(OPE-L) Re: the economic cell-form and form-analysis

From: OPE-L Administrator (ope-admin@ricardo.ecn.wfu.edu)
Date: Fri Apr 16 2004 - 15:17:11 EDT

----- Original Message -----
From: "Jur Bendien" <bendien88@lycos.com>
To: <Glevy@pratt.edu>
Cc: <Gerald_A_Levy@MSN.COM>
Sent: Friday, April 16, 2004 5:00 PM
Subject: (No Subject)

Hi Paul,

> ...the issue of what is 'materiality' in Marx, a serious stumbling
>  block for those who don't understand the concept of value.

Well, I have been accused of not understanding Marx's concept of value
in my choice of girlfriends, and I spoke also once to a chap who
thought I meant "Ma tear I all". But economics is one thing, human
affections are another. Sometimes the best way to understand something
is by starting off understanding nothing about it at all.

As regards "materiality", we discussed this before with Prof. Williams.
Marx refers to this primarily to distinguish between social forms
created by institutionalised rules governing interactions and
transactions between economic agents, and the tangible physical
substratum for these, consisting of products and labor-services
owned/controlled and exchanged. But his use of the expression is,
philologically, often very loose, suggesting variously a contrast

(1) "material and ideal",
(2) "physical and mental",
(3) "physical and social",
(4) "material and spiritual",
(5) "mind-independently objective" and "subjective or intersubjective"

The relevance of these distinctions is not really so much ontological
or philosophical, but rather practical. That is, in defining the
commodity form, what matters is the practical ability to privately
appropriate an asset through an effective transfer of ownership of the
asset from one private owner to another private owner. That is, it
must be possible to "alienate" the asset from one context or owner,
and transfer it to another. If you cannot privately appropriate an
asset, or you cannot guarantee private ownership of it, then it is not
possible to transform the asset into a saleable commodity because
exchange cannot happen, only thieving or robbing perhaps. But this
impossibility does not necessarily inhere in the intrinsic nature
of the asset itself, but rather it is contingent on technological and
social developments. Something which was not alienable may become
so, and vice versa, something which was alienable may no longer be
alienable lateron. The reasons could be technical, or they could
be social, inasmuch as legislation is adopted which
prohibits the sale or purchase of an asset. The term "material" is not
really necessary to use, but insofar as it is useful to express a
distinction, why not ? The real problems are with the use of the term
"materialism" when what is really meant is "realism" in the sense of the
mind-independent existence of the external world, which validates a
distinction between what exists objectively and subjectively.

What is interesting about intellectual property rights applied to
information and communications, is the problem-fraught nature of the
attempt to transform information into private property of a secure kind,
and to transform communications themselves into commercial transactions.
Because to accomplish this, requires a massive change in individual
behaviour of human beings themselves, who, if they e.g. "leak"
information, or if they fail to adhere to commercial communication
rules, may cause the total value of "information commodities" and
"communication services" to disappear in an instant, showing them to
have been a sort of "fictitious capital value" which just depended on
people not being "in the know" yet. That is one reason why the rule of
capital over humanity has been weakened, prompting a search for
extra-economic means to maintain bourgeois class power.

The general tendency for the capitalist mode of production is (1) to
create communication and information products and services which are
physically tangible (even if only a bit of paper which you must buy or
possess privately) and which are mass reproducible in a way which is
consistent with the commodity form, (2) to elaborate new kinds of access
rights to information and (3) to exert more control over the ability of
people to communicate in all sorts of areas, blocking them here, and
encouraging them there. My favourite example is pop music: first you
have live concerts, then you have sound recordings, and finally you have
video's, mobile phone jingles and broadcasts.

This discussion has important consequences for the discussion of
productive labour. Marxists often try to find categorical distinctions
of "materiality" and "productiveness", but in reality, these are to an
important extent historically contingent and changeable.

The real significance of "productive labour" (labour from which a
surplus product can be appropriated privately) is rather its continual
modification, in step with the development of the social and technical
division of labour. I have discussed this previously on PEN-L with Prof.
James Devine. If socialism is in good part about the transformation of
the division of labour to conform better to real human needs, then
obviously this issue is also important for socialist political economy.
Marx thought socialism was desirable not just because the exploitation
of people could be drastically reduced, but also because a much greater
economic certainty and social certainty could be achieved about all the
basic preconditions for a civilised human life (shelter, food & drink,
clothing, work, love & sex, play).

I think Marx is to blame himself to a certain extent for the
controversy about his theory of value, because of four main reasons:

(1) he used the term value to refer to different kinds of "economic
 value" and value aggregates, making different assumptions;
(2) in arranging his presentation, he tried to develop his definitions
  dialectically, with what Rosa Luxemburg called an unfuriatingly obscure
  "Hegelian rococo", aiming to get his readers to think critically and
  even "set traps for them";
(3) some of his crucial manuscripts (such as Capital Volume 3) were
  never prepared for publication by himself;
(4) he never systematically, explicitly and separately analysed the
 concept of "price" and what price aggregation actually involves in an
 epistemic, psychological and ontological sense - making appropriate
 distinctions between potential prices, hypothetical prices, theoretical
 prices, actual selling prices and final selling prices on the one hand,
 and subjectively, intersubjectively and objectively existing entities on
 the other hand.

As regards (3), here is an example for you: in chapter 49 of Cap. Vol.
3, on the analysis of the production process, Marx starts off by saying
"For the analysis now following we can ignore the distinction between
value and price of production, since this disappears whenever we are
concerned with the value of labour's total annual product, i.e. the
value of the product of the total social capital" (Pelican edition, p.

This passage seems to be consistent with the postulate that total
prices = total values which Marx adopts in examining the capitalist
mode of production in its "ideal average" (he says a little earlier
on in the same book, specifically, that Das Kapital he is "only out to
present the internal organisation of the capitalist mode of production,
its ideal average, as it were" - p. 970).

However, on the very next page, Marx admits that "In actual fact the
surplus-value is not completely realized [in the price of commodities],
for since the amounts of socially necessary labour required for the
production of a given commodity are constantly changing owing to the
constant changes in the productivity of labour, one section of
commodities are always produced under abnormal conditions, and must
therefore be sold below their individual value." (p. 972).

This second passage implies, that the postulate of total prices=total
values does not in reality hold, and is only an assumption which Marx
makes in a theoretical model. This interpretation is supported, by the
fact that Marx goes on to say cavalierly "for our present purpose the
realized surplus-value can be equated with the total surplus-value" and
that "for all practical purposes" this assumption is legitimate to make

Now this is obviously a conceptual imprecision, an inconsistency, if
not a downright sloppiness given  its theoretical importance, and due
to the fact that Marx just didn't prepare his draft up to publication
standard.  The consequence is that millions of people have subsequently
tried to render Marx more precise, but cannot all agree in their textual

But in truth, the primary foundational reasons for the necessary
distinction between value and price are precisely

 (1) the temporal discrepancy between the valorisation process in
production and the realisation process in exchange. If, through credit
and insurance mechanisms it becomes possible to achieve realisation
prior to valorisation at some future date, this basic reality about the
sequence of events is obscured, since financial claims can be made to an
output which does not exist yet. Marx referred to market-competition
inverting the temporal order in the heads of businessmen, and an
excellent illustration of this is provided by George Soros who writes:
"Every market participant is faced with the task to estimate the value
in the present of a future development of events, but that development
is co-determined by the value which all market participants together
attribute to it in the present. That is why market participants are
forced to be led partly by their subjective judgement. Characteristic of
that bias is that it is not purely passive: it has influence on the
course of events which it should represent. This active aspect is
lacking in the concept of equilibrium such as is used in economic theory.
Fortunately there exists
a measure in the external world  which gives an indication - but not a
measurement - of the bias of the participant, namely the factual course
of events. Although there exists no reality independently from the
thought of the participant, there does exist a reality which is
dependent on it. In other words, what is involved is a sequence of
events which actually happen, and this sequence embodies the interest of
the bias of the participant." (translated from the Dutch edition of "The
Crisis of Global Capitalism", p. 83-84).

(2) the fact that the only way to connect relative price movements
with human productive efforts is by means of a concept of economic value.
Marx was quite clear that this holds true also for socialist economy:
"...even after the capitalist mode of production is abolished, though
social production remains, the determination [Bestimmung] of value still
prevails in the sense that the regulation of labour-time and the
distribution of social labour among various production groups becomes
more essential than ever, as well as the keeping of accounts on this."
(p. 991). Of course it is possible to create a theory of capitalist
civilisation exclusively in terms of prices (Hayek), in terms of Culture
(Habermas) or sexual potency (Marcuse) but what matters in evaluating
these alternative theories is their internal coherence and their power
to explain empirical human experience. And here I think Marx still tops
the bill with his conceptualisation.

The deviation between produced surplus-value and realised surplus-value
does not however present any serious epistemic or ontological problem
however, because surplus-value is always observable either as
labour-hours or as prices.

The existence of a "futures economy" and a "hyper-real economy" does
not cancel out Marx's law of value by any means whatever. In my draft
reply to Paul Cockshott on Marxmail List, I have tried to explain
that the law of value in the capitalist economy must be understood as
creating a dynamic, whereby enterprises competing for market-shares of
effective consumer demand in respect of a certain product, given an
already established production price (through previous price competition
and effective demand growth), try to produce output "below value",
meaning very specifically that they try achieve a labour expenditure
per product unit, which is below the sectoral average, in order to
maximise the difference between input prices and output prices. That
is the driving force of capitalist development, and we cannot logically
express this fact other than by distinguishing, explicitly or implicitly,
between value and price. What this sectoral average is, however, cannot
be known in advance or even contemporaneously, because even if we know
labour-hours expended, we do not know in advance how the market will
valuate those labour-hours and thus how labour effort relates to prices
realised. Of course, this lack of exact knowledge is neither required to
economise labour resources, and exploit them to the maximum - and Marx's
point is that this economising and exploitation will occur, regardless of
what price fluctuations occur, except where exchange as such breaks down,
through extreme disproportions between supply and demand. Because the
whole capitalist economic system is based on maximising private gain, as
theorised by neoclassical economics.

This "new solution" of the transformation problem I have devised
(really not so new or novel !) implies:

(A) the imperative or compulsion of capitalist enterprises for trying
to maximise productivity, in the sense of maximising output per production
period, and maximising the quantity of surplus-labour, given a system of
private property and competition between juridically defined private
interests. Given market uncertainty created by competing private
enterprises, and the lack of control over (1) the cost-structure of
production and (2) market-prices for output in response to a changing
effective demand, this imperative will moreover exist regardless of
specific market fluctuations, a very important point.

Since, for that reason, the productivity of labour stands in inverse
ratio to the value of commodities in the defined sense, the rate of profit
will fall, unless it is offset by market expansion and/or reduced input
costs ( we are no longer talking about a "tendency" here, we are talking
about the socially imposed necessity to offset that fall).

But because of (1) the uneven development of capitalist enterprises
themselves in space and time under competitive conditions, (2) the
uneven growth pattern of supply and demand under competitive conditions
given unequal bargaining positions of enterprises, social classes and
individuals, and (3) an historic increase in the proportion of constant
capital (fixed equipment, raw materials and ancillary physical operating
costs) advanced, the rate of profit must eventually fall. This
interpretation of the necessary connection between LoV and the TPRF is
however a minority viewpoint, in the sense that most Marx interpreters
do not agree with it.

As regards (3), the empirical proof is that there is almost no branch
of production anywhere in which wage-costs as a component of total capital
expenditure have increased proportionally, and in almost all branches,
wage-costs have decreased as a proportion of total capital expenditure
in the last two-hundred years. This is quite easy to demonstrate with
the statistical information and business data we have available.

(B) that new surplus-values produced as a component of new output are
themselves never "transferred" between producing enterprises, as the
often-used "pooling metaphor" suggests (see e.g. Mandel's false
description of this), because

(1) those surplus-values exist only as expenditures of living labour
which are stored in actual output at a specific point in time,

(2) the realisation of more surplus-value or less surplus-value as a
component of gross enterprise income is due to

(i) individual enterprises producing below value or above value - the
"value" here being a sectoral average, or

(ii) the income receipt or added cost of a surplus-profit, obtained
through blocking competitors for a given market demand (Mandel is quite
correct in saying that in reality the quest for surplus-profits becomes
the dominant mode of competition in modern capitalism).

Instead, the "transfers of surplus-value" apply to unequal exchange
and to commercial activities in the sphere of circulation (purely
financial transactions concerning the transfer of ownership), which
grows on the basis of capitalist production. This interpretation
permits an analysis of the cost-structure of a unit product with
a final consumer price, in terms of wage costs, producer profit,
interest, rents, insurance profits, distributor costs and profits,
wholesale profits and retail profits etc. Again, this is a minority
viewpoint, in that most Marx interpreters do not agree with it. They
are often trapped in official national accounting categories which are
based on a specific concept of production and income distribution which
includes items which Marx classifies as belonging to circulation, and
excludes items which Marx classifies as income newly generated by
production (I won't develop this point in detail here).

The conceptual problem in estimating the new net social product for
national accounts is, that we must distinguish for all transactions,
within a complete system of transactor types, between (1) what is a cost
to production, and what is a revenue from production, and on this basis
(2) what is "gross" income & expenditure and what is "net" income and

To do this, you necessarily require a distinction between (1) new
value created and value conserved, and (2) production and circulation, but
what can be the basis for that distinction, if you only have price flows
to work with, and no systematic categorisation of the social relations
of production and exchange ?

In reality, double-entry bookkeeping techniques, used for centuries to
report aggregate financial transactions of private enterprises, are
generalised by social accountants to the economy as a whole, according
to institutional definitions, but this cannot be done in a completely
consistent and socially objective manner, precisely because that
bookkeeping is done from the point of view of the class of private
enterprise-owners only.

To understand this, consider that if profit simply equals sales less
costs, then if in market exchange "one man's monetary gain is another
man's monetary loss", then theoretically all the gains and losses should
cancel each other out, and the aggregate profit of the whole economy
should equal zero. The fact that it consistently doesn't equal zero,
just means that the source of new value and profit has not been
conceptualised adequately, and the result of that is an eclectic
conception of profit which, in economic textbooks, is attributed to all
kinds of sources (the reward of entrepreneurial risk or innovation, the
cost of using capital, and all sorts).

The whole point of Marx's "Theories of Surplus-value" and "Capital"
was to get rid of these vulgar notions through a conceptually precise,
historically established distinction between production and circulation,
and between value and price. And it was in fact Marx's distinctions
which inspired Kuznets and others in their statistical aggregation
principles for national accounts - this was acknowledged even by JM

The primary problem of our epoch is that the increasing inversion of
the realisation process of capital and the valorisation process of capital
through the expansion of credit (with the slogan "live now, pay later,
and if possible shift the costs to somebody else who's weaker than you
are") has definite limits, beyond which key economic events could
trigger a very large default of debt repayments and a breakdown of the
market system. The fact that this problem exists at all, shows that
Marx's sequential analysis of the transformation of values into prices
of production is perfectly valid. But of course it is one thing to admit
that, it is another thing to demonstrate how capitalists try to mediate
this contradiction. After all, if capitalist development is a highly
contradictory process, then the real path of capitalist development
consists of the specific mediations of those contradictions; and it is
here that the natural and cultural substratum of the market, to which
Alvater refers, is particularly relevant, since, in the midst of political
apathy among the masses, it provides the rationales for renegotiating
terms of exchange and the bargaining power of competing private interests.



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