[OPE-L:111] Re: the "law of value" (was: Marx's goals)

Gilbert Skillman (gskillman@mail.wesleyan.edu)
Fri, 22 Sep 1995 07:32:47 -0700

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One will see from the following that in most of the points Jim raises
we aren't in disagreement. I don't see how raising irrelevancies is
going to help us focus our attention on what parts of Marx's
foundation needs to be rebuilt, and what parts should be carried

I emphatically *do not* want to restage the lengthy Ch. 5 debates
from PEN-L. If avoiding this implies not identifying (still unrefuted)
logical disparities in Marx's basic argument, then so be it; it's not
like I'm on this list because I have lots of free time I don't know
what to do with.

> In addition to Paul's points, it is important to realize that
> there are more ways in which prices can "regulate" prices than the
> standard "transformation problem" way (i.e., that there's some
> mathematical formula which can be used to calculate a given price
> of production from values which are presumed to exist independent
> of prices).

The transformation refers to only half of the sense in which Marx
suggests that values "regulate" prices, so this in no way contradicts
the sense of my argument.

> A very common meaning of the word "regulate" comes at things in a
> different way, i.e., that prices and values are related at the
> macro-societal level. (One mainstream thinker with this view is
> William Baumol; see also my article in RESEARCH IN POLITICAL
> ECONOMY 1990.)

It may be a very common meaning, but it is not Marx's meaning as he
makes clear throughout Capital and in other places. Why bring this
up? It doesn't address my argument.

In this perspective, often stated as one of Marx's
> so-called "invariance conditions" (not a term Marx used), total
> value = total price (where both are stated in the same units and
> both are added up in a way that avoids double-counting). (Also,
> total surplus-value = total property income (profits, interest,
> rent, etc.))

One can assume this, or redefine values to guarantee this by fiat,
but these invariance conditions are not in general valid as other
than heuristic assumptions. Again, this does not address my

As a society, capitalism hires wage-labor to produce
> value and surplus-value. Once realized, these limit the amount of
> value and surplus-value that can be distributed to individuals: in
> terms of commodities rather than values, one can't receive real
> income unless _someone_ produces products corresponding to it.
> (BTW, this is definitely a non-tautological proposition.)

Yes, and it definitely has nothing whatsoever to do with Marx's law
of value. That's been my point all along.

> In this perspective, we can reconsider the price of a commodity
> that has no value, a case which at first seems to reinforce the
> orthodox Marx-critic's attack on Marx's law of value. Marx
> mentions such things as unimproved ("virgin") land, the activity
> of lending money, and conscience as having prices but no value.
> But how can such a commodity have a price if it has no value?
> The fact is a commodity owner may not actually have contributed to
> the flow of value but can nonetheless lay claim to part of
> society's value. As Mike L. points out, the appearance of
> everything is reversed when the role competition is introduced. A
> money-lender (e.g.) can claim a fraction of society's value that
> was produced by someone else -- because loanable money-capital is
> scarce (usually).

Yes, just so. Also what I've argued.

But it is (productive) labor that actually
> produces the value. After the value has been produced, it is
> redistributed to the money-lender or the owner of unimproved land
> or the seller of conscience.

Yes. Repeat above.

> The owner of the commodity with no value is one of those folks who
> can benefit from individual appropriation of value and
> surplus-value without directly contributing to the socialized
> production of value and surplus-value. The fact that the
> zero-value commodity has a price is just as much part of Marx's
> value theory as is the fact that some commodities' prices are
> highly correlated with their values: it is part of the
> contradiction between individualized appropriation and socialized
> production.

It might be part of Marx's theory of exploitation, but it is not part
of his "law of value", as he characterized it. The above is
inconsistent with Marx's insistence that surplus value can't be the
result of price-value disparities.

> >> And ... Marx doesn't simply make this abstraction [price
> proportional to value] for convenience; at the end of ... Chapter
> 5 he *insists* that one must be able to account for surplus value
> on the basis that commodity prices and values are proportional.
> That's invalid: price-value equivalence is neither necessary nor
> particularly relevant to a world in which profit (and therefore
> exploitation) exists. <<
> (1) What Marx _insists_ on at the end of K1 ch. 5 is that "the
> formation of capital [i.e. the creation of surplus-value] must
> be possible even though the price and the value of a commodity
> be the same, for it cannot be explained by referring to any
> divergence between price and value." (n. 24 of Vintage/Penguin
> ed.)

But yes it can: the divergence of the value of the money commodity
in the form of capital from its price, i.e. interest. Yes, to
anticipate subsequent comment, something else must be presupposed
(production of value), but this must be supposed in explaining
surplus value whether or not one presumes price-value equivalence.

> The reason why he _insists_ on assuming that price is
> proportional to value in K1 and K2 is that if it isn't then one
> is simply talking about _redistribution_ of value, as when the
> money-lender grabs a fraction of the value without contributing
> value. If one doesn't separate out the redistributions, one has
> a harder time dealing with the actual production of value and
> especially surplus-value (which allows the money-lender to earn
> interest).

Surplus value doesn't include simple redistribution only because Marx
defines it that way (without justifying the restriction) in Ch. 4.
Of course value, to be redistributed, must first be produced. I
don't see why there is any "hard time" in seeing this, once one
accepts the fact of exploitation. Even granting that production must
occur in the course of the circuit beginning with M and ending with
M', my argument still holds.

It's Marx's way of avoiding the fallacy of
> composition: he abstracts from the price/value deviations to get
> an idea of what's happening on the societal level and to not get
> bogged down in the microeconomic and fetishized perspective of
> the participants of the system and most economists.

I've already explained why this abstraction, though possibly having
heuristic value, is seriously misleading. As far as avoiding a
fallacy of composition, Marx compensates for it by committing a
fallacy of division in Ch. 5; cf. Marx's comment "The capitalist
class of a given country, taken as a whole, cannot defraud itself."
True but utterly irrelevant.

It sure
> looks _to the money-lender, the seller of virgin land, the
> seller of conscience, and the neoclassical economist_ as if
> they're "producing property income." But says Marx, they
> couldn't appropriate any of that property income at all if it
> weren't for the capitalist hiring and exploiting wage-labor,
> regulated by the reserve army of the unemployed.

Exactly the problem: neither theory nor history (including Marx's
reading of history) establishes that capitalists must hire labor power,
"regulated by the reserve army of the unemployed" or not, for capitalist
exploitation to exist. These things intensify the rate of
exploitation, but they are not necessary to it.

> In most of K1, by assuming individual prices are proportional to
> values, Marx deals with capital as if it were a "representative
> firm," with capital in general exploiting labor in general,
> abstracting from the particular characteristics of both capital
> and labor. In K3, he deals with the obvious limitations of this
> abstraction. There not only a more complete conception of
> competition but the differences amongst capitalists are
> introduced. Once he's figured out where surplus-value comes
> from, he can deal with its distribution and redistribution,
> together with price/value deviations.

Is this an argument? It doesn't seem to clash with what I've said
about the law of value or its connection to the theory of

> Actually, Marx seems pretty favorable in this note to the idea
> of using prices of production rather than values in his effort
> to ferret out the etiology of surplus-value, as when he says "he
> would formulate the problem of the formation of capital as
> follows: How can we account for the origin of capital on the
> assumption of that prices are regulated by the average price,"
> i.e., the price of production? I for one am glad that Marx
> didn't use this formulation,

He used what was formally an extreme version of it in Volume I, i.e.
that prices are proportional to values.

since is dealing with the ideal
> equilibrium state of equalized profit rates (one that seems
> extremely unlikely to me). Values are not necessarily
> equilibrium phenomena.

They can't be, by Marx's definition. They are a statistic of
production conditions, not market conditions.

> (2) Gil writes that Price/value proportionality is >> invalid:

No, I didn't, I wrote what Jim quotes below.

> price-value equivalence is neither necessary nor particularly
> relevant to a world in which profit (and therefore exploitation)
> exists. <<
> Marx is also very clear in the same note that "average prices
> [prices of production] do not directly coincide with the values
> of commodities."

Yes, I know he is, and didn't say otherwise.

> However, price/value proportionality is a
> _useful abstraction_, since it reveals the societal nature of
> captital and its exploitation of wage-labor.

I've already explained why the abstraction, however "useful", is
essentially misleading about "the societal nature of capital and its
exploitation", whether of wage labor or not, as corroborated by
Marx's analysis in Vol. III of circuits of capital which did not
presume hiring of wage labor.

Sure, once the rate
> of surplus-value is positive (profit exists), prices of
> production will differ from values (unless, as is extremely
> unlikely, all capitalists have the same organic composition of
> capital). But in order to understand why prices of production
> differ from values, one has to first understand why
> surplus-value exists.

No, it's a problem of simultaneous determination. As a *strictly
logical* matter, price-value disparity is not implied by the
existence of surplus value; Marx's Volume I analysis purports to
establish this. As an economic matter, surplus value generically
corresponds to the existence of price-value disparities, so Jim's
suggested order of priority is misleading at best.

>It cannot be simply assumed the way
> neoclassicals do (as with their silly aggregate production
> function).

Utterly irrelevant.

The job of understanding why surplus-value exists is
> facilitated by Marx's assumption of price/value proportionality.

No, it's harmed by it, as I've already explained.

> Gil's last comment seems to be a criticism of all abstraction.

Of course it isn't. I'm all in favor of abstraction. Just not
essentially misleading abstractions.

In the hope of moving forward,

Gil Skillman