[OPE-L:3998] Re: e: m in Marxs theory

From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Fri Oct 06 2000 - 23:02:02 EDT

Some comments on Gil's response:


>  Duncan writes:
>>Doesn't this kind of miss the forest for the trees? I think Marx's
>>point was that capitalist societies operate on the basis of money
>>value calculations, particularly profitability calculations, and that
>>the basic macroeconomic determinants of profitability are the ratio
>>of the value of output to the value of capital (what Tom Michl and I
>>call the "productivity" of capital) and the ratio of profit to total
>>value added (which is a transformation of the rate of exploitation).
>>I take the essence of Marx's theory of value to be the observation
>>that you can't change the rate of profit in the macroeconomy without
>  >changing one or the other or both of these variables.
>If I read it correctly, the ratio product that Duncan emphasizes here
>corresponds to the identity between the average rate of profit for the
>economy and the productivity of capital times the profit share of net
>product, or something very close to that.  But you certainly don't need a
>labor theory of value to perceive or express any such macro
>identity--manifestly it can be stated, is stated, in monetary terms, and
>many non-Marxian theories deal with macro entities represented in monetary

OK, I'll bite. What are the non-Marxian theories that determine the 
profit rate by starting from this identity? You might not "need" the 
labor theory of value to get to this way of thinking about the profit 
rate, but in fact it's the only path anyone has ever taken to it, as 
far as I know.

>   Thus a labor theory of value would have a particular claim of
>relevance with respect to this expression only if it offered some special
>insight into the determination of the ratios on the right-hand side of the

Which it does. It leads you to start thinking about how the wage 
share is determined, and about the dynamics of changes in the 
productivity of capital (closely related to Marx's theories of 
relative surplus value and technical change).

>...Given this emphasis on determination of the wage *rate* rather than the
>wage *share*, one would logically get a more direct insight about the
>determination of the profit rate, the left-hand side variable, from
>something akin to the Sraffian wage-profit frontier, rather than the macro
>expression Duncan isolates above.

I agree that this is a problem in Marx, because he oscillated between 
his own early version of the Ricardo-Malthus view that wages would be 
pushed down to subsistence and a later version (expressed in the 
falling rate of profit analysis in Volume III of Capital) that 
emphasizes a relatively constant value of labor-power (i.e., wage 
share). The Sraffian approach to this problem undoubtedly yields some 
insights that are worth following up, but it isn't the only 
interesting path. For example, Goodwin's model of the labor market is 
another, as is Marx's theory of induced technical change.

>On the latter issue, the main claim about capital productivity that Marx
>derives from his value analysis is the rather indirect one that the drive
>for *relative* surplus value leads capitalists to favor capital-using,
>labor-saving technical innovations (i.e. those that increase the organic
>composition of capital for a given wage rate).  But this does not follow:
>first, individual capitalist firms would logically adopt any innovation
>(product or process) that promised to increase profits, no matter what
>doing so implied for the organic composition of capital; and second, there
>is no reason to think that capital-using, labor saving innovations would
>necessarily tend to predominate over other forms, e.g. innovations that
>were *both* capital- and labor- saving (a reasonable assessment of the
>effects of the computer revolution on many forms of production).

As Dumenil and Levy point out (Metroeconomica 1995) there is a close 
relation between the wage share and the bias of technical change, 
even if the underlying pursuit of cost minimization is completely 
neutral between capital-saving and labor-saving. It's not as easy to 
save both labor and capital as it is to save one by using the other.

>...I don't see how Duncan infers that the stated identity "was Marx's [main?]
>point" in developing his value theory, or that a story about the behavior
>of the right-hand side ratios constituted "the essence of Marx's value
>theory."  There is so much else that Marx emphasizes as fundamental
>implications of his value analysis.  I count at least five substantive
>(albeit in some cases highly problematic) claims that are emphasized by
>Marx yet not directly reflected in Duncan's formulation:
>1)  The notion that that commodity prices are somehow "regulated,"
>"rationalized (i.e. rendered non-"imaginary")" or at least in some
>meaningful sense undergirded by corresponding labor values, measured by
>socially necessary labor time, a notion that Marx twists himself into
>logical knots to defend under conditions of pure competition in V.III,
>Chapter 10.  A corollary of this is his attempt to establish the aggregate
>"transformation" identities in Ch. 9.

Where does Marx "emphasize" this?

>2)  The notion that surplus value, and therefore exploitation, is the
>fundamental basis of capitalist profit.  [This idea is so fundamental to
>what Marx argues in Capital that I'm surprised it finds no direct
>reflection whatsoever in Duncan's representation of "Marx's point."]...

This is precisely the point I was making, as far as I can see.

>3)  The notion that the primary significance of the labor/labor power
>distinction lies in accounting for the possibility of surplus value given
>the "pure" case that all commodities exchange at their respective values (a
>fallacy I expose in an as yet unanswered thought experiment in OPE-L 3538).

I've read your extensive critique on this point, which I think makes 
some good points. On the other hand, maybe Marx was just trying to be 
pedagogically effective, and was particularly worried about his 
audience getting the idea that profit could come from just "marking 
up" costs in price.

>4)  The notion, alluded to above, that the desire for relative surplus
>labor leads capitalists to adopt predominantly capital-using, labor-saving
>technical innovations, leading to persistent unemployment and the
>"tendential" immiseration of the working class.
>Marx uses this argument to account for the persistence of capitalist
>exploitation in the face of capital accumulation.  Its validity requires
>some strong assumptions that are obscured by Marx's value-theoretic
>analytical framework.

I don't think we completely understand these interactions even now, 
but Marx's analysis of endogenous technical change provides a 
perfectly good starting point for working through them.

>5) The notion that the bias in technical innovation mentioned in (4) is
>sufficient to establish a "tendency" for the rate of profit to fall.
>Incidentally, Marx's falling profit rate story is not based on an analysis
>of the relative behavior of the ratios that Duncan isolates.

I'd dispute the last point. It seems to me that's exactly what he's 
talking about, even though he uses slightly different language.

Duncan K. Foley
Leo Model Professor
Department of Economics
Graduate Faculty
New School University
65 Fifth Avenue
New York, NY 10003
messages: (212)-229-5717
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e-mail: foleyd@cepa.newschool.edu
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webpage: http://cepa.newschool.edu/~foleyd

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