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Value?


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Initial post: Jul 22, 2009 1:59:22 PM PDT
For anyone interested or knowledgeable...

Many people, Marxists and others, contend that choosing labor as the commodity in which value is extracted was arbitrary on Marx's part. I myself have no definitive answer, however I do not see why capital or natural resources cannot be bought at their value and, through consumption of their use vales, have extracted from them more value than their worth. I do hold, however, that profit must be extracted from a commodity within the M-C-M' cycle. Anyone have any ideas?

Posted on Sep 8, 2009 11:43:48 AM PDT
A. Lannan says:
I am by no means an economist, but this is how I understand this:

Increasing the amount of productive capital in the manufacture of a commodity can only increase productivity or material wealth ( the use-values produced per unit time). Marx believes that when a commodity can be produced using less labor due to development of the means of production (capital, management etc.), the exchange-value of each use-value produced will diminish. In comparing handcrafted goods to mass-produced goods this would seem to be the case. Increases in capital can create more of a particular good, but once the new level of production becomes the social norm, the labor-time per use-value will be lower, and each use-value will sell for less, i.e., the amount of value created will be the same as the less productive method.
Hope that helps, know you posted a while ago. I have been slowly making my way through Capital for some time now. If you are interested David Harvey has posted a course he teaches on Capital.
http://davidharvey.org/
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In reply to an earlier post on Oct 12, 2009 6:52:16 PM PDT
Thanks, I also am sorry for the slow response.

I will get back to this in a couple days.

In reply to an earlier post on Oct 17, 2009 9:31:05 PM PDT
But what about value being added through the consumption of a natural resource?

Posted on Oct 24, 2009 3:49:01 PM PDT
Last edited by the author on Oct 24, 2009 5:42:56 PM PDT
The Labor Theory of Value (LTV) is not some arbitrary value system that Marx chose, in fact it is essentially what his whole theory of exploitation (perhaps his entire theory!) hinges upon-- and a reason the marginalists seem to assume that his theory is worthless when they claim to have correctly disputed the true source of value (not in labor but in utility). In fact labor does not extract value, it creates it. There is no value if labor is not applied to a set of natural resources through which something of use is created. This understanding of value (use-value) is ahistorical... it is essentially basic human nature to labor and create useful product for consumption. It is during capitalist social relations (mode of production) that exchange-value (sometimes just called value in certain parts of Capital) becomes the dominant expression of value. Marx assumes for much of the first volume that value and price are in equilibrium (though he numerously states that this is for simplicity and that equilibrium would only happen occaisionally and momentarily). In essence it would be impossible (in capitalism described by Marx, some other LTV theorists like Smith consider profit what is sold above value) to have a value higher than the worth of something. Price higher or lower than value is to be assumed, yet value is essentially the measure of equilibrium of the system in complete optimalization. Sweezy and some other more modern Marxist economists recommend jetisoning the LTV all together because under Monopoly Capitalism the logic of the system has so deviated from equilibrium that it seems counter-productive (unless you are not a Marxist) to use the LTV to analyze the system at all, only good to demonstrate the origin of suplus-value (profit).

The chapters dealing with the industrial reserve army illustrate how price and value, during accumulation, can become increasingly disequilibriated during periods of growth and contraction. Essentially all value is a measure of the necessary labor needed to produce a commodity based on socially average (necessary) time. This includes all materials (fixed and constant capital) and education (skill level) needed to achieve a certain level of proficiency for production. This is based on culturally relevant subsistence levels for reproducing workers. Exchange-value (value) only can change based on productivity. The material conditions of subsistence (use-value consumption) can increase while relative value of labor power remains the same in real terms. Consumption of natural resources only create new value when labor is applied to them in order to transform them from say 'wood' into a 'table.' This is the consumptive production principle that Marx outlines in the Intro to the Critique of Political Economy and Intro to Grundrisse. The LTV (in all forms) is the only objective measure of value in economic literature.

Gotta go for now, keep the discussion up... its a good topic. BTW Labor is not a commodity to Marx, it is an element of basic human nature. Labor power is the commodity.

In reply to an earlier post on Feb 17, 2010 1:18:28 AM PST
Thanks Robert. I was struggling back then for some strange reason although I had already answered my own question repeatedly. It seems so silly in hindsight, the question itself that is. Anyway, I recently ended a discussion with an extreme Austrian school supporter by putting him on ignore. I did this because, after about 20 pages of going back and forth, he did not care to do anything but mock/attack and regurgitate his useless catechisms of the labor theory of value being inconsistent. His major reason (here comes the comedy) - exchange cannot exist when items are of equal value because there would be no reason to exchange one thing for another. Of course, he tried to argue on the basis of the inability of transforming value into individual prices - i.e. he attempted to say that the labor theory of value cannot explain why a French wine costs more than another wine - however I made quite clear that the labor theory of value is not a theory of short term price determination. Either way, he ignored my responses and pushed through. Check out the thread, of course do not read it all - perhaps the last few pages:

http://www.amazon.com/review/R18077BQVG0XVS/ref=cm_cd_pg_next?ie=UTF8&cdPage=35#wasThisHelpful

Posted on Feb 17, 2010 9:53:18 AM PST
At least that debate is more interesting than the one I have been having in the Capitalism community threads. Two Austrians that don't even agree with each other on how price comes to be (is it the buyer or the seller?) and a guy calling me a totalitarian thug, fun. I haven't been into economic stuff as much lately, so I have been thinking a lot about epistemology and ontology, the nature of society (is it a thing or just the sum of all relations, etc., etc.), and really in to calculable rationalization (Weber, Neo-Weberians, Neo-Marxists). I actually just got through some Alfred Schutz (who was in the Mises Circle) and was pretty impressed with his theories, yet he adheres to the Misian assumption that anxiety is the primal motivation for all action--which I just can't accept.

I was actually more open to alternatives before I started reading them. After being exposed to subjective value theories (utility theories) and marginal-utility, I just sort of laugh. Marx's genius is that he accepts utility as an economic component, just not the overall driving force of the capitalist economy. In fact, that entire theory can be absorbed into Marx's LTV (modified of course) to explain the ahistorical nature of utility and human action as revolving around the necessity of use-value. If I had to offer a critique of your interpretation of Marx (which is well versed and thorough), is that I don't think Marx saw the LTV as anything other than a set of relations coinciding with capitalism. Sometimes, at least how I read you, it seems that you tried to extend it. To labor is human (homo faber), but to create value for exchange is not universal. That's the problem with the socialist calculation debates, they are trying to assess socialist societies on the basis of calculation using the labor theory of value, when it should really be understood in terms of meeting the needs of people. But I digress, there are different interpretations. I see Marx's main point as being about overcoming alienation, others see it differently. Anyways, take it easy.

Posted on Feb 17, 2010 11:39:15 AM PST
Last edited by the author on Feb 17, 2010 11:46:32 AM PST
Yes, I did try and extend it in the past. I was quite confused in the past and I believe it shows in multiple places. However, if you read the debate carefully on my critique of Mises' 'Socialism', I do come out with what I also believe is the proper interpretation: labor has always created value, and the appropriation of surplus value has always been the foundation on which growth has rested in complex societies; however value only rules exchange in a commodity producing society.

As far as the 'calculation' nonsense, I do agree with your conclusion. The problem is, however, that in the opposing conceptual framework -into which the Neoclassicals and the Austrians may be conveniently lumped for these intents and purposes - 'meeting the needs of people' is only possible through the market, through the information that is conveyed by buying and selling on the market. Now, the former is clearly erroneous and would require extreme assumptions to reach even some Benthamite 'greater good' catechism. At best markets are now seen to be fine in allocating the supply of luxuries or non-necessities, not actual biological and physical needs. However, this is besides the point. If prices serve to allocate resources to productive uses, even inefficiently, by capturing the information of demand on the market, then the issue of how this will occur with this information in a complex society is a natural question (we will ignore Mises' erroneous theory of money). Ultimately, it must be shown that prices are not reflective of individual choice. The 'transformation problem', only alive and well on these Amazon forum's and Mises institute halls nowadays (the only place where Bohm-Bawerk and Mises still have a large voice as well, coincidentally) was the attempt to show that Marxian values could not be transformed into prices - hence prices could not be explained in value terms. Where the superficiality of this 'demolishment', as they say, comes in is with the realization that value-level analysis does not explain individual point in time prices directly, but instead the regulatory force on price. That this has indirect effects on price goes without saying, and the most important for Marx (and what continues to be in my opinion) was issues of distribution between classes. If distribution is in the first place out of the individuals control, then, as a regulatory force on price, prices will become only a caricature of information via individual choice: the calculation issue is bunk simply because calculation on the market in real commodity producing economies has no desirable orderly pattern that socialist economies would be unable to replicate. The only orderly pattern it has is one that socialist questions want to address in the first place, namely extreme polarizations of wealth.

Posted on Feb 17, 2010 5:05:47 PM PST
I had the pleasure of hearing Duncan Foley give a lecture at Colorado State U the other week. And I think he touched on several other points of contention that I had previously not thought about, mainly the endogenous negative external effects of relationships in the market. He specifically mentioned economists such as Mises, Hayek and Freidmann (and their followers) as groups who consistently overlook that characteristic of exchange while at the same time demonizing the government for interfering with market optimality. I thought it was interesting, at least in recognizing the fact what happens between two people in the market seldom only affects just those two people. This would seem to throw off any sort of uni-calculable measure for the market, in fact Foley was arguing that there can be several points of optimality depending on how many variables and externalities are taken into account. I'm not a big fan of econometrics (or statistics/ calculus in general) as a predictive measure for social action, there is no agency in a reified ideal-type so to speak, but I thought his projections were at least illustrative.

Really only two groups talk about the transformation problem anymore, those who you mentioned, and the inter-Marxists debates about it. If you see economics as a way to predict short-term prices, chances are you will be critical of that aspect of Marx's lit. If you are more into dialectics and trying to find the "ghost in the shell" so to speak, you probably will overlook all of the controversy associated with it. But that is inconsequential, at least for Marx (in my reading). Prices can change due to supply and demand, and people can pay more for something (or less) than the embodied social value in that commodity if they want, even Marx seems to be explicitly clear about this. That whole debate from Austrians towards Marxists is based on a faulty premise, notably that they are not even talking about the same thing. That was Hilferding's criticism of Bohm-Bawerk's criticism of Marx at least. But then someone who considers Marx attempts to argue back, and is equally on disparate foundations from which to criticize. You have to read both versions and understand the presupposition. Thats what I got from your discussion in that thread. But most so-called Austrians (can we say nearly all economists as well?) probably never read Mises or Menger, certainly have not read Marx, and accept these presuppositions the same way that any religious zealot accepts their faith, on belief alone. To come to Marx, at least in this society, means to go against one's primary upbringing, not saying that there are not dogmatist Marxists who are unable to critically disect Marx, find faults and attempt to overcome them (if possible). I just think that exposure to Marx creates some sharpened sense of criticism, at least questioning the status quo. Nevertheless, I am a sociologists by trade, pure economics (at least in the fragmented sciences as they exist in the university today) interest me little. I have to see Marx through a different lens than many who claim to be in line with his dialectical materialist philosophy of history. But each is entitled to their opinions and interpretations.

My biggest gripe with the idea that money is just knowledge is that money is something that people covet. Sure it sends signals, like what people are buying or not, but that doesn't explain why people will hoard it. If you ever get the chance, read Georg Simmel's Philosophy of Money. While I have some reservations about his conclusions, he at least offers a very thoughtful critique of money (from a more subjectivist standpoint). The introduction is famous for saying that "not one word of this text is about economics" yet the whole book deals with money and its social role. To assume that value is subjective would mean that it is entirely internal to the subject itself. Once there are objects which have become suppliments for the erradication of the specific desire (something of exchange) then you have the objectification of value--in a very literal sense. The fact that everyone in the US uses dollars, pays set prices in the grocery, etc., and recognizes the ability of that dollar to reproduce its potential to erradicate other desires should be a strong enough defense of objective value (at least intersubjective) in the form of money. How much is a dollar worth? Is that subjective too? The Austrian school is famous for its circular argumentive style, and as you can imagine this would keep going in circles.

By the way, I was pretty impressed with that guy who criticized labor for being destructive of value. At least he was trying. But no one is arguing that labor cannot destroy things, in fact how else would there be agriculture or cities in the first place? We had to reconstitute materials provided by nature (sometimes that means destroy them) in order to create new things that we want for ourselves. In the end I feel it is difficult for people to grasp the movement between use and exchange, concrete and abstract. The difference between concrete and abstract labor is always the most misunderstood foundations of Marx's theory.

Posted on Feb 17, 2010 6:46:33 PM PST
Last edited by the author on Feb 17, 2010 6:49:10 PM PST
I hope Duncan Foley is still teaching when I am ready to go to graduate school (after I finish mathematics degree, which I put off for too long). It will highly influence my decision on whether or not to go to the New School. The main issue I have is this: having graduated from a military academy of high regard, knowing 3 languages, having lived in different countries, having a 3.8+ GPA with honors, amongst other things - I have a really good shot at Ivy League for PhD in economics. I BELONG, however, meaning where my I would be if practical matters had no influence, at the New School with Prof. Shaikh, Foley, and the like.

Needless to say I was not impressed at all with the person who criticized the labor theory of value on the grounds that labor can be destructive. Aside from destruction being a form of creation itself in many instances, which he was not implying nor do I believe even understands, what he was saying was that if a laborer decides to put more labor into a commodity than another it will be worth more regardless of whether or not the former actually improved the item - a lazy worker will produce a commodity of more value than a productive worker. Marx covered this in the first pages of Capital (first chapter at least), that is the concept of socially necessary labor time. This person should not be criticizing theories that he has no conception of, which is clear from him being adamant on that position. There is really no excuse for this persons ignorance when he himself takes the step of arguing about contending economic theory with authority. That is not to say people cannot argue for presence of ignorance - if this were the case noone would be able to argue about anything but simple cause and effect relationships (i.e., everyone would be Austrians). This is to say that one should know his or her limits, and not argue, let us say, that the Marxian labor theory of value is inconsistent without any knowledge of the Marxian labor theory of value. This person could argue on grounds of its conclusions based on their own theoretical understanding - as insufficient as this is this is it is the best that could be done without actually learning the opposing side. The whole debate on my 'Socialism' thread is just one major frustration because the two people opposing me have zero knowledge of Marx outside of what they read on the Mises institute forums, which, as we know, is equivalent to reading about Israelis from Hamas.

I would be interested to see you enter the discussion on my thread, as you seem more able than I to maintain a low blood pressure when dealing with idiocy.

Posted on Feb 18, 2010 1:22:41 PM PST
Hahaha, well I don't know about that. From what I read, the argument in that thread is already getting circular, at least on the part of some of the people contesting your propositions. When it gets to them misunderstanding or taking something out of context, and regurgitating it several times, I just sort of shrug and move on.

It's cool that you know three languages (as I am relearning my second since it has been 5 years since I really used it), that will really help doing research (or at least having an excuse to do field research) in other countries. I actually got accepted to the New School, and it is where my heart is at, but I just didn't have the money to do it. Maybe I will try to get back there for my PhD if I can get a free ride. I say go where you want to, where you are going to fit in, because it makes no sense trying to get into a fairly prestigious school only to be just another cut-throat grad student trying to work with people who are oblivious to your existence. I am in a small sociology program now, and they have a good environmental sociology focus (with food systems and agriculture--which is my main interest now), lots of interaction between profs and students, very comfortable place (plus they have an interdisciplinary Political Economy certificate, which is cool--Economic Anthropology anyone?). I am looking at CUNY, New School, U of Oregon, U of Hawaii Manoa, and a few others for my PhD though.

I know that was a bit off topic, but it seems no one else cares about socialist value theories. Speaking of which have you read much Oskar Lange? I haven't, but I know he is making a case for marginal utility theory in a socialist context.

Posted on Feb 18, 2010 2:22:10 PM PST
Yes, they have been circular for a while now. The more outside people entering the conversation always helps, however, especially if they understand the theories at hand and can lend support.

I have read some Oskar Lange, mainly in connection with the neoclassical vs. Austrian calculation debacle. However, it would make perfect sense that marginal utility theory should be applicable in a socialist context because goods would, theoretically, be exchanged based on their use-value as opposed to their value. That, as far as I am concerned, is the largest irony. As George Bernard Shaw said, in closing an argument with Wicksteed in this regard: "My own hopes centre in a Socialist state in which Mr. Wicksteed and I, as perfect and regenerate catallactic atoms, shall dispute about utilities alone, forgetful of the very existence of a ratio of exchange".

Posted on Feb 25, 2010 11:53:44 AM PST
Thats a rather interesting quote, and I was trying to explain it to a friend who is a partisan of marginal-utility and all I got was a blank stare. BTW, I guess this is what the Mises institute considers good scholarship on criticism of Marx's LTV: http://mises.org/daily/4103

The fact that the author thinks that Marx does not consider profit to be a legitimate part of the economic cycle is probably the most telling aspect of how unknowledgeable of the LTV and Marx the author is.

Posted on Feb 25, 2010 1:57:13 PM PST
Wow. That article reduces the embodied labour theory of value to the labor commanded theory of value that Smith got jumbled up in, then attacks the labor commanded theory as if it were the Marxian theory of labor embodied. He summarizes his twisted interpretation thus: "If more than that basic cost of labor is included in the purchase price, the element of profit or "surplus value" appears." In reality, the cost of labour power and the process of labour are not the same thing, as Marx makes so explicit in chapters 3-7 of Capital, vol 1, that it is hard to believe that this author has read the text he is critiquing. I was able to identify this inconsistency between Smith and Marx early in my undergraduate studies - a shame that the author of that article has still not been able to do so.

Yes, most people - by that I mean economics students of the mainstream - just stare at me blankly as well. I am becoming less and less argumentative because the majority of them simply have no ability to understand what I am telling them. A poll that was taken a while ago that asked economic students what the most important factor for determining which PhD program of economics they were able to join was resulted in 70% saying mathematics and modeling, whereas only 3% said knowledge about the economy was important. A sad state of things.

Posted on Feb 26, 2010 11:31:43 AM PST
That's an ironic finding in that poll. Unfortunately I have to deal with profs who are more interested in statistical modeling of society than actual society itself (if they could define such an entity). It is just practical for the most part, you are not going to get a job arguing about human nature or what value is, you are going to get a job because you can use some predictable formula to 'empirically' demonstrate certain parameters of society. I go back to C. Wright Mills' critique of what he calls 'abstract empiricism' in "The Sociological Immagination" every time I get frustrated with the way the discipline is structured. I am not saying there is no room for such exercises, but we should at least be critically examining our methods and questioning the appropriateness of using statistical modeling (calculus as well) as a proxy for concrete human behavior.

Furthermore, the author of that piece is still talking about costs (price) and value as almost being synonomous. Even though they appartently criticize the fact that Marx, and Marxists, emphasize that price and value are not the same thing, which means for them that the analysis is useless. Marx is pretty clear in his criticism of Ricardo and Smith that there is nothing added to the value that happens at the market, and it is not just upping the price of something above the cost of labor. It is always a very precarious matter for people to understand who have not read Marx, where he simplistically demonstrates his concept of exploitation (surplus value) and valuation in Capital Vol. 1 in very approachable language. Somehow the guy that guided me to that article seemed to see, along with the author, that there is a divergence between Marx's utopian ideals (illustrating further that they don't know what they are talking about) and human nature (which he didn't define, and of which I had to at least point out that for Marx, there really is no such thing as some static human nature). I remember talking about human nature in classical sociological theory, and it was Marx who actually saw the pure human state (the uncultured basically) as being generally good and decent (whatever that means) and it was others, like Durkheim, who saw humans as instinctually barbarous creatures that needed social regulation and normalizing governance to be decent.

Posted on Feb 26, 2010 4:09:05 PM PST
Last edited by the author on Mar 11, 2010 1:01:33 PM PST
Yes, the Austrians seem to think Marx was a Utopian socialist or had some concrete stance on immutable human nature. Needless to say, neither of these is the case. It is quite clear in Capital and his other works that he endlessly criticizes people who hold either of these views. Marx, in all cases dealing with speculation on human nature, believed that people who were truly subjectively free were far more able to see the world for what it was and in turn deal with real, concrete social issues than those who are implanted with a subjective existence that runs contrary to their objective reality. Thus, I find it quite deranged that Marx is 'interpreted' (we both know what that means) in the opposite manner.

Also - the discussion seems to have erupted again on my review of Mises' 'Socialism'. I think it would be good if you put your two cents in, as it is centered around Marxian theory and concepts that are quite difficult for me to put in the simple manner that this person seems to be capable of understanding.

In reply to an earlier post on Jun 16, 2010 3:33:55 PM PDT
Hows it going Robert? What have you been getting into lately?

In reply to an earlier post on Oct 12, 2010 11:26:21 PM PDT
Sorry man, busy with the thesis. I have been taking a class on the history of economic thought, which is enlightening, especially because I was lost in some of your comments. Reading Roncaglia's Wealth of Ideas, which is okay but I think is really reading into some peoples theories a bit too much and others too little (Smith, Sraffa). Lucky to have heterodox prof though.

Went to Japan to do some field work for my thesis for two months over the summer as well. Was fun. Crunch time: thesis and PhD apps. What about you? I am sure you have been broadening your economic tool box over the past few months, any new and interesting discoveries in the realm of value theory?
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