

I can see that irony is forced to play the ragged mendicant in this thread. Please excuse me for attempting to introduce it. I’m absolutely the last guy on Earth to argue the correctness or the fastidiousness of the LRV as an economic theory, or present myself as the arbiter of elegance where creativity is concerned. Perhaps Brecht, who wasn’t above a bit of irony himself, put it best: Für die gerechte Verteilung überirdischen Güter. Works for me.

Now as has been said above, when considering the LTV as a moral thesis, I think we’re on the trail of something. Look about you. Do all those flat-screen TVs and Anatolian getaways actually mean what Ben Bernanke –or Hillary Clinton, for that matter — are telling you that they mean? Or are Predator drones, Three-Gorges dams, and Monsanto soybeans more fitting symbols of the capitalism-that-Marx-didn’t-understand?

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William Timberman 07.06.11 at 12:27 pm

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

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William Timberman 07.06.11 at 12:30 pm

And …der überirdischen Güter…. while you’re at it. I shouldn’t attempt this stuff before coffee….

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hartal 07.06.11 at 1:26 pm

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.

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hartal 07.06.11 at 1:35 pm

As I wrote earlier:

“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.”

Now you seem to be saying that Marx assumed that value is a thing that workers create, when value is not such thing. But Marx says that value is a socially determined expenditure of labor time objectified in a thing. He does not say value is a thing; nor is the incorrectness of the thing assumption the focus of Cohen’s critique of the LTV. Please reread section 6 of Cohen’s piece to get his argument which really only takes one sentence to summarize.

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StevenAttewell 07.06.11 at 1:46 pm

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.

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hartal 07.06.11 at 1:58 pm

Steven,
Why are you stopping the process so early. Yes money is lent into existence; it also has to be paid back on time with interest. So what happens when we follow the process through? Moreover, look at the role of the gold sector in Vol II–creating the money to realize surplus value. The gold sector of the perfect size is a deus ex machina in Marx’s ideal schema, but the credit process can serve the same purpose. Moreover, given the US role as as the intl reserve currency, the US Fed is itself a gold mine. Marx does have an analysis of paper currency in relation to its value. Please just read Foley’s Understanding Capital or Adam’s Fallacy; Desai’s Marxian Economics or Marx’s Revenge.

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hartal 07.06.11 at 2:59 pm

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.

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Anonymous 07.06.11 at 3:10 pm

These Faulkner/Thor/Swoosh arguments sometimes sound like someone saying they’ve disproven Marx because a dollar bill takes as much time to make as a 100 dollar bill.

I don’t know that much about Marx or about economics, so maybe I’m missing the point, but doesn’t such a criticism imply the absurd view that the 100 dollar bill is worth more *only* because someone sees it that way? And that if we all got together and decided to see all of each others bills as 100 dollar bills, we’d all magically be rich?

If the argument is: the capitalist doesn’t have to overwork employees to increase capital, she just needs to convince consumers the product is worth more, doesn’t that suggest that the basis of value is not labor but a form of inflation? And wouldn’t an economic system based entirely in inflation be a practical impossibility (impossible to get off the ground, as opposed to self-destructive, as Marx says of capitalism)?

And does it really show that LTV is false, since convincing consumers the product is worth more is achieved through more labor?

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hartal 07.06.11 at 3:17 pm

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.

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john c. halasz 07.06.11 at 5:59 pm

Well, hartal @222-23 does a very clear job of explaining the issue. Glad he saved me the trouble. The reason though it comes up in the comments repeatedly is that JQ referenced it in the OP, as a refutation of Marx. The problem though was created by neo-classical critics of Marx, as showing that Marx’ overall theory was logically inconsistent therefore falsified. Marx did conduct such a “transformation” into cost-prices-of-production and asserted basic constraining equalities: total profit = total surplus value, total prices = total values, and total money rate-of- profit = total value rate-of-profit. And supposedly it was shown that all 3 equalities couldn’t hold in Marx transformation solution. However, the neo-classical critics read their own assumptions into Marx’ account. They re-normalized each notional production period as at equilibrium, which Marx didn’t do, and then accused Marx of the very double-counting that they had read in. A very simplified explanation. Workers are paid in advance during each production period and their hard-money wage approximates readily the value of their commodified labor-power. But in the course of that production period, some of those workers will produce new capital goods which will raise the technical productivity of some sectors. Hence the value-relations in the next production period will change, even as workers were paid in terms of the value-relations of the prior period. Now capitalist buy their means of production at cost-prices, not values, and the transformation of value-relations into cost-prices must not just be an output of the transformation, but also an input. So the neo-classicals took the output prices and plugged them in as input prices. But input and output prices can’t be the same in each period, since value-relations change across periods. So the neo-classicals took the output prices from a period and plugged them in as input prices for that same period. Making time run backwards. Marx’ account is temporal, historical and dynamic: non-ergodic. The neo-classicals models are static and ergodic, featuring a simultaneous determination of all prices and quantities, by means of equations, without really explaining the processes of price-formation, as Marx’ does, (save for Walras’ auctioneer), but rather postulating a prior their assumption of an equilibrium between supply and demand. The further claim is that cost-prices-of-production are the actual basis for the realization of capitalists’ profits and the investment decisions that they make, (which Marx agrees with), so, it is claimed, that labor-values are redundant and can be dropped out of consideration entirely, (like luminous ether), in favor of an theory based entirely on nominal prices. SO the apologetic function is achieve through mis-reading of making Marx entire account of the source of profits and the dynamics of capital accumulation disappear, without, of course, providing rather than assuming an alternative explanation.

If anyone is interested, an pretty good, more extended discussion of the issue can be found here, presumably by an “amateur”:

http://kapitalism101.wordpress.com/tag/transformation-problem/

http://kapitalism101.wordpress.com/transformation-math-supplement/

But, don’t worry your pretty little head over it, Phil. Chris B. has already taken the trouble for you.

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Martin Bento 07.06.11 at 6:09 pm

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.

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geo 07.06.11 at 6:29 pm

What unit is “value” measured in?

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hartal 07.06.11 at 6:34 pm

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.

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geo 07.06.11 at 6:39 pm

You’ve guessed my game, Hartal. I’m a mindless positivist. I think that if people (like you) are going to use phrases like “prices above their values” (from 222), you ought to be prepared for obvious questions like this.

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Phil 07.06.11 at 6:41 pm

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 ‘È ora, è ora potere a chi lavora!’ (‘Power to the workers!’) and ‘Più 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.”

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hartal 07.06.11 at 6:46 pm

I didn’t know your game; I didn’t even know that your comment was directed at me. That’s why I asked you to do us the courtesy of clarifying your point. My first answer is that in Marx’s transformation calculation the socially determined quantity of total unpaid labor time cannot be measured directly as it only becomes manifest as the sum of non-wage income. Surplus value is thus always monetarily expressed. This goes back to Marx’s analysis of the value form. Because value only becomes value if the labor time proved to have been socially necessary and since that requires for a commodity to have been exchanged, we only know the value of a commodity by way of another commodity, specifically by the physical quantity of the use value that serves as the universal equivalent for which the commodity in the relative form has been exchanged. The absurd way in which value is measured is part of Marx’s send up of bourgeois society.

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geo 07.06.11 at 6:54 pm

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?

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hartal 07.06.11 at 6:58 pm

Now second answer. Value is not quite an unobservable that would not meet positivist strictures for the simple fact that labor is quite directly observable. However the hypothesis that value is regulating economic phenomena through a complex process of mediation is confirmed by the system having the tendencies that Marx predicts on the basis of the law of value. In that sense, the law of value is a successful retroduction (which is an idea IIRC that goes back to Pierce). Postone speaks of the retroactive validation of Marx’s initial deduction of the law of value by the system having those tendencies that he predicted. There are less lofty reasons to accept the theory. As Desai notes, how else do we make sense of the total obsession with rising labor productivity or unit labor costs? And then there is also the evidence of price movements, which I already cited.

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hartal 07.06.11 at 6:59 pm

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

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geo 07.06.11 at 7:07 pm

labor is quite directly observable

Yes, but as you pointed out a moment ago, socially necessary labor is not directly observable, since you can never know whether what you’re observing is socially necessary without consulting what you call “the absurd way in which value is measured.”

As for “the system having the tendencies that Marx predicts on the basis of the law of value,” I believe there’s some as yet unresolved difference of opinion in these precincts about how predictively successful Marx’s theory has been, as others will perhaps want to point out.

And as for “how else do we make sense of [capitalists’] obsession with rising labor productivity or unit labor costs?”, is this really a question we can only answer by means of Marx’s value theory?

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geo 07.06.11 at 7:12 pm

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.

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john c. halasz 07.06.11 at 7:25 pm

@219:

“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.”

If this claim or citation is really accurate, the case is really bad. Cohen would then just be repeating the crude marginalist criticism of Marxian LTV. By marginalist ideas had been around long before they were first formalized in the 1870’s, and they are part of what Marx stigmatized as “vulgar political economy”, while extolling the greatness of Smith and Ricardo. It’s not as if Marx didn’t know his way around such ideas and didn’t already answer such criticisms. In general, it’s not a good idea to assume that Marx was stupid, rather than just mean, and to attribute to him crude mistakes. To the contrary, he wasn’t just highly intelligent and very broadly knowledgeable, (in particular having devoured just about all the economic literature available in his time), but he was a deeply systematic thinker and worked things out in extensive detail.

But someone spoke above about “believers” in Marx’ LTV. But it’s not a matter of believing it, as if it were some sort of revealed truth. Rather it’s a matter of defending and explaining the coherence of his theory, how it functions, and it’s explanatory aims and value. So that it can be a possible candidate for “truth” with respect to its relevant domain, and can be compared and criticized with other possible such candidates. I don’t think that anyone here is claiming that Marx can not or shouldn’t be open to criticism or that his 150-year-old work (against its own express intentions), represents some sort of timeless, infallible truth. It’s rather that, whether the topic is LTV or any other topic in the complex architectonic of his thought, criticism should be reasonably informed, based on some effort at accurate interpretation and “on the level”. It’s then that open discussion and fruitful criticisms can be made, ones that really “tell”, since I don’t think anyone here really thinks that Marxism worked out well and got everything right and is still ready to go, “just off the shelf”, and there’s nothing further to add. Rather, it’s because there’s been much water (and blood) under the bridge since, that we have these kinds of discussions. Marx, to my mind, is a classic, and he belongs prominently up on the shelf together with other such classics, such Aristotle, Vico, Rousseau, Kant, Hegel, -(…O.K. make up your own damn list!),- under Nietzsche’s aphorism that one can learn infinitely more from the errors of great minds than the truths of small minds.

Chis B @ 2o2:

“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. “

Er, “value” is not a “thing” at all, (which goes to the difference between embodied labor and extracted labor versions of LTV), but rather “value”, use-, exchange-, surplus-, is the basis of the commodity *form* at the root of the industrial capitalist mode of production. Things only acquire value insofar as they are imprinted by that form, not as they are in themselves. Further, one of the main thrusts and theses of “Capital” is that the eponymous hero of that epic, is not itself a thing, a sum of money or a set of machines, but rather an ensemble of social relations. (Capital is like the parodic doppelgaenger of Hegelian Geist, hence the prevalence of ghost metaphors). But I think you should already know this.

As I said, above (@174?), “value” is an “internal” systems concept and nothing has “value” outside the context of such a system. One of the implications is that the “same” thing can have different “value” in different economic systems. Say, an advanced industrial economy places a high value on some natural resource, but also has a limited supply, whereas an underdeveloped economy has a large supply, but only places a very limited value on it. So the two conflicting systems of value come to intersect with one another and get traded off against each other, though on unequal and incommensurable terms. (This is what Marx termed formal vs. real subsumption). Does such a case strike you as at all plausible, even empirically familiar?

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john c. halasz 07.06.11 at 8:44 pm

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.

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StevenAttewell 07.06.11 at 8:47 pm

Phil –
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.

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.

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Adrian Kelleher 07.06.11 at 9:01 pm

@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?

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geo 07.06.11 at 9:09 pm

JCH: they’re not just asking about worth or merit, nor calculating individual opportunity cost

I guess I would have said that’s exactly what they are doing.

workers produce more than they consume … [the] surplus then shows up as savings and investment

Does one need a value theory, or any theory, to state and explain these facts? If workers produce everything, and if there are non-workers who consume, then by definition workers produce more than they consume.

I really don’t believe you’re such a positivist

I know you mean this kindly, so I’ll take it in that spirit.

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ScentOfViolets 07.06.11 at 9:13 pm

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 ;-)

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ScentOfViolets 07.06.11 at 9:18 pm

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.

In other news, opinions on the shape of the Earth differ. It’s all very well to reject LTV. But one must have some sort of alternative formulation to replace it. Either that, or remain silent on any political prescriptive as applied to matters economic.

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Henri Vieuxtemps 07.06.11 at 9:18 pm

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?

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ScentOfViolets 07.06.11 at 9:27 pm

As something that is accurate, scientific, and motivating, I’d go with, “I’m being paid less than I was ten years ago, even though I’m working longer hours and am more productive during those hours. I’m being ripped off!”

Seems like a pretty effective use of LTV to me.

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Phil 07.06.11 at 9:38 pm

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.

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ScentOfViolets 07.06.11 at 10:02 pm

Ah, another thought occurs about LTV, namely the strategy of delegitimization. This one isn’t hard to figure out: Zhi Sixpack is constantly exhorted by his boss not to slack, that he’s expected to produce 2,000 complete Transformer toys each and every day or face the consequences, and there is a bonus for every lot of 200 toys each day over quota. Ask him if he thinks if he’s being paid for the value added colorless lumps of plastic.

But at the same time, you can’t justify keeping wages constant while simultaneously pushing for increased productivity. Not unless you can effectively discredit the LTV that is being used to (negatively) motivate them in the first place. Then you’ve got to come up with an elaborate apparatus, justified, stamped and certified by bona-fide scholars and intellectuals and “scientists” that explain why “the value of a commodity is just what someone is willing to pay for it.” Hence the inarticulate pooh-poohing of the application of the LTV to the lower orders, the rude mechanicals, while at the same time adopting it in spades for the more highly placed echelons of society.

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hartal 07.06.11 at 10:49 pm

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.

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john c. halasz 07.06.11 at 11:17 pm

@239:

Toilet paper as a refined product? What would we do without it, if it became terribly dear? I guess it would be back to leaves and sticks and those hard-to-remove underwear stains. I still remember my first encounter with European toilet paper as a kid, (and those Italian inverted-urinal “toilets” with the foot-steps placed strategically in the middle). Maybe sore asses explain a lot.

Clearly, Thomas Crapper’s contribution to the progress of civilization has been given short shrift, as evidenced by the failure to award him a knighthood!

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Adrian Kelleher 07.06.11 at 11:34 pm

@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.

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hartal 07.07.11 at 12:09 am

Geo suggests that I am being metaphysical; others think this discussion is technical or even obscure.

Yet it’s too important to dismiss so easily.

Money has a monopoly over direct exchangeability only because it alone represents social abstract labor time. In virtue of being or representing what else does money have the unique properties that it has? There are doubtless other good answers, but Marx has a powerful idea.

At the outset of Capital Marx does not set out to explain exchange ratios on the basis of value but the dazzling nature of money as a consequence of its having to come alone represent social abstract labor and every other commodity thus having to request humbly an exchange with it for it to be counted too as part of social labor and thus to have a claim on it.

In other words, Marx’s value theory should not be confused with a microeconomic theory of relative exchange ratios at any one time. For Marx, this is only aspect of the exchange process, and this quantitative aspect which is messy is hardly as interesting as the emergence, peculiarity and power of money.

Money does not exist in Walrasian general equilibrium theory or the Sraffian formalism, but it is the first task of economic theory to disclose its nature. Yet the valorization of money capital is the essence of capital, and it is the one-sided demand for money that engenders the general glut.

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

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hartal 07.07.11 at 12:43 am

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.

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geo 07.07.11 at 12:45 am

hartal: You ask in what units value is measured. That is a different question from what value is

If someone asks, “in what units is length measured?”, then obviously that is a different question from “what is length?” But if someone replies that “the length of a commodity is not measured directly,” but rather “length only becomes length if the labor time [used in the production of the commodity] proves to have been socially necessary … and since that requires for a commodity to have been exchanged, we only know the length of a commodity by way of another commodity,” inasmuch as “the length that commodities have—and they don’t have length 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 [matter] that serves as the universal equivalent,” I think I might be justified in suspecting metaphysics.

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

I would indeed like to make sense of what you wrote, but I have also most definitely read the first couple of chapters of Capital (and quite a bit more), several times, in a study group many years ago with a distinguished Marxist theorist. I didn’t understand him, and I don’t understand you, but not for lack of bothering to read a couple of chapters. Sentences of the form “If you can’t understand me, it’s because you won’t take the trouble” are probably best avoided unless you know who you’re talking to. Or even if you do.

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hartal 07.07.11 at 1:31 am

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.

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ScentOfViolets 07.07.11 at 3:33 am

But if someone replies that “the length of a commodity is not measured directly,” but rather “length only becomes length if the labor time [used in the production of the commodity] proves to have been socially necessary … and since that requires for a commodity to have been exchanged, we only know the length of a commodity by way of another commodity,” inasmuch as “the length that commodities have—and they don’t have length 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 [matter] that serves as the universal equivalent,” I think I might be justified in suspecting metaphysics.

That goes to how adversarial/rigorous the discussion is, doesn’t it? You can’t simultaneously demand that an explanation be clear, accurate and concise all at once for a lot (most) complicated phenomena now, can you? And if you give a short answer that is only jumped on by someone else as being inaccurate/incomplete, you can’t whine that they’re being too wordy when they actually take your criticisms seriously[1].

Maybe you should confab with the other guys here who are demanding this sort of rigor so that you can all get your ducks in a row.

[1]I am reminded of a “discussion” a while back with someone who had a beef with the Heisenberg uncertainty principle. When he pointed out that my explanation was “wrong”, and I went from discussing electrons and photons to talking about this mysterious thing called the “commutator”. But this led into more digression about things like inner products and and operators. At which point my interlocutor whined that I was trying to bamboozle him with math, and that fobbing him off with saying either take my word for it or study the subject for a year or three just wasn’t cutting it. And that – of course – my twisty ways only served to convince him of the essential rightness of his objections.

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john c. halasz 07.07.11 at 4:04 am

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.

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Robert 07.07.11 at 5:51 am

I did not find hartal @230 difficult to understand. When he writes of “the physical quantity of the use value that serves as the universal equivalent for which the commodity in the relative form has been exchanged”, he is talking about what is expressed concretely in our societies as dollars or euros or british pounds or …

I am now going to demonstrate that Sraffa can be read as solving Marx’s transformation problem. (I wish hartal to keep in mind, in his obiter dicta about Sraffa, that scholars are only starting to explore Sraffa’s unpublished notes. In particular, Christian Gehrke and Heinz D. Kurz have shown that Sraffa shares criticisms of Bortkiewicz not current in his day.)

What commodities can a dollar purchase in the U.S.? The answer notably fluctuates. The Consumer Price Index (CPI) is a crudely empirical way to look at such fluctuations. The CPI is not right standard to look at Marx. We want a standard for the value of money that relates closer to Marx’ theory.

One way to read Marx is as a description of an accounting scheme. Think of a yearly cycle of production, where the year is imposed by the period of agricultural harvests. The heterogeneous collection of commodities produced in the year is the result of the labor expended during the year with the pre-existing capital equipment, some of which is used up in the year. Net output results from gross output by subtracting out enough commodities to replace used-up capital goods such that production can continue on the same scale. Part of the net output can be accumulated to support expanded production; part can be consumed by the workers who produced it; and part can be consumed by capitalists, landlords, etc. out of the surplus.

Marx, roughly and abstracting from realization problems, equates the value of this net output to the labor expended to produce it. As A. Smith puts it, “The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes…” Volume 1 of Capital presents a macroeconomic model. Volume 3, in his notes on the so-called transformation problem, investigates difficulties in simultaneously maintaining this equality and other equalities, such as between the value of the net product not paid out in wages (“surplus value”) and the amount of unpaid labor expended in the annual cycle.

Sraffa showed, as is illustrated in Table 8 in my exposition linked to by my name above, that a standard composite commodity arises from the relations of production for which Marx’s equalities are maintained. (The United States Bureau of Economic Analysis (BEA) provides data to perform these sorts of calculations. I’m not convinced I correctly interpreted the National Income and Product Accounts the last time I attempted this arithmetic.) The standard commodity can be used to convert between monetary expressions of value and labor time. And Marx’s equalities hold true in producing the standard commodity.

I find this descriptive for actually existing capitalist economies. Above I and others have noted how some such theory of value directs one’s attention to interesting aspects of empirical reality.

In the linked exposition, I do have a very little bit of algebra. A full exposition would go into the theory of eigenvalues and eigenvectors for non-negative matrices. John Von Neumann developed the mathematics of linear programming for this type of approach in one of his excursions into economics.

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Henri Vieuxtemps 07.07.11 at 6:05 am

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

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Martin Bento 07.07.11 at 9:55 am

“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.”

No, I said that the economic value of ideas cannot be reduced to the average time necessary to have or develop them. Saying that the value of creativity cannot be measured by time is not the same as saying time cannot affect creativity. Responding to a statement by inserting a completely different one composed of the same elements is the pretty good indication that you have no response to the original statement.

“exception which proves the rule”

There is nothing exceptional in the modern economy about value accruing from branding. Most of the items in the supermarket have brands and are priced higher than generics.

“Marx made plentiful “observations””

You seem to think you can impose a ground rule of debate that we cannot say Marx was wrong about something he addressed because Marx was so brilliant. Marx’s brilliance has to be established by examination of his ideas, so the minute you defend his ideas by invoking his brilliance, you have fallen into tautology.

“particular instances don’t invalidate a general rule.””

So the LTV is just a generalization? And so are its implications? Capitalists gain profit by exploiting workers – this is just usually true, according to Marx, nothing something that is categorically the case under Capitalism? This is the softest Marxism I have ever encountered.

“Does MB think that the “law of one price”, (a neo-classical saw), is automatically invalidated by contrary instances”

You keep attributing to me a defense of neo-classical economics, but I have not made one. I am being purely destructive here.

“No, persisting discrepancies usually are thought to require investigation, given the “law” in question is not being “observed””

First one has to prove the law. And I am investigating them and finding that the law is inadequate to account for them. You are trying to shunt them aside as irrelevant. They are, however, becoming more and more what is driving economic development in our time.

“based on the “creativity” of the “new class”, any different from the same-old/same-ole”

I said nothing about a new class. I also said that creativity was involved to some degree in almost all labor. That the economy is driven more by abstract information than it was in Marx’s day I think obvious, but we can debate that if you like.

“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”

Actually, I said in my very first comment that one could object that Marx was analyzing the production and exchange of commodities, and some or all (depending on how tightly you want to define “commodity”) of my examples were not commodities. But the body of things I brought up collectively represent a great deal of what contemporary Capitalism does. If one wants to say that Marxism is a theory of the economy of staples and, perhaps, t-shirts, fine, but then it can no longer claim to be a comprehensive theory of Capitalism.

“could constitute cases that refute any “law of averages””

As I said, some of my examples cannot be replicated, and there can be no law of averages for unique occurrences. But let’s look at another example: how does labor determine the economic value of the Google search engine? Is it really a function of the average programmer time to code such a thing? How many failed dot coms did just as much coding to no avail? The main value was the concept and having it first. Microsoft has duplicated the concept and put far more money in, but it is getting nowhere. And this is not exceptional. This is how software, one of the key industries of our time, works.

“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?”

I never said creativity operated independently of socio-economic power, only that the value it produced could not be reduced to the time typically required for producing such a thing. You’re making stuff up.

“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 now we’re getting into Cui Bono arguments that are completely irrelevant. Keep your eye on the ball. We’re analyzing what value is, how it is created, and how it can or should be measured. Who gets the benefit is another question. BTW, I explicitly said creativity was involved in almost all labor, you’re the one going on about “uncreative” workers. If they improve the process, they are being creative. Happens all the time. Won’t necessarily be compensated for it. Inventors of Superman got ripped off too I think.

“And to what public good is it to be distributed? “

You accuse me of having ulterior motives and of being wrong is holding that Marx’s theory was motivated by his normative commitments, but here you are attacking my analysis on the basis of what you hold to be its normative implications that you don’t favor, though I did not draw such implications, and you have not demonstrated that they necessarily follow. I did suggest that intellectual labor could be best publicly funded and put in the public domain. I didn’t elaborate because it was tangential, and I am actually trying to stick to analysis.

“Why is all this to be accorded to the credit of basically speculative capital and why should “we” trust its “instincts”?”

I give up. Why? I never said it should be so accredited, nor that such instincts should be trusted. Your homunculus is acting up again.

“Er, yes, the rational/explanatory content of Marx’ work is no better than phrenology. ”

Er, no. Any comparison will have points of difference and similarity and you have to see what is relevant, which in this case is pretty explicit, but you have missed it. Phrenology was defeated by purely destructive criticism, and, if one accepts this as legitimate, one has to accept purely destructive criticism. Even directed as so august a figure as Marx. Since you claim to accept purely destructive criticism, I take it there is no actual dispute here, just your harrumphing as seeing Marx forced to slum with the lowly.

“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)?”

This is purely homuculur. I never said that present perspective was automatically superior to past perspective. I spoke dismissively of phrenology. If you differ, feel free to argue your case. Nor did I advocate forgetfulness of the past.

Then you accuse me of advocating theories I did not even mention without providing any argument whatsoever that they are implicit in what I said.

“There’s really no need to tie political liberalism to economic liberalism”

Glad to hear that, since I didn’t.

“Nor even to associate economic liberalism with marginalist thinking”

So why do you keep dragging marginalist thinking into this? Or economic liberalism for that matter? I said I think intellectual work could function best by being publicly funded and not being treated as property. That’s hardly a classic Milton Friedman or Gary Becker position. Nor is it marginalist.

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Random Lurker 07.07.11 at 2:50 pm

@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”.

In “Das Kapital”, that not coincidentially was titled “Das Kapital” and not “Das Labor Theory of Value”, Marx argues that:
1) Technologic improvements mean almost always economies of scale, so that, with the advancement of technology, people, in order to work, had to work increasingly in factories and not at home and alone;
2) But factories are owned by privates, who employ workers in order to have a profit. The profit means that workers have to produce more than they can buy. The workers have to agree to those unfavourable conditions because they need the factories (the “means of mass production”) in order to work.
3) Hence all profits are a form of “rent on anticipated capital” that has been used to buy the factory, the materials etc., and as such are ethically not justified.

As you can see, the three point never mention the LTV. Marx made his points through economic discussion,and since the prevailing economic theory of the time was ricardian LTV, Marx used the LTV; also, in order to understand some of Marx’s economic theories, which are stated through a LTV-thinking, we have to understand or accept the LTV. But Marx’s theory was not the LTV, but the theory of capital accumulation/crises, that is a different thing.

[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

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Progressive Libertarian 07.07.11 at 3:20 pm

Phil [202]

“All capitalists are in the structural position of exploiting labour by paying the workers who produce their wealth as little as they can. The point of the LTV is that it’s both a critique and a description.

As for how the LTV fails, I’m genuinely confused. (Nobody seems to be suggesting that value comes from anywhere else, for one thing.) The transformation problem seems to play a big part here – could someone summarise it without using algebra?”

Hate to admit it, but I spent the last two days coming up (in part) with an answer to a misreading of your first sentence. (Something along the lines of “All X are rarely Y in the real world of human interaction. This may still apply to your statement, but since I *somehow* skipped over the “structurally in the position” part of it on first reading(s), that will have to wait for another time.)

The other part of my thinking time was concerning the statement “(Nobody seems to be suggesting that value comes from anywhere else [other than LTV], for one thing.)”

Actually, I’m pretty sure I read several folks suggesting that, and if not, I would strongly suggest that is the heart of the controversy.

Unfortunately, though, I find precious little discussion of what the owners of capital contribute. The only discussion of risk I found (searching last evening) was to say that Marx certainly knew about it, and didn’t include it. Very little discussion of what I think of as the “blood, sweat and tears” that many owners of capital contribute to the production process.

I’m curious, without personalizing the discussion too much, how many of the “(former) college boys [and women]” on this thread have actually contributed their own blood, sweat and tears as a capitalist. I certainly haven’t. The closest I’ve come to being a capitalist are: a lemonade stand and investing my retirement funds.

On the other hand, my experience as a wage slave for over 40 years, and my little bit of study of business, have given me some knowledge of the real world of capitalism.

Along with risk, which is often glorified and is very difficult to value, owners contribute savings that make it possible to bring the goods and people together to do the work. To use the (not very modern or sophisticated, IMHO) shirt production example:

* unless someone saves to create the funds that make it possible bring together the cloth, machinery and other stuff with the people and know-how, there would be no shirts for the capitalist and laborers to be paid for.

To bring it a bit closer to home for me, I worked for a restaurant owner through a big part of my “college boy” years, and she brought money she had saved both through labor and inheritance, knowledge of the restaurant business (early part of Berkeley’s “gourmet ghetto” in some since), love for food, ability to manage and hire good managers and laborers, and the willingness to risk her savings in a very difficult business. (Tip your waiters and waitresses well, generally even the worst of them work their butts off.)

And these are only the things I know of as someone who *never* owned any business, and wouldn’t own a restaurant unless my life depended on it. And a restaurant is a far simpler model than many other capitalist ventures.

I may agree with Phil that “capitalists are in the structural position of exploiting labour,” and certainly do to some extent, however, it does none of us any good to propound economic theories that don’t do their best to reflect the real world.

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hartal 07.07.11 at 3:24 pm

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

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geo 07.07.11 at 4:03 pm

Henri @258: within the LTV approach value has to be measured in hours of labor

I thought it had to be measured in hours of socially necessary labor, which is a very different kettle of fish.

hartal @262: I have my explanations for their behavior

You mean apart from not having bothered to read the first couple of chapters of Capital? Speculating (or even, as in this case, demonstratively refusing to speculate) about the motives of your ideological opponents is a dead end, comrade. Best to assume that we’re all dumbly plodding along by such light as we have, however inadequate.

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Henri Vieuxtemps 07.07.11 at 4:11 pm

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?

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bianca steele 07.07.11 at 4:14 pm

The main value was the concept and having it first.

So the CEO (can it be the Director of Engineering? the Chairman of the Board? The primary funder?) has a concept and the technical staff exercise themselves to comprehend his concept and put it into some sort of physical form? Sounds to me like you could end up with some funny results if you tried to do this instead of actually doing your own work. And it does not help at all if one decides the concept should have been “public property,” in the first place,

Google is a poor example. Few even innovative companies are founded on the basis of a Ph.D. dissertation. I do hope we are not discussing the history of innovation using Business Week articles as our main source.

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Random Lurker 07.07.11 at 4:16 pm

@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.

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Walt 07.07.11 at 5:01 pm

Phil, I’ve fallen behind on the thread, but I appreciate your answer to my question. My impression of the goal of the (Marxian) labor theory of value is that it’s shooting for something more precise, so that Marx’ premises can be shown to be necessary facts about capitalism, that profits must come from exploitation, and that this inevitably leads to crises.

The fact that profits come from exploitation is not particularly tied to the labor theory of value. In Marx, capitalists make money without doing anything useful. If you assume that capitalists do something useful that goes into the production function, and that “profits” are wages for that useful action, then there’s no exploitation. Another version of this argument (and I think this is specifically Bohm-Bawerk’s) is that the useful action performed by capitalists is just delaying consumption. If I give you food today under the assumption that you give me slightly more food tomorrow, that’s not exploitation. Now if capitalists make more money than can be explained by either of these useful services, then that’s exploitation, but you don’t need the labor theory of value to make this point.

On LTV itself, the main issue seems to be that different industries will have different productivities, which seems to be the first objection everyone has to the LTV. At the same time, classically it was held that rates of return should be the same across industries. As far as I understand, Marx has a two-part response — one, that exploitation is clearly visible in aggregate, that aggregate profits represent the aggregate expropriation of surplus value. Two, money prices function to distribute these aggregate profits to equalize rates of returns across industries (the transformation problem).

I’ve now tried to familiarize myself with two solutions to this mentioned on this thread — the TSSI (temporal single-system interpretation), and Sraffa’s solution. These both seem to suffer from a technical objection that John makes in his original post, that they rely on constant coefficient technologies. (The descriptions of TSSI that I’ve found on the web seem to rely on this, though this could be a limitation of the descriptions. Samuelson claims in his New Palgrave article that Sraffa’s solution requires constant coefficients.) Constant coefficients means that there’s no choice of techniques in making goods. For example, every car requires so much metal, so much plastic, etc., and there’s no option of using more metal and less plastic. This doesn’t seem very realistic, and the introduction of new techniques seems like the hallmark of capitalist production.

Also, the two different solutions don’t seem to be compatible, so it’s not clear which is “the” solution. Sraffa’s solution is an equilibrium solution where simultaneously inputs are fed into outputs, so it has a kind of timeless quality to it. In Robert’s example, value is invariant through time. In TSSI, everything changes through time, including the value of goods.

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geo 07.07.11 at 5:05 pm

Henri: What’s so complicated here?

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

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Martin Bento 07.07.11 at 8:21 pm

Random lurker at #260

You cannot just say that anything that does not follow the principles you lay out is “an excepttion” due to the fact that equilibrium is never achieved. That leaves you no evidentiary standards at all. You have to show how the effect can be achieved as a disequilibrium within your model. Marx did this for example is arguing how prices can vary from value in reaction to local shortages. Explain to me how the value of the Google search engine is a function of the average time to code such a thing, save for some failure to reach equilibrium. For beginners, you have to show how it would even be possible for the value to be so determined.

Secondly, saying the LTV has implications does not necessarily mean normative implications: logical implications exist too. Among the implications of the LTV, in Marx’s version since that is the topic and there are some differences from Ricardo, is that a necessary condition of Capitalist profit is that workers produce an abstract exchange value in excess of the abstract value of what they are paid. One could make a similar argument just on price – the workers are paid less than the monetary value of what they produce – but this is not the argument Marx made, because he does not think price is a direct reflection of exchange value though it tends in that direction (in contemporary terms, we might call Marxian value an attractor for price). So the LTV is necessary to Marx’s account of profit and of exploitation. Other accounts are possible, but the LTV is necessary to Marx’s account.

You say the LTV in Marx has no normative implications, then pursue a chain of logic about production to an ethical ann implicitly normative conclusion. No, you did not type the words “labor theory of value” but you did say, as the crucial pivot of your argument:

“The profit means that workers have to produce more than they can buy. ”

Since what they produce and what they buy are unlike in kind, (differing use values, if you like) one has to have a way of measuring them by a common dominator to make this argument. Marx could have used price, but, as mentioned above, deliberately did not. What he used was the LTV, which is why the LTV is essential to this line of argument.

I never said Marx’s theory was solely the LTV, but it is essential to his argument, particularly to the point that Capitalism is intrinsically based on extraction of surplus value from labor.

On 214, I haven’t said anything about commodity fetish in Marx’s sense at all, other than pointing out that something Henri said didn’t qualify.

Also this:
“” 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.

So is the value of the swoosh a direct function of the average labor-time necessary to create cultural icons, and the value of Thor of that necessary to create superhero movies? The theory asserts much more than “look at that value! Labor was involved!”

“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.”

By my count, I’ve mentioned the “average labor time socially necessary” or close variants 11 times in this thread, so I don’t know why you think I am hung up on actual work.

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Henri Vieuxtemps 07.07.11 at 8:36 pm

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.

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Martin Bento 07.07.11 at 8:54 pm

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? If Marx’s theory means only that “work creates value”, it is trivial. It means much more than that, of course, but you are ignoring what it actually means when you claim that executives justifying their salaries by the claimed value of their work are in any way using or endorsing the LTV. Indeed, if they claim, as you said, that people’s salaries, their own and others’, are justified by the fact that the market produced them, they are asserting something Marx’s LTV directly denies. The LTV would clearly state they do not deserve those salaries, so their theory of value, if they have one, must be something else, and that something else will. involve their labor in some form, but that doesn’t make it the LTV.

“I’m being paid less than I was ten years ago, even though I’m working longer hours and am more productive during those hours. I’m being ripped off!”

Right, so if we manage to get Jamie Dimon’s salary halved, and he invokes this, he will have a point, right? Look, it’s one thing to decry the evils we see around us, quite another to say that they necessarily imply a specific analysis simply by virtue of being unjust. Saying that the LVT is true, because some people are overpaid, dammit – and don’t even admit they’re overpaid! -and others underpaid is table-thumping, not argument.

Saying that Marx’s LTV must be true if no other sources of value can be found is false, because the claims of the LTV go well beyond this to measurement.

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ScentOfViolets 07.07.11 at 9:34 pm

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?

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duaneg 07.07.11 at 9:40 pm

Totally OT, but I cannot let this pass:

There’s also an ongoing effort (almost completed now, IMO) starting, probably, with Dijkstra in the 60s, to remove as much as possible any elements of craftsmanship from [the software] industry and make it as routine as conveyor-belt assembly

First, IMO and experience, this effort, to whatever extent it existed, has been abandoned as a total failure. I’ve been in the industry for around 15 years now and have heard it seriously espoused precisely once. Needless to say, that person was utterly incompetent and their company failed in short order.

Second, how can you possibly implicate Dijkstra, of all people, in this foolishness? Edsger “Elegance is not a dispensable luxury but a factor that decides between success and failure” Dijkstra?

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ScentOfViolets 07.07.11 at 9:42 pm

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 ;-)

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Robert 07.07.11 at 10:42 pm

I think I found clear the posts “geo” cites @268. They clearly relate to the start of Volume I of Capital.

Walt @267 writes: “Sraffa’s solution … seem[s] to suffer from a technical objection that John makes in his original post, that [it] rel[ies] on constant coefficient technologies. “

Sraffa, of course, explicitly denies this, “No changes in output and (at any rate in Parts I and II) no changes in proportions in which different means of production are used by an industry are considered, so that no question arises as to the variation or constancy of returns. This investigation is concerned exclusively with such properties of an economic system as do not depend on changes in the scale of production or in the proportions of ‘factors’.” A large literature exists on this issue, including much work disputing Samuelson’s opinion.

Walt further writes: “Constant coefficients means that there’s no choice of techniques in making goods.” Part III in Sraffa’s book is entitled “Switch in Methods of Production”.

Walt also writes, “In Robert’s example, value is invariant through time.” I don’t know how this claim is warranted since I considered a single production period.

I find the remainder of Walt’s comment equally accurate.

Marx explains why the vulgar cannot be expected to understand.

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john c. halasz 07.07.11 at 11:58 pm

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.

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Martin Bento 07.08.11 at 2:23 am

SOV, I’m sorry if you feel I’ve misrepresented you. Let’s look a little closer at what you said.

The overpaid shmoe is making the following claims:

1) There is some value to his labor.
2) His pay should reflect that value.
3)His pay does reflect that value.
4)His uber-skills are part or all of why his that value justifies that pay (this one actually superfluous, but I’m including for a complete rendering of what you said).

Marx’s version of the LTV makes this claim:

The value produced by labor is equal to the average labor time socially necessary to produce the result.

If Mr. Overpaid Shmoe is using the LTV, he has to be saying something that at least implies this. Which of the four claims above asserts that value is a function of average socially-necessary time necessary to accomplish the end? If Mr. Smoe is not saying that, he is not endorsing the LTV. Simply saying that someone claims that someone’s labor, for example his own, has some specified value is not the LTV, as the LTV is a theory of how that value is determined. If the LTV merely stated that labor produces value, it would be trivial. If it said labor produces value and should be compensated according to that value, without any assertions about how to determine that value, it would be only a bit less trivial. If Marx had stopped at either of these points, we would not be discussing him now. But that’s all the can be supported from the shmoe’s claims.

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

This is another version of the same thing. “I deserve all the money I get because I’m brilliant” is not a Marxian analysis. Whether that would be true in a Marxian view would depend on where the speaker stood in the system of production.

Then this:

“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.”

Now, you said Shmoe was overpaid, so presumably the salary-setting mechanism, probably the job market, though there are other mechanisms, is rewarding him at some rate greater than you consider appropriate. So the salary shmoe is justifying applied to himself is that produced by the market. These other people are getting a low salary, presumably also because of the market. So shmoe is really asserting that the market is producing accurate measurements of value, both in his case and that of the other people. This is perfectly consistent, and it doesn’t amount to the LTV at all.

On the question of tone, you wrote:

““I’m being paid less than I was ten years ago, even though I’m working longer hours and am more productive during those hours. I’m being ripped off!”

Seems like a pretty effective use of LTV to me.”

Why would we assume this person was not overpaid before? You obviously accept the notion that people can be overpaid because you said Shmoe was. This is an example of why I attribute your argument to stridency of tone. We cannot possibly evaluate this without further information, and you’re basically asking us to make a lot of assumptions about why this person’s salary declined, what sort of people are overpaid, etc. But you’re not actually arguing those things, you’re figuring (I think) that we all know the score here, we all know who is screwing and who is getting screwed, so you can express it in shorthand. But you can ‘t argue in this kind of shorthand, because the actual logic is part of what is excised. You’ve given me no reason to believe shmoe does or does not deserve his money other than your assertion that he is overpaid. On the basis of that assertion I suppose – since I see no other basis – I’m supposed to make a variety of assumptions about where shmoe fits in the order of things. But that’s not arguing.

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Martin Bento 07.08.11 at 2:46 am

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.

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Martin Bento 07.08.11 at 2:55 am

Bianca, the people who have the ideas are typically the founders, who often do not end up as CEOs. Google is not atypical at all. The standard Silicon Valley pattern is: someone has an idea and puts some work in to show they can pull it off and it will work. They go to Menlo Park to try to get some angel and/or VC money. If they make good progress, they start to hire more regular business type people, which may include bringing someone in as CEO. Google’s CEO until recently, Eric Schmidt, was such a brought-in person. It’s that a CEO has an idea, it’s that someone has an idea, and he can be the CEO if he wants. The important thing is making the company he is CEO of worth a damn.

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Martin Bento 07.08.11 at 4:00 am

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

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John Quiggin 07.08.11 at 5:03 am

SoV @194 I don’t think Marx was as systematically wrong as Freud, but he was wrong about enough crucial things that he has to be viewed pretty much as “interesting guy, asked the right questions, got the ball rolling …” but not as the founder of a systematic economic theory that is of any interest today. And you’re quite right – that is how I am looking at him in these posts.

Among the crucial things that have to be either ignored or reinterpreted/read down into insignificance if you want to remain as an orthodox Marxist
* the immiseration of the working class
* the disappearance of the petit bourgeoisie
* the declining rate of profit
* steadily increasing severity of crises (the current one is pretty bad, but not comparable to the Great Depression) and last but not least;
* the imminent prospect of proletarian revolution

282

John Quiggin 07.08.11 at 5:11 am

Robert @275 Sraffa certainly denies that he has a fixed-proportions model, but on the basis of the claim that the fixed proportions technology he presents is an adequate local approximation for his “Prelude to a Critique …”, with the implication that a more general model was on the way. That was 50 years ago, and, AFAIK, the general model is no closer now than it was then. All the Sraffian stuff I see (admittedly not a lot) still has fixed-proportions technology.

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Henri Vieuxtemps 07.08.11 at 6:15 am

Duaneg, how can you say it’s failed, considering all those software factories in Bangalore and elsewhere? Please. And yes, Dijkstra, structural, modular programming, that was the beginning of it becoming a capitalist industry, IMO. We’ll have to agree to disagree here.

Martin, a pill is a commodity, it can be exchanged for toilet paper or anything else. But formula for a drug is not a commodity, no matter how much money is made there. When you own the patent for a formula, you collect rent, as if you owned a piece of land.

We are still material beings, and what want, need, and use is tangible objects. There is software, yes, but you still can’t comment here without a physical laptop. You don’t need to know software, any more than you need to know about the oil pump in your car, how it was invented, improved, patented, etc.

284

Walt 07.08.11 at 6:34 am

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.

285

john c. halasz 07.08.11 at 6:43 am

JQ @282:

1) That happens in the early phases, as craft production is destroyed and peasants are driven of the land. (No small sufferings. Nothing to be sneezed at). Afterwards, you have to pay attention to the difference between relative and absolute immiseration, with its counterpart, the distinction between relative and absolute surplus-value. The “iron law of wages”, i.e. the inverse proportion in the distribution of the surplus-product, remains in force through thick and thin, but the realization of capital actually depends in significant measure on wage-based demand, and thus conditions for workers and their wages will improve, so long as capital itself is booming. But that doesn’t abolish, of itself, that “iron law. “Absolute immerseration” then takes hold only as a result of crises.

2) no such disappearance is postulated, though the tendency of that stratum to identify with their “betters”, even as they are economically captured and reduced by them is to be noted. A better tack is to not Marx’ over-estimation of the rate at which agriculture would become “industrialize”, since that sphere constitutes a buffer against the monetary/commodity-producing economy, even if the marginal productivity of agricultural labor is 0, or IOW mere subsistence and survival. On the other hand, the working-class doesn’t have to bee a demographic majority to be a “leading element”. Class alliances are always possible, but I think Marx was far more relying on the tendency toward the concentration of capital than on simple majorities in his prognostication.

3) That concerns profits-from-production, and the wage-and-profit income to be derived from them. And it’s a tendency, not a deterministic law, so it is worth asking both what are the countervailing tendencies and what are the “necessary” measures taken to maintain profits or better the rate-of-profit at the expense of more general social welfare or human and natural ends.

4) It’s easy enough sitting on one’s fat ass within the cocoon of relative prosperity to say that crises are not so severe, but that just ignores the extent to which they’ve been displaced onto others, (shock therapy in Russia?), and have thereby been postponed. Looks to me like chickens coming home to roost.

5) I think old Marx was expecting the self-organization of a working-class revolutionary movement to take hold and develop via crises and self-improvement, a collective Bildung, within a few generations after his death, say, 1930. At levels of technical development far below what has been attained today, for better and for worse. But, of course, there were more than a few things he failed to foresee, such as world wars, the rise of fascism and the atomic bomb. I think the entry point for criticism, which is where I would start the “deconstruction” of Marx, is his failure to provide an account of the state and the political domain, (which is endemic, since he began by critiquing/repudiating Hegel’s account).

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john c. halasz 07.08.11 at 7:06 am

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”?

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Random Lurker 07.08.11 at 7:22 am

@Martin Bento 269
So is the value of the swoosh a direct function of the average labor-time necessary to create cultural icons, and the value of Thor of that necessary to create superhero movies?
In my opinion, yes – in a greater detail, the price of the swoosh is directly proportional to the labour time etc.

but this is not the argument Marx made, because he does not think price is a direct reflection of exchange value though it tends in that direction
I think that the “exchange value” is exactly the price “at equilibrium”, nothing more, nothing less.

Also, on the normative/descriptive point, Marx for sure makes a lot of ethical considerations (normative), but this doesn’t mean that the LTV in itself is normative: for example, one could create an ethical theory from darwinism, even if in itself darwinism is descriptive and not normative.

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Walt 07.08.11 at 7:46 am

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.

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John Quiggin 07.08.11 at 8:12 am

“It’s easy enough sitting on one’s fat ass within the cocoon of relative prosperity to say that crises are not so severe”

Umm, so are you going to claim that the current crisis is worse than the Great Depression? If not, why the cheap abuse?

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john c. halasz 07.08.11 at 8:46 am

@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?

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Robert 07.08.11 at 9:04 am

I take it Walt is unaware that “Vulgar political economy” has a technical meaning. Whatever interactions I have had with Walt have not made much of an impression on me.

John Quiggin @282 seems odd. I don’t see how one can say that Sraffa says he has a “local approximation”.

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Martin Bento 07.08.11 at 9:19 am

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.

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Henri Vieuxtemps 07.08.11 at 9:51 am

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

I think that’s right. It’s not normative, but this is an approach, an angle that helps you understand social mechanisms, and reach normative conclusions, the sort of conclusions StevenAttewell was talking about upthread. You can measure value in dollars, of course, and it could be more useful for other purposes.

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