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

More Marx, socialism, and ecology

MR Online
Marx and Metabolism: lost in translation?

Ian Angus | editor of Climate and Capitalism

MR Online
On the eve of Venezuela’s elections, the U.S. empire isn’t sitting idly by

Editorial

MR Online
Ten Marxist ideas that define the 21st century
Sergio Alejandro Gómez

Econospeak
The So-called Labour Fund

Sandwichman

Radical Political Economy

Capitalism and the Expropriation of Nature: The Strategic Discourse of Ecosocialism

John Bellamy Foster

Naked Capitalism

To Reform Capitalism, Look to Marx

Frank Block | Research Professor of Sociology at the University of California, Davis

Michael Löwy — Marx’s ecology: recovered legacy

While mainstream ecological theory has been dismissive of Karl Marx, serious research in recent decades has recovered some of his very important insights on ecological issues. The pioneers have been James O’Connor and the journal Capitalism, Nature and Socialism—a tradition continued by Joel Kovel—but the most systematic and thorough investigations on Marx’s ecological views are those of John Bellamy Foster and his friends from Monthly Review.

Many ecologists accuse Marx of “productivism.” Is this accusation justified? No, insofar as nobody denounced as much as Marx the capitalist logic of production for production: the accumulation of capital, wealth and commodities as an aim in itself.
The fundamental idea of a socialist economy—contrary to its miserable bureaucratic caricatures—is one of producing use-values, goods which are necessary for the satisfaction of human needs. Moreover, the main importance of technical progress for Marx was not the infinite growth of goods (“having”) but the reduction of the labour journey and the increase of free time (“being”).

In the being-doing-having model, being is more important than doing. Doing follows from being. Doing is more than having in that having is a by-product of doing. Happiness is a property of being that accrues from unfolding one's potential as a person (human being) and as an individual (particular personality).

In the consumerist model, having in most important, and doing is the sine qua non of having. Being largely irrelevant in this model, so genuine happiness is precluded. This results in alienation.

In contemporary capitalism, based on the consumer economy, consumerism replaces the increased leisure made available by increases in productivity. Freedom gets traded for trinkets, promoted by advertising, so that firms can maintain profits. One result of consumerism in addition to alienation is ecological degradation.

MROnline
Marx’s ecology: recovered legacy

Michael Löwy | emeritus research director in social sciences at the CNRS (French National Center of Scientific Research) and lectures at the École des hautes études en sciences sociales (EHESS; Paris, France)

Peter Cooper — The Strange Capitalist Embrace of Austerity Viewed in Terms of Marx’s Falling Profit-Rate Law

In this sense, Marx’s profit-rate tendency seems to offer an explanation for the capitalists’ counterproductive resort to austerity. Capitalists want to have their cake and eat it too. They want growth, but only growth that profits them (not growth in not-for-profit activity). They want a higher rate of profit, but they do not want to suffer the collapse in capital values that would deliver a higher rate of profit (for instance, they want to bail out banks rather than let them fail). They oppose growth within a low-profit regime because this implies an economy increasingly dominated by not-for-profit activity.

As for the rest of us, we have no actual need of profit. Nor does it motivate our production. After all, we do not share in profit. Profit, being the result of unpaid labor, is actually a disincentive to productive effort for the vast majority, because it is labor performed for the benefit of a small minority and accumulated into a private stock of wealth, instead of being performed for the benefit of the community as a whole and accumulated into a stock of wealth to be owned in common.

Not-for-profit activity is socialism rather than capitalism, which theoretically is driven by investment based on risk-taking in search of reward.

"Theoretically," because a lot of "capitalism" is based on rent-seeking much of which is made possible through economic policy based on government capture.

Social, political and economic symmetry, which is a necessary condition for perfect competition, is the enemy of monopoly capital, especially in an environment dominated by an oligarchic private sector and government that is chiefly funded by plutocrats.

heteconomist
The Strange Capitalist Embrace of Austerity Viewed in Terms of Marx’s Falling Profit-Rate Law
Peter Cooper

Brad DeLong — Must-Read: Quentin Skinner: Liberty Before Liberalism and All That

The Roman conception of the free state, assumed later by Marx, is contrasted with the liberal conception of freedom based on Hobbes's adoption of the scientific/engineering meaning of freedom as freedom of motion (action).

WCEG — The Equitablog
Must-Read: Quentin Skinner: Liberty Before Liberalism and All That
Brad DeLong

John Locke is considered to be the "father" of English liberalism. His view of freedom is freedom of action rather than legal status.

T]he Idea of Liberty, is the Idea of a Power in any Agent to do or forbear any Action, according to the determination or thought of the mind, whereby either of them is preferr’d to the other. (E1-4 II.xxi.8: 237) — Stanford Encyclopedia of Philosophy

Chris Dillow — Markets need Marxism

All this poses the question. Why, then, haven't we seen state help to create what Robert Shiller has called financial democracy?

It's certainly not because of a commitment to laissez-faire: the massive implicit subsidy to banks tells us that the state is very happy to intervene in the financial system.

Instead, the answer was pointed out by Marx: the state serves the interests of capitalists, not the people. And financial capital would rather financial markets consisted of rent-seeking than of enhancing aggregate welfare. Crony capitalism has encouraged financialization (pdf), not financial democracy. 

In this sense, a well-functioning market economy requires that the state be freed from the grip of capitalists. In some respects it is capitalism that is the enemy of a market economy, and Marxism that is its friend.

Stumbling and Mumbling
Markets need MarxismChris Dillow | Investors Chronicle

David F. Ruccio — Varoufakis’s Marx

This is an important post. This the clearest and best assessment of Yanis that I have seen, largely in his own words. It also explains why YV is a "pseudo-Marxist." He is a realist who understands Marx rather than a Marxist revolutionary. That is his strength or weakness, depending on one's point of view.

Relatively few realize that Marx was actually the real liberal who recognized that  human freedom is the basis of advancing civilization — as did Hegel for that matter, from whom Marx inherited the dialectic as Hegel had inherited from the ancient Greeks. But Hegel did not write on economics. 

Although even though Marx ended up writing on economics, he was chiefly a philosopher and his doctorate was in philosophy. Marx approached his work in terms of the enduring questions with a few toward creating a systematic approach to them based on the paradoxes of the human condition that develop historically — the apparent contradictions that drive and historical dialectic based on an internal logic that is actually consistent, even though it appears to be contradictory at turning points. Every question generates answers and the answers generate further questions. Now we would call this a complex adaptive system characterized by reflexivity (feedback) and emergence (innovation).

This is the basis not only of the human condition, which is "experimental" and adaptive, but also the historical dialectic that operates on the basis of exploring the range of possibilities. Like a homing device, humanity oscillates among options in his search for the target, which is distributed freedom rather than the freedom of a few.

Yanis understand this, and understand that the neoliberals are not actually liberal at all. They are not for distributed freedom but plutonomy on the back of labor.

Occasional Links & Commentary
Varoufakis’s Marx
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Chris Dillow — Fighting The Pro-Capitalist State

Marx thought that the pro-capitalist state could only wither away after a socialist revolution. I fear he was right - and that such a revolution is a distant prospect.

Stumbling and Mumbling
Fighting The Pro-Capitalist State
Chris Dillow | Investors Chronicle

Chris Dillow — The "middle class", & Marxism

The current situation is precarious for "captialists" v. "workers" in Marxist terms since it is crucial for the haute bourgeoisie that is, the rentiers, capitalists and top managers, to keep the petite bourgeoisie, or small business people, with them rather than the petite bourgeoise allying with the proletariat, that is, those selling their labor as opposed to those selling the product of others' labor.

While this is a somewhat dated point of view today, since conditions have changed considerably since Marx was writing, there are parallels that Chris Dillow brings out and which others are also noticing and calling to attention.

While conditions may have changed since the time of Marx, class structure and power structure persists.

Stumbling and Mumbling
The "middle class", & Marxism
Chris Dillow | Investors Chronicle

John Gray — The Real Karl Marx

John Gray reviews Karl Marx: A Nineteenth-Century Life by Jonathan Sperber, debunking the myths about Marx.

The New York Review of Books
The Real Karl Marx
John Gray

(h/t Dan Kervick on FB)

Christian Science Monitor — Researchers argue Britain now has seven distinct classes

'New affluent workers' and 'precariats'? Britain's classes get makeover (via The Christian Science Monitor)

Copyright ImageClick to View A new survey of 166,000 Britons found that instead of the three traditional classes – upper, middle, and working – that are prominent in shows like 'Downton Abbey,' shown at left, now there are seven distinct strata.(PBS/AP) Britain's infamous class system has become…

Robert Vienneau — Marxian Exploitation As Descriptive

Marx explains returns to capital by his theory of surplus value. For Marx, surplus value arises from the exploitation of workers. Capitalists hire labor power, and the use value of labor power is the ability for the workers to labor under the direction of the capitalists. Suppose the produced commodities (which include the means of production) and labor power are both sold at their (labor) value. Surplus value is the difference between the value added by the workers and the value of their labor power.

I think this account of exploitation is intended by Marx to be descriptive. It is not, for Marx, the basis of a normative judgement of capitalism. I havepreviously documented that many scholars and activists, over more than a century, have shared my view. In this post, I note two more references putting forth a view consistent with mine [Allen Wood and William J Baumol].

Thoughts on Economics
Marxian Exploitation As Descriptive
Robert Vienneau

Distribution of 'Surplus Value' in the Roman Empire, c. 30 AD

Some previous posts back Tom, Peter and Magpie and myself got into the concept of  Marx's of 'Surplus Value' in the comments here.  This got me thinking about Marx's observation of this concept, I don't think I have this down 100% but here goes anyway..

Taking from the Wiki on 'Surplus Value':

Surplus value is a concept written about by Karl Marx. Although Marx did not himself invent the term, he developed the concept.[1] It refers roughly to the new value created by workers that is in excess of their own labour-cost and which is therefore available to be appropriated by the capitalist, according to Marx; it allows then for profit and in so doing is the basis of capital accumulation.

So this gets into the portion of the economic "surplus" that is distributed between "labor" and "capital" I guess which becomes a major area of contention between "Marxists" and "Capitalists" that you often witness, etc... lots of "lamentation and gnashing of teeth" on this topic over the years for sure...

We can examine the Greek Scriptures for revelation as to how the economic "surplus" was arranged to be distributed by the Roman government at that time of our history that the scriptures document.

Matthew 20 begins:

1 "For like is the kingdom of the heavens to a man, a householder, who came out at the same time with the morning to hire workers for his vineyard. 2 Now, agreeing with the workers for a denarius a day, he dispatches them into his vineyard.  Mat 20:1 

So it is apparent that a day wage of one denarius for farm work was at least sometime agreed upon if not prevailing due to the Roman fiscal and economic policies.

In Mark 6 there is the story sometimes called "the loaves and the fishes".  Whatever you call it, the scripture depicts events where there is a vast group of people who have been out in the countryside all day being taught by Jesus, and haven't eaten so His disciples become concerned for them in this regard:

35 And already the hour coming to be much advanced, His disciples, coming to Him, said that "This place is a wilderness, and already the hour is much advanced. 36 Dismiss them that, coming away into the fields and villages around, they should buy themselves bread. For they have nothing that they may be eating."   37 Yet He, answering, said to them, "You give them to eat." And they are saying to Him, "Coming away, should we buy two hundred denarii worth of bread and give them to eat?" Mk 6:35-37

So there was a vast throng and the disciples estimated that they would have to spend 200 denarii to be able to go away and purchase enough bread to provide a simple meal to those in attendance.

If we assume that all 12 of the disciples were with Him on this day, this 200 denarii amount of nomisma would breakdown to about 18 denarii per disciple, so, they would have been traveling at this time with at least an average of 18 days worth of wages per person.

The scripture goes on to reveal that those in attendance that day numbered 5,000 men:

44 And those eating the cakes of bread were five thousand men. Mk 6:44

So, we can see that 200 denarii was an amount that could be used to purchase a simple meal on-the-go for 5,000 men.  Do the math and that comes out to one denarius could purchase 25 of these simple such "take-away" meals.

So based on the fact that an agricultural worker could earn one denarius per day as wages which we learned above, if we assume that a worker could be sustained by perhaps 4 of these equivalent meals per day, then the "minimum wage" or "prevailing wage" at this time of our history would provide a "surplus value" (in real terms) of 21 simple "take-away" meals to the worker.

If we were to estimate a productivity adjusted equivalent price for such a simple take-away meal today of perhaps $10.00, this would result in a contemporary day wage of $250.00, if one worked 200 days per year this would result in a $50,000 annual income.  If one worked 250 days, it would result in an $62,500 annual income.

With "Surplus Value" distributed to the worker of  the 21 "meals" or $210 per day.

At our current "minimum wage" of (I don't even know what it is but know it is absurd) say $9.00 per hour and a 2080 hour work year (only weekends off), that comes to $18,720 annual income.  And then income taxes and payroll taxes are taken out by our morons who think our government is "out of money" so that doesn't leave much net to the worker.

So based on these estimates computed from facts that we can glean from the Greek Scriptures, we can see that the contemporary disgraced blind morons occupying positions of authority in our government are delivering economic results to our nation at relative pathetically low levels of economic justice as measured by this Marxian concept of "Surplus Value".

The current delivered "Surplus Value" that is being distributed to our workers pales in comparison to that which was delivered by our more just and non-moron Roman ancestors by a large factor.

Marx was able to focus on this concept of "surplus value" and apparently it was a key data point in observing economic results for him; I look at Marx as a true Israelite in this regard.

At the end of the Book of Acts, standing on the steps of his rented house in Rome while awaiting his appeal before Caesar, Paul reveals this ability of the Israelites to be able to "observe" things by quoting the Prophet Isaiah:

"And observing, you will be observing, and may by no means be perceiving,"  Acts 28:26

So accordingly, Marx could "observe" what was going on during his time, "you WILL be observing", and perhaps knew that at some level, the results he was observing were unjust, or perhaps just "wrong" in some way to him.  In any case, the scripture reveals that Israelites, let's assume like Marx, WILL be able to observe accurately.

The words of the Prophet Isaiah through Paul here, while indicating that the Israelites will not be able to perhaps understand or truly "perceive" what they "observe", indicate that they WILL be able to "observe" nonetheless.

Perhaps this focal point of the Israelite Marx's economic "observation" should be of greater interest to Christendom today, who may be given to in addition "perceive" it, and then, hopefully, be given to know what to do about it.

Matias Vernengo on the surplus

Robert Paul Wolff comments on something I have often said about the economic history: Economics begins with the transition from tribal subsistence to surplus societies, and both political and economic history is chiefly about the surplus. According to Wolff:

"A good deal of Theology, Philosophy, History, Political Science, Sociology, Anthropology, and of course Economics is devoted to answering ... three questions.

The three questions are:

1. Who Gets the Surplus?
2. How do the Surplus Getters get the Surplus? and
3. What do the Surplus Getters do With the Surplus After They Get It?"

Naked Keynesianism
And Now for Something Completely Different (very short)
Matias Vernengo | Associate Professor of Economics, University of Utah

Chris Dillow — MARXISM & FREEDOM

Chris Dillow gets THE fundamental issue facing the world today, freedom, how Marx understood it, and why it is fundamental. The primary drive of human beings is freedom, which is the criterion of a fully developed human being and why history has a liberal bias.

This drive cannot be met in a system which excludes self-determination and self-actualization for a large portion of the society. The result of this is alienation. 

The question then becomes whether is freedom possible in the current system. The answer Marx came to was, not under capitalism, which as Dillow observes is necessarily crony capitalism in a democratic republic where representation is for rent.

Failure to understand this is failure to understand the basis of Marx's thinking and why it is still relevant.

Stumbling & Mumbling
MARXISM & FREEDOM
Chris Dillow | Investors Chronicle (UK)

Robert Vienneau — How To Attack Marx's Theory Of Value

Wonkish, but of interest to Marxians and Post Keynesians.

Vienneau concludes: My conclusion is that Marxist political economy should remain a live and exciting field of scholarly research.

Thoughts on Economics
How To Attack Marx's Theory Of Value
Robert Vienneau

Peter Cooper — Reform or Revolution, MMT or Marx

Peter delves into the logic of capitalism and how this relates to MMT and Marxism.

Read it at heteconomist.com
Reform or Revolution, MMT or Marx
by Peter Cooper

Marxian David Ruccio goes MMT?

In other words, with fiat money, there is not intrinsic incapacity to finance growing fiscal deficits. The kinds of debt-to-GDP ratios that are thrown around in the United States and Europe—40 percent, 60 percent, 100 percent—are just that, numbers. They’re arbitrary numbers.

The issue is not what levels of debt are sustainable but how does the state intervene to support (or not) social expenditures and to determine the nature and level course of private business activity.

Read the whole thing at Toto, we’re not on the gold standard anymore

h/t Stephen Ewald