Re: Quantifying Values - response to Juriaan

Alan Freeman (
Wed, 21 Jan 1998 22:57:35 +0000

Juriaan writes (20 Jan 12:18):

> Insofar as the manfacturer
> pays out interest on borrowed capital, it is a production cost to him, and
> insofar as it is clear this cost is paid out of current manufacturer's
> income it represents an appropriation of surplus-value by the lender from
> the social point of view. The banks make money out of lending capital to
> industry etc. and the interest they receive is a fraction of surplus-value.
> That's all I am saying. <snip> I agree with Alan
> that "interest payments can be either one or the other. Either they are a
> manufacturing cost, or they are an allocation out of profits. They cannot
> be both". But I did not specifically argue they were both, merely saying
> that interest can be a cost, or a source of income.

I think that the source of our puzzlement may be the use of the word
'production' in 'production cost'. Let's look at that.

Every payment is a cost in a certain sense. If I buy a radio, it costs me
its price. If I pay interest, it costs me whatever the bank can get away
with charging me. If I buy iron to make steel, that is a cost also.

However the total 'costs' in this general sense of any given capitalist
resolve themselves into three parts:

(1) constant capital, that is, raw materials and machinery
(2) wages
(3) profits or surplus value

In the context of his analysis of productive and unproductive labour, the
last two are Marx's 'revenues' and the first his 'capital': so when he
speaks of exchanging against capital, he means an expenditure out of
constant capital; when he speaks of exchanging against revenue, he means an
expenditure either out of variable capital or surplus value.

These account for the whole of the value of the product [though not, I
hasten to say to avoid a hornet's nest, by 'adding up to it']

Productive and unproductive expenditures reduce to this: if you think a
cost is productive, you will put it in constant capital, and if you think
it is unproductive, you will put it in revenue. There is nowhere else for
it to go: no hiding place. In NIPA terms, either it adds value, or it's a

Now, the issue concerning interest is 'what kind of cost is it'? To me, the
word 'production cost' conveys a deduction from constant capital: something
that goes into the product in the same way as steel, energy (or, to take
the case of a productive service, communications). A production cost is
something that is exchanged against capital, as opposed to revenue.

Is interest a production cost, something without which one would not have a
car? Or is it something external to the labour-process as such, something
that may (or may not) help sustain the society that permits this
labour-processs, but isn't an indispensible pre-requisite for an individual
capitalist to make a car?

I don't particularly care which answer you give. That isn't my point in
this discussion. My point is that you can't give both. For each sum of
money that the capitalists spend, on the basis of some theoretical
criterion or other, you must either allocate this sum to capital, which is
what I would call a production cost, or you must allocate it to revenue.

Nor do I think things are any different when we operate at the social
level. Total capital is the sum of the individual capitals that make it up.

Now, what is the relation between this and Marx? To some extent it is
unfortunate to come into the middle of a discussion that's been going on
for the best part of two years, and it isn't your fault. Nevertheless, both
Andrew and myself have been at pains systematically to argue on this list
that it is extremely dangerous to impute to *Marx* errors that in fact
arise from his *interpreters*. The reason that this is dangerous is that it
is the means by which the economics profession censors Marx, from which
stems a lot of real human suffering, so that this is not a small or an
academic matter. That's why both of us keep coming back to it, and for my
part, I am not going to stop coming back to it until the point is taken:
above all by the Marxists since they occupy a special position they are
not always aware of: their word is greedily accepted by the rest of the
profession as proof positive that Marxism must be in error, since his own
closest followers are the most enthusiastic to denounce him.

The standard argument against Marx is as follows: "it is evident, from
reading Marx as I choose to do (justified either by the fact that this is
how everyone reads him, or in the case of the originals such as
Bortkiewicz, justified by the fact that it doesn't fit with Walras) that
Marx appears to have a variety of views. I don't understand how they fit
together. I presume, therefore, that I am free to interpret these views as
I see fit and choose which one I like. On examination, my interpretation
turns out to be incoherent. Therefore, Marx is incoherent. Therefore there
is no need to discuss Marx further and we can safely write him out of the
curricula, substituting instead the bits of Marx that I like."

All the better if I can now establish myself as an authority, and better
still get tenure, on the strength of my particular version. Especially
since, having so convincingly shown that Marx's thought as a whole isn't
worth the paper it is written on, it won't do the slightest damage to let
me prattle on about my own 'corrections' to his thinking until the cows
come home, and it even helps to be able to cite me as a 'balanced'
authority for the prosecution.

I (Alan) wouldn't be so insistent on this point were it not for the fact
that this is not a comedy but a real human tragedy: I have become convinced
that at least from the point of view of its theoretical treatment, this is
the principal means by which orthodoxy has been imposed by the profession.

I don't expect anything different from non-Marxists. I am frequently
appalled that 'Marxists' lead the way in the denunciation of Marx, and that
they slip into it so casually and so thoughtlessly, as if it were just an
incidental observation. It isn't an incidental thing to make a judgment of
this character. It has an impact, just like a small racist jokes: each one
may seem innocuous, but they all add up to a climate in which many more
unpleasant things happen than jokes or casual disclaimers. This is why I
get irritated by it.

So, in conclusion: I think it is rather important to make a clear
separation between the difficulty of the subject matter itself, our own
difficulties in grappling with a subject, and the errors of those who
studied it before us. Until convinced otherwise, I suggest as a wise
working hypothesis first to look for the problems in our own thinking, next
in the subject matter, and finally and very late on -- if ever -- others
who studied it first.

I especially recommend this as it is the diametrical opposite order to that
usually adopted by economists.