Where I wrote
>"Labor cost of production" theory is most coherently
understood as a (very) special case of a scarcity-based theory of
value. <
Jim responds
Gil should note that this is true only for _one_ interpretation of
political economy (or what Schumpeter termed a "vision"), i.e., that
dominated by the scarcity-based paradigm (dominated by neoclassical
economics, especially its Walrasian-utopian form), which sees "value"
and "price" as well-nigh synonymous. There exist other visions or
paradigms, to say the least, unless economics has entered the
Thatcherian era of "there is no alternative."
I don't see the basis for Jim's criticism here. First, in all my comments
I was careful to distinguish effects on values and on (cost-)
prices. There is a connection between the two, in that something that has
an opportunity cost in terms of labor expended necessarily has an
opportunity cost in the neoclassical sense (although not vice versa), but I
never treated values and prices as identical. Second, I was careful to
situate my characterization in Marx's own writing, about which more below.
FWIW, I also don't see the basis for Jim's suggestion that the
"Walrasian-utopian form" (whatever that is) of neoclassical economics
"especially" dominates the scarcity-based paradigm. Walrasian analysis,
while still important, is hardly the dominant thread of contemporary
mainstream economics. As for "utopian", I don't see how the Walrasian
framework is any more "Utopian" than, say, Marx's Vol. I scenario of
exchange at value. Indeed, one can show that exploitation arises even
under Walrasian conditions. So it's difficult to see what's necessarily
"Utopian" about this framework. Unrealistic, perhaps, but so is the
scenario of exchange at value.
Perhaps I am here and below misrepresenting what Gil's scarcity-driven
vision is exactly. But this is only because he does not clearly
specify which scarcity-driven theory he is advocating. He might be a
follower of Henry George, for example.
Well, geez, Jim, neither did Jon "clearly specify which scarcity-driven
theory" he was inquiring about, but I notice you didn't take *him* to task
for this when you posted your response to his e-mail. Maybe *he's* a
follower of Henry George.
For what it's worth, though, with just one clarification and one caveat,
everything I wrote is consistent with the semi-definition you supplied in
your own reply to Jon: a good is "scarce" if its supply curve is not
infinitely elastic at zero price. The clarification would be to add the
qualifier "at the level of current demand"--i.e., a good's supply curve
doesn't have to be *perpetually* infinitely elastic at zero price to render
the good "unscarce." Agreed?
The caveat, consistent with the passages I cite from Marx, is that this
definition works just as well if opportunity cost is embodied labor time
"transformed" into price terms, rather than direct and imputed factor
costs. Thus, a good is scarce if the supply price is non-zero at a given
level of demand. This could be due to either purely economic scarcity
(positive opportunity cost) or absolute scarcity (the supply curve goes
vertical at the level of current demand). And also FWIW, beginning with
the Grundrisse and continuing through his Value Price and Profit lecture,
Marx consistently endorsed this "cost-price" view of labor values.
Consequently, if your allusion to Henry George concerned the phenomenon of
absolute scarcity, I'd say that's a subset of the issues being considered
here. But not really to the point if so, since I was focusing on the case
in which opportunity cost, rather than absolute scarcity, dictated supply
price--the case Marx was concerned with in constructing his account.
Continuing---where I wrote,
One way to see this is to note three significant caveats to Michael
P's reply to Brad DeLong. First, as Marx himself insists, a necessary
condition for a commodity to have value is that it have use-value
(that is, people "need" it) [Capital V.I p. 131,]. So as Marx says,
even if a commodity contains labor, it doesn't have value if there
isn't demand for it. ...<
Jim comments
That's right. Marx never denied the role of demand. In fact, his big
book starts with it: "A commodity is ... a thing that by its
properties satisfies human wants of one sort or another ... whether
they spring from the stomach or from fancy...." The old
history-of-economic- ideas view that Marx's theory of value and price
is totally "objective" is wrong.
He _does_ abstract from the specific use-value of specific commodities
soon thereafter in CAPITAL, but abstract use-value (and thus demand)
still plays a role in the theory. It then is reintroduced step by step
as the book progresses.
Great, but I'm not sure how any of the above alters my original
point: according to Marx, labor embodied in a commodity is not of itself
sufficient for that commodity to have value. It must also be
demanded. Thus, just as in the neoclassical approach to scarcity, Marx's
is not *strictly* a production-side theory of value.
BTW, I think it's a mistake to conflate wants and needs (as Gil does
and Marx sometimes does).
No, I don't really, and BTW in any case my argument doesn't in any way
depend on it, as you concede below. I was just echoing Jon's use of the
term in his phrase "scarcity-need," since the distinction is not central to
the issues at hand and thus, as you say, "no big deal."
Wants are subjective, while (at least as I
understand them) needs are objective. I may or may not want something
(e.g., television shows, water, heroin) subjectively, but it may or
may not be something I need objectively; that is, it may or may not
contribute to my physical or societal health and survival. Because
it's no big deal, and because the theory of need is complex (calling
Mike Lebowitz!), I'll leave this issue aside. (I don't see the
definition of needs as "especially intense wants" to be very useful.
That just refers to wants that encourage inelasticity of demand.)
See above.
In a slightly reformatted form, Gil writes: >Second and more
generally, Michael's response obscures the point that the labor
embodied in a commodity is itself a reflection of scarcity, that is,
of expenditure of a resource that has alternative economic uses. Marx
makes just this point in his 11 July 1868 letter to Dr. Kugelmann
defending his formulation of value theory in _Capital_:
"Every child knows too that the mass of products corresponding to the
different needs [of a country] require different and quantitatively
determined masses of the total labor of society. That this necessity
of distributing social labor in definite proportions cannot be done
away with by the particular form of social production, but can only
change the form it assumes is self evident."
Thus, to withdraw a portion of the "total labor of society" away from
some line of production in order to devote it to another is deny some
form of "needs" being met. Labor allocation matters because labor is
economically scarce, and couldn't possibly matter if labor weren't
ultimately scarce in this way.<
Labor-power isn't always scarce (nor is anything else). In cases of
recession and depression, where Dr. Keynes replaces Dr. Walras, the
"factors of production" are no longer scarce. To use Leijonhufvud &
Clower's terminology, scarcity is only notional (and not effective).
The economy is inside the textbook production possibilities frontier,
so that the Walrasian scarcity-driven vision does not apply.
First, this does not address my point that in *Marx's own* perspective
(which was not evidently Keynesian in nature), the justification for
labor-embodied as a basis for value is in terms of opportunity cost and
competing needs--i.e., scarcity. So at least I'm doing no violence to
Marx's labor-based approach as he conceived it.
Second, I don't see how the introduction of Keynesian considerations
fundamentally alters my point, since "excess supply at going wage rates" is
clearly not equivalent to "infinitely elastic supply at zero wages". Or to
put it another way, labor power doesn't stop being scarce just because
markets for labor power don't clear (just as the value of labor power
doesn't become zero just because there is excess supply). And I'll bet
neither Leijonhufvud nor Clower argue to the contrary, whether or not the
resulting situation is "Walrasian." Do you have a citation suggesting to
the contrary?
Further, to Marx, the dynamics of capital accumulation imply that
labor-power cannot be scarce for long. If it is scarce, this squeezes
profits, slowing accumulation and the demand for labor-power (cf.
CAPITAL, volume I, ch. 25). The reserve army of labor -- i.e.,
non-scarce labor-power -- is thus reproduced over time. Labor-power is
non-scarce in the Walrasian sense because its price (the wage) does
not equal either the marginal disutility of submitting to an
employer's authority for a specific time-period and the marginal
productivity of the capitalist's use of labor-power. (Obviously, Marx
did not write in these terms. But it's a mistake to assume _a priori_
that he thought in terms of the scarcity-driven vision.)
Aren't you being inconsistent with your own characterization of "scarcity"
here? The existence of an industrial reserve army doesn't imply that the
supply of labor power is infinitely elastic at zero wages at going levels
of demand. And I don't see the basis for your suggestion that labor power
is "non-scarce" because "its price...does not equal either the marginal
disutility of submitting to an employer's authority for a specific
time-period [or] the marginal productivity of the capitalist's use of
labor-power." Whose scarcity definition is this? Certainly not Walras's,
or of anybody I know who uses the Walrasian framework. Reference?
Third, right before the quote above, Marx says "Every child knows that
any nation that stopped working, not for a year, but let us say, just
for a few weeks, would perish." This is not in tune with the
scarcity-driven paradigm.
Sure it is, it's just an extreme version of the implications of
scarcity. If there literally were no scarcity, then no one's survival
would depend on the allocation of labor.
It fits more with Luxemburg's later ideas
about the "mass strike."
Perhaps that too, without at all contradicting the idea of scarcity.
Even ignoring this societal element, Marx is
referring not to the microeconomic kinds of issues that drive the
scarcity vision. Instead, it's a macroeconomic phenomenon -- "any
nation that stopped working," with "the mass of products" being a
notion akin to that of GDP.
See above, but even if I granted this it wouldn't contradict my point. You
found a sentence where, on hypothesis, Marx wasn't talking about
scarcity. So what? I cited a passage where he was (see next comment).
Above, Gil referred to "withdraw[ing] a portion of the 'total labor of
society' away from some line of production in order to devote it to
another" but it's clear _in context_ that Marx was talking about
withdrawing _all_ of the labor of society from _all_ lines of
production.
No, this isn't clear "in context." Quite the contrary. If you'll reread the
passage I cited, Marx says "Every child knows *too*..."--that is, "also",
that is, Marx is making an *additional* point beyond the one made in the
passage cited by Jim. According to Jim's reading, if I say that I'm going
to the store, and then say that I'm going to read a book "too", I'm really
only saying "in context" that I'm going to the store. This interpretation
seems dubious.
And furthermore, just to make the point explicit, in the passage I cite
Marx speaks of the *distribution* of social labor "in definite proportions"
*across* the "different needs" of society, which is manifestly "micro" not
"macro." There is no way this can be interpreted as withdrawing *all*
labor from production or not, no matter what Jim says.
If only some sectors of the working class were to stop
working, so that the phenomenon is microeconomic, the result would be
different (an example of the fallacy of composition) unless of course
the percentage of the working class on strike is pretty large.
See above.
Marx's statement above gives away quite a lot to a scarcity-based
conception of value, but even so it is based on some very restrictive
assumptions, in particular 1) that the "total labor of society" is
given ... and thus invariant to relative prices; <
In terms of his CAPITAL, volume I, Marx's discussion is of _abstract_
labor (and thus abstract labor-power).
Perhaps, but I wasn't citing CAPITAL, I was citing Marx's ex post
justification of his labor-based value theory in CAPITAL. That
justification stands whether or not Marx was discussing abstract labor,
since that is simply an aspect of the theory thus justified.
That is, he abstracts from the specific use-values produced by labor
and specific skills -- in order to focus on the class relationship
between abstract labor and abstract capital (i.e., M-C-M'). The way I
interpret this is in terms of the _shared characteristics_ of all
labor and those of all labor-power. In that case, the aggregation
problem does not apply. Of course, it must then be remembered that the
abstract labor/abstract capital story of volume I is clearly NOT the
same as the more concrete story of volume III or the even more
concrete reality we encounter. (As Paul Sweezy noted early on in his
THEORY OF CAPITALIST DEVELOPMENT, it's a mistake to ignore the
importance of different degrees of abstraction in Marx. It's crucial
to put all of Marx in context.)
Interesting, but not relevant to his ex post *justification* for the
labor-based theory of value that Jim partially describes here.
2) that the "different needs" of a society are invariant (and thus
invariant to relative prices); <
In terms of my definition, needs _are_ invariant (for a given size and
mix of population). Biological needs are given by the nature of human
bodies, while socially-created needs are constant in any given
historical era.
Per the above, the sense of my argument is completely unaffected if we
substitute "different wants and needs" for Marx's own phrase.
The second part of this formulation is a bit doubtful, since people
are always creating new needs for themselves or for each other. But in
context it makes sense. A mass strike would clearly cramp the ability
to fulfil needs whether they were changing or not.
See above.
Some day, we'll have a more complete vision of political economy that
involves the endogenous change in needs (though Mike Lebowitz has done
a lot of work on this, drawing out Marx's theory).
I'll bet. But none of this affects my point.
Some day, neoclassical theory will also drop its silly assumption that
wants (preference sets) are given exogenously. Unfortunately, even
experimental/behavioral economics doesn't seem to want to deal with
endogenous tastes. It smacks of the dreaded sociology, which everyone
knows is inherently fuzzy and unscientific and therefore anathema.
(Economists want to forget that economics is nothing but a type of
sociology.)
This inaccurate diatribe against mainstream experimental/behavioral
economics is in any case not relevant to my argument.
and (3) that meeting a given configuration of social "needs" for
consumption goods implies a specific allocation of social labor "in
definite proportions," denying the possibility of varying embodied
labor requirements through changes in production technique. <
This seems a quibble. Marx is talking about a specific time-period
(and _ex post_ results rather than _ex ante_ decision-making), not the
dynamics of capitalist accumulation and the changes in technology.
It's not a quibble for the reasons explained subsequently: granting Marx's
in-context scarcity justification for his labor-based approach to value, it
is still the case that labor values are generally a poor index of scarcity
except under special conditions, including fixed factor proportions.
It's at best not obvious that any of these conditions hold in
general. And if they don't, the "labor cost of production" theory of
value becomes problematic at best, and typically incoherent.<
The "labor cost of production" theory of value is not what Marx was
talking about.
As noted above, it is at least consistent with what he was talking about,
as he repeatedly endorsed. Disagreement on this reduces to the above
question as to whether Marx understood labor expended as an index of scarcity.
If by this Gil means a "labor cost of production"
theory of _price_, then it fits more with Ricardo's economics (at
least 93 percent of the time according to Stigler) or the theory
presented by some neo-Ricardians.
Not really. In Capital V.I, Marx continues to defend the notion that
(average) commodity prices are "regulated" by their corresponding values,
suitably transformed (see footnote, p. 269 Penguin ed.).
(The whole "transformation problem"
cul-de-sac talks about the possibility of developing a complex (but
still very static) labor-cost theory of price, in which the vector of
prices of production (long-run equilibrium prices or centers of
gravitation for market prices) is related in a simple mathematical way
to the vector of values, which are assumed, by this school, to be
given beforehand.)
See above.
Marx did not develop a theory of price as much as (A) a labor theory
of societal exploitation and (B) a theory of the deviation between
societal reality (represented by values) and the empirical
microeconomic reality encountered by individuals (represented by
prices), i.e., the theory of commodity fetishism or (in volume III)
that of the illusions created by competition. In volume I, in step
with his abstraction from the specific use-values of commodities, he
assumed that values and prices corresponded, so that the fetishism of
commodities could be cut through. (Of course, most readers skip the
last part of chapter 1 of volume I, and thus ignore the role of
commodity fetishism and its importance in Marx's vision.)
See above. FWIW, I never skip the last part of Ch. 1.
Of course, Gil (like many others), disagree with this interpretation
of Marx's law of value.
When did I disagree with this? I've never denied that Marx develops either
(A) or (B). But I don't need to in order to maintain in addition that he
justified his labor-based approach to value in terms of scarcity.
But I don't see how the "Marx developed a
complex version of Ricardian price theory" vision fits with the
totality of the structure of the three volumes of CAPITAL. Why, for
example, did Marx leave price theory to volume III?
Well, he didn't entirely, per the V.I. reference given above.
More specifically, as Jon's comment affirms, labor value theory is a
*production*-based theory of value, i.e. it abstracts from *levels* of
commodity demand. <
In Marx's "theory of market value" (chapter 10 of volume III),
market-values depend on demand. This differs from the abstract values
of previous books and chapters. With high demand for corn, for
example, poor land is drawn into production, lowering productivity and
thus raising market-value. This concept is only a difficulty if we
assume that Marx's major concern was to derive a theory of
cost-determined prices. I don't make that assumption, so Marx's
CAPITAL makes sense to me.
Despite the fact that Marx's argument in Ch. 10 is logically incoherent,
pretty much from beginning to end?
Which is to say that, *unless* conditions are invoked (i.e., those
consistent with some form of the nonsubstitution theorem) which allow one
to abstract from demand considerations, Marx's labor-based approach to
value is incoherent, as well.
However, a *necessary* condition for commodity values--let alone
prices--to be invariant to the pattern of demand is that the
stringent conditions of some form of "nonsubstitution theorem"
obtain.... This type of theorem requires in general three conditions:
.... <
This whole theory assumes that Marx was a minor post-Ricardian, who
aimed at adding a gloss or two to Ricardo's labor theory of price. But
Marx, in my reading, was not a Ricardian except as a first
approximation for pedagogical reasons (as in his _Value, Price and
Profit_, 1865), where he used the _lingua franca_ of economists of his
day.
No, I think it means something stronger, that Marx's justification for his
theory of value in terms scarcity is flawed except under very special
conditions. Absent these conditions, embodied labor time is a poor index
of anything but a purely tautological conception of a commodity's "value."
... Bottom line: to the extent that commodity labor values matter, they
are an index of economic scarcity, but as such they are incomplete and
inessential under general and arguably "real-world" conditions. Thus,
the "labor theory of production" is at best understood as a very special
case of a scarcity-based theory of value. <
The interpretation I'm developing of Marx's law of value is quite
different. First of all, I see prices of production as mostly being a
distraction, because the real world of capitalism involves a
constantly-changing disequilibrium process, with the disequilibrium
process feeding back to help determine the "technical coefficients"
and thus the values. (However, they aren't _totally_ irrelevant; it's
a mistake, in my book, to rule out abstraction.
(oh, in my book too, definitely)
The "Temporal Single
System" school of Freeman and Kliman make a mistake by ignoring them.
The price of production/value nexus does reveal some answers to some
abstract questions. If you can't find any relationship between POPs
and values, then there's a problem.
There's also a problem if "values" are at best epiphenomenal or (my point)
dependent on commodity prices in general.
Gil
