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Greetings, Rakesh, along with apologies for the delay in my response.
In response to this passage from me,
>>Surplus value arises from the circuit of industrial capital (or, indeed,
>>any circuit that finances the creation of new value) if capitalists are
>>able to appropriate a portion of the newly created value financed by this
>I think we are confusing two issues: how/why the capitalists lay claim
>to or "appropriate" surplus value and the origins of surplus value.
I agree that creation of new value and appropriation of value by
capitalists are two different things, but I strongly disagree that I have
"confused" appropriation with "the origins of surplus value,", since
appropriation is *by Marx's definition* an aspect of this "origin." On
this point at least I seem to be more faithful to Marx than those who are
arguing against me. I could do no better here than quote Marx verbatim:
"It is therefore impossible that, outside the sphere of circulation, a
producer of commodities can, without coming into contact with other
commodity-owners, valorize value, and consequently tranform money or
commodities into capital. Capital cannot therefore arise from circulation,
and it is equally impossible for it to arise apart from circulation. *It
must have its **origin** both in circulation and not in circulation.*" [p.
268, Capital V. I, Penguin ed.; emphasis added]
Consider what's just been said. Marx is insisting that the appropriation
of newly created value by capitalists (VA) be put on a conceptual par with
the creation of that value (VC) in his understanding of the definition,
i.e. the origin, of surplus value. If nothing else, this passage makes
clear that I'm not "confusing issues" in insisting on the integral
connection of VA to the *origin* of surplus value; to the contrary, by
Marx's own quite explicit stipulation it would be a confusion to *separate*
these two issues.
In addition, this passage makes clear the relevance of my critique
concerning the logical invalidity of Marx's first justification for
abstracting to the case of price-value equivalence: in Ch. 5, he's only
shown that price-value disparities are insufficient to account for VC; he
doesn't say a word one way or the other about their connection to VA. But
since VA is an integral part of his definition of surplus value, his
argument is *necessarily* logically incomplete. Would you agree to this point?
>you agree that the latter at the level of the system as a whole (Mike
>W) can only be produced by new labor (Fred)--this is the labor
>theory of value which it seems to me you are rejecting. I would hope that
>you do so openly.
1) "Do I agree"? And "will I do so openly"? Please. *From the beginning*
of this discussion (and before, which you can verify from my Science &
Society articles)*I've* been the one insisting that surplus value must be
based on the creation of new value (thus "new labor"), by Marx's
*definition* of the term as requiring "valorization" of value, rather than
mere *redistribution* of value that existed prior to the initiation of the
relevant circuit of capital.
You cite Fred on this point, but you could have more easily cited me, since
I've made the point repeatedly in different contexts of this discussion:
see,. for example, affirmations of this position in posts 2903, 3197 (a
response to you when you raised the same point before), 3363, 3364, 3365,
3367, 3377, 3381, and 3456. One passage from 3364 will stand for the rest,
a reply to Fred when he belabors the same question:
'The issue behind my critique is not, has never been, the
connection of surplus value to "the existence of labor-power in
capitalism." This is completely beside the point. *Of course* surplus
value requires the exploitation of labor power, which is just the capacity
to labor: surplus value requires surplus labor by definition, and surplus
labor requires the capacity to labor by definition. That's *never* been in
I hope given the above we can finally put this question to bed. My
critique does not involve, and has never involved, disputing that surplus
value must be based on the creation of new value subsequent to the
initiation of a circuit of capital.
2) However, contrary to the passage you attribute to Mike W, referring to
"the system as a whole" is *completely beside the point* in establishing
the connection between surplus value and new labor. Surplus value requires
the creation of new value in any instance of the circuit of capital,
without the need to refer to aggregate conditions, *simply by virtue of
Marx's definition*; this is made clear by Marx's non-aggregate analysis of
the hypothetical exchange between parties A and B in Ch. 5. (p. 265)
On the other hand, if the creation of new value subsequent to the
initiation of a circuit of capital *weren't* part of Marx's definition of
surplus, then reference to the "system as a whole" would be insufficient to
establish this condition. If it were allowed that surplus value could
result merely be redistributing value that existed prior to the circuit of
capital, then it occur just the way it has since before the capitalist mode
of production, with merchant's capital, usury capital to non-producing
"extravagant magnates", etc etc.
That references to "the system as a whole" are still being made in
connection with this issue just shows, in my opinion, the continuing evil
influence of that reddest of red herrings in Ch. 5, "The capitalist class
of a given country, taken as a whole, cannot defraud itself." (p 266) True,
but utterly irrelevant. The issue is not "fraud", and the issue isn't
whether the capitalist class can exploit *itself*, but whether the
capitalist class can exploit *some other* class.
Bottom line: reference to "the system as a whole" is utterly irrelevant to
establishing the connection between surplus value and condition VC.
3) I see that we have a difference in terminology. Since it's only
terminological and not substantive, we can just note it and move on. You
associate the condition that surplus value requires "new labor" with "the
labor theory of value." I don't: I see the former as simply an aspect of
Marx's definition of surplus value, requiring no commitment of itself to
any particular theory of value. Roemer in effect uses Marx's definition,
for example, in his Walrasian-looking treatment of capitalist exploitation.
Second, I take my cue about "the labor theory of value" from Marx's Ch.1
analysis: that is, the labor theory of value corresponds to the notion that
there is some systematic and meaningful connection between commodity prices
and their respective values. This notion is reflected in Marx's Ch. 5
suggestions that price-value equivalence corresponds to "the pure case of
commodity exchange" or an expression "of the immanent laws of the exchange
It's this latter interpretation of "the labor theory of value" that I'm
disputing. One could trash it entirely without contradicting the notion
that surplus value depends on the expenditure of new labor subsequent to
the initiation of a given circuit of capital--which, again, is simply an
aspect of Marx's *definition* of surplus value.
> As I have tried to suggest, Marx's exploitation theory is by no means an
>obvious conclusion even on his own ch 5 and 6 assumptions, given the agio,
>innovation, and physical surplus theories of the permanence of productive
>interest--though Heilbroner may be correct that Sraffa really does
>not provide a theory of the origins of surplus value. I think your actual
>theory of *the origin of surplus value* is being obscured in this endless
>discussion of the putative price-value stipulation, and I would like to
>draw it out.
See above for why a discussion of "the origin of surplus value" *must*
contend with the connection between prices and values, since by Marx's own
stipulation surplus value involves *both* VC and VA. It would be more
appropriate to say that *Marx* has obscured the issue by insisting on the
condition of price-value equivalence without adequate justification.
>>Wait a second. If constant returns to scale don't exist at the sectoral or
>>industry level--the level at which neoRicardians effectively invoke the
>>condition--then labor values are necessarily demand driven, because market
>>demand always determines average and marginal production conditions in the
>>absence of constant returns, and Marx's labor theory of value goes straight
>>down the tubes. In particular, Marx's Ch. 1 claim that labor values are
>>determined by *average* rather than *marginal* production conditions is
>No[,] demand is a precondition for value emerging and for value itself.
>Justifying my crude analogy to quantum measurement, Marx writes:
>"The point of departure is not the labour of individuals considered as
>social labour, but on the contrary the particular kinds of labour of
>private individuals, i.e., labour which proves that it is universsal social
>labour only by the supersession of its original character in the exchange
>process. Universal social labour is consequently not a ready -made
>prerequisite but an emerging result. Thus a new difficulty arises: on the
>one hand, the labour time of individuals becomes materialised universal
>labour time only as a result of the exchange process." Critique of Poltical
>Economy, p. 45
I agree that the *existence* of labor value requires only that demand is
positive, but in the absence of constant returns to scale at the industry
or sectoral level, the *magnitude* of a commodity's value depends
necessarily on the level of demand. Changes in demand will change the
average (and marginal) conditions of production,and will thus change value
magnitudes. Consequences are as noted in my earlier post--for example, it
is not reasonable to say under these conditions that labor values are based
on *average*, as opposed to *marginal*, conditions of production.
>Without that commodities have NO value, but that does not MEASURE their
>value. I am not saying that relative prices are measured by measurable
>utilities--the trumpet does not cost 50x the silk hanky because it is 50x
>more pleasurable to blow into one than the other. And if there are rising
>rates of return, this only will lessen proportionally the socially
>necessary labor time needed to reproduce the commodity--which is the basis
>of its value, not the satisfications its consumption enables.
I don't disagree with these points, but nor do they contradict my point.
> The measure of labor is thus implied in Marx's understanding of value as
>socially necessary labor time, i.e., the quantity of labor that society
>will of necessity expend for its production, when that society requires
>that expenditure. This notion of reproduction is based on labor time as
>measure of value, not utility.
>Maybe I am missing your point?
My point is just that the absence of sector-level constant returns creates
just as many problems for the labor theory of value as it does for
neo-Ricardian prices of production, since both notions of value are derived
from production conditions. So if non-constant returns renders
neo-Ricardian "values" problematic, it necessarily does as much to labor
--For example, the problems noted immediately below:
>>Furthermore, the Marxian depiction of competition must fundamentally change
>>in the absence of constant returns: in the case of increasing returns at
>>the industry level, to a model of "natural" monopoly; in the case of
>>decreasing returns at the industry level, competition would logically only
>>equate *marginal* rather than *average* rates of profit, and yet *another*
>>reason to invalidate the case of price-value equivalence would then arise.
>You know I just don't get this value price equivalence stuff. How could
>commercial capital ever make a profit if all commodities sold at value?
That's not the point at issue. That commercial capital, *taken alone*,
cannot create surplus value follows immediately from Marx's definition of
surplus value as involving the *valorization* of value, rather than merely
the redistribution of pre-existing value. Thus no reference to the
connection between prices and values is necessary to make this point. Marx
makes a broader claim in Ch. 5, to the effect that surplus value must be
explained on the basis of price-value equivalence, because price-value
disparities can't account for VC. Although the last clause follows
necessarily from Marx's definitions, the broader claim is a non sequitur,
because it leaves entirely open the question of whether price-value
disparities are a *necessary* condition for VA, which as we've seen is an
equally central aspect of Marx's definition of surplus value.
Thus I could legitimately replace your rhetorical question with another
one: how could usury capital or merchant capital extended *directly* to
value producers ever realize surplus value
if all commodities exchanged at value? Answer: they couldn't, although
Marx grants quite explicitly that these circuits generated surplus value.
So in these cases, targeted price-value disparities were *necessary* for
the *origin* of surplus value.
>you think Marx's theory is based on value-price equivalence even as an
"Is" based? Certainly it "is" based on the stipulation of value-price
equivalence, and not even approximately. My question is *should* it
be--and there, my answer is no: there are no economically meaningful or
logically coherent grounds for focusing on the case of price-value
equivalence as the basis for explaining surplus value. To the contrary, as
I've argued elsewhere, a system that produces surplus value is in a deep
sense *essentially* one in which at least targeted price-value disparities
>What then do you make of his theory of commercial capital?
Which aspect of it? I certainly grant that once you've posited industrial
capital as the basis for the existence of surplus value under the
capitalist mode of production, it follows that commercial capital and lend
rents represent mere divisions of already-existing surplus value. But
again, that's not the point at issue. In Ch. 5, Marx wants to establish
conditions that logically *entail*, in one sense or another, the conclusion
that industrial capital is the basis of surplus value. But his arguments
in support of this claim are invalid, so this attempt doesn't get off the
ground in the first place.
>As for market prices, of course some capitals and perhaps branches will
>make more and others less than the average rate of profit. Do you think the
>Marxian theory of competition rules out the centralisation and
>concentration of capital?
Perhaps you need to reconsult Leontief's praise
>of Marx for having predicted such trends long in advance?
Not at all. As I said to Fred, just because I criticize one aspect of
Marx's argument, it doesn't follow that I'm rejecting *all* aspects of
Marx's analysis. To the contrary, the second half of my "Ch. 5 critique"
*champions* Marx's historically contingent analysis of capitalist
production as anticipating a number of modern theoretical and empirical
developments. But the point remains that the useful parts of Marx's
argument--those you cite just now, or those I cite--depend in no way on the
invalid arguments Marx gives in Ch. 5 for his conclusion that surplus value
has to be explained on the basis of price-value equivalence.
>>First, neoclassical theory does not speak of the "exchange of equivalents"
>>except in the very narrow sense of "exchanging at average cost" under
>>perfectly competitive partial equilibrium conditions. Even this doesn't
>>necessarily obtain in the general equilibrium form. I also don't think
>>"exchange of equivalents" means much more than a tautology, if anything, in
>>Marxian theory, since we know commodities don't typically exchange at their
>>respective values, even in theoretical terms.
>Gil, can we agree that some version of neo classical theory attempts to
>provide an explanation of the permanence of productive interest which is
>not grounded in exploitation (see Guy Routh, Origin of Economic Ideas on
>marginalism for example)? Are you saying that it is possible to prove the
>injustice of productive interest despite its not being grounded in
>exploitation? Are you an ethical socialist?
No, the other way around: whatever neoclassical theorists think they're
trying to do (more about that in a second), they cannot logically claim to
have shown that productive interest in not grounded in exploitation, as
*Marx* defines the term. If nothing else, Roemer's work has fully
established this point. My guess is that most neoclassical theorists don't
think that "exploitation" as Marx defined the term is relevant or
significant, and thus don't care about the connection one way or the other.
> Roemer has demonstrated this.
>> That is, it's possible to distinguish Marx's labor theory of
>>*exploitation* from his labor theory of *value*.
>OK new debate topics are finally emerging.
For reasons established above, I thought they had been all along.
>>Third, if the phrase "Marx's value-based exploitation theory" translates as
>>"Marx's exploitation theory developed on the premise that there is some
>>systematic connection between commodity prices and values", I'd choose the
>>neoclassical framework for analyzing exploitation, because, as indicated
>>above, the possible connection between prices and values is entirely
>>irrelevant to the account of exploitation. Furthermore, the neoclassical
>>framework, in contrast to the value-based framework, makes clear what are
>>the underlying conditions that make surplus value possible. Finally,
>>asserting a systematic connection between prices and values leads to a
>>potentially very misleading understanding of the basis of capitalist
>I do take the blame for not understanding this.
In a nutshell, accepting the relevance of Marx's indictment that capitalist
profit depends on exploitation of workers *in no way* entails any
particular or connection between commodity prices and values. To the
contrary, insisting on such a connection, as Marx does at the end of Ch. 5,
creates an essentially misleading view of the relationship between
capitalist exploitation and capitalist production.
>>critique suggests a reformulation of Marxist political economy, yes, but in
>>no way its *abandonment*--not unless one insists that Marxism *requires*
>>the labor theory of value. Now *that* would be evidence of superstition
>>and totemism, not to mention fetishism.
>Of course I so insist. The existence of value and surplus value is evidence
>of the existence of fetishism; I think you fundamentally misread Marx's
>theory of fetishism here.
I don't see that. The notion that what is ultimately a relationship among
producers is misrepresented as a relationship among commodities depends in
no obvious way on the labor theory of value, at least as Marx poses that
theory in Chs. 1-5 of V. I. Perhaps this is another disagreement about
> But it's nice to get you lay your cards on the table finally after five
Again, it not that I haven't been laying my cards on the table all this
time, and I resent the unwarranted implication that I've been hiding
something. To the contrary, the problem is that, apparently, the other
players have never taken the trouble to look at my hand! Even now!--see
> You don't really just want us to correct a logical error in chap 5
>or derive the commodification of labor power in historico-strategic terms;
>you want us to give up the theory that exploited wage labor is the source
>of surplus value.
No, that is wrong, wrong, wrong, wrong, wrong, and a complete and
continuing misrepresentation of what I'm arguing. See above. Why do you
keep insisting on attributing claims to me that I don't make?
>Is it asking too much after five years that you lay out
>your rival theory for the persistence of productive interest?
See above; there is no "rival theory". I'm taking as a *starting point*
that productive interest corresponds to surplus value; that's the content
of the Fundamental Marxian Theorem. I've taken this as a starting point all
along, as you'll see by checking any of my articles or the post numbers
referred to above. What I'm contesting is Marx's claim that establishing
this relation depends in any meaningful or useful way on the abstraction of
price value equivalence. And I've redundantly "laid on the table" what
this implies for Marx's theory: namely, that Marx's labor theory of
exploitation does not depend on, and is not usefully served by, his labor
theory of value (as I understand that notion).
>>First: It's true that I'm arguing for the relevance of (much of) Roemer's
>>analysis for Marxian theory.
The part that establishes the disjunction between Marx's labor theory of
exploitation and his labor theory of value.
> This conclusion does not involve any specially
>>different treatment of "property relations" or "the legal basis of the
>>scarcity of capital." *Marx* quite explicitly requires capital scarcity in
>>his account of surplus value. Whatever the *social and historical basis*
>>for this condition is, Roemer simply shows that it is also generically
>>sufficient for surplus value to exist.
>OK, so is this not only the basis but the sum of your alternative theory of
>the persistence of productive interest? The scarcity of capital?
Not mine, Rakesh; *Marx's*. *Marx* is the one who insists that the
reproduction of the capitalist mode of production is premised on conditions
that ensure the absolute scarcity of capital. All I'm doing is
illustrating the implications of these conditions. And not just productive
interest, of course, but capitalist profit.
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