Date: Sun, 26 Oct 1997 18:27:36 +0000 From: James Heartfield <James-AT-heartfield.demon.co.uk> Subject: M-TH: value theory and the empirical economy In message <l03102809b077db70aad6-AT-[166.84.250.86]>, Doug Henwood <dhenwood-AT-panix.com> writes >Bill, maybe you can answer me on this, since I can't get an answer out of >Jerry. What does this sort of analysis >the under lying conception of value >>theory >tell you that the intelligent use of >bourgeois statistics can't? > >Doug Doug asks a good question. For a few years now I have run reading groups on Capital Vol 1 (though not in an academic setting) and I have to say that there is quite a gulf between Marx's value theory and an empirical account of the economy. However, that is not so surprising since Marx does not aim at an empirical account of the economy, but a theoretical reconstruction of it. The question, then, is, is there any virtue in Marx's theoretical reconstruction? The answer I think depends on what it is you are after. Clearly there is no simple correspondence between Marx's Capital - A Critique of Political Economy, and Capital in the world. As Henryk Grossmann points out in The Law of Accumulation (Pluto, 1992) Marx makes a series of methodological assumptions, abstractions from complex empirical conditions, so as to reconstruct capital logically, from its simplest element, the commodity. That means that there are several assumptions made in the course of Capital that one would have to say were preposterous were one interested simply in an empirical account. Such assumptions are the abstraction from supply and demand, the assumption that commodities exchange at their value (Vol1) rather than their price of production (not explained until Vol3), the reduction of all labour to simple, unskilled labour in its value creating properties, the reduction of capital to industrial capital (vol1), and the subsequent abstraction from interest-bearing capital or rent-bearing land (again not explained until chapter 3), the assumption of a uniform turnover time (vol2), the assumption of a uniform rate of profit (vol3), the abstraction from the impact of the world market. Clearly, the conceptual account in Capital is not the same thing as the an empirical account of the Capitalist economy. Indeed, one would have to say that it was deficient in the respects outlined above. So, are there any advantages in these methodological assumptions. Again, the question is what are you looking for? Marx's Capital is not history or journalism (both respectable endeavours on their own account, as Gerry Levy alluded too, from another perspective, Marx was quite a mean journalist, writing sarcastic reports of the City of London for the New York Press) and does not tell the What? but the Why and the How? In so far as it is plausible (I think it is), Capital's logical reconstruction has these advantages over empiricism: * Marx distinguishes between the social *form* of production (value production) and the technological production of use values. Such a distinction, unless I am simply ignorant of the material, is a closed book to bourgeois economics, and so there is no reason to suppose that an interruption of the productive process is any more than a technical question, or to reflect too deeply on the growing divergence between capital accumulation and human development; * Marx shows that the antagonism between value creation and the creation of material wealth has its origins in the two-fold character of the commodity, and hence is an intrinsic, and not accidental or extraneous aspect of Capital accumulation; * Marx shows that value, despite its expression as an exchange ratio between commodities, and hence is an objective and not a subjective relation (contrary to marginal utility theory); * Marx argues that money is not a mere convention, but a necessary development of the value form, and hence must itself have value - a contention that ought to be tested against the spectacular divergence of money in circulation from Gold reserves; * Marx exposes the myth that each purchase is a sale, and hence supply and demand must always be equal, showing that money divorces sale from purchase; * Marx formulates a law of the money supply that is an interesting reversal of the monetarist one, showing money supply to be the dependent variable, while values and the velocity of exchanges are the independent variables - something that Margaret Thatcher discovered practically, when if she had been of a mind to, she could have anticipated by reading Capital; * Marx shows that labour-power creates more value than is paid in wages - surplus value - and so gives an account of the dynamic character of value creation that is missing from neo-classical economics; * Marx differentiates between surplus value and the rate of profit, explaining the illusion that profits are created in Nassau Senior's 'last hour'; * Marx shows that 'constant capital', such capital as is it not invested in wages, creates no new value, but only transfers its value to the final product; And further that the value enhancing impact of new technology comes from the cheapening of the commodity labour-power, by cheapening those commodities that make up wage goods, leading to a relative increase in the share of value produced that falls to the capitalist as 'surplus value' (the importance of this, again, is to show the mismatch between value production and production per se, as relative increases in surplus value are bounded by the length of the working day, where production as such is not); * As against those theories that capital expansion finds its limitation in the sphere of circulation (Sismondi) as a lack of markets for additional products, Marx shows that capital accumulation creates its own markets (vol2); * Marx (in vol3) explains that the formation of an average rate of profit implies a redistribution of value between capitals, transferring value produced in labour intensive industries to those in capital intensive industries (that bears upon the redistribution of value from the less developed world to the developed); * Marx shows that the origins of profit, interest and rent are to be found in surplus value, as the only factor that will allow creation of new value (and hence that the number of labourers productive of surplus value sets a limit on profits, interest, rent etc); * Marx shows that the increase in the mass of profits (ie surplus value) is expressed in a falling ratio of profit to capital (which, bearing in mind that the empirical rate of profit differs from Marx's theoretical reconstruction of it, is demonstrated in The Imperilled Economy, URPE, 1987, and in Aglietta's book on the US economy); * And Marx shows that there exist a number of counter-tendencies to the falling rate of profit (greater mass of surplus value through increases in labour productivity, devaluation of constant capital, mobilising idle capital through credit etc) meaning that the falling rate of profit is expressed as a tendency. Now, because Marx's theory is a logical reconstruction and not an empirical account it is open to the charge that the categories and concepts of the system are self-serving, constructed to achieve the results obtained. It is always possible to turn a theoretical system into a dogma, by susbstituting the mental appropriation of the system for an investigation of the real economy. There are many versions of the objection that the system is self-serving (such as Bohm-Bawerk's attack on the value/price of production distinction) and I do not intend to answer them here, only to note the lingering suspicion that the sole import of Marx's theory is to console Marxists that Capital will collapse. Of course, any theoretical system is open to such a charge, but I think it is sufficient to say here that anyone who thinks Marx predicted the collapse of the capitalist system under the weight of its own contradictions has misread him. But what to make of his contribution? I suggest that Marx's theoretical construction is a guide to empirical investigation. Not that the facts should be made to fit the theory, but that insofar as the theoretical reconstruction captures the underlying essence of the process of accumulation, it directs us give more weight to certain trends (overaccumulation, growth of unproductive labour, growth of speculative capital) and less to others (realisation problems, political barriers, currency speculations). Marx's theory of Capital is one of a radically disequilibriating economy, that combines both constructive and destructive tendencies, and that is historically relative. As such it is no substitute for empirical research, but the best explanation of why the economy behaves as it does, as well as being the best account I know of the real character of social relations, their dynamic and their contingency. To take an example from Doug's book Wall Street (of which I am a fan), I found it ambiguous on the relation of Wall Street to the real economy. I read there asides to the effect that Wall Street is not simply parasitic on an otherwise healthy economy, which seems right. But Marx's discussion of speculative capital would lead to the conclusion that its arose out of the limits to productive accumulation. Cart and Horse judgements belong to the realm of theroetical reconstruction, I suggest. As to the efficacy of value theory today, that seems a difficult question. Marx was never simply an economist. Rather his interest in Political Economy was both a critique of the best scientific expression of the ideas of his own day, and a critique - not just of the economy, narrowly understood, but of social relations in their totality. The problem is that Marx's critique is in part limited to the critique of political economy, and serves to the extent that those categories are, as he says real forms of social existence. Clearly the paucity of economic thinking today qualifies the extent to whcih one can appropriate real social conditions in categories that were developed by classical economy, reappropriated by Marx, but then dropped by all bourgeois thinkers. Clearly value has an objective existence outside of its reflection in theory. However, with the falling away of economic thinking (see Paul Ormerod, The End of Economics) Marx's theory of capital loses its character as a critique of a living ideology. As such it can become more like model-building than a critical-theoretical account, as Marx's categories take on more of the character of theoretical constructs, than real forms of social existence. I have often thought that if Capital was re-written today it would have a very different character. First, it could not take the critique of political economy as its route into an account of social relations, because PE is in effect a dead science. So what material would one attack instead. Sociology, perhaps, would be a better expression of bourgeois thinking in 1997. The passages on the form of value would seem to be an excellent model for a critique of the reflexive-modernity theories that are popular here, or the communications-theoretic model in Germany. Development theory and anthropology seem to be important places where people think about the world economy. In any event, it would be a mistake to think that economics accounts for the totality of social relations in the way that Marx was able to assume that Political Economy approximated to those in his own day. Fraternally -- James Heartfield --- from list marxism-thaxis-AT-lists.village.virginia.edu ---
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