[OPE] classical macrodynamics and the labor theory of value

From: Jurriaan Bendien <jurriaanbendien@online.nl>
Date: Thu Feb 03 2011 - 05:50:52 EST


Marx's initial criticism of Smith is, that Smith thinks the the value of a
commodity is V+S instead of C+V+S, or more precisely, Cfc+CCc+V+S.

Smith's idea would imply, that the value of a commodity (or an output) is
equal to the net factor incomes it generates.

In fact this is not so, since fixed capital is consumed and intermediate
goods are used up as well - these items are necessarily part of the
production cost. In modern national accounts, this difference is resolved
via the distinction between gross output and net output. Smith, like the
physiocrats, ran into trouble when he tried to find a consistent procedure
for grossing and netting the national product.

Marx thinks, that because Smith defines the concept wrongly, Smith cannot
theorize the difference between value (C+V+S) and the production price
(C+V+P) and show how they are related. The classical economists kept
confusing surplus value with profit, and the rate of surplus value with the
rate of profit. This leads to inconsistencies, and in the end, only a vulgar
theory of "factor rewards" remains.

However most economists have also confused the modern distinction between
gross and net output.

Namely, they think the net output of an industry is equal to the net value
of the goods or services it produces, so that, e.g., the GDP of the car
industry equals the value of the cars it produces.

This is also a mistake, because the value of the cars produced also includes
intermediate costs. The net output refers only to the "gross value added" of
the car industry. The total output sales of cars is the gross output.

So really economic science hasn't advanced much since Adam Smith on this
issue - the same errors continue to be propagandized. The recent revisions
of national accounts aim to bury the concept of product-value altogether,
and mystify the sources of new wealth.

There is a good essay to be written on the concept of production prices,
which rips the shit out of the nonsense of Marxist academics and the
post-Sraffians, but I haven't written it up yet.

When the New Zealander Ronald Meek originally defined the issue for New Left
Marxists in his Studies in the Labour Theory of Value, Meek was very much
influenced by Maurice Dobb and Piero Sraffa, because, after all, he studied
under them. The whole postwar tendency was to assimilate Marx to Ricardo,
Smith and Sraffa. But in so doing, Meek actually misrepresents the real
theoretical development of the classical theory, as well as Marx's critique
of it. Towards the end of his life, Meek made it quite clear that he could
not understand anymore "what you needed value theory for". This was many
years before Ian Steedman's "Marx after Sraffa" repeated the vulgar theory
that, since all we need is prices, the concept of value is redundant.

Mathematical equations cannot substitute for conceptual precision in the
definition of measuring units; they can only reveal the logical and
quantitative implications of concepts and measurement units. That is why we
should never be baffled by mathematical bullshit from academics whose only
intellectual rigour consists in their ability to formalize their preferred
abstractions - while smuggling in a causal theory of the operative forces at
work which is never defended. It is just "hot air", to borrow Ian Wright's

Most Marxists (and neo-Ricardians) know almost nothing about social
accounting, even when they use social accounting concepts. Therefore, their
"mathematics" cannot be taken very seriously, they don't even know what they
are counting. In fact they don't even have a scientific understanding of the
concept of "price", nevermind "value".


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