[OPE-L:8395] Re: Re: Electronics and Value

From: Paul Adler (padler@usc.edu)
Date: Mon Jan 27 2003 - 11:29:55 EST

Thx Jerry. The general idea of my post was this: that Marx seems to 
be suggesting that as direct simple labor recedes in importance to 
the production of goods -- to be benefit of (a) very
"complex" labor (that embodies in "living" form society's accumulate 
scientific and technical knowledge) and (b) automated equipment (that 
embodies, in "dead" form, a growing body of science and technology) 
-- the the yardstick of (exchange) value on which the functioning of 
the capitalist systems function relies -- socially necessary labor 
time -- loses its ability to effect the essential coordinating 
function.  We should therefore observe a growing reliance on 
conventional, rather then "economically determined" prices.

You seem to think such a shift is inconsequential. My hunch is that 
this would have several consequences that add to the instability of 

_  At 10:05 AM -0500 1/23/03, gerald_a_levy wrote:
>Re Paul A's [8373]:
>I don't understand why you interpreted the following:
>>  My starting point is the Grundrisse:
>>  "As soon as labour in the direct form has ceased to be the great
>>  well-spring on wealth, labour time ceases and must cease to be its
>>  measure, and hence exchange value [must cease to be the measure] of
>>  use value." (705)
>>  That is: Science becomes increasingly central to productivity
>>  improvement, but that makes the market system of coordination
>>  increasing ineffectual.
>Please explain.  [Note:  for the benefit of others who prefer the MECW
>translation, see Volume 29, p. 91.]
>>  My hunch is that because of the public-goods nature of knowledge, the
>>  pricing of knowledge intensive goods/services/assets cannot be
>>  determined "economically" (classically, by socially-necessary labor
>>  time requirements, or even neoclassically, by supply and demand) --
>>  because these requirements are essentially indeterminate.
>>  Instead, I conjecture, these prices will be determined by social
>>  convention. How does a law firm set fees? Or a commercial R&D
>>  company? I think these firms set prices by reference to non-economic
>>  norms.
>It is entirely possible that individual prices are established "by social
>convention" peculiar to 1 or more specific branches of production.
>This can then give the appearance that prices no longer have a
>relation to the law of value.  However, there is the question of how
>surplus value is distributed among capitalists, e.g.  does the
>establishment of the arbitrary 'convention' by some capitalists come
>at the expense of other capitalists?  There is also the possibility, if
>the 'knowledge' commodities are means of consumption purchased
>by the working class, that there could be a redistribution of value
>from the working class to a segment of the capitalist class.  There is
>also the question of rent which you discuss below.
>>  Expanding on this -- Is the following reasoning tenable?
>>  1. Suppliers of knowledge-intensive goods are not sure what price
>>  would cover their costs, for two reasons. First, the main source of a
>>  firm's innovative ideas is society's total stock of knowledge rather
>>  than assets held privately by the innovating firm.
>Yet, there is also proprietary information held by corporations which
>is only indirectly part of the social 'stock' of knowledge.  The cost of
>that  internal information is accounted for internally or at least can be
>>  Given the
>>  public-good character of much of that knowledge stock, identifying or
>>  justifying a "raw materials" cost for new ideas generated from this
>>  knowledge stock is difficult. Second, an innovative idea is just as
>>  likely to arise during free time as on the job, so identifying a
>>  "transformation" cost is difficult.
>An "innovative idea" is not the same as innovation.  I gather you are
>referring to "discovery" (as distinct from innovation).  While it is
>conceivable that the discovery of a new process or product can
>occur during one's free time, it is certainly _not_ just as likely
>to occur during free time as it does during working time.  That is,
>both discoveries and innovations are overwhelmingly produced
>during working time (and one could argue that if one is thinking
>about an "innovative idea" during one's "free time' then it really
>isn't free time at all but rather unaccounted for working time. Yet,
>this working time disguised as free time  _could_ then be
>accounted for as a cost.)
>>  Whereas competition between
>>  suppliers of most other types of goods drives prices toward their
>>  marginal costs, no comparably grounded "supply schedule" guides the
>>  price of knowledge.
>>  2. The customer side is no easier. The potential customer for an
>>  innovation typically cannot judge the worth of the idea without
>>  having its secret revealed, and intellectual property protection is
>>  cumbersome and expensive (Arrow's old point).
>True, but there is no way that consumers can know for any class
>of commodity to what extent individual prices differ from values.
>Putting it in similar terms to what you expressed above, consumers
>are familiar with 'conventions' for the pricing of individual commodities,
>i.e. they have historical experience purchasing  different classes of
>commodities, but they still have no way of _knowing_ whether those
>prices established by convention are equal to the value of those
>>  Moreover, intellectual
>>  property rights, compared to property rights in other kinds of
>>  assets, lack a legitimating material substratum.  See (1) on  the
>>  difficulty of determining the price of knowledge based on its
>>  production cost; the alternative basis would be rent, but rent is
>>  only a viable price-form when the asset in question is not
>>  reproducible and is rivalrous in use, whereas knowledge (at least in
>>  its codified forms) is reproducible at close to zero cost and
>>  nonrivalrous in use. Its price is therefore less grounded in any
>>  material considerations: it is purely a function of convention and
>>  relative power. Lacking a legitimating material basis, intellectual
>>  property is amongst the most contentious of forms of property (could
>>  we show this??). Perhaps that is why patent rights are so often
>>  bundled and bartered in dyadic trade rather than sold on open markets.
>We briefly discussed (in December, 2002?) the question of whether
>rent theory could be used to comprehend the value of software.  It
>was a short exchange as I remember (with Paul C participating). Perhaps
>we should return to that question.  
>>  Of these 2 sets of concerns, the supply schedule ones seem more
>>  troublesome and we could imagine that the demand schedule ones  might
>>  not be insuperable. But even if only the supply schedule disappears,
>>  surely price formation will become very strange, no?
>Yes, very strange. 
>>  3. If this reasoning is approximately correct, the prices of
>>  knowledge-intensive goods should behave differently, be more
>>  "brittle," no? I imagine that we would find them more stable for
>>  longer periods, and changing thru radical breaks rather than gradual
>>  evolution. But I don't yet have a good theory with which to
>>  characterize the differences between conventionally-determined rather
>>  than economically-determined prices.
>Re brittleness:  this sounds like something that could be empirically
>>  Perhaps there is some literature
>>  that would serve as a starting point -- perhaps even the literature
>>  on land prices and absolute rent??
>Didn't you suggest above that for determining the price of  knowledge
>commodities, rent theory was inadequate?
>>  If we could straigthen out the theory -- and if there was anything
>>  left to my brittleness hunch when that was done -- then you could
>>  imagine testing that  hypothesis on:
>>  * asset prices: compare the evolution over time of the stock prices
>>  of more vs less knowledge-intensive firms (as measured by R&D
>>  intensity or % of labor force in professional categories)
>This could probably be done if, as you say, your theory is
>straightened out.
>>  * labor prices: compare the evolution over time of the prices of more
>>  vs less knowledge-intensive forms of labor (i.e. more vs less skilled
>  > and schooled) -- this complicating the list's discussion of the value
>>  of complex labor!
>Well, this could be done empirically perhaps, but what would it tell
>us in the absence of a class analysis of  struggles by different segments
>of workers?
>>  * product prices -- compare the evolution over time of the market
>>  prices of more vs less knowledge-intensive
>>  commodities/products/services
>Could be done subject to straightening out first.
>>  Marx's discussion on automation in the Grundrisse suggests that
>>  advanced capitalism poses  challenges to the price system's ability
>>  to coordinate economic activity.
>More anarchy?
>>  The labor theory of value (Marx
>>  says) isn't his theory, but is rather the theory that capitalism
>>  itself relies on, and as capitalism develops, this theory becomes
>>  increasingly obsolete, because labor becomes a less significant and
>>  identifiable factor of production.
>Some empirical work, e.g. by  Allin and Paul C, suggests that
>underlying labor value is a good predictor of commodity prices
>in  contemporary advanced capitalist nations, e.g. the UK
>and US.  This doesn't seem to me to be consistent with your
>assertion. [NB: I am not endorsing the conclusions of the AC/PC
>empirical work here, I am simply noting that there are empirical
>studies which do not seem to be consistent with your thesis.]
>>  As a result, he "value form"
>>  wobbles increasingly unstable on a narrowing base. Thus:
>>  "instability" -- leaving aside the question of macro economic crises
>>  (that's an open question!) then, I read him to say, growing
>>  instability in each specific market.
>I'm not sure of a way that we could test that proposition, but I am
>skeptical of the idea that there has been increasing instability
>over the long term in "each specific market".
>Solidarity, Jerry

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Prof. Paul S. Adler,
Management and Organization Dept,
Marshall School of Business, 
University of Southern California,
Los Angeles, CA 90089-0808
USC office tel: (213) 740-0748 
Home office tel: (818) 981-0115
Home office fax: (818) 981-0116
Email: padler@usc.edu
List of publications and course outlines at: http://www-rcf.usc.edu/~padler/ 
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