File spoon-archives/marxism.archive/marxism_1994/marxism.Jul12-Aug17.94, message 281


Date: Sun, 07 Aug 1994 23:32:31 +1000
From: Steve.Keen-AT-unsw.EDU.AU
Subject: Re: Re[2]: reply to Steve Keen


(Long post: 35 paragraphs)

Gene writes:
          My understanding has always been that the use/exchange
          value dialectic with respect to labor was *consonant* with
          the understanding of the LTV derived from the categories
          necessary/surplus labor (not different from or opposed to
          it, as Steve suggests).

          I confess to not seeing the advantage -- if the use/exchange
          and necesary/surplus versions of the LTV are indeed
          incompatible -- of retaining the former rather than the
          latter.  ... I feel sure I'm in complete agreement
          with Steve and his quotation from Marx -- as "heirs" our
          business will always be to sift out what is useful within
          Marx's capacious writings from what is less so.

We are in agreement that sifting the "wheat from the chaff" is necessary
with Marx. Unfortunately, we differ in our classifications. In my
opinion, abandoning the use-value/exchange-value dialectic because it
conflicts with the labor theory of value would be rather like rejecting
the Theory of Relativity because it conflicts with Newtonian dynamics.
In what follows, I'll first attempt to illustrate why the two are in
conflict, then in 2 parts, show why I regard the former as so much more
powerful than the latter (even though it involves abandoning some long-held
articles of Marxist faith).

(A) Conflict between use-value/exchange-value dialectic and
necessary/surplus labor derivation of the sources of value

The use-value/exchange-value dialectic is consonant with the assertion
that labor-power is *A* source of surplus; it is not consonant with
the assertion that labor-power is *THE ONLY* source of surplus. This
can be seen in Capital I pp. 164-188 and pp. 196-199 respectively. The
first segment is an eloquent and logically valid application of the
dialectic to derive the source of surplus value in labor-power; the
second is a convoluted and logically flawed attempt to get the result
that machinery is not a source of surplus-value.

To commence with the first, Marx sets the ground by stating that:

The change of value that occurs in the case of money intended to be 
converted into capital ... must ... take place in the commodity bought 
by the first act, M-C, but not in its value, for equivalents are 
exchanged, and the commodity is paid for at its full value. **We are, 
therefore, forced to the conclusion that the change originates in 
the use-value, as such, of the commodity**, i.e. its consumption. In 
order to be able to extract value from the consumption of a commodity,
our friend, Moneybags, must be so lucky as to find, within the 
sphere of circulation, in the market, a commodity, **whose use-value 
possesses the peculiar property of being a source of value.** (Ibid, 
pp. 164. Emphases added.)

His finale (after the usual diversions!!) occurs 24 pages later:

The past labor that is embodied in the labor power, and the living 
labor that it can call into action; the daily cost of maintaining it,
and its daily expenditure in work, are two totally different things.
** The former determines the exchange-value of the labor power, the 
latter is its use-value. ** The fact that half a [working] days 
labor is necessary to keep the laborer alive during 24 hours, 
does not in any way prevent him from working a whole day. 
Therefore, the value of labor power, and the value which that labor
power creates in the labor process, are two entirely different 
magnitudes; and this difference of the two values was what the 
capitalist had in view, when he was purchasing the labor power...
** What really influenced him was the specific use-value which 
this commodity possesses of being a source not only of value, 
but of more value than it has itself. ** This is the special service
that the capitalist expects from labor power, and in this 
transaction he acts in accordance with the eternal laws of the
exchange of commodities. ** The seller of labor power, like the 
seller of any other commodity, realizes its exchange-value, 
and parts with its use-value.** (Ibid, p. 188. Emphases added.)
Note that 2 crucial aspects of this dialectic are (1) that in
the case of the inputs to production, use-value and exchange-
value are both objective and quantifiable (in the case of
labor-power, they are both measured in units of hours worked).
(2) The two are "entirely different magnitudes"--the dialectic
of the commodity under capitalism is such that exchange-value
and use-value are (in general) incommensurable, so that in 
this instance when they are both quantitative, they are highly
unlikely to be the same magnitude.

Now compare this to Marx's later attempt to use the use-value/
exchange-value dialectic to reach the same conclusion as
is presumed in a simple labor theory of value, that machinery
is not productive of net value (because there is no matching
distinction for machinery between "necessary" and "the working
day" as there is for labor-power):


"Value exists only in articles of utility... If therefore an article
loses its utility, it also loses its value. The reason why means 
of production do not lose their value, at the same time that they 
lose their use-value, is this: they lose in the labor process the 
original form of their use-value, only to assume in the product 
the form of a new use-value... Hence it follows that in the labor 
process the means of production transfer their value to the product 
only so far as along with their use-value they lose also their 
exchange-value. They give up to the product that value alone which 
they themselves lose as means of production." (Ibid, p. 196)

There are two erroneous propositions in this paragraph, while another 
is ambiguous. Firstly, the two final sentences which appear to link 
the transfer of value by the machine to its depreciation are 
incorrect (see below). Secondly, the statement that the use-value of 
a machine reappears in the use-value of the product equates the 
use-value of the machine to the utility enjoyed by the "consumers"
who purchase the goods the machine produces. But the use-value of 
a machine is specific to the capitalist purchaser of the machine 
only. By arguing that the use-value of the machine reappears in the 
product, Marx is in fact contemplating the existence of abstract 
utility, with the "usefulness" of the machinery being transmuted 
into the "usefulness" of the commodities it produces.

The ambiguous statement concerns the transfer of value by the means 
of production. Which of their two "values" do machines transfer, 
their exchange-value or their use-value? If Marx meant that they 
transfer their use-value, then this sentence would be correct in 
terms of his analysis of commodities. But later he makes it clear 
that by this expression he meant that the means of production 
transfer not their use-value (which is the case with a worker) 
but their exchange-value. 

In the clearest illustration of the flaw in his logic, he states 
that over the life of a machine, ** "its use-value has been completely 
consumed, and therefore its exchange-value completely transferred 
to the product"** (Ibid, p. 197) This logical "sleight of hand" lets
him reach the conclusion in his emphatic final paragraph on this
issue:

"The maximum loss of value that they [machines] can suffer in the 
process, is plainly limited by the amount of the original value 
with which they came into the process, or in other words, by the 
labor-time necessary for their production... However useful a 
given kind of raw material, or a machine, or other means of 
production may be, though it may cost #150 ... yet it cannot, 
under any circumstances, add to the value of the product more 
than #150." (Ibid, p. 199)

What this paragraph asserts is that the exchange-value of a
machine sets an upper bound to its use-value; yet, earlier,
Marx used the proposition that under the "eternal laws" of
exchange in capitalism, the two are "completely different
magnitudes": "The past labor that is embodied in the labor power, 
and the living labor that it can call into action; the daily 
cost of maintaining it, and its daily expenditure in work, 
are two totally different things..."

"The daily cost of maintaining" a machine is its depreciation,
and this is--over its lifetime--equivalent to its exchange-value.
"its daily expenditure in work" is its value contribution, and
in Marx's dialectic, this is its use-value. If the rules which
apply to the commodity labor-power are indeed general ("The 
seller of labor power, like the seller of any other commodity, 
realizes its exchange-value, and parts with its use-value"),
then in the case of machinery too, there should be a difference.

Marx did in fact make this association only once, in the Grundrisse.
But he pulled back from ever developing it: "It also has to be 
postulated (which was not done above) that **the use-value of the 
machine significantly (sic) greater than its value**; i.e. that its 
devaluation in the service of production is not proportional to 
its increasing effect on production." (p. 383. Emphasis added.)

I believe that at this moment Marx realised the possibility of
conflict between the LTV and the new means of analysis that he
had developed only that month, of the dialectic between use-value 
and exchange-value (Grundrisse, footnote pp. 267-68). But the new
tool was too powerful for Marx to abandon it; so instead, he
contorted its application to the question of the value productivity
of machinery until he convinced himself that there was no conflict.

(B) Superiority of the use-value/exchange-value approach

Gene suggests that we do what Marx did not: that since the two
conflict, let's throw out the new and stick with the old. What
then are Marxists left with as a proof that labor-power is the
only source of net value--that ultimately, all profit derives
solely from living labor? Fundamentally, no matter how fancy the
footwork, all such attempts boil down to what Bohm-Bawerk
characterised so long ago as "a negative proof".

In his view, Marx arrived at the opinion that use-value plays 
no role in the determination of value, and the conclusion that 
labor power is the only source of value, via a method of 
exclusion. Bohm-Bawerk observes that this procedure is 

"somewhat singular... It strikes one as strange that instead 
of submitting the supposed characteristic property to a 
positive test ... Marx tries to convince us that he has found 
the sought-for property, by a purely negative proof, by 
showing that it is not any of the other properties. (BB in
Sweezy (ed.), 1949. Karl Marx and the Close of his System, 
Orion, New York, p. 69)

As illustrated above, Marx did have a positive methodology by
which he derived the source of surplus-value, and Bohm-Bawerk
missed this because of the substantive differences between
Marx's concept of use-value and the neoclassical/Austrian concept
of utility. But Marx's followers (apart from Engels and Hilferding)
also missed this difference, and instead were left only with a
"negative proof" means to dismiss the value productivity of
machinery. Sweezy's attempt is typical (though far less complicated
than some modern day variants):

"It is clear that surplus-value cannot arise from the mere process
of circulation of commodities... It seems equally obvious that
the materials entering into the productive process cannot be a
source of surplus-value. The value which the materials have at
the outset is transferred to the product at the conclusion, but
there is no reason to assume that they possess an occult power to
expand their value... From the standpoint of value there is no 
reason to assume that either materials or machinery can ultimately 
transfer to the product more than they themselves contain. This 
leaves only one possibility, namely that labour-power must be 
the source of surplus-value." (Sweezy, Theory of Capitalist 
Development, pp. 60-61.)

Fundamentally, all attempts to show that machinery is not
productive of net value boil down to attributing "occult"
powers to labor-power--in the sense that value becomes something
peculiarly pertaining to labor, but at the same time not
physical (since to be physically linked brings in the Sraffian
critique of the transformation problem)--or reduce to the kind
of negative methodology presumed above by Sweezy, and criticised
by Bohm-Bawerk.

(B1) Use-value/exchange-value dialectic vs the LTV

The most direct consequences of the LTV which are contradicted
by the uv/ev analysis are the transformation problem, the tendency 
of the rate of profit to fall (TRPF), the prediction of a terminal
crisis for capitalism, and the inevitability of socialism.

I doubt that anyone would disagree that the transformation problem
has been a highly negative aspect of marxism. The uv/ev analysis
above, which contradicts the assertion that labor-power is the
sole source of surplus, also contradicts the transformation
problem: it is, as Steedman put it in _Marx after Sraffa_, a 
"pseudo-problem, a chimera" (Steedman 1977, pp. 14-15)

The TRPF has positive aspects to some. But it directs the attention
of Marxists to issues of production--and the generation of surplus--
alone to explain the crises of capitalism, and puts the focus on 
secular rather than cyclical issues. The consequent relative neglect 
of issues of distribution--and the realisation of surplus--, and
cyclical crises, have left those fields to non-marxist critics of
capitalism. Marxism, in this sense, has been marginalised, even
within the radical critique of capitalism.

There is one aspect of the TRPF which has also been taken for
granted, but which Elias Khalil has recently raised in a paper
which I expect will eventually be published by the JHET,  "Is 
Marx's Theory of the Falling Rate of Profit Differentia Specifica 
of Capitalist Production? An excursion into the logic of Marx's 
argument". That is that while many Marxists have assumed that 
the TRPF will eventually sound the death-knell of capitalism 
(in that it will bring on the final crisis), there is nothing 
about the TRPF which restricts it to capitalist production. 
If a TRPF exists, then it should apply to socialism as much 
as to capitalism.

That is, unless socialism somehow transcends necessary
and surplus labor, unless under socialism, an increasing
organic composition does not cause a falling ratio of s/(c+v),
then the relative size of investible surplus under socialism 
will fall, and with it should fall the rate of growth. The TRPF 
predicts, not just the collapse of capitalism, but the 
inevitability of a stationary state as the level of technology 
rises, regardless of the social system in place.

As for terminal crises--and the inevitability of socialism--
capitalism has had plenty of crises since Marx died, but none 
of them has proved terminal. Meek, when he began the first 
edition of the _Studies in the Labor Theory of Value_, explained 
the need for the book because in part he had a desire to prove 
that the Labour Theory of Value was still "good science today 
... because we have tended to be over-optimistic about the probable 
duration of the monopoly capitalist period." (p. 8.) How much longer
can that optimism last before marxists accept that, however flawed
it may be, capitalism does not have a built-in self-destruct
mechanism? And that however much socialism may be desired, it is
much more difficult to keep such a society "on track" than it is
to bring it about in the first place?

(B2) Advantages of the uv/ev dialectic over the LTV

The uv/ev dialectic had many more uses to Marx than the crucial
one I outlined above of establishing the sources of surplus
value. It also featured in his attempts to explain the cyclical
crises of capitalism, and in his analysis of money (though this
was poorly developed). Hilferding also used it to explain the
reduction of skilled labor to unskilled (on this, see my JHET 
piece, Vol. 15 No. 2).

I will restrict myself to considering Marx's use of the concept in 
the Grundrisse to analyse the "realisation problem":

"Inside the production process, realisation appeared totally
identical with the production of surplus labour ... and hence
appeared to have no **bounds** other than those ... posited
within this process itself... There now appear barriers to it
which lie **outside** it. To begin with, ... the commodity is
an exchange value only in so far as it is at the same time a
**use value**, i.e. and object of consumption... As **new
value** and as **value** as such, however, it seems to 
encounter a barrier in the magnitude of **available equivalents**,
primarily money... The surplus value now requires a surplus
equivalent. This now appears as a second barrier." (pp. 404-05)

[Other segments of Marx's writings where these issues are discussed
include the Grundrisse, Notebook IV pp. 404-24, Notebook VI pp.
678-80, and "Capital as Fructiferous" in Notebook VII, p.
745-60. These early discussions are partially developed in 
Chapter 15 of Volume III of Capital. Groll's 1980 "The active 
role of use-value in Marx's economics", HOPE, Vol 12 No. 3, 
pp. 336-371 gives quite a thorough account.]

It should be obvious that the realisation problem is specific to
capitalism (though socialism in practice can certainly have its
own problems on this front), unlike the TRPF. There are many
other instances where the uv/ev dialectic was used as a major
analytical tool by Marx, and in fact he asserted that the best
things in Ricardo emanated from an unconscious appreciation of
this dialectic:

"In its reproduction as commodity, capital is fixated in a
particular form of use value, and is thus not **general exchange
value**, even less realised **value**, as it is supposed to
be. The fact that it has posited itself as such in the act of
reproduction, the production phase, is proved only through
circulation... The **particular nature of use value**, in which
the value exists, or which now appears as capital's body, here
appears as itself a **determinant** of the **form** and of
the action of capital... ## As we have seen in several instances,
nothing is therefore more erroneous to assert that the
distinction between use value and exchange value, which falls
outside the characteristic economic form in simple circulation,
to the extent that it is **realised** there, falls outside it
in general... Use value itself plays a role as an economic
category. Ricardo ... derives the most important determinations of
exchange value precisely from use value, from the relation
between the two of them: for instance, **ground rent, wage
minimum, distinction between fixed capital and circulating
capital**, to which he imputes precisely the most significant
influence on the determination of prices...## One and the same
relation appears sometimes in the form of use value and sometimes
in that of exchange value, but at different stages and with
different meaning. To use is to consume, whether for production
or consumption... From the standpoint of capital, exchange
appears as the positing of its use value, while on the other side
its use (in the act of production) appears as positing for
exchange, as positing its exchange value. Likewise with
production and consumption. In the bourgeois economy, they are
posited in specific distinctions and specific unities. The point
is to understand precisely these specific, distinguishing
characteristics." (pp. 646-47. My emphases are marked by ##.)

Conclusion

The above is only part of the baby that would be throw out were
the uv/ev dialectic dispensed with in order to preserve the LTV
bathwater. It is the aspect of Capital which Marx regarded as
his greatest advance over his classical forebears, and it is
a foundation on which a new and vigorous marxian analysis could
be based--but at the expense of the LTV.

Cheers,
Steve Keen


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