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This is the third installment to my reply to Ajit's (3741). It focuses on
the role of the key variable m in Marx's theory, the "money new-value
produced per hour of labor". As discussed in my last post, m is the key
variable in Marx's theory that was completely missing in the standard
interpretation and that Duncan's work has brought to light.
Ajit argues that m is completely arbitrary in my interpretation; it could
be anything, which means that new-value and surplus-value also could be
I don't think so. m is not arbitrary. Marx's labor theory of value, as I
understand it, assumes that, in a given period of time in the real
capitalist economy, each hour of average social labor produces a certain
amount (say, m) of money new-value (or money value added). Even though we
don't know what m is (i.e. we can't observe m), and even though we cannot
explain what determines m, the theory assumes nonetheless there is an
actual, unique m in the real capitalist economy. And it is this actual,
unique m that is taken as given in the determination of the total
new-value produced in this period. Therefore, m is not arbitrary; m
cannot be anything; we are not building abstract models here, where we are
picking numbers from a hat that have no relation to the real capitalist
economy. Instead, m is taken to be equal to the actual m that is assumed
to exist in the real capitalist economy. The value of m comes from
reality, not from a hypothetical model.
As Duncan has argued in (3761) (and elsewhere), the unique value of m in a
given period must be equal to NV / L, i.e. to the ratio of the money
new-value produced in this period to the average social labor performed
during this period. This does not mean that m is determined by NV / L.
It only means that m has this unique value. We don't know what
determines m. But whatever determines m, and whatever the value of m, if
it is assumed that NV = m L, then m must be equal to NV / L, and cannot by
assumption be equal to anything else.
Now, let's take a quick look at how Marx determined m in Capital.
Throughout Capital, Marx assumed that m is equal to the inverse
of the labor-time required to produce a unit of gold, or the amount of
gold produced per hour of average social labor, which he took as
given. In Chapter 3 of Volume 1, Marx said: "Henceforth we shall assume
the value of gold as a GIVEN factor, as in fact we take it at the moment
when we estimate the price of a commodity." (p. 314) In Chapter 7, Marx
derived his numerical example of m (0.5 shillings per hour) from gold
production. On the assumption that it takes two hours of labor to produce
an amount of gold equal to one shilling, each hour of gold labor produces
0.5 shillings worth of gold, so that m in all industries (e.g. cotton
yarn) is equal to 0.5 shillings per hour. And so on.
So far as I know, Marx never discussed any modification to this
determination of m at more concrete levels. But gold production is also
usually capitalist production. Therefore, the rate of profit in the gold
industry should tend to be equalized with the average rate of profit in
the rest of the economy. This seems to suggest (I could be wrong) that,
at this more concrete level of abstraction with prices of production, m
would no longer be determined solely by the gold produced per labor hour,
but would also be affected by the equalization of profit rates across
industries. But Marx apparently did not discuss this possibility at
all. Nor can I think of Marxists since Marx who have discussed this
question. If anyone knows of any discussions of this issue, either by
Marx or others, please send me the references.
Hence, this question - the determination of m with prices of production -
remains an important unanswered question in Marx's theory.
Furthermore, there is an additional important and difficult issue involved
in the determination of m. Marx of course assumed throughout Capital that
money was a (real) commodity (usually gold). There has been recent debate
on OPEL and elsewhere about whether or not money MUST be a commodity in
Marx's theory. As I have said before, I myself have not yet made up my
mind on this issue. Either way, there are difficult questions. If money
in Marx's theory has to be a commodity, then in what sense is money a
commodity in contemporary capitalism? On the other hand, if money in
Marx's theory does not have to be a commodity, but can simply be paper,
without any automatic convertibility into a commodity, then how is m
determined in this case, since it no longer seems linked to gold at
all. Duncan has written some on these issues, which I have not had the
time to review. Maybe Duncan could summarize a bit of his ideas on this
subject, or at least give us a few key references.
However, I continue to think that, even if we do not yet completely
understand how m is determined, it is still legitimate simply to take it
as given. This given m is not arbitrary, as Ajit argues. It is a
fundamental assumption of the labor theory of value that, in a given
period of time in the real capitalist economy, there is an actual, unique
m; in other words, each hour of average social labor produces a definite
amount of money new-value. This actual, unique m is what is taken as
Furthermore, even without a full explanation of what determines m, the
theory is still able to explain many important phenomena of capitalist
economies: how surplus-value (dM) is produced, conflicts over the length
of the working day and over the intensity of labor, inherent technological
change, periodic crises, concentration and centralization, etc., etc. For
more on this subject, please see my "Marxian Economic Theory: True or
False? A Marxian Response to Blaug's Appraisal", in Moseley (ed.),
Heterodox Economic Theories: True or False (1995).
The value of m may change in the real economy from period to
period. However, Marx assumed that a change in the value of m causes all
the monetary variables to change proportionally, so that the key ratios of
Marx's theory (the rate of surplus-value, the composition of capital, the
rate of profit) DO NOT CHANGE. (C.III: 236 and 238; TSV.II: 203; and
MECW.33: 106) So Marx generally assumed that m remained constant.
I look forward to further discussion.
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