[OPE-L:5382] RE: Luxury goods and profit rate

Duncan K. Foley (dkf2@columbia.edu)
Wed, 27 Aug 1997 06:07:24 -0700 (PDT)

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In reply to Ajit's OPE-L:5363:

Continuing the discussion...


>I think there are two fundamental aspects to the whole theory of value and
>exploitation in Marx: One is the pseudo exchange between the capitalist
>class and the working class, and this is primarily concerned with the
>theory of exploitation (main concentration of Volume one). This particular
>aspect is governed by the determination of the length of the working day
>and the length of the working day devoted to what the workers receive in
>this so-called exchange.

The length of the working day, is surely a key issue in capitalist society,
but aren't there other important aspects of exploitation as well, such as
the intensity of labor and the level of wages?

>Now, how should this rate of exploitation be
>determined is where we have some disagreement (my problem with the new
>interpretation of exploitation is detailed in my paper 'A Critique of New
>Solution' that I sent on the list sometime ago, and which is coming out in
>the next issue of RRPE).

I don't think I have seen this, though I'd like to, if you could send it in
a readable form.

>But before we get to that, let me mention the
>second aspect. The second aspect is the exchange between sectors and not
>really individuals. This represents the social division of labor aspect of
>the capitalist economy. Prices are necessarily a solution to the
>intersectoral exchanges. The transformation problem is essentially a
>problem of linking the relation of exploitation, i.e. the pseudo exchange
>between the two classes, and the exchanges between sectors. I think, vol.2
>is more concerned with the details of sectoral exchanges, given the rate of
>exploitation, rather than individual exchanges between capitalists and
>workers. The cost aspect of wages to individual sectors is primarily an
>aspect of exchanges between the 'wage good' and the 'capital good' sectors.

This is true of the last chapters on the reproduction schema, but not the
main focus of the parts of Volume II that concern the "circuit of capital",
which have to do with the temporal unfolding of production and exploitation
and the complex intertwining of different stages of production and
reproduction, I think.

>I think the fundamental problem with which we are dealing with here, and
>which started with my debate with Mike Lebowitz, is the meaning of the
>given money wages.

Just to set the record straight, the NS does not assume "given" money
wages. It does propose to measure the division of value created in monetary

>In a given input-output system once the real wages or
>the money wages are given, then all the relative prices are known as well.

I guess here you're assuming profit equalization through competition.

>Workers accept money wages because they know what money can buy. When we
>accept a salary of $50,000 or so or when workers accept a wage of $15/hour,
>we have a fairly good idea of what standard of living such salary or wage
>provides. Imagin that prices get determined by many other independent
>forces quite independent of given money wages, in that case the given money
>wages would turn out to be a kind of gambling for the workers. In such
>circumstance, my contension is that the system of money wages would
>collapse. This would introduce too much of uncertainty in the system. A
>large population of a system will not accept gambling with its livelyhood
>on annual or daily basis. There will be a demand that the employer provide
>a housing, medical facilities, schooling for children, transportation, and
>many such things, i.e. a demand for wages to be paid in real terms.

This doesn't sound quite right to me in terms of American (both South and
North) political economy, at least. In fact there is a substantial
uncertainty for workers as to the purchasing power of their wages, and this
is a considerable focus of union bargaining and other working class

>why a period of hyper inflation is an acute crisis situation for the
>system. One may suggest that prices do change overtime even in a normal
>situation which affects real wages. But such effects on real wages should
>not be interpreted as a result of this unique factor of wages being paid in
>money terms. But rather should be interpreted as a trend in real wages
>determined by the real factors of the economy, as the classical economists
>did. It would be incorrect to think that classical economists had some kind
>of iron law of wages. What I'm trying to say is that the idea of 'given
>money wages' implicitly assumes a given real wages. It could not stand
>independently on its own. When we take given money wages, we take that the
>money commodity is determined before hand. When we take real wages as given
>then we have freedom to chose any commodity as money commodity, and this
>provides a much more open enviorenment for working out a theory of prices.

I confess I have some problems understanding what you're getting at here.
In fact wages are paid (usually, anyway) in the form of money. If there are
some mechanisms determining the real wage, they must operate through the
formation of money wages and prices. Perhaps I'm leaping ahead, but what I
think you're driving at is a defense of the assumption w = pb where w are
money wages, p are money prices and b is a socially-historically determined
level of workers consumption. (This assumption is not made my the NS, but
it's not inconsistent with it, either.)

>>>I think
>>>the idea of 'exchange' between the *working class* and the *capitalist
>>>class* is the relevant idea here. Given that your own interpretation of the
>>>transformation problem is more 'macro accounting' oriented, I hope you would
>>>agree on the point that the wages question is eaaentially about the
>>>'exchange' between the two classes, and not individual exchanges as such.
>>But aren't there two stages? The class relations emerge from the repetition
>>of the individual relations all over the society. The "exchange" between
>>classes is not a real, direct, transaction at the macro level but a social
>>reality that emerges from innumerable individual transactions.
>This sounds like methodological individualism. I would suggest that no
>individual exchange between a capitalist and a worker takes place prior to
>or independent of the class relation they are part of. The system does not
>come into being through individuals (rational) actions. Rather all the
>individual actions take place within the given social relations.

I don't think what I said was methodological individualism. I was trying to
paraphrase what Marx says in chapters 4-6 of Volume I of _Capital_ (I don't
have the book in front of me, since I'm sitting in Logan airport)
contrasting the equality of individual worker and individual capitalist as
"freely" contracting agents with the class relations. I agree with you that
individual actions are structured by social relations, but I see the two
levels as dialectically linked, not as one of them dominating the other.
The individual wage bargains are quite real, just as the division of value
added between the classes is quite real.

>>>Now, when we take the class oriented position, then the relevant information
>>>we need to know to determine the real wages is how much of various goods and
>>>services are consumed by the working class as a whole.
>>>This information can
>>>be gathered without any reference to individual workers' subjectivities an
>>>choices. Once we know the aggregate consumption of the working class and the
>>>total numbers of workers employed/labor-time spent in the production
>>>process, we can easily determine the 'average' real wages per worker/unit of
>>>time. Thus, I think the problem of different workers might be having a
>>>slightly different basket of consumption is irrelevant. What we are after is
>>>the aggregate and the average derived from it. What would be your main
>>>problem with this approach?

I think this makes sense as an _ex post_ description of what winds up
happening. I also agree that workers' average standards of living are
highly autocorrelated, and move very slowly compared to a lot of other
prices. On the other hand, there are dramatic changes in workers' standards
of living over decades, say, and there is a challenge to understand what
underlies these changes.

>>As I said in my 1982 RRPE paper and in _Understanding Capital_, one must
>>distinguish the _definition_ of the value of labor-power from the
>>_determination_ of the value of labor-power. The NI involves only the
>>definition. As long as you maintain the definition that the value of
>>labor-power is the money wage divided by the monetary expression of labor
>>time, you are perfectly free to argue that the wage is _determined_ so that
>>it can pay for a certain historically and socially determined workers'
>>standard of living. This is _not_ the same, however, as defining the value
>>of labor-power as the labor time embodied in the commodities workers
>>actually consume, as the Morishima/Seton/Roemer/etc interpretation does.
>But the big problem, as I see it and as I have explained it in my paper
>mentioned above, with NI definition is that it makes the rate of
>exploitation dependent on the allocation of labor. In effect it says that
>if the surf was working three days on his/her land and three days on the
>landlords land, then the rate of exploitation would depend on whether the
>surf is producing rice or wheat on the landlords land, given that the
>intensity of work for the two crops remain the same. Don't you think that
>this is a problem with NI? Cheers, ajit sinha

As I understand it, no. Since capitalism is a commodity system, exchange
value comes to play the key role. They're calling my flight...

Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu