[OPE-L] Sraffian surplus vs Marxian surplus

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Thu Jun 29 2006 - 17:25:32 EDT

Thanks for the ref, Ajit.

I wrote about govt macroeconomic models:

"It is a largely pragmatic exercise, strongly empirically oriented, and most
of the references to "equilibrium" in it are rhetorical flourishes. What
they mean is that if you have an imbalance here, you get an imbalance there,
and if you have a balance here, you get a balance there, but at any time
there are really both balances and imbalances."

Of course I could add another variant, i.e. that a balance here implies an
imbalance there, and an imbalance here implies a balance there, i.e. the
quest for equilibrium is riddled with contradictions. So really, the
capitalist equilibrium only exists as a sort of "modus vivendi".

I find the problem with concepts of economic "equilibrium" is, that it is
epistemically difficult to know when you actually have one.

In theory, of course, you can say that there exists a set of ideal prices at
which demand and supply would match. But in reality, practically, at most a
businessman can estimate stuff like "this is how much we can possibly sell
at a given price over a given interval" (which economists can dress up with
the concepts like the marginal propensity to consume, opportunity costs, and
the like), which however really implies the concept of equilibrium is
tautological - a given price structure means there is a supply-demand
balance, and at the same time, a supply-demand balance means a given price
structure. It is just a sort of faith that a price can be found at which
supply and demand will balance.

This may be reasonable to suppose in particular cases, but I could equally
well argue that there exists actual demand and potential demand, and actual
supply and potential supply, *dependent* on price.

So then the next step in the argument, is that if prices empirically remain
stable, this MEANS that there is a supply-demand balance, the proof is, that
prices remain stable. But the reason that prices remain stable  could be
almost anything, e.g.  just that sellers cannot afford or do not want to
sell below that price, and that a portion of buyers cannot afford the price
at all, and therefore do not buy it. In other words, price stability may not
tell us anything about real or potential demand or real or potential supply;
it is merely that market-allocation is thought to be more desirable than any
other form of allocation. So really I think the concept of "economic"
equilibrium is best seen as the self-justification of the market, i.e. it is
an ideological, not a scientific notion.

I think Karl Marx knew this very well, and that is why he never bothered
much about prices and concentrated on value-relations in order to reveal the
real motive forces impelling economic actors, who were caught up in a market
situation which none of them could control. One had to rise above the hustle
and bustle of the marketplace, in order to understand its overall dynamics.

Thomas Sekine argues in the article I mentioned that "Marx's theory of
surplus value which defines the fundamental capital-labour relation in
Volume 1 of 'Capital' holds true only in an equilibrium situation. We can
talk neither of value nor of surplus-value rigorously, when the economy is
out of equilibrium" (loc. cit. p. 9).

Already here he is mistaken, because Marx does not assume any equilibrium,
he assumes only equal exchange here. We could of course argue that the two
mean the same, but they don't - you can have equal exchanges without
supply-demand balance. Marx just assumes for the sake of argument in Cap.
Vol. 1 that commodities will be sold (at their value), but this does not
imply equilibrium ipso facto.

Then Sekine goes on to say, "a state of economic equilibrium in the
capitalist economy tends to be approached only in the phase of average
activity in the course of a business cycle (...) Bourgeois (or neoclassical)
economics is not to be criticised for elaborating the concept of
equilibrium, but for universalizing it without questioning its ontological
base (...) if the tendency towards a general equilibrium could not be
identified at any moment of its dynamics, such an economy could not be
regarded as 'capitalist' in any meaningful sense" (p. 10).

I don't see how this follows either. What he means by equilibrium here is,
that given the prevailing technological conditions, demand and supply for
labour are in balance, and "average profits" (?) are earnt in all sectors of
production. But how do we know that this balance exists, and what does it
mean? It seems to me like like Sekine's equilibrium has become a statistical
artifact. How do we know the labour market is "in balance"? Presumably the
labour market would be in balance if there was full employment? What are
these "average profits"? The very notion of average profits statistically
means, that there exist above-average and below-average profits, which, if
we average them, yields an average. But there is always an average possible,
what now is the "equilibrium" average?

I think what we have to conclude is that Thomas Sekine is apologising for
"the market" here, he's happy to join in the faith that the market tends to
reach equilibrium on its own. That is a faith, because there is no evidence
for it, and plenty evidence to the contrary. His faith is the obverse of his
claim that there is "no evidence" of the law of value operating. Actually,
what he is really arguing is, that there *cannot* be any evidence for the
law of value operating by definition, it's just an abstract concept. Well if
economics was that easy, we'd be away laughing. We could just solve
economics problems pondering at our writing desks. In reality, we do
actually have to look at the evidence. The question that remains is, why you
would believe in the concept of the law of value, even although there is no
evidence for it whatsoever? Is it, perhaps, a sentimental attachment to the
prose of Karl Marx and Kozo Uno? Why would Marx have adopted the concept of
the law of value, if there was no evidence for it?

This is actually what Marx says about it:

"Every child knows that any nation that stopped working, not for a year, but
let us say, just for a few weeks, would perish. And every child knows, too,
that the amounts of products corresponding to the differing amounts of needs
demand differing and quantitatively determined amounts of society's
aggregate labour. It is self-evident that this necessity of the distribution
of social labour in specific proportions is certainly not abolished by the
specific form of social production; it can only change its form of
manifestation. Natural laws cannot be abolished at all. The only thing that
can change, under historically differing conditions, is the form in which
those laws assert themselves. And the form in which this proportional
distribution of labour asserts itself in a state of society in which the
interconnection of social labour expresses itself as the private exchange of
the individual products of labour, is precisely the exchange value of these
products. Where science comes in is to show how the law of value asserts

And here we really get to the crux of the issue - Marx is talking about a
social and physical necessity for matching society's needs with the products
of human labour, through economic exchange. That is the "ontological basis"
for talking about a "law"; somehow, this necessity has to be reflected in
trading ratios and relative prices. The question then was how specifically
this law would assert itself, but if there cannot be any evidence for the
law, as Thomas Sekine argues, we cannot even answer this question.

At most we could agree with Sekine that neoclassical economics overextends
the concept of equilibrium. But not because a tendency to equilibrium
applies to a specific phase of the business "cycle" only, but instead
because it happens to be the self-justification of the market, the faith
that demand and supply will match. Behind this ideology, is the rational
thought that in markets, an equilibration (or calibration) process occurs
whereby supply and demand tend to adjust to each other. Marx regarded this
as a rather obvious insight requiring no great erudition. But this continual
adjustment process itself does not imply that any equilibrium exists at any
time, and theorising it does not require any reference to any hypothetical
necessary equilibrium. At most Marx says that for the expanded reproduction
process to occur, there are certain proportions of supply and demand which
are necessary, and that the growth path of capitalism will occur through
continual adjustments which approximate these proportions. But since there
is competition among private enterprises, and no overall coordination of
economic resources, that adjustment process occurs haphazardly and unevenly.
Unfortunately, Sekine doesn't seem to understand that Marx's concept of
economic reproduction and the market concept of economic equilibrium have
nothing in common. The first condition for economic reproduction is not
supply-demand balance, but the ability to reproduce the initial conditions
of the process through the process (and reproduce them on an increasing


This archive was generated by hypermail 2.1.5 : Fri Jun 30 2006 - 00:00:03 EDT