Re: [OPE-L] A startling quotation from Engels

From: Ian Wright (wrighti@ACM.ORG)
Date: Sat Aug 25 2007 - 14:40:30 EDT

> But the master rule to follow in scholarly debates is to be as rational as possible and
> avoid discrediting the opponent with spurious accusations.

Alejandro, I think this is hyperbole. I am not trying to "discredit"
you or "accuse" you. I wrote, "I'm not sure you are well-versed in
Marx's law of value". I think that your understanding of Marx's value
theory is likely to have been attained via second-hand critical
sources, which distort and vulgarize, set up a straw man etc. This is
a critical observation.

My apologies, however, if you think I have treated you unfairly,
particularly since I am genuinely very happy that you are contributing
to OPE-L. I hope you continue to do so because mutual critique is
essential for the progress of knowledge. Growing one's ideas in a
mono-culture makes them weak.

Of course, this is a list devoted to developing Marx's critique of
political economy, so you must expect to be contradicted when you
sally forth in this area.

> But when, referring to Engels, I wrote that only when market reaches the
> point where commodities are fully useful, then commodities have their full
> labour value (otherwise market mechanism depreciates its labour content) you
> formulated the question: Isn't it precisely the other way around?

Why do you think that the labour-value of a commodity depends on the
market? The labour-value of a commodity depends on the conditions of
production. In Marx's theory by definition it is not possible that the
"market mechanism depreciates [the] labour content" of a commodity.

The price of a commodity and the labour-commanded by a commodity is,
of course, another matter.

> Why do you believe that market prices lag labour-values? Because you (1)
> have in mind a fictitious concept: that of an attractor;

Labour-values are a property of the conditions of production. If the
conditions of production change, say that corn requires less labour
for its production, then labour-values immediately change. Marx: "the
value of a commodity is determined not by the quantity of labour
actually realized in it, but by the quantity of living labour
necessary for its production. A commodity represents, say 6 working
hours. If an invention is made by which it can be produced in 3 hours,
the value, even of the commodity already produced, falls by half".

In contrast, market prices do not immediately respond to changes in
technique. They are formed over time via the circulation of
commodities and money, the increase or decrease in inventories, and
the local decisions of producers and consumers.

Almost by definition market prices must lag labour-values.

Furthermore, the concept of an attractor, or a fixed-point, or a
locally stable equilibrium etc., far from being a "fictitious
concept", is in fact one of the more important advances in the
scientific understanding of causality.

Although the classical economists did not have the mathematical tools
that we now enjoy they nonetheless formulated the distinction between
market prices and natural prices, between the process of gravitation
and the point that is being gravitated towards. Market prices are
determined by a plethora of contingencies. In contrast, the concept of
natural price is intended to uncover a major determinant of the
long-term trajectory of market prices, specifically in terms of the
objective "difficulty of production" of commodities.

> and because you (2)
> are not considering price as a sharp mechanism for rationing goods according
> to gained and lost individual marginal utilities. You can't accept the
> second one without harming the first one.

Economic actors have subjective preferences. And of course prices
function to reallocate scarce resources according to social demand.
But who would deny that? You will need to explain further why you
think such facts contradict a LTV.

> Labour time is reallocated in a
> market economy thanks to the full action of entrepreneurs according to the
> profitability of production but, what hides back profitability? The
> willingness of consumers with sufficient buying power to execute it. The
> primary motion of market mechanism in Capitalism rests on monetary
> capability to consume, and on a plain willingness to consume in Market
> Socialism provided that the distribution of income is almost equal.

I am very wary of the notion that profit is merely a technical signal
of consumer demand. Surely in capitalism profit also signals to what
extent the capitalist class can exploit the working class? But even if
your characterization of the meaning of profit is accepted, I still do
not understand why you think the existence of
-- supply and demand dynamics
-- consumer preferences
constitutes a refutation of the possibility of a LTV.

Merely having a preference, and spending one's money differently, does
not change the objective "difficulty of production" of bringing
commodities to market. This is not exclusively a Marxist insight, by
any means. You will find such common-sense, objective notions at the
birth of political economy.

> The idea of an attractor could be useful to imagine the steady state of an
> equilibrium provided that there is not technological change and consumer's
> preferences are static.

On the contrary, the concept of an attractor is essential in order to
understand the dynamics of the economy, particularly when there is
technological change and changing preferences.

An attractor is a property of causal laws. Initially, let's say we
abstract from technological change and changing preferences. Assume
that we discover that market prices gravitate toward natural prices,
which are proportional to labour-values, a property of the prevailing
conditions of production. We label this dynamic process "the law of
value". Already, even at this stage of analysis, the situation of
prices proportional to labour-values is an exceptional special-case.
The "law of value" does not refer to an equilibrium point, it refers
to a law of motion.

Next, let's say we introduce changes in technique. Does this new
source of change invalidate the law of value? Not at all. A change in
technique alters the labour-values that prevail in the economy. Hence
the attractor of the law of value is now subject to change. In this
more concrete situation, market prices therefore follow a trajectory
governed by an attractor that itself has a dynamic trajectory,
governed by the laws that determine changes in technique.

My necessarily brief sketch already underlines the importance of the
power of abstraction. In order to fully understand the empirical
evolution of a complex system, such as an economy, we need to
analytically separate parts of the system, study those parts in
isolation in order to understand their essence, and then synthetically
combine the parts to understand how their interaction mutually
determine concrete reality. Uncovering the deep and hidden casual laws
that govern the apparent contingency and randomness of empirical
reality is one of the tasks of science.

So my scientific instincts sound the alarm when I hear of any approach
that starts with empirical reality and market prices, forms the
empirical generalization that market prices rarely, if ever,
correspond to their labour-values, and then concludes that
labour-values in principle cannot explain market prices. Despite the
initial impression of empirical relevance, I do not believe that this
kind of methodological approach will ever attain a full understanding
of concrete reality. For example, Newton's laws of motion, which
represented an enormous step forward in human knowledge, are in every
case *directly contradicted by empirical experience*. It is no
accident that the classical economists employed the metaphor of

Human subjectivity is of course an essential part of the causal
relations that constitute an economy. For example, the decisions of
your heroic entrepreneurs will indeed play some role in determining
which new technologies are produced, adopted etc. (although if we are
not beguiled by Schumpeter's elitism it is easy to see that changes in
technique are almost always the result of the efforts of the working
class). But you will need to explain further why you think this fact
implies that labour-values are not objective properties of the
economy, as per the Mises quote you gave earlier.

> But then you have to face a crude reality: labour
> value in itself doesn't attract prices, but you as a planner have to follow
> prices to allocate labour.
> If you do not so, consumer market will depreciate
> the labour content of products and you will have an imbalanced economy with
> overproduction of some products and underproduction of others. You will have
> not sold inventories and long lines of consumers trying to catch their most
> subjectively valued products.

I am not convinced that detailed planning of a socialist economy is
either feasible or desirable. But since I have not studied or thought
very deeply about this problem I prefer to say nothing. I do think
however that a proper understanding of the causal laws and dynamics of
capitalism, and the development of computational and mathematical
models, can contribute to your and Paul's project of designs for
post-capitalist economic organization.

Best wishes,

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