Date: Thu, 11 Aug 1994 11:44:46 +1000 From: Steve.Keen-AT-unsw.EDU.AU Subject: Re: LTV (again) Dear Eugene (and Glen) On the availability of papers, perhaps the best route is for me to snail-mail your addresses and I will do so. As for your attempts to show that the LTV and uv/ev analysis are consistent, yes I did (I believe) understand your argument, but I argue that you are incorrect. I'll intersprerse my observations with excerpts from your posting. "Take as a point of departure the capitalist's purchase of labor- capacity as a commodity: he parts with its exchange-value (pays a wage), in order to use its use-value in production. This use- value in production *exceeds* the exchange-value paid for it, the latter being (like that of all commodities) determined by its cost of production. This may sound as if use-value and exchange- value are suddenly comparable -- but no (as you rightly insist, they are not): only exchange-values are quantifiable and comparable; to say that labor's use-value exceeds its exchange- value is short-hand for saying that the exchange-value *eventually* realized, through the capitalist's sale of the goods produced, on the labor-capacity used in producing those goods exceeds the exchange-value *initially* expended on that labor- capacity." Here we don't quite agree. What I said was that uv and ev are in general incommensurable: I did not say that they are *never* comparable. Marx's (dialectically inspired) genius was to see that, in the specific circumstance of productive consumption, they were comparable. Let me prelude an explanation with a bit of HET: Marx inherited the tradition of Ricardo, Smith, and before them the Canonists, of arguing that the "utility" of a commodity did not affect its price; this contrasts with the neoclassical, Austrian, and before them Mercantilist position that price reflected the buyer's subjective valuation of the commodity. Prior to the Grundrisse, this meant that Marx "did what Ricardo did"--he repeated Smith on the proposition that cost-of-production determines exchange-value, and that use-value, while a vital pre-requisite for exchange, was otherwise irrelevant to political economy. This made Marx a linear descendant of Ricardo, with the main advance of his political economy being an explanation for the origin of surplus in terms of the difference between necessary labor and the length of the working day. (His advances elsewhere, in understanding cycles, rejecting Say's Law, having an integrated analysis, are of course legion). While writing his Rough Draft, Marx re-read Hegel's Logic, noting in a letter to Engels that this had been of much assistance to him. Most commentators have focussed on a section of the Grundrisse where Marx drafted a couple of distinctly Hegelian chapter outlines for Capital (which were not followed in practice). I focus instead on a footnote where the "flash of insight" about uv/ev first occurred (and remember that this "footnote" would have been a highlighted thought, out of sequence with the argument of the remainder of a set of notes which were not intended for publication--it is thus not a minor point of clarification, as footnotes are in a published work, but... something possibly much more significant). Read on: "Is not value to be conceived as the unity of use-value and exchange-value? In and for itself, is value as such the general form, in opposition to use-value and exchange-value as particular forms of it? Does this have significance in economics? Use-value presupposed even in simple exchange or barter. But here, where exchange takes place only for the reciprocal use of the commodity, the use-value, i.e., the content, the natural particularity of the commodity has no such standing as an economic form. Its form, rather, is exchange-value. The content apart from this form is irrelevant; is not a content of the relation as a social relation. But does this content as such not develop into a system of needs and production? Does not use-value as such enter into the form itself, as a determinant of the form itself, e.g. in the relation of capital and labor? If only exchange-value as such plays a role in economics, then how could elements later enter which relate purely to use-value... The price appears as a merely formal aspect of it. This is not in the slightest contradicted by the fact that exchange-value is the predominant aspect. But of course use does not come to a halt because it is determined only by exchange; although of course it obtains its direction thereby. In any case, this is to be examined with exactitude in the examination of value, and not, as Ricardo does, to be entirely abstracted from, nor like the dull Say, who puffs himself up with the mere presupposition of the word `utility. Above all it will and must become clear in the development of the individual sections to what extent use-value exists not only as presupposed matter, outside economics and its forms, but to what extent it enters into it. Proudhons nonsense, see the `Misere..." (Marx 1857, footnote pp. 267-68.) I could have attempted to highlight points of significance for my interpretation, but frankly, that would have meant highlighting the entire statement! The basic point is that use-value matters in Marx's economics (after the Grundrisse) as a primary economic category, when it is concerned with productive consumption. Far from being a convenient shorthand for saying that "the exchange-value *eventually* realized, through the capitalist's sale of the goods produced, on the labor-capacity used in producing those goods exceeds the exchange-value *initially* expended on that labor- capacity", use-value is a primary concept in its own right here. The beauty of Marx's argument is that, while in general use-value is qualitative, irrelevant to exchange-value and incommensurable with it, in the specific circumstance of production, the use-value of a commodity is still irrelevant to exchange-value (the wage paid a worker reflects his/her cost of production, not his/her productivity) it is quantitative; and here the fundamental incommensurability of use-value and exchange-value in the classical/Marxian scheme of things means that the two magnitudes will be different. If you read Marx carefully (especially in the Grundrisse) you will find that frequently he contrasts his easy ability to derive the source of surplus value, armed with the dialectic between use-value and exchange-value, with Ricardo's struggles to do the same, armed only with a labor theory of value: "What the capitalist acquires through exchange is *labour capacity*; this is the exchange value which he pays for. Living labour is the use-value which this exchange value has for him, and out of this use-value springs the surplus value and the suspension of exchange as such." (Grundrisse, pp. 561-62) Similarly, a throw away reference to Proudhon shows implicitly the importance Marx placed on deriving a logical basis for surplus: "the surplus value which causes all Ricardians and anti-Ricardians so much worry is solved by this fearless thinker simply by mystifying it, 'all work leaves a surplus', 'I posit it as an axiom'.. The fact that *work goes on beyond* necessary labour is transformed by Proudhon into a mystical quality of labour." (p. 641) He emphasises that it is vital to properly identify what is the exchange value of a commodity and what is its use-value, at least in the case of the commodity labour power: "Labour capacity is not = to the living labour which it can do, = to the quantity of labour which it can get done - this is its *use-value*. It is equal to the quantity of labour by means of which *it must itself be produced*. The product is thus in fact exchanged not for living labour, but for objectified labour, labour objectified in labour capacity. Living labour itself is a use-value possessed by the exchange value [,labour capacity,] which the possessor of the product [,the capitalist,] has acquired in trade". (p. 576)" If you treat use-value, as you did, as a short-hand for the comparison of two magnitudes of exchange-value, you drop use-value back to the status of a secondary concept, as it was to Ricardo and Smith, thus missing the main advance in logic that Marx made over them. You also lose the complexity of his treatment of the dialectic between exchange-value and use-value--for instance, the next stage of his analysis (after using uv/ev to reveal the source of surplus) is to argue that, in trying to realise surplus-value, uv now has primacy over ev: the commodity must satisfy a need, and must not be produced in over-abundance. All this logic is expressed in uv/ev terms. But the key usage--in terms of its impact on Marxian political economy--remains the derivation of the source of surplus. Once you treat use-value as a primary category along with exchange- value, not just a short-hand that one can at your leisure ignore; once you accept the dialectical consequence that what is in general qualitative and incommensurable can in the vital specific circumstance of production become quantitative and comparable, then you can't make the LTV and this uv/ev analysis consonant without basically making a nonsense of the concept of use-value when considering machinery. You continue: "One advantage of this dialectical LTV is that it doesn't have to attribute to labor (or to machines, for that matter) any "occult" power of "transferring" value to goods. The value of any commodity is its cost of production." I would observe that, yes, "The value of any commodity is its cost of production"--the LTV, however, goes on to elaborate that, in the end, value comes only from labor--which means, in effect, that the sole source of cost of production, as well as the sole source of profit, is labor. The uv/ev analysis, on the other hand, concludes that value potentially emanates from all inputs to production. The physical and value are thus much more consonant with uv/ev analysis than with the contrary notion of the LTV. Statements such as: "This is not to say that capitalist production doesn't produces "goods" as well (nor that capitalist accounting may not have ingenious ways of assessing the "net value" of those goods): but that's just not the focus or the interest of Marx's critical LTV" to me indicate just how hard LTV adherents have had to wriggle in order to maintain the LTV in the face of technically compenent criticism. Of course the production of goods was an interest of Marx's! Were it possible for you to go back in time and repeat that assertion to The Scribbler himself, I doubt that you'd survive his reply! The problem is that his analysis of the production of goods was fundamentally flawed by his continuing adherence to the LTV, after he had devised a logical framework which made its transcendence possible. The irony of his presenting his followers with this contradiction was that this logical framework, of which he was so justifiably proud, was almost the first thing they lost. I'm far from the first person to argue that the LTV is logically flawed. What sets my critique apart is that it has been developed using Marx's fundamental logic. That has rather different consequences for the corpus of Marxian political economy than the critiques of Bohm-Bawerk, Steedman, et al. On this point, I don't think I can improve on the following statement, which is the conclusion to the thesis that is apparently stuck in cyberspace: It could be thought that acknowledgement of Marx's mistakes in applying his system of logic would lessen his stature as an economist, and reduce the influence of his thoughts. I would argue otherwise. Critics of the labour theory of value have argued for decades now that nothing of value in Marx's analysis depends on the labour theory of value, and in so saying they have generally been inclined to completely dismiss his analysis of commodities and his dialectical method. I agree that the labour theory of value contributed nothing of value to Marxian economics; indeed it stymied the development of classical political economy by Marx and by his followers. However I believe that Marx's analysis of commodities, and the general dialectic method on which this was based, was the foundation on which most of the many valuable contributions made by Marx to economics were made. Proper application of this method should provide many more worthwhile additions to the intellectual weaponry of Marxian analysis, based on an absolute theory of value. In this new tradition, which can exist co-operatively with Sraffian and Kaleckian economics while containing the superior concepts of dialectics and value, it should be to Marx's credit that he provided the dialectical analysis by which the labour theory of value could be transcended, and labour and commodities together regarded as the joint sources of value and determinants of exchange value. Cheers, Steve Keen ------------------
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