Peter Cooper — Productive and Unproductive Labor in a Macro Context

As is well known, Marx and the classical political economists before him made a distinction between productive and unproductive labor. Marx’s distinction is somewhat differed from Smith’s. For Marx, labor is productive when it is: (i) directly productive of surplus value; and (ii) exchanged directly against capital. I remain unsure how applicable the distinction is to a state money system. Some of my misgivings are explained in an earlier post. The uncertainty has held back an attempt to explore connections between Marx and Modern Monetary Theory (MMT). To get around this, here I proceed on an as if basis, by assuming for the sake of argument that the distinction is meaningful....

heteconomist
Productive and Unproductive Labor in a Macro Context
Peter Cooper

John Laurits Under Fully-Automated Communism, Your Wage Is $90 Per Hour (Says Math)

There is no problem with scarcity — there is a problem with humanity’s social organization and with its institutions. There is no failure in our production of economic values — even now they are being produced to abundance (maybe even over-abundance). The math above shows that, if it could be allowed, this country can afford to pay a wage just shy of $100 to every human being who is willing to work.

It is only the obscenely wealthy whom we stretch and strain to afford…

Economic rent.

John Laurits
Under Fully-Automated Communism, Your Wage Is $90 Per Hour (Says Math)

David F. Ruccio — Marx ratio

First there was the Great Gatsby curve. Then there was the Proust index. Now, thanks to Neil Irwin, we have the Marx ratio.

Each, in their different way, attempts to capture the ravages of contemporary capitalism. But the Marx ratio is a bit different. It was published in the New York Times. Its aim is to capture one of the underlying determinants of the obscene levels of inequality in the United States today—not class mobility or the number of years of national income growth lost to the global financial crash. And, of course, it takes its name from that ruthless nineteenth-century critic of mainstream economics and capitalism itself....

Occasional Links & Commentary
Marx ratio
David F. Ruccio | Professor of Economics, University of Notre Dame

See also

Putting aside this rich line-up of events, what has caught our attention is the equal proliferation of pieces celebrating Marx’s birthday, for the better or for the worse. From misleading and derogatory articles such as the Rulers of the world: read Karl Marx! published by The Economist to educational short pieces such as Cooper’s It’s time to normalize Karl Marx, it is difficult to not wonder about the reasons behind such opposing views. Similarly, it is difficult to resist the temptation to add a little contribution to the debate. So here we are.…

Developing Economics
Marx’s Birthday and the Dismal Science: A Few Observations

Carolina Alves and Ingrid H. Kvangraven

David F. Ruccio — Utopia and value theory

Mainstream economists refer to it as price theory, everyone else value theory. But whatever it’s called, it’s at the center of economists’ differing explanations of what happens in (and alongside) markets.

As I see it, price/value theory serves as the framework to explain a wide range of phenomena, from how and for how much commodities are exchanged in markets through the determinants of the distribution of incomes to the outcomes—for the economy and society as a whole—of the allocation of resources and commodities through markets.

And each price/value theory has a utopian dimension. It’s not just an accounting for and an explanation of the conditions and consequences of commodity exchange; it’s also a way of thinking about the fairness and justice of markets. It therefore informs (and is informed by) a utopian horizon within and beyond markets.

Let me explain.…

Excellent short explanation of a key economic idea that functions as a political weapon in the class war.

The differences between neoclassical price theory and Marxian value theory couldn’t be more stark. The differences are even more dramatic when we compare their utopian horizons. Whereas neoclassical price theory leads to a utopian celebration of capitalist markets, Marxian value theory both informs and is informed by a utopian critique of capitalist exploitation—and therefore a movement beyond capitalism.

The question is how surplus value is created. Surplus value becomes profit (owners' share by fact of ownership), which is income that is not earned since it is the difference between proceeds and wages.

In both cases—neoclassical price and Marxian value theory—the story about commodity exchange, and therefore the analysis of the form that wealth takes under capitalism, has a utopian dimension. The two theories have that in common. Where they differ is the form that utopian dimension takes....

Occasional Links & Commentary
Utopia and value theory
David F. Ruccio | Professor of Economics, University of Notre Dame

See also

Michael Roberts Blog
Inequality and exploitation
Michael Roberts

See also

Monthly Review
The Multiple Meanings of Marx’s Value Theory

Riccardo Bellofiore

Robert Paul Wolff — One Last Word on Exploitation

The Philosopher's Stone
One Last Word on Exploitation
Robert Paul Wolff | Professor Emeritus, University of Massachusetts Amherst

Robert Paul Wolff — The Connection Between Expropriation and Exploitations, Part Two

… “Clearly,” I said to myself, “workers in a capitalist economy are getting the short end of the stick, but Marx’s explanation, invoking the distinction between labor and labor-power and all the rest, is wrong. So what is the explanation? What is more, how can we capture in our explanation the central feature of capitalism to which Marx devotes so much time in the opening chapters of Capital, namely its mystification of what is going on?”

So I went back to Marx’s text and looked again. And there it was, as plain as day. The workers in a capitalist economy get only a portion of what they produce by their skill and labor, because by a long historical process of expropriation, they have been denied ownership of their own means of production – of their tools, of their machinery, even of their skills – until all they have left is their labor, which if they wish to live they are compelled to sell in the marketplace as though it were a commodity whose natural price is the cost of its reproduction. Why don’t farmers get to eat all the food they grow, after setting aside what is needed for seed? Because they do not own the land and the farm tools. Why don’t factory workers get to wear the clothing they make or to sell it to buy the food they need? Because they do not own the wool or the cotton or the thread or the machinery with which they turn these materials into clothing.

How, I asked, can we capture this situation in a set of formal equations that explains exactly how the workers are getting screwed and simultaneously explains why in a capitalist economy it seems as though the workers are getting a fair return for their labor? Here is what I came up with:

The Philosopher's Stone
The Connection Between Expropriation and Exploitations, Part Two
Robert Paul Wolff | Professor Emeritus, University of Massachusetts Amherst

Robert Paul Wolff — Marx Without Marx, or He Who Must Not Be Named

Good one from Robert Paul Wolff today. Professor Wolff looks at primitive acquisition as the basis of expropriation of the commons, which led subsequently to further levels of expropriation based on class power.

The regular commentator who goes by the internet handle TheDudeDiogenes writes: “I have been wrestling with the concept of exploitation/surplus labor for a while now; my issue is, if the Labor Theory of Value is false (as you hold, and I think so do I, though perhaps based on misunderstanding), then what, precisely, does exploitation consist in? How can surplus labor be extracted from the laborer if the LTV is false?”

When I replied by referring to a paper in which I answer the question mathematically, he said, “I am neither good at nor fond of maths (though I value highly those who do understand them), and my intellectual interests are often more "big picture", but if you could write a post for a humanities semi-expert but mathematical novice, I would surely appreciate it!”

This request was seconded by two other readers, which in my rather parochial world constitutes a tsunami of demand, so I shall make an attempt. There are two ways in which I can respond. 

The first way, which is most natural to me, is to render my mathematical treatment of this question in plain English, leaving the formal proofs for the cognoscenti. This way has the great virtue of preserving one of Marx’s deepest insights, the mystified character of capitalist relations of production, which in my judgment is one of the greatest intellectual achievements of modern social theory. 

The second way is to justify the use of the concept of exploitation to characterize capitalism without referring either to Marx or to the Labor theory of Value. This way has the virtue of circumventing the sectarian squabbles that have absorbed so much of the energy and time of those who proclaim themselves Marxists – no labor/labor power distinction, no tendency of the rate of profit to fall, no negative labor values with positive prices [pace Ian Steedman], and all rest. [I say this, of course, as one who wrote an entire book offering my take on these urgent issues.]

After some reflection [not aided by a morning walk – rain today], I have decided to adopt the second course first. If, when I have finished, anyone has the stomach for more Marx shtick, I will attempt the first. With that said, let me begin.

[I have broken up the paragraphing for online readability.]

The Philosopher's Stone
Marx Without Marx, or He Who Must Not Be Named
Robert Paul Wolff | Professor Emeritus, University of Massachusetts Amherst

Fred Moseley — Comments on Milankovic on Marx

Clarification of Marx's labor theory of value that equates profit with surplus value.

Econospeak
Comments on Milankovic on Marx

Fred Moseley | Professor of Economics, Mount Holyoke College

See also

I would encourage all of you to read Fred Moseley’s case for the labor theory of value and the problems he has with Branko Milanovic’s interpretation of it. This may seem like an exercise in Marxist antiquarianism, but the underlying questions are important....

As both Marx and Proudhon [to whom Marx was reacting] would have understood, the theory of profit-making is at the core of figuring out how capitalism works and envisioning pathways beyond it.

Econospeak
It's Red Friday and Time to Discuss the Role of Exploitation in Profit
Peter Dorman | Professor of Political Economy, The Evergreen State College

David F. Ruccio — Productive vs. unproductive labor

Adam Smith on productive vs. unproductive labor.

Occasional Links & Commentary
Productive vs. unproductive labor
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

David Ruccio — Capitalism—what’s in a word?

Quote from Richard Wolf.

According to Richard Wolff, critics of capitalism need to be clear about what they mean by capitalism. It’s not free markets or free enterprise, both of which have been present in various forms of slavery and feudalism (and, of course, both of which have been absent in various forms of capitalism). Instead, it’s how surplus labor is organized, in the form of surplus-value.

Note that in this view, political economy is about distribution. Distribution determines the type of economy and the economic infrastructure determines the type of society, that is, social structure in terms of institutional arrangements that order socio-economic relationships. Imposition of institutional arrangements is a matter of power and therefore politics.

Occasional Links & Commentary
Capitalism—what’s in a word?
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

CJ Polychroniou — Actually Existing Capitalism: Wrecking Societies for the Benefit of Big Capital and the Super-Rich

The evidence suggests that capitalism has become wholly predatory and has given up all pretense of being "socially responsible."

Truthout | Op-Ed
Actually Existing Capitalism: Wrecking Societies for the Benefit of Big Capital and the Super-Rich
CJ Polychroniou

Bill Mitchell — Bullshit jobs – the essence of capitalist control and realisation

... in the last few days I have done a few media interviews (radio) on an article that appeared in the local Fairfax press, but was originally published in the Strike! magazine as – On the Phenomenon of Bullshit Jobs by LSE anthropologist, David Graeber. The title in the local article had changed to “nonsense jobs” – a sign of the conservatism of our press. The interviews I did were interesting because the article brings together a number of strands that further expose the weakness of the economic theory taught to students in most universities. That is much more interesting to write about here than the tawdry realities of Australian politics at present which can be described as indecent ignorance.



David Graeber article seeks to investigate why the 1930 prediction by John John Maynard Keynes that by the Year 2000, “technology would have advanced sufficiently that countries like Great Britain or the United States would have achieved a 15-hour work week” has not materialised.

He might have just concluded – Capitalism and realisation of surplus value.....

Does he really answer his basic question – to explain why we are not all working within the technological limits – that is much less hours? He clearly doesn’t provide a good explanation despite the Op Ed being much longer than most. 

To really answer the question and to understand why neo-liberalism has become dominant we have to ground the explanation in the dynamics of the capitalist system, which is why most of the competitive neo-classical theory fails. The latter doesn’t differentiate between the unique characteristics of production systems and thus ignores key dynamics, which yield explanatory capacity.

Bill Mitchell – billy blog
Bullshit jobs – the essence of capitalist control and realisation
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Daniel Little — Marx and the physiocrats

Gehrke and Kurz provide a highly detailed survey of the times and sources through which Marx studied the physiocrats, and the comments and questions that he raised in his working notebooks. They present the results of this analysis in two useful appendices to the article. In the primary text they focus on the most important question: to what extent, and in what specific ways, was Marx influenced by the physiocrats' system?

A lot, it seems.

Understanding Society
Marx and the physiocrats
Daniel Little | Chancellor, University of Michigan at Dearborn

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.

Bill Mitchell — Sport and doping – the spreading tentacles of capital

Bill Mitchell put up a post today that covers a lot of ground and focuses on the concept of work as it has evolved over time to the contemporary neoliberal concept of productive as equable with work from which management can profit from wages.

...the dominant elites, which are increasingly being dominated, in turn, by large financial interests, which themselves are inherently unproductive, have developed a narrative to convince us that it is better to have millions of people doing nothing than advancing societies commonwealth.
If a person is not advancing private profit-seeking behaviour then the work is unproductive. We have bought that narrative from the elites. We have also bought the narrative that the unemployed are in some way letting themselves down – they are lazy, unskilled, lacking in something or other.

What I found most interesting in the post is Bill's observation:

I note that not all of my MMT colleagues would agree with me that Marx is an important part of understanding the basis of MMT. I am not suggesting that MMT is part of Marxist doctrine – it could be but it doesn’t have to be. But I think you cannot understand the capitalist monetary system unless you understand class dynamics.

That is certain to raise eyebrows but it is consistent with the growing interest in Marx lately. A lot of people are beginning to figure out that workers are not getting fair shake and are questioning the prevailing narrative. Marxist and Marxian analysis has not only been marginalized in the United States, but demonized. Therefore, most people have no knowledge of it and no interest, since they have been inculcated with the idea that any association with Marx involves sure descent into totalitarianism. That's unfortunate since Marx makes many observations that are still relevant wrt to the prevailing narrative about work.

Bill Mitchell — billy blog
Sport and doping – the spreading tentacles of capital
Bill Mitchell

See also Matias Vernengo, Sraffa and Marxism or the Labor Theory of Value, what is it good for?