[OPE-L:4333] Re: Re: SV, labour and machines

From: Steve Keen (s.keen@uws.edu.au)
Date: Sat Oct 28 2000 - 09:50:47 EDT

Hi Andy,

Thanks for the reply--I am enjoying our exchange, so don't take the
following the wrong way -:), but I'll use a riposte to your argument which
Marx himself used against Ricardo:

Summarising Ricardo, Marx says that in Ricardo's system:

"The *value of labour* is therefore determined by the *means of
subsistence* which, in a given society, are traditionally *necessary* for
the maintenance and reproduction of the labourers.

But why? By what law is the *value of labour* determined in this way?

Ricardo has in fact no answer, other than --- the law of supply and demand
--- He determines *value* here, in one of the basic propositions of the
whole system, by *demand and supply*---as Say notes with malicious
pleasure." TSV II, p. 400.

Marx is also adamant that one has to have a logico-historical argument as
to why labour embodied differs from labour commanded; you can't merely take
it as a premise:

"Ricardo starts out from the actual fact of capitalist production. The
value of labour is smaller than the value of the product which it
creates... The excess of the value of the product *over* the value of the
wages is the surplus-value... For him, it is a fact, that the value of the
product is greater than the value of the wages. How this fact arises,
remains unclear. The total working-day *is greater* than that part of the
working day which is required for the production of wages. Why? That does
not emerge." TSV II,  pp. 405-06.

So Marx scoffs at the idea that "supply and demand" could be behind the
divergence which exists between the use-value and exchange-value of the
labourer, which in his system is the (or in my argument, a) source of
surplus-value. I therefore hardly think that Marx could or would avail
himself of the proposition that supply and demand would cause the use-value
and exchange-value of a machine to be equalised.

Marx put the incommensurability of use-value and exchange-value as a
general phenomenon which applied to all commodities in capitalism, and used
a logico-historical argument as to why this incommensurability exists. It
therefore applies to all inputs the capitalist purchases, not just labour.

In fact, Meghnad Desai--who was one of the few Marxists to realise how
central this use-value/exchange-value logic was to Marx--attempted to
reinterpret it in a way which did allow for the difference you are
suggesting in his Marxian Economics. However, the way he did it effectively
violated every one of Marx's strictures about the nature of exchange under
capitalism (as well as contradicting Marx's key concept that use-value and
exchange-value are incommensurable).

Desai argued that, because of the power relations between capitalists and
workers, the capitalist pays the exchange-value of the worker and gets the
use-value. However, because a capitalist purchases a machine from another
capitalist, the power relations are equal and the capitalist pays the
use-value and receives the use-value, hence no surplus is generated from

This proposition runs completely counter to Marx's arguments that one
should not even attempt to explain surplus on the basis of unequal exchange
when one is attempting to deduce the general laws of capitalism: "A worker
who buys commodities for 3s
appears to the seller in the same fashion ... as the king who does the
same." (Notes on Adolph Wagner in Carver, T., Karl Marx: Texts on Method,
p. 241).

That's *not* to say that machines--or labour--actually exchange at their
values, because both are not true commodities. The use-value/exchange-value
dialectic for commodities points to another for products which are both
commodities and non-commodities. But this issue comes up at a later stage
of the argument. At the stage of Capital I, Marx is treating
everything--including money and labour--as commodities, and therefore
abstracting from higher dialectics which attenuate the general rule in

When Marx allows that machines--or rather, capital in general--is not a
simple commodity (something which applies strictly only to products on the
C--M--C circuit), then it is possible that the use-value of capital does
play a role in determining its price. But here this brings in issues of the
role of expectations and uncertainty in determining asset prices. This is
evident in another critique of Ricardo, this time over the issue of how is
a price determined for undeveloped minerals:

"Ricardo never uses the word *value* for utility or usefulness or "value in
use". Does he therefore mean to say that the "compensation" is paid to the
owner of the quarries and coalmines for the "*value*" the coal and stone
have before they are removed from the quarry and the mine---in their
original state? Then he invalidates his entire doctrine of value. Or does
*value* mean here, as it must do, the *possible* use-value and hence the
*prospective exchange*-value of coal or stone?" TSV II, p. 249

I have argued that this concept provides a foundation for a common
proposition in Post Keynesian economics, that there are 2 price levels
under capitalism--one for standard commodities, and one for assets and
means of production. This might look like it completely counteracts the
initial argument, somewhat in the manner you suggested, so that the
exchange-value of a machine equals its use-value.

But (a) this implicitly accepts that machines can produce surplus-value, in
that their use-value exceeds their cost of production, and (b) this is a
highly volatile price: when expectations of future profit are high, the
price of an asset like that Marx discusses above could rise well above, not
just its cost of production, but even its actual return (which can only be
found out in the uncertain future), and in times of slump, it could fall
well  below its cost of production.

At 04:00 PM 10/27/2000 +0100, you wrote:
>Many thanks for the very interesting long post. A lot to chew on but 
>the key seems to be your view that the important distinction 
>between machines and labour does not entail that SV is only 
>produced by labour. The 'tortuous' argument of Marx, denying that 
>machines produce SV, that you refer to is difficult (though not 
>tortuous) only because Marx's prior notion of value and labour is 
>entailed, imo. Anyway Marx's argument seems to me to amount to 
>the following:
>IF a machine were, in general, to contribute more value in 
>production than it initially costs THEN the laws of free exchange - 
>ie. supply and demand - entail that its price will go up until equal to 
>the sum of (present) value contributed. This is simply the 'law of 
>one price': the machine and its contribution to production are 
>merely different forms of the same commodity (the potential form 
>and the realised form), rather than being two distinct commodities, 
>hence their price (present value) is the same. What do you think?
>Best wishes,
Dr. Steve Keen
Senior Lecturer
Economics & Finance
University of Western Sydney Macarthur
Building 11 Room 30,
Goldsmith Avenue, Campbelltown
PO Box 555 Campbelltown NSW 2560
s.keen@uws.edu.au 61 2 4620-3016 Fax 61 2 4626-6683
Home 02 9558-8018 Mobile 0409 716 088
Home Page: http://bus.macarthur.uws.edu.au/steve-keen/

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