- As you come in, I’ll start to welcome you. I’m Paul North. And these are the Franke lectures in the Humanities at the Whitney Humanities Center. This is a series called the value of Marx’s capital, which I’m convening along with my co-conspirator, Paul Reitter at Ohio State who is the valiant translator of a new translation of Volume I into English.
- The series is also a companion to an undergraduate seminar. So the undergrads have valiantly gone through Volume I, with a kind of a microscope and they’ve survived and if they have survived, they’re in the audience tonight. I have to read this. The Franke lectures are made possible by the generosity of Richard and Barbara Franke, and are intended to present important topics in the humanities to a wide and general audience. I need to thank as I always do, Alice Kaplan, the director of the Whitney Humanities Center, Sandra Malan-Bowles and Leana Hirschfeld-Kroen who have done behind the scenes organizing and Audrey Leak who is our tech genius, making things stay on track. I know a lot of you have been here. So you’ve heard this before. We will have the presentation from our speaker. Then, tonight we’re going to have a short response by our friend and another co-conspirator Michael Heinrich, who’s back to discuss a little bit with Fred Moseley, and then we’ll open to questions, hold your questions and put them into the chat.
When we get to that period, otherwise, I will lose them. I’m doing my best to keep everybody in order. It is a great pleasure to introduce Fred Moseley who is an emeritus professor of economics at Mount Holyoke College, where he taught Marx and Marxian economic theory for many years. He has published extensively on Marxian theory and the Marxian analysis of the US economy. His latest book is “Money and Totality,” a macro-monetary interpretation of Marx’s logic in “Capital.” And the end of the transformation problem, we can celebrate that that was from 2016. He also edited and wrote the introduction to the English translation of Marx’s economic manuscript of 1864 to 65. These are the manuscripts that are newly translated into English that became Volume III of “Capital,” edited by Engels.
He’s a longtime member of the Union for Radical Political Economics, and served as program director for the URPE sessions at the annual convention of the American Economic Association for 10 years. I’d like to welcome Fred Moseley. Fred, I’m gonna give the microphone over to you.
- Well, thank you very much, Paul. And thank you for the invitation to participate in this very interesting and innovative, I think, seminar.
I’ve watched some of the other sessions and it’s been really an inspiration to hear the different perspectives on Volume I. Thanks also to the Whitney Foundation for the generous funding for this seminar that is really quite a contribution. Both the theory and the pedagogy, I think Marxian theory.
Well, the paper I’m gonna present tonight is different from my original intention and the one I sent to Paul in September just to explain a little bit. That paper was an overview of all of Volume I with a focus on these two important aspects that I discussed in my recent book, The monetary nature of Marxist theory in Volume I, and the macro nature of Volume I, mainly explaining the total surplus value and the economy as a whole. However, listing to the presentation by my old friend, Michael Heinrich, in his presentation in the seminar, I thought I would add a few comments to my paper, and then I kept adding more and more comments, and eventually I had a whole new paper, obviously very stimulated by Michael’s opportunity to engage again with Michael and it decided I would discuss this new paper in my presentation, both because that’s what I’m most interested in at the moment and I also hope you will be more interesting to participants to dig deep into the all important chapter one, and to consider these two somewhat different interpretations of this important chapter. Some of you may have read the other paper and have questions about that, I would of course be happy to discuss.
And let me say, even though Michael and I disagree about some aspects of interpretation of Marx’s theory of value and money, in chapter one, I wanna say at the outset how much I appreciate Michael’s contribution to Marxian scholarship and how much I have learned from him especially about the MEGA.
I first learned about the MEGA from Michael in the early 90s from a 1989 paper he published in Capital and Class about the manuscript of 1861, 63, published for the first time in the MEGA in the 80s, and almost unknown at the time, among English speaking Marxist and I was very excited, including myself.
I was very excited to learn about MEGA. And much of my research since then, has been related to the MEGA in one way or another.
So for me, and for many other English speaking and German challenged Marxist, Michael, has been a very important kind of conduits from the German Marxian scholarship, and especially the MEGA to Anglo Marxist, which I appreciate very much. You could say today, maybe Michael has been a sort of super spreader, in a good sense of the term of German Marxian scholarship.
So my talk will focus on chapter one, then, by all accounts chapter one is a very difficult chapter. And for that reason, very controversial.
Yeah. Marx said in the preface to the first edition, if you remember, beginnings are always difficult in all sciences. The understanding of the first chapter will therefore present the greatest difficulty. “I have popularized,” he says,
“the passages concerning the substance of value “and the magnitude of value as much as possible.
The section and the form of value is the most difficult. “My favorite preference, actually, the Volume I “is to the French edition.” I don’t know if you’ve noticed this or not. But he says, “the method of analysis which I have employed, “and which had not previously been applied “to economic subjects, “makes the reading of the first chapter rather arduous.
“And it is to be feared that the French public “substitute the American public, “always impatient to come to a conclusion, “eager to know the connection “between the general principles and the immediate questions
“that have aroused their passions “may be disheartened because they cannot move on at once.”
Marx says “this is a disadvantage “I am powerless to overcome, unless it be by for warning and for arming those readers who zealously seek the truth.
“There’s no royal road to science, “no easy road to science, “and only those who do not dread “the fatiguing climb of its steep paths “have a chance of gaining its luminous (indistinct).”
So you probably have found chapter one to be a fatiguing climb.
And I hope there will also be some looming assignments.
So first, I wanna briefly describe the overall logical structure of chapter one
that Marx alluded to in these prefaces. And the key point to understand about the logical structure is that there are three main aspects of Marx’s concepts of value. It’s a complicated concept, right?
And these three aspects are
substance of value, the magnitude of value, and the form of appearance.
Value and so, I will briefly describe each one of these.
First the substance of value, right? This is the common property of commodities, that determines their exchange values with other commodities, which Marx of course assumed to be the abstract labor required to produce commodities.
So, that’s the substance of value, the common property that determines the exchange value.
Right? Then the magnitude of value is quantitative, right? The quantity of the substance of value required to produce commodities, the quantity of abstract labor required, contained in commodities which Marx called the socially necessary labor time contained in commodity, right?
So substance magnitude then the form of appearance of value, the money and prices, the observable phenomena, right?
The substance and magnitude of value are not directly observable as such, in units of abstract labor, therefore, commodities require an observable form of appearance, so that the magnitude of each commodity can be compared and equated with the magnitudes of value of all other commodities. And this observable form of appearance is ultimately derived as money and money prices.
Sections one and two of chapter one are about the substance and magnitude of value, section one is the most important. The title of section one is substance of value, the subtitle, substance of value, magnitude of value, right? In section three is about the form of appearance of value, its title is the value form, or exchange. The part I wanna emphasize is that there is a strict causal relation between these three aspects of value.
Causal relation is that the substance and the magnitude of value are derived and presupposed in section one, one and two, and then the form of appearance of value is derived from the substance and magnitude of value in volume three.
So I think it really helps us to understand this overall logical structure. And then the whole chapter I think, becomes more intelligible and perhaps less of a fatiguing climb, excuse me, my voice isn’t what it used to be at 19.
Okay, so then one more kind of introduction, just to kind of preview and identify four important, controversial issues, involved in chapter one,
in the interpretation of chapter one. So the first issue is in section one,
Marx’s derivation of abstract labor, as the substance of value as the common property of commodities, that determines their exchange values.
And the issue is, what’s the logic of this derivation?
And is the derivation value acceptable?
Second issue with respect to the magnitude of value, defined in Volume I, is this magnitude of value of property of each single individual commodity, or is the magnitude of value a property of multiple commodities possessed jointly together?
Actually, I learned from an email from Michael yesterday that perhaps we don’t disagree as much as I previously thought about that. And so I’m happy about that and will not concentrate on that as much.
Third issue. And this is really, I think, the most important issue both between Michael and myself and the general Marxian scholarship, is the magnitude of value determined entirely in production, the production process or does it also depend at least in part on circulation and demand for a particularly product.
And unfortunately, just the derivation in section three of money and prices is the necessary form of appearance of value.
And for me, the main issue here is that this very important section is often overlooked or not discussed in any depth and I think it’s important in part in large part because of it’s difficulty and it seemed as so boring and detail, but it’s very important as we shall see.
So, I will now review kind of section by section
my interpretation of chapter one
with substantial textual references, and then I will discuss at least one aspect
in particular of Michael’s interpretation, this third issue is the determination of the magnitude of value in production and or exchange.
Okay. So, section one, the substance of value abstract labor, the magnitude of value, socially necessary labor time.
Section one begins with an analysis of a commodity as a general system of commodity exchange, and this general system is assumed to be mutually consistent,
A is equal to B, and B is equal to C, and A is equal to C.
And this property of mutual consistency implies that commodities are treated objectively as equivalent, exchange is the exchange of equivalents. Each commodity is in principle equivalent with all other commodities.
And this relation of equivalence in turn implies that each commodity must possess some common property and possess this common property in definite quantities that determine the ratios in which commodities are equivalent with one another. Marx discusses an example of a relation of equality between two commodities, the famous corn and iron example, which he expressed in terms of an equation, right? Emphasizes the relation of equality between commodities, Marx says “whatever their relation of exchange may be, it can always be represented by an equation,” right? In which a given quantity of corn is equated with some quantity of a buyer. So, what does this equation signify?
Marx says “it signifies that a common element “of identical magnitude exists in both of these things in the two (indistinct).” And Marx of course argued that this common property of commodities, that determines their exchange values is abstract labor, the substance of value.
Marx summarized his derivation of abstract labor, as the substance of value in the following key passages. So, let us look at the residue of the products of labor.
So we’re looking at a commodity here considered within a system of general commodity exchange, right?
So, what do we see, well, we don’t really see anything, but we know, we now understand that there is nothing left of them, but what he calls a phantom-like objectivity.
They are merely congealed quantities of homogeneous human labor.
All these things now tell us as we observe, tell us is that human labor power has been expended to produce human labor is accumulated in them, as crystals of this social substance which is common to them all they are values.
So, Marx described as we see the substance of value as a phantom-like objectivity.
Because, this abstract labor contained in commodities is not directly observable as such.
It exists, it’s contained within commodities, but it’s not something we can observe and we will come back to this point in section three.
So, Marx’s derivation then, of abstract labor as the substance of value can consist of the following steps. Each commodity is considered to be an equal and equivalent to all other commodities, the relation of equality implies that all commodities possess a common property, right?
And this common property is (indistinct), right? So, that’s the bare bones of the derivation in section one.
And in the next paragraph, after the summary, Marx preview, is later derivation of section three, on money as the necessary form of appearance of this substance of value abstract labor.
And he noted, Marx noted in this preview, we must first however, we must first consider the nature of value independently of its form of appearance.
So first, we’re just gonna consider the commodity in terms of abstract labor and socially necessary labor time, independently of money and prices. And he says “the progress of our investigation will bring us back to exchange value as the necessary mode of expression “form of appearance of value.
“For the present, however, “we must first consider the nature of value “independently of its form of appearance.”
And also, independently of any actual act of exchange, because we’re just observing this commodity and its properties.
On next page that Marx defines the magnitude of value in units of labor time, hours, days, independently of its form of appearance, in terms of money.
The quantity, the magnitude of value is measured by its duration, labor time and a particular scale of hours or days.
And Marx clarified that the hours of labor time that constitute the magnitude of value are not measured by actual hours of concrete labor, which would be observable, but are instead measured in terms of a social average, quantities of labor or what he calls socially necessary labor time required to produce commodities.
His definition in a sentence, socially necessary labor time is the labor time required to produce any use value under the conditions of production, normal for a given society, and with the average degree of skill and intensity of labor prevalent in that society. So, the magnitude of value is a social average, not any particular individual quantity only.
And then in the next paragraph Marx summarizes the very clearly what exclusively determines the magnitude of the value of any article is therefore, the amount of labor, socially necessary, the labor time socially necessary for its production.
So one other important point in section one that I didn’t mention in my paper, is that “socially necessary labor time,” Marx says, “varies inversely with the productivity of labor,
“i.e with the quantity of a product produced per hour “of abstract labor,” and I will come back to this point later as well.
So toward the end of section one, look, thinking again about this overall logical structure and the three aspects of value, toward the end, Marx summarizes the argument thus far in another preview, of section three on the form of appearance, with the following summary of the logical structure of chapter one, he says, “now we know the substance of value,” right? “It is labor.” We know the measure of its magnitude, it is labor time.
The form which stamps value as exchange value remains to be analyzed.
But before this, we need to develop the characteristics we have already found more fully.
Develop the substance and magnitude more fully in terms of labor time, in terms of abstract labor and socially necessary labor time, before we go on to the formal appearance of value in section three.
So, I think Marx is emphasizing this logical structure, which I think is very important.
Now, just a word about section two which further develops the substance and magnitude of value prior to money and prices.
And he further clarifies that the precise meaning of the magnitude of value as socially necessary labor time in units of hours or days is, he clarifies the assumption about different skills and how he treats skilled labor.
He states that the basic unit of measure of socially necessary labor time is simple unskilled labor without special development. And that then skilled labor is treated in the following way, one hour of skilled labor is assumed to count in the determination of the magnitude of value as some of the coefficient of one hour of simple unskilled labor, Marx put it more complex labor counts as intensify or rather multiply, simple labor so that a smaller quantity of complex labor is considered equal to a larger quantity of simple labor, right?
And this reduction is assumed to have taken place here in section two, right? Prior to the derivation of money in the form of appearance in section three.
Under section three, again, a section that’s often overlooked, but is very important because it links the inner hidden essence of value with the observable forms of appearance, it’s actually one of my favorite sections that so much blood sweat and tears that I have come to appreciate its significance.
So, as I mentioned, the logic in section three is a continuation of the logic in sections one and two.
We have already seen that Marx explicitly noted in section one that this logical continuity between the sections. So as previewed in section one, section three derives money as the necessary form of appearance of the substance, and magnitude of value in sections one, two.
And very briefly summarize Marx’s argument in section three is as follows.
The necessity of money arises from the fact that the substance and magnitude of value are not directly observable as such, in units of labor time, as already mentioned, so, this is what Marx meant in section one by Phantom-like objectively means not observable.
Therefore, the question addressed in section three is the following.
How do the presupposed unobservable quantities of socially necessary labor time contained in commodities as previously derived, how does socially necessary labor time acquire an objective observable form of appearance so that the value of each commodity can in fact, in practice, be compared with the value of all other commodities?
That’s the subject that Marx promises twice in subsequent to return to as we have seen, and the progress of boxes investigation has indeed led back to exchange value as the necessary form of appearance of the substance and magnitude of value.
Marx posed his question in section three.
In the introduction to section three, as follows, he says “not an atom of matter, enters into the objectivity of commodities, as values.”
It is in this sense, the direct opposite of course, the (sensuous) objectivities as physical objects.
Says, “we may twist, we’re analyzing this commodity, “this representative commodity,” right?
And he said, “we may twist and turn this commodity as we wish.” Right?
“It remains impossible to grasp, “it remains impossible to observe it
“as a thing possessing value.” So, then Marx’s general answer in section three to this important question of how unobservable quantities of abstract labor obtains an observable form of appearance is that the quantity of abstract labor of socially necessary labor time in any given commodity is objectively expressed in terms of the physical quantity of another commodity, the equivalent commodity and ultimately the money commodity and this equivalent commodity is equal to the given commodity because it contains the same quantity of socially necessary labor time. So, by equating these two commodities that have the same quantity of labor time, the magnitude, substance and magnitude of value in the first commodity is expressed in terms of the physical quantity of the equivalent commodity that contains the same quantity of labor time.
Marx says, “we started from exchange value or the exchange relation of commodities in order to track down the value that lay hidden, unobservable within it, we must now return to this form of appearance of value.”
So, the logic is from the hidden to the observable from the observable.
The observable form of appearance is derived from the hidden substance in magnitude of value.
And perhaps the clearest evidence that section three presumes, that each commodity contains a definite quantity of abstract labor, and that these presumed quantities of abstract labor are used to provide a quantitative labor theory of exchange value is one subsection in particular, of the simple form of value that is entitled the quantitative determinacy of the relative form of value. Pages 144 to 146 in the Penguin Edition.
A very important and often overlooked subsection.
In this subsection Marx emphasized that the abstract labor contained in commodities is presupposed, and it must be expressed not only in qualitative terms as the same kind of homogeneous human labor, but also must be expressed in quantitative terms as a definite quantity of magnitude of value contained in commodities, socially necessary labor time is a quantity. And therefore, its objective form of appearance must also be quantity. So, in this subsection it is clearly and explicitly assumed that any commodity says, contains a definite quantity of human labor.
That’s the presupposition. “Equality of linen and coats” Marx says,
“presupposes the presence of exactly as much of the substance of value or the same quantity of labor time in the two commodities.” This subsection also discusses how the quantitative expression of the linen in terms of the exchange value with coats, changes the quantitative expression of the value of the linen in terms of the quantity of coats, this quantitative ratio changes if the labor time and the quantity in either the linen or the coat changes.
The presupposed quantities of labor time change,
Marx discusses this, for cases, right? First, the labor time required to produce the linen changes, then the labor time required to produce the coat changes and then both together and then in different directions. But in each case, the labor time contained in the commodities is presupposed, and that then determines the exchange. So, I have an extensive excerpt from this subsection in my paper. And I will come back to this later as well.
But the basic logic I think, is very clear from the presuppose labor times in production to exchange values in exchange.
So, these conclusions with respect, this is in a subsection of the simple form of value.
But the same conclusions apply as well to the expanded form of value, the general form of value, and ultimately the money form of value and money prices, money prices are determined by relative quantities of labor time and production, and changes in exchange values are determined by changes in these relative quantities of labor time required to produce a given commodity and equivalent.
In subsection C, of section three, the general form of value, is defined in terms of equations, emphasize the relation of equality between the relative and the equivalent forms. One coat is equal to 20 yards of linen, or 10 pounds of (indistinct) equal to 20 pounds of linen or 40 pounds of cotton is equal to 20 pounds of linen, etc, right?
So all these equations presuppose that the two commodities on either side of the equation contain the same property and contain an equal magnitude of the same commodity.
That’s what an equation means. And Marx emphasized again, in this section that the general form of value is not only quality, it’s not only an expression of abstract labor as a common property, but that this expression of value is quantitative, right?
And expresses this in this general form of value when all commodities are counted.
Now, finally, as comparable, with the linen, all commodities appear not only as qualitatively equal,as value in general, but also as values of quantitatively comparable magnitudes.
So, section D of subsection D of section three is entitled the money form of value. And in this subsection, the price of a commodity is defined as the exchange value of a given commodity with the money commodity.
And this price is determined as before, by the relative quantities of labor time, presupposed to be contained in the given commodity, and the money commodity.
So the price of a commodity in terms of gold, is the quantity of gold, right?
A physical quantity, a quantity of gold, that contains the same amount of labor time as the given commodity whose price is being determined.
And here there’s another set of equations similar to the equations for the general form of value, except that the equivalent commodity is gold, rather than linen, so there’s a gold price for each and every other commodity, which of course presumes that gold and each of the other commodities, contain the same quantity socially necessary.
Then, in the first edition of Volume I, unfortunately, not in late, Marx concluded his derivation of money and prices as the necessary form of appearance of value by emphasizing once again, the overall logical structure here, and that the form of value what he says, arises out of, or is derived from the substance and the magnitude of value. Marx says, “what was decisively important was to discover the inner necessary connection “between value form, value substance and value amount,” right? “And express conceptually,” he says, to prove that the value form arises “out of the value concept.”
Right? So I think these many passages in chapter one, provide very strong, unambiguous textual evidence to support the interpretation.
Interpretation that chapter one presupposes that individual commodities contain definite quantities of socially necessary labor time as derived in sections one and two. And then section three derives money prices as the necessary form of appearance of these quantities of presupposed quantities of abstract labor. That’s the inner necessary connection between sections one and two and three of chapter one and that’s the overall logical structure of Marx’s labor theory of value and money and abstract prices in chapter one.
Okay, how am I doing in time? — You’re doing great.
40:22
- Okay, so then I’ll take the time I have left to discuss this most important aspect, these differences of interpretation between Michael and myself and and I will suggest a possibility perhaps, for some maybe (indistinct).
And that issue has to do with the determination of the magnitude of value, right?
And is the magnitude of value socially necessary labor time, is that determined entirely in production, or also at least in part in exchange and depends on the demand on the market for individual commodity, so this is really one of the most controversial issues among Marxian economists in general in recent decades.
Michael’s interpretation as I understand, it comes out of the (indistinct) reading in Germany, which has evolved in the rest of the world, in terms of value form, the so-called value form, interpretation of Marx’s theory, this so-called value form interpretation has become popular in recent decades.
And its proponents argue that socially necessary labor time is not determined solely by average labor time in production, but also depends in part on social demand on the market.
And Michael is a prominent proponent of this value form interpretation
Michael wrote in the introduction in his introduction to “Capital” book, labor time expended in production as well as for the satisfaction of monetary social demand, constitutes value.
Turning the sentence, value is constituted both by the labor expended in production and the satisfaction of monetary demand.
So first I wanna review again, some of the main passages in chapter one, that support my interpretation, that socially necessary labor time is determined by production.
- Could I interrupt you for a sec? — [Fred] Yeah. — I just wanna ask you a question that might open up this disagreement or almost agreement to everyone who’s joining us, what would you say the stakes are of your interpretation, his interpretation and the disagreement? What’s at stake there really, aside from the proofs one way or the other?
- Well, I think, first of all, just being what I’m trying to be,
as a true is possible to Marx’s text, and that itself is a first objective.
I also think it eventually the differences have to do with whether Marx’s theory is a theory of, at least in part of equilibrium prices, right?
Or non-equilibrium prices, and what’s the relative importance?
And that’s also been a kind of separate discussion going on in Marxian scholarship for a long time, right?
But what I think is not very clearly and widely recognized and including by myself, until really working on this paper, right?
Is the connection between those two issues.
So is Marx’s theory a bad kind of, well, I mean, I would say Marx’s theory is mainly about surplus value, right?
But then equilibrium prices or assume in order and explain in order ultimately not to explain equilibrium prices, but to explain surplus value
- And how does it change our understanding of surplus value to think that value is created and gets its magnitude in the production process with no additional inputs?
- Okay, the Marx’s theory of surplus value, the inner law as he called it, surplus value is determined by surplus labor, right?
Surplus labor in production and a clear strong conclusion of exploitation, right?
But, if surplus value also depends on the market, right?
On demand, that is what Marx called a distracting influence, right?
And is a less strong theory of the inner law of surplus value and exploit. It brings in distractions, right?
- That’s very helpful, I appreciate it, I know that line of thinking to some degree that if value is all created in production, then it strengthens the revolutionary position of the proletariat or makes exploitation a graver issueor a more emphatic problem in capital. So, I appreciate your clarifying that.
- Okay, and we can come back. — Derail your presentation, so you’re welcome to go along with it.
- Okay, thank you. So, let me just review a few of the key quotations.
So we’ll have my interpretation, is we saw Marx define socially necessary labor time, as the labor time required to produce any use value, under the conditions of production, normal for a given society and with the average degree of skill and intensity of labor prevalent in that society.
The next paragraph Marx summarize, what exclusively determines the magnitude and value of any article, is therefore the labor time socially necessary for its production, right?
So, nothing is said here about exchange and demand, what exclusively determines socially necessary labor time is the average labor time in production. And coming back to the issue of the inverse relationship between the magnitude of value and the productivity of labor, toward the end of section one, Marx discussed this relationship and he said “the value of a commodity will therefore remain constant, if the value would remain constant, if the labor time required for its production also remain constant,” right?
So, even though supply and demand may be changing around all over the place, right? If the quantity required for its production is constant, the value is constant, right? But the latter changes, the productivity changes, well, value changes with every variation in the productivity of labor. And he says, “the productivity of labor is determined by various circumstances, the average amount of skill of the workman, the state of science, the degree of its practical application, the social organization of production, the extent and capabilities of the means of production, “by physical conditions, etc.”
Right? So, these are characteristics of production that affect socially necessary labor time.
In general, the greater the productivity of labor, the less is the labor time required to produce that article and the less therefore is the value and vice versa. He says, “the value of a commodity therefore, varies inversely with the productivity of the labor in (indistinct).”
Well, I also wanted to quote from that subsection on the quantitative determination of the form of value, but I must have misplaced that page.
But it’s again, I hope you will look at it, right? Page 144, five and six.
This is the labor times are presupposed, and that then determines the relative form.
- Do you feel like there’s enough evidence on the table to rest your case temporarily?
- Oh, yes, yes, yes. I also wanted to discuss the value form.
Sorry, I lost my page there.
Okay. So the value form interpretation, in contrast, right?
Argues that if supply is greater than demand in an industry, then the price of the commodity will fall and the socially necessary labor time will also be reduced, right? Because of the insufficient social demand, even though even if the average labor time in production remains the same.
However, and this is the point we touched on a minute ago, I argue that Marx’s theory in capital, generally assumes that supply is equal to demand, right? And so assumes away that case except for a few asides here and there.
In other words, Marx’s theory of value and capital is not about the daily fluctuation of market prices, but is instead about the center of gravity of those market prices.
The equilibrium prices, the long run average which are the centers of gravity around which market prices.
The main question as I said, in Marx’s theory is to explain surplus value and the inner law of surplus value with surplus labor, and to consider fluctuations due to supply and demand. Marx argued at the end of chapter five would be a distraction from discovering and pinpointing the inner law of surplus value.
So, I present more textual evidence in my paper to support this supplies equal to demand, equilibrium interpretation of Marx’s theory of value, and would be happy to discuss these later, and I think the evidence is conclusive that Marx is trying to explain the inner laws of capitalism and not the daily fluctuations of market prices.
And since equilibrium prices assume supply is equal demand, then in that case, supply and demand have no effect on the determination of equilibrium prices. Cancel each other out. Equilibrium prices are determined in that case solely by the fundamental cause of average labor times in production.
Supply and demand, determine market prices, not equilibrium prices.
Furthermore, if supply is not equal to demand in an industry, which is usually the case, the market price of the commodity will be different from the equilibrium price, but the equilibrium price will nonetheless remain the same, right? And will still be determined by the average labor time in production even though supply and demand are not equal and market prices are fluctuating around the equilibrium price. Equilibrium price will change only if the average labor time in production changes.
One more page. Michael wrote in his book, that socially necessary labor time is determined by three reductions.
And this was actually very helpful to me.
One, reduction of unequal productivities of labor to average productivity within each industry.
Two, the reduction of skilled labor to unskilled labor in all industries and
three, the reduction of supply to demand, right?
However, if it is assumed that supply is equal to demand, then Michael’s reduction number three of supply to demand is nullified, plays no role, right?
And in this case, socially necessary labor time is determined by the first two reductions, unequal productivities to average productivity, skilled labor to unskilled labor, right?
And these two remaining reductions are characteristics of production and determinants of labor time in production.
Thus, if it is assumed that supply is equal to demand as Marx generally assumed in capital, then demand and exchange have no effect on the determination of socially necessary labor time, even with Michael’s interpretation of socially necessary labor time because the supply is assumed to be equal to demand and that reduction is not necessary.
So, I hope Michael will agree that under the assumption of supply is equal to demand at least, socially necessary labor time depends only on the average labor time in production.
And if supply is not equal to demand, then we have I think, two different interpretations of socially necessary labor time, which may in fact, be compatible, be mutually compatible and not mutually exclusive, they apply to different cases, right?
One an equilibrium concept of socially necessary labor time determined by average labor time in production and independent of demand, because you’re assuming that away, right?
And secondly, a disequilibrium concept of socially necessary labor time received through exchange, right? Which also depends on important demand.
And it has occurred to me in recent weeks while working on this paper that maybe we agree on this point more than I thought, right? In the case of supply is equal demand,
I hope we can agree that socially necessary labor time is the average labor time in production, which determines the equilibrium price, right? If so, then the disagreement would really boil down to in the case of supply, not equal to demand. What’s the definition of socially necessary labor time and is the concept operative at all?
It seems to me that maybe these two definitions, I don’t think Marx ever talked about this, explicitly in terms of socially necessary labor time anyway, but I wanna search some more and think some more about this.
That the equilibrium and the disequilibrium concepts of socially necessary labor time may be mutually compatible.
And I think this would be a significant agreement.
And, as I said, Michael’s discussion of the three reductions,
one of which is the reduction of supply and demand, I think, helped me realize at least this possibility of more of agreement. If supply is equal to demand then there are only two reductions, both of which have to do with labor time of reductions.
So I’ll stop here for now and give Michael a chance to respond and see what other people have to say.
Thank you very much for your attention. And I look forward to the discussion.
- Thank you, Fred. Let’s just take a minute to thank Fred for his talk before we get into the beautiful family fight.
There’s no better fights and family fights, and especially when they’re about scripture. It turns out all sorts of hermeneutic questions are on the table now too, so I think — — What sort of what questions? — [Paul] Hermeneutic questions. — Okay, yeah.
- But thank you very much for your presentation. I think Michael you’d like to respond and you could take as much time as you want to do that.
- This is dangerous when you allow me these, to take as much time as I’d want.
HEINRICH
I try to make it briefly.
But first is the connection okay. Can you understand me? Okay. So, first, I have to thank Fred that he changed his original idea of a paper and make such big efforts to discuss my approach to value theory,
I think this is a very big appreciation of my work and I’m very thankful for that, that you have main critical points is not bad because I think in this point, we will agree that critique is the method to get progress, nothing is final nothing is perfect. So, we need critique and I appreciate your critique on my points and already in this short exchange, we had the last days, I learned a lot and maybe we will not come to an agreement, but at least also for me, it became clearer in which points I have to argue more precise, more exact, and this I learned by you.
So, I want to focus on the main point (on which) we disagree is the magnitude of value already determined by production before the exchange process or is the magnitude of value not determined by production alone and in (indistinct) also not before the exchange process?
Already one person asked before what is on stake, what are the consequences of these different interpretations? And I think he not Fred the person who asked came to the conclusion, okay,
it strengthens revolutionary when everything is rested in production,
I think this is rather independent from any revolutionary activities or from insights which lead to revolution, but there is something on stake, when everything already is determined by production, then at least in principle, we can know everything, we can know all the magnitude of value, we can treat value not as an outcome which emerges like Marx says in the back of the producers, but we can treat them as known amounts.
And exactly this, in Soviet Union in the so-called real socialism planning economy was attempted, there was the theory of, they called it the conscious application of the law of value. And this conscious application exactly presupposed that we know already by production without an process of exchange, what are the magnitudes of value and this planning process was an enormous failure.
So for this, the wrong theory they had. And of course, not only this was wrong, I don’t want to reduce all the failure of Soviet Union to this single point. But this point, also contributed to this.
It had some revival some years ago, in the discussions of a socialism of the 21st century, when, for example, authors like Paul (indistinct) argued by the use of computer now we have the technology to make use of all these knowledge and we can use this knowledge we have from the production process of commodity production for a socialist system,
I think this is totally wrong. And when you try to do a socialist system, according to such assumptions, it will be disastrous.
So indeed, there is something on stage. It’s not only a question of details, or pure science, it has political consequences.
- Michael, can I ask you just on this point? — [Michael] Yeah. It seemed to me that Fred was saying that as a manifestation of value, exchange value allows you to know what’s determined in production. Do you mean that when you say you can’t treat them as known amounts, the magnitudes of value, do you mean that they’re actually being determined in exchange, or they’re just coming to be known in exchange.
I think there’s a difference between being determined and being known. — Exactly it is a difference and they not come to be known before exchange, they are not determined, they are as Fred quoted me correctly, they are determined by production and circulation or production and exchange, production alone is not enough to determine magnitude of value.
And it is not a question of knowledge. I will explain this at once, let me just do before one remark about different levels of discussion.
We can discuss this question, where magnitude of value is determined on a hermeneutical level, interpreting Marx texts, what is the opinion of Marx, but also we have to discuss what is the reality of commodity production and commodity exchange and in so far the hermeneutical level is only a helper when we assume that Marx did a very good analysis. So, we must be clear about his analysis, but the point which is decisive in our analysis then of reality and not the analysis of texts of Marx. So, I think they have to distinguish these two levels,
I will come briefly to the level of reality
I take this as an abbreviation, why do I think that magnitude of value is not determined only by production, just let us restrict to these two determinations, we agree, socially necessary labor time and the reduction of complex labor to simple labor.
Socially necessary labor time is a kind of average, there are different kind of production processes as Marx discusses this in chapter one, the one producer is quicker the other is slower, but what contributes to this average is not just what every producer is doing, it contributes only that products, which are brought to the market, when there is super modern factory with an extremely high productivity but the products are hindered to enter the market or the owner of the factory decides to sell these products abroad, because he can receive higher prices or whatever, then this factory or the labor in this factory will not contribute to this average socially necessary labor time.
So by looking only on the production side, we don’t know really what contributes to this average, and even more clear, it becomes when we look to the reduction of complex labor, to simple labor, it is not only one reduction, you have a lot of different kinds of complex labor, all of them must be reduced to simple labor, let us say, one hour of labor of a craftsman is reduced to three hours of simple labor, five hour labor of…
One hour labor of an engineer is reduced to five hours of simple labor.
But where does this reduction come from, easy determined by production.
I don’t know not even a theory who explains this reduction by production itself,
Marx speaks of a social process in the second subsection of chapter one, and in chapter seven, in the last footnote of this chapter, he stresses that this reduction also depends of social prejudice, for example, that it comes out in a historical process.
And we have very striking examples, that for example, the such branches of work, where women dominate as workers, usually such branches count less in this reduction, it is not a question of the pure complexity of labor or of the production process, it is also the part of social evaluation and this is beyond the production process. In so far, I think it is impossible to determine the magnitude of value only by production.
I don’t want to go deep in the question of demand and supply, which has, I think, nothing to do with the two points I just mentioned. But I want to stress one point, it is true that Marx later in “Capital” says, “I presuppose demand and supply equals” and by this he can abstract from a lot of problems, but what is the demand and the supply which equals. How is demand and supply determined? This we must discuss before we can assume supply and demand equals. And I think what Marx is doing in the third chapter he gives a second meaning to socially necessary labor time.
And this second meaning then defines what is demand and only then we can discuss or we can presuppose demand and supply we assume that it is equal, but, okay this is another point.
Now, I want shortly to come to the hermeneutical level, what is Marx telling us?
I think indeed, we have to look to the logic of Marx argumentation, as Fred also stressed, I would say we have to be clear, what in the first three chapters, Marx is doing, what is the object, what Marx wants to research in the first three chapters of Volume I.
I think it is commodity circulation. This complicated process of commodity circulation, commodity against money, money against commodity, commodity against money and so on, this permanent intersection is reduced by Marx in a first step of abstraction to the exchange process, commodity owners exchange commodities, and the core of the analysis of this exchange process is the exchange relation, which Marx analyzes in chapter one.
So, when we read “Capital,” we do the journey backwards, we start with the most abstract core, the exchange relation of two commodities.
In chapter two we include the commodity owners we come to the exchange process. And in chapter three, we see the intersection and interference of all the exchange processes in the circulation in the commodity circulation. So, exchange, (clears throat) sorry my voice is not in a good condition in the moment.
So, what Marx analyzes as exchange relation is the most abstract core of the circulation process of commodities.
And this exchange relation, he dissects like an anatomist.
Fred gave the nice quote where Marx says,
“we have to consider value independently from,”
I think it’s a form of appearance of value form. I stress that Marx wrote, we have to consider, he doesn’t say value exists independently from value form. He says, we have to consider it. And so I think Marx behaves like an anatomist who wants to analyze the human body.
And he has to start with certain organs. So maybe he starts with the heart, which is pumping blood, and then comes to the lung, which is filling the blood with oxygen.
But this sequence of explanation is not identical with a sequence of existence that first the heart exists. And then after a while, the lung exists.
And then after a while, something else exists. So what I think is a mistake of Fred, is to identify the sequence of explanation we find in Marx, with a sequence of existence, a sequence in time. And also, I think it’s a mistake to see in the sequence of time, causal relationship, a causality from what he thinks is fast to that what he thinks comes later.
At the beginning of his paper, he gives this nice quote from the first edition that Marx said I wanted to prove that value form arises from the value concept.
This is a very Hegelian wording and Marx himself said sometimes, he is pocketing with Hegelian terminology, he also becomes clear that this terminology arises from is not a temporal sequence.
When you read Hegel’s science of logic, you have the essence and the necessity that the essence needs a form of appearance. But of course, Hegel nowhere argues that essence exists first in time, and then after a while it receives a form of appearance, and I think the same is true for value and value form as form of appearance, they can only exist simultaneously.
So, what Marx is doing in the first chapter, he is dissecting the exchange relation, he talks about value, but value inside the exchange relation, not outside the exchange relation.
So, this is one important difference in the hermeneutics, in the interpretation.
I will just briefly mention another difference.
Now, Fred didn’t mention it in his lecture, but he mentioned it in the paper, he sent me and I suppose also it was distributed to the audience, where the point is, what means the common in the phrase that labor is the common social substance of value.
Fred, absolutely correctly, quotes my interpretation that there
are two different ways to interpret this common. Common can mean that two things independently from each other, process a property or it can mean that common means they share this property, and my interpretation is the second one, they share it.
And here is the point I also want to give some textual evidence for my approach, for the approach that also Marx had in mind, this meaning of common as a shared property inside the exchange relation.
There is a difference between the wording of the first edition and wording of the second edition, which is totally lost in the existing English translations.
When you read the first translation, other than translation of the first edition of “Capital,” which also Fred quotes. You can read in the translation of (indistinct), the common social substance which merely manifests itself differently in different use values, is labor, in the second edition, you can read a very similar sentence in the translation of Ben Fowkes as crystals of this social substance, which is common to them all they have values.
In both English sentences, we have the word common, but in German Marx changed the words. In the first edition, the word he used was Gemeinsam and for Gemeinsam, common is a proper translation.
In the second edition, Marx used the word Gemeinschaft (leash) and here, common is a very poor translation. Gemeinschaft (leash) comes from the noun Gemeinschaft, community. Gemeinschaft leash, you have something when the community has it. So, that Marx changed from Gemeinsam, common, to gemeinschaft (leash) in community for me is very clear sign that he saw the value substance as something which is only existing when there is a relation between the two commodities and this relation is in the exchange relation.
In the exchange relation, we can say the one commodity has a magnitude of value and the other commodity has a magnitude of value.
With this I agree with Fred, but outside this relation, you cannot speak about magnitudes of value. So, with this I want also to close my answer to Fred, thank you very much.
=================
1:23:46
- Thank you, Michael. We appreciate your coming back. And your being such a good support and giving us a lot to think about. It’s great when we have family fights, it’s great when hermeneutic questions get opened up.
It’s always interesting to me when people use the the hagiographical move, which is this is what Marx was saying. And when people use the move, well, even if he was saying that he might not be right.
There’s these ways of looking at the text are different and they’re both important and they move around in different people’s readings.
Fred, I’m gonna give the microphone over to you. Do you want to respond?
- A few responses I also wanna hear from other people. So let’s start with the first point about the magnitude of value cannot be known in production.
And I’m not arguing that the magnitude of value social necessary labor time. It can be known in production.
I argue that Marx assumes that it exist in production in a system of commodity production, we’re not, so it’s produced for exchange. Right? So it’s already in production, it’s in an exchange relationship. It’s in an economy based on commodity exchange, right?
So I’m certainly not saying that it is known or has to be known, right?
I mean, it exists. And my point is that I stressed that section three is about,
it’s not knowable in production, it’s not knowable in terms of abstract labor.
That’s why money is necessary, right? So I think that kind of misses my point all together, that socially necessary labor time in order to exist, but is unknown, right?
Is assumed to exist, right? And in order to become known, right?
It has to express its hidden value in the observable form of money. So I think you are conflating know and exist, right?
And I’m not conflating that, I’m emphasizing that that’s not the case.
That value is not known until exchange, until the form of appearance, right? Just the form of appearance.
I think the reference to the USSR is not relevant.
As I’m not, this is a theory of capitalism, right? And it was attempted to be applied in crude ways to a planned economy, but I don’t think that has anything to do with the validity or lack thereof of Marx’s theory, certainly not my interpretation.
And on simultaneity of everything in capitalism, I think the body analogy is not a good one.
Because Marx is analyzing capitalism within, which is a process, right? And the process is the circuit of capital, right?
And the circuit of capital goes through distinct phases, right?
Capital exists first on the market, in the form of money used to purchase means of production and labor power, then capital exist in production, right?
Where Marx says exclusively a capitalist formed, right?
Surplus value is produced, right? And then, right? Consecutively in time, there is the return to the market and the sale of the markets of the products produced and the realization of the value produced, right? I’m not saying that value is known in production, right?
I’m saying value is produced. Production and then subsequently,
I mean, I’m not saying that simultaneous determination is not possible in other cases, I’m saying that exchange value, right?
Is determined by production. Now, in that sequence, production comes before sale, right?
And so, in that particular case, in that particular reality,
there is temporal sequence of causation, right?
Because we’re talking about a process, (indistinct)
So I think I’ll stop there for now and maybe come back, but I like to hear from other people too.
- Right. So why don’t we open up the chat for questions and maybe we can come back around
- =========================
to these distinctions through people’s, other people’s minds.
There might have been some comments earlier on but if you wanna make a comment, would you put it back in?
Now repost and also post your questions.
Okay, could we go to Manuel Casique Herrera. Audrey would you open Manuel’s mic?
Manuel, if you’re there, you could ask your question.
Do we have you? — [Manuel] Yeah. Can you hear me? — [Paul] Yes.
- [Manuel] Having to speak in English in front of a whole audience. So I’m gonna try really hard to do my best.
My question is like, is obvious that market prices have oscillations and those oscillations if after private labor is the substance of all the value produce and all the surplus value is the same remain the same.
So, when market prices oscillate, capitalists can compete each other to appropriate surplus value produced by other capitalist because their surplus value pool remains always the same, despite the prices oscillations.
What would you think of that?
- Thank you, Manuel was a perfect English rendition of your question. Fred, do you want to respond?
- Well, capitalist would mean that was the subject of Volume III, that is the subject of Volume III, the distribution of surplus value, right?
And some capitalists are able to appropriate more surplus value than others for various market power reasons, right?
But that is a subsequent division of the surplus value that is produced by workers.
So it’s a part of the theory, it can be incorporated in a theory,but because one capitalist appropriates more surplus value that another capitalist doesn’t mean the capitalist produced that surplus value.
The total surplus value comes from the surplus labor of workers, and then that’s divided up in various competitive ways.
I hope that helps. — Okay, we have a question from Bilal. Can we open the Bilal’s mic?
Bilal (indistinct) undergraduate in the seminar. Welcome.
- [Bilal] Thank you. Thank you, Professor Moseley for your interesting comments. I had a question about inflation in particular, you mentioned how Marx’s theory explains the inner laws of capitalism and not minor fluctuations.
But one of the inner laws is the sustained increase in gender price level that we’ve seen, constantly increasing inflation.
So I was wondering whether your interpretation of Marx maybe just Marx’s writings itself, sort of tie in and can explain this in a law of capitalism. Or is it something that I don’t know, a lot of Marxist theory that I’ve seen just somehow overlooks inflation.
I’m not really sure how Marx explains a lot of it.
-Well, that’s a good kind of contemporary question.
Obviously. And, in Marx’s theory, in “Capital,” he assumes that money is a commodity, right? Some people argue money has to be a commodity, and I don’t think that’s true, right? But Marx’s theory has to be, I think, updated and elaborated to take into account the fact that money is no longer a commodity like gold.
Right? So I think that’s an important current task of Marxian economics is to develop a more complete theory of non-commodity money.
I’ve done some work on that. And I don’t think it’s the final answer.
But based on (indistinct) when there was inconvertible, fiat money in the late 18th and early 20th century, then, if too much money is forced into circulation, then prices will rise, right?
So that I think is at least a starting point, it’s not the total answer.
And it requires much more development,but also a change of the basic functionof definition of what money is in capitalism today.
- Okay, thank you. I’m going to read a question from the chat from Andy Summers.
1:36:48
Is the disagreement in forming the surplus value problem actually related to appearance about the nature of physical labor versus cognitive labor in the formation of a commodity socially necessary labor time and hence, its labor power.
Does value form analysis solve that problem?
Also, doesn’t this also resemble the later historical issue of monopoly capital unaddressed by Marx, but taken on by Baran and Sweezy.
Doesn’t this also allow for the kinds of issues brought up by analytic Marxism in terms of inequality of distribution.
Referring to Ruma. (Roemer?) So the first question is about the difference between physical and cognitive labor in I guess the calculation of the magnitude or the creation of the commodities value, and the second is about. - Monopoly capital.
— [Paul] Monopoly capital.
- Well, I think the question about monopoly capitalists, in my view, much easier to answer.
And again, I think that was related to the previous question that monopoly affects the distribution of surplus, okay,
in my view, interpretation of Marxist theory, monopolies affect the distribution of surplus value.
But unless that’s affecting wages in some way, does not affect the production of surplus value and the total amount of surplus value that’s produced, right?
So, this I would disagree with Baran and Sweezy, right?
They thought monopoly capital actually increase surplus value, right?
But I think a more consistent interpretation would be that monopolies get a bigger share of the total surplus value, but in general, except maybe on a smaller scale, do not affect the production. And the total amount.
- Over time as well monopolies have to cede their monopoly at a certain point.
Right? It’s a temporarily bounded problem monopoly. — Yeah, it’s one aspect of the competition. and competition has to do with, determines the distribution of surplus value, and that will certainly change over time.
The cognitive question, I think, is another challenge.
I think obviously is value producing
so I mean, this would be one one example of skilled labor.
And so the cognitive labor would produce in an hour more value.
How much more value? We don’t know.
But that is what Marx’s theory would suggest.
Then the question is how important is it to know these reduction coefficients?
And I think it is of some importance, but I mean, Marx said at the end of chapter seven, his theory of surplus value, even though he didn’t present any theory of what determines those reduction coefficient, so to speak, instead, the same theory applies to skilling, right?
That skilled labor is paid more, right? But they’re also produce value at a higher rate.
And therefore, the basic theory of surplus value still applies. And I think that would also apply to cognitive.
- Okay, I wanna invite anyone else in the listenership, watchers, viewership
to pose some questions. While you’re doing that, I wanna go back to something that Michael brought up.
That needs a lot more exposition. And I know, maybe he’s done it elsewhere. but I wanna ask you Fred about his proposition that, in fact, exchange enters into the constitution of socially necessary labor time. That is, products that are produced and not realized in exchange don’t get counted in the average. So this is a backdoor way and that doesn’t have anything to do with the supply demand problem. What do you think about that?
- Well, I think the theory assumes a system in which what is produced is exchanged.
We’re looking at a totality, in that case, the company that sells elsewhere, right? In another market, would that be included in the determination of socially necessary labor time, is not a purely physical thing in any country, you do a weighted average of the labor times and determine socially necessary labor time, is goods that were produced for this market. And that they’re the only ones that go into the average.
I don’t see a problem. — Looks like there aren’t any other questions.
We wanna thank you for your presentation. Invite you to not sign off while we let everyone else go.
Let them thank you for coming and presenting really important material. So thank you.
- Thank you. — Thank you also, it was nice to meet Fred again.
(Fred laughs) — Thanks for your comments as always, and we will be in touch I’m sure.
- [Michael] Yeah. (Fred laughs) — Thank you, Michael.
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