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>My dear Gil,
>I have no intention of playing the useful idiot here for you to prove that
>only Roemer has a logically complete critique of the use of neoclassical
>theory to justify the market's absurdly unequal distribution of income or
Rakesh, if the "useful idiot" comment is prompted by my prefatory remark
that your post raised useful issues, I regret the unintended connotation
and apologize for it. All I meant was that the questions you raised about
the connection of surplus value to neoclassical market theory are
necessarily relevant. That said, your reference to Roemer is off the mark:
I didn't suggest that "only" Roemer had a logically complete critique of
neoclassical justifications of wealth inequality. Indeed the only reason
for invoking Roemer is that he has carried out the thought experiments
necessary for establishing the connection between surplus value and the
possible implications of neoclassical market theory. My ultimate point
remains that, contrary to your earlier claim,
>> Bourgeois theory *does not* predict that market competition will tend
to eliminate >>surplus value, as Marx defines the term.
To which you reply
>Of course interest or profit has to be explained even by bourgeois theory.
That's a different question than the one you started with. The issue isn't
the need for bourgeois theory to explain interest or profit, it's whether
the bourgeois theory of competition implies the elimination of surplus
value. It doesn't.
>As Duncan points out in Understanding Capital (p.47), the neoclassicals
>attempt however to explain "surplus value" as, to use my shorthand, a
>diachronic *exchange of equivalents*.
In neoclassical terms, "exchange of equivalents" necessarily takes on a
much different meaning than in Marxian terms--in particular, it has nothing
whatever to do with the notion that commodity prices correspond to their
respective values. In the Marshallian version of perfectly competitive
markets, it just means that all goods exchange at their average costs of
production, where the latter are understood to include a normal rate of
profit. So "exchange of equivalents" just means that "goods with the same
price have the same average costs of production"--but that leaves open what
these costs include. However, neoclassical theory does not *require* this
assumption, contrary to your-or Duncan's-claim. In particular, as I stated
in my previous post, the Walrasian theory of competitive equilibrium does
not require this condition, as Roemer has demonstrated. [Nor, for that
matter, does the Marshallian theory of *purely* competitive markets.]
>I understand that there is some confusion in bourgeois economics about
>whether interest is to be understood in productivity or purely temporal
No, there's no *confusion* at all, just different theoretical scenarios.
That's like saying that Marx is confused about the connection between
prices and values because he assumes they're proportional at one point and
not proportional at another point in _Capital_.
Next, in some sense interest is *necessarily* a temporal phenomenon: if
you had to pay a loan back the second you got it, you wouldn't be willing
to pay any interest. The key question is whether the existence of positive
interest rates in capitalist economies is driven by temporal preferences
(the Marshallian perfectly competitive story) or relative scarcity (the
Walrasian-style Roemerian story). The theory of profit introduces yet
another possible theoretical dimension, of course, based on risk
preferences--more on that below.
>Duncan seems to understand the neoclassical apologia of interest in
>its essence as a purely based in time preferences, though perhaps
>productivity will affect the actual magnitude thereof.
I suppose Duncan's representation of neoclassical theory should be taken up
with him (are you listening in, Duncan?), but I believe what I said above
and in my previous post is an accurate characterization of the possible
valid implications of neoclassical theory with respect to the existence of
>However, there is no exchange of wages against time; wages are only a
>ratification of time already spent--which is clear to workers who never get
>wages because the firm went bankrupt before the first payday payday. . Plus
>the firm owners, madly using the overdraft system, are hardly sacrificing
We're not in disagreement over the fact that workers typically must labor
before they're paid. What I've argued, and your passage here does not at
all dispute, is that this condition may have nothing to do with worker time
preferences (indeed, the neoclassical theory of ideal markets would predict
that impatient workers are paid up front, in order to avoid having to pay a
wage premium in competitive equilibrium); that there may still be a
qualitative difference between the two weeks that workers typically wait
for their wages and the much longer spans that capitalists might wait for a
return on their investments; that even if you're right, profits might be
explained as payments for risk; and finally, and of most relevance to this
discussion, that in Walrasian/Roemerian terms, neoclassical theory need not
make any reference to time or risk preferences at all in order to account
for profit and interest.
>Let me just skip ahead to this which confuses me greatly.
>> Relevant picture: imagine a competitive market for something
>>called "capital services" with a reverse L-shaped supply curve, and imagine
>>an equilibrium in which the demand curve for these services crosses the
>>vertical portion of that supply curve, ensuring rents to even the marginal
>So the scarcity of capital explains the phenomenon of interest!
>What then is the source of the supply of this capital? Why is there a
>shortage of this capital?
Yes, of course one must inquire at some point about the historical
conditions that give rise to surplus value understood as rents! My point
all along has been that it's this *historical* analysis, rather than Marx's
(also ahistorical, by the way) *value-theoretic* analysis in Chapter 5,
that serves as the valid basis for explaining surplus value. But we're not
discussing *historical* analysis here, we're discussing--by your
stipulation, by the way, not mine--the purely *theoretical* connection
between surplus value and market competition in neoclassical terms. And
the purely theoretical connection between competitive equilibrium and
surplus value understood as rent is just as I've posed it.
> Instead of pursuing the formation of this capital
>to its birthplace--the sphere of production--you are just bogged down in
>sphere of circulation with the rest of the economists.
If you've read *any* of my previous posts detailing my Ch. 5 critique, you
know this is completely false. From the beginning I've accepted Marx's
stipulation that surplus value requires the "valorization" of value,
understood as the creation of new value subsequent to (and dependent on)
the initiation of a given circuit of capital. So my starting point in
accounting for surplus value, just like yours, just like Marx's, is the
sphere of production. The question here is rather the connection of
*capitalist control of production* to surplus value, and more immediately
the status of Marx's stipulation of price-value equivalence in pursuing
> To say that capital
>is in short supply only means that in the course of accumulation the
>primordial source of this capital, surplus value in Marx's precise sense,
>has become progressively more scarce. See Marx's theory of FROP.
No, it can't "only" mean that, since Marx's theory of the *existence* of
profit as surplus value logically and sequentially precedes his theory of
the *falling* rate of profit. And your comment misses the point: as
Marx's Vol. I account suggests and Roemer's Walrasian account confirms,
relatively scarce capital is a *necessary* condition for capitalists to
accrue surplus value understood as rent ("neoclassical" scarcity in the
sense of "having positive opportunity costs" is sufficient to establish
surplus value corresponding to *normal* profit), with or without Marx's
analysis of tendentially rising organic composition. If you build Marx's
assumption about class-based wealth inequalities into the bourgeois model,
surplus value in the form of rents results. If you don't have this
assumption, then surplus value as rents fails to arise, even in Marx's
Thus the essential substantive basis for surplus value understood as rent
in either theoretical system is this class-based scarcity of productive
assets. This conclusion makes it clear that neoclassical theory dictates
neither the elimination of surplus value nor its explanation solely in
terms of time preferences. The *historical* conditions that yield this
substantive basis are a separate issue from the ones you initially raised.
>>[And yet they can "wait" for the wages they're paid only *after* they've
>>labored, as you remark below?]
>Because they draw from savings or take usurious consumption loans.
But that would be my point--to the extent that workers can draw from
savings, for example, then they can indeed " ' wait' until they are offered
the net surplus over and above their costs of reproduction."
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