on 2/8/02 00:45 PM, Michael Perelman at [EMAIL PROTECTED] wrote: > I will try again. > > miyachi wrote: > >> on 2/7/02 08:25 AM, Michael Perelman at [EMAIL PROTECTED] wrote: >> >>> I tried to send you my paper, but your mailbox is full. >> Excuse me. But my mailbox is not full!? >> [EMAIL PROTECTED] > > -- > > Michael Perelman > Economics Department > California State University > Chico, CA 95929 > > Tel. 530-898-5321 > E-Mail [EMAIL PROTECTED] > > > ~M~A~X~T~H~I~N~K > Marx, Devalorization, and the Theory of Value > Introduction > I am offering yet another reinterpretation of Marx's value theory. Although > this value theory does not easily lend itself to algebraic or statistical > modeling, the approach that I propose has the advantage of providing a closer > link between Marx's crises theory and his theory of value. > The core of this article concerns the treatment of constant capital in Marx's > value theory. All quantitative treatments of Marxian value theory must find a > way to measure the transfer of value from constant capital to the final > products. Although the expanding literature on the solutions to Marx's > so-called transformation problem has worked on this problem, none to my > knowledge has satisfactorily come to grips with the impossibility of correctly > measuring this transfer of value. > An Alternative Approach > Let us begin at the beginning. In the first volume of ‰Capital?, Marx > analyzed commodities at their most abstract level. We might refer to the > quantitative value theory that Marx presented there as a presentation of > "simple value," to indicate an affinity with simple reproduction or the most > simplistic version of Marx's model of expanded reproduction. > Keep in mind that both simple reproduction and expanded reproduction were > merely analytical devices, neither a full description of reality nor a formal > model. Nonetheless, neither simple nor expanded reproduction is entirely > without interest. > Both simple reproduction and simple value theory represented a significant > theoretical advance over classical economics. For example, Marx's > reproduction schemes laid the foundation for a more concrete investigation of > a dynamic economy in the sense that they illustrate the difficulty of > establishing the right proportions among sectors of the economy. In effect, > Marx proposed an anti-equilibrium theory, which demonstrates that, unless > certain unlikely conditions are met, the economy can experience a > disproportionality crisis, similar, in some respects to the Harrod-Domar > model. Had he gone no further, Marx might be remembered today as an > interesting economist, but perhaps not much more. > Both simple value theory and simple reproduction presume either a static or at > least, a proportionately expanding economy, implying that all relationships > retain all aspects of their initial structure, including relative prices. > Nobody would argue that Marx's schemes of simple reproduction were a realistic > model of the economy, but only a conceptual device that demonstrated the weak > foundations of the sort theory that Say's Law represented. > Neither simple value theory nor simple reproduction was a mere mental > exercise. Marx used both to analyze the contradictory nature of capitalism. > Despite their indisputable importance in this regard, both simple reproduction > and simple value theory are inadequate for a more concrete level of analysis. > The limits of simple reproduction theory are easier to recognize than those of > simple value theory. To acknowledge the limits of simple value theory does > not minimize the analytical importance of this concept, any more than the > unrealistic assumptions underlying simple reproduction theory invalidate the > insights that the reproduction schemes provided. > Although Marx developed enormous insights from simple value theory in the > first volume of ‰Capital?, simple values are inadequate for analyzing the > dynamic economy that Marx analyzed in the later volumes. Certainly, Marx was > interested in the dynamic nature of the economy. He saw himself as breaking > new ground by realizing, "Capital ... can be understood only as a motion, not > as a thing at rest" (Marx 1967; 2, p. 105). Before he could begin his > dynamical analysis, Marx had to move beyond simple value analysis. > Of course, Marx had already moved away from simple value theory, even before > he began his dynamic analysis. For example, he allowed for deviations due to > different organic compositions of capital, although he considered that > modification to be minor. > To sum up the argument to this point, most of the literature on Marx accepts > the assertion that Marx's general method was to begin with a very abstract > analytical approach, which he would progressively modify as he applied his > theory to more concrete levels of analysis. Value theory is a case in point. > Marx continually developed his value theory as he moved to more concrete > levels of analysis. This value theory was not a formal model to be used to > derive a mathematical rule for establishing prices, but rather a way of > understanding the laws of motion of capital. > Capital Valuation and Technical Change > Depreciation Rules and Simple Value Theory > Let us look at how Marx developed his more concrete concept of value. We all > know that unsophisticated critics have charged that Marx suddenly discarded > value theory in mid-course once he realized that he left something out of his > original analysis of value theory. > Nothing of the sort ever happened. Disregarding the debates over whether > value should be interpreted as a monetary expression of value or not, value > theory and price theory operate on different levels of abstraction. From my > perspective, each serves a different purpose. The more abstract theory can > reveal aspects of the economy that more concrete levels of analysis would > obscure. Marx's application of value theory analysis to the wage form stands > as the classic case. Price theory hides the nature of exploitation. Simple > value theory makes it transparent. > Remember that in simple value theory, value depends on the direct and indirect > labor embodied in the commodity. This indirect labor represents labor, which > was previously deposited in capital goods and which gradually becomes > re-embodied in the finished commodities. > This transfer of value from capital goods to finished commodities is as > unobservable as the process whereby labor values are abstracted. The question > of abstract labor is instructive in pointing out some of the difficulties of > quantitative marxian theory. > How can labor values be measured in terms of abstract labor? Many readers of > Marx have long understood that the process of abstraction of labor defies > quantification. Faced with the challenge of quantifying the abstract labor > process, we are left with two choices. Either we can measure the total amount > of labor hours (presuming that each hour contains the same quantity of > abstract labor) or we can weight each hour by the appropriate wage rate. The > first choice is obviously wrong, since it rules out the process of abstraction > altogether. The second choice involves circular reasoning. It suggests that > we have to use the price system to get a handle on the value system, which was > supposed to allow us to go beyond the price system in the first place. > Either approach makes quantification questionable, if not impossible. We will > soon see that even more difficult hurdles stand in the way of quantification > when we address the movement from simple value theory toward a more concrete > form of value theory. > This analysis will be worth the effort since it throws light on some > qualitative aspects of Marx's value theory that have not been properly > appreciated. It also provides some guidance to those who want to pursue > quantitative Marxian analysis. > At this point, we can extend Marx's famous hint, that there is nothing simple > about a commodity, to the value of a commodity (see Schwartz 1977). In the > same vein, value theory is not as simple as it seems. > According to simple value theory, capital goods unrealistically depreciate > according to predetermined patterns, just as they do in neo-classical > production theory. If a tool is to be used over a fixed period of time with a > known pattern of intensity, we can develop a rule to measure the rate at which > the labor embodied in the tool is deposited in the flow of commodities. To > argue for the realism of such conditions is tantamount to proposing some sort > of "rational marxian expectations." > Once we go beyond the analysis of semi-static, expanded reproduction, how > could we make the theory operational? We would require knowledge about future > economic conditions before we can calculate the amount of abstract labor > transferred from constant capital to the final commodity. For example, if > unpredictable technical change can make a tool obsolete in the near future, > how do we develop an appropriate rule to allocate the transfer of value from > the tool to the final product? In short, without a proper rule for > determining the rate at which abstract labor is deposited in commodities, > precise measurement and quantification of value is impossible. > The absence of such a rule does not present a problem if the primary objective > of simple value theory is the qualitative information that it provides, as in > the case of Marx's analysis of the wage form. Unfortunately, most of the > literature on value theory treats values as if they are simple quantitative > values, assuming that they do not stand in need of any modification to take > account of more concrete analysis. I will attempt to show why that > interpretation prevents us from taking advantage of the full power of Marx's > analysis. > Toward a More Concrete Theory of Value: Reproduction Values > Marx did not always take pains to give us much guidance in following his > methodology. He placed many of his valuable analytical signposts in prefaces > and postfaces of his work or even letters or notebooks rather than in the > actual body of ‰Capital?. In the case of process of continual modification of > his value theory, Marx left little doubt about the importance that he placed > on the subject, although he never established its methodological importance. > The most crucial step in his elaboration of the value theory is the shift from > value as a measure of the sum of the actual labor values used to produce a > commodity in the past to a new definition of value as the amount of labor that > would be required to reproduce the commodity today. In his words: > ##[The] value [of a unit of capital] is no longer determined by the necessary > labour-time actually objectified in it, but by the labour-time necessary > either to reproduce it or the better machine .... When the machinery is first > introduced into a particular branch of production, new methods of reproducing > it more cheaply follow blow upon blow. [Marx 1977, p. 528] > Reproduction value differs from simple value in one important respect: simple > values are objective values (presuming that we can measure the previous inputs > of abstract labor). In the case of simple values, we treat the lifetime of > the capital goods as given in advance. If a machine lasts ten years, we can > assume that 1/10 of its value is transferred to the commodities produced in a > given year. Each commodity that the machine produces will account for a > portion of that total value. Consequently, to calculate the value of a > commodity, we merely have to take the sum of the direct labor input and the > amount of value transferred to the commodity. > In the case of reproduction values, quantitative measurement of value is more > difficult. We could even say that it is subjective since capitalists cannot > know in advance what will happen to the cost of reproducing their machines > once they purchase them. > Marx understood that these considerations were important. He was certain > that, once produced, machines typically undergo dramatic revolutions in > reproduction values. He went so far as to insist that new technology destroys > capital values so rapidly that no factory ever covers its original production > costs (Perelman 1987, Ch. 4; see Marx to Engels on 14 August 1851, in Marx and > Engels 1982, p. 424; Marx 1967, III, p. 114; and Marx 1963, p. 65; Marx to > Engels, 19 November 1869; in Marx and Engels 1942, p. 270). Marx observed: > ##The value of machinery, etc., falls ... because it can be reproduced more > cheaply. This is one of the reasons why large enterprises frequently do not > flourish until they pass into other hands, i.e., after their first proprietors > have been bankrupted, and their successors, who buy them cheaply, therefore > begin from the outset with a smaller outlay of capital. [Marx 1967; 3, p. > 114] > Marx cited Babbage's example of frames for making patent net that initially > sold for twelve hundred pounds. They cost only sixty pounds a few years later > (Marx 1977, p. 528; Babbage 1835, p. 286 and 214; see also Baumol and Willig > 1981; and Gaskell 1833, p. 43; cited in Alberro and Persky 1981). Babbage > claimed, "the improvements succeeded each other so rapidly that machines which > had never been finished were abandoned in the hands of their makers, because > new improvements had superseded their utility" (Babbage 1835, p. 286). > Babbage's rule of thumb was that the cost of an original machine was roughly > five times the cost of a duplicate (Babbage 1835, p. 266). According to > Babbage's estimates, one hour of labor embodied in patent nets that were only > a few years old would be equivalent to three minutes of direct labor embodied > in a new machine. > To the extent that Babbage's example was typical, quantitative measurement of > values would be difficult, if not impossible. Reproduction costs shift in > unpredictable patterns. Because we cannot predict what future technologies > will be available at any given time in the future, we have no way of knowing > in advance how long a particular capital good will be used before it will be > replaced. A machine that lasts 20 years would presumably transfer value to > the output at a different rate from a machine that would be expected to last > only a single year. > Because we cannot see into the future, we can only retrospectively calculate > the appropriate amount of value transferred from the constant capital. In > other words, some time in the future after the equipment used in the > production process had been used up we could calculate the values of goods > produced today. We cannot calculate the values of goods produced today, > because knowing the appropriate values of the constant capital being > transferred today is impossible without advanced knowledge of future > reproduction values. > Alternatively, we could calculate the value of goods based on capitalists' > estimates of future depreciation patterns. Once we embark on the path of > taking subjective estimates of future depreciation into consideration, we open > a new can of worms. > To begin with, we have no way of knowing the capitalists' subjective opinions. > In addition, Marx's assertion about bankruptcies suggests that these > subjective opinions are grossly mistaken. > Although replacing simple values with reproduction values makes quantitative > analysis more difficult, I want to demonstrate that the qualitative insights > of reproduction value theory make Marx's analysis of business cycle theory > more powerful than any analysis based on simple value theory. > Parenthetically, let me mention here that reproduction values can also > increase, especially if capitalism creates environmental destruction, which > makes reproduction more difficult. Here again reproduction value theory > offers deeper insights into that relationship between the resource base and > economic conditions. I have treated this matter elsewhere (Perelman 1987, > Chapter 2). Now I want to concentrate on Marx's analysis of how reproduction > values change and how, in the short run, the market allows prices to deviate > from reproduction values. > A Qualitative Crisis Theory > An Application of Qualitative Crisis Theory > The analysis of the depression of the late 19th century provides an excellent > application of the sort of qualitative value theory that I am suggesting. For > example, the 1880s were the most rapid decade of economic growth in the post > Civil War period, measured by per capital growth of reproducible tangible > wealth, amount of savings, investment funds and growth of per capita income > (Sklar 1988, p. 44; and Friedman and Schwartz 1963, pp. 92-3). At the time, > industry in the United States was rapidly introducing new technologies. > Between 1869-89, the average factory doubled in size and capital invested per > manufacturing worker grew from $700 to $2000 (O'Brien 1988; and Jensen 1993, > p. 834). > You might expect that capital profited from a general prosperity during this > period. In fact profits suffered. > This new technology forced owners of outdated plant and equipment to adopt one > of three options. First, they could withdraw from production. Second, they > could adopt improved technologies. Or third, they could attempt to meet the > competition by dropping their prices. > Apparently, relatively few took the first option, since prices plummeted. As > a result, installed capital generally depreciated before firms could amortize > their investments. Profits fell because firms had to abandon equipment before > it had paid for itself. > Consider the example of Andrew Carnegie, who was notorious for his > single-minded determination to lower production costs. Once when his young > assistant, Charles Schwab, reported a superior design for a rolling mill, > Carnegie ordered him to raze and reconstruct an existing three month old mill > (McCraw and Reinhardt 1989, p. 595). > As a result of this ruthless pursuit of the best available technologies, the > price of steel rails fell by 88% from the early 1870s to the late 1880s > (Jensen 1993, p. 835). Steel was not unique. Electrolytic refining reduced > aluminum prices by 96%; synthetic blue dye production costs fell by 95% from > the 1870s to 1886 (ibid.). Based on this experience, most major U.S. > economists abandoned their faith in the market and sought refuge in trusts, > cartels and monopolies as a means to stabilize capital values (Perelman 1994). > In one of the most dramatic mergers in history, J.P. Morgan bought out > Carnegie's organization and merged it with a number of lesser firms to form > United States Steel. Freed from competitive pressures, the company did little > to modernize its operations (ibid. pp. 607 and 595). > In this regard, the editors of ‰Fortune? magazine reported: > ##Now there are two possible ways to look at a steel plant or an ore mine. > One is as an investment that must be protected. The other is as an instrument > of production, to be cherished only so long as it cannot be replaced by a more > efficient instrument. The first may be called the banker's point of view; the > second, the industrialist's. [Anon. 1936, p. 170] > According to the investigators at Fortune, United States Steel "has always > been a management with a financial rather than an industrial turn of mind" > (ibid., p. 63). This perspective reflected the origins of the corporation. > "The Steel Corporation was founded by financiers, has been dominated ever > since by financially-minded men" (ibid., p. 170). > Under the leadership of United States Steel, the industry's management in the > United States was notorious for its unwillingness to invest in modernization. > Even though basic oxygen furnaces and continuous casting offered substantial > cost savings, the industry refused to invest in these technologies long after > they had become standard in steel plants throughout the world (Adams and > Dirlin 1964; and 1966; Oster 1982; and Barnett and Schorsch 1983). > Because capitalists with substantial market power can avoid the necessity of > adjusting prices immediately when reproduction values fall below from simple > values, the price system will effectively attribute excessive values to > capital goods -- at least temporary. Marx called these claims to excess > values, "fictitious capitals." > The Benign Divergence of Values and Prices > In effect, firms in an industry with market power can act as if the values of > their capital goods were simple values rather than reproduction values. The > more this practice continues, the more their prices will diverge from > reproduction values. > When large divergences become typical throughout the economy, the price system > will become increasingly incapable of coordinating the economy. Malinvestment > will become common. This state of affairs cannot continue forever. > Eventually, forces of competition will compel prices to fall in line with > reproduction values (see Perelman 1987, Chapter 6). > Marx repeatedly explained how, over and above changes in reproduction values, > value can appear to take on a more or less independent existence until a > crisis brings values back in line with reproduction values. The following > citation is worth considering in detail: > ##Capital, as self-expanding value ... can be understood only as motion, not > as a thing at rest. Those who regard the gaining by value of independent > existence as a mere abstraction forget that the movement of industrial capital > is this abstraction ‰in actu? .... If social capital experiences a revolution > in value, it may happen that the capital of the individual capitalist succumbs > to it and fails, because it cannot adapt itself to the conditions of this > movement of values. The more acute and frequent such revolutions in value > become, the more does the automatic movement of the now independent value > operate with the elemental force of a natural process, against the foresight > and calculation of the individual capitalist, the more does the course of > normal production become subservient to abnormal speculation, and the greater > is the danger that threatens the existence of the individual capitals. These > periodic revolutions in value therefore corroborate what they are supposed to > refute, namely, that value as capital acquires an independent existence. > [Marx 1967; 2, pp. 105-6] > Of course, this 'independence' of values is only a partial independence. We > shall explore the nature of this independence in the next section. > The Labor Theory of Value as a Requirement of Capital > Under the ideal conditions that Marx used in presenting his simple value > theory, a capitalist economy would maintain its balance by exchanging > commodities at prices roughly equal to the underlying labor values. Again, > the treatment of simple values parallels the treatment of simple reproduction. > We know that Marx never claimed that the algebraic equations of simple > reproduction provided predictions of equilibrium. He was merely showing that > an economy that failed to satisfy the requirements of the model could fall > into a crisis. In this sense, the reproduction schemes are consistent with a > qualitative value theory. > Marx's simple labor theory of value worked in the same fashion. Like the > simple reproduction model, simple value theory showed the difficulties that > arose when economic conditions failed to meet certain relatively stringent > conditions. Simple values, like simple reproduction schemes, suggested a > requirement of capitalist stability. Marx demonstrated that prices had to > indicate underlying labor values in order to steer the economy away from > crises (see Perelman 1987, Ch. 6). > In the analysis that some call the transformation problem, Marx acknowledged > that prices would not exactly equal values, even in the context of a system of > simple values. Nonetheless, in writing about crises, Marx indicated that, > despite the deviations of prices and values, the structure of prices should > still roughly conform to the structure values. Otherwise, prices cannot give > a signal to capitalists that is adequate to maintain a coherent economic > organization (see Perelman 1987, Ch. 6). > Just as the mathematical relations of simple reproduction are unlikely to hold > in a real economy, actual prices tend to drift away from underlying labor > values. As the linkage between prices and values becomes looser, the price > system gives increasingly misleading signals, making speculation more > profitable than earning profits by producing goods and services for the > market. > The deviations of prices and values due to the failure to adjust prices in > light of the gaps between simple values and reproduction values can cause far > more substantial deviations of prices and values than the deviations caused by > the transformation problem. More important, unlike the deviations associated > with the transformation problem, these deviations are not systematic and will > accumulate over the business cycle. > As fictitious capital accumulates during an upswing, it drags down the rate of > profit. As we suggested before, when these fictitious capitals become too > extreme, they contaminate the price system, which can no longer give the > proper signals. The continued functioning of the system then requires a > crisis strong enough to wipe out fictitious capitals and bring prices back in > line with values (Perelman 1987, Chapter 6). If the system can withstand the > shock of the crisis, a new cycle will begin with a higher rate of profit and a > coherent system of prices and values. > Here we have a different crisis theory than a regular, decennial replacement > cycle. This one revolves around the irregular accumulation and destruction of > fictitious values. I believe that this non-periodic crisis theory will prove > to be a more fruitful line of investigation than the more algebraic analysis > commonly associated with marxian crisis theory (Perelman 1987). This analysis > also helps to clarify finance's role in crisis theory. > Reproduction Values and Business Cycle Theory > We have seen that, in an unpredictable, dynamic world current values depend on > the future reproduction values of constant capital. Revaluations of > reproduction values create a parallel, but delayed counterpart on the price > structure. In addition, these shifting prices of capital assets can be a > major influence on the rate of profit. > Let us look at this relationship between capital asset revaluations and > profits more closely. The profit resulting from a purchase of fixed capital > depends upon the sum of current profits from basic business activities plus > any appreciation or depreciation that occurs as a result of that investment. > Often, the introduction of a new capital investment entails the devaluation of > a capital good that the new investment replaces. > In an economy with high capital-output ratios (measured in value terms), such > fluctuations in asset prices can swamp current profits. Both Kliman and > Perelman have argued that the rate of profit has a tendency to fall when > sufficiently rapid technical change devalues existing assets before their > values can be realized in finished commodities (Perelman 1987; Kliman 1988; > and 1996). > Although economists have generally overlooked this problem of capital > revaluation, business has not. Because of the resulting capital losses on > existing equipment, business resists replacing capital-intensive investments > unless the savings that result from the investment repay the cost of the > investment in a very short period of time; however, such a strategy is not > always feasible. As Marx observed: > ##On the one hand the mass of the fixed capital invested in a certain bodily > form and endowed in that form with a certain average life constitute one > reason for the only gradual pace of the introduction of new machinery, etc., > and therefore an obstacle to the rapid general introduction of improved > instruments of labour. On the other hand competition compels the replacement > of old instruments of labour by new ones before the expiration of their > natural life, especially when decisive changes occur. Such premature renewals > of factory equipment on a rather large social scale are mainly enforced by > catastrophes or crises. [Marx 1967: 2, p. 170] > In short, Marx realized that, in an economy where large firms can blunt the > force of competition, some firms will be able to treat obsolete capital values > as if the forces of devalorization had never existed. > Toward a Rehabilitation of Qualitative Value Theory > My concern here is two-fold. I am warning against a one-sided application of > marxist theory in which we take simple value theory to be an objective > representation of reality. Second, we must guard against being lulled into a > false sense of scientificity in working with empirical measures. > I could have mentioned other difficulties with quantitative value theory. For > example, estimating a social rate of profit requires knowledge of total > constant capital. Unfortunately, measures of aggregate constant capital are > of questionable validity because of the complications created by changes in > the social division of labor (Perelman 1987, Chapter 5). > In addition, many of the quantitative measures used in making empirical > estimates are of dubious accuracy. For example, Engels observed, when > supplying Marx with estimates of surplus value in English spinning mills, that > such statistics are not readily available only because "few capitalists ever > think of making calculations of this sort with reference to their own > business" (Marx 1967; 3, p. 76; see also Perelman 1987, pp. 126-8; and Marx > 1977, pp. 327-28). > My emphasis on qualitative value theory does not mean that we must throw > quantitative theory overboard. The sort of algebraic analysis associated with > the mathematics of reproduction schemes or a rising organic composition of > capital is be appropriate at some times and inappropriate at others. In this > sense, we might also interpret the respective analysis of reproduction values > and reproduction schemes as complementary. To begin with, we can look at the > reproduction schemes as a qualitative method for demonstrating the difficulty > of establishing a balance between sectors even when values are fixed. > Reproduction value theory reinforces that analysis, since with reproduction > values fluctuating and fictitious capitals accumulating and then vanishing, > economic stability is even more unlikely. > In addition, quantitative analysis, such as we find in the reproduction > schemes, might be more appropriate during specific periods. Babbage witnessed > what was apparently a process of rapid technological change, which would make > estimation of future capital depreciation all but impossible. Under such > conditions, quantitative value theory would become especially problematical. > In contrast, according to Engels' account of the cotton industry, capital > goods were relatively long-lived. Quite possibly, values were relatively > stable in that industry at the time. Under these conditions, simple value > theory might offer a reasonable tool of quantitative analysis, since > capitalists might not go terribly wrong in their estimates. > I do not want to deny the importance of quantitative analysis. We still need > empirical analysis to get a rough handle on broad social issues such as the > rate of profit. Although such empirical work is undeniably important, we > should be modest in the way we regard it. We must also keep in mind that > quantitative analysis reflects capital's own tendency to reduce everything > down to quantitative measures. > In short, quantitative analysis can yield, at best, a crude approximation. We > should drop any pretense of exactitude. Marx's comparison of rates of surplus > value across widely different social formations, from Britain to Danubian > feudalism is an excellent example of modest empiricism. These estimates are > on a different level of abstraction than Marx's value theory, which deals with > unmeasurable units of analysis. Although they are not precise, they > illustrate an insight that some might find counter-intuitive -- that > capitalism is more exploitative than a vestigial form of feudalism. In this > sense, a closer reading of Marx's qualitative value analysis will not supplant > empirical research. Instead, it will strengthen empirical research by making > it more realistic. > Conclusion > We have seen that quantitative value theory faces a serious problem in > determining in advance how fast fixed capital goods will lose value. No > algebraic theory of value can ever attain some sort of exactitude without > prior knowledge of the future. We can still apply quantitative value theory > in a macroeconomic setting to get a rough handle on empirical questions, such > as the falling rate of profit, but we must be aware of the limits of any such > calculation. > Qualitative value theory, in contrast, is a valuable analytical tool for > understanding capitalist economy. It casts considerable light on the nature > of exploitation. It reveals how at any moment the underlying contradictions > of markets can break out into a crisis. > I regret that we have paid too little attention to qualitative side of Marx. > This article is intended to stimulate a renewed interest in that dimension of > his work. > References > Adams, Walter and Dirlin, Joel B. 1964. "Steel Imports and Vertical Oligopoly > Power." ‰American Economic Review?, Vol. 54, No. 4 (September): pp. 626-55. > ___. 1966. "Big Steel, Invention, and Innovation." ‰Quarterly Journal of > Economics?, Vol. 63, No. 2 (May): pp. 167-89. > Alberro, Jose and Persky, Joseph. 1981. "The Dynamics of Fixed Capital > Revaluation and Scrapping." ‰Review of Radical Political Economy?, Vol. 13, > No. 2 (Summer): pp. 21-37. > Anon. 1936. "U.S. Steel: The Corporation. Part 1." ‰Fortune? (March): pp. > 59-65 and 152-91. > Babbage, Charles. 1835. ‰The Economy of Machinery and Manufactures?, 4th ed. > (London: Charles Knight). > Barnett, Donald F. and Schorsch, Louis. 1983. ‰Steel: Upheaval in a Basic > Industry? (Cambridge, Massachusetts: Ballinger). > Baumol, William J. and Willig, Robert D. 1981. "Intertemporal Failures of the > Invisible Hand: Theory and Implication for International Market Dominance." > ‰Indian Economic Review?. Vol. 16, Nos. 1 & 2 (January-June): pp. 1-12. > Friedman, Milton and Anna Jacobson Schwartz. 1963. ‰A Monetary History of the > United States, 1867-1960? (Princeton: Princeton University Press, 1971). > Gaskell, P. 1833. ‰The Manufacturing Population of England? (London). > Jensen, Michael C. 1993. "The Modern Industrial Revolution: Exit and the > Failure of Internal Control Systems." ‰Journal of Finance?, Vol. 48, No. 3 > (July): pp. 831-80. > Kliman, Andrew. 1988. "The Profit Rate Under Continuous Technological Change." > ‰Review of Radical Political Economy?, Nos. 2 and 3 (Summer and Fall): pp. > 283-9. > ___. 1996. "A Value Theoretic Critique of the Okishio Theorem." in A1an > Freeman and Guglielmo Carchedi, eds. ‰Marx and Non-equilibrium Economics? > (Cheltenham: Edward Elgar): pp. 206-24. > McCraw, Thomas K. and Forest Reinhardt. 1989. "Losing to Win: U.S. Steel's > Pricing, Investment Decisions, and Market Share, 1901-1938." ‰Journal of > Economic History?, Vol. 49, No. 3 (September): pp. 593-619. > Marx, Karl. 1963. ‰The Poverty of Philosophy? (New York: International > Publishers). > ___. 1967. ‰Capital?, 3 vols. (Moscow: Progress Publishers). > ___. 1977. ‰Capital?. Vol. 1 (New York: Vintage). > ___ and Frederick Engels. 1942. ‰Selected Correspondence? (Moscow: Progress > Publishers). > ___. 1982. ‰Collected Works?. Vol. 38. ‰Marx and Engels: 1844-1851? >(New York: > International Publishers). > O'Brien, Anthony Patrick. 1988. "Factory Size, Economies of Scale, and the > Great Merger Wave of 1898-1902." ‰Journal of Economic History?, Vol. 48, No. 3 > (September): pp. 639-49. > Oster, Sharon. 1982. "The Diffusion of Innovation among Steel Firms: The Basic > Oxygen Furnace." ‰The Bell Journal of Economics?, Vol. 13, No. 1 (Spring): pp. > 45-56. > Perelman, Michael. 1987. ‰Marx's Crises Theory: Labor, Scarcity, Finance? (NY: > Praeger). > ___. 1994. "Fixed Capital, Railroad Economics and the Critique of the Market > in the United States." ‰Journal of Economic Perspectives?, Vol. 8, No. 3 > (Summer): pp. 189-95. > Schwartz, Jesse George. 1977. "There is Nothing Simple about a Commodity." > Jesse George Schwartz, ed. ‰The Subtle Anatomy of Capitalism? (Santa Monica: > Goodyear Publishing Co.): pp. 474-500. > Sklar, Martin J. 1988. ‰The Corporate Reconstruction of American Capitalism: > 1890-1916? (Cambridge: Cambridge University Press). >
Sir Michel Perelman MIYACHI TATSUO PSYCHIATRIC DEPARTMENT KOMAKI MUNICIPAL HOSPITAL KOMAKI CITY AICHI Pre. JAPAN [EMAIL PROTECTED] you insist that beginning from concrete society is right method of analyzing. But Its method was already failed in Adam Smith, Ricardo, Sismonndy, proudon etc. Alternatively Marx insisted that scientific method to analyze concrete society must be began from abstract category, and ascending to shape of concrete society(Engels modified title of Capital?as "process of capitalist production as awhole but in original version, Marx wrote as " Shape of capitalist production. It is not available in any English trasnlations) Below is Marx!'s own explanation on his analytical method in "Introduction to Contribution to Critique of Political Economy"in1857. I apologize Marx's citing is too long, but is necessary to understand his method. "It would seem to be the proper thing to start with the real and concrete elements, with the actual preconditions, e.g., to start in the sphere of economy with population, which forms the basis and the subject of the whole social process of production. Closer consideration shows, however, that this is wrong. Population is an abstraction if, for instance, one disregards the classes of which it is composed. These classes in turn remain empty terms if one does not know the factors on which they depend, e.g., wage-labour, capital, and so on. These presuppose exchange, division of labour, prices, etc. For example, capital is nothing without wage-labour, without value, money, price, etc. If one were to take population as the point of departure, it would be a very vague notion of a complex whole and through closer definition one would arrive analytically at increasingly simple concepts; from imaginary concrete terms one would move to more and more tenuous abstractions until one reached the most simple definitions. From there it would be necessary to make the journey again in the opposite direction until one arrived once more at the concept of population, which is this time not a vague notion of a whole, but a totality comprising many determinations and relations. The first course is the historical one taken by political economy at its inception. The seventeenth-century economists, for example, always took as their starting point the living organism, the population, the nation, the State, several States, etc., but analysis led them always in the end to the discovery of a few decisive abstract, general relations, such as division of Iabour, money, and value. When these separate factors were more or less clearly deduced and established, economic systems were evolved which from simple concepts, such as labour, division of labour, demand, exchange-value, advanced to categories like State, international exchange and world market. The latter is obviously the correct scientific method. The concrete concept is concrete because it is a synthesis of many definitions, thus representing the unity of diverse aspects. It appears therefore in reasoning as a summing-up, a result, and not as the starting point, although it is the real point of origin, and thus also the point of origin of perception and imagination. The first procedure attenuates meaningful images to abstract definitions, the second leads from abstract definitions by way of reasoning to the reproduction of the concrete situation. Hegel accordingly conceived the illusory idea that the real world is the result of thinking which causes its own synthesis, its own deepening and its own movement; whereas the method of advancing from the abstract to the concrete is simply the way in which thinking assimilates the concrete and reproduces it as a concrete mental category. This is, however, by no means the process of evolution of the concrete world itself. For example, the simplest economic category, e.g., exchange-value, presupposes population, a population moreover which produces under definite conditions, as well as a distinct kind of family, or community, or State, etc. Exchange-value cannot exist except as an abstract, unilateral relation of an already existing concrete organic whole. But exchange-value as a category leads an antediluvian existence. Thus to consciousness-and this comprises philosophical consciousness -- which regards the comprehending mind as the real man, and hence the comprehended world as such as the only real world; to consciousness, therefore, the evolution of categories appears as the actual process of production -- which unfortunately is given an impulse from outside -- whose result is the world; and this (which is however again a tautological expression) is true in so far as the concrete totality regarded as a conceptual totality, as a mental fact, is indeed a product of thinking, of comprehension; but it is by no means a product of the idea which evolves spontaneously and whose thinking proceeds outside and above perception and imagination, but is the result of the assimilation and transformation of perceptions and images into concepts. The totality as a conceptual entity seen by the intellect is a product of the thinking intellect which assimilates the world in the only way open to it, a way which differs from the artistic, religious and practically intelligent assimilation of this world. The concrete subject remains outside the intellect and independent of it -- that is so long as the intellect adopts a purely speculative, purely theoretical attitude. The subject, society, must always be envisaged therefore as the pre-condition of comprehension even when the theoretical method is employed. But have not these simple categories also an independent historical or natural existence preceding that of the more concrete ones? This depends. Hegel, for example, correctly takes ownership, the simplest legal relation of the subject, as the point of departure of the philosophy of law. No ownership exists, however, before the family or the relations of master and servant are evolved, and these are much more concrete relations. It would, on the other hand, be correct to say that families and entire tribes exist which have as yet only possessions and not property. The simpler category appears thus as a relation of simple family or tribal communities to property. In societies which have reached a higher stage the category appears as a comparatively simple relation existing in a more advanced community. The concrete substratum underlying the relation of ownership is however always presupposed. One can conceive an individual savage who has possessions; possession in this case, however, is not a legal relation. It is incorrect that in the course of historical development possession gave rise to the family. On the contrary, possession always presupposes this "more concrete legal category". One may, nevertheless, conclude that the simple categories represent relations or conditions which may reflect the immature concrete situation without as yet positing the more complex relation or condition which is conceptually expressed in the more concrete category; on the other hand, the same category may be retained as a subordinate relation in more developed concrete circumstances. Money may exist and has existed in historical time before capital, banks, wage-labour, etc. came into being. In this respect it can be said, therefore, that the simpler category expresses relations predominating in an immature entity or subordinate relations in a more advanced entity; relations which already existed historically before the entity had developed the aspects expressed in a more concrete category. The procedure of abstract reasoning which advances from the simplest to more complex concepts to that extent conforms to actual historical development. It is true, on the other hand, that there are certain highly developed, but nevertheless historically immature, social formations which employ some of the most advanced economic forms, e.g., cooperation, developed division of labour, etc., without having developed any money at all, for instance Peru. In Slavonic communities too, money -- and its pre-condition, exchange -- is of little or no importance within the individual community, but is used on the borders, where commerce with other communities takes place; and it is altogether wrong to assume that exchange within the community is an original constituent element. On the contrary, in the beginning exchange tends to arise in the intercourse of different communities with one another, rather than among members of the same community. Moreover, although money begins to play a considerable role very early and in diverse ways, it is known to have been a dominant factor in antiquity only among nations developed in a particular direction, i.e., merchant nations. Even among the Greeks and Romans, the most advanced nations of antiquity, money reaches its full development, which is presupposed in modern bourgeois society, only in the period of their disintegration. Thus the full potential of this quite simple category does not emerge historically in the most advanced phases of society, and it certainly does not penetrate into all economic relations. For example, taxes in kind and deliveries in kind remained the basis of the Roman empire even at the height of its development; indeed a completely evolved monetary system existed in Rome only in the army, and it never permeated the whole complex of labour. Although the simpler category, therefore, may have existed historically before the more concrete category, its complete intensive and extensive development can nevertheless occur in a complex social formation, whereas the more concrete category may have been fully evolved in a more primitive social formation. Labour seems to be a very simple category. The notion of labour in this universal form, as labour in general, is also extremely old. Nevertheless "labour" in this simplicity is economically considered just as modern a category as the relations which give rise to this simple abstraction. The Monetary System, for example, still regards wealth quite objectively as a thing existing independently in the shape of money. Compared with this standpoint, it was a substantial advance when the Manufacturing or Mercantile System transferred the source of wealth from the object to the subjective activity -- mercantile or industrial labour -- but it still considered that only this circumscribed activity itself produced money. In contrast to this system, the Physiocrats assume that a specific form of labour -- agriculture -- creates wealth, and they see the object no longer in the guise of money, but as a product in general, as the universal result of labour. In accordance with the still circumscribed activity, the product remains a naturally developed product, an agricultural product, a product of the land par excellence. It was an immense advance when Adam Smith rejected all restrictions with regard to the activity that produces wealth -- for him it was labour as such, neither manufacturing, nor commercial, nor agricultural labour, but all types of labour. The abstract universality which creates wealth implies also the universality of the objects defined as wealth: they are products as such, or once more labour as such, but in this case past, materialised labour. How difficult and immense a transition this was is demonstrated by the fact that Adam Smith himself occasionally relapses once more into the Physiocratic system. It might seem that in this way merely an abstract expression was found for the simplest and most ancient relation in which human beings act as producers -- irrespective of the type of society they live in. This is true in one respect, but not in another. The fact that the specific kind of labour is irrelevant presupposes a highly developed complex of actually existing kinds of labour, none of which is any more the all-important one. The most general abstractions arise on the whole only when concrete development is most profuse, so that a specific quality is seen to be common to many phenomena, or common to all. Then it is no longer perceived solely in a particular form. This abstraction of labour is, on the other hand, by no means simply the conceptual resultant of a variety of concrete types of labour. The fact that the particular kind of labour employed is immaterial is appropriate to a form of society in which individuals easily pass from one type of labour to another, the particular type of labour being accidental to them and therefore irrelevant. Labour, not only as a category but in reality, has become a means to create wealth in general, and has ceased to be tied as an attribute to a particular individual. This state of affairs is most pronounced in the United States, the most modern form of bourgeois society. The abstract category "labour", "labour as such", labour sans phrase, the point of departure of modern economics, thus becomes a practical fact only there. The simplest abstraction, which plays a decisive role in modem political economy, an abstraction which expresses an ancient relation existing in all social formations, nevertheless appears to be actually true in this abstract form only as a category of the most modern society. It might be said that phenomena which are historical products in the United States -- e.g., the irrelevance of the particular type of labour -- appear to be among the Russians, for instance, naturally developed predispositions. But in the first place, there is an enormous difference between barbarians having a predisposition which makes it possible to employ them in various tasks, and civilised people who apply themselves to various tasks. As regards the Russians, moreover, their indifference to the particular kind of labour performed is in practice matched by their traditional habit of clinging fast to a very definite kind of labour from which they are extricated only by external influences. The example of labour strikingly demonstrates how even the most abstract categories, despite their validity in all epochs -- precisely because they are abstractions -- are equally a product of historical conditions even in It would be inexpedient and wrong therefore to present the economic categories successively in the order in which they have played the dominant role in history. On the contrary, their order of succession is determined by their mutual relation in modern bourgeois society and this is quite the reverse of what appears to be natural to them or in accordance with the sequence of historical development The point at issue is not the role that various economic relations have played in the succession of various social formations appearing in the course of history; even less is it their sequence "as concepts" (Proudhon) (a nebulous notion of the historical process), but their position within modern bourgeois society. It is precisely the predominance of agricultural peoples in the ancient world which caused the merchant nations -- Phoenicians, Carthaginians -- to develop in such purity (abstract precision). For capital in the shape of merchant or money capital appears in that abstract form where capital has not yet become the dominant factor in society. Lombards and Jews occupied the same position with regard to mediaeval agrarian societies. Another example of the various roles which the same categories have played at different stages of society are joint-stock companies, one of the most recent features of bourgeois society; but they arise also in its early period in the form of large privileged commercial companies with rights of monopoly. The concept of national wealth finds its way into the works of the economists of the seventeenth century as the notion that wealth is created for the State, whose power, on the other hand, is proportional to this wealth -- a notion which to some extent still survives even among eighteenth-century economists. This is still an unintentionally hypocritical manner in which wealth and the production of wealth are proclaimed to be the goal of the modern State, which is regarded merely as a means for producing wealth. The disposition of material has evidently to be made in such a way that (section) one comprises general abstract definitions, which therefore appertain in some measure to all social formations, but in the sense set forth earlier. Two, the categories which constitute the internal structure of bourgeois society and on which the principal classes are based. Capital, wage-labour, landed property and their relations to one another. Town and country. The three large social classes; exchange between them. Circulation. The (private) credit system. Three, the State as the epitome of bourgeois society. Analysis of its relations to itself. The 44 unproductive" classes. Taxes. National debt. Public credit. Population. Colonies. Emigration. Four, international conditions of production. International division of labour. International exchange. Export and import. Rate of exchange. Fiv, world market and crises. "
