Peter Cooper — Developments in Value Theory

Previously I have discussed how Marx’s well known aggregate equalities have been shown to hold under single-system interpretations of his theory of value. In the July 2018 edition of the Cambridge Journal of Economics, there is a noteworthy paper by Ian Wright that reconciles the classical labor theory of value with Marx’s prices of production within a dual-system framework. As with single-system interpretations, Marx’s equalities also hold under Wright’s approach. However, they do so in a different way. Here, I want to offer some thoughts on the difference.

Why is this important now other than as a matter of historical interest? British classical economists Smith and Ricardo raise the issue of economics rent and rent extraction, which would have been obvious to all in a recently post-feudal society and nascent capitalism. Marx noticed the similarity and attempted to show how in a capitalist system, economic rent is extracted chiefly from labor rather than land rent as it had been in feudalism, although the basis of rent under feudalism was also the making of land productive through labor. The factory became the new manor or landed estate.

A major thrust in the development of neoclassical economics was discrediting this idea based on marginalism, which purported to show that both capital and labor received their marginal productivity in terms of "just deserts" based on contribution. This is key because economic rent is unearned and simply a privilege of ownership.

Almost entire economic issue being debated now, which is of course constituted of many related issues, inequality in particular, reduces to economic rent and the many ways it is extracted as a privilege of ownership and control, control resulting in market power. The entire rationale for capitalism is assuming that free markets, free trade, and free flow of capital are based on symmetric power as long as government does not influence the market, together with assuming that ownership of the means of production is financially and economically neutral (no privilege involved if the state stays out of the picture). Thus, the attempt on the right to drown the state in the bathtub (Grover Norquist).

This is the basis of economic liberalism that is really bourgeois liberalism, the "bourgeoisie" being the owners of the means of production under capitalism, comparable to the aristocracy and landed gentry under feudalism.

Marx argued that just as land ownership as ownership of the means of production conveyed privilege under feudalism; so too, ownership of the means of production under capitalism also conveys privilege. There is therefore no "naturally" free market under capitalism, and this is especially evident in the labor market, as Marx sought to show. Thus, replacement of the labor theory of value with the neoclassical theory of marginalism became a high priority. Marx and his followers were excluded and supporters of marginalism were supported by directing a (small) portion of the economic rent extracted to them, along with social benefits for their political contributions.

We need to stop arguing over whether Marx was "right," or "wrong," and instead look at his work (along with his close collaborator Engels) in terms of useful contributions for the present impasse humanity faces. Nor should this be limited to Marx and Engels, but also should include subsequent Marxists and Marxians. It is rich field and needs to be mined intellectually. To dismiss it out of hand is simply bias based on propaganda.

This post requires some previous knowledge of the debate. Peter Cooper has quite a few posts on Marxism, and Marxism and MMT.

heteconomist
Developments in Value Theory
Peter Cooper