Marx’s law of value: a debate between David Harvey and Michael Roberts

This is going to be a long post, so bear with me.  First, you will have to read a paper (attached below) by Professor David Harvey, then a critique by me below – and finally a reply to my critique by Professor Harvey.  And then it’s up to you readers to see what you make of it: is this like a medieval religious debate about how many angels there are on the head of a pin; or is it a debate that leads to something really worth knowing?

For more on the nature of Marx’s law of value and its relation to crises, see my new book, Marx 200 

David Harvey’s misunderstanding of Marx’s law of value (Michael Roberts)

Recently, Professor David Harvey (DH) sent out an email to several people, including me, attaching a short paper for discussion (see Harvey paper).  The paper outlines DH’s view that Marx’s theory of value in capitalist economies has been badly misunderstood.

Just in case you are unaware (difficult to believe), Professor Harvey is probably the most eminent Marxist scholar alive today with a host of books, papers and educational videos to his name on Marxist economic theory.  The short paper circulated expressed succinctly his view of Marx’s value theory that he has recently outlined more expansively in his latest book, Marx, Capital and the madness of economic reason.[i]

In the paper, entitled Marx’s refusal of the labour theory of value, DH argues that Marx did not have a ‘labour theory of value’ at all.  His theory of value was distinctive from that of the classical economist, David Ricardo.  Instead, according to DH, Marx argued that value was a reflection of labour embodied in a commodity which is only created/revealed in exchange in the market.  As DH puts it: “if there is no market, there is no value”.  If this correct, then it is in the realization of value as expressed in money that value emerges, not in the production process as such.

DH then goes on to argue that if wages are forced down to the minimum or even to nothing, then there will be no market for commodities and thus no value – and this is the “real root of capitalist crises”.  And thus it follows that a policy for capital to avoid crises would be by “raising wages to ensure “rational consumption” from the standpoint of capital and colonizing everyday life as a field for consumerism”.  This is the consequence of a correct view of Marx’s value theory, according to DH.

DH points out that this interpretation of value theory “is far beyond what Ricardo had in mind and equally far away from that conception of value usually attributed to Marx.”  It certainly is.  But is DH right in his interpretation of Marx’s value theory and, even if he is, does such interpretation have any empirical validity?  I would answer both these questions with: ‘no’, ‘non’, ‘nein’, to use Marx’s three best known languages.

DH starts by saying that “It is widely believed that Marx adapted the labour theory of value from Ricardo as a founding concept for his studies of capital accumulation” and “since the labour theory of value has been generally discredited, it is then often authoritatively stated that Marx’s theories are worthless.”  It is not clear who DH is referring to here.  Clearly bourgeois mainstream economists consider Marx’s law of value as discredited.  The neoclassical marginalists have long rejected the concept of labour-value by labelling it ‘metaphysical’.  Neo-Ricardian, post-Sraffian, and post-Keynesian economists, in particular, are also strongly inclined to dismiss any notion of ‘value’ as an ideological mystification.

But most Marxist economists are aware of the distinction between Marx’s value theory and Ricardo’s.  And the difference is not what DH says it is, namely, Ricardo had a ‘labour theory of value’ and Marx did not.  The difference is that Ricardo had a theory of (use-) value based on ‘concrete labour’ (physical amounts of labour) measured in labour time.  Marx’s law of value was based on ‘abstract labour’ (value measured in labour time when ‘socially’ tested on the market).

Under capitalism, human labour power itself is a commodity to be sold on the market.  Indeed, this is a key characteristic of the capitalist mode of production where the majority has no means of production and so must sell their labour power to the owners of the means of production.  So, just as with other commodities, labour has a dual property. On the one hand, it is useful labour, that is, expenditure of human labour in a concrete form and for a specific purpose and with this property creates use values. On the other hand, it is abstract labour, that is, expenditure of human ‘labour power’ without specific characteristics which creates the value of the commodity in which it is represented.  Thus Marx made the distinction between labour and labour power, a distinction that is absolutely crucial for the understanding of the source of profit.

This was the great advance in Marx’s law of value. The labour time embodied in the commodities normally purchased by the worker for the reproduction of himself and his family in a day is less than the labour time that a worker actually offers to the owner of capital during the same time period. The result is that for any given time period, the worker produces more value than the wage equivalent which is paid by the owner of capital for the use of the labour power. This difference, Marx calls “unpaid labour” and “surplus labour”- or surplus value.  Marx’s value theory of abstract labour exposes the exploitative nature of the capitalist mode of production, while neither Ricardo’s nor Adam Smith’s labour theory of value does.

DH mentions just once (and in passing) this vital discovery of Marx (i.e. abstract labour) that distinguishes Marx’s law from the classical labour theory of value.  And that is because DH wishes to press on to his interpretation of Marx’s theory as one where value is created/realized only in exchange, and not in the process of production using labour power.  DH says that “value is initially taken to be a reflection of the social (abstract) labour congealed in commodities.”  But “as a regulatory norm in the market place, value can exist, Marx shows, only when and where commodity exchange has become “a normal social act.” So, without money, there is no value.

Yes, but the value of a commodity is still the labour contained in it and expanded during the production process before it gets to market.  Value is expended physical and mental human labour which is then abstracted by the social process of production for the market.  Value is not a creature of money – on the contrary.  Money is the representation or exchange value of labour expended, not vice versa.  I think Marx is clear on this crucial point.  He says in Capital Volume One: ‘The value of a commodity is expressed in its price before it enters into circulation, and it is therefore a pre-condition of circulation, not its result.”[ii]

Murray Smith in his new and forthcoming edition of his book, Invisible Leviathan[iii], provides a concise explanation of the difference between Marx’s law of value and DH’s interpretation.  Marx said that: “Money as the measure of value is the necessary form of appearance of the measure of value which is immanent in commodities, namely labour-time.” Smith comments that this “is certainly inconsistent with the idea that value can be created in the act of exchange. ..It is precisely because exchange effects a process of ‘equalisation of products of lab our on the market’ (that is, involves a real abstraction) that production oriented toward exchange must take account of the fact that ‘physiological labour’ is both utility-shaping and value-creating – that is, both concrete and abstract at one and the same time. To try and argue that that value is created ‘not in production but at the articulation of production and circulation’ is a notion replete with circular reasoning and requiring the most robust of mental gymnastics to entertain…. The problem with this approach is that if one accepts that abstract associated labour has no substantial existence apart from the value form, money, then commodity values appear to be severed entirely from any determination in the conditions of their production, and the way is paved for an effective identification of value and price.”

Instead, Marx’s law of value is based on the view that the labour involved in the production of commodities produces value, while exchange realises it in money-form. It is only because of this that Marx can distinguish between the amounts of value and surplus-value created in commodity production, and the generally different amounts realised through exchange.

Contrary to the view of the mainstream and neo-Ricardian economists, there is no ‘mystification’ here.  Value is objective and real and not just expressed in money.  Marx’s law of value, where abstract labour (measured in labour time) explains exchange value and prices, can be empirically validated.[iv]

There is reason behind DH’s interpretation.  If value is created only at the moment of exchange for money and ‘money rules’, then it will be (effective) demand that will decide whether capitalism smoothly accumulates without recurring crises.  To show this, DH describes in some detail the impact of capitalist accumulation on the conditions and living standards as capitalists strive to raise relative surplus value through the introduction of machinery.  He uses some of the graphic examples provided Marx in Chapter 25 of Volume One.  DH emphasises that capitalist accumulation aims to minimize the value of labour power – even to the point of pauperism.

DH concludes that “If this is a typical outcome of the operation of the capitalist law of value accumulation, then there is a deep contradiction between deteriorating conditions of social reproduction and capital’s need to perpetually expand the market.  As Marx notes in Volume 2 of Capital, the real root of capitalist crises lies in the suppression of wages and the reduction of the mass of the population to the status of penniless paupers.”  So the ‘real root of crises’ is found in the “suppression of wages” and the “reduction of the mass of population to the status of penniless paupers”.  This is an underconsumptionist theory of crises.

There are several points here.  First, Chapter 25 entitled, The general law of capitalist accumulation, does not just refer to the pauperization of the working class.  DH leaves out a very important aspect of that general law: the tendency for the organic composition of capital to rise[v].  This is what drives up relative surplus value but is also a key factor in the tendency of the rate of profit to fall (developed in Volume 3), ‘the most important law of political economy’[vi], which lays the basis for Marx’s theory of crises.  DH ignores this aspect.

But DH goes further in his underconsumptionist interpretation.  “Value depends on the existence of wants, needs and desires, backed by ability to pay in a population of consumers……It also means that the diminution of wages to almost nothing will be counterproductive to the realization of value and surplus value in the market. Raising wages to ensure “rational consumption” from the standpoint of capital and colonizing everyday life as a field for consumerism are crucial for the value theory.”  Thus DH argues that capitalism goes into crises because wages are suppressed; and so raising wages, ensuring ‘rational consumption’, would provide the ‘ability to pay’ and so end the crisis.

This underconsumptionist interpretation of Marx’s crisis theory has been firmly dismissed – by Marx himself – in the famous note in the same Volume 2 that DH refers to (underlines are my emphasis).

It is sheer tautology to say that crises are caused by the scarcity of effective consumption….That commodities are unsaleable means only that no effective purchasers have been found for them.   But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and ‘simple‘ (!) common sense, such a period should rather remove the crisis.”[vii]

In my view, Marx rejected both the law of value as DH interprets it and also the conclusion that crises caused by an inability to pay for the ‘wants, need and desires’ of people.  But Marx could be wrong and DH right on the cause of crises.  Empirical evidence does not support DH, however.

Let me cite just three facts.  The first is that workers’ consumption is not the largest sector of ‘demand’ in a capitalist economy; it is productive capital consumption.  Gross domestic product or expenditure is a measure of annual demand for ‘wants, needs and desires’.  In the US, consumption would seem to constitute 70% of GDP.  However, if you look at ‘gross product’ which includes all the intermediate value-added products not counted in GDP, then consumption is only 36% of the total product; the rest constitutes demand from capital for parts, materials, intermediate goods and services.  It is investment by capitalists that is the swing factor and driver of demand, not consumption by workers.

This is shown in the second fact.  If we analyse the changes in investment and consumption prior to each recession or slump in the post-war US economy, we find that consumption demand has played little or no leading role in provoking a slump.  In the six recessions since 1953, personal consumption fell less than GDP or investment on every occasion and does not fall at all in 1980-2.  Investment fell by 8-30% on every occasion.

Percentage change in US real personal consumption (PC), investment and GDP

The third fact relates directly to wages and DH’s claim that raising them would help capital.  Carchedi finds that of the 12 post-WWII crises, 11 have been preceded by rising wages and only one by falling wages (the 1991 crisis)[viii].  That confirms Marx’s view in the note in Volume 2  above.

I conclude from DH’s short paper that he aims to establish an argument that class struggle is no longer centred or decided between labour and capital at the point of production of surplus value. Instead in ‘modern’ capitalism, it is to be found in other places in his ‘circuit of capital’ that he presents in latest book and in various presentations globally.  For DH, it is in the point of realisation (ie over rents, mortgages, price gouging by pharma firms etc) or in distribution (over taxes, public services etc) that the ‘hotspots’’ of class struggle are now centred.  The class struggle in production is now less important (even non-existent).

In my view, to support this, DH presents a series of theoretical confusions in this paper.  First, Marx did not have a labour theory of value.  Second, value is only created in exchange (in realisation). Third, the rate of profit (or even profit alone) is irrelevant to crises: what matters is the driving down of the value of labour power to the minimum (or even zero!) so that workers are unable to meet their ‘wants, desires, etc’.  This becomes a crude underconsumption theory – cruder than Keynes.

DH deliberately ignores the difference (and duality) between concrete and abstract labour, and its counterpart, use value and exchange value.  The dual nature of value in a commodity, as Marx discovered, is reduced by Harvey to the lack of the ability of workers to buy their use values.  Use value (wants and desires) is the key, not exchange value in value, for DH.  Marx’s theory of crisis (based on insufficient surplus value) is replaced with insufficient use values for workers as consumers.   Overaccumulation is replaced by underconsumption.  The class struggle becomes not workers versus capitalists; but consumers versus capitalists or taxpayers versus governments.

It’s not Marx’s view.  More important, the whole approach is confusing to a class analysis and strategy for the working class struggle.

And now here is David Harvey’s response to my critique of his paper on Marx’s value theory.

The misunderstandings of Michael Roberts (David Harvey)

There are, obviously, some serious points for discussion over Marx’s value theory and I hope that some dialogue with Michael Roberts can help clarify them.  Before getting to them, I need to remove a number of misreadings and misrepresentations of my position in Roberts’ response.  Let me be clear. Value is always created in the act of production.  But it is realized in the moment of market exchange. I therefore think of value in terms of what Marx calls “the contradictory unity of production and realization.”  Value cannot be produced through market exchange. But it cannot be realized outside of market exchange.  Marx is clear enough about that.

The essence of value is abstract labour or, as I prefer to refer to it, “socially necessary labour time”.  Roberts is obviously correct to say that Marx’s definition is entirely different from the concrete labour time that Ricardo postulated.  No matter whether we say “abstract labour” or “socially necessary”, however, the onus then falls on how the abstraction is made and how socially necessary is to be understood. The answer to such questions has to be grounded in material processes and not constructed through idealist exercises.  So by what materialist process is value constructed if it is not “immanent” in commodities but historically created.

The answer is given in Marx’s starting point in Capital which is the idealized material act of commodity exchange.  If the capitalist takes a commodity to market and there is no want, need or desire for it, then the labour congealed in it is socially unnecessary and it therefore has no value (this is what Marx says at the end of the first section of Capital – p.131 in Penguin/Vintage edition).  This does not mean that value is created in the market (which Roberts incorrectly accuses me of saying). But – and here this may be my peculiar way of looking at it – I take the value created in production to be only a potential value until it is realized.  An alternative way would be to say that the value is produced but then the value is lost if there is no demand for it in the market.  In which case, we would need to construct a strong theory of devaluation to account for what happens in the market place. Devaluation rarely appears in Roberts’ accounts and has no role in his response.  Given my interest in the relation between value and not-value or anti-value this latter formulation might also work for me.  But in either case I think it undeniable that the state of wants, needs and desires backed by ability to pay has an important role to play in sustaining the circulation of capital. This does not mean, as Roberts again and again infers, that this is the only relevant factor in crisis formation.  I have gone out of the way many times to say that this is just one important moment in the circulation of capital where devaluations (sometimes but not always of crisis proportions) can occur.

But again and again Roberts loves to relegate me into that pejorative category of underconsumptionist whenever I mention such matters.  It was Marx, not me, who said “the real root of crises” lies in the diminished purchasing power of the working classes and if I cite Marx on that point it is because it is a neat antidote to all those who endlessly cite the falling rate of profit.  Crises come in many shapes and forms, I have argued.  The falling rate of profit or the collapse of consumer demand are two of many other explanations (I note in passing that Marx in his comments on the crises of 1847- and 1857 – crises that had an uncanny resemblance to 2007-8 – described the crises as commercial and financial crises without any mention of either falling profit rates or insufficient consumer demand).

My objection to any exclusionary productivist interpretation (to cite a matching pejorative characterization!) is that it casts to one side the whole history of creation of wants, needs and desires (let alone the mechanics of ensuring an ability to pay) in the history of capital accumulation.  I think we should pay much more attention to this aspect of things. This does not mean I downplay, deny or refute all the work that has been done on the labour process and the importance of the class struggles that have occurred and continue to occur in the sphere of production.  But these struggles have to be put in relation to struggles over realization, distribution (e.g. rental extractions, debt foreclosures), social reproduction, the management of the metabolic relation to nature and the free gifts of culture and nature. These have all figured large in recent anti-capitalist movements and I insist that we take them all seriously along with the more traditional focus on the Marxist left favoring class struggle at the point of production as the key moment for struggle.  This is why I think the diagram I offer of circulation and the definition of capital as value in motion is so important.  Strange to have it all dismissed in the citation from Murray Smith as “circular reasoning”!!

This perspective opens up some interesting lines of enquiry and points of difference.  Marx’s account over struggles over the working day and the forces that drive technological and organizational changes in the search for relative surplus value all depend upon the “coercive laws of competition”.  That term comes up at various key points in Marx’s argument throughout Capital.  Where is this force mobilized and most clearly felt?  In the market of course!  We cannot understand what goes on in the realm of production (or social reproduction for that matter) without market forces playing their part. It is the coercive laws of competition in the market that mandate capitalist reinvestment and the lengthening of the working day etc.

But this tracks back to how Marx sets up how the abstraction of value – which, by the way, is in Marx’s view, a social relation hence “immaterial but objective” and not “immanent” and “real” as the quote from Murray Smith proposes (“not an atom of matter enters into the objectivity of commodities” says Marx in Capital– p.138).  Value arises not as a product of thought but as a product of a historical material process.  Marx’s study of equivalent and relative forms of value leads into the generalization of exchange which underpins the rise of value as a regulatory norm operating in the market and it is this regulatory norm of value that then returns to dominate behaviors not only in the market but also in the realm of production and social reproduction.  This is a very dialectical move that Marx make but quite commonly encountered in Marx’s work.  Only in this way, for example, can we understand how it is that workers make the capital which then returns to dominate them and how we can all become prisoners of our own products (academics beware!!).

Finally, let me comment on the empirical example on which Roberts reduces final demand to 30 from 70 percent.  To be sure, there is a complicated question of how to deal with value relations across commodity chains (there is an interesting piece by Starosta on Commodity Chains and Marx’s Value Theory in Antipode for 2011).  But imagine a situation where iron ore is mined and the mining company produces value and surplus value that is realized through a sale to a company that produces steel which realizes more value and surplus value through a sale to an auto company that produces yet more value and surplus value that is realized by a sale of autos to final consumers who want and need an auto and have the money to buy one.  The value of the auto is all the accumulated past abstract labour applied.  Suppose for some reason the final consumers cannot pay or get fed up with autos. Then all the accumulated value is lost (devalued).  In practice, as Marx observed, the chain of payments might take a while to work through but when it does then all value production in the chain disappears.

Of course, all sorts of other scenarios can be imagined.  But the point here is that no one apart from crazy people and speculators will want to accumulate steel in the absence of a market for it.  So what happens to value in all of this becomes problematic and Robert’s account makes it seem as if investment in the production of means of production is independent of final demand and can occur without any mind for final market conditions.  Of course, there are certain kinds of investments with all sorts of time lags (fixed capital and infrastructures) like the Chinese overproduction of cities funded by doubling down on indebtedness, where things get very complicated (as I outlined in the final chapter of the madness of economic reason book).  But Roberts’ empirical example makes no sense to me whatsoever as an elucidation as to why realization and the politics of realization are irrelevant or at best a sidebar to the main action at the point of production.

All this and we have yet to get to the thorny questions of money and the politics of distribution along with the circulation of interest-bearing capital in relation to value theory.  Can banks produce value?  They are clearly producing representations of value hand over fist…..Are they a mere side-bar too?

For more on the nature of Marx’s law of value and its relation to crises, see my new book, Marx 200 



[ii] Capital Volume One, p260 trans. Ben Fowkes, New York: Vintage 1977

[iii] Murray Smith, Invisible Leviathan, Historical Materialism, forthcoming 2018

[iv] Cockshott and Cottrell broke down the economy into a large number of sectors to show that the monetary value of the gross output of these sectors correlates closely with the labour concurrently expended to produce that gross output.  Anwar Shaikh also did something similar.  He compared market prices, labour values and standard prices of production calculated from US input-output tables and found that on average labour values deviate from market prices by only 9.2 per cent and that prices of production (calculated at observed rates of profit) deviate from market prices by only 8.2 per cent. Lefteris Tsoulfidis and Dimitris Paitaridis investigated the question of price-value deviations using the input-output Table of Canada. They found for the Canadian economy the results are consistent with Marx’s law of value. And G Carchedi, in a recent paper, showed that the validity of Marx’s law of value can be tested with official US data, which are deflated money prices of use values.  He found that money and value rates of profit moved in the same direction (tendentially downward) and tracked each other very closely.

[v] “The accumulation of capital, though originally appearing as its quantitative extension only, is effected, as we have seen, under a progressive qualitative change in its composition, under a constant increase of its constant, at the expense of its variable constituent.”  Capital Vol 1, Chapter 25

[vi] Grundrisse p748

[vii] Capital Volume 2, Chapter 20


180 thoughts on “Marx’s law of value: a debate between David Harvey and Michael Roberts

  1. Bravo! Harvey does not understand the concept of ‘abstract labour’ and on top of that he does not understand money (gold),as a general equivalent of goods.

    He thinks like a marginalist; if you scratch, you will find that he considers value is in the head of the beholder, that is to say created by the market. .

  2. I was under the impression, perhaps mistaken, that Marx saw “value’ as a mystification, and that “abstract labour” was an essential or basic ‘category’ of capitalist thought if not clearly recognized by bourgeois economists or capitalist culture, an essential or basic category since under capitalism labour is most certainly made into and treated as a commodity.

    Consequently, because “value” was a mystification — according to Marx (in so far as I can tell) — he looked forward to a future in which exchange would no longer be “commodity exchange,” in which money and “abstract labour” or, what is the same, “the law of value,” would be nothing but a distant and awful historical memory.

    I’m just a working class schmuck trying to make sense of the world in which I live, not a scholar, and certainly not an economist, but I have tried to read Marx. To me, he makes a great deal of sense. Perhaps I’m misreading him, that is to say, reading into him. I don’t think that I am or at least not entirely. But I’d be curious, Michael, and only if you have the time and feel the inclination, to get some feedback about my reading of Marx as pertains the issue of “abstract labour.” I’ve posted a series of notes (a summary of a discussion, really, that I’d had with someone) here. I’ve also summarized as briefly as I can what I take to be Marx’s understanding of the “source of profit” and why the “rate of profit must fall” in a capitalist economy here; and I’ve summarised, again as succinctly as I can, what I take to be Marx’s understanding of the relationship between “abstract labour” and “exchange value” here.



    1. I was not going to intervene. What makes labour concrete is that it is the product of the division of labour (specialisation) and the division of skill. Using these two criteria the specific locus of each individual’s labour-contribution can be found. The sum total of all these concrete forms of labour is the total labour expended in production. Abstract labour is this total labour reduced to its simple average, therefore shorn of the divisions that make it concrete. It is a simplification needed for the purpose of research and elaboration.

      1. Is this the manner in which Marx puts forth the concept of ‘abstract labour?’

        Or does it rather have to do with the structure of the commodity as he understands it and the ‘fact’ that labour in a capitalist context is commodified?

        And what is the structure of the commodity? It has, he tells us, a twofold nature: on the one hand, it has a use-value, which corresponds to the commodity in all of its concrete features and uses, and thus makes it different and unique in comparison to all other commodities; on the other hand, it has an exchange-value, which in qualitative terms makes it identical in kind to all other commodities, but do note that this presumed qualitative sameness or identity is only possible, logically speaking, if one abstracts away all of the concrete aspects of the commodity, if one reduces it, that is, to an abstract ‘thing’ that in this instance, as a capitalist category, only has exchange-value as its characteristic.

        Thus the “abstract character” of any commodity, that which makes it like any other commodity, is both implicit in and essential to the notion of the commodity as conceptualized by the capitalist mindset.

        And what did Marx say specifically about labour in this connection?

        ‘I was the first to point out and to examine critically this two-fold nature of labour contained in commodities. As this point is the point on which a clear comprehension of Political Economy [turns,] we must go into more detail.’ (source: Marx’s Capital – Philosophy and Political Economy by Geoff Pilling 1980, Chapter 2, “Marx’s Critique of Classical Economics” see the second paragraph(what is in bold is my emphasis))

        And what of this twofold nature of “labour” as such?

        Well, consider this footnote by Marx (Vintage Books Edition, August 1977, footnote ((18) on p.142.)):

        “One of the first economists, after William Petty, to have seen through the nature of value, the famous Franklin, says this: ‘Trade in general being nothing else but the exchange of labour for labour, the value of all things is …most justly measured by labour’ (The Works of B. Franklin etc., edited by Sparks, Boston, 1836, Vol. 2, p. 267) Franklin is not aware that in measuring the value of everything ‘in labour’ he makes the abstraction from any difference in the kinds of labour exchanged – and thus [he, Franklin,] reduces them all to equal human labour. Yet he states this without knowing it. He speaks first of ‘the one labour,’ then of ‘the other labour’, and finally of ‘labour’, without further qualification, as the substance of the value of everything. [Franklin, is confusing ‘conceptual categories,’ as Marx is clearly stating, here.]”

        This is not a negligible piece of textual evidence for my reading of Marx. And he is saying in words that are difficult to read in any other way that B. Franklin is guilty, without being aware of it, of ‘reducing’ all forms of labour to equal human labour, an ‘abstraction’ that he is unwittingly committing. In no equivocal terms, then, Marx is saying that ‘labour,’ in a capitalist world, has, like the commodity, because it is a commodity, a twofold structure: one aspect that is concrete and particular, and another that is abstract in the extreme, and it is the extreme abstract aspect of labour that is taken by the capitalist mindset to underpin “the value of everything.”

        Merely to buttress the point with a bit more textual evidence, in a note by Engels clarifying a footnote by Marx (on P.138. of my edition of ‘Capital’ (V.B.,August 1977)), Engels writes:

        “The English language has the advantage of possessing two separate words for these two different aspects of labour Labour which creates use-values and is qualitatively determined is called ‘work’ as opposed to ‘labour’; labour which creates value and is only measured quantitatively is called ‘labour,’ as opposed to ‘work.’

        Again, what is being underscored is the ‘double’ nature of ‘labour-power’ to which Marx wants to draw attention and which he is at pains to point to as being a ‘cultural given’ in capitalist culture, but a ‘given’ that tends to go unnoticed – viz. to paraphrase Marx, ‘I was the first among economists to point to this double nature of ‘labour-power.’

        Thus for Marx, “abstract labour” does not appear to be a conceptual category of convenience for the sake of simplifying research and elaboration.

        Rather, it is part and parcel of the ideology of capital which when accepted en masse — by the working class every bit as much as the bourgeoisie — makes the buying and selling of ‘labour’ for a wage appear to be perfectly natural and “fair,” as well as being the “substantial essence “ of all the commodity values pursued on the open and free market.

      2. The two fold nature of the commodity is vital. Concrete labour can produce a useless product. In which case it has no use value, cannot be sold, and the concrete labour it contains cannot become part of the labour of society through being converted into its monetary form. It is wasted labour. This is the key point Marx was making. In a capitalist society, the labour of the individual only becomes part of the labour of society, indirectly, that is through the process of being exchanged. In the USSR the labour of the individual became part of the labour of society directly as part of the plan. Those theorists who conflate the two, who obscure the commodity form it takes under capitalism, cannot explain what went wrong in the USSR. Another way to understand abstract labour is through labour time. In volumes one and two Marx describes the value of a commodity as representing socially necessary labour time. Time is understood here to include not only duration, but also intensity, that is average intensity. In Chapter 10 of Volume 3 ( a most important chapter) Marx moves from abstract value to market value, from average labour time to weighted average labour time. Market value is the historic form value took (more concretely) until such time that commodities circulate as products of capital and therefore at prices of production. Why is weighted average so important? Because it alone provides the total labour time expended on a particular product when multiplied by the number of products produced. Simple averages do not because the weight of production may be greater in the more efficient firms in which case the weighted average will reside below the simple average and vice versa if the is a preponderance of less efficient firms in that industry. So abstract value is simple average, market value is weighted average. Marx could not use market value to begin with because that would have meant not all capitals were average, some would have been more productive than others. This would have introduced a complication preventing Marx elaborating on the capitalist social relation in its pure form. Hope this helps.

      3. Many thanks for the reply, ucanbpolitical.

        You write:

        “The two fold nature of the commodity is vital. Concrete labour can produce a useless product. In which case it has no use value, cannot be sold, and the concrete labour it contains cannot become part of the labour of society through being converted into its monetary form. It is wasted labour. This is the key point Marx was making . . . ”

        Yes, to what you are speaking to. No, to what I am speaking to. For although what you are speaking to may have been ‘one’ of the key points Marx was making, it wasn’t the only one.

        When Marx is wrapping his head around the “commodity” as such, he is discussing the commodity as an object (a good or service) produced for sale, setting forth an analysis of the object as such, that is to say, as distinct from the equally important implications of the failure or success of its exchange in the market, which he also admittedly analyses as an aspect of capital in circulation.

        But what he notes about the commodity as an object perceived and handled in a capitalist context is that it is very much a conflation of two pivotal aspects: one concrete and the other “abstract.”

        The “abstract” aspect of the commodity is deduced, if you will, from the fact that in exchange “an equality” is made: so much of ‘this’ is equal to so much of ‘that.’ This is something very much implicit to Capitalism and capitalist culture.

        In what way, for example, is ‘the activity of nursing’ made to equal a ‘computer?’ There has to be a ‘basis’ by which to construct the ‘equality’ between these two fundamentally and in ‘reality’ completely different ‘things.’

        The route to this ‘equality’ or ‘identity,’ as a matter of initial observation (initial, that is to say, as a preliminary step in wrapping one’s head around this thing that we call capitalism and very much in the spirit of what Marx is doing by starting Capital with an exploration of the commodity), is to “make the abstraction from any difference in the kinds of [things] exchanged.” If this isn’t “the key point Marx was making,” it certainly was one that he regarded as important: he himself very much insists upon it, as the quotes I’ve already provided attest.

        But consider yet another quote from Marx that I found in something Paul Mattick wrote:

        Quote begins:

        “. . . that finally there has been found the abstract expression for the simplest and oldest of social production relations of general validity. In one sense this is true, of course, but in another sense not, for the modern lack of interest regarding specific types of labor presupposes the great and actual variety of the labor activities of modern capitalism, of which none in particular can be adjudged the ruling type of labor… Labor as such, labor in general, this simple abstraction, which is the starting point and the high point of bourgeois economy, appears as a practical truth only as a category of modern society, even though it also expresses an ancient and for all social formations valid relationship.” [[Marx,Grundrisse der Kritik der Politischen OkonomieBerlin, 1953, p. 89 (from here on referred to as Grundrisse)] [What is in bold is my emphasis.]

        Quote ends.

        (To hammer the point: “this simple abstraction, which is the starting point and the high point of bourgeois economy.”)

        And I’ll let Mattick comment on that quote, since I very much agree with his interpretation:

        Quote begins:

        It is precisely the difference in the various kinds of labor which is the necessary condition for the exchange of commodities “measured” in terms of abstract labor-time. The reduction of all kinds of labor, regardless of skill and productivity, to abstract or simple labor is not only a postulate of value theory but is actually and constantly established in the exchange process. “A commodity may be the product of the most skilled labor, but its value, by equating it to the products of simple and unskilled labor, represents a definite quantity of the latter alone.”[24]Furthermore, it is not the individual’s productivity which determines the value of any particular commodity but the socially-necessary, or average, productivity required for its production; and it is not the individual’s particular skill which finds consideration in the exchange process but only the social evaluation of this skill. And this evaluation, by the nature of the thing, can only be quantitative – a multiplication of simple labor expressed in money terms. [ The Limits of the Mixed Economy, chapter: III. MARX’S LABOR THEORY OF VALUE, Mattick, 1969.]

        Quote ends.

        As Mattick puts it, ‘abstract or simple labor’ is not merely a postulate of value theory, but is actually established, as both an implication and practical matter, in the exchange process. Otherwise, how is the “equating” of all forms of labour that is “the process of exchange” — forms of labour that in their astounding varieties are really not at all ‘equivalent’ and thus not possibly reducible to one another — even possible?

  3. Here’s my observations about David Harvey’s (DH) replica (between quotation marks, what he wrote; the rest are my observations per se):

    “Let me be clear. Value is always created in the act of production. But it is realized in the moment of market exchange.”

    No, it’s not. What is realized in market exchange is capital. Value is already created. If the capitalist can’t trade it back into the money form, then value is destroyed. This can result in less profit or even a loss, but the ceiling is the total value created, or, if we want to take the process as a whole, the average (social) profit rate. The word “realization” can be confusing, but it doesn’t mean value only becomes real in circulation, in any situation.

    “I therefore think of value in terms of what Marx calls“the contradictory unity of production and realization.” Value cannot be produced through market exchange. But it cannot be realized outside of market exchange.”

    See my clarification above.

    “No matter whether we say “abstract labour” or “socially necessary”, however, the onus then falls on how the abstraction is made and how socially necessary is to be understood. The answer to such questions has to be grounded in material processes and not constructed through idealist exercises. So by what materialist process is value constructed if it is not “immanent” in commodities but historically created.”

    Ok, and what? Just because something is “historically created”, doesn’t mean it’s less concrete.

    “The answer is given in Marx’s starting point in Capital which is the idealized material act of commodity exchange. If the capitalist takes a commodity to market and there is no want, need or desire for it, then the labour congealed in it is socially unnecessary and it therefore has no value.”

    No, Marx didn’t say that. If a commodity isn’t sold in the market, then its value is destroyed, it doesn’t mean it has no value (again, see my first clarification). Every day, one third of all the food produced is discarded; it doesn’t mean there aren’t hungry people.
    Value was destroyed because its use value was lost (e.g. food was rotten). Use value is the Träger des Tauschwerts, the “carrier” of exchange value. Exchange value is not value at all, but just the expression of value in the market. But the substance of value is still socially necessary labor time.

    “I take the value created in production to be only a potential value until it is realized.”

    This is the root of DH’s failed “theory”.

    “Devaluation rarely appears in Roberts’ accounts and has no role in his response.”

    Devaluation only happens when socially necessary labor time to produce said commodity is reduced. But it doesn’t make it any less concrete, empirically measurable.

    “But in either case I think it undeniable that the state of wants, needs and desires backed by ability to pay has an important role to play in sustaining the circulation of capital.”

    But this is, as Marx himself stated, tautological in capitalism. From the capitalist point of view, demand comes only from those who can pay. Otherwise we couldn’t explain, for example, the luxury market.

    Besides, this “consumption theory” doesn’t explain how new necessities are created since, as far as I know, human imagination is limited: it can’t imagine things that go beyond human necessities. Or is DH insinuating the Pharaohs or Roman imperators were poor because they didn’t have iPhones?

    “It was Marx, not me, who said “the real root of crises” lies in the diminished purchasing power of the working classes and if I cite Marx on that point it is because it is a neat antidote to all those who endlessly cite the falling rate of profit.”

    No, he doesn’t say that. On the contrary, the few times Marx mentions crises, he states it comes just when wages are at their highest.

    “Marx’s account over struggles over the working day and the forces that drive technological and organizational changes in the search for relative surplus value all depend upon the “coercive laws of competition”. That term comes up at various key points in Marx’s argument throughout Capital. Where is this force mobilized and most clearly felt? In the market of course!”

    But the competition is for the surplus value (already created), not for the totality of value. Profit is surplus value by another name. Either way, value is already created, be it surplus or not.
    “We cannot understand what goes on in the realm of production (or social reproduction for that matter) without market forces playing their part.”

    And what does this have with the Law of Value?

    “Marx’s study of equivalent and relative forms of value leads into the generalization of exchange which underpins the rise of value as a regulatory norm operating in the market and it is this regulatory norm of value that then returns to dominate behaviors not only in the market but also in the realm of production and social reproduction.”

    But here Marx is explaining the commodity, not value. The commodity is the dialectical contradiction between value and exchange value (and here enters equivalent and relative forms).
    “But the point here is that no one apart from crazy people and speculators will want to accumulate steel in the absence of a market for it.”

    Why not? If there’s a hypothetical society where steel is essential for something (e.g. war), and one tribe wants to have a military advantage of the other and has the conditions to hoard steel from its rivals, then (over)accumulation of steel would make sense. Accumulation, in abstract, means nothing. It is a mistake to assume accumulation can only happen in capitalism. The difference here is that, in capitalism, one would accumulate steel in order to win a major portion of surplus value in the market through rising prices. But price is not value.

    “All this and we have yet to get to the thorny questions of money and the politics of distribution along with the circulation of interest-bearing capital in relation to value theory. Can banks produce value? They are clearly producing representations of value hand over fist…..Are they a mere side-bar too?”

    I can’t see the “thorny questions”. Interest-bearing capital doesn’t produce value. Banks are producing nothing.

  4. Here’s my conclusion about David Harvey’s (DH) replica to Michael Roberts:

    In my opinion, DH distorts Marx because he wants to find an immediatist Marxist theoretical tool for a “First World problems revolution”.

    I don’t think it is a coincidence DH began to degenerate right after he moved to teach in the USA: the USA issues the international fiat currency, the country is the consumer nation par excellence; to approach the problems of the contradictions of capitalism in the USA through the flank of consumption seems to be an easier route, since the USA has a very high percentage of useless/unproductive workers (workers of the circulation process). In this sense, I can see DH is well-intentioned with his underconsumption theory.

    The problem is, his theory is just plain wrong. And, since the working class has the truth on its side, that means DH’s theory is doomed to fail, to demobilize/divide the working class instead of instead of uniting it. We don’t need to lower to the enemy’s level to fight him.

  5. Michael, you will understand if I do not participate in this debate. You are one of the few, I mean less than a handful of academic Marxists, worth engaging with. David Harvey is certainly not. I look at the world markets and their violent oscillations, the fact that we are going to be dunked into the white water of history, and I then look at these ivory tower Marxists, and the word irrelevant comes to mind. By the way, as my recent posting shows the mass of profits before adjustments actually fell in the USA in the last quarter despite FactSet’s estimate of a 17% rise in S&P 500 profits. This should make you smile.

  6. Interesting debate. I am myself closer than your side. And i think it´s important even to form a political plattform that goes beyond populist politics.

    De: Michael Roberts Blog
    Enviado: lunes, 02 de abril de 2018 12:13 p.m.
    Asunto: [New post] Marx’s law of value: a debate between David Harvey and Michael Roberts

    michael roberts posted: “This is going to be a long post, so bear with me. First, you will have to read a paper (attached below) by Professor David Harvey, then a critique by me below – and finally a reply to my critique by Professor Harvey. And then it’s up to you readers to s”

  7. David Harvey identifies consumerism as a fundamental problem of capitalism. But expanding the market means expanding production and new means of production within a country and the movement to areas where the capitalist relationship is less developed. And this means that the over-accumulation of capital is put off by expanding to areas less developed and more exploitable. This movement just causes the fundamental problem of capitalist production: the rise of the OCC and its corollary, the falling rate of profit,
    on to a wider scale. Only a professor divorced from the every day conditions of working people even in the USA could bring back the arguments of mainstream economist of the 1950s (The Affluent Society) and think that working people are driven by consumerism. It is productive consumption and the enormous expansion of debt to facilitate that productive consumption that drives the capitalist economy, not the development of toys and trivialities.

  8. Thank you Michael for posting this important exchange between David Harvey and yourself. In your reply to his original piece, you quoted favourably some passages from the new and expanded edition of my book Invisible Leviathan (forthcoming in 2018 from Brill as part of the Historical Materialism Book Series), for which you have kindly written a Foreword. (Many thanks again!) Drawing on some of the major themes of that book, and lending support to your side of the argument, I’d like to offer the following observations on Harvey’s contributions to the present exchange.

    1) In good part, Harvey’s essay attempts a popularization of Diane Elson’s argument in her 1979 essay “The Value Theory of Labour,” which was an important contribution to what I call (in my Invisible Leviathan) ’neo-orthodox Marxist value theory’. A defining characteristic of this current within the broader ‘value controversy’ is its attempt to sidestep Marx’s supposedly problematic procedure for transforming commodity values into prices of production by highlighting the value-form aspects of Marx’s theory, even while agreeing with the neo-Ricardians/Sraffians that his value-magnitude analysis is at best redundant to the derivation of output prices from physical inputs or, worse, logically flawed. Such a purely ‘qualitative’ (philosophical or sociological) appreciation of Marx’s value theory is at odds with a ‘fundamentalist’ approach that insists upon the need to articulate the value-form and value-magnitude aspects of Marx’s theory, precisely with a view to sustaining the two key postulates of the law of value: that living labour is the sole source of new value, and that value exists as a definite quantitative magnitude at the level of the capitalist division of labour as a whole. As a magnitude that sets parametric limits on prices, wages, profits, etc., value possesses real deterministic force. True, value is a social relation between people; but it is a social relation that comes fully into its own as a dominating principle of economic intercourse only when abstract labour establishes itself (through the money form) as a universal structure mediating the relations between all commodities. I consider this to be the general (though not always clearly acknowledged) position of those I identify as ‘fundamentalist’ value theorists (including Shane Mage, Guglielmo Carchedi, and the young Anwar Shaikh, among others).

    2) By itself, Elson’s value theory of labour cannot sustain the two postulates of Marx’s law of value as stated above, and for this reason it represents a kind of watering down of Marx’s theory. She writes: “My argument will be, not that Marx’s value theory of price is more complex than Ricardo’s, but that the object of Marx’s theory of value is not price at all. This does not mean that Marx was not concerned with price, nor its relation to the magnitude of value, but that the phenomena of exchange are not the object of the theory… My argument is that the object of Marx’s theory of value was labour. It is not a matter of seeking an explanation of why prices are what they are and finding it in labour. But rather of seeking an understanding of why labour takes the form it does, and what its political consequences are” (see Value: The Representation of Labour in Capitalism, p. 123). I have sympathy for this argument to the extent that it suggests that Marx’s theory of value is concerned with the fateful consequences of a labour process that has taken the social form of a valorization process. My quarrel with Elson (and Harvey) is that the appropriate theoretical and political consequences of this observation can only be fully and adequately drawn out by establishing the veracity of the key postulates of Marx’s law of value. And this can only be achieved by giving due weight and attention to the value magnitude analysis, which is primarily concerned with how key macroeconomic trends under capitalism are shaped by the operations of the law of value, the general law of capital accumulation, and the law of the tendency of the rate of profit to fall.

    3) It is precisely this deficiency in Elson’s theory that Harvey finds attractive. Like other neo-orthodox theorists, Harvey prefers to understand value as an indeterminate magnitude resistant to empirical analysis. Moreover, like other underconsumptionists or (or perhaps more precisely) theorists of ‘the problem of realizing surplus value,’ he seeks to deny that the Achilles heel of capitalism is the insufficient production of surplus value relative to capital investment. Why does he want to deny this? Might it be because a focus on the failure of surplus-value production suggests the need for a revolutionary rather than a reformist program?

    4) My strong impression, based on my reading of several of his major works, is that Harvey’s account of Marx’s economics is in the service of left populism (a new iteration of New Deal ‘popular-frontism’?) and sectoral reformism, not a politics of revolutionary proletarian class struggle. This in turn goes a long way to explaining (what you call) his ‘eminence’ as a Marxist scholar in a period in which radical leftists have been far more inclined toward cross-class coalitionism than toward defending the political independence of the working class.

    5) Harvey nowhere defines what he means by the LTV in his original article or in his reply to you. (To repeat, I define it succinctly as a theory which posits that living labour is the sole source of new value and that value exists as a definite quantitative magnitude that sets parametric limits on prices, wages, profits, etc.)

    6) According to Harvey, Marx conceptualized value as an “immaterial but objective relation.” But Marx nowhere refers to the “immateriality” of value (nor, by the way, to the currently fashionable concept of ‘immaterial labour’). A search of Marx’s major writings will show that he uses the adjective ‘immaterial’ only in the sense of ‘so insubstantial as to be irrelevant’.

    7) I have never dismissed as “circular reasoning” Harvey’s diagram of circulation or “the definition of capital as value in motion.” In Invisible Leviathan, I was arguing against Michel De Vroey’s confused notion that value is created “not in production but at the articulation of production and circulation” — a notion that is widely shared by those who regard the origins of capitalist crisis in ‘problems of surplus-value realization’ rather than in the insufficient production of surplus value relative to capital investment. (Does Harvey agree with De Vroey’s formulation, and if so how does he reconcile it with his declaration in his reply to Michael that value is indeed created in production?)

    8) Harvey is also critical of the quotes selected by Michael Roberts from my book. The first of these was: “Money as a measure of value is the necessary form of appearance of the measure of value which is immanent in commodities, namely labour-time.” Now this line certainly appears in Invisible Leviathan, but it also happens to be a direct quote from Marx, Capital I (Vintage edition, 1977, p. 188). In his reply to Roberts, Harvey writes that the “abstraction of value … is, in Marx’s view, a social relation hence ‘immaterial but objective’ and not ‘immanent’ and ‘real’ as the quote from Murray Smith proposes (‘not an atom of matter enters into the objectivity of commodities’ says Marx in Capital – p. 138).” Apparently, Harvey thought he was disputing a formulation by Smith when in fact he was actually disagreeing with Marx! (Incidentally, both of the above Marx quotes appear in the first edition of Invisible Leviathan published in 1994, the first on pp. 57 and 58, the second on p. 97.)

    9) In the end, Harvey’s version of Marxian value theory makes major concessions to the subjectivism and market-centred ideas of neo-classical marginalism and Keynesianism, whereas Marx’s own value theory insists on the ontological primacy of production in the creation of value and surplus value. In doing so, Marx’s theory locates the source of capitalist crisis (cyclical and historical-structural) in the intensifying contradiction between the developing forces of production and the (increasingly constrictive) capitalist relations of production. This is at the heart of Marx’s law of falling profitability.

    10) None of this suggests that — for individual capitalists or the social capital as a whole — there is no ‘problem of insufficient aggregate demand’. But this phenomenon should be seen as merely a surface manifestation of a deeper and more profound crisis of valorization. Periodically, capitalists are unable to realize fully the initial prices they ask for their commodities in the market — prices set in accordance with expected profit margins as established in previous periods. But why is this so? I argue, as I think Marx does, that (abstracting from processes of surplus-value redistribution resulting from competition) this problem is primarily due to the fact that the values supporting those (now unrealistic) prices are constantly receding as a result of the displacement/shedding of living waged-labour from production and the consequent reduction in the total pool of social surplus value.

    1. “10… values supporting those (now unrealistic) prices are constantly receding as a result of the displacement/shedding of living waged-labour from production and the consequent reduction in the total pool of social surplus value.”

      Marx explained as early as 1847 that this worked the other way around. Machinery is introduced in response to falling profits. His early focus was on those falling profits resulting from wages rising with accumulation soaking up the reserve army of unemployed. But subsequently he merely noted that wages tended to rise at the peak of the boom while emphasizing disproportions between the two departments as narrowing profit margins.

      Living waged-labour gets displaced when labour intensive techniques become uneconomic compared with more capital intensive techniques. That does not depend on new inventions but on prior changes in the price structure. Specifically as Maksakovsky explains, the crash in prices at the end of a cycle results in a price structure favouring a wave of new investment in replacing fixed capital at a higher organic composition of capital. The lag between prices encouraging such replacement and the new plant actually being constructed results in disproportions that repeat another phase of boom and crash.

      This is the opposite sequence from a rising organic composition reducing profits. The reduced profits at the end of a cycle drive a rising organic composition for the next cycle.

      There would be no incentive to introduce alternative techniques that lower the average rate of profit. Prices have to change BEFORE, not after that introduction.

  9. The debate between Roberts and Harvey represents the poor understanding ersatz contemporary Marxist economists have of the circulation of capital phase of the transformation of value over the full reproduction of capital. Roberts emphasizes the production of value process which relies on what is called productive labor only (a concept Marx borrows from classical economics, in which his own views are deeply (tho not totally) embedded. Yes, Roberts, per Marx value is created only in the exploitation of productive labor; but Yes also Harvey, it is not ‘realized’ until converted to money forms of value in the exchange, or circulation of capital (aka value) that must occur first before it is converted back to non-money, physical forms of capital in the next phase of production (e.g. physical, fixed, variable, etc.). So both Roberts and Harvey are arguing past each other. Both are right. But neither have bothered to deeply understand the nature of value and capital in the post-production and before reproduction circuit of capital. The glaring missing analysis in Marxist economics is the understanding of how capitalist economy has revolutionized the exchange circuit of capital. Or to put it another way, contemporary marxist economists–who are not so much marxists in the scientific sense but are perhaps better described as ‘marxist philologists’–do not understand 21st century finance capital. M-M’ circuit may be ‘fictitious’ but that doesn’t mean that fictitious capital does not disrupt fundamentally the full reproduction of capital and value transformation process. This is not 1850, when capital accumulation was primarily financed out of profits or profits redistributed through the banking system (envisioned as a mere intermediary for redistribution of profits). This is not even 1880 when the appearance of financing of capital accumulation out of equity (joint stock companies) began to emerge as a force (which Marx recognized). This is 21st century global capitalism, This is a world where goods producing multinational corporations now create at least a third of their profits from financial portfolio investment; where they have become shadow banks themselves; where credit no longer relies on fiat money (inside or outside); where the majority of investment (real or financial), that is capital accumulation, is provided from so-called capital markets (a bourgeois term) raised via debt issuance, and not from internal earnings (a profit term), or EBITDA (ditto),and not from bank loans.

    The falling rate of profit tendency ‘law’ (per Roberts) is not functional. It is indeterminant. When reference for the data for profits is derived from national capitalist accounts –e.g. ‘net private domestic investment’, ‘after tax profits’, etc–it amounts to using data on profits obtained from financial asset investment as well as real (productive labor) investment. (note the one third of all corporate profits from portfolio investing today). Nor do corporate profits data in national accounting account for all capitalist profits. (It excludes non-corporate business income). In short, even profits data is unusable as recorded to determine the falling rate of profit. And that’s not considering the fact that perhaps only one fifth or one-fourth of all capital accumulation is enabled from profits (whatever the data or definition), whereas the other three fourths of accumulation is financed from non-profit forms of money capital; that is, M-M’.

    Bottom line, Marxist economists today should rise out of marxist philology (i.e. Marx said this, or said that, pp. this or that in vol. 1 or 3,etc.) and start applying Marx’s method to understanding what has changed in the exchange circuit of capital and value–i.e. after the production of value from productive labor only. That’s the sphere of primary exploitation only (Marx’s real contribution of analysis). But there’s a world of secondary exploitation in exchange (Which Marx noted but did not analyze). Is there also a sphere of ‘tertiary’ and other levels of exploitation in 21st century capitalism? Stop debating the past and texts, and analyze the present and the new data.

    Jack Rasmus

    1. I broadly agree. Both are right and both are wrong and they are arguing past each other.

      But in getting away from “philology” (and its offspring, “philately”) it is not sufficient to analyze the present and new data.

      Both the correct and the wrong ideas expressed by all participants in this discussion were just as correct and just as wrong in 1850 and 1880.

      Before being able to usefully analyze the present and the new data we do need to grasp the “pure theory” first of commodity production (which arose millenia earlier) and then of capitalist production (which arose centuries earlier) and indeed of just plain “production” (which arose with the emergence of humans from hominids. We won’t get to modern finance without a prior understanding of early money which came after commodity production and before capitalism. Nor is there any hope of understanding modern finance without first understanding nineteenth century bills of exchange and banking which came long after capitalism and before modern finance.

      We don’t need all the details, but a conceptual theory is necessary to correctly perceive what is in the current data. What we cannot comprehend conceptually we also are unable to see at all.

      Marx can be enormously helpful for that, provided one is not distracted by the philology and philately.

      Start with the contradictory unity of use value and exchange value in commodities, even before money and trace through to the phenomena of regular cycles in which price and value are torn apart and forcibly brought together in crises since the early nineteenth century. That is what Marx did and Maksakovsky systematized.

      Without that underlying “law of gravitation” trying to understand modern globalized supply chains and finance is as hopeless as trying to explaining the peturbations in the orbit of Uranus on the basis of epicycles. There are laws, that need to be understood, like gravity and undiscovered planets like Neptune.

      Once we have grasped the laws of gravitation it still takes a lot of work to be able to figure out something new (eg a few centuries from Newton via Kepler to discovery of Neptune and that was long before special and general relativity and quantum mechanics – the “modern” physics that is now a century old).

      As far as I can make out the discussion here is still stuck at a level that imagines that one can explain such dramatically disequilibrium phenomena as crises on the basis of an understanding of equilibrium rather than rupture between prices and values.

      1. Re. your point about ‘bills of exchange’, classical economics and including Marx, who held a very classical economic view of money in Vol 1., did not understand money and banking very well. The Ayr bank crisis and banking crises during the Napoleonic era were not well understood. The focus was largely on supply side with money as neutral (i.e. the neutrality of money and dichotomy of money misconceptions). Henry Thornton was a much overlooked classical theorist of money and understood ‘bills of exchange’ and bank speculation of fiat money and currency better than most.

        Like all great economists, Marx attempted to break out of the limited conceptual framework of his predecessors. He succeeded in part. Thus the idea of socially necessary labor time with which to finally measure labor value conceptually. But, like all great economists, he was also unable to fully break from the conceptual framework, Beyond the idea of money as a form of capital in process, he held a largely classical commodity theory of money in vol 1. and only began to break from it in vol 111. One can’t fault him too much for that, since finance capital was itself only just beginning to evolve into new forms. He saw that with joint stock companies. But finance capital today is far more complex, and important for disrupting the full reproduction circuit of capital. (It’s not a question of failure to realize value in exchange, as DH argues. It’s more than that). Marxists economics today needs to innovate conceptually more and further. It tries to explain the new complexities of capital today using the limited conceptual framework of 1850s. It is trapped within that framework and therefore can’t explain how financial cycles interact and mutually determine real cycles. Another limitation is that it favors long run and supply side analyses, and doesn’t explain well short term business cycles which include 20th-21st century depressions. Another is that it perpetually proposes and confuses correlations with causation in effort to adapt long run analysis to explaining business cycles. A good example is the too often theorizing about falling rates of profit as determining business cycle turning points. I don’t believe Marx ever intended the FRPT as an explanation of short term business cycles, but instead as one of many determinants of capitalist long term breakdown tendencies. But advocates of FRPT perpetually tryto fit profit rate correlations with business cycles, without explaining causation via transmission mechanisms between profits and real cycle downturns.

        I’m not against starting from the general to the particular–i.e. simple commodity to capitalist commodity to etc. production. But Marx did that well theoretically. We need to get from mid-20th century industrial capitalist regional economies to 21st century integrated global finance-industrial capitalist economy and a framework conceptually that explains it better. All conceptual frameworks become outmoded as anomalies appear over time as capitalist continues to transform itself and creates new forms of itself.

      2. 1. Thanks for engaging seriously. As we are agreed both in having a low opinion of current “marxian” theory and that philological analysis of Marx’s texts tends not to help fix that I won’t go into my strong disagreement with your view that Marx did not understand 19th century banking etc well when he wrote volume 1.

        2. Marx was thoroughly familiar with both currency and banking schools and the very long history of fiat as well as credit money. In particular he did study Henry Thornton as early as 1851, long before writing the Grundrisse. But he obviously could not study 20th and 21st developments and we are agreed that must now be done.

        3. I fully agree with you both that Marx never intended FRPT as an explanation of business cycles and that current efforts to do so are incoherent. (More striking than the absence of a mechanism to explain downturns is the obliviousness to the very idea that such a theory would also need to explain the regular subsequent recovery, prosperity and boom).

        4. I have not yet read your work but am struck by the fact that monetary and financial explanations of crisis are still the most popular mainstream theories and that was the case long before Marx, but have not been successful.

        5. I fully agree with Maksakovsky that in fact early 20th century finance capital, as described for example by Rudolph Hilferding, did not change the underlying mechanism in which finance could only amplify the basic sectoral disproportions that resulted in crisis becoming necessary to restore the disrupted relations between price and value that became too far apart during the boom.

        6. Like Marx, Maksakovsky could not analyse subsequent late 20th century or current developments in which State fiscal and monetary policies became far more important than in the nineteenth century and were in turn transcended by a globalized world economy without a global state. He did point out that the “Keynesian” proposals advocated by Hilferding and others long before Keynes could only postpone crises while also intensifying them and this was thoroughly confirmed by the Harvard school in the 1920s leading up to the Great Depression.

        7. The postponement of another such major crisis since the second world war has certainly been a far longer interval than Maksakovsky or Marx ever did or could have predicted. It is hardly surprising that Marxist economics was largely forgotton with such a long period of capitalism being able to boast of having overcome crises.

        8. But there seems now to be good reason to expect that when the next postponed major crisis does arrive it will indeed have been intensified as much as it has been postponed. There is an awful lot of work needed to flesh that out and I certainly have not done that work.

        9. But I don’t see how I could possibly end up understanding modern finance, in all its current pre-crisis weirdness, without first understanding what it emerged from – what contradictions in the previous monetary and credit systems were resolved or rather postponed by abandoning Bretton Woods etc half a century ago and how we got to Bretton Woods from 19th century bills of exchange.

        10. In particular I expect to learn that the quite extreme financial measures now being taken (“quantiative easing” etc) are not the cause of crisis but have been rather successful in postponing crisis for so many decades, with the inevitable result that the distortions they have papered over have continued to intensify and the eventual crisis will be deeper.

        11. My very superficial impression of your work is that you take the opposite view – that current central bank policies are responsible for developing crisis rather than postponing it and even that a “constitutional amendment” could reverse this. Have I misunderstood the announcement for your recent book?

        12. Either way, I need to understand the underlying “real” movement and the history of financial adaptations attempting to avoid recurrent cycles before I could hope to analyse the current situation.

        13. I certainly agree that the focus must be global and that this is missed by most. (Though I don’t see how that “global” focus could be consistent with ideas about “constitutional amendments” to fix central banks).

      3. Thanks for your thoughtful criticisms and comment. let me reply in order of your points.

        1. I did not mean to say that Marx didn’t understand 18th-19th century banking. What I meant, more accurately, is that 18th-19th century economists (Smith, Ricardo, did not understand. And Marx’s thinking on that in Vol. 1 was similar. The disruptions to fractional reserve banking posed by fiat-currency money, and periodic banking crises, was noted by Smith-Ricardo, but they weren’t able to explain how and why these crises occurred or how they contributed to real crises–depressions etc. (Thornton excepted, who understood the problems of banks creating currency (bills of exchange) and other financial instruments, and the effects of this on financial bubbles, and banking crashes.)

        Marx in vol. 1 is not far from the classical economics view of money and banking. (He tries to go deeper in vol. III with some success but there’s no theory there how financial cycles and real cycles interact). He focuses on commodity money (specie, gold, etc.) as the ‘universal equivalent’ expression of the value form. It enables value from commodities to transform into the money commodity form and from there back to other forms of value (constant and variable capital) and back into reproduction of commodities. That process envisages money as ‘neutral’ (the similar ‘neutrality of money’ proposition being a hallmark of classical economics in general). Or to say the same thing re. Marx, only real factors of production (productive labor especially) can create value, and therefore the total surplus and its market expressions (profits, wages, rent, interest). Like the classical economists, Marx was thus a kind of ‘supply sider’ (not to be confused with contemporary supply side ideology). He’s concerned with long run factors (labor, land, capital) driving capital accumulation (or what mainstream economists would call economic growth). Focusing largely on the long run and supply side, he’s explaining how value transformations lead ultimately to capitalist ‘breakdown’. That’s not a theory of the business cycle, a short run event. (And that’s why the falling rate of profit tendency thesis is n ot about business cycle causation; it’s about long run capitalist breakdown)

        If per Marx money, the universal value equivalent, doesn’t create value and is neutral re. production, then it follows that the exchange circuit of capital–where value is transformed into money and circulates back into physical forms of capital as it re-enters reproduction–is not given much emphasis in the full circuit of capital. So long as the commodity is converted to money (i.e. ‘realized’), it is then assumed value will eventually return to reproduction undisturbed. (This has its origins in Physiocracy).

        What I say in my work is that this is a black box view of money and a ‘blank view’ of what happens on the financial asset side of the circuit of reproduction of capital and value. There’s a lot more going on in the exchange side of the circuit that can disrupt the full circuit and completion of the reproduction of value. (In vol 1. capital and value are one and the same, evolving through various forms until returning to production and the creation of more value from productive labor). Marxist economics has not to date paid enough attention to what happens to value and capital after commodities are ‘realized’ in exchange and until they re-enter production in the next cycle. This is not a ‘neutral’ sphere. Marx was clear that value had to be converted to exchange (money) or else there was no value created. Commodities created but not sold (realized) represented no value creation. (I think that was what Harvey was trying to clumsily say but he goes overboard in saying so and opens himself to criticism).

        My work focus on what determines financial asset bubbles and cycles, and how these financial cycles interact causally (and mutually) with real cycles; or another way to put it, how financial asset investment affects real investment (aka capital accumulation in Marxist terms). Roberts and others assume financial capital has no impact on real; and that it is the decline of profitability on the real side that causes the shift to financial investing (a financialization thesis). I don’t agree with this direction of causality. I argue that financial investing is more profitable (even if creating fictitious capital, or M-M’). It disrupts the flow of money values from re-entering the reproduction of commodities. Moreover, there is a mutual feedback determination effect between financial and real investment, It is bidirectional, not unidirectional. Thus one cannot understand why real investment has been steadily slowly since 2000 globally, without considering how the financialization of the global capitalist economy has been accelerating. Investment, real of financial, is driven not by retained earnings (profits), moreover. It may be driven by equity creation, debt creation, inside and outside fiat money creation by the capitalist state, etc. Profits only account for one third of all capital financing. This has profound implications for the falling rate of profit thesis as an explanation of capitalist short run business cycles (which include depressions). Marxists need to open the ‘black box’ on the exchange circuit side of capital and value transformation to better understand what’s going on there that disrupts, distorts, or destroys value as it evolves from commodity to money to constant-variable capital forms. (Marxists simply disregard this sphere and call it ‘fictitious capital’ and therefore consider it undeterminative of interrupting the full circuit of reproduction (also a kind of view that money–aka finance capital–is neutral).

        My work to date has been trying to explain these relationships between financial and real cycles determination by using the conceptual framework of mainstream economics. It is a framework that is deficient, meaning that new concepts are needed for the explanation. The same mutual cycles explanation can be explained, I believe, using the Marxist conceptual framework. But it too requires further concept development to do so. Marx began to break conceptually from classical economics and succeeded in part–aka concepts like abstract labor, socially necessary labor time, value of labor power, absolute and relative surplus value (his two best innovations), and the organic composition of capital–to name the most important. But he nevertheless failed to fully break fully from the classical.

        Vol 1 only ‘works’ because he assumes value is equal to price in the long run and as a social-wide average. He needed to take his notes and reflections in vol III and develop a further conceptual framework to explain how ‘price variables’ based on value–i.e. profits, wages, rent, financial asset prices, etc. fluctuate in relation to value in the exchange sphere of the circuit of capital reproduction, AFTER commodities are transformed into money form and BEFORE transformed back into constant and variable capital for production.

        (OK, I took too long responding to just your first point. I’ll address your others subsequently).

      4. Here’s my reply to a couple of your other points:

        I think my 1. reply actually addressed your 1-3 points. So I’ll start with 4.

        I don’t see my work as a monetary or financial theory approach to explaining capitalist crises. Nor do I see it as a non-monetary or supply side approach either that focuses only on real determinants (or productive labor in production, to use a Marxist term). The explanation must be both–financial and real side. (I strongly reject, for example, simplistic ‘monetarist’ analyses, whether per Friedman, John Taylor’s silly ‘monetary growth rule’, or any other. That’s economic ideology, not economic science.)

        Points 5. to 7. I haven’t read Maksakovsky so I can’t comment. But it sounds worth looking at.

        Points 8-10.

        What purports to be ‘Keynesian’ economics, really isn’t. It’s just selective propositions from Keynes combined with pre-Keynesian neoclassical nonsense. It’s the worst of both worlds. (that’s why it can’t predict worth a damn where the economy’s going).

        My latest 2017 book, ‘Central Bankers at the End of Their Ropes’ is about how late capitalist has come to rely on central banks not only to bail out private banks (and shadow banks) when they periodically go bust (which they do now more frequently). Their function has evolved from just bail out (lender of last resort) to a permanent subsidization of the private banking system. Just since 2008 the five major central banks have pumped $25 trillion in fiat money into the system to prevent subsequent banking crashes post 2008 and stave off, temporarily, a 1930s like depression. But they have created their own contradiction in the process. The massive liquidity injections have flooded the global economy with excess money capital, which has flowed largely into financial asset markets, now generating the next bubbles that will burst and a financial contraction that will precipitate another real economic contraction. (Note that I say precipitate, not cause in a fundamental sense. I distinguish three levels of causality: precipitating causes, enabling causes, and fundamental causes). The global economy has again been growing more ‘fragile’ since 2009 (by ‘fragile’ I mean more prone or sensitive to another major financial instability event–the subject of my 2016 book, ‘Systemic Fragility in the Global Economy’. In my ‘Central Bankers’ book I propose in the postscript the constitutional amendment to fundamentally restructure the Federal Reserve. What that details is how to take the Fed out of the control of the private bankers, which it has always been. I propose to democratize the Fed and make its mission more like a public bank, and provide low cost credit for households and small businesses. For the large banks, they can’t be reformed. Glass-stegall is an illusion. So is the Volcker Rule. The speculative banking system must simply be ended, the rest nationalized, and the Fed function as the national Public Bank and as a non-profit funding Infrastructure Bank. Of course, I have no illusions that’s about to happen, so the constitutional amendment is really a proposal to get people to understand the Fed is there for the finance capitalists, to bail them out, and now to even provide a further subsidization function. The Capitalist State is having to intervene more directly and deeper int he 21st century to keep the capitalist economy afloat. In the US alone, since 2000, the Fed has pumped more than $10 trillion into the banks as bailout; and Congress has passed to date $15 trillion in tax cuts for investors and corporations. Trump’s $5 trillion tax cut for investors-businesses (Yes, not $1.5T) represents the relative shift to fiscal policy from monetary policy as the main engine of subsidization of capital. I’ll be addressing that in my 2018 forthcoming book, “Taxes, War, and Austerity: Neoliberal Policy from Reagan to Trump”.

        (OK. I’ll get to the rest of your points tomorrow)

      5. A last comment on your points 10.and 11.

        Central bank policies (of massive liquidity injections to bail out and subsidize the banks) do both–they contain the crisis AND they create int he process the conditions for yet another subsequent, likely worse, crisis. But the capitalists have no other policy answer when the banks crash.

        The massive liquidity injections refloat the collapsed balance sheets of the banks in the crisis. In so doing, however, they flood the economy will still more liquidity. That excess liquidity generates even more financialization of the global economy. By financialization I mean creates expanding liquid financial asset markets worldwide, creates new financial securities in which to speculate in those financial markets, and expands the number and economic and political influence of a new global finance capital elite. The latter are about 200,000 of professional investors, finance capitalists with annual income flows of $25 million or more. They have dominated increasingly the global banking system via their ‘shadow banks’ institutional structure. They now control more investable assets than do commercial banks (the older traditional form of banking). Their political influence has also grown significantly within capitalist political-government institutions. Thus my view of financialization includes this global network of shadow banks-financial markets-proliferating new financial securities (derivatives of all k inds)-and the human agency of the new finance capitalists. The central bankers are at their call.

        What it represents is a major contradiction: more liquidity to bail out and subsidize, that creates financial instability, bubbles and crashes, that requires more liquidity to bail out and subsidize. The solution to the crisis becomes the source of the subsequent crisis. So to answer your point, the central banks ‘contain’ the crisis and then set in motion the causes of the next crisis.

      6. Jack thanks for extended discussion.

        Re your response to my 1-3:

        I will need to read your books before fully understanding what you are saying here. But I do get strong impression in these paragraphs that you have read ersatz “marxians” rather than marx on these issues. They simply are not dealt with in volume 1 but were left to the (unfinished) 3rd volume. As he mentioned in the original preface to vol 1, the first 3 chapters including money are a summary of a more extended treatment in the earlier 1859 “Contribution” and “points worked out fully there are only touched on in this volume”. More than half of the “Critique” deals with money. The points worked out fully there include a detailed refutation of the “bullionist” theories advocated by Ricardo (referred to from vol 1 by footnotes). You would not be alone if you simply haven’t read it at all. The Moscow edition has an introduction by Maurice Dobb, dismissing this essential reading before attempting the first 3 chapters of Capital:

        “To the reader of today such theories will have less interest…. but both they and Marx’s treatment of them retain enduring interest for the cricital history of economic thought”. (ie philology as you put it)

        This is similar to David Harvey’s “A Companion to Marx’s Capital Volume 2”. This also covers volume 3 and he essentially offers the reader an alternative to actually trying to think their way through what he says is “a rather boring book (and that may be an understatment)”.

        Anyway, I won’t attempt to respond further to what you said above before reading your works but am just letting you know that it conveyed the strong impression you are a victim of the ersatz “marxians” put off from reading Marx on the subject of money by what his supposed “companions” say he says about it despite the fact that as Lenin mentioned, none of them even understood the first 3 chapters of Vol 1.

        Re 4-7. Ok, I won’t be put off from reading “Central Bankers” by the announcement, which is what gave me the admittedly superficial impression that you were explaining crises from finance (as most people do).

        Hope you do follow up on Maksakovsky. Michael Roberts still hasn’t got around to it despite a rather stronger expression of interest and it is pretty easy to keep getting distracted by the latest more “current” stuff for another few decades.

        Postpone the long translator’s introduction. Short Foreword and author’s introdction are only 11 pages so I hope you take a quick look immediately to decide when to read the rest (free download at above link). Chapter 1 is 34pp and confirms this is not philology or Soviet dogmatism. Worth reading next. The core of his theory is Ch2 only another 57pp. That covers the “real” side. If those 102 pages don’t interest you the rest probably won’t either. But he only deals with “The Role of Credit” in chapter 3 on the basis of first having dealt with the underlying “real” cycle that is “amplified” by credit.

        BTW I can be contacted via above site but it won’t be ready for a while and currently just has notes to myself with no navigation structure.

        Re 8-10 “…Just since 2008 the five major central banks have pumped $25 trillion in fiat money into the system to prevent subsequent banking crashes post 2008 and stave off, temporarily, a 1930s like depression. But they have created their own contradiction in the process….”

        That is something like what I extrapolate from chapter 3 of Maksakovsky. His view in the 1920s was that banks would keep on extending credit to avoid a crash even though this would only postpone the crash and intensify it. An opposite policy of sharply raising interest rates to bring on an earlier crisis would actually result in less extreme oscillations (as advocated by Austrians etc) but they cannot do it.

        He was relying on empirical work done by the first serious econometrics studies in the US from Harvard School (later continued at Columbia and NBER):

        Review of Economic Studies paper linked there acknowledged that their forecasts based on assuming that counter cyclical measures taken during the 20s to chop off the peaks and smooth out the troughs would work were less accurate as predictors than simply blindly accepting the signals sent by the “leading indicators” they had calculated. Two dips were indeed arrested thus postponing any crash until a rather intensified crash came in 1929….

        But although the term “fiat money” may be technically correct since end of Bretton Woods I think it conveys a misleading impression. It isn’t just an old style injection of paper to inflate away state debts. There is something different about bloated central balance sheets with international convertability. In particular incipient deflation is a rather surprising result if it was just “fiat money”.

        Also, the emphasis on “created their own contradiction” still suggests that some other policy could have been followed that would have worked out better. My impression is that George W Bush was telling the truth when he said “this sucker could go down”.

        The contradictions had intensified from the 1970s on and several previous injections had prevented crashes and postponed a 1930s style depression. I don’t see how any central banker offered a choice between bringing on a 1930s style depression and “creating their own contradictions” while postponing it could deliberately choose to bring it on. US Congress initially baulked at the bail-out until all the corporate jets flew in and told them it simply wasn’t optional and they didn’t have another day to spare.

        The intention of keeping the Fed nominally “independent” was to reduce effectiveness of Government pressure for inflationary policies when more “sound” bankers knew workers needed a good dose of unemployment from time to time…

        Since 1930s Depression capitalists have been pretty convinced that workers would not tolerate another one. Are you saying they are wrong to keep trying to postpone that?

        Not at all sure what your Consitutional Amendment is supposed to be about. Raising such issues naturally feeds the widespread beliefs that Depressions are caused by evil financiers rather than by capitalist social system.

        Re 10-11 “…Central bank policies (of massive liquidity injections to bail out and subsidize the banks) do both–they contain the crisis AND they create int he process the conditions for yet another subsequent, likely worse, crisis. But the capitalists have no other policy answer when the banks crash.”

        That seems to me very much in line with what Maksakovsky explained. But instead of extended denunciation of “financialization” and “elite” he explains the role of crisis as a necessary phase in the capitalist cycle that is followed by a higher level of technical development (with more capital intensive technology).

        Looks to proletarian revolution to end the “real” cycle rather than Constitutional amendment to stop banks from being banks.

        BTW although I don’t get the idea of Constitutional amendment at all I especially don’t get how it could be compatible with your recognition that we are now dealing with a global economic and financial system not under the jurisdiction of any single “Constitution”.

      7. Thanks again for the comeback. Re. your points:

        I don’t generally read third party commentaries on who I consider original economists. My only reading of Marx on money is from vol. 1 of Capital, chapters-VI. International Publishers 1967 edition. There money is mostly commodity in form and the emphasis is on medium of exchange. I’ve also closely read chapters in vol III, on banks, banking, credit, etc. Some interesting insights there. Too bad it was unfinished work.

        Are you suggesting to read Marx on money further in his 1859 Critique of Political Economy work? It wasnt clear.

        As for reading the original authors, my views of Smith come from the same original Wealth of Nations and ditto for Keynes’ Treatise on Money and General Theory. I find that so-called Keynesians today caricature Keynes and libertarians clearly have not read SMith either except where it suits them.

        My big question about Marx’s vol 1. is the key assumption that socially necessary labor time plus surplus value equals price (in the long run, as a social average, with constant capital-labor and therefore productivity ratios across industries, etc. etc.). That assumption allows him to develop the rest of his labor theory of value. He then says it’s the market price of ‘necessities’ that define the SNL value. But how can market prices, that fluctuate according to supply and demand, determine value that occurs in production and is not subject to supply and demand? Sounds like the old Smith idea that market price fluctuates around a core ‘natural price’ that’s equal to labor value in the long run, and here with Marx the SNL is the analog of Smith’s natural price.

        Sounds like Makasovsky is a definite read. What’s the book’s publication title?

        As for the constitutional amendment, i agree it won’t save the system from crises. It’s offered as a tactical political idea, to help readers understand they don’t need for profit capitalist banking systems, to help them understand central banks have always been but appendages of the private banks (run by and for the latter), and to raise the idea of democratizing these off limits, capitalist institutions.

        Should the central bankers not bail out the banks when the alternative is depression and crisis? Of course not. They will. That’s their primary function, regardless of the longer run consequences of fueling further crises. The central bankers book is in large part a history of the evolution of central banks arising out of private banks and accreting functions over time designed to try to stabilize the capitalists banking system. A point I emphasize in the conclusion is that central banks,as capitalist system institutions, are failing to evolve in terms of functions apace with the changing structure of global capitalist finance. They can’t keep it, and therefore are failing in all their major functions. This has consequences for capitalist economic and financial stability. The system is growing more unstable (aka fragile) and their institutions are failing to address the problem. Capitalist fiscal policy is also become less effective in stabilizing the system.

      8. Jack, my long response intended for this sub-thread has ended up a separate sub-thread (towards end of page)

  10. I have not much to add to Michael’s critique and the supportive comments here. My speculation is that Harvey correctly sees that the “class struggle” in the classical sense is not happening and I agree with him on this point (and I think in as far as it (still) exists it won’t produce a nice socialism). And so went to look for an interpretation of Marx that does allow for some form of active struggle. Active, because unlike labor value class struggle is not an abstract category but something people have actively to engage in. From the theory of value it follows that there is a contradiction or antagonism between capital and labor but it won’t take the form of any significant class struggle. This leaves the pressing question on how a political actor can arise that can curb of even abolish capital. The latter seems very undesirable unless one develops a strong wish to go back to the middle ages. Capital should become true social capital, not in private hands but governed by “sovjets” with competition and market left intact upto a serve.

    Somewhat connected with this is a fundamental problem I have with the theory of (surplus) value. I have not studied this thoroughly but the essence seems to be that value only flows from labor. This leaves out the fact that the capitalists organizes the production (and the distribution) one can’t say that this contribution is not a necessary human input in the production, regardless of the owners do this organizing themselves or hire people to do this. The lower organizing functions are generally thought to belong to labor, but from a certain level (don’t know any analysis) is thought to be part of surplusvalue i.e. the bourgeoisie. The same goes for the state-apparatus, which is also necessary for the reproduction of the whole and thus for the creation of value.
    Another problem is I have not found a satisfying theory of the “value” of intellectual labor (research, automation). This is closely related to the organizing contribution of capital.

  11. As DH makes clear, for Marx, the labor theory of value (his is the antithesis of Ricardo’s) is operative only in a fully developed, hegemonic capitalist system of production and distribution operating at the center of a social order of its own creation. I think he’s right and that for Marx (but apparently not for DH) capital itself is fundamentally neither a thing nor its monetary equivalent, but a social phenomenon arising out of an historically created and evolving “social relation”. In Capital 1, Marx makes very clear that this social relation is expressed in value form within capitalism’s commodity as a contradiction between its use value and exchange value. His concept of surplus value (which is produced during the entire working day, not just at its end) revolutionizes Ricardo’s theory by implanting the commodity’s (including labor power’s) contradicting values and social relation within Ricardo’s value equations.

    But, ultimately, it’s not the commodity form or the capitalist mode of production that interests Marx, it’s the production and reproduction of capitalism’s social relation, upon which the viability of capitalism as an historical social system depends.

    I Think that both DH and MR get stuck within the realms of capitalist production and circulation of commodities, losing sight of how capital’s hegemonic social relation (within which the social majority are necessarily excluded from the above realms) critically influences (exchange) value creation and its realization. Within the severe confines of the debate, MR is clearly correct. Harvey fails to follow the implications of his strongest points and typically flies off into right field, in this case, countervailing the explanatory power of the theory of the tendency of the rate of profit to fall with a flurry of capital’s own real countervailing efforts to defeat the real thing. The former leads to H’s theory of the madness of economic thought, the latter to the real actions of the personifications of capital: ever deeper crises, environmental destruction, social repression, war.

    I believe that John Smith’s recent critique of Harvey’s dismal ventures into the problematics of global value transfers compliments MR’s argument. It was available in Monthly Review’s online magazine for April, but now gone into cyber space (probably archived). Maybe he’ll join this conversation, and, out of this controvery, some unity.

  12. The only remembrance that this discussion rises to me is something I read that says that every time that the capitalists see their rate of profit decrease they tend to press for lower wages and unemployment as it is happening now in the current crises. Several economists such as Heiner Flassbeck and Costas Lapavistsas advice that one way of getting us off the current crises is to do the opposite of what the EU Central Bank is advising for the indebted countries in the eurozone. Flassbeck goes further and accuses Germany of “begging their neighbor” as they reduce internally the wages of their workers in order to be more competitive in the Euro market. So, it is not to be impressed if Mr Harvey finds such an importance to the lack of purchasing power as a cause of crises. Mr Roberts allusion of the preponderant role that the capital market plays in the capitalist economy reveals a hidden economy, dominated by the national governments and big transnational companies that happens above the everyday life of the worker but nevertheless has an important role on how we live or die as long as this production efforts is mostly directed to military power competition among nations states, this too has a direct effect on increasing economy crises.

  13. Nobody has mentioned Marx’s very short concise exposition of value theory which is absolutely essential reading for everyone in this discussion:

    Here is what Lenin said about it:

    “Of outstanding interest as a contribution to a fuller and more profound understanding of Marxism is the letter of July 11, 1868 (p. 42, et seq.).[1] In the form of a polemic against the vulgar economists, Marx in this letter very clearly expounds his conception of what is called the “labour” theory of value. Those very objections to Marx’s theory of value which naturally arise in the minds of the least trained readers of Capital and for this reason are most eagerly seized upon by the common or garden representatives of “professorial” bourgeois “science”, are here analysed by Marx briefly, simply, and with remarkable lucidity. Marx here shows the road he took and the road to be taken towards elucidation of the law of value. He teaches us his method, using the most common objections as illustrations. He makes clear the connection between such a purely (it would seem) theoretical and abstract question as the theory of value and “the interest of the ruling classes”, which must be “to perpetuate confusion”. It is only to be hoped that every one who begins to study Marx and read Capital will read and re-read this letter when studying the first and most difficult chapters of that book.”

    I hope that is clear enough and short enough to understand and actually take the trouble to click on the link and read what Marx actually said he meant.

    1. Marx is describing the transformation of use values (that all social forms of production must produce) into exchange values within the capitalist mode of production (one of many historically created forms of production.

  14. “As China’s rate of economic growth has slowed over the past few years, China Labour Bulletin, a Hong Kong-based organization, tracked a surge in reported strikes — most likely a small measure of all the actual strikes — from fewer than 200 in 2011 to 1,256 in 2017. Government data indicates a 38 percent increase in the number of labor dispute cases heard by Chinese courts, from 589,244 in 2011 to 813,589 in 2015.

    Mirroring the recent trend of manufacturing moving from the coasts to the middle of the country, the most labor strife this year appears to be happening in central provinces such as Henan, Jiangsu and Anhui. And the unrest isn’t affecting only traditional industries like manufacturing. White-collar workers and new-economy industries like e-commerce and green tech are also dealing with labor struggles.”

    This excerpt from NYT (4/2/2018) by Harvey Thomlinson indicates that the conflict at the production place goes on despite that people sitting on their professorial chairs 6000 miles away don’t bother to pay attention.

  15. Oh Moishe why did you leave us when we most need you. Now this will be the prevailing level of the discussion.

  16. Carlos, Thanks for your comment. The reason Marx was a Communist was because he viewed the production process as where crises were generated and where the class (the proletariat) capable of replacing capitalist rule is located. If we just ask where the productive sector of the working class is growing, we should not be surprised if it is in the newer developing economies that the fight begins. Because Harvey concentrates on the developed economies, he views the working class of those countries as concerned with consuming trinkets and unwilling to lead the fight.
    He should look a little more carefully. Each sector or the world working class has its impediments to battling capital. In the early 1900s countries like Germany, Great Britain, the USA were expected to be where socialist revolutions were to take place, and, instead, it broke out in a peasant country with a newly forming working class. It is going to be quite interesting to see where giant struggles first take place when the next crisis of world capitalism take place. No matter where it first takes place, our task will be to help that struggle to expand worldwide.

    1. In the USA, the most important worker action comes out of the non-productive teachers unions, right in the back yard of so-called Trump County

  17. Michael, in regard to the section of your post that begins with,

    “But most Marxist economists are aware of the distinction between Marx’s value theory and Ricardo’s. And the difference is not . . .”

    and ends with,

    “Marx’s value theory of abstract labour exposes the exploitative nature of the capitalist mode of production, while neither Ricardo’s nor Adam Smith’s labour theory of value does.”

    Marx certainly demonstrates that the capitalist system is exploitative, not merely objectively speaking but even on its own ideological terms, terms that want to see the relationship between workers and employers as being a ‘fair exchange,’ but that in reality are anything but.

    And the way in which he does this is to demonstrate, on the one hand, that labour under capitalism is perceived and treated as a commodity, that is to say, both in “concrete and abstract terms,” or analogously, in terms of “use-value (the concrete aspect of the labour-commodity)” and “exchange-value (the abstract aspect of the labour-commodity)),’ and that it is the (unconscious) ‘reduction’ of concrete labour to “abstract labour” which is the unperceived “mystification” – what Marx called “the commodity fetishism,” unperceived by the likes of Ricardo and most everyone ideologically in thrall to the capitalist way of life — that is the sleight of hand that makes for surplus-value extraction, that is to say, the ‘exploitation or theft that is implicit in wage labour.’

    So to my mind it’s not so much that Marx himself subscribes to or embraces a variant of “value theory” as such, that he himself buys into the notion that “labour is actually productive of (exchange) value,” but rather that capitalism, properly unmasked, is “the thing” that posits “labour abstractly conceived” as the basis of what the capitalist mindset regards as “value.”

    Said differently but to emphasize the point, Marx’s so-called ‘labour theory of value’ is not anything like an affirmation that labour objectively imbues commodities with “value,” but that capitalism properly theorized, that is to say, a self-aware capitalism, if such a thing were possible, would be “the thing” that posits “labour conceived abstractly as the measure of value as understood in capitalistic terms.”

    After all, Marx dreams of a communistic future, a future in which commodity exchange will no longer exist, a future without wage labour, without money, that is to say, without “abstract labour” and consequently without “value” as it is realized (if not completely and consciously understood) in a capitalist context.

    In this sense, if not necessarily in Harvey’s, I would indeed agree “that Marx did not have a ‘labour theory of value’ at all.”

  18. A very interesting discussion. I was quite impressed by the dynamic approach of DH and his starting point of the dialectical use value/exchange value. According to Ilyenkov, I think I’m correct in saying that this contradiction is is sublated, temporarily resolved by the third thing in the exchange relation, money.

    Whilst starting out well DH does degenerate into an underconsumptionist. T^he value of overproduced commodities doesn’t fasll to zero, they’re generally sold off at a discount or at a pprice lower than their initial value and this is is a suppl/demand price fluctuation, nothing else.

    Roberts I think brings DH back to earth and his critique of DH is sound. To those who argue that the theoretical models are too nineteenth century, I’d say that the law of value transcends these difficulties. We now have very complex credit arrangments, coercive advertising and casino like activity in effort to make money directly out of money but none of this is actually sustainable. The method of rising from the abstract to the concrete and the crucial dialectic of use value/exchange value (this is also actually quality and quantity) operate just as well in the 21st century as they did in the 19th. Also because we’ve had 40 years of relatively dimminished class struggle, this doesn’t mean it’s not going to reappear and in fact early indications are that it is returning. We shouldn’t therefore be looking to sign up to the Frankfurt school anytime soon.

    1. ” Also because we’ve had 40 years of relatively dimminished class struggle”. Disagree! It is rather, as George Soros points out, that ”my class is winning.”

    1. ”What he(Marx) doesn’t understand however, as we’ll discover a bit later, is that this situation in a monetary economy (i.e. the one he is yet accounting for in this chapter) isn’t equilibrium producing.”

      Dear John (Debunked):Sorry, but Marx understood this very well cf ”Marx and Non-equilibrium Economics” eds. A. Freeman and G. Carchedi. Equilibrium is a concept as alien from Marx’s thinking as it is possible to get! I am sure you must already be in line for the ‘Nobel’ Prize for Economics.

      1. The laissez-faire concept of equilibrium no doubt was alien to Marx. But that doesn’t take away from the fact that with his set of first principles, he has no choice but to balance outgoing expenses with incoming revenue, as he needs a determinate point of departure in the narrative just started. Do you see it differently? Perhaps, because of other connotations, equilibrium isn’t the best expression to use here. But that would make it a question of semantics, no? For while Marxian economics may well be non-equilibrium, it still is deterministic; while values arising from a monetary economy, thus given money as a unit of account, are indeterminate at all times, even at any point of departure. This is rudimentarily implied in the closing comments of this paper and argued more in depth elsewhere.

        Don’t think I’m debunked, yet… 😉

      2. ” For while Marxian economics may well be non-equilibrium, it still is deterministic ”

        Marx employs ‘determine’ to express the concept of ‘setting limits to.’

        e.g. In criticising Ricardo, he remarks, ”The quantity of produce required is not a fixed magnitude. It would be correct to say, ”A certain quantity of produce required within certain LIMITS of price.”

        And ”the value of each individual commodity in a particular sphere of production is determined by the total mass of social labour-time required by the total mass of the commodities of this particular sphere of social production…….The commodity produced under more favourable conditions contains less labour time than that produced under lees favourable conditions, but it sells at the same price and has the same value, AS IF it contained the same labour-time, though this is not the case” ( Theories of Surplus Value Part 2 Pp 203-206).

      3. I guess Marx is free to use his own jargon in order to solve economic problems. But that would mean solving them, and not needing to resort to gibberish when the logic of his jargon leaves him lost. My paper set out to critique a specific problem that Marx is trying to tackle; i.e., where do the funds come from to pay for the 2/3 part that constant capital embodies in final output. Should be easy, no? After all, it must have been happening since time immemorial, for otherwise there would be a permanent glut on the market, to pretty much the same 2/3 extent as what the embodiments represent. Well, this is Marx’s final answer: “[t]he revenue, which consists only of added labour, is able to pay for this [final] product, which consists partly of added and partly of preexisting labour; that is to say, the labour added in these products can pay not only for itself but also for the preexisting labour, because another part of the product—which also consists of labour added and pre-existing labour—replaces only preexisting labour, only constant capital.” If this looks to be all about the funds previously expended by the retailer and thus necessitating a return, and hence it all makes sense to you, please explain. Inquiring minds like to know. But if it’s gibberish to you too and you would like to know why Marx cannot possibly come up with clear answer, given his point of departure as determinate, you may want to continue reading where you left off.

      4. ”I guess Marx is free to use his own jargon” Determine ( Marx of course uses ‘bestimmen’) is a term taken over into European thought from the Ancient Greeks . It is the Latin translation of the Greek ‘Horizein’ used by such jargon mongers as Plato and Aristotle etc.

        The rest of your post is to me at any rate so incoherent as to be incomprehensible ( perhaps others can make some sense of it), and as you do not provide a reference for your Marx quotation further debate is thereby rendered pointless.

        We can see at any rate that a commodity produced under more favourable conditions might be sold at a price that expresses its social value or at a price that expresses its individual value, or indeed at some price between the two. What is clear to those whose brains are not befuddled by marginalism, that alchemy of the economistic mind, is that no matter the demand a commodity cannot be sold at just any price, for as Marx remarks, “Determinatio est negatio”!

      5. <>
        Care to provide a quotation of Aristotle or Plato, where ‘determine’ is used in that way? Heck, since Marx used ‘bestimmen’, a German-English dictionary should do, I got one: “” lists 50+ translations for ‘bestimmen’, the first one is ‘to determine’ and not one of them is ‘to limit’ or ‘setting limits to’. If Marx uses the term as per your interpretation, he is using a jargon of his own. But it was your interpretation that led me onto that path. My original point was that Marx is using a point of departure that he holds as determinate because of his set of first principles. And it is this logic that gets him into the kind of trouble as identified in the previous post. Or: “how, starting with a mistake, a remorseless logician can end up in bedlam”. (Keynes on Hayek)

        The reference to the Marx quotation was in the paper, ahead of the part you quoted and thus obviously read. Here it is again: Ch. 3, mainly sect. 10… Since I was talking about Marx’s final answer, you could have figured out it would have to be at the end of sect. 10. It so happens to be its very last sentence and here is the exact page: 142.

        As to the rest of your post, I don’t have the foggiest idea what your reference to Marginalism is all about. In any case, my papers couldn’t be further removed from what you correctly identify as alchemy. Instead your brain may be suffering from a condition long ago also identified by Keynes and here I paraphrase: “the difficulty lies not in getting a new perspective, but in escaping from the old one; which, after having nurtured it for so long, has branched out to fill every nook and cranny of one’s mind”. Don’t take it personal, it happens to the best of us.

      6. ”since Marx used ‘bestimmen’, a German-English dictionary should do.” No, you need a Greek-German dictionary, wherein you will find that ‘horizein’ is translated by ‘bestimmen’ and ‘begrenzen’! The very root itself ‘horos’ means ‘boundary.’

        ” translations for ‘bestimmen’, the first one is ‘to determine’ and not one of them is ‘to limit’ or ‘setting limits to’. What do you think the Latin ‘terminus’ means? One guess only!

        Look up the Latin ‘limitare’ and see what German verb is used to translate it.

        Here is another jargon monger: ”Der Untershied uberhaupt enthallt seine beiden Seiten als Momente; in der Verschiedenheit fallen sie gleichgültig auseinander; im Gegensatz als solchem sind sie Seiten des Unterschiedes, eines nur durch andere BESTIMMT” ( Hegel, ”Wissenschaft der Logik” Vol2). I should translate ‘bestimmt’ here as ‘determined.’ How about you?

        Speaking of things Keynesian, his pupil Joan Robinson denounced Marx’s theory of Value as so much ‘Hegelian metaphysics.’ Not that I have found any evidence of her having read Hegel in German and thus understanding the philosophy of that ‘mighty thinker.’ Still this won her the sentimental value of Keynes’ friendship and the altogether more concrete value of a Cambridge Professorship. So there is hope for career advancement for you too, John. Who knows one day,

        ”The Johannes van Vertegaal Institute for anti- Marxist Gibberish”!

      7. Although I’m sure it will be in vain, I’ll try to set you straight once more. All reasoning, even or especially dialectical, involves the taking of numerous steps through an argument in order to come to a resolution. The description of this process is language independent and it doesn’t matter in the least what it’s called in ancient Greek, etymologies notwithstanding. The point being instead that each stepping stone needs to be solidified before the next one can be taken. This solidification is called ‘bestimmen’ in German, and ‘to determine’ in English. Hence your claim that ‘bestimmen’ is used by Marx as form of ‘begrenzen’ is a senseless opinion when solidification and not limitation is required. A particular step may well have been made on quicksand and somehow ‘begrenzen’ that patch will still metaphorically sink the argument.

        The accusation that I call Marx’s concepts ‘jargon’ and his theories ‘gibberish’ is outright false. First off, there is nothing pejorative at all about jargon per se. Just about every profession uses some it with the desired effect. And if you check back, my use of the word was made in that sense. Furthermore, it wasn’t Marx’s concept but your inept interpretation of Marx’s concept that made me use the word jargon. If anyone here shares your interpretation of Marx’s ‘bestimmen’ I wouldn’t mind knowing.

        Just like repeatedly invoking the expression ‘jargon monger’, claiming that I called Marx’s theory gibberish reflects more on your ability to verbalize meaningfully than it does on mine. For in the latter instance, nobody holding a theory to be gibberish would attempt to write a substantive critique. Instead, a couple or three sentences would be read, concluding it’s gibberish and that would be the end of it. As far as I’m concerned only Marx’s conclusion of the section critiqued, as expressed in its very last sentence, qualifies. But if you’re so sure Marx doesn’t write gibberish, why don’t you explain what it means with respect to the poor retailer involved, after him or her having obtained and paid for the to be sold merchandise, 2/3 consisting of constant capital embodied final output. You needed its location in order to comment further, which you now have. Who knows, it might even earn you a ‘Nobel’ prize! after the revolution of course…

      8. Okay, Michael,agreed, but I do not believe we should allow to pass without criticism one who calls Marx’s concepts ‘jargon’ and his theories ‘gibberish’. On the other hand, ironically enough I did feel that several of the comments made against D.H. did tend towards the ad hominem!

      9. I agree – nobody has overstepped the mark yet. But I am currently very sensitive to the tone of discussions because of previously bad experiences on the comments page. There is no need for me to say whose side that I’m on in the debate you are having. I’m keeping my powder dry for now.

      10. ”Scientists estimate that about 80 percent of an individual’s height is determined by the DNA sequence variants they have inherited,” (U.S. National Library of Medicine : Genetics Home Reference).

        Marx uses determine of course to define more than just boundaries or limits. As one looks around about one observes people of varying height, but no human attains the height of a giraffe ( limits) or could exist with a height of 1 centimetre (determinatio est negatio).

        For Marx’s use of ‘determine’ cf McMurty “Marx’s World View”, a brilliant book.

        ” The description of this process is language independent ”

        Are you serious?

        Further example “People make their own history but this is determined by the social relations into which they are born.”

        Is it difficult to appreciate that determine embraces the notion of limitation?

        or ”The socially necessary labour time to produce a commodity determines its value.” But some commodities embody more and others less labour time than is socially necessary; but this does not mean that the value of such commodities is not also determined by the socially necessary labour time.

        ‘”The accusation that I call Marx’s concepts ‘jargon’ and his theories ‘gibberish’ is outright false.”

        Oh no John, no John, no John, No. Okay, if so , apologies. Let others decide. No more time to waste on John. Just off on a walk to try to discern a human whose height has been ‘solidified’ by their genetic code!

    2. Sorry, I gave up on your paper at about p3 as it started from Marx trying to analyse Smith’s confusion about depreciation and constant capital in Theories of Surplus Value and attributed that confusion to Marx rather than Smith. I may have missed you eventually getting around to mentioning where Marx dealt with his own analysis of expanded reproduction, depreciation and the flow of funds involved in Volume 2.

      Anyway if you were going to get to it you should have said so at the start.

      As Engels said, those chapters were very badly written while suffering from insomnia and should be postponed until after Volume 3 (which would help you understand that simple reproduction and equilibrium were merely steps in analysis not illusions about the turbulent disequilibrium reality he was thoroughly aware of and repeatedly emphasized).

      A much more readable though still difficult summary of Marx’s analysis of reproduction and depreciation is at:

      The UN System of National Accounts presents a modern account of the issues Marx was grappling with:

      Their treatment of fixed capital depreciation etc owes a great deal (unacknowledged of course) to Marx’s – and emphasizes the difficulties he emphasized:

      “OECD: Measuring Capital – OECD Manual


      Capital – in particular of the physical sort – plays several roles in economic life: it constitutes wealth and it it provides services in production processes. Capital is invested, disinvested and it depreciates and becomes obsolescent and there is a question how to measure all these dimensions of capital in industry and national accounts. This revised Capital Manual is a comprehensive guide to the approaches toward capital measurement. It gives statisticians, researchers and analysts practical advice while providing theoretical background and an overview of the relevant literature. The manual comes in three parts – a first part with a non-technical description with the main concepts and steps involved in measuring capital; a second part directed at implementation and a third part outlining theory and a more complete mathematical formulation of the measurement process.”

      PDF version:English

      Start at the end Glossary pp231-232.

      1. The subject dealt with in this particular section is far more fundamental than you appear to realize, but let me deal with your first comment(s) first. The title of the the analyzed ToSV, ch. 3, sect. 10: “Inquiry into How It Is Possible for the Annual Profit and Wages to Buy the Annual Commodities, Which Besides Profit and Wages Also Contain Constant Capital” is Marx’s, not Smith’s. Smith is quoted exactly once, with a promise by Marx to return to this subject sometime later; followed by “let us return to our example”. All terminology used is Marx’s throughout, without a hint as to how this would relate to Smith’s WoN. And while at the end of the previous section Marx does say that Smith had already occupied himself with the problem (to be exposed in the following one), here he only mentions Smith’s entanglement in contradictions. Marx never gets around to pointing out what these (alleged) contradictions are about, nor critiques them; either in the rest of that last paragraph, or anywhere in the section to follow. Hence Marx isn’t analyzing Smith at all, and Smith, whatever he might have written, is entirely irrelevant to Marx’s arguments; as the latter could well be set within any framework. If you do have some further proof that’s indicating Smith’s true involvement in this section however, please show me. Until that happens though, your suggestion that I spent the first three pages of my critique with Marx analyzing Smith, and stating that I should have made it clear from the beginning that analyzing Marx himself would come later, is baseless. I’m getting the impression you’d like to dismiss certain parts of Marx’s work when these are in conflict with his writings elsewhere; which I guess is fair enough, opinions mature through writings, and possibly relative to the quantity of the latter. But in this particular case, I very much doubt such a conflict exists.

        Expanded production and the related flow of funds isn’t relevant to this section. That analysis concerns an altogether different subject. What this section is all about is that in any vertically integrated economy, incurred costs need to be passed down until a resolution takes place at the retail level, where the system then becomes determined and thus readied for an unencumbered continuation; and it all has to be explained coherently, as occurring in the real world. No wonder Marx was suffering from insomnia at the time he wrote about this. Marx was no dummy and he knew quite well he got himself into a fundamental problem that he couldn’t extricate himself from. (more, in my paper..) The economy as a going concern, with of without exploitation, cannot coherently be depicted in terms of material things as these “exist” at any one time. A demand side is simply indispensable; for what isn’t in demand has no value. As a rule, workers wouldn’t even want to accept their own (unwanted or not) output as a gift. And no theory, even as having the best interest of workers at heart, is going to make a difference in these workers’ opinions about such value. Your later posts to Rasmus seem to indicate you wouldn’t necessarily disagree with this. But the essential point is: when thus demand becomes critical instead, so will be the _accounting_ for “who is entitled, in accordance with passed-on costs and profits, to what”. The physicalness of it all then becoming a reality that is fully suspended in time and impossible to analyze, until it’s revived later in physical use-values through final demand.

        Marx goes wrong at the opening line of his Grundrisse, and the analyzed section in question is the perfect vehicle to point out why, and what this entails. (i.e.) The replacement of embodied constant capital, existing in time according to Marx as a physical reality, in the real world cannot be accounted for as distinct from new capital formation; as he is trying, and miserably failing, to do in this section. And if he would have tried it again in any of the Capital tomes, he would have failed there too. Because for _continuity_ reasons, and the essentiality of the demand factor this implies, capital isn’t real before becoming realized; with (and this is the crux of the matter) that realization being the exact same ongoing process of embodied constant capital _replacement_, through the sale of final output. More on p6, and in the closing comments of my paper… An economy is thus a process always underway to become (providing) and never _is_. Marx can’t possibly get there from anywhere in his oeuvre; and as such, as far as political economy is concerned, his polemics are a dead end. Recapping: When a set of first principles is concocted with a missing demand side, there is no way to bring it in later. But my mind remains open for a convincing argument to the contrary.

        Since the formation of new capital invariably involves incurred to be resolved expenditures, such activity is accounted for on the debit side of ledgers; which it never leaves, as long as drawing booked income as returns (credits) on its behalf. Capital cannot be independently measured from these returns, except by way of the negativity of incurred expenditures. So the relevance of the OECD manual to the critique of this section is?

      2. Chapter 3 is titled “Adam Smith” and each of the 11 subsections is about his views.
        Smith was confused about the possibility of “resolving” values into “ultimate” revenues as wages, profits, rent and interest for all proceeding stages and that view is also expressed more thoroughly in “Austrian” concepts of a period of production. I think that is the sort of thing you are talking about but I am not interested enough to check past page 3. I have given you two references that you might find very helpful or you might not. But I cannot assist while you don’t even look at them. They are not about demand and I do agree that demand is critical which is why Marx emphasized the contradictions between use value and exchange value, between market prices and values and their resolution in crises. The two references I gave are not about that but are necessary for understanding what he did say about that since most people don’t even understand that exchange is necessarily of specific use values at as well as specific exchange values. OECD relevance is that it explains the statistical problems of calculating capital values when these in fact depend on unknown future returns, which you seemed to be interested in. Why not take a look at both before writing more?

      3. What I’m interested in are the necessary underlying philosophical principles by which any human-made system can be shown to exist and continue existing. The necessity of (effective) demand in this case follows secondarily from that. And no, I’m not the least bit interested what Austrians promulgate in this respect. What I’m getting from your response is that Smith had a concept of “resolving” that was either fundamentally different from Marx, or perhaps that Marx’s terminology is understood by many Marxists not to include such “resolution”, because it isn’t considered to be necessary in order to critique capitalism. I’m including the latter possibility because in an online debate with a high-ranking Marxist scholar quite some time ago, the guy showed a hard time in getting his head around the “resolution” concept. But below I’d like to present an argument that shows you wrong if you’re of the latter view too. And yes, it’s that same section all over again.

        Your dismissal of the validity of my critique, as far as the reasoning being the chapter title under which Marx’s reasoning takes place, still isn’t making sense to me. I’ve given several reasons why already, and non of these were addressed with a response. I’d like to add a couple more. First, on a number of occasions in this section, Marx expresses his opinion of what in the world of _his_ perception, and not with respect to anything Smith wrote, has to be happening in order for it to make sense; and then he tries expanding on those views further, thus all the while not adhering to the chapter’s title. But finally, let’s say you’re right and Marx is really just critiquing Smith’s system as you maintain, then how come Marx is going to the extraordinary effort in the carried out resolution argument, to prove “Smith’s” logic, according to you, _true_? Since Marx doesn’t agree with Smith, as he makes clear at the outset just before this section starts, the polemic by logical necessity would have to have a diametrical hallmark from what it has. While I have no trouble admitting that Marx quotes a lot of Smith and critiques it in this chapter; in sect. 10, Smith is no more than an empty framework to expose Marx’s own interpretation of “resolution” on. Now please start quoting some Marx from that section to show you’re right and I’m wrong.

        I think the rest of your comments are addressed in my response to Carlos.

    3. Even Harvey acknowledges that land has no value unless living labor is applied to it. However, everyone recognizes that the earth and labor are both sources of wealth (see critique of Gotha Program).

      Feudal society produces surpluses but not value for exchange and self valorization. The same with self subsistence agriculture. If exchange happens, it is marginal and sporadic. In these societies value is not the regulating factor of social relations. Instead we have personal relations of domination (same with slavery).

      Smith was right to state that labor was the source of value. Although he was not able to develop the concept of labor power which is the use value consumed (destroyed) in capitalist production.

      Capital in general as developed in volume one reflects subjectively the essence (value) and its unfolding.

      The competition of capitals as reflected in volume 3 as manifested in its role in the equalization of profits, beside the role of supply and demand, the concept of cost of production and other surface phenomena (appreances of the essence) are dealt with in this volume. See Moseley on the idea of total social capital and its relation to its manifestation in money as referred in volume 3.

      I think it is worth reading to understand the development of the concept of capital. Yes, crises in the last instance are no other than the manifestation of the contradiction between use value and exchange value. Say, Proudhon, and others you credit did not even have these conceptual tools to work with. Proudhon believed that eliminating money would take care of the misery of people. I would read the whole first chapter of the Grundrisse to clarify the preliminary concept of money too.

      Was disappointed in thinking you had a serious and comprehensive reading of the theory you want to discredit.

      1. I should add that raw materials and tools are consumed in production beside labor power. Even in immediate production and consumption like in a football game. Smith despite his brilliant insights confused circulating and fixed capital, which create theoretical problems for him, which are already talked about in the Grundrisse. The source of profit being a reflection of total capital invested (variable plus constant capital), or a form of appearance of surplus value (variable capital or living labor), became puzzle for him.

      2. You may be surprised to learn that until your “Capital in general…” I agree with every word you say, but my critique concerns Marx’s critique of a capitalist economy and so that first part isn’t relevant. I’m just as anti-capitalist as Marx and anyone here on this blog. A certain footnote in my paper ought to have made that clear. But given that Marxists have been at it now for well over a century and a half, and, with your influence going backward, having pretty much squat left, I would have hoped that perhaps a different approach would be within the realm of a possible consideration.

        As long as you guys agree with the capitalists that capital is valuable, and the more of it they “make” the more there will be to take over when the revolution arrives, you will never be able to defeat them. If the goal is the latter, it will be necessary to kick the foundation of capitalist logic right out from under it. And this is impossible if a part of that logic is your own. Letting this logic fester until the inherent contradictions of capitalism will bring it down from within, just leaves an inordinate amount of needless suffering in its wake. Especially as long as there is a deus ex machina to bail it out after every occurring crisis.

        Unlike feudalism and whatever isms if any preceded it, capitalism is fundamentally different in it being a system that sucks natural resources in from outside of itself, reworks those resources within at costs+, and spits the results back out into our natural existence needing a resolution of what was priced within. In order to do so a system of accounts is indispensable. Capitalism couldn’t work without being expressed in terms of units of account. But this is also its Achilles heel, because ledgers consist of only two columns; one showing the outgoing negatives and the other the incoming positives. And in financial statements, accumulations remain offset by liabilities. Since all booked capitalist activity starts with expenditures or negatives, these systemic debts will need to be resolved by positive returns for capitalism to continue functioning. (i.e.), Capital becomes a to be resolved debt, regardless of any empirical appearances or the hubris of capitalists; and all endogenous exchange-values are indeterminate ahead of its resolution later through use-values. “Doing” economics, following whatever persuasion, becomes impossible. Economics becomes a form of macro-accounting, and virtually all micro is relegated back to the dustbin whence it sprang.
        A depletion of material positives, as Marxist logic would have it working in a natural-world setting, just isn’t an applicable reality to critique capitalism with.

        And just like no serious and comprehensive reading of orthodox economic theory is required to discredit it, neither is it necessary to do so with Marx’s theory, when it’s possible to kick the foundation away from underneath either of them. Now you may well be of the opinion that I haven’t done so (yet). But that leaves you with the task to show how a capitalist system exists, by renewing itself on an ongoing basis. I mean, look at that title again. It’s about final output embodied for _2/3rds!_ with ‘dead’ labour; the latter being Marx’s calculation of this “reality”, not Smith’s. Now obviously these stiffs aren’t in the market for any of those goods. So how is it possible that, crises excepted, the system’s realization and renewal through final output has yet been going on ever since the dawn of capitalism? I’ve provided my explanation why Marx is critiquing a system that cannot exists according to the parameters of value Marx had set for himself; and as a result showing why Marx couldn’t make good on the quest of this section, which is foundational to Marxism. My effort is open to be critiqued of course, or, how about providing a Carlos-Marxist explanation?

        The reality from my set of first principles, has only exchange-values as a means existing within an economy. Use-values are the determinant of the system and reside only exogenously, i.e. as part of our natural existence. As a Sismondian I don’t have much use for Say, except to mention that disequilibrium is a meaningless concept without starting out with the conditions of equilibrium. So as far as that goes, there was some logic to his thinking. Proudhon vaguely had the right but also unworkable idea. What’s needed instead to get rid of capitalism is neutralizing the effects of money through fiscal measures, possibly combined in the future with blockchain technology so that cheating becomes impossible, and outlawing all other crypto-currencies so that the “miners” end up stuck with them.

        But as long as all the critique I’m getting ultimately relies on this meta-axiom of depletable positives, we’ll be talking past one another, and likely not for very long. I’ve got no idea how many followers are reading this, but for the ones who find this approach of mine interesting there is always the index page of my website. Would prefer it to be different though…

  19. Roberts writes: “This was the great advance in Marx’s law of value. The labour time embodied in the commodities normally purchased by the worker for the reproduction of himself and his family in a day is less than the labour time that a worker actually offers to the owner of capital during the same time period. The result is that for any given time period, the worker produces more value than the wage equivalent which is paid by the owner of capital for the use of the labour power. This difference, Marx calls “unpaid labour” and “surplus labour”- or surplus value. Marx’s value theory of abstract labour exposes the exploitative nature of the capitalist mode of production, while neither Ricardo’s nor Adam Smith’s labour theory of value does.”

    What utter nonsense. The idea that Marx invented the concept of surplus value is laughable. Marx wrote a whole book about theories of surplus value that came before him. Chapter 3, Section 3 of “Theories of Surplus Value” is entitled “Adam Smith’s Extension of the idea of Surplus Value to All Spheres of Social Labor.”

    1. While smith and Ricardo saw profit, wages, rent, and interest as independent conceptual realities, Marx saw in them only the different manifestations of value in the mode of production based on capital accumulation. Smith and Ricardo took the phenomena for the reality of capital and could not establish the proper organic connections among them. Marx did clarify the difference between the essence and its related phenomenological appareances. Marx study besides being empirical was methodologically logic. Smith and Ricardo drowned in empiricism.

      1. It’s not that Smith and Ricardo are drowned in empiricism, it is rather that they see “exchange” in the market — that is to say, everywhere that commodity exchange takes place — as being, in the last instance, an “equal” exchange between “labour-time,” or what is the same, between equivalent “amounts” or “quanta” of “abstract labour.”

        Marx, however, and in so far as I am able to tell, agrees in part with the viewpoint of Smith and Ricardo: “the law of value” is indeed the regulating principle of exchange, but only in those exchanges of commodities that are not themselves properly speaking that commodity that goes by name of “labour” or “simple labour” or “abstract labour” and which trades for a “wage.”

        In that particular transaction, in the exchange of “labour power” for “wages,” the “law of value” is transgressed: wage labour does not receive as its due what it gives up in actual “abstract labour” or “labour time.” See, for example, the “Introduction to Karl Marx’s
        Wage Labour and Capital.”

        Thus the basic difference between Marx, on the one hand, and Smith and Ricardo, on the other, is that whereas the latter believed the exchange between the labouring masses and their employers to be “fair,” that is to say, to also be regulated by the “law of value,” Marx showed that in this particular instance, the exchange of “labour-time” for “labour-time” did not in fact hold. Of course, this little flaw in the system, while making “profit possible,” also makes the system unworkable or prone to crises.

        In other words, and as Mattick rightly puts it, “Marx took pains to demonstrate the validity of the law of value for a system which [actually] precludes a value exchange.”

    2. ‘What utter nonsense’ Ian, can you refer me to any passage in Smith’s ”Wealth of Nations” where he employs the term ‘surplus value’?

      I think you ought to be more temperate in your utterances: you might steal that “Nobel” Prize for Economics away from John Vertegaal!

    3. I.D
      “The idea that Marx invented the concept of surplus value is laughable.”

      Maybe , but that’s not what Michael wrote!
      It reads:-
      “Marx made the distinction between labour and labour power, a distinction that is absolutely crucial for the understanding of the source of profit.
      “This was the great advance in Marx’s law of value.”

      This distinction wasn’t made by bourgeois political economists like Smith & Ricardo.
      Marx wrote “Theories of Surplus Value” to explain why they weren’t able explain the origin of Surplus Value and therefore Capital Accumulation.

      “..all commodities in exchange with living labour buy more labour than they contain, It is precisely this more that constitutes surplus-value.”

      He goes on:-

      (Smith) “ does not perceive how this contradiction arises, through labour-power itself becoming a commodity, and that in the case of this specific commodity its use-value”

      (Theories of Surplus Value)

      Failing to make this distinction leads Smith into a circular argument in which “value is made the measuring rod and the basis for the explanation of value “

      Ricardo is aware of the problem, but skips over it.

      Harvey’s revision of Marx seems to be leading him into similar territory.

    1. I find David Harvey difficult to take seriously as he is an advocate of “zero growth”. This was especially puzzling as he did seem to grasp some aspects of Marx that were widely misunderstood eg theory of rent, perhaps because of background in geography. But it is quite impossible to understand Marx and not see that he wants to unleash the productive forces.

      But Harvey does avoid the widespread misunderstanding, strongly pushed by mainstream “marginalists” that Marx was merely a “minor Ricardian” as Samuelson put it, especially on labor theory of value.

      Marx wrote a CRITIQUE of those classical theories. His concept of value went far beyond theirs and very strongly emphasized the contradictory of use value and exchange value, without which it is impossible to understand the disequilibrium phenomena and especially crisis.

      Not listed in your references is a reasonably clear explanation of this by Rosodolsky “The Making of Marx’s Capital”.

      BTW Jevons was right to acknowledge that his marginalism was consistent with classical theory. Modern national accounts with input output tables and mathematical value theory based on linear programming, convex analysis, duality prices etc was largely developed for planning in the Soviet Union. What the mainstream prefers to call “profit” produced by capital “stock” as a “factor of production” is what Marx called “virtual depreciation”. I have not read your work carefully yet but could not see any sign of grasping that when I skimmed it.

      The difficulty with any empirical studies is that valuations of capital stock and therefore of depreciation and hence of gross and net flows in input-output accounts is highly problematic. Valuations tend to actually be made by capitalizing expected future income.

      See my comment above with link to:

      Click to access OECD-Capital-e.pdf

  20. At the risk of engaging of philology, it is important to distinguish the conceptual differences between one sided political economy and the dialectical logic of capital.

    “The produce of the earth-all that is derived from its surface by the united application of labor, machinery, and capital-is divided among three classes of the community; namely, the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the laborers by whose industry it is cultivated … In different stages of society, the proportion of the whole produce of the earth which will be allotted to each of these classes under the names of rent, profit, wages, will be … different … to determine the laws which regulate this distribution, is the principal problem in political economy.”

    Ricardo, Principles of Political Economy and Taxation, p.5

    “It has been shown … that the price of the greater part of the commodities resolves itself into three parts, of which one pays the wages of the labor, another the profits of the stock, and a third the rent of the land.” Wealth of Nations, p. 313

    “Capital -profit (or better still capital-interest), land-ground rent, labor-wages, this economic trinity as the connection between the components of value and wealth in general and its sources, complete the mystification of the capitalist mode of production, the reification of social relations, and the immediate coalescence of material relations of production with their historical and social specificity.” Capital, vol. 3, pp. 968-69

  21. Personally I did not get the impression from reading David Harvey’s paper that he was saying value was “created in exchange”. When Michael Roberts uses phrases like “labour time embodied in the commodities” and “the value of a commodity is still the labour contained in it”, it seems to me important to remember that “embodied” and “contained” should be considered figurative and not literal descriptions. I think it is accurate to say that without its realization in exchange there is no actual value produced, and that producing something that cannot be sold is not a waste of value but rather a waste of time.

    I recently read Diane Elson’s “The Value Theory of Labor” and it seemed compelling to me. (I also read “From the Commodity to Capital: Hegel’s Dialectic in Marx’s Capital” by Jairus Banaji, which I found extremely helpful.) My main point of confusion when it comes to the nature of Marx’s value is: how can it be inherent to a commodity in and of itself? Use value can be seen as inhering in a product, but I don’t see how value itself can exist without there being a completed cycle of production and sale of a commodity.

    I am likewise not sure I get the argument about “underconsumptionism”. It seems intuitive to me that if the number of people employed is reduced, there will be less end consumption and that this would ultimately undermine the capitalist mechanism of generating surplus value. Is that not what the ultimate result would be of full automation?

    1. I think that Ron has raised a number of pertinent points that need to be addressed. Clearly the debate needs to continue.

    2. ” I don’t see how value itself can exist without there being a completed cycle of production and sale of a commodity.”

      Neither could Marx. Only “marxians” can.

      But on underconsumptionism Marx did explain why the “intuitive” views are wrong.

      1. All systems of exploitation require that workers produce a surplus for exploiters to live off. Capitalism does not differ from slavery or feudalism in that regard. But only capitalism has regular economic crises so it makes no sense to explain these by what capitalism has in common rather than by some difference.

      2. A notable feature of wages and crises is that wages tend to sharply rise just before the outbreak of crisis. The “intuitive” underconsumptionist view would expect the opposite.

      Re full automation. Yes, Marx did expect the ultimate result would be an end to capitalism:

      “The exchange of living labour for objectified labour – i.e. the positing of social labour in the form of the contradiction of capital and wage labour – is the ultimate development of the value-relation and of production resting on value. Its presupposition is – and remains – the mass of direct labour time, the quantity of labour employed, as the determinant factor in the production of wealth. But to the degree that large industry develops, the creation of real wealth comes to depend less on labour time and on the amount of labour employed than on the power of the agencies set in motion during labour time, whose ‘powerful effectiveness’ is itself in turn out of all proportion to the direct labour time spent on their production, but depends rather on the general state of science and on the progress of technology, or the application of this science to production. (The development of this science, especially natural science, and all others with the latter, is itself in turn related to the development of material production.) Agriculture, e.g., becomes merely the application of the science of material metabolism, its regulation for the greatest advantage of the entire body of society. Real wealth manifests itself, rather – and large industry reveals this – in the monstrous disproportion between the labour time applied, and its product, as well as in the qualitative imbalance between labour, reduced to a pure abstraction, and the power of the production process it superintends. Labour no longer appears so much to be included within the production process; rather, the human being comes to relate more as watchman and regulator to the production process itself. (What holds for machinery holds likewise for the combination of human activities and the development of human intercourse.) No longer does the worker insert a modified natural thing [Naturgegenstand] as middle link between the object [Objekt] and himself; rather, he inserts the process of nature, transformed into an industrial process, as a means between himself and inorganic nature, mastering it. He steps to the side of the production process instead of being its chief actor. In this transformation, it is neither the direct human labour he himself performs, nor the time during which he works, but rather the appropriation of his own general productive power, his understanding of nature and his mastery over it by virtue of his presence as a social body – it is, in a word, the development of the social individual which appears as the great foundation-stone of production and of wealth. The theft of alien labour time, on which the present wealth is based, appears a miserable foundation in face of this new one, created by large-scale industry itself. As soon as labour in the direct form has ceased to be the great well-spring of wealth, labour time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value. The surplus labour of the mass has ceased to be the condition for the development of general wealth, just as the non-labour of the few, for the development of the general powers of the human head. With that, production based on exchange value breaks down, and the direct, material production process is stripped of the form of penury and antithesis. The free development of individualities, and hence not the reduction of necessary labour time so as to posit surplus labour, but rather the general reduction of the necessary labour of society to a minimum, which then corresponds to the artistic, scientific etc. development of the individuals in the time set free, and with the means created, for all of them. Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth. Hence it diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition – question of life or death – for the necessary. On the one side, then, it calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it. On the other side, it wants to use labour time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value. Forces of production and social relations – two different sides of the development of the social individual – appear to capital as mere means, and are merely means for it to produce on its limited foundation. In fact, however, they are the material conditions to blow this foundation sky-high. ‘Truly wealthy a nation, when the working day is 6 rather than 12 hours. Wealth is not command over surplus labour time’ (real wealth), ‘but rather, disposable time outside that needed in direct production, for every individual and the whole society.’ (The Source and Remedy etc. 1821, p. 6.)

      Nature builds no machines, no locomotives, railways, electric telegraphs, self-acting mules etc. These are products of human industry; natural material transformed into organs of the human will over nature, or of human participation in nature. They are organs of the human brain, created by the human hand; the power of knowledge, objectified. The development of fixed capital indicates to what degree general social knowledge has become a direct force of production, and to what degree, hence, the conditions of the process of social life itself have come under the control of the general intellect and been transformed in accordance with it. To what degree the powers of social production have been produced, not only in the form of knowledge, but also as immediate organs of social practice, of the real life process.”

      1. Here I am posting to a three-year old discussion. Oh, well. Arthur cited a passage from the Grundrisse in which Marx cited The Source and Remedy of the National Difficulties. This is good. But what I can’t understand is why almost nobody ever goes back to look at what the pamphlet said. Actually, the pamphlet has a major bearing on the category of socially necessary labour time both in its own analysis and the arguments of William Godwin that were formative for Charles Wentworth Dilke’s thinking. Dilke was the author of the anonymous pamphlet. Dilke employed a levelling principle to arrive at his equivalent of socially necessary labour time. There was a very good analytical reason for using that principle and it is curious that Marx didn’t follow suit. He may have had his reasons but he didn’t articulate them. Anyways, what ensued was Marx strongly endorsing Dilke’s (and Godwin’s!) fine statement that wealth is disposable time but seemingly passing over one of the analytical steps leading to that conclusion. I am not saying Dilke was right and Marx was wrong. I am simply saying that reading Dilke — and Godwin — is essential to understanding Marx’s concept of socially necessary labour time.

      2. Oddly I am also posting to this three-year old discussion. My WordPress app showed me comment by originalsandwichman three years later (but without a reply button to it).
        Have now downloaded from site linked to reply author’s name:

        Click to access ambivalence.pdf

        Look forward to reading that and following up from the rest of that site as soon as possible. Unfortunately that won’t be soon.

        Meanwhile I haven’t yet read Dilke or Godwin or re-read the rest of this thread but would guess that if a “levelling principle” is connected with “embodied” concrete labour then Marx’s letter to Kugelmann I linked in this thread with review by Lenin could be helpful for curiosity of Marx not adopting Dilke’s principle.

        Marx’s starting point is the net social product (roughly “GDP”) as a “social working year” produced by social labour, which takes the form of “value” ONLY because it is split up into private exchanges.

    3. Ron,

      My main point of confusion when it comes to the nature of Marx’s value is: how can it be inherent to a commodity in and of itself?

      For what it may be worth, I’ve set out,among other things, what I take to be Marx’s meaning of “value” here.

      I don’t think that Marx sees it as being inherent to anything at all so much as he understands it to be an abstract relation between things, in this instance, a relation that is a ratio of quantity between two distinct and dissimilar categories of commodities, as Marx understands commodities.

      And yes, I agree:

      When Michael Roberts uses phrases like “labour time embodied in the commodities” and “the value of a commodity is still the labour contained in it”, it seems to me important to remember that “embodied” and “contained” should be considered figurative and not literal descriptions.

      Pertaining to:

      Use value can be seen as inhering in a product, but I don’t see how value itself can exist without there being a completed cycle of production and sale of a commodity.

      . . . I think that Marx would agree that the “exchange value” of a commodity is only and ever “realized” at the moment that its sale has been transacted in the market.

      Consequently, implicit in an understanding or discussion of what counts as a commodity is that it’s attributed “exchange value” is always consequent upon it’s being realized in an actual market exchange. When Marx ascribes “exchange value” to the commodity as an aspect of its dual nature or structure, it is being presumed for the sake of argument that that “value” is either pending or will be realized in market exchange.

    4. [quote]My main point of confusion when it comes to the nature of Marx’s value is: how can it be inherent to a commodity in and of itself? Use value can be seen as inhering in a product, but I don’t see how value itself can exist without there being a completed cycle of production and sale of a commodity.[/quote]

      Good question. I had trouble wrapping my head around the idea to. Will try to offer a response, but of course more knowledgeable readers might want to correct me if I get it wrong.
      Value is inherent to a commodity because it is the equivalent of the labour time needed to reproduce it unders specific historical and technological conditions.
      Of course, if one analyzes a chair, one cannot see that element “within it”, in its atoms or whatever. It is, in a sense, something that is bestowed upon it by our human (social) consciousness, because we understand that that “thing” is not only matter, but something useful that was created in order to be exchanged in the market (ie. a commodity). In a sense, it’s like the “usefulness” of a thing, its use-value: it is inherent to the thing because a chair is useful for you to sit on, other commodities do not necessarily affect or change it. But you wouldn’t find that usefulness if you analyzed its atoms, it is something betstowed upon it by our human consciousness: by the fact that we recognize the chair as an object that we can make use of in order to please a want.

      [quote] I think it is accurate to say that without its realization in exchange there is no actual value produced, and that producing something that cannot be sold is not a waste of value but rather a waste of time.[/quote]

      Well, Marx’s theory of value applies to commodities, which are to be exchanged in the market. AFAIK If something is produced through labour in order to be exchanged in the market, it has value, even if it doesn’t eventually get exchanged (because it gets destroyed in a fire in warehouse or something).

      My question to other people would be: what is the relevance between value being *created* at the point of production vs. merely *realized* in the market and value being *created* in the market through exchange? I know it’s not just splitting hairs and has some relevance, but I’d like people to clarify it for me if it’s possible.

      1. @ Eric,

        what is the relevance between value being *created* at the point of production vs. merely *realized* in the market and value being *created* in the market through exchange? I know it’s not just splitting hairs and has some relevance, but I’d like people to clarify it for me if it’s possible.

        In a capitalist society, a commodity that cannot be sold is worthless, that is to say, is without any “value.”

        Under a bartering system, a sale is a purchase and a purchase is a sale. In a sense, there is a kind of “value equilibrium’ in such a system.

        But under capitalism, if a purchase is a sale for someone, nothing guarantees that a subsequent sale to someone else will occur to cover the expense that was that purchase.

        Between producing a commodity — which presupposes a purchase of materials and/or labour to produce another value-added commodity — and selling that commodity in an attempt to at least recoup its “prices of production” or what in our modern argot we call the commodity’s ‘costs of production,’ there is a separation, break, or pause in time, the time that it takes for the commodity to become ‘market stock’ and then for a buyer to actually buy the commodity, a buyer that may never materialize.

        No buyer, no value. Period.

        That’s what economic crises affecting the sphere of production boil down to. Just another ‘fracture’ in the system that always potentially stands as a trigger for next economic crisis.

      2. Perhaps another way of looking at it is that if someting is produced that cannot be sold, the labor power expended in its production evidently was not ‘socially necessary’. If value is created only by socially necessary labor, the production of something which is not deemed socially necessary would create no new value. If that is the case, the sale of a commodity does not just realize or fail to realize value that has always already been created in production, it actually determines whether in fact such value was created in the first place. Yes? No? Maybe?

    5. @ Ron,

      Pertaining to your remark:

      Perhaps another way of looking at it is that if something is produced that cannot be sold, the labor power expended in its production evidently was not ‘socially necessary.’

      I “get” what you are saying, and in so far as that goes, I agree: something was created but had no usefulness for anyone, and thus from a social standpoint, was without any value, either of use or in exchange.

      Among Marxists, however, the expression “socially necessary labor” means the ‘quantity’ of ‘labor’ estimated to be required for the completion of a given task, a task to be performed in the context of given technologies, techniques, and organizations of work.

      As an example, consider two lumberjacks from two different eras: one from the days in which trees were felled with a cross cut saw, and the other from the days in which the chain saw is the means. Clearly, working the cross cut saw will require more time than working the chain saw to produce a 128 cubic feet pile of logs. And not everyone, whether working with one or the other saw, will produce a cord of wood in exactly the same amount of time. But there will be an average for both, and that of the chain saw will far exceed that of the cross cut saw, no matter how burly or not the individual men may be. That average, in this instance, is the “socially necessary labour[-time]” required to process a cord of timber, that associated with the chain saw being orders of magnitudes less than that associated with the cross cut saw.

      So whether a commodity is “realized” or not in exchange in the market, the magnitude of the “socially necessary labour” required to produce it under the prevailing technologies and techniques for producing it remains the same. But unless the commodity is sold, the “socially necessary labour” that was required for its production will have been for naught.

      Others will correct me if I am mistaken in my understanding of ‘SNL’ or ‘SNLT.’

      1. True, I conflated the terms “socially necessary labor” and “socially useful labor” above. Marx does use the latter term. (He apparently never used the former?) Perhaps “socially necessary useful labor” would be a fair description of the labor involved in creating new value.

        Something might not be sold because it is of no use to anyone, or it might not be sold because no one can afford it. A commodity must have use value in order to have (potential exchange) value, so in the former case (e.g., mud pies), there is no use value and hence no value. But in the latter case (e.g. food in a poor country) there is use value, so perhaps it could be argued that in that case there is potential value that simply cannot be realized. Seems a bit iffy to me, though. I tend to agree with you (I think!): unless there is an exchange to confirm that the labor expended was socially useful, no value can be said to have been created in production.

  22. May I ask DH:
    if a capitalist could not sell his or her products therefore there would be no value created ,so there would be no surplus value .does it mean that there would be no exploitation so this capitalist was not a capitalist at all and the proletariat was not in fact proletariat ?

  23. Maybe one could look at it like this: If a product is not sold, the capitalist stops producing it and lays off the workers. In the most abstract sense these workers don’t exist any more and so there is less value-producing capacity. At the same time the costs of a unit of labor raises slightly because the laid off’s are not dead but get some dole. The already created value (paid labor for a product) is lost, however this is a loss of capital. This holds partially if capital has to sell under value.

  24. For those interested in further pursuing the debate on value it would be worthwhile perusing Michael’s post of 12/11/17,”Value, class and capital”, which occasioned no fewer than 178 responses. Some of the questions raised here are addressed there.

  25. 1. I assume you meant to say you read Marx on money from chapters 1 to 6 of Volume 1, especially chapter 3 (not just chapter VI as typed). As explained in the original preface Vol 1 was a “continuation” of the work started with the 1859 “Contribution”.

    2. Yes I do strongly recommend first reading the 1859 “Contribution” and especially the final part “C. Theories of Circulation and of Money”.

    3. See also the “Chapter on Money” in Grundrisse, which starts with analysis of Darimon on the Bank of France.

    4. See also Chapter 1 of Marx’s first mature economic work, the 1847 “The poverty of philosophy”.

    5. See also Rosdolsky “The Making of Marx’s Capital” chapter 27 “Fragments on Interest and Credit”. Extensive discussion of the mess Engels had to deal with in what you more politely describe as the “unfinished” chapters on banking, credit etc. This is serious philology as opposed to the usual pointless stuff and indicates Marx’s intention to postpone these issues to a later work.

    6. Above should convince you that Marx deliberately omitted banking and credit from volume 1 rather than having only studied it later.

    7. Fully justified in my view by the fact that he could not have written a description consistent with the further developments we have to deal with today and did closely follow the changes that were already happening in his lifetime.

    8. “My big question about Marx’s vol 1. is the key assumption that socially necessary labor time plus surplus value equals price (in the long run, as a social average, with constant capital-labor and therefore productivity ratios across industries, etc. etc.). That assumption allows him to develop the rest of his labor theory of value. He then says it’s the market price of ‘necessities’ that define the SNL value.”

    Above quote is VERY confused. Appears to be treating SNL time as applying only to wages, not to total value. Hopefully just badly phrased. Not sure what you mean.

    9. “But how can market prices, that fluctuate according to supply and demand, determine value that occurs in production and is not subject to supply and demand? Sounds like the old Smith idea that market price fluctuates around a core ‘natural price’ that’s equal to labor value in the long run, and here with Marx the SNL is the analog of Smith’s natural price.”

    Yes Marx is much closer to Smith (and even “neoclassicals”) on that than to most “Marxians”.

    There is some odd phrasing in Capital but I seriously doubt it would have have occurred to Marx that anybody could so totally misunderstood him as to not think he was talking about such fluctuations around a “natural price” (which he explained was a more developed form of value, “production price”). BTW Maksakovsky just takes that for granted too as did all Marxists before “Marxianism”.

    See item 4 where Marx lectures Proudhon on the “truisms” well known to the classical economists before Proudhon’s “scientific discovery”.

    10. Maksakovsky “The Capitalist Cycle: An Essay on the Marxist Theory of the Cycle”.

    You mentioned (initially):

    “Vol 1 only ‘works’ because he assumes value is equal to price in the long run and as a social-wide average. He needed to take his notes and reflections in vol III and develop a further conceptual framework to explain how ‘price variables’ based on value–i.e. profits, wages, rent, financial asset prices, etc. fluctuate in relation to value in the exchange sphere of the circuit of capital reproduction, AFTER commodities are transformed into money form and BEFORE transformed back into constant and variable capital for production.”

    That is pretty much what Maksakovsky does, specifically by tracing the contradictory movements of input and output prices above and below values in the main departments over the course of a cycle.

    Publisher’s blurb:

    “Following the dialectic of Hegel and Marx, Maksakovsky aims to provide a “concluding chapter” for Marx’s Capital. The book examines economic methodology and logically reconstructs Marx’s analysis into a comprehensive and dynamic theory of cyclical economic crisis.”

    Links here for free download or cheap paperback:

    11. “A point I emphasize in the conclusion is that central banks,as capitalist system institutions, are failing to evolve in terms of functions apace with the changing structure of global capitalist finance. They can’t keep it, and therefore are failing in all their major functions. This has consequences for capitalist economic and financial stability. The system is growing more unstable (aka fragile) and their institutions are failing to address the problem. Capitalist fiscal policy is also become less effective in stabilizing the system.”

    Well, I will have to read it but this reinforces my impression that you are following the general trend to blame crises on problems with the financial system. Maksakovsky explains the opposite view, that regular cycles with crises are inherent in the system dynamics (as opposed to “Marxian” views about “breakdown” and “long run”.

    I think the central banks have evolved incredibly rapidly. From “lender of last resort” they have become “dealers of last resort” for the much wider capital markets in an emergency coordinated global response despite the absence of a corresponding world government and fiscal paralysis from the national governments an EU region. This has astonishingly postponed a major crisis that was overdue in the 1970s for yet another decade. Give them some credit!

    1. Let me reply to your points 8 and 11.

      But first, I wonder why Marx would not have included his earlier analyses of money in 1859 and Grundrisse in Vol 1. I assume that in later works, if one leaves out prior analyses (especially if not published) it suggests the writer has changed his mind on some aspects of the subject. I am dubious about reading earlier ideas into later published works that delete those ideas.

      Re. point 8. Let me rephrase. Of course SNLT is not limited to wages. SNLT is the equivalent of the value of labor power that is paid to the worker that amounts to the ‘socially necessary (average over time, place, culture, etc.) to reproduce labor as a commodity. SNLT is a fraction of the total value produced. The difference from the total value and the SNLT is the surplus value. The rate of exploitation is the ratio of surplus value to SNLT value. I think that’s correct so far. If not explain. Now, what I was getting at was, in my reading of Marx, he argues that SNLT is equal to the average social wage (and all the assumptions that go with that), so that value (SNLT) is equal to price (wage, value of labor power). So value equals price, given the assumptions. So SNLT=value of labor power=price(wage). THis is a special case. (In classical jargon, the market price of labor (wage) is equal to the natural price (SNLT, Value of Labor power). Now here’s where I see a logical contradiction: if the SNLT, composed of the necessities for reproducing a worker (at a given time, place, etc.), is measured by the market price of the necessities that constitute the SNLT, aren’t we not measuring value (SNLT) by using price inputs? And as price inputs may fluctuate per supply and demand, aren’t we measuring value (a fixed quantity not subject to supply and demand) by varying quantities–i.e. the fluctuating price of the necessities that constitute the SNLT?

      Re. point 11 and central banks. Read my concluding chapter about the contradictions in central banking’s functions, and the quantitative evidence that central banks in recent decades have been failing to achieve those functions: i.e. control of the money supply, bank supervision, lender of last resort, etc. The ability of the central banks to stimulate real investment has declined significantly. Or in economist jargon, the interest rate elasticity of investment has been falling.(i.e. growing more inelastic or ‘sensitive’ to interest rate cuts). The liquidity injections aren’t going into real investment, but are being diverted into financial asset markets, financing mergers and acquisitions, and funding stock buybacks and dividend payouts (or just being hoarded on balance sheets). This is a major reason why real growth is weakening over the long run in the 21st century. (Conversely I argue the massive liquidity provisioning by the central banks since Bretton Woods collapse has made interest rate hikes more elastic to real investment contraction. Concretely, what I mean is that it took rate hikes by the Fed to 5.25% to precipitate the 2007-08 financial asset crashes. I am predicting that Fed rate hikes to only 2.5%-3% will now precipitate the same. (Conversely, rate cuts to 0.15% for seven years did nothing to stimulate real investment after 2009–an observation that lead me to argue that in the 21st century Fed rate policies are more about subsidizing banks than bailing them out The banks were bailed by 2010 in the US. Yet the Fed continued for seven more years with zero bound rates. Why? To subsidize the banks and finance capital. Lender of last resort function has transformed into a direct subsidization function. This is why central banks are ‘failing’. Yes they ‘succeeded’ in bailing out the private banking system, but at the expense of fueling the next crisis. A crisis which they may not be able to again bail out given that their own balance sheets are serious bloated. The central banks have not resolved the last crisis. They have only transferred the private debt of corporations and investors onto their own balance sheets. and now the private debt has risen again above 2007 levels. Look at the bank of japan. It’s not only buying up bond debt, but subsidizing stocks and derivatives by purchasing equities and all sorts of stuff. The central banks are keeping capitalist financial markets artificially afloat. How long can they do this? No one really knows. But I suspect no more than one more bailout perhaps. By 2030 capitalist monetary and fiscal tools will have been rendered useless. Maybe even before. Should we give the central banks ‘credit’ for this, as you suggest? Central banks as we know them as capitalist institutions of the 20th century mostly (they really only arise around the 1800 Napoleon period, with the exception of the bank of england), will disappear and at best morph into something different by the mid-21st century, I argue. (YOu may want to read my article in last September issue (or about then) in the European Financial Review, entitled: “WIll Central Banks Survive by the Mid-21st Century?”

      Thanks for the references, btw. Will take a look at 1859 and Grundrisse, notwithstanding my aforementioned reservations, and especially the Makasovsky on credit cycles. WIthout falling into the nonsense of the Austrian School, I’m much interested in credit cycles and their causal effect on real cycles. I think bourgeois economics doesn’t understand the nature of the differences between money and credit. And certainly today, forms of credit are appearing unrelated to supplies of money. Money may enable credit, but not all credit requires money (increasingly). I have found some value in some bourgeois economists attempts to understand credit cycles. There’s Keynes’ Treatise on Money and Ch. 12 of his General THeory (a strange chapter that doesn’t fit with the rest of his analysis, and that focuses on the professional investor-speculator’s effect on business cycles. THere’s also Irving Fisher’s ‘Booms and Busts’ 1932 book that tries to explain the relationship between debt and deflation as accelerators of depression level economic collapse. And of course Hyman Minsky has made some contributions as well. But none have the full story or convincing explanation. And of course Marx Vol 3 is very interesting. But once again, how much can we attribute unfinished notes and speculations as the ‘final view’ of an author? (Or earlier works superseded by later publications)?

      1. Jack,

        You write:

        Now here’s where I see a logical contradiction: if the SNLT, composed of the necessities for reproducing a worker (at a given time, place, etc.), is measured by the market price of the necessities that constitute the SNLT, aren’t we not measuring value (SNLT) by using price inputs? And as price inputs may fluctuate per supply and demand, aren’t we measuring value (a fixed quantity not subject to supply and demand) by varying quantities–i.e. the fluctuating price of the necessities that constitute the SNLT?

        The discrepancy between SNLT and price happens because under capitalism there is always a separation in time and place between, on the one hand, the nexus where surplus-value is created and appropriated, that is to say, in the process of production as such, and, on the other hand, the nexus where surplus-value is realized, that is to say, in the market as such, where price is always in a state of dynamic disequilibrium and may thus deviate with respect to the “value” of commodities whose magnitude was fixed on the basis of time during production.

        If not for that separation between the production process (where surplus-value is created and captured) and the market (where surplus-value is consolidated or realized), then “price” and “value” would indeed coincide perfectly.

        At least that’s how I understand and see the distinction between “value” — the magnitude of which is “labour-time” or, if you will, “time” tout court — and “price,” the latter being the result of very complex market dynamics that for the most part defy rational analysis and virtually guarantee that “price” and “value” can never exactly coincide, but that nevertheless are very much constrained to approximate to one another, given that the total amount of labor that was remunerated in production on the basis of time was effectively remunerated with the money that in its possession now becomes the most significant part of the very demand that will in fact “realize” in the market whatever part of the surplus-value captured in the course of production actually ends up fortuitously “realized.”

      2. What my point raised involves the production of value. SNLT is part of that process. It is not part of the realization process, when the commodity is sold. It is about when the commodity is produced and thus pre-realization. The issue is this: can you measure a quantity, value in production (SNLT, value of labor power, assumed equal in vol. I) by price inputs (necessities that constitute SNLT) when the price inputs fluctuate according to supply and demand themselves? Can you determine a fixed quantity by quantities that are not fixed? Marx assumes there’s no problem using market price inputs to socially necessary labor because he makes the special case assumption that in the long run (plus several other assumptions about capital-labor ratios, etc.) value is the same as price, value equals price. But production of commodities occurs in the short run, where the assumption of value equals price does not hold. A related problem is how does one quantitatively measure total value created and separate it into the two elements of surplus value and socially necessary labor value. Marx shows it logically, using the concept of ‘time’ (the solution Smith, Ricardo and others couldn’t figure out). But it’s still a logical depiction of time, until the elements of surplus value and SNL can be estimated quantitatively. The only approach I know of trying to do this is ‘MELT’, the money equivalent of labor time’ that some Marxist economists have been proposing. I’m still dubious, although Marx’s approach ‘works’ if one assumes value=price (plus related assumptions) and accepts his logical explanation of total value-surplus value-SNL (value of labor power) relationships.

      3. Thank you for the reply, Jack.

        You write:

        What my point raised involves the production of value. SNLT is part of that process. It is not part of the realization process, when the commodity is sold.

        Yes. That is, I think, precisely the point that I am speaking to. The contradiction you perceive is not a flaw in Marx’s analysis, but a contradiction implicit in the unity (or disunity) of the “entire process” that is the “value realization” we call capitalism.

        The analysis of “value” is both static (necessarily of moments in time or of phases of the valorization of “value”) and a matter of perspective (depending upon whether you are looking at things from the standpoint of the individual firm or from the standpoint of the “whole system”).

        The “moment in time” part of the analysis has to do with the fact that “value,” temporally speaking, has two aspects: there is the aspect of it in its overall circulation when it is being produced and captured “in the process of production;” and there is the aspect of it in its circulation when it is being “realized” in exchange in the market (in reality, in the market also being “produced and captured,” but said to “realized” in this part of “the moment of its production and capture” so as to distinguish this part of the “production and capturing of it” from that part of it happening “in the production process”). These temporal aspects of “value” are inseparable poles of value, but poles, because of the entire process or movement that is “value” under capitalism, that are also separated in place and time. Because there is this separation in the unity of the whole process which produces the “value” effect of capital, there will necessarily be differences in the price expressions of the self-same “value” depending upon whether the moment in the whole of the process under consideration pertaining to the “production and capture of value” is either “in the process of production” or “in the market, at the moment of market consolidation in exchange.” The contradiction which you see is “systemic,” that is to say, implicit in the overall structure of “value,” and not a logical inconsistency of Marx’s analysis. And we are both talking about value, because SNLT is part of the element of “value” when it is being considered “in the process of production.”

        As to the constraint of perspective on the analysis, it is important to understand that only the “capitalist system as a whole” is susceptible to “the law of value,” that is to say, as being in fact determined in its dynamics or movements by “labour time.” If things are looked at only from the standpoint of the individual firm, “labour time” does not seem to affect the “price of commodities.” Thus it is that for some firms, after they rationalize their production process and shed some labour, they nevertheless continue to receive roughly the same “price” for their commodities. So this would seem to give the lie to the “idea” that “labour time” is the basis of the “value” of commodities. But what happens when things are looked at from ten thousand feet above the ground, so to speak? If all businesses engaging in the same processes of rationalization, if all cut production costs by streamlining their organizations and introducing automation, then all shed labour and reduce the overall “labour time” in their operations all taken together. As overall “labour time” shrinks, so does the overall purchasing power in the economy as a whole, and eventually a point is reached where the valorization of commodities becomes more difficult and profits begin to shrink. The aggregate “value” of all commodities then begins to reflect the reduction in “labour time” that happened when rationalizations were instituted, and we can thus see that the “law of value” is very much operative in the system when the system is looked at as “a whole.”

        But the point is that, yes, sometimes SNLT will be expressed in “prices” that fluctuate according to demand and supply and sometimes “not,” as the basis of its magnitude is in reality and always, behind the surface fluctuating appearance of its expression in “prices,” “labour-time” or “time.”

      4. Thanks for taking the time to provide your explanation, but I’m still not convinced you answered my point. SNLT (value segment) will equal price only in a special case (in the long run, with other assumptions) and not in general. I don’t consider this a ‘flaw’ but just part of Marx’s methodology. He only starts to talk about prices per se in vol 3. And then he would have to resolve the issue of explaining how prices and values diverge in the short run. Like classical economists before him, Marx is focused on the long run, not short run business cycles analysis. Smith addressed long run economic growth determinants (and ignored short run), and foresaw a ‘steady state’ potential condition when growth stopped altogether. (So did Ricardo with his ‘stationary state’ concept). Both ‘states’ were the result of productivity slowing or falling somehow. Marx’s ‘breakdown’ thesis (long run) is related to their ‘states’. It too is long run (and supply side drive–supply as production based). That’s why trying to explain business cycles with the falling rate of profit variable is not Marx (apart from all the problems of trying to estimate and get global data sufficient to estimate the rate). Marx’s Organic Composition of Capital is also a kind of productivity causing a decline variable. There’s great potential in the OCC variable. Marxists should try to develop the concept further. Problem is that using classical economics conceptual framework of constant and variable capital does not enable a deeper analysis of the implications for growth and exploitation in the OCC concept.

        Sorry, I’m not convinced, however, re. your reply re. SNLT. But thanks.

      5. Jack,

        Vol 1 was explicitly a “continuation” of the “Contribution” frequently cross referenced in footnotes from Vol 1. “Grundrisse” was a “rough draft” for all 3 volumes (and more). As Rosdolsky explains Marx intended to postpone banking and credit together with world market and crises to a later work than volume 3. Certainly never intended for vol 1.

        Re 8. I think your rephrasing confirms confusion on SNL. Above reading can help on that better than I could.

        Re 11 I have carefully read your article and was sufficiently stimulated/irritated to write a long reply as annotations to it. Please take a look:

        Can discuss further here if you or others want (there is no audience at above blog). But it was far too long for me to add to this thread which is only indirectly related.

      6. Can you state succinctly why you still think my ‘rephrasing’ re. SNL is ‘confusing’? I don’t think historical references to SNL before Marx are convincing. (SNL seems to me to be a concept Marx adapted and advanced from the classical notion of the iron law of wages, a long run population-labor supply side concept of wage determination). But I might better understand your position about my view of value-price contradiction in the SNL of Marx if you can state your critique more succinctly.

        Yes, let’s discuss the central bank contradiction point in my book and the article. I’d like to know your criticisms.

        I have the Makasofsky book and have begun reading it. I’m impressed a working class radical guy like him also found the time to write it. From what I can tell he was way ahead of others, including bourgeous economists, who still weren’t thinking about money velocity and money demand, which he clearly was. His focus on credit is very similar to my focus on debt (the consequence of credit) and its role in precipitating financial cycle instabilities. Re. that you might want to read the concluding, summary chapter from my 2016 book, ‘Systemic Fragility in the Global Economy’, where I critique mainstream economics at length for not understanding what happened in 2008 (or will happen again around 2020), and provide my own explanation of how financial and real (short term) cycles interact and mutually determine each other. The chapter is entitled ‘A Theory of Systemic Fragililty’. (‘Systemic’ here referring to the global capitalist economy). It’s based on nine key variables deep feedback causations. I can send you the chapter if you contact me offline. I’d like your comments. (btw, I’m now in the process of quantifying the interactions, using a machine learningi process called ‘neural networks’ to determine the mutual weights of the variables and how those weights change over time as the business cycle unfolds.

        That book critiques contemporary economics in depth, identifying its two major wings–hybrid Keynesians and Retro Classicalists. It also critiques classical economics, Minskyan economics, and what I call ‘Mechanical Marxist’ contemporary economists. The ‘central bank’ book and the ‘systemic fragility’ book are closely related. I have a third book critiquing fiscal policy coming out later this year.

        I welcome your input. But I forewarn, none of these analyses are expressed in Marxist economic categories (although they could be I think).

        Thanks for the Makasovsky. I will get back to you with my analysis of his arguments at some point.

      7. Jack, Norman and mandm,

        Socially Necessary Labor time is not specific to capitalist production. It is much simpler as described in letter to Kugelmann:

        Marx explicitly points out that it is an obvious aspect of all social production, not just capitalism.

        If a tribe wants to do more hunting it has to do less gathering.

        Demand for meat and fruit will obviously affect how much work is done for each but socially necessary labor time to acquire a tonne of the meat or of fruit will approximately determine how much time spent on getting fruit and therefore how much fruit has to be reduced to spend more time on getting another tonne of meat.

        That’s all.

        Classical economics already got the basics and already understood that without knowing in advance how much SNLT is required, approximate ratios MUST emerge from fluctuations in demand and supply since there IS only so much working time available and it DOES have to be switched from doing one thing to doing another.

        This was not understood as much earlier because both feudal and slave society did not conceive of labour as something common to humans. (The class that had leisure to think did not do much work and did not see much in common between different sorts of work). In fact even in Marx’s time it was better understood in America than in Europe because Americans switched occupations more readily.

        Mainstream Micro 101 describes it as “opportunity costs” and “trade offs”. Convex analysis and duality theory describes such “trade offs” mathematically and Marx went into very detailed and far reaching consequences that were not and are not understood by others. But the “mystification” and obscurantism about this is from Marxians and other opponents of Marx, not from Marx.

        There is no exact predetermined proportion and nothing “embodied” or “crystallized” except metaphorically.

        This objective necessity is expressed in the form of exchange value when production is organized through commodity exchange which exists long before capitalism and even feudalism but becomes fully dominant only when wage labour and other inputs are themselves commodities – consequently with (fluctuating) prices as both inputs and outputs. The fluctuations necessarily express both changing SNL time with changing technology etc and disproportions in demand and supply.

      8. @Arthur

        Very nice! Indeed, a key passage is the Letter to Kugelmann, perhaps the most important paragraph in the history of economics.

        Both SNLT and exchange-value are not specific to capitalism. E.g., law of value, exchange-value, money etc. all existed and operated in feudal times, wherever extent of market, and competition, was sufficient.

        Yes, a lot of obscurantism around on this issue. A mode of production is defined by the dominant mechanism of pumping out surplus-labour. In capitalism, that’s the wage system.

        One question/clarification: I agree that SNLT can also change in response to fluctuations in supply and demand, but only through the latter’s affect on productivity (e.g., greater demand may induce less productive techniques). The important point is that SNLT is a market-independent property of an economy.

        Best wishes.

      9. Thanks Ian!

        I would rank it as one of the most important paragraphs. I regard the “fragment on machines” which I fully quoted above in this thread as just as important and with even more contemporary resonance (technically two paragraphs but the very long first para covers it). Also the explanation of Marx’s “general conclusion” in preface to 1859 “Contribution” (technically historical materialism rather than economics but arguably so is letter to klugmann). Also many of the paras in Introduction to the Grundrisse. This guy wrote too many important paras and they were too long. No wonder he is widely misunderstood!

        Re question/clarification, I did say (fluctuating) “prices”. Did not say fluctuating SNL time nor fluctuating exchange values. Don’t want to get into fine distinctions between market prices, market values, regulating prices and values etc etc.

        Do agree important aspect is market independent but many qualifications. Merchant capital trading margins, interest and capitalization of rent and interest with “production prices” based on average rate of profit could also be regarded as merely development/modification of SNLT. But domination of supply costs depends on fact that supply is generally more elastic than demand (can switch to meet demand easier than relative requirements adjust to costs). But demand side works primarily through budget constraints which depend on incomes which depend on state of market.

        As you mention, choice of technology is itself dependent on market conditions eg switches to higher organic composition after cyclical crash as explained by Maksakovsky (and excess demand in boom puts mothballed higher cost plant into use).

        But also it is hard to avoid directly considering demand and supply with joint products. Exchange values of “main” and “waste” products produced in fixed ratios, like different cuts of meat tend on average to be sold at a TOTAL price of production that depends on SNLT. But relative prices of different joint products entirely dependent on demand. This is not a minor qualification since pretty well everything is in fact a joint product (though with less fixed ratios than for cuts of meat). So the actual averages around which prices fluctuate do depend on demand as well as on SNL time.

        Particularly important these days with so much being a joint product of urban infrastructure, heavy investment in advertizing and segmentation of markets to capture “consumer surplus”. All these can only be properly understood after first grasping the fundamental as outlined to Kugelmann so must be treated as secondary for later development. But ignoring them completely would concede too much to the vulgar economists.

        Anyway thanks again!

        PS. Flattery will get you everywhere. I just took a look at your blog and am very interested. Will have to get back to it later. Downloaded and skimmed your paper on “The General Theory of Value”.

        Quick skim left me with impression that your production matrix A is square i.e. with no choice of technology (as well as no joint production). But you specifically indicated above that you are aware of choice of techniques being affected by price structure and you took a step towards actual prices by introducing stocks and flow of money.

        Please take a look at references on this page of my (unopened) blog:

        Hopefully you will find it of interest and will follow up on helping to do models for Maksakovsky (links on my home page).

        PPS I am curious about apparant inconsistency of first post at your blog re “theft” and enthusiasm for Marx’s account of “equal exchange” (which is not theft). Does that reflect shift since you started blog?

      10. The fact that it is admitted that SNLT is a market based concept avoids my question. Indeed, if it is, then issue is whether a fluctuating market price can be used to determine a non-market, non-supply and demand,variable like value. (Also, arguing that SNL existed before Marx is in no way an answer to my point).

      11. @ Arthur,

        Nowhere in the quote to which you refer is there any mention of SNLT.

        What the quote deals with is the distinction to be made between, on the one hand, “natural necessity,” which holds in all times and places, and, on the other hand, so-called economic laws, that is to say, the “forms” in which “natural necessity” might assert itself and that are really only specific to given and limited historical periods, and consequently transitory historical phenomena, but transitory social imperatives that vulgar economists mistake as being permanent (or, if you will, eternal).

        And in the quote to which you refer, the example that Marx gives of what constitutes a ‘natural law’ of social existence which transcends all times and places is the need to “work” if only to secure life, but not only to “work,” but to apportion labour to various tasks corresponding to the satisfaction of various needs in ‘amounts’ proportionate to the effort required to complete those ‘necessary’ tasks, and thus he speaks of the ” . . . necessity of the distribution of social labor in definite proportions [that] cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance.”

        In contrast to “that” natural necessity, however, he juxtaposes the “form” that “that” very necessity must assume in a “. . . society where the interconnection of social labor is manifested in the private exchange of the individual products of labor . . .,” and that transitory “form” “is precisely the exchange value of [those] products.” [the emphasis in bold emphasizes the emphasis in Mars’s original quote].

        But what of SNLT? Is it or is not a variant of “exchange value” and therefore absolutely specific to capitalist production, as against your specific contention?

        Marx writes:

        The value of these commodities is determined by the necessary labour-time contained in them. If therefore the commodities are sold at their value, the labourer buys with one commodity, which is the product of twelve hours’ labour-time, another twelve hours’ labour-time in the form of another commodity, that is to say, twelve hours’ labour-time which is embodied in another use-value.

        Clearly, in this particular quote, pertaining to the manner in which Smith and Ricardo, according to Marx, misapprehend the commodified character of labour, the expression, “necessary labour-time” is a synonym for “exchange value,” and as such is not anything like a “natural necessity” that Marx would deem to hold in all places and all times, but that belongs very specifically to the era of capital.

      12. Norman, this is also the succinct explanation of why I think Jack’s description of SNLT is confusing.

        My understanding is that “Socially Necessary Labour Time” is EXACTLY what Marx was talking about in the letter to Kugelmann and the confusion you and Jack share about this is a major reason for Lenin recommending that it be “read and re-read” to help understand the first 3 chapters of Capital.

        Your next two paragraphs are a reasonable summary of what he said explicitly in that letter.

        So is the third.

        Fourth para should have said opposite: eg

        “So, as Marx said, the form taken by the objective necessity of expressing the proportionate relations of socially necessary labour time in a society based on private production of commodities for exchange is exchange value.”

        The confusion you and jack both express is that this has something specifically to do with wages.

        As a quite separate matter Marx emphasized that the commodity labour power, like any other commodity produced for exchange has an exchange value related to the socially necessary labour time required for producing it.

        Marx stresses that this exchange of labour power for wages is an exchange of equal values like any other. Quite opposite to the comments here that there is some sort of rip off in the exchange. Or that exchange values are some sort of illusion created by bourgeois ideology.

        Surplus value is produced by exploiting labor power. The term “exploit” is a synonym for “use” or “employ”. The capitalist employs, uses and exploits labour power to produce surplus value just as one uses or employs or exploits tools and land. The outputs of production have an exchange value which exceeds the exchange value of the inputs. This exchange value of all outputs and inputs is based on socially necessary labor time as described in the letter to Kugelmann. (Further developed in many details subsequently explained concerning the capitalization of merchant profits in trade, rent and interest and the equalization of an average rate of profit in “production prices”).

      13. Sorry, you’re reply still hasn’t answered my point. Whether you argue that SNL existed before Marx, or refer to the same statement on SNL by Marx in Vol 1. or reaffirmed in a letter by Kugelman. The issue remains: you can’t estimate value derived from labor in production (a non-market, non exchange variable) by using fluctuating, supply and demand determined prices (that compose SNL). You’re back to the dilemma unresolved that SMith and classical economists faced by assuming market prices determined by supply and demand fluctuated around a core, natural price. But they never explained how the market price and natural price (aka labor value assumed in the long run, with various assumptions, to be equal to price) influence each other. They are not mutually exclusive. They have causal mutual affects. What are they? How to measure? Smith never could, and Marx repeatedly criticizes efforts to explain the determination of value by fluctuating market prices. yet that is just what remains when one assumes in the short run that the market prices of necessities inputs to SNL play a role in determining the amount of surplus value. You’re not going to solve this question by referring simply to what Marx said here or there (Kugelman or other). Or by Lenin, who was a master politician but not an economist comparable to even Luxembourg, Bukharin, or certainly Maksakovsky. The (in)famous transformation problem in Marx (which he only began to try to resolve in Vol.3), is about explaining how value is transformed into price. Here,with the SNL question, we have the inversion of that: how prices transform value. Either way, it can only be shown quantitatively. Referring to passages in Marx, Kugelmann or Lenin or whomever, only restates the problem. It doesn’t resolve it.

      14. Norman and Jack,

        As Jack explicitly mentioned classical “iron law of wages” I should add that initially Marx did more or less argue that “socially necessary” for labour power did amount to “bare subsistence”. This was enthusiastically taken up by La Salle and became official dogma of the largest mass workers party, the German Social Democrats. Marx sometimes appeared to be merely qualifying this by referring to necessary requirements depending on social conditions.

        My view is that in fact he repudiated the “iron law” completely and put forward a much more subtle theory of wages. This is a quite separate issue but is clearly related to the confusion on SNLT as there is some sort of desire to read into Marx a theory that supports saying wages are too low.

        My view on this separate issue is that this is also related to confusion about tendency for long run rate of profit to fall being basis for regular cycles. Marx described “absolute overaccumulation” as occurring when reserve army of unemployed is fully absorbed so any further accumulation has to drive wages up above value and so reduce both rate of surplus value and rate of profit. Normal accumulation does not result in this because there is a gradual shift towards increasing organic composition together with higher real wages. This is consistent both the obvious fact that real wages in developed capitalist countries have risen (and were rising in Marx’s time) and are vastly above “subsistence”. It is also consistent with neoclassicals “marginal productivity of labour” which they calculate by simply attributing a “marginal productivity” to the profit on capital and subtracting it from the “value added” to get wages. It is also consistent with the price of leisure being equal to opportunity cost of not getting paid wages for time not at work. But this all really is a separate topic to the simple fact that Marx was talking about socially necessary labour time in the sense of his letter to Klugman for ALL commodities.

      15. Jack,

        You write:

        The fact that it is admitted that SNLT is a market based concept avoids my question. Indeed, if it is, then issue is whether a fluctuating market price can be used to determine a non-market, non-supply and demand,variable like value. (Also, arguing that SNL existed before Marx is in no way an answer to my point).

        I am of the opinion that “a fluctuating market price” cannot be used to determine a non-market, non-supply-and-demand, variable like value. If that was your original point and contention, I have to agree with you.

        At the moment I can’t see how that ‘gap’ can be breached.

        I understand, I think (or to some degree of certainty), how it is that “the law of value” really does regulate ‘market exchange’ and how it is that the exploitation implicit in wage labour ultimately is the cause of a falling rate of profit, with all that entails in terms of the inevitability of eventual and recurrent crises, but you certainly have put your finger on an issue for which, at the moment, I see no solution, not even in principle.

      16. @ Arthur,

        Pertaining to your reply to Jack and me that begins with: “Norman, this is also the succinct explanation of why I think Jack’s description of SNLT is confusing.”

        For I brief moment I thought I was following you. But you reply falls apart for me when you assert:

        “Marx stresses that this exchange of labour power for wages is an exchange of equal values like any other. Quite opposite to the comments here that there is some sort of rip off in the exchange. Or that exchange values are some sort of illusion created by bourgeois ideology.”

        I think that Marx and Engels are quite explicit about “exchange value” under capitalism being both a mystification and rip off. If ‘labour-time’ was in fact being exchanged throughout the process that is capitalist exchange in equivalent proportions, there could be no profit. Period.

        It is precisely Marx’s point of contention with Smith and Ricardo that “labour power,” the commodity aspect of labour under capital, is not exchanged, as the likes of Smith and Ricardo would have it, on the basis of an equivalency of “labour-time.”

        Can you show me where Marx quite explicitly and unambiguously stresses that “labour power for wages is an exchange of equal values like any other?” Provide a quote or a reference.

        In the meantime, permit me to provide you with a reference to an instance in which Engels demonstrates black on white that the working class gets shafted in the exchange of its “labour power” for wages that are supposed to be proportionate to the “labour-time” of the “labour power” expended over the course of the workday:

        Introduction to Karl Marx’s Wage Labour and Capital

        If after reading that introduction, you don’t or can’t see that there is a sleight of hand that occurs in the exchange of the commodity Marx designates as “labour power” for “wages,” then it’s obvious to me that you don’t really understand what it is you are reading. For the rip off consists in this: that “labour power” is remunerated on the basis of the estimated “costs” of keeping the person who provides this commodity to the capitalist alive (or at a given standard of customary comfort), and not on the basis of the “labour-time” expended, which capital tells us is the basis of all commodity exchanges.

        On the other hand, and who really can tell, maybe Marx and Engels didn’t really understand themselves or what they were writing and writing about.

  26. As Marx says in Vol. I and II, value is already created in the process of production itself but may not be realized(realization crisis) in money form as measured by price. in the market. Commodities created in the process of production has potential value in the market as expressed in price.That is why Marx said that there may be a difference between the value of a commodity created in production, based on the value of abstract labour as measured by the socially necessary labour time( its real value) and its price when it is finally sold(its market value) because of higher demand for it in the market which capitalists claim to be justified by the law of supply and demand.(Vol II)[ This law was actually formulated mathematically by the French Physiocrats in a world where there are no classes and everyone is equal, that is it is actually a variant of Adam Smith’s metaphysical invisible hand but now boasting to be rationally proven( mathematical pure reason and not practical reason as Kant would say).]
    Capitalist crises are caused by investment in production for increasing the organic composition of capital or more expenditures for more machineries impelled by competition, but which may not be realized in profits as Marx discusses in Vol II . And to offset the falling rate of profit due to the increasing organic composition of capital and overproduction, the latter caused by the individualistic nature of capitalist production which are often unregulated by the government or lack social planning, capitalists turn to the money market, or the stock market and other forms of derivatives, which create bubble economies because as Marx says these are based on fictitious capital(credits), of which value is not derived from any socially labour time but on speculation through the earnings of interests or dividends. As Marx observes in Vol III financial crises, like the one in 2008, are caused by the accumulation of fictitious, speculative or imaginary capital as imaginary as the price of a lost relic of Ancient Egypt bought by a billionaire,(Marx’s Vol. II)
    Thus, value as abstract labour is already produced in the process of production and should be differentiated by the price or the money equivalent of a commodity in the market , which may be higher or equivalent to its real value as expressed in money form.. That is why capitalist economists are wont to invent such a mathematical formula in their theory of stagflation to explain why when there is growing unemployment or when consumption goes down, still prices go up! In Harvey’s theory, this phenomenon cannot be accommodated. As the recent Nobel price awardee(can’t recall his name) in economics said one must account for the behaviour of capitalists to explain market phenomena.(Only now did they realize that it is capitalist greed that is a big factor in the market and not some high-falllutin mathematical rationalizations.)

  27. “As DH puts it: “if there is no market, there is no value”. ”

    That’s the same mistake that Ricardo made in confusing value with exchange-value, which opened the door to subjectivists such as Samuel Bailey. Harvey should read Marx’s own rejection of the notion he is putting forward, which is contained in TOSV 3, in his response to Ricardo’s confusion, and the advantage taken of it by Bailey, and the other anti-Ricardians.

    In short, as Marx makes clear in that refutation, you cannot have exchange-value, the basis of the market, unless you first have values, because exchange-value is only the objective relation of one amount of value, contained in one use value, as against another. As Marx puts it, value is a measurement of immediate intrinsic value. It is absolute in the sense that it represents a definite determinable mass of labour-time, and is not dependent upon any outside relationship. It is only variable to the extent that changes in productivity change the absolute mass of that labour-time.

    Exchange value, which is what Ricardo always discusses and confuses with value, which is why Malthus and Bailey criticise him for also talking about it in value terms, as an absolute amount of labour-time, is not an immediate intrinsic measurement of value, but is contingent upon external relations, i.e. relations with other values, with which it is brought into relation and comparison. The process by which the product is gradually transformed into the commodity, by external trade between nomadic peoples, is also the process by which the individual value intrinsic to a product is formed into a social value (average socially necessary labour), and this social value then expressed in relation to other products, as an exchange value. Engels describes it, for example, in his Supplement to Capital III.

    By this process, as Marx also sets out in the Contribution, and in Chapter 3 of Capital I, the value form analysis shows how a universal equivalent form of value is derived, as a money commodity, which then becomes as Marx puts it in his refutation of Bailey in TOSV 3, exchange value incarnate, the external measure of value. But, it is impossible to get to exchange value, or a universal equivalent form of value, a money commodity, or money, without their first being individual value embodied in individual products, equal to the labour-time required for their individual production, which becomes transformed into social/market value as part of a process of social production, as an aggregate of those individuals, a social average amount of necessary labour time currently required for the production of any class of product, which can then be placed into a relation with other products, as a basis for comparison, which is a fundamental requirement for trade, and for a market to develop in the first place.

    My only comment on this, as I am too busy, and have covered this elsewhere, and will be covering it in more detail in relation to Marx’s argument against Bailey et al, in Theories of Surplus Value 3, in coming months on my blog.

  28. A final, final comment. Its not correct to say,

    “Marx’s value theory of abstract labour exposes the exploitative nature of the capitalist mode of production, while neither Ricardo’s nor Adam Smith’s labour theory of value does.”

    Adam Smith following on from the Physiocrats, DID recognise that the value created by labour was greater than the value required for the reproduction of that labour, and thereby, as Engels says, it was rather like Priestley’s discovery of oxygen, without knowing what he had discovered, he uncovered the source of surplus value without knowing he had done so. But, Smith then explains that as soon as capital and landed property come into existence, the labour can no longer claim the full value of their labour, and he explains this on the basis of supply and demand, i.e. labour is in excess supply, and capital in short supply creating a low price for the former and high price for the latter.

    Smith believes that capital will accumulate faster than the supply of labour, so that wages must rise over the long-term, and profits continually diminish until they disappear, which is the basis of his theory of the law of the falling rate of profit. Ricardo, also, as Marx sets out, recognised that his labour theory of value implied exploitation of the working-class. In TOSV I, Chapter 4, in discussing Productive and Unproductive Labour, Marx notes Ricardo’s comment that the act of labour is always an act to create profits for someone else other than the worker, and it is on that basis that Ricardo argues that the condition of the labourer is a miserable one, and one to which the smallest proportion of society should, therefore be subjected to. Marx notes Ricardo’s comment as against Smith, that it is not the size of the population and of GDP that counts, but the size of the net product that can be created with the smallest amount of labour.

    Value is created in production and realised in exchange, but to be fair to Harvey, as Marx himself sets out, its not that straightforward. Firstly, there is the question of the value creation, which precisely because it is based upon abstract not concrete labour involves the question of the post fact determination of the multiple of simple labour that any concrete labour actually represents. As Marx points out that is only determinable post facto in the market. On the other hand, if we take value determination at a social level, this problem disappears, for the reason that Marx sets out in Capital I, in his Robinson Crusoe example, which is that all of these different labours are subsumed under one general social labour.

    And, as Marx says, the is the question of market value, of what actually constitutes socially necessary value creating labour. If production of any commodity is conducted by even the most efficient means, if more of it is produced than is demanded at its exchange-value/price of production, the labour expended on the excess production was not socially necessary, and was not thereby value creating. And, as Marx also points out, that also determines which producers constitute the average producer in different market conditions. The level of demand also determines the level of supply, and because the level of supply output affects economies of scale etc. it also affects value, and because value affects market value, exchange-value, price of production that in turn determines the level of demand, because the level of demand is influence by the market price.

    1. Yes, you are correct in your purports, Boffy. Smith and Ricardo do indeed recognize that the working class is being hard done by. Duly noted. For I often unfairly reduce the viewpoints of Smith and Ricardo to the view that “labour” for “wages” is a fair deal. I think I do that for wanting to be brief and to underscore a ‘difference’ btw Marx, on one side, and Smith and Ricardo, on the other — as admittedly sloppy as that is.

      The real difference, if it is to be encapsulated in a nutshell, is that Marx explicitly demonstrates how the theft that is profit is executed, whereas Smith and Ricardo remain on the cusp of that explicit demonstration.

      1. Norman,

        I don’t think this is quite right either, for the reason Marx sets out in TOSV II. Smith understands that the value crated by labour is greater than the value required to reproduce that labour (power), and so understands the source of surplus value, though like Ricardo, he never refers to it as such, as opposed to talking about rent or profit.

        As Marx says, Smith has a romantic view of labour, unlike Ricardo, which is down to the different times at which they were writing. Smith has to explain not the source of surplus value (profit, rent), but the reason the surplus value ends up as profit or rent in the hands of the capitalist or landlord, rather than the labourer, and does that in terms of natural prices, and competition. Its here he falls back into a cost of production theory of value, as opposed to his labour theory of value, and gets into all sorts of contradictions, at one point describing rent as part of the cost of production, and then at another arguing that it is different to wages and profit.

        Smith’s argument is that it is the excess supply of labour relative to land and capital that reduces the natural price of labour and raises the natural price of capital. His romantic view of labour is what leads to his belief that this situation will be reversed as capital accumulates faster than the growth of the working-class.

        Ricardo, unlike Smith, never bothers with analysing the source of surplus value, and simply takes its existence for granted, which leads him at times effectively putting forward a profit on alienation theory of profit, whereby it is simply an historically determined norm added to the cost of production. But, Ricardo unlike Smith, consistently determines commodity values by the quantity of labour-time required for their production. Ricardo also assumes a fixed length of working-day so that absolute surplus value does not exist for him. For him surplus value/profit are the same thing, and can only arise on the basis of relative surplus value, so that profit can only rise if wages fall and vice versa, and consequently a rise in wages, fall in the rate of surplus value is the cause of the law of the tendency for the rate of profit to fall, because his law of diminishing returns for agricultural production leads him to conclude following Malthus that as the industrial workforce expands along with the accumulation of capital, less and less fertile lands will be brought into cultivation, causing agricultural prices/wages, and rents to rise.

        These are the catastrophist theories of the falling rate of profit, caused by a squeeze on profits that were developed by Marx’s predecessors and which he rejected as an explanation of that long term tendency, but which he acknowledges can result in a short term profits squeeze during conditions where capital has been overproduced. For Marx it is the over accumulation of capital that leads to the profits squeeze, and potential for crises to erupt, and not vice versa.

      2. Many thanks for the reply, Boffy. I must meditate on it and peruse TOSV II as well as all of the other chapters and sections. It’s going to take me some time for being such a slow reader. But I’ll get to it as soon as I re-read your reply.

        Again, thank you for the help.

      3. ”Marx explicitly demonstrates how the theft that is profit is executed” I think it is mistaken to call profit ‘theft.’ Remember how Marx criticised Proudhon’s phrase ‘Property is theft.’ Since the bourgeoisie determine the laws of property in capitalist society, profit is perfectly legal. Perhaps ‘legalised extortion’ would be a better term, since profit results from command over others’ labour power.

      4. Granted. I’m somewhat familiar with Marx’s criticism of Proudhon, the man who thought he could abolish ‘money’ without abolishing ‘commodity relations.’

  29. Am asleep. Meanwhile “the universe is its own fastest simulator”. Of course you cannot calculate these averages of fluctuations in advance any more than you can calculate what you will do next. Economies consist of millions of very complex systems each of which has lots of neurons. Thought you mentioned working with neural networks. The way you figure out what they will do is by running them. Gone back to sleep.

    1. For when you awake!! Yes, I’m proposing a neural networks solution to predicting variables that cause global financial instability events. I will produce an equation. And then I will test it with DATA. Where does Marx do that? His theory of value in Vol 1, to be fair, is a conceptual-logical argument for labor value as the source of capital accumulation (and disruptions to that accumulation, long term–aka breakdown). I understand he starts from the abstract and the general and intends in later volumes to move to the particular, and the concrete of price theory. (All very Hegelian). But he never got there did he. So vol 1 and theory of labor value should be viewed as such. It’s just a ‘first statement’. The real work was yet to come. Marx is a profound advance over classical economics, but it is stuck in the conceptual framework of classical economics, having taken the concepts as far as they could go, innovating profoundly but nevertheless limited by it. Marx’s economics is therefore ‘profoundly incomplete’. Who’s then trying to take it to the next level, instead of just assuming it’s the last word? Your Maksakovsky attempted to do just that, taking Marx’s vol. 3 comments on credit and developing it further. Exploitation theory certainly has something to do with the evolution of capitalism. Why should contemporary marxist economists keep churning the mid-19th century level of analysis and trying to understand 21st century exploitation in its secondary and even tertiary forms instead of just repeating primary exploitation analysis (surplus value in production from productive labor only). at least Mosely is trying to do so, with MELT analysis. (I don’t agree with it all). But debating definitions of Marx’s concepts, that need updating, is not the way to advance Marxist analysis in my opinion. It’s time to get more data analytical, focus on the new anomalies of 21st century capitalism (including the rise of finance capital), undertake a global analysis approach, and focus more on the short run, not just the long run-supply side (production primary) that is Marx Vol 1 (and smith, ricardo, etc.). They could not do much except speculate on the short run because they lacked the data and data analysis tools. That’s not true for the 21st century. OK, that’s my last contribution on all this about SNL, market price, value vs. market (exchange), etc. We should just acknowledge Marx left a problem unresolved. So what. That doesn’t negate everything else he observed. The greatest observation I believe being what every worker knows through everyday experience: he’s working longer hours, harder, faster, and finds his job nonetheless taken by the machine (including today’s software as machine). In otherwords, the most profound part of Marx vol 1. is the explanation of absolute and relative surplus value in production. (where’s the analogs to this in secondary exploitation in the exchange circuit of capital reproduction? Shouldn’t we be focusing on understanding and clarifying that? )

      Thanks to Arthur, Norman and Roberts for the stimulating debate.

      1. Marx and Engels placed socialism on a scientific basis, and as Engels observed having become a science socialism needs to be studied. Therefore as with any other science it has to generate new theories and the concepts necessary to their explication. I agree with Jack Rasmus ” Marx’s economics is therefore ‘profoundly incomplete’.” It is sufficient merely to look at the project Marx envisaged for himself ( Rosdolsky Pp 12-13) to ascertain this. Particularly noteworthy is that the plan was originally to conclude with a Book on ”The World Market and Crisis.” This is surely the Book that Marxists still need to produce: as Jack says, ” It’s time to get more data analytical, focus on the new anomalies of 21st century capitalism (including the rise of finance capital), undertake a global analysis approach,”.

        I cannot think of a more anti-Marxist notion than that of ‘classical Marxism.’ I became somewhat depressed when Murray Smith concluded in his otherwise cogent and indeed elegant criticism of David Harvey’s views ”which radical leftists have been far more inclined toward cross-class coalitionism than toward defending the political independence of the working class.” Independent of what? I understood Harvey as rather trying to broaden the arena of class struggle beyond ”the proletariat versus the bourgeoisie,” and he is surely right. One recalls that The Chinese Revolution triumphed against the ‘advice’ of the Comintern, while the Cuban Revolution did so against the indifference, if not outright hostility, of the communist party. Yet one still comes across pundits who insist that these were not genuine communist revolutions because the peasantry played a major role, which is apparently contrary to ‘classical Marxism.’ We need to attack capitalism in all its manifestations: its social contradictions should not be reduced merely to that between the bourgeoisie and the proletariat.

        I look forward to reading Jack’s books. At the same time I would affirm the need to defend the epistemological validity of the theory of value. As Boffy remarks,”Value is created in production and realised in exchange, but to be fair to Harvey, as Marx himself sets out, its not that straightforward.” Boffy summarises the matter succinctly in his last paragraph.

  30. In regard to Arthur’s reference to Marx’s letter to Kugelmann, Marx was referring to socially necessary labor time as such. Socially necessary labor time within use value producing social orders, which privilege production for the satisfaction of need, and SNLT within the capitalist mode of production for profit will have a much more determinant effect on what is produced in the latter than in the former. Marx specifically limits himself in Capital to a critique of political economy because of that difference. His labor theory of value is a critical tool limited to the analysis of the capital mode of production.

    1. mandm. We had a discussion on exactly this matter in Michael’s post of 12/11/17,”Value, class and capital”, which occasioned no fewer than 178 responses. Some of the questions raised here are addressed there.

    2. I’m not certain that I agree with you, mandm, which doesn’t mean that you aren’t correct. I’m just not seeing it as you do for the moment.

      Question: How do you know that he was specifically referring to SNLT?

      When I read that letter, I see the matter as one being of a distinction between “natural necessity” and the transitory “forms” in which that “necessity” manifests itself under capital.

      SNLT is something operative under capital and NOT in other kind of society, though it would most probably be also operative under market socialism since goods and services would yet be “exchanged” in an open market environment and the revenues to production units would be tied to that.

      But let me quote something from the website that does an excellent job, to my mind, of very succinctly and accurately summarizing the issue of SNLT for a neophyte student of Marxist scholarship, such as myself, and that makes quite clear just what the function of SNLT is under capital, a function that can only belong to a “market exchange economy:”

      Quote begins:

      Alone on his tropical island Robinson Crusoe can take as long as he wants to build a cabin for himself. It’s up to him. We don’t have that luxury when we produce for market exchange. When Wonder Bread makes bread they are competing in the market against Pepperidge Farm, Arnold and White Rose. If their workers are less productive, if they take longer to make bread, that doesn’t mean they can sell their bread for more money. The social value of bread is not set by individuals but by the average amount of time it takes to produce bread. This is called the “Socially Necessary Labor Time”. (SNLT)

      In neo-classical economic theory there are all sorts of concepts that, though mathematically elegant on paper, have very little descriptive power in the real world. When was a capitalist society ever in General Equilibrium? When was there ever Pareto Optimality? When did consumers ever measure their desires in utils?

      SNLT is not like that. SNLT is something very real that we can observe at work everyday. The private labor that goes on behind factory doors will not know for sure what its social value is until the products of that labor enter the market to be compared to the products of other workers. In the market these private labors become social. Socially necessary labor time is asserted. This SNLT then acts back upon production. It disciplines what goes on in the factory. Factories that were spending more labor than was socially necessary are considered inefficient. They must change their production methods or else go out of business. Factories that were producing under the socially necessary time, that were more efficient than average, are rewarded.

      Let’s say that the average television takes 1 hour to make. 1 hour is the SNLT for televisions. But the owner of the ACME TV factory invests in some fancy new machines that make his workers twice as productive. They can now make a television in 30 minutes. They are producing way below the SNLT. This allows ACME to produce twice as many televisions in the same amount of time.

      Now if ACME sold their new TV at half the old price they wouldn’t make any more money than before and there would have been no point in investing in all that new stuff. Rather than sell them at their individual value (30 minutes) they continue to sell them at the SNLT (1 hour), or perhaps just under the SNLT in order to out-sell their rivals. Because the price of TVs hasn’t changed significantly there is still the same demand from consumers for TVs, but now there is a giant surplus of TVs on the market because ACME has been making twice as many TVs. ACME’s rivals won’t be able to sell all of their TVs. Part of their product will go unsold. Meanwhile ACME will sell most of their TVs at the SNLT, making not just their normal profit, but an additional “super-profit” because they sold their TVs above their individual values by selling at or near the SNLT.

      Profit vs. super-profit

      Profit comes from exploiting workers. The only way to turn money into more money is to invest it in workers, or to be precise, in labor power, the only commodity which can produce more value than it costs. (This is all covered in the video “Law of Value 5: Contradictions”.) When ACME sells TVs at under the SNLT they don’t just reap their normal profits from exploiting workers. They also get super-profits: profit appropriated in exchange because their TVs are made at under the SNLT.

      It is this race for super-profits that drives much of the technological dynamism of a capitalist society as capitalists compete to constantly lower SNLT. By doing so capitalists don’t just exploit value from workers. They also appropriate value in exchange.

      Physical vs. Value Productivity

      A superficial look at the ACME TV factory might give one the impression that ACME is making more profit because they are creating more value. But this is not the case. The same amount of workers are doing the same amount of work as before. The same amount of labor time is being performed, spread out over a greater number of commodities. Thus the amount of value they create is not increasing merely because the physical output is increasing. It is extremely important to understand this difference between physical productivity and value productivity. As it becomes easier to make TVs their prices fall. Thus, just because we can make more of something doesn’t mean we have created more value. If other firms were to adopt technology similar to ACME’s we would see the SNLT of TVs fall to half of its former value and ACME’s super-profits would disappear.

      Appropriating Value in Exchange

      What does it mean to say that ACME makes a super-profit by appropriating value in exchange? If you trade one commodity for another of greater value then you have appropriated value in exchange. There are lots of ways this might happen. One of these ways of appropriating value is to produce a product at less than the SNLT but to sell it at the SNLT. Thus we get back more in exchange than we put into exchange. But where does this appropriated value come from?

      At first glance it appears to come from the consumers that buy the commodities. But these consumers are buying a commodity at its value, at the SNLT. They are not losing value in exchange. They pay $50 for a TV and they get a TV worth $50. The people that do lose value are all of the other capitalists who are still producing at the SNLT. They are not able to sell all of their product. They lose out. ACME is able to lure more consumers away from them.

      Exchange is a zero-sum game. Whenever one person wins another must lose. There are only so many people willing to buy TVs at the SNLT. When ACME appropriates value in exchange this doesn’t mean that they are stealing money from the coffers of their competitors. It means that they are filching away sales from their rivals. More value comes to ACME than it actually created, less goes to its rivals. (1)

      SNLT and the Labor Process

      This process goes on everyday in a capitalist society. We have an obsession with time and efficiency. Everything from the working day, to the motions of workers are timed and rationalized. From the moment the alarm clock rings you are checking train schedules, punching time cards, and working as efficiently as possible. There is an entire field of industrial engineering which is devoted to decreasing SNLT in society. Some of the most influential minds of the last century have been people like Henry Ford and Frederick Taylor who made substantial contributions to the reduction of SNLT, all in the quest for a super-profit.

      This drive to produce a super-profit does not mean that less and less labor is happening in society. It means that the same amount of labor is producing more output. We are often told that machines will make life easier, reducing the need for work. But this has never been the case in a capitalist society. Machines just create more output per hour worked. Often times machines are used to get more work out of workers because the machine can dictate the pace and intensity of work. SNLT is a force that presses down upon us, disciplining our motions, driving us to produce value merely for the sake of producing value, rewarding us when we can produce above the average productivity and punishing us when we fall behind.

      SNLT and the centralization and concentration of capital

      Capitalists compete to lower the SNLT by investing in fancier equipment. The better the machines the more efficient the labor process the higher the output the lower the prices the more super-profit the more money available to invest in new machines… Competition for SNLT means that more and more equipment is needed in order to stay competitive. This makes it harder and harder for small firms to stay in the market. The size of the firm gets larger and larger and the amount of firms in an industry shrinks. The winners gobble up the losers and capital is consolidated into fewer and fewer hands. If firms become powerful enough they may even take measures to blunt competition so that nobody can produce more efficiently than them. (2)

      SNLT and Market Socialism

      The tools we use to critique capitalism determine how we envision an alternative to capitalism. Models for market socialism that talk of worker-owned cooperatives coordinated by market exchange clearly see that production for the enrichment of the capitalist class must be done away with if we are to overcome capitalism. Yet any society coordinated by market exchange is still disciplined by SNLT.

      This means that workers in such a society would still have to discipline their actions to the social average. Cooperatives that worked at under the SNLT would appropriate value in exchange. Cooperatives would compete to modernize their equipment so as to lower the SNLT. And how would co-ops obtain the money to invest in better, labor-saving equipment? They would have to exploit themselves. That is, the more money that workers want to plow back into making their labor competitive, they less they can pay themselves. Not only would the workers be disciplined by SNLT, they would also find themselves disciplined by the need to amass surplus value so as to stay competitive. What happens to the workers in firms driven out of business by the centralization of industries? Where do they get the capital to start new firms? Do they have to sell their labor in the market?

      Production of surplus-value for its own sake, fierce competition over super-profits, the disciplining of the labor process to the whims of impersonal market forces… sound familiar? Now perhaps one might be of the opinion that it is impossible to do away with SNLT, with market coordination. If this is the case then our best option is do debate what type of market socialism would be least exploitative, least alienating. But why not challenge ourselves to imagine a world without these things?

      A world without What?

      This seems to be the big question whenever we critique capitalism. Surely labor will always take time and we must have a way of coordinating labor to produce all of the goods society needs. Surely this labor must not just produce immediate goods but also surplus goods, as well as invest in long-term projects like infrastructure and machines that will make work better in the future. So we can’t say that we want to produce a society without work, without time, without surplus product, or without machines. (4)

      What is unique about capitalism is that labor time, surplus and commodities are all measured in value. The types of commodities created, the types of assets the surplus is invested in, and the quality of the life of those who do the labor are not important. What is important is this endless expansion of value for its own sake. This is capital’s defining substance.

      But if we are to coordinate human labor, the production of surpluses, innovation, distribution, etc without value production then what other method are we to use? It is not within the scope of this series evaluate different proposals for alternatives for capitalism. But it is the place to talk about how Marx’s analysis of SNLT might help us evaluate these different proposals.

      We’ve probably all heard Marx’s famous description of the higher phase of communism: “From each according to his ability, to each according to his need.” Marx didn’t actually come up with this phrase but he quotes it in one his rare commentaries on communism. Here an hour of one person’s work is equal to an hour of anyone else’s, creating a basis for real equality throughout society, regardless of the productive abilities (or privileges) of individuals. In the Critique of the Gotha Program Marx describes the lower phase of communism as a system in which, after an hour of labor, all workers receive a certificate entitling them to a certain amount of consumption goods in proportion to their working time, not their level of productivity. There is no SNLT, and no inequality, because everyone’s work has the same social power. Obviously this is not a robust plan for how a communist society should be run. But it gives us a glimpse into the sort of radical questions we should be asking ourselves when thinking about communism. (5)


      Our private labor doesn’t immediately become social. It must become value in order to be social. But in becoming value it is disciplined by socially necessary labor time. SNLT acts as an external force which disciplines our private labor, constantly compelling us to work more efficiently, yet never actually making our work easier or more fulfilling. SNLT creates the possibility for super-profits when one produces under the SNLT, and the search for super-profits drives much of the mad, chaotic development of the productive forces of a capitalist society, generating all sorts of unforeseen consequences.

      In a society not producing for competition or capital, but for communal ownership, there would not be a SNLT in this same sense. This means that work would not exist in order to make value. Work would exist in order to both provide use-values for society and to better the life of the worker. In our culture we have an intense fascination with those rare people whose work is fulfilling and challenging. Great musicians, athletes, artists, etc inspire us because these are people whose work has challenged them to become the best possible person they can be. Perhaps in a world without SNLT such an experience of work could become more universal.

      Quote ends.

      On the assumption that SNLT has here been properly exposited, as against Arthur’s contention that it is a dynamic that holds in all places and in all times, SNLT is very much and only belongs to the era of capital.

      1. ”Alone on his tropical island Robinson Crusoe can take as long as he wants to build a cabin for himself. It’s up to him. ”

        Marx’s point is the exact opposite of this, namely that Robinson has to apportion his labour -time by necessity to meet his various needs. If he spends too long on constructing shelter and not long enough on food provision he will starve. This is true of all societies.

      2. Yes, I agree that Marx uses the Robinson Crusoe scenario to make the point that you say he made. In this instance, the scenario is being used for another purpose entirely — I think. I don’t think the fiction is intended in this text to echo the particular use Marx made of it. Albeit, yes, there are definite allusions of the one instance to the other because of the topic under consideration.

    3. “Marx specifically limits himself in Capital to a critique of political economy because of that difference. His labor theory of value is a critical tool limited to the analysis of the capital mode of production.”

      Hard then to understand all of the analysis in Capital of the development of exchange value, and of money as the universal equivalent form of value, thousands of years ago, by petty commodity producers, including in systems of barter, or Engels comment in the Supplement that it is in fact ONLY in these pre-capitalist modes of production that the Marxian Law of Value applies, i.e. determines the basis of exchange values, whereas under Capitalism commodities do not exchange at these values, but at prices of production!

  31. The number of responses to this post and that of 12/11/17 demonstrates that the theory of value is the most fundamental in socialism. Whatever may be the deficiencies of David Harvey’s exposition of his understanding of value, or for that matter of Marx himself, I seemed to detect a current of feeling that wanted to excommunicate him ( Harvey, that is, but maybe Marx too) from the ranks of Marxism as if socialism were some sacred church of scriptural marxology.

    A case in point is Arthur’s comment that ”I find David Harvey difficult to take seriously as he is an advocate of “zero growth”. This was especially puzzling as he did seem to grasp some aspects of Marx that were widely misunderstood eg theory of rent, perhaps because of background in geography. But it is quite impossible to understand Marx and not see that he wants to unleash the productive forces.”

    I can quite understand how Arthur would come to such a conclusion: there can be little doubt that Marx envisaged a great increase in the production of use values under socialism. Having said that, I do not think we can understand Marx as arguing that the abolition of the fetters imposed by capitalist relations of production thus leads to the untrammelled expansion of the forces of production, which creates the economic prerequisites for the subsequent foundation of socialism. Such a view of socialism was at the basis of the Trotsky/Stalin debate in Russia and later in China between Mao and Deng: all the talk of ”building” or ”constructing” communism, so redolent of the gigantic undertakings of Five Year Plans and the transformation of nature. Already by 1870 Marx had argued that the English proletariat had all the material necessary for revolution, just that they lacked a revolutionary spirit. How much more then is that true today! The planet can no longer sustain the capitalist mode of production. Harvey is absolutely right to advocate ‘zero growth’. The fetters of capitalism render this impossible; capital is indeed self-expanding, which is why the socialist revolution is more necessary than ever. Marx was an economic determinist, not an economic reductionist. So even if Arthur’s understanding of Marx is partially correct, that does not invalidate Harvey’s position today. A number of Marxists have demonstrated how Marx came to refine his theories in the light of further and deeper investigation. Saito writes ( 2017 ”Karl Marx’s Ecosocialism”), ”his critique of capitalism became steadily more ecological with each passing year…

    ”Marx’s theory of value also demonstrates that capital contradicts the fundamental limitedness of natural forces and resources because of its drive towards infinite self-valorisation.

    ”Marx did not answer all questions and did not predict today’s world……Careful examination of Marx’s excerpt notebooks is not minor ‘philological’ work, and that analysis will lead to unknown dimensions of Marx’s critique” (pp256-265).

    The production forces theory of socialism is an absolute travesty of Marx’s thinking. Harvey is right: we need zero growth, whatever may have been the case 150 years ago. In fact I would argue that the modern Communist Manifesto should include in its programme the demand for strict rationing. Of course such would not be popular in the short term , but we will persuade no-one with the pinko-liberalist popularism of the now defunct socialist and communist parties. Many including myself will have to accept a much lower standard of living if the is to survive.

    1. Thanks Jlowrie, that was just my point in commenting on Marx’s view of snlt in the letter to Kuglemann.

      Before capitalism, goods were produced for need. Socially necessary labor time under these conditions was the time necessary for the associated producers to produce needed goods for themselves, not profitable ones for the private owners of the means of production. Early social consciousness of snlt might take the form of difficult decisions regarding what needed products to produce within communities, but greater need (not less socially necessary labor time and greater profit) would decide. The same determinations will operate in future egalitarian orders, if we survive to address the the human and ecological disasters of capitalism’s law of value.

      Early merchants/pirates appeared late in the neolithic period when profit was outright theft or a function of the relative scarcity of needed goods between communities–hardly a function of private accumulation-driven production and the calculation of capitalist snlt. It took many thousands of years more before established commodity money forms and professional merchants appear, and thousands more before capitalist socially necessary (alienated) labor time came to determine the production and “value” of things human and natural.

      Marx was nothing if now profoundly humane and historical in his materialism.

  32. Isn’t it, according to Marx, the abstract labour required for the REproduction (rather than the abstract labour expended in the production) of a commodity that defines the value realized in exchange? So that, if necessary labour time changes between the production of a commodity and its sale, the value will be defined by the new necessary labour time.

    1. Yep. You got that exactly right, I think.

      For “necessary labour time” pertains to the amount of “labour-time” corresponding to cover the “costs” of keeping the laborer at his or her accustomed standard of living. If it is reduced — either by wage reductions or by increases in productivity that end up cheapening the price of commodities, thereby lowering the cost of living — “surplus labor” increases and translated into an increase in the surplus value captured in production, assuming market realization.

      “Socially Necessary Labour Time” is not “necessary labour time” — if this is what is prompting your question.

      “Socially Necessary Labour Time” (SNLT) is the average amount of time required under a given regime of technologies and methods to produce a given quantity of commodities.

      In “market exchange,” SNLT regulates “surplus value” realization, which originates in both the process of production (where “necessary labour time” conditions “surplus labor”) and the market, where additional profit can be ‘realized’ by producing commodities below prevailing “production times” or the “Socially Necessary Labour Time.”

      SNLT regulates both competition and exchange for being a means by which profit or market share can be leveraged. It is only operative as a regulating principle of exchange, oddly enough, in a “market exchange economy.”

    2. Dimitri, you are absolutely correct. Reproduction is what Marx is analysing. The difficulty lies in determining the new socially necessary labour time, when reevaluation takes place. As I understand the matter the revaluation must be defined against the historic cost of the capital advanced, otherwise it would be impossible to calculate the extent of devaluation, and the revaluation would be retrospectively without a cut off time. The common answer is that the new value is determined by the current costs of production, but are these the replacement costs of the inputs or the average costs incurred by all producers in the same sphere. Marx remarks, ” the value of each individual commodity in a particular sphere of production is determined by the total mass of social labour time required by the total mass of the commodities of this particular sphere of social production ( Theory of Surplus Value Part 2 Pp 205-206). But as Boffy notes above, the question is a decidedly complicated one :” the question of market value, of what actually constitutes socially necessary value creating labour.”

      At any rate we can readily appreciate the absurdity of the marginalists’ favourite trope of ‘ a glass of water in the desert.’ How can it be REPRODUCED, except by magic?

      1. J,

        In Capital II.III, and in numerous places in TOSV, Marx shows why the historic cost is irrelevant. All a comparison of the historic cost as against the current reproduction cost can show is the extent to which a given capital might have obtained a capital gain or loss as a result of an appreciation or depreciation of its capital stock (fixed capital, productive supply of circulating constant capital, work in progress, or commodity-capital waiting to be sold.)

        The question of such capital gains or losses are separate from the question of commodity values, or calculations of the rate of profit for the reasons Marx sets out. Moreover, they are ephemeral. A capital gain resulting from a rise in the value of the commodities that comprise the physical capital, is more than offset by the fall in the rate of profit, which that rise in capital value brings about, and vice versa.

        What has to be replaced as Marx makes clear in numerous places, and as he says in Capital III, Chapter 49, physically replaced on a “like for like basis” are the commodities that comprise the components of that capital. The values of those commodities, whenever they were produced or bought are determined by their current reproduction cost, and it is that along with their use value, which must be reproduced out of current production, and that value will either have risen or fallen as a result of changes in social productivity, which determines how much labour-time is required to reproduce that capital.

        The question of a cut-off does not arise, because the average socially necessary labour-time is continually being calculated, in the background, as an average of all of the abstract labour-time that has been required to produce all of the commodities of a particular class, and all combined, at the particular time. The labour-time actually consumed in the production of some of the components (e.g. constant capital) forms part of that calculation of the current value, but does not determine the value of that consumed component, whose value is determined by its current reproduction cost.

        I explained this in a series of comments here several years ago in a discussion with Andrew Kliman.

        Take a farmer who produces grain, and also uses the grain as seed as constant capital, as well as his workers being paid wages in grain. Marx’s uses similar examples to this several times in TOSV, If the farmer starts the year with productive-capital, following on from the schemas of reproduction of the Physiocrats. It also emphasises Marx’s point that for existing capital, the circuit always begins with a quantity of productive-capital, that must be physically replaced, and not with a quantity of money, a concept, as Marx says in Capital III, seems to emanate from the role in Economic theory that the bankers and financiers have introduced, as they only see money-capital as real capital.

        If the farmer has 1,000 kilos of grain, it may be divided into 1,000 kilos used as seed for this years’ production (constant capital), 1,000 kilos used to pay wages during the year as production takes place (variable-capital) and 1,000 kilos used as unproductive consumption by the farmer during the year.

        If we take the value of this 3,000 kilos, it may comprise 3,000 hours of labour, made up of 1,000 hours value of the seed, plus 2000 of new value created by the workers. Now suppose that there is a good harvest, so that the 1,000 kilos of seed having been grown results in the 2,000 of labour added to it, producing not an additional 2,000 kilos, but an additional 5,000 kilos. The total output then will be 6,000 kilos, and the labour consumed in its production will have been 1,000 hours for the seed, plus 2,000 of new labour. In other words, 3,000 hours, so that the value per kilo falls from 1 hour to 0.5 hours.

        The historic cost, i.e. the 1,000 hours actually used a year previously to produce the 1,000 kilos of seed is irrelevant to its current value, which is determined by its current reproduction cost, which consists not just of the dead labour previously required for its production, but also the living labour, currently required for that reproduction, of which much less is now required.

        Instead of requiring 1,000 hours, to reproduce the seed, only 500 hours are now required. Moreover, as Marx makes clear, the value of the output is not altered by the change in the value of labour-power. It is determined only by the labour-time expended. The fact that the 1,000 kilos of grain required as wages now represents only 500 hours of value does not change the amount of new value created, it simply alters its distribution between wages and surplus value. So, now only 500 hours of labour/value is required to reproduce the consumed constant capital/seed, and 500 hours to reproduce the variable-capital/wages/labour-power. That leaves 2,000 of value left over as surplus value, equal to 4,000 kilos of grain, which is also the quantity of surplus product.

        The rate of profit, measured on this basis of current reproduction costs, as Marx does, is the only rational basis for the calculation in relation to its true purpose, which is to understand the process of social reproduction, which, as Marx sets out in TOSV in particular, is really a process of reproduction of material balances, as the fundamental basis for any expanded reproduction.

        On this basis, the rate of profit rises from 33.3% to 200%. The significance can be seen when looking at the process of accumulation, because it is the very fact that this rise in social productivity has reduced the value of the capital on which the rate of profit is calculated, which enables a far greater degree of capital accumulation. The capitalist farmer, here, could, for example, continue to consume 1,000 kilos of grain unproductively, whilst having 3,000 kilos of grain that can be used for accumulation.

        The same applies in reverse, as Marx also sets out in TOSV, where say a crop failure causes the value of grain to rise sharply. It means that a far greater proportion of current social labour-time must go to reproduce the seed, and the grain paid as wages, and correspondingly the fact that the 3,000 hours of value is then spread over a much smaller level of output, causes the value per kilo to rise sharply. As Marx points out, all surplus value is ultimately relative surplus value, because it is only ever possible where the new labour undertaken is greater than the labour required to reproduce the labour-power.

        In TOSV, Chapter 16, Marx gives an example of this, in relation to rent, which shows how the confusion arises when the calculations are undertaken in money terms, rather than in terms of the requirement for the reproduction of these material balances.

      2. ”At any rate we can readily appreciate the absurdity of the marginalists’ favourite trope of ‘ a glass of water in the desert.’ How can it be REPRODUCED, except by magic?”

        In fact it is difficult to understand how this glass of water got there in the first place. Perhaps on a flying carpet!

  33. As Norman remarks,”Many thanks for the reply, Boffy. I must meditate on it and peruse TOSV II as well as all of the other chapters and sections. It’s going to take me some time for being such a slow reader. But I’ll get to it as soon as I re-read your reply.

    Again, thank you for the help.”

    I was not aware of the debate with Andrew Kliman, but will certainly avail myself of it forthwith.

    Incidentally, Boffy has himself produced 3 Volumes “Marx Translated for the 21st Century.” I am now finishing Vol. 2. Highly recommended, though not I think for beginners. On Kindle.

    I do hope others will join in this debate. It is fundamental and the concept on which the right wing such as Joan Robinson or Steve Keen always launch their attacks.

    The fact that there are disputes is true of all branches of science cf Darwinism. I recall that somewhere Marx remarks something to the effect that at times the commodity seems to take on an almost metaphysical aspect!!

  34. I promised Michael I would respond to David Harvey’s criticism of the use of Gross Output. Those of you who have read my work appreciate I use gross output as well as value added. Together they form the basis for the turnover formula. Further gross output less the gross surplus provides the annual value of circulating capital in an industry. When divided by the annual rate of turnover it forms the value of circulating capital for one circuit of capital. When this outlay is added to fixed capital (but not fixed capital plus inventory because inventory is already included in circulating capital) it forms the denominator for the most concrete approximation of the rate of profit. As I pointed out to Michael, in China this is the only way to extract a rate of profit because of the problem with their presentation of wages. (Again as I pointed out, China does provide data for circulation comprising the average production period and the payment period for an industry which confirms the accuracy of the turnover formula.)

    Now turning to David Harvey’s criticism of Michael. I would argue that it is confused, but more than that, the confusion goes to the heart of his misunderstanding of the distinction between the production of value and its realisation. He refers to the chain of production resulting in an auto, beginning with iron ore, steel, and the fabrication of autos. Now let us assume that the miner sells to the steel works and is paid for the iron ore. The steel yard works up the iron ore into plate for the auto company and is paid. The auto company builds the car only to find no buyer for it. Has all the labour been wasted, has the labour of the miner, the steel maker and the car worker all been wasted? No. Only the labour of the car worker for it alone has not been realised through sale. Who bears the loss. The car factory owner who not only loses the labour newly produced but part of his capital in the form of inputs such as the steel for which he has paid. Only at a subsequent stage, if the auto company reduces its orders for steel does the steel company and the miner sit with excess stock of steel and iron ore. Only then does a realisation problem occur in those intermediate industries both with regard to price and time (the circulation of capital slows down).

    I cannot tire of saying that both value added and gross output belong to Marx. As I said to the BEA who praise the National Accounts as giving measurement, sight of and direction to economic phenomena, “that while Marx wanted the head of capitalism, in the mean time he gave the capitalists their eyes”. We should use Marx methodology. When readers refer to classical Marxism, they are not referring to Marx, because Marx always understood a science to be an applied science, not a purely theoretical science.

    Finally in a society where the labour of the individual only becomes part of the labour of society indirectly, through being successfully exchanged, this labour has to take the form of the value of the commodity being exchanged. Private labour is only converted into social labour through being monetised. This describes a society divided by production, united by exchange, where individual producers are only connected by the commodities they exchange. It ends when society is united rather than divided by production. This is the genius of Marx and his insight into the future.

    1. The question I have, and it may be a naive one, is this: If the car in your example is produced but not sold, was there any new value created by the labor involved in producing the car itself? Can there have been new value created without it having been “realized” in exchange? If the answer is yes, how can we know that? How could we know how much value was created if a commodity is never sold? What would be the practical difference between saying that value was created but never realized and thus was wasted, versus saying that no value was ever created in the first place?

    2. ucanb, Your final paragraph is the essence of the issue. Open anti-Marxists and “Marxians” have united in denying that this is precisely what Marx said.

      Re stages in development of “realisation problem”. In a crisis it only MANIFESTS itself even LATER when credit extended as mere circulation credit turns out to have been invested in overproduction and falls due with resulting liquidity crisis. But the overproduction problem did actually OCCUR even EARLIER when the steel mill itself was built. Entire steel mills and shipyards etc got sold off as scrap following the 1929 crash. Recovery starts from the subsequent Great Depression when a new wave of investment in less labor intensive plant begins made both possible and necessary by the post crash price levels. The lag until demand for inputs to produce these is followed by actual supply of outputs from completed plant results in cycle repeating with disproportions emerging and prices overshooting again until the next crash. Absence of full crashes since WW2 means postponement and intensification of the overproduction which is ALREADY in full progress right now, BEFORE showing up in overstocked car dealers etc.

  35. Regarding the question of where value is created, this blurb from “A Contribution to a Critique” might be relevant:

    “Commodities are the direct products of isolated independent private labors, which have to be realized as universal social labor through their alienation in the process of private exchange, that is to say, labor based on the production of commodities becomes social labor only through universal alienation of individual labors.”

    Does this not indicate that the labor in production only becomes social labor in the process of exchange? Would that not mean for Marx “value” likewise only becomes value in the course of exchange?

    1. If I’m not mistaken, ‘labor’ as such becomes ‘social’ as soon as it’s divided up into different tasks to be performed by more than one person. So although production under capitalism is private and therefore in that respect not ‘social,’ the workforce of each private capital, because it is comprised of individuals brought together to be coordinated and to collaborate to (a) common purpose(s), is effectively ‘social labor.’ But the product of work, because it is ‘private property’ belonging to the a private firm or capitalist, doesn’t itself become ‘social’ until it enters the market for, or is realized in, exchange.

      ‘Value’ is something different if related: it is the outcome of a process or circuit.

      If a commodity doesn’t get sold, or until it is exchanged for the ‘money form’ of ‘value,’ then it effectively remains without ‘value.’

      If the commodity remains unsold, it was ‘socially unnecessary;’ if it is sold, it was ‘socially necessary’ and its ‘value’ is thereby both realized, confirmed and, so to speak, ordained.

      In spite of whether the commodity’s value is ever realized in exchange, if the labor of which it was the product involved more than a single pair of hands, then that labor was ‘social labor,’ albeit in the production of a for-profit, privately owned commodity.

      Do you have the page number (or a link) for where your quote appears in A Contribution to the Critique of Political Economy?

      1. The page number I think is 321. Marx goes on immediately after that to say:

        “But by assuming that the labor-time contained in commodities is directly social labor-time, Gray assumes it to be common labor-time or labor-time of directly associated individuals. Under such conditions a specific commodity like gold or silver could not confront other commodities as the incarnation of universal labor, and exchange value would not be turned into price; but, on the other hand, use-value would not become exchange value, products would not become commodities and thus the very foundation of the capitalistic system of production would be removed.”

        I agree with your statement that “If a commodity doesn’t get sold, or until it is exchanged for the ‘money form’ of ‘value,’ then it effectively remains without ‘value.’” As I see it, that means that the creation of value requires both production and exchange. To say simply that value is created in production is false if by that we mean that it already exists prior to the commodity being sold.

    2. Nice! I mean this bit in particular, where Marx writes, “[b]ut by assuming that the labor-time contained in commodities is directly social labor-time. . .” — which in a capitalist context is exactly the wrong assumption to make about how things actually are, and speaks to the crux of why Marx rejected schemes of “labor money” that left “property relations” untouched.

      Money is necessary under capitalism because “social labor-time” or “social labor,” which is the basis of the production of the “labor-time equivalencies” in market exchange, is NOT “direct.”

      If it was, the system of exchange would actually be a “bartering” system.

      In such a circumstance, it is obvious that ‘money,’ in its function as the expression of the magnitude of “value” in “exchange” under capitalism, loses its function as part of the mechanism (or operation or process) of “appropriation,” that is to say, of clinching the “appropriation of surplus-value” in exchange.

      Under capitalist exchange, what breaks the “direct exchange” that is implicit to a bartering system, and that in that ‘break’ or ‘separation’ makes money both necessary and possible, is the interposing of the institution of “private property” between “the production of goods and services” and “their distribution.”

      Although it employs “labor” that is “social” in the process of production, the private firm makes of the total product of work not merely goods and services to be exchanged, but “privately owned goods and services to be sold at a profit,” objects that are both by definition and in juridical fact “not social,” but that only become ‘social’ in and at the moment of market exchange. Money is not merely the expression of the “value” that is “labor-time,” but the expression of the gratuitous claim of “private ownership” on that “value.”

      And that is why Marx in the quote at hand is able to say that if we assume, as Gray does (by conflating the categories of ‘social labor’ and ‘labor-time’), that ‘labor-time’ is ‘directly social’ under capital, and if this assumption were in fact correct (which most emphatically it is not), then ‘money’ becomes inexplicable. For if ‘labor-time’ was ‘directly social,’ it is obvious (to Marx if no one else) that “gold or silver [i.e. money] could not confront other commodities as the incarnation of universal labor, and exchange value [the content of which is ‘labor-time’] would not be turned into price [the expression of the magnitude of “value in exchange” whose essense is ‘labor-time’]” – in other words, where ‘labor-time’ is ‘directly social’ there is no need for ‘money,’ and in fact, there cannot be any ‘money.’

    3. Pertaining to your quote, Ron, this is as close and as contextualizing as I could find:

      Quote begins:

      Labor-time being the intrinsic measure of value, why should there be another external measure side by side with it? Why does exchange value develop into price? Why do all commodities estimate their value in one exclusive commodity, which is thus converted into a special embodiment of exchange value into money? That was the problem which Gray had to solve. Instead of solving it, he imagined that commodities could be related directly to each other as products of social labor. But they can relate to each other only in their capacity of commodities. Commodities are the direct products of isolated independent private labors, which have to be realized as universal social labor through their alienation in the process of private exchange, that is to say, labor based on the production of commodities becomes social labor only through universal alienation of individual labors. But by assuming that the labor-time contained in commodities is directly social labor-time, Gray assumes it to be common labor-time or labor-time of directly associated individuals. Under such conditions a specific commodity like gold or silver could not confront other commodities as the incarnation of universal labor, and exchange value would not be turned into price; but, on the other hand, use-value would not become exchange value, products would not become commodities and thus the very foundation of the capitalistic system of production would be removed. But that is not what Gray has in mind. Products are to be produced as commodities, but are not to be exchanged as commodities. He entrusts a national bank with the carrying out of this pious wish. On the one hand, society, through the bank, makes individuals independent of the conditions of private exchange, and on the other, it allows them to go on producing on the basis of private exchange. The logic of things, however, compels Gray to do away with one condition of capitalistic production after another, although he wishes to “reform” only the money system which results from the exchange of commodities. Thus he transforms capital into national capital,62 land into national property,63 and if his bank is to be watched closely, it will be found that it not only receives commodities with one hand and issues certificates for work delivered with the other, but that it regulates production as well. In his last work, “Lectures on Money,” in which Gray is anxious to demonstrate that his labor-money is a purely bourgeois reform, he gets tangled up in even more glaring contradictions.

      Quote Ends.


      Compare this with the quick and anticipatory reading I gave your quote before I went looking for it in A Contribution to the Critique of Political Economy? I think that I was not too far off the mark if at all.

  36. To be realised, something has to exist beforehand. The process of realisation is merely a change in form from the value immanent in the commodity into its monetary form.

    1. Not “merely”. As Marx says. It requires a “salto mortale”:

      Noun. salto mortale (plural salti mortali) A dangerous and daring jump with possibly lethal outcome. (figuratively) A risky, dangerous or crucial step or undertaking.

      The socially necessary labor time that would be required to produce such a commodity if it was socially useful has been expended but it has no exchange value until it has actually proved that it is a commodity by proving it also has use value for somebody else and even then the amount produced also has to be “socially useful” otherwise at least some of the labor expended turns out not to have been really “socially necessary” after all.

      “The leap taken by value from the body of the commodity, into the body of the gold, is, as I have elsewhere called it, the salto mortale of the commodity. If it falls short, then, although the commodity itself is not harmed, its owner decidedly is. The social division of labour causes his labour to be as one-sided as his wants are many-sided. This is precisely the reason why the product of his labour serves him solely as exchange-value. But it cannot acquire the properties of a socially recognised universal equivalent, except by being converted into money. That money, however, is in some one else’s pocket. In order to entice the money out of that pocket, our friend’s commodity must, above all things, be a use-value to the owner of the money. For this, it is necessary that the labour expended upon it, be of a kind that is socially useful, of a kind that constitutes a branch of the social division of labour. But division of labour is a system of production which has grown up spontaneously and continues to grow behind the backs of the producers. The commodity to be exchanged may possibly be the product of some new kind of labour, that pretends to satisfy newly arisen requirements, or even to give rise itself to new requirements. A particular operation, though yesterday, perhaps, forming one out of the many operations conducted by one producer in creating a given commodity, may to-day separate itself from this connexion, may establish itself as an independent branch of labour and send its incomplete product to market as an independent commodity. The circumstances may or may not be ripe for such a separation. To-day the product satisfies a social want. Tomorrow the article may, either altogether or partially, be superseded by some other appropriate product. Moreover, although our weaver’s labour may be a recognised branch of the social division of labour, yet that fact is by no means sufficient to guarantee the utility of his 20 yards of linen. If the community’s want of linen, and such a want has a limit like every other want, should already be saturated by the products of rival weavers, our friend’s product is superfluous, redundant, and consequently useless. Although people do not look a gift-horse in the mouth, our friend does not frequent the market for the purpose of making presents. But suppose his product turn out a real use-value, and thereby attracts money? The question arises, how much will it attract? No doubt the answer is already anticipated in the price of the article, in the exponent of the magnitude of its value. We leave out of consideration here any accidental miscalculation of value by our friend, a mistake that is soon rectified in the market. We suppose him to have spent on his product only that amount of labour-time that is on an average socially necessary. The price then, is merely the money-name of the quantity of social labour realised in his commodity. But without the leave, and behind the back, of our weaver, the old-fashioned mode of weaving undergoes a change. The labour-time that yesterday was without doubt socially necessary to the production of a yard of linen, ceases to be so to-day, a fact which the owner of the money is only too eager to prove from the prices quoted by our friend’s competitors. Unluckily for him, weavers are not few and far between. Lastly, suppose that every piece of linen in the market contains no more labour-time than is socially necessary. In spite of this, all these pieces taken as a whole, may have had superfluous labour-time spent upon them. If the market cannot stomach the whole quantity at the normal price of 2 shillings a yard, this proves that too great a portion of the total labour of the community has been expended in the form of weaving. The effect is the same as if each individual weaver had expended more labour-time upon his particular product than is socially necessary. Here we may say, with the German proverb: caught together, hung together. All the linen in the market counts but as one article of commerce, of which each piece is only an aliquot part. And as a matter of fact, the value also of each single yard is but the materialised form of the same definite and socially fixed quantity of homogeneous human labour. [17]”

      BTW last sentence also indicates correct treatment of joint products as having a total exchange value based total product. Individual cuts of meat from same cow obviously have relative market values determined primarily by demand and not directly by cost since costs are for cows (and other joint products of pastoral industry), not for chops, steaks, ribs etc.

      Whole passage also indicates centrality of technical change and choice of technique. Simply absurd to derive crises directly from exchange at values eg with long run tendency for rate of profit to fall. Has to be derived, as Marx did and Maksakovsky systematized, from disproportions that tear prices apart from values so that the crises are needed to forcibly restore feasible proportions.

  37. ” in Marx’s theory, the value transferred to products from used-up physical assets depends neither on their historical cost nor their post-production replacement cost, but on their pre-production reproduction cost.)”

    This seems to be Andrew Kliman’s position in the debate with Boffy and others from 8/12/11.

    Still haven’t got my mind round it. I often find myself persuaded by the latest contribution I read. No doubt others are in the same boat, which is why we need the debate to continue on this, the most important concept in all economics.

    1. Pertaining to that discussion, I stumbled upon this piece by Patrick Murray, Avoiding Bad Abstractions: A Defense of Co-constitutive Value-Form Theory (note: the link is to a .pdf file)

      I only started reading it last night, alas, at about the time that my eyes were beginning to fail me, and I haven’t returned to it yet, but I am about to. But I did get about halfway through the essay, and so far it reads to me as a very sound refutation of TSSI, that is to say, of Kliman’s position and of others who take a similar tact.

      Once I’m done, and if I find the time, I’ll try to summarize it in my own words and relate that back to you. Of course, that will be my “interpretation” of Murray and might not be exactly correct. Consequently, people should read the paper themselves. It’s well written and very accessible, in my opinion. Enjoy the read!

  38. Arthur. Disproportions always exist under capitalism. New products are always disruptive under capitalism. So what? The real point is when disproportions become GENERALISED, let me say it again GENERALISED and in case you did not see it GENERALISED. When this occurs, demand falls in every industry such that their is excess production everywhere. That happens only under one condition, when investment falls, causing turnover periods to elongate, causing inventories to pile up which can only be cleared at a loss if at all.

    Yes, Marx was very eloquent on the issue of use value and exchange value. To qualify as an exchange value, an object must exist as a use value to the buyer, otherwise the buyer will not spend money on it. Again I have to say so what. This is the ABC of value. The fact that commodities today circulate as products of capital so that profit can be redistributed, means that individual prices and values deviate, but this does not invoke the question of realisation even in those sectors where value exceeds price. Over the course of the industrial cycle total value and total price equate (setting that element of labour fixed in useless products which does not constitute social labour). During the upswing their is no realisation problem compared to the downswing when there is.

    This debate illustrates why Marx had to begin with abstract labour, that is labour rendered average, by assuming that all exchanges were equal, so that the value given up in the form of the commodity was received back in the form of money of equal value. Only once this is established can we discuss the more complex issues of what really happens in the world economy. I have written much about how productivity has been depressed by an extensive realisation problem due to the chronic build up of un-invested capital due to globalisation. This is my last comment.

    1. Ucanbe, as you mentioned you don’t want to comment further I will keep this brief and include more substantive respose along with response to Jack Rasmus and others that I will eventually post a link to here.

      1. Agree that disproportions always exist. That was point of the long quote – shows Marx attached great importance to the fact that realization is not “merely a change in form from the value immanent in the commodity to its monetary form” as you said, but rather a “risky dangerous and crucial step or undertaking”.

      2. “So what?” Marx repeatedly emphasizes this because it is central to understanding capitalist crisis.

      3. I also fully agree that it is only after properly grasping this stuff, starting from simplifications where exchanges are at equal values that one can usefully discuss more complex concrete reality.

      4. Your (widely shared) view that generalised overproduction only occurs when there is “excess production everywhere” and that this “happens only under one condition, when investment falls, causing turnover periods to elongate, causing inventories to pile up” is an excellent summary of the prevailing “falling rate of profit theory”. As far as I can make out that theory is popular among “marxians” largely because of the sheer absurdity of the opposing “underconsumption” and “wage share profit squeeze” theories. If you read Maksakovsky you will find there is an alternative view much more closely corresponding to what Marx wrote and specifically relevant to your “So what” when reminded that Marx said the opposite of your “merely”.

    2. ucanbe, Will take more than a few days for link to full response. So meanwhile a few more points:

      5. What makes your explanation such an “excellent” summary of prevailing “marxian” views is that it so concisely and explicitly reverses the casual sequence of the regular 19th Century crises analysed by Marx.

      6. Crises and the cycle obviously involve “the more complex issues” of disequilibrium so one has to go well beyond the initial simplification of an (equilibrium) exchange at equal values and explain why overall prices regularly rise above and fall below values in different phases of the cycle. Since “over the course of the industrial cycle total value and total price equate” there are clearly disproportions on the upswing as well as the downswing (but in opposite directions).

      6. Marx repeatedly emphasized that there are many different conditions that can produce crisis, not “only one condition”. The explanation given by various “Keynesian” theories starts as you do “when investment falls”. But the regular cycles Marx described as “crises of overproduction” had the opposite sequence. The crisis breaks out when the overproduced products cannot be sold to final buyers. This naturally results in increased stocks (often inventories in Marx’s day, more typically unused plant capacity since the full development of monopoly and state capitalism). Such piling up of stocks is equivalent to slowing of turnover and is typically described as the economy turning over “slowly” during the depression after having “crashed” at the peak of the boom. Naturally there are lower profits and so also lower investment as a result. This is the exact opposite sequence to your explanation.

      7. Engels describes the actual sequence like this:

      “Little by little, the pace quickens. It becomes a trot. The industrial trot breaks into a canter, the canter in turn grows into the headlong gallop of a perfect steeplechase of industry, commercial credit, and speculation, which finally, after breakneck leaps, ends where it began — in the ditch of a crisis.”

      This vividly describes an INCREASE in turnover ending in “breakneck leaps” and consequent crisis. It is obviously not a description of “underinvestment” leading to crisis but quite opposite – that is why Marx called it “overproduction”. The roots of the crisis lie in the preceding boom (which in turn develops from conditions arising from the preceding crisis).

      8. Linking to Maksakovsky, Marx emphasises that there cannot be a simultaneous disproportion in all sectors. He says the crisis becomes generalised when the leading sectors, specifically in Department I start producing more than they can sell (contrary to theories of underconsumption which would have crises starting from Department II).

      9. You are writing extensively on your blog in refutation of many opposing ideas and have at least got as far as understanding the Marxist origins of input-output tables used in the UN System of National Accounts. You would find Maksakovsky a much more interesting target for you to analyse than others you have been dealing with. Take a look, links here:

  39. I have also gained a lot of insight from Alan Freeman’s writings, accessed above from Michael’s link.

    The argument itself contains the clue to its own refutation. As is well-known from Chapter 10 of Volume III of Capital, the market value of the yarn will not sink to that determined by the cheapest available process of production but to an intermediate value, between the individual value of those producers who have just purchased their cotton and the individual value of those producers who are still using up old stocks. Therefore, although the value transferred by the cotton has sunk below its original value, it has by no means sunk to the individual value of the producers now entering the market with stocks of new, cheap cotton. It is neither equal to its replacement cost, nor to its original historic cost, but to some intermediate value, dependent on the relative weight in the market of the producers buying new cotton and the producers using old cotton – and hence in turn dependent in the quantity of new cotton on the market, in comparison with the size of the stocks of the old cotton. The difficulty, therefore, is how to determine this intermediate value.”

    ”Replacement Costs, Stocks and the Value of Inputs”. 1995

    ”Theories of Surplus Value Part 2”. Pp203-206 complement Ch 10 of Vol3.

  40. ”The three bad abstractions of TSSI theorists are complementary and mutually reinforcing: (1) they falsely separate value from its nec- essary form of appearance, exchange-value (money), (2) they falsely separate Marx’s exposition of the magnitude of value from his exposition of the value-form, and (3) they falsely separate production from distribution. TSSI’s bad abstractions are reminders of how difficult it is to get free of Verstand thinking, or what Marx called “the bourgeois horizon.”

    Thus Murray. I quickly read through his piece, which I really enjoyed. Not sure though if the TSSI theorists would accept his strictures.

    Anyway, take point (1): If from a hen-run I supply eggs to a corner shop, which is put out of business by a new supermarket, do the eggs now have no value because they cannot command a price? All will agree that they still have a use-value. But this is not the end of the story. I might arrange to exchange them with others who produce fruit or vegetables on private allotments, but what will determine the ratio at which the goods are exchanged but the labour-time necessary for their production? I should not continually exchange a kilo of eggs for a kilo of potatoes.

    Thus I would argue that value is not only conceptually but also practically antecedent to exchange.

    1. Again, my interpretation: TSSI theorists like to quote this bit from Marx, and even Michael quotes it in his post: “[t]he value of a commodity is expressed in its price before it enters into circulation, and it is therefore a pre-condition of circulation, not its result.” (Capital, Volume One, Vintage Books, 1977, p.260.)

      They quote it to emphasize that Marx believed that the nexus of the production of “value” lies (predominantly) in the ‘process of production.’

      But practically speaking, what does that quote mean?

      Price is something that is established in the market, and NOT in the ‘process of production.’

      Consequently, if the value of a commodity is already expressed in its price BEFORE it enters into circulation, the PRICE at issue is the PRICE of the commodity as a type of commodity currently in play in the market and being traded at A GIVEN EMPIRICALLY ASCERTAINABLE PRICE, that is to say, the commodity’s current market value in terms of money and in so far as that commodity represents a category of existing commodities already circulating in the market.

      In what other possible way could a commodity’s value be expressed in its actual price BEFORE even being sold?

      In effect, Marx is saying that capitalists, by and large, will produce a commodity only if there is already a market for it, if the “price” they will get for the commodity can be reasonably estimated or anticipated in advance and before incurring costs for producing it, and so it is that the commodity’s price can be said to be already expressed – but where else? – in the current market under current market conditions.

      See, the situation is broadly the following (and if it’s permissible to quote oneself):

      At any moment in time, anyone can go to the market and discover the average, persistent and established price of a commodity for which there is an actual, already pre-existing market.

      The capitalist game is therefore to find an answer to the following question: “given” that a commodity predictably sells for on average, say, ‘x’ number of dollars, what can be done to produce it at a profit at that already “given” and “established” or “customary” price?

      There are essentially three ways in which this can happen, none of which are mutually exclusive, all of which can be used singly or in combination: a) force one’s private labor force to ‘accept’ a reduction in wages, thereby reducing the cost of producing the commodity using the customary and established material means of (instrumental-organizational) production at hand; b) improve upon the customary and established material means of (instrumental-organizational) production at hand in such a way as to greatly reduce the amount of time or labour that would otherwise be necessary to produce the commodity, i.e., “increase productivity;” or c) offshore the production of the commodity to a locality where either labour or resource costs, or both, are significantly lower than in the current localities where the commodity is being produced. And after any or all of this is achieved in whatever combination, introduce the now more cheaply produced commodity into the pre-existing home market where the commodity will predictably (although no necessarily) fetch its customary and already established market price.

      It is in this way that capitalist enterprise creates a profit margin for itself: its profit being the difference between the customary and pre-established market price of the commodity and the now decreased cost of bringing that commodity to the market.

      Unfortunately for the capitalists who “innovate” in this way, other capitalists looking to their own advantage and viability, are quick to adopt the newly developed strategies for “creating” profit opportunities. The moment that these strategies become generalized throughout the economy, on account of the effects induced by SNLT, profit margins once again deteriorate precipitously, and the crisis of shrinking margins asserts itself again with the implacability of a catastrophe.

      Value isn’t only something created in exchange, and it isn’t only created in the production process, but emerges from an interplay between the inseparable poles of both the ‘porcess of production’ and ‘exchange’ in the market.

  41. jlowrie. Market value is the weighted average value for any product. The market value is the only value, which when multiplied by the volume of the product, yields the total labour time expended on that product by the many producers. I have dealt with this in detail on my website. The market value changes due to the weighted change in an industry which can be between 1 and 100%. Hence market value is always a composite value composed of the old and the new but its direction of travel is always set by the new. This is the point Marx was making though not very well until chapter 10 of volume 3. See the following article which is one of a series sorting out the transformation problem.

    1. Thank you for this. I did read your previous article, but I may as well confess that I have difficulty in following some arguments because of an intellectual deficiency in Maths, though it might well be because of an intellectual deficiency in general. As it happens, however, if I understand you aright, you may have answered a question that has been exercising me, namely that a commodity in the same sphere has an individual, an average and a market value, and the latter two should not be conflated.

      ”Which of the categories has a decisive effect on the average value will in particular depend on the numerical ratio or the proportional size of the categories” (TSV 2 Pp204-205).

      But, ”The quantity of labour by which for example the value of a yard of cotton is determined is therefore not the quantity of labour it contains, the quantity the manufacturer expended upon it, but the average quantity with which all the cotton manufacturers produce one yard of cotton” (p 204).

      Are you able to clarify this?

      1. Yes, we have to be careful with Marx’s use of abstraction. Only in chapter 10 does Marx introduce the relevance of weighted averages, today called the median average, to replace simple average. Here is the easiest example I can give of the difference between the two. Assume 3 individual producers. The individual labour times are given as 6, 8 and 10. The simple average here is 8 or 6+8+10 divided by 3. Now let us add in the volume or weight of production each is responsible and give it as 25, 15, and 10 respectively giving a total of 50 meters. Total labour time is (25 x 6) + (15 x 8) + (10 x 10) or 150 + 120 + 100 = 370. So 50 meters takes 370 hours to produce. One meter therefore takes 7.4 hours. This is the market value of one meter of cloth that sets its market price not the individual values. Nor is it the 8 hours which a simple average yields. Why? 8 hours times 50 meters yields 400 hours of labour time. But only 370 hours has been expended in the industry. This is the importance of weighted averages because 7.4 hours time 50 metres equals 370 hours. You are not the only one confused by the distinction between simple and weighted averages. It is not clear even in volume 3, chapter 10 where Marx uses the expression a preponderance of lower or a preponderance of higher cost produces.

        Marx avoided using weighted averages for as long as he kept all capitals average (abstract). Weighted averages implies capitals of differing productivity, hence capitals different to each other. Market value is the first transformation of values into prices such that prices differ from individual values. I have read Arthur’s comment below with interest and will follow the link to Mosely whom I respect but who I believe got the transformation solution wrong.

      2. Thank you for that. I think you are correct. Moseley affirms (”Money and Totality” P 287), ” the given constant capital at the time the output is sold would be the ‘current’ capital ,as evidenced by the most recent purchase of these means of production in the sphere of circulation. The constant capital that is transferred to the value of the output is a SOCIAL AVERAGE constant capital…”

        I think this is contradictory. If the price of the most recent purchase expresses the current value, then this cannot be an average. Am I right?

        The solution surely is that the market value i.e. the weighted average determines the value transferred and some commodities embody more and others less socially necessary labour time i.e. value e.g. ” The commodity produced under more favourable conditions contains less labour-time than that produced under less favourable conditions, but it sells for the same price, and has the same value, AS IF it contained the same labour-time, though this is NOT the case” (TSV Part 2 p206 My Emphasis).

    2. ucanb, I just quickly read your link above with notes on transformation problem. Your view that Engels should have placed chapter 10 before chapter 9 is refuted by the actual manuscripts as documented by Mosely (p14) here:

      (see link on how to access Library Genesis at my home page above if your access is blocked)

      I am generally uninterested in “philology” but I think your belief on this reflects the same issue as above. You seem to regard differences betwen price and value as primarily relevant to the “transformation problem” etc. Marx discussed market value after production prices because production prices are a further development of value itself (in the sense of the disequilibrium average of fluctuations). This is necessary before getting into other preliminaries for the actual fluctuations in chapter 10, which is necessary before getting in to crisis (which Marx intended to postpone until after dealing with state, world market and competition).

      Until “marxians” it was routine for Marxists to simply conflate value and production price, when discussing crisis etc, as Maksakovsky does.

      Chapter 9 could be helpful for ending any confusion from Boffy with its explicit examples of calculating rate of profits on capital advanced including whole of fixed capital. Table 2 is critical for understanding this. Skipping directly to table 3 is unwise.

      On your p9 I agree with your recognition that chapter 10 is very relevant to business cycle (para 3). But 2nd last para is wrong. After crash, rate of profit is lower than usual average and costs of inputs required for new plant are also lower. Hence without any new invention plant that was previously uneconomic as too capital intensive becomes profitable while existing plant becomes technologicall obsolescent. This is described in Maksakovsky. Subsequent next cycle has higher organic composition and lower average rate of profit, supporting higher real wages even if rate of exploitation increased. This cyclic obsolescence is what drives rising organic composition and falling rate of profit not the reverse as in “falling rate of profit” theories of crisis.

      Will study more closely later but not soon. An actual “mathematical proof” in general mathematical notation is clearly desirable.

    3. ucanbe,

      1. I have now read your two papers on transformation more careully (though still not thoroughly), plus the paper by Moseley referenced in second paper.

      2. Previously I started Moseley’s book and read far enough to see he had actually noticed that Marx’s examples were always in terms of value expressed in money, not physical quantitities and since an opposite assumption in terms of physical quantities (even baskets of wage goods!) was central to the “marxian” confusion I assumed he had “got it” and that there was no point ploughing through the rest of the heavy academic writing to figure out why on earth he thought an entire book was needed for something so simple.

      3. Now I think you are actually in some ways closer than Moseley since you have grasped these points clearly:

      3.1 Single system with costs of reproduction, not historical costs and “embedded” hours of labour.

      3.2 Any “transformation” of prices has to apply to all parts of capital, not just circulating or just constant.

      3.3 Market values and weighted mixture of techniques in use are mutually dependent and vary with rate of profit etc. This is especially important.

      3.4 Its always a good idea to peek ahead (eg as you do to Ch 11) when actually thinking about what Marx wrote rather than trying to follow blindly behind.

      4. But you haven’t peeked further ahead to chapters on rent, and “fictious” values of land from expected rents, with similar for streams of interest or dividends etc.

      These are valued by “capitalization” at the estimated average rate of profit.

      Key point (not explained by Moseley): Exactly the same is true for fixed capital.

      Fixed capital is valued based on “Net Present Value” of the expected stream of returns, ie capitalization of expected profits. This ends up making the whole thing seem obscure. Capitalists count their “expected” profit as part of “costs” and the expected rate of profit they use (which gyrates wildly with the conjuncture) is a complete mystery to them. Marx explained how to get from concrete real statistics like UN System of National Accounts (which did not exist then and would need LOTS of careful adjustments to use even now) to a rough estimate like 22% for average rate of profit.

      5. The OECD manual on fixed capital I have linked to twice in above thread is part of the UN SNA. It describes the conflict between this “financial” valuation of fixed capital and “historical cost” and “efficiency” approaches (which make it very difficult to estimate value of capital stock and hence also difficult to estimate depreciation, since it includes “virtual depreciation” due to technological obsolescence that has to be based on revaluing capital stock at current reproduction costs).

      6. So starting from actual statistics on Gross and Net Output and Input costs one could estimate Value Added and Constant Capital. There is still a much bigger problem estimating depreciation and investments so they only do “Gross Domestic Product”rather than actual Value Added. At the level of abstraction Marx is working at, including “simple reproduction” rather than necessarily changing organic composition and technology with expanded reproduction, one could pretend to have such statistics (whereas nobody could pretend to have physical quantities). Then subtracting Wages from Surplus Value we have basis on which to calculate s/(c+v) as a rate of profit.

      7. Then you can simply apply that rate to value the fixed capital, from the surplus, and as Moseley said, there simply isn’t any transformation problem. Note that 3.3 above leaves no other option. Any “transformation” would need to be iterated for both fixed and circulating capital and variable capital as changes in relative prices (and wages) would change technologies. The reality is that the technology in use adjusts dynamically to the capitalized values i.e. if one can buy a new steel mill with equivalent capacity etc for less than the NPR of an existing steel mill that plant is obsolete and will be replaced, before or afer it physically wears out, by new plant with different organic composition etc not by fresh plant with the same old technology.

      8. The reality also is that everything actually happens cyclically with overall price levels changing in waves, not just with local or sectoral fluctuations and the context is expanded reproduction with changing technology. Need later steps from Marx’s level of abstraction towards the concrete not yet systematized by Marx but started by Maksakovsky.

      9. Both you and Moseley still go along with the usual “marxian” idea that rate of surplus value is somehow determined before prices and values.

      This is universally agreed by both “neoclassical” and “marxian” economists as central to the division between them.

      See long quote from Bliss in my notes here:

      In my view Marx is far closer to the classicals and even neoclassicals on that. He starts from VALUES being prior to division of Value Added as explained in letter to Kugelmann (cited above). So “Value Added” could in principle be estimated from statistics and THEN one can consider its division between profit, rent and wages (and further divisions into interest, profit of enterprise, skilled and simple wages etc etc).

      THAT is what enables him to explain a rate of profit and a sophisticated theory of wages instead of the vulgar economists arbitrary markup on prices and the absurd fantasies about physical quantities and “embedded” labour hours.

      It is VALUE that is prior to Value Added (ie difference between input costs and output costs is needed to estimate Value Added).

      So Marx ridicules vulgar economists who try to derive Value Added by adding together wages, profits and rent etc.

      He would equally ridicule “marxians” who try to derive Surplus Value prior to Value rather than subtracting actual wages from actual Value Added which depends on prior input and output Values based on socially necessary (and useful) labor time as in letter to Kugelmann.

  42. Arthur, I agree with much of what you said up to point 9. Yes, depreciation is a huge problem and one that has pre-occupied me in my earlier writings especially since the emergence of the depreciation of Intellectual Property becoming the biggest component of fixed asset depreciation. This restatement occurred when R&D and in-house software was moved from its status as an intermediate sale (a cost) to a final sale (capital) a restatement which has inflated GDP by 3%. Concretely I would be wary of saying that once a steel mill is opened employing a more efficient method of producing steel all the other steel works are devalued. It depends on the weight of that change. That steel works may decide not to go for market share by reducing its price, but to enjoy a premium profit on its existing sales. When sufficient steel works change over, such that the weight of change becomes significant, such that there is now a struggle for market share driving down the market price, at that point there is large scale devaluation of the fixed capital employed by less productive works. And as you point out, the speed with which all this occurs depends on market conditions itself. In an upswing, when the demand for steel is rising, and possibly prices, the pressure for change is reduced, whereas in the downswing, when the market price is determined by the most efficient producers, then devaluation and even bankruptcy accelerates. In all cases however the direction of travel will always be dictated to by the lower cost producers. It is merely a question as to the speed of this travel.

    I tried to follow your link to Moseley, but was blocked. Perhaps you can send me the documentation to

    1. Attached Moseley offline.

      Details for how to access Library Genesis at link given previously for Maksakovsky (which you will find VERY interesting):

      From there specific page for blocked access is:

      As UK access seems to be blocked. Anyone there who gets round the block using above info should post details of precise route used for others here. (Not blocked in Australia or USA, don’t know about other countries).

      We seem to broadly agree on depreciation, especially that it is important to get a good handle on (as both Stocks, and Flows of constant capital depend on it, hence also value added and surplus value). OECD manual very important for studying this.

      Don’t see any conflict between what you said re depreciation and my point 9 (but agree that it is of course an independent issue).

    2. Re upswing and downswing. I basically agree. But when (correctly) valuing their fixed capital the low profit producers should capitalize it based on their lower NPV and premium producers on higher NPV so the devaluation already occurs. The premium producers have the more up to date technology better fitted to current prices, including wages and average profit rates so their valuation is closer to their book value with expected depreciation whereas the others have more “virtual depreciation” or devaluation. Critical point made by Maksakovsky is that post crash is not merely a “down swing” but drastic phase shift to lower average current rate of profit and current prices, especially input prices produced by department II crashing more than final output prices produced by department I or wages so sudden obsolescence of a lot of existing plant in department II and eventually a wave of fresh investment in replacement of the heavily devalued obsolete plant, which kicks off recovery for next cycle. This is directly OPPOSITE sequence to “falling rate of profit” theories that start with “normal” gradual replacement of plant somehow occurring DESPITE resulting in a lower average rate of profit rather than wave of replacement BECAUSE of cyclical collapse in current average rate of profit.

  43. For those interested, aside from a bit of general editing partly in response to the comments received here, I’ve added the following footnote to:
    “While Marx revisits the herein posed problem in Capital, Vol.2, Chapter XX, part 2, effective demand is no longer a part of the argument. Also gone are these wholly “paying for themselves” economic components, like seed-goods and natural fertilizers. Instead, while initially agreeing with Smith that it is only consumers who ultimately pay for the total c+v+s embodied final product (“every child can see that this is absolutely correct”), the ‘c’ part now gets pulled out of the revenue circuit of v+s and becomes “consumed” productively by capitalists (presumably as part of the production process, ahead of marketable final output), as well as some bartering amongst themselves. Again, and because his point of departure being ‘c’ is real _before_ becoming realized, Marx neither seems to be aware of a cost-accounting impossibility of such “productive” consumption that still comprises a 2/3 share of total embodiment, nor as having a clue about the inherent contradiction of his argument here. Alas for Marxists, the hole Marx has dug for himself only only got deeper.”

    1. ” the ‘c’ part now gets pulled out of the revenue circuit of v+s and becomes “consumed” productively by capitalists (presumably as part of the production process, ahead of marketable final output),

      Again, and because his point of departure being ‘c’ is real _before_ becoming realized, ”

      Is it just me or can anybody make sense of this?

      1. Did you guys read the indicated section? Marx writes therein that “although the value of each individual commodity is made up of c+v+s [i.e. a certain amount of embodied labour], nevertheless the sum of the values of all commodities passing into the consumption-fund, taken at its maximum, can be equal only to that portion of the value of the social product which resolves itself into v+s”. This means that the ‘c’ part now gets pulled out, with only v+s (labour embodiments) remaining in the revenue-consumption circuit, doesn’t it?

        Then a bit later he states: [Smith’s] “phrase that the value of the entire annual product must ultimately be paid by the consumer would be correct only if consumer were taken to comprise two vastly different kinds: individual consumers and productive consumers”. I take that to mean that “individual” consumers, comprise workers and capitalists consuming out of their revenue flows, thereby resolving and realizing aliquot labour embodiments; correct or not? Marx continues with “However that one portion of the product must be consumed productively means nothing but that it must function as capital and not be consumed as revenue”.
        And what is then is the function of capital? Marx just confirmed that it cannot be to gather revenue for capitalists, because there isn’t any of that left to circulate, and no identifiable other source is available. Somehow constant capital (the labour embodiment of ‘c’, 2/3 of the final product) _exists_ for the pleasure it creates for capitalists’ “productive consumption”?

        So we went from an expression that “the consumers of the [final output] pay for the value of all the means of production contained in [it] (‘c’), and of the wages (‘v’) plus surplus-value of [all the capitalists involved] (‘s’), that indeed every child can see is absolutely correct” to the tortuosity of singled-out “productive consumption” that nobody understands. Please correct me if I’m wrong.

        Between the just stated beginning and end, there is a paragraph that for its veracity in part depends on dept. II being in the possession of revenue with which to pay dept. I; this being the same revenue Marx spent chap. 3 sect. 10 of the TSV in vain trying to locate. In the second half he takes its existence for granted initially, while subsequently qualifying it as it not being “the actual state of affairs”. Then his reasoning becomes a matter of both illegitimately involving v+s, since that would involve revenue not yet in the possession of dept. II, and, in one way or another, exchanging capital for capital; as if this combination would indeed replace physical labour embodied constant capital, or the ‘c’ part of each individual commodity. And in any case it would still fall woefully short of making up the commodity’s indicated 2/3 embodiment.

        The crux of it all is of course a feasible continuity, and what does _existence_ mean both in terms of the latter and as numerated in a unit of account. And it so happens that if the overriding criterion becomes accounting for it all, the physicalness of existence has to fall by the wayside, until a realization and with it a reappearance occurs in terms of use-values. In other words, values-in-exchange are just that, without any physicalness involved whatsoever, regardless of Marx trying to have it both ways. Just as physical use-values exist without a numeraire of value and couldn’t possibly be enumerated under one, neither can a physical existence be imposed on values-in-exchange. The classifications are incongruous, with one ruling out the other; that’s the way the cookie crumbles.

        For a bit more on this from a different perspective please read at least p. 6’s middle paragraph of my paper as well as the closing comments.

  44. It seems clear that Marx felt that the value of a commodity exists regardless of the price at which it is sold, and therefore presumably regardless of whether or not it is sold at all. In Capital Volume 3 he says:

    “We have already seen that the cost price of a commodity is less than its value. Since C = k + s, k = C — s. The formula C = k + s can be reduced to C = k, commodity value = cost price, only if s = 0, a case that never arises in conditions of capitalist production, even if certain special market conditions may cause the sale price of commodities to fall to their cost price or even below. If the commodity is sold at its value, a profit is realized that is equal to the excess of its value over its cost price, i.e. equal to the entire surplus-value contained in the commodity value. But the capitalist can sell the commodity at a profit even if he sells it at less than its value. As long as its sale price is above its cost price, even if below its value, a part of the surplus-value contained in it is always realized, i.e. a profit is made.”

    If the phrase “special market conditions” means that the sale price is something other than the normal prevailing selling price for the commodity, then it could be argued that it is the normal selling price that determines the quantity of value “contained” in a commodity (after adjusting for the effect of the averaging of the profit rate), and that therefore such value can be said to ‘exist’ regardless of the extent to which it is “realized”.

    If the normal selling price of a commodity is zero, it could be said to ‘contain’ the value of the constant capital that was employed in its production, and that value would then be destroyed when the commodity is destroyed (or given away). But since per Marx the value of variable capital does not get transferred to the value of the commodity, we might say it gets destroyed in the very process of producing an unsellable commodity (no “new” value is ever created). Of course that is “a case that never arises in conditions of capitalist production”, but it might be useful to contemplate as a limit case.

    1. On second thought, it seems to me that if a commodity’s normal selling price were zero it could not ‘contain’ any value at all, and that therefore the value that would normally have been transferred to it from the constant capital employed in its production must be destroyed in its production as well, along with that of the variable capital so employed.

      In any case, my point is that the normal selling price of a commodity determines the quantity of the value contained in that commodity (realized or not). That is not to say that it creates that value. It is socially useful labor power that creates (economic, fictitious, capitalist) value; the normal selling price merely determines the degree to which labor power is in fact socially useful.

    2. I ran across a citation in Capital Vol 3 that seems to support the notion that the quantity of a value can be determined by factors other than the factor that is responsible for the creation of that value:

      “In short, given the surplus-value that accrues to a certain variable capital, it still depends very much on the business acumen of the individual, either the capitalist himself or his managers and salespeople, whether this same surplus-value is expressed in a higher or lower rate of profit and therefore whether it delivers a greater or lesser amount of profit. … This variation in the way the same mass of surplus-value is expressed, or the variation in the rate of profit and therefore in the profit itself, with the same exploitation of labour, may also stem from other sources; it can even arise purely and simply from the variation in the business skill with which the two enterprises are conducted. And this circumstance misleads the capitalist by convincing him that his profit is due not to the exploitation of labour, but at least in part also to other circumstances independent of this, and in particular his own individual action.”

      So profit is “due to” (is created by) the “exploitation of labor”, but the actual “amount” (quantity) of that profit can depend on the “business acumen of the individual” capitalist or manager. This seems to me to support the argument that while surplus value can only be created by labor power employed in the production of commodities, the actual quantity of that surplus value is determined ultimately by the normal selling price of those commodities.

      1. I suppose the counter-argument would be that profit is a ratio of values and not a value per se.

        Very perplexing. How can a value exist if it cannot realized? What is its precise ontological status!

  45. For those still interested in Harvey’s original essay and the criticisms of it by Michael, I have written a lengthy (4000 word)analysis which is now on Jim Kincaid’s blog:

    I am critical of both authors, but along with some of the commentators above, I want to express my appreciation of the seriousness and thought-provoking qualities of their contributions. My apologies for not responding to the many interesting comments above most of which I did not read until after I had finished my own piece.

  46. I think Harvey is calling for deepening and expanding the theory of value. While Harvey may have some errors in his argument, I think the most important thing lies in his intention to strengthen the theory of value by better understanding the process of circulation.

    It seems to me that if Harvey studied the Temporal Single System Interpretation (TSSI) and the understanding of the MELT (according to Ramos-Freeman) and Nick Potts’ new studies on circulation, Harvey could have a first answer to his questions. I also think that if Harvey studied the book ‘Beyond Capital’ by Michael Lebowtiz he would find a second answer to his questions.

  47. Dear Mike

    Thanks for your post.

    It’s quite important that Harvey does not only downplay the tendency of the rate of profit to fall, as you rightly point out, but he at the same time decries use of the concept of imperialism. These two aspects – his misreading of Marx and rejection of Lenin – need to be brought together. What both emphasise is the necessity of crisis and capitalist reaction.

    While Viyay Prashad rightly critiques Harvey politically for missing out imperialism, he doesn’t really get to him on the economics. And Mike, your critique Harvey’s misrepresentation of ‘Capital’, on ‘the economics’ of rate and mass of profit, does not as yet show the connection with imperialism.

    Harvey wriggles through the crack. His claim that he has consistently drawn attention to value transfer is patently untrue, a rewrite of his own position, trying to win back lost ground. But he is astute enough to have hit on the key point and claim it: value transfer. Except Harvey considers value transfer in a conventional and reformist manner. The transfer is more than from ‘labour intensive’ to ‘capital intensive’ sectors, as he argues. The international transfer of value is underpinned by the super-exploitation of workers in the poor countries.

    The unity between the political and the economic is that imperialism is a world system of surplus labour transfer, backed up by military force as and when required. Imperialism generates surplus-profits for some capitals which may or may not be shared with others. Then the fight to secure surplus-profits, the state, to offset declining profits. Hence not only crisis, but war: a permanent semi-war on the working people of the global South.

    1. Dear Mike

      Thanks for your post.

      It’s quite important that Harvey does not only downplay the tendency of the rate of profit to fall, as you rightly point out, but he at the same time decries use of the concept of imperialism. These two aspects – his misreading of Marx and rejection of Lenin – need to be brought together. What both emphasise is the necessity of crisis and capitalist reaction.

      While Viyay Prashad rightly critiques Harvey politically for missing out imperialism, he doesn’t really get to him on the economics. And Mike, your critique Harvey’s misrepresentation of ‘Capital’, on ‘the economics’ of rate and mass of profit, does not as yet show the connection with imperialism.

      Harvey wriggles through the crack. His claim that he has consistently drawn attention to value transfer is patently untrue, a rewrite of his own position, trying to win back lost ground. But he is astute enough to have hit on the key point and claim it: value transfer. Except Harvey considers value transfer in a conventional and reformist manner. The transfer is more than from ‘labour intensive’ to ‘capital intensive’ sectors, as he argues. The international transfer of value is underpinned by the super-exploitation of workers in the poor countries.

      The unity between the political and the economic is that imperialism is a world system of surplus labour transfer, backed up by military force as and when required. Imperialism generates surplus-profits for some capitals which may or may not be shared with others. Then the fight to secure surplus-profits, the state, to offset declining profits. Hence not only crisis, but war: a permanent semi-war on the working people of the global South.

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