[OPE-L:1233] Re: A weakness of capitalism

John R. Ernst (ernst@pipeline.com)
Mon, 26 Feb 1996 21:41:51 -0800

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Given the distinction that Alan makes between the labor-commanded by
an ounce of gold (Value-E) and that used to produce that same ounce
(Value-P), I have some questions.

1. To what extent is this distinction related to that of individual
value and social value? Specifically, if the labor that gold
commands is greater than that used in its production, is not
its social value greater than its individual value?

2. Can abstract labor time be measured independently? If so, how?
Clearly, in theory, we can imagine abstract labor time as an
activity that exists without reference to prices or actual
quantities of money, but, in capitalism, how else is abstract
labor expressed?

3. To what extent does this distinction presuppose that the labor
time used in gold production is constant? Suppose it falls, is
the value of gold already produced affected?

Alan says:

I am happy with the expression "embodied labour-time commanded in exchange

by an ounce of gold is greater than the labour-time required to produce an

ounce of gold." It identifies the two distinct concepts, each of which can

be theorized (and, I believe, measured) separately. As long as I (and Marx)

are allowed this conceptual distinction, I claim we can say 990f what we

need to say.

To avoid loaded terminology let us call these Value-E and Value-P

Then there is a discussion to be had about how much it *matters* that
value-E can differ from value-P. Allin seems to think (this could be a
misreading) that it doesn't matter much, I think it is absolutely central.

But at least if we agree on the *possibility* they can diverge and that
therefore we must theorize Value-E and Value-P independently, then we are
talking a common language. So I take this as an important step.

What is its practical relevance? Well, can I suggest the following:

Generally speaking I am 99ertain the evidence will show that as Marx
suggests, Value-E falls below Value-P in booms and rises above it in

So we are dealing with a periodic phenomenon governed by the business

Thus, the cyclic movement of the price level is an integral and very
component of the crash-and-boom, chaotic character of capitalist
I don't think it is in itself the underlying mechanism but it is an
part of it, and in particular I think it can be shown that it is part of
mechanism that turns cyclical downturns into 'crashes'. So it is a quite

It is an important policy issue: Keynesian economics is premised on a
certain sense on the idea that this cyclic movement of the price level can
the very least be 'tamed' and compensated by government intervention.

Monetarism is premised on the reverse idea that it is a product of
forces' and that there is a natural restorative force which can be set free
act if disturbing influences are eliminated.

I think Marx says that these dynamic effects are not only non-restorative,
but cannot be eliminated. And I think this view stems from his economic
His polemics with Darimon and also with the Banking school turned on these

>From this point of view I think the word 'temporary' is ill-advised, as
is the word 'disequilibrium'.

When a pendulum is swinging, I don't view its deviations from the centre
as either a temporary, or a disequilibrium phenomenon. This would only
be a valid way to describe it if we knew of a mechanism that would result
in the pendulum eventually coming to rest.

This is the centre of our differences with the standard view of Marx, which

assimilates him to neo-Classical General Equilibrium (NCGE) for which the
is that of a self-restoring pendulum. This reading reproduces all the
of NCGE and saddles Marx with them. In particular, the idea that prices of

production and values are not just a centre of gravity (a perfectly
*non*-equilibrium concept) but a sort of *resting-point* for actually
prices and values (an unacceptable *equilibrium* concept): to which they
settle, if left 'undisturbed'.

This whole way of looking at it, in my view, has produced all the problems.

These movements are inherently dynamic. We need concepts to describe them
neither depend on nor make use of any equilibrium assumptions at all.

The very term 'disequilibrium' suggests that there is an equilibrium to be
dissed from. I prefer 'non-equilibrium' or just plain 'dynamic'.

The term 'temporary' suggests that it is only for a very short time. But
if the motion is periodic, then actually the two only coincide for a very
short time: like the Mad Hatter's watch which is right twice a day -
it has stopped. I am against the economics of the Mad Hatter, which is
I think the language of equilibrium springs from.

These issues feed into the language of practical politics. If the deviation
prices from a 'natural' norm is a 'disequilibrium, why then, is not the
task of government to intervene to restore this equilibrium? Or, perhaps,
to remove the 'disturbing forces' (such as trade unions, regulatory
state intervention...) which prevent this equilibrium occurring naturally?

And if the disturbance is 'temporary', why not leave nature to take its

But if the deviations of Value-P from Value-E are not only intrinsic
to capitalism but self-sustaining, uncontrollable and wild, then some very
different conclusions arise, since neither banking reform, nor
can eliminate their effects; in short, socialism is necessary.