[OPE-L:454] Re: International value.

Steve.Keen@unsw.edu.au (Steve.Keen@unsw.edu.au)
Wed, 8 Nov 1995 14:10:56 -0800

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My apologies for a truncated version of this being sent earlier!
To continue--hopefully without the double-spacing problem that
caused me to abort (and unintentionally send an incomplete

Looks like I'm going to be busy--and probably under attack -:(--
on OPE-L today, so I'll start with the least controversial
of my posts (replying to Makoto and John) on complex
labor and value creation. And I doubt that this will be

This post concerns the problem of the reduction of skilled labor
to unskilled.

This problem was actually solved by Hilferding in his reply
to Bohm-Bawerk. This fact has been missed by subsequent
marxists because, in the early part of his reply, Hilferding
actually seemed to dismiss the system of logic that he later
used to successfully solve the reduction of skilled labor to

This logic is what I have elsewhere called "the dialectic of
the commodity", which revolves around the distinctive use
to which Marx put the concept of use-value. But rather than
trying to explain that, I'll go straight to Hilferding's
solution to the problem posed by Bohm-Bawerk:

Marx did not actually consider the mechanism by which skilled
labour is reduced to unskilled labour, in *Capital* or any other
work. Nonetheless, Bohm-Bawerk accurately characterises the
reasoning subsequently used and the results reached by Sweezy
and Meek, where they effectively followed the same procedure
as Marx employed in considering the value contribution of
the non-labour inputs to production, when he says that if
the labour which went into educating a workman simply
reappeared in the product, then "there could only be
actually five hours of unskilled labour in one hour of
skilled labour, if four hours of preparatory labour
went into every hour of skilled labour".(Sweezy
(ed.), _Karl Marx and The Close of his system_,
pp. 84-85.)

Hilferding's reply was that:

"The labor of the technical educator thus transmits, not
only *value* (which manifests itself in the form of a
higher wage), but in addition its own *value-creating
power*. The formative labours are therefore *latent
as far as society is concerned*, and do not manifest
themselves until the skilled labour power begins to
work. Its expenditure consequently signifies the
expenditure of all the different unskilled labours
which are simultaneously condensed therein." (p. 145.)

This has been misinterpreted by subsequent authors
(e.g., Harvey,"The Value-creating Capacity of Skilled
Labour in Marxian Economics", *Review of Radical Political
Economics*, Volume 17 No. 1/2, 1985, pp. 83-102.) on the basis
of the last sentence:

"skilled labor is seen as an expenditure of simple labor
to which is added (1) a proportionate share of the workers
own past simple labor spent learning the skill, and (2) a
proportionate share of the direct and indirect labor of others
who contributed to the training process... In Hilferdings
words an expenditure of skilled labor, `signifies the
expenditure of all the different unskilled labor which
are simultaneously condensed therein." (Harvey, pp. 86-87)

This interpretation is understandable, but the real intent of
Hilferding's analysis is contained in the first sentence: he
separates the transmission of value (which adds to the cost,
the wage, of skilled labor) and the transmission of value
creating power (which adds to the productivity, and therefore
the surplus generated by, skilled labor).

To explain how education can increase both the value of
skilled labor and also the value-creating power of that
labor--thus enabling an hour of skilled labor to
produce much more value than an hour of unskilled
labor--Hilferding refers to education transferring
both value and use-value to the student. He first
hypothetically reduces the labor of the tutor to
"a number of unskilled labors". Then, he characterizes
the value-creating power as the use-value of the
technical educator: training "thus creates on the
one hand new value and transmits on the other to
its product its use-value--to be the source of
new value." (p. 145).

"Unskilled labour, if applied to the production of a
qualified or skilled labour power, creates on the one
hand the value of this labour power... but on the
other hand ... it creates a new use-value, ... that
there is now available a labour power which can
create value with all those potentialities possessed
by the unskilled labours utilized in its formation."

He reiterates this in the next sentence: training
"thus creates on the one hand new value and
transmits on the other to its product its
use-value--to be the source of new value."(p. 145)

Hilferding thus argues that education passes on
the use-value as well as the value of the
education to the student. The latter increases
the cost of the skilled labourer; the former
increases the skilled labourer's ability to
generate value. With this explanation, Hilferding
is comfortably able to conclude that skilled
labour is worth multiples of unskilled labour
in value creation terms. This concurs with
Marx's belief, expressed in *Capital* Volume
I, that a skilled worker is worth perhaps
six unskilled ones in value creation terms.

This analysis explains that training itself can be
a source of surplus, and is based around the concept
of a quantitative difference between the exchange-value
of education (which adds to the value of the "output",
so that the cost of developing a skilled laborer
exceeds the cost of developing an unskilled
one) and the use-value of education (which
adds to the value-creating ability of the "output",
so that a skilled worker is able to create value
over and above that needed to impart the
education). Thus not only is a skilled worker
more productive than an unskilled one, training
can also lead to more surplus generation by a
skilled worker than an unskilled.

One consequence of this analysis is that you can't ex-ante
"reduce" a given skilled labor to so many multiples of
unskilled labor, based on the amount of labor-time that
has gone into training the worker. That labor-time represents
the additional value of the worker, which helps determine
his/her exchange-value. But it bears no relation to the
use-value of this labor, the value-creating power of the
skilled laborer.

This is in contrast to the (unsatisfactory) approach of
Meek, Sweezy et al, which does not make the distinction
between value and value-creating power (still less
employ use-value and exchange-value in a dialectic
fashion). There an ex-ante comparison can be made, but
the end product is that the skilled laborer creates no
additional value compared to an unskilled laborer, but
simply "unwinds" the hours that have gone into his/her
training over his/her working life. As Meek put it:

"there is little difficulty (at least in theory) in
reducing skilled to unskilled labour.... If *p* hours
is his expected productive life, and *t* hours of
simple labour have been expended upon him and by him
during the training period, then when he starts work
each hour of his labour will count as (1 + t/p) hours
of simple labour."(Meek, Studies in the Labor Theory
of Value, 2nd edition, p. 172)

Hilferding's method, in contrast, has no set ratio between training
input and the additional value productivity of the skilled labourer.
The training inputs will determine the wage paid to skilled
labour,(Footnote: if competitive conditions prevail in the market for
skilled labour, which is unlikely.) but the additional productivity
of the skilled labourer, being the use-value of the education
imparted, is independent of the cost of education. The skilled
labourer can therefore add much more value to output than his or her
education cost--which as Hilferding points out means that education
can be a source of additional surplus value.

Steve Keen
PS There is an obvious dilemma in the above, to which I alluded:
earlier on in his reply to Bohm-bawerk, Hilferding appeared to
argue that use-value played no role in political economy. Yet
here he is actively using the concept to solve an economic
problem--the reduction of skilled labor to unskilled.

The solution is to realise that what Hilferding was rejecting
was the assertion that the use-value (utility) of a given
commodity plays any role in determining the value (price or
exchange-value) of that same commodity. I'll take this up
in a subsequent post.