Gil writes: >… I just make this observation: it doesn't *necessarily*
follow that the circuit of capital must be implemented on the basis of
capitalists purchasing just workers' capacity to work. <
If you use the phrase "workers' capacity," that includes the notion of
hiring an independent contractor. It doesn't just include the hiring
of fully proletarianized individuals. And I would agree. There's no
reason why capitalists can only hire the fully proletarianized.
(Sounds like an old slogan: "hire the fully proletarianized!")
Gil: >Nor does it make sense that profit-seeking capitalists would
settle for this if they could dictate the labor to be performed by
simply contractual means: why go through the trouble and expense of
exerting direct supervisory control over the production process if you
don't have to? <
Obviously, they know how to balance (expected) costs and benefits.
They understand that there are often economies of scale in hiring
wage-workers. Or we could assume those away.
Gil: >A plausible answer is that capitalists don't use merely
contractual means to achieve surplus value because sometimes they
can't -- i.e., contracting is seriously imperfect. But not always,
because in the real, non-ideal world, we do in fact sometimes see
capitalists engaging specific labor services [of course they do --
JD], and do sometimes see workers hiring capital, as in the case of
worker-owned firms that borrow money to finance production.<
just because "contracting is seriously imperfect" doesn't mean that
capitalists never "engaging specific labor services." Managing purely
proletarianized labor is also seriously "imperfect" (compared even to
idealized capitalist standards, in which workers are akin to the
silkworms of Braverman's excellent example).
"workers hiring capital"? does this mean someone hired Bill Gates to
do the debugging of his Windows PC?
This is an example of the degradation of language. For Marx, "capital"
refers to capitalist society or to the capitalist class – or to a
specific representative capitalist (Moneybags, in volume I of
CAPITAL). For most economists, the word "capital" has several
different meanings (money capital, physical capital, human capital,
social capital, etc.) though lazy economists sometimes don't clarify
which of these they're referring to. In finance, "capital" refers to
net worth or equity (what a company owns, net of what it owes, i.e.,
what the stockholders own). Here, for Gil, "hiring capital" means
"borrowing money" – even though, all else equal, borrowing reduces
one's net worth (i.e., one's capital).
(Borrowing money seems to be what Samuelson and Roemer are talking
about when they refer to "workers hiring capital," even though they
refer to K (capital goods) being introduced into a neoclassical
production function, in total symmetry to L ("labor services"), though
the values of the first and second derivatives may be different. This
conflation of concepts arises because borrowing is a very common way
to finance the acquisition of capital goods. But these worthies don't
worry about issues of finance.)
But ignoring the deep ambiguity of Gil's language, it's absolutely
true that worker-owned co-ops borrow money (and I don't know who
denied this). This has always been the major Achilles Heel of co-ops.
Not only do bankers dislike lending to co-ops, charging them an excess
risk premium, but they want to be treated more like stockholders
(i.e., owners) and less like rentiers (i.e., mere creditors). This is
a severe problem partly because the worker-owners usually do not have
enough capital (i.e., equity) of their own, so their assets are not
diversified but are instead set up for a dramatic fall by being
concentrated in one basket, the co-op.
This makes it difficult for a workers' co-op to survive as a co-op
(i.e., run in a democratic way). It's the main reason why co-ops tend
to be very small, struggling in the interstices of capitalist society.
The problem that workers' co-ops have with borrowing indicates that
they aren't really "hiring capital" as much as suffering from
operating in a capitalist society. Because of their extremely
difficult situation, they face a Faustian choice: either borrow money
and stop being a true workers' co-op or stay very small and die off
when the members retire or die. They don't have a Roemerian "farm" to
run to, so that they are not the independent producers of point (D)
above. Instead, they are on the cusp between complete
proletarianization and stagnant simple commodity production.
Gil: >What we arguably *never* see, in contrast, is the "ideal" case
Marx used to motivate his argument in Ch. 6, i.e. commodity exchange
at value….<
Marx didn't "motivate" his argument with the assumption that
commodities exchange at value. Rather, as I've said before, he _used_
the lingua franca of his day (Ricardian political economy, with its
93% labor theory of price) as a way of simplifying the argument. It's
just like Roemer using general equilibrium claptrap (the lingua franca
of his day) to communicate his theory of scarcity rents as
exploitation.
But, unlike Roemer, Marx was interested in the "critique of political
economy" (and indeed subtitled CAPITAL using those words), i.e., in
exposing the fetishized vision of the political economy of his day.
Part of this story is that Ricardians (including the Ricardian
socialists) tended to see "exchange at value" as "equal exchange," as
somehow embodying bourgeois standards of fairness. Marx assumes that
capitalist exchange is "fair" in this way. But then it turns out that
exploitation happens anyway (because of the difference between the
value of labor-power and the value produced by using labor-power).
The case of values = prices is also important if one's standard of
comparison is SCP (as it was for many of the Ricardian school, who
followed Smith to conflate simple commodity production and
capitalism). One of Marx's points is that SCP, the ideal of Smith and
others, is qualitatively distinct from capitalism as a social system.
The price = value assumption is also useful for understanding
redistribution of surplus-value, admittedly a secondary question.
By abstracting from the differences of use-value between commodities
very early on in volume I of CAPITAL, he ends up with values and
prices of production (POPs) proportional to each other. (He doesn't
think market prices are proportional to values but instead rotate
around POPs the way electrons do around an atomic nucleus.)
This abstraction from the heterogeneity of use-values allows him to
focus his analysis on exchange-value and social relations of
production. Specifically, it helps him limn the social relationship
between abstract capital (which is not a real person, but rather a
"bearer" of a social role) and abstract labor (ditto) rather than
immediately jumping in to discuss the differences among capitalists
(which are introduced in a serious way only in volume II) and
competition amongst them (which is introduced in volume III), not to
mention the differences among and competition amongst workers (which
appears only in the never-written "book on wage labor," or volume IV,
as Mike Lebowitz argues). All the details of commodity relations and
competitions, to Marx, hide and distort the appearance of the
underlying class relations (this, again, is Marx's "commodity
fetishism").
If I can read Mike's mind, Marx would have dealt with the issue of
capitalists hiring the labor services of independent contractors when
he got to volume V.
Gil, have you ever read a book like that by Fred Moseley on Marx's
method in CAPITAL? You don't seem to have done so.
For Marx, under commodity production, "the relations connecting the
labor of one individual with that of the rest appear, not as direct
social relations between individuals at work, but as what they really
are, material relations between persons and social relations between
things." (CAPITAL, V. I, ch. 1, s. 4.) By uniting "material relations
between persons" (value relations) and "social relations between
things" (price relations), in volumes I and II of CAPITAL, he wanted
to make things clearer (though he seems to have failed for many
readers). This is an example of Marx's "acid of abstraction."
Note that he doesn't deny (but instead asserts) the reality of
alienated material relations between persons in this quote. It's not
like prices are some sort of epiphenomenon; appearances are real for
Marx; the fetishism of commodities is not a hallucination. They are
just as much part of capitalism, in his view, as values are. The fact
that a pencil that's sitting in a glass of water appears to be bent is
not a hallucination. Rather, it's a real phenomenon, just as desert
mirages are, of us seeing things in a distorted way under certain
circumstances.
In addition, the values = POPs assumption shows the interconnectedness
of the entire capitalist mode of production (or a SCP system). We all
live in a society; we're not a bunch of atomistic individuals as in NC
economics.
This forms a useful macrofoundation of microeconomics. It allows Marx
to sketch very clearly, for example, that if an individual
commodity-seller sells his or her good or service above its value,
that's a redistribution of value from other sellers. (Though value
isn't created in exchange, Marx did say that use-values can be gained
via trade. But he saw the "gains from trade" as a trivial matter
compared to social relations of production.)
As Hilferding argued against Böhm-Bawerk, central to the Marxian
viewpoint is to look at matters from the standpoint of society, while
B-B wanted to look at matters only from the standpoint of individuals.
Some Marxists, alas, got stuck with the standpoint of society _only_
(partly because they got stuck with volume I of CAPITAL), but it's
clear that in volume III, Marx also looks at capitalism from the
perspective of individuals within the context of capitalism. (See the
summary of his book that occurs on the first page of text of volume
III.) But his perspective is that we have to understand the social
_context_ in order to understand the individual standpoint and the
individual's fetishized perspective.
I had written: >>But we don't have to start that way (and that
idealist method [of Roemer and the neoclassicals, etc.]). I think it's
reasonable to start with the real (empirical) world as one's
theoretical benchmark, even though that world is at best incompletely
known.<<
Gil: >You may think that, but that's not what we're discussing, which
is Marx's argument in Capital V.I. Part 2. Marx bases his Ch. 6
argument explicitly on the very non-empirical condition of commodity
exchange at value.<
There's a difference between a rejection of idealist abstractions and
a rejection of abstractions _per se_. As people on the left used to
ask, "is that a good abstraction?" Idealist abstractions in economics
involve deductive logic from axioms. That's different from a
materialist abstractions, of the sort that he talks about in the
Introduction to the GRUNDRISSE.
Exchange at value is _definitely_ non-empirical, because we live in an
alienated, fetishized, society. (If we lived in a non-alienated,
non-fetishized society, the class relations of capital would be
readily apparent, if they existed. The non-equality of values and POPs
helps stabilize the system by obscuring it.) However, the assumption
of exchange at value is only one part of the entire book, which goes
on to volume III, where values are no longer assumed equal to POPs.
See what I said above, about reasons for the assumption and the
comparison to a modern labor economics textbook in terms of
presentation (my endorsement of Lebowitz's point 1).
Gil: >And there are serious problems with this procedure: (1) his
theoretical justification for it is illogical. (2) this scenario does
not typically occur. (3) The most plausible *ideal* case under which
it obtains is one that abstracts from the exact phenomenon under
study, i.e., positive surplus value. That's a pretty counterproductive
basis for beginning an analysis of how surplus value exists.<
We've discussed this before. I can see why you assert that e-mail
discussions on venues such as pen-l are useless.
I don't know if Marx's approach is "unproductive" or not. Such a
judgment depends on one's values. But maybe a relative comparison can
be made. Given his premises, he showed that surplus-value exists.
Roemer made many, many more abstractions from empirical reality and
still didn't show the existence of capitalist exploitation as much as
assume it. The benefit/cost (i.e., the ratio of theoretical
contributions to abstractions, if such things could be measured)
calculus favors Marx over Roemer.
Gil:>Now again, no "ideal" contracting assumption is really needed to
maintain the relevance and empirical validity of Walt's point [as Gil
interprets it], because in fact sometimes capitalists *can and do*
accrue surplus value simply on the basis of loans to direct producers,
and sometimes they *can and do* engage specific labor services rather
than just hiring labor power.<
there's no "simply" about it. They can do so only under very specific
social conditions. See my discussion above (points C, D, and E).
When, empirically, have all commodities exchanged at their respective
values, per Marx's ideal assumption?<
_Of course_ goods and services don't trade at value (and Marx thought
they only did so under very strict assumptions such as that the OCC is
constant across industries and the economy is in equilibrium with
profit rates equalized between sectors). Part of Marx's point in
volume III was that commodity POPs differ from values.
But, as I said before, I think that his assumption is superior (given
his goal) to the standard neoclassical ones of abstracting from such
trivia as money, production, and historical time. In general, unless
one is a total empiricist, one shouldn't reject abstraction
altogether. The issue, as I said above, is _which_ abstractions are
_better_, given one's goals? Marx is trying to figure out the social
relations of capitalism (and other modes of production) and to change
the world for the better, whereas the neoclassical goals seem to be to
idealize it, apologize for capitalism, seeing it as nothing but an
imperfect version of the idealized market (while typically conflating
SCP and capitalism).
me:>>In the real world, it is normal if not ubiquitous for contracts
to be incomplete. Imperfect and asymmetric information are normal, not
exceptions to be considered in special articles.<<
Gil: >Nothing I've said denies that. Just that sometimes they are
*sufficiently* complete to allow regular exceptions to Marx's
categorical assertion that capitalists purchase [only] labor power.
Thus his categorical inference appears to be unjustified.<
Marx makes no such "categorical assertion." You're the one who's good
at quoting scripture: where did he make such a categorical assertion?
On the rest, see my discussion above, where I discuss Marx's purported
"insistence."
me:>> Given this approach, it's necessary for one to say "assume that
contracts are complete" in order to create with the Debreu-style
utopias that have been so influential in NC-type economics for so
long.<<
Gil: >No, I don't think so. "Complete contracts" is just a theoretical
benchmark for NC economics, just like "commodity exchange at value" is
a theoretical benchmark for Marxian economics. But as argued above,
contractual completeness may often be closer to empirical relevance
than universal commodity exchange at value. And by the way,
Debreu-style economies, however hypothetical, are in no sense
"utopias."<
Complete contracts are only a "theoretical benchmark"? the only thing
that's good about such a benchmark is that serious
(empirically-oriented) economists raised on NC gruel have developed
ways to get rid of that assumption. Thus, we see interesting work on
incomplete contracts under incomplete information, etc. (I'd guess
that that the vast majority of the major achievements of NC economics
involve breaking the unrealistic assumptions of Debreuvian general
equilibrium.[**] For example, the idea of an externality would never
come to someone (like Smith, Ricardo, or Marx) who started with a
real-world conception of markets rather than one that sees markets as
the ideal form of human relationship.)
utopia: >(1) A place in which social, legal, and political justice and
perfect harmony exist; (2) A literary work which describes the ideal
state or way of life. …; (3) an imaginary and indefinitely remote
place of ideal perfection especially in laws, government, and social
conditions; (4) an ideal and perfect place or state, where everyone
lives in harmony and everything is for the best; or a description of
such a place; (5) An ideal place or state. Any vision of a socially
and politically perfect society. From Greek roots, it derives its
meaning from the words outopia, meaning "no place" and eutopia,
meaning "a place where everything is right." In a sense, a utopian
land in fiction becomes both a place that never quite existed as it is
portrayed and a place where everything seems perfect. It is an
imagined world.< (from a google search for "utopia define").
Debreu's novel is so idealized that laws, government, and social
conditions don't _even exist_. There's no "political justice," because
there's no state. Given this, "everyone lives in harmony and
everything is for the best." It's true that inequality of wealth
distribution can make the utopia look bad to outsiders [a snake in the
Garden!], but insiders (people in the novel) cannot think about such
things, since they're not really people.
[**] two cases of NC advances which _don't_ fit this rubric are the
"theory of the second best" and the Sonnenschein-Mantel-Debreu
Theorem.
<ellipsis>
--
Jim Devine / "You need a busload of faith to get by." -- Lou Reed.
