Marginal Futility- Reflections on Simon Clarke’s “Marx, Marginalism and Modern Sociology”

Reflections on Simon Clarke’s “Marx, Marginalism and Modern Sociology”

I say “reflections” but this post is mostly a summary of parts of this great book by Simon Clarke. I read Clarke’s book “Marx’s Theory of Crisis” a year ago and found it an incredibly helpful history of the evolution of Marxist crisis theory. Both this and “Marx, Marginalism and Modern Sociology” are available in their pre-publication format for free on Clarke’s website, along with dozens of other books and publications of his . “Marx, Marginalism….” actually has two editions, a fact I only discovered after reading the first. The second is definitely an improvement, containing an entire chapter of critique of specific aspects of marginalist value and profit theory that are not in the first edition.

Simon Clarke

I post this summary/reflection as part of the “lead-up” to my next video, Law of Value 8:subject/object, which aims to address sum of the problems of the old debate over subjective and objective value that dates back 100+ years to early debates between Austrian economists and Marxists. This means that I am more interested in Clarke’s critique of marginalism than his critique of sociology. However the two critiques are related. It was the early marginalists’ desire to shrink the field of economics to theories of consumer preferences in their relation to price that excluded all sorts of important questions from the new “sciences”, questions that had previously been a part of political economy. Issues of social power, the molding of the individual by society, class, etc were excluded and taken up by the emerging field of sociology. Clarke’s book is about this process by which the unrealistic and obnoxious abstractions of marginalist thinkers bifurcated political economy into economics and sociology rendering both disciplines full of theoretical problems and lacking in the analytical tools to explain the real contradictions of capitalism.

Marx himself never read any of the founders of marginal utility theory and so we might feel that we cannot look to him for a critique of marginalism. However, Clarke is able to develop a strong marxist critique of marginalism based on Marx’s critique of the bourgeois economy that came before him. It is Clarke’s argument that both classical bourgeois economy and marginalism suffer from many of the same faults.

The essential fault is the attempt by both bourgeois theories to “naturalize” the social relations of capitalism. This the basic hallmark of any dominating ideology, to make the current state of affairs seem like the permanent, unchangeable, natural order of things. Bourgeois economics does this by claiming that capitalist-specfic categories like class, profit, capital, and wages, are just natural expressions of the technical division of labor.

Marx called this the Trinity Forumula: the idea that wages equalled labor’s contribution to the social product, that profit equalled the contribution of capital, and that rent was equal to the contribution of land to productivity.  Thus the distribution of the social product between wages, rent and profit seemed like natural, technical properties of commodities themselves and not social relations between classes.

Clarke argues that marginalism is making basically the same claim, and thus falls prey to the same problems of classical economics. It is not clear exactly which properties of commodities correspond to profit. Does profit come from money, capital or means of production? Is it due to abstinence of the capitalists, the supervisory work of the capitalist, the capitalist’s ingenuity, risk, or the time of production? Are wages related to the value of means of subsistence, the disutility of work or the productivity of labor? Is rent related to the scarcity of land or the marginal fertility of land?

Regardless of the ways in which bourgeois thinkers have answered these questions we can’t escape the fact that things can’t have social powers unless bestowed upon them by social relations. Thus it makes no sense to isolate these social relations from our analysis and try to relate all economic categories to purely technical properties of commodities/production. Marx calls this mistake the fetishism of commodities and Clarke’s critique, in the end, boils down to an accusation of fetishism. (1)

Marginalism’s scope of analysis


Despite their similarities, marginalism’s subjective approach to value came as a response to some inadequacies in classical economics. In classical political economy prices were only theorized after a consideration of distribution. Once the contribution of land, labor and capital were analyzed independently price was just the adding of up of these sums. Thus we can only understand markets and prices through an understanding of class, leaving the way open for more radical interpretations of the theory that might question this distribution. (2)

Marginalism responded by developing a theory of price that directly related price to the subjective valuations of individuals contemplating objects. All social phenomena were abstracted away. This narrowed scope achieved three things: 1. Class and distribution were spirited away, allowing marginalists to claim that such questions were outside the sphere of economics; 2. The obviously political nature of distribution could be reduced to purely technical explanations (marginal productivity, etc) thereby allowing marginalists to claim that they were engaged in pure, non-partisan theory; 3. It provided a naturalistic justification of capitalism.

Clarke argues that the early founders of marginalism were not wholly ideologically motivated by the need to establish a new theory of capitalist apologetics, but that by the 1890’s the marginalist ‘revolution’ had taken on a deep apologetic nature, playing a central role in the worker movements of the late 1800’s in debates between reformist and revolutionary factions. Also, this was a time of rapidly growing social movements for reform. Marginalists wanted to develop some science of economics that could measure the effects of state intervention on the economy. This brought together people of different political persuasions to the marginalist project.

The Irrationality of Marginalism


Marginalism can abstract away all of society from economic theory because of its claim that capitalism corresponds to a formal rationality rather than a substantive rationality. Formal rationality is a purely technical calculation of means and ends as opposed to substantive rationality which is oriented around values or higher aims. For instance, in Human Action Mises claims that the basis of economics is the natural quantitative relations between objects… so much input can produce so much output, etc. For marginalism any constraints  or limits to the system are purely technical, a result of natural scarcity in relation to our timeless wants, not social, and the market is the best mechanism for organizing these desires. This means that the marginalist model will fail if it can be proven that capitalist institutions have a ‘necessary substantive significance in subjecting individuals to social constraint’. In other words, if the limits and constraints of our society can be shown not the result of technical aspects like scarcity but rather the result of social institutions with particular values oriented toward the interests of certain groups of people (ie the capitalist class) than marginalism has not justification for its formal rationality, for its abstraction of society from economics, and the entire edifice of marginalism falls. It is not enough just to point to this abstraction as proof of the ideological nature of marginalism. We have to prove that it is an illegitimate abstraction. This is the common thread underlying all of Clarke’s specific critiques of different aspects of marginalism. (3)

Marginalists begin with the isolated individual making choices in a vacuum and erect all of their basic ideas upon some simple observations about these choices. As the model becomes increasingly complex, adding in more people, more commodities, money, the division of labor, private property, etc. it is claimed that all of their basic observations still hold. The expansion of the model is seen as just a formal matter. But Clarke argues that when we move from individual exchange to a system of exchange we are actually dealing with different phenomenon. In a market economy exchange is no longer and exchange for direct utility; in other words, we aren’t  measuring our actual utility for the commodity we give up with the utility for the commodity we buy. Money intercedes as a mediary. We exchange things against money. Use-values are exchanged for values which are socially determined. Any claim to the formal rationality of the individual’s behaviour becomes dependent upon the rationality of the system as a whole.

The existence of money demands that we immediately abandon the basic principles of marginal utility. In the simple barter models posed by marginalists both actors can fully judge the use-values of items they are trading. But when we are exchanging things for money we are not just trading two commodities in isolation. Money links each commodity to an entire of world of commodities. Now if it was possible to know the future values of all commodities then it would be possible to generalize the marginalist barter model into a theory of indirect exchange. But we don’t know the future values of things. These are entirely uncertain. In fact, If the values of all commodities were always known we wouldn’t need money because any commodity could serve as money. This compromises the entire marginalist model.

In other words, marginalism can only have a theory of indirect exchange (of commodities traded for money instead of commodities bartered with each other) is all parties have perfect information on prices. But if we make this assumption we can no longer explain competition (or money).

Clarke then goes on to summarize and critique various failed solutions to this problem by Walras, neo-Austrians, Marshall, and Keynes. I won’t go into them all, but I will mention the neo-Austrian take on this issue: The 2nd generation Austrians like Mises were worried that Walras’s awkward solution to this problem left the door open for arguments for a socialist planner, a person that would know all prices and therefore eliminate the need for market. They therefore rejected the general equilibrium approach that we today associate with neo-classical economics and developed a theory of markets as dynamic information systems. Rather than individuals requiring perfect information, rather than markets tending to a state of perfect equilibrium, the new-Austrians argued that individuals lack perfect information. Prices are what carry information and the market is the place where this information is “processed”, creating the most efficient clearing house of information. The problem with this argument is that the defense of the market relies merely on faith and assertions. Just because the market is an expression of individual preferences doesn’t mean that it is a realization of those preferences or that it is the best way to organize individual behaviours. Instead the neo-Austrian defense of the market is based more on critiques of bureaucracy and state-planning. (4)

Theories of Profit


Similar difficulties face marginalist theories of profit. The ideological defense of capitalist profit must establish that profit is a naturally occurring result of some technical aspect of production (the contribution to the product of machines or land, subjective preferences over time, etc.) and not the result of social relations of domination/exploitation. This is impossible because profit is a category of value not of physical quantities of products, thus capitalist profit always presupposes the existence of capitalist social relations. Yet the various marginalist theories of profit will maintain that wages, rent and profit are not qualitatively different categories based on different social relations to production. Instead marginalists will argue, as did the classical economists, that wages, rent and profit are a result of technical aspects of production. But not only is profit a value category and not a physical quantity category, profit is also determined by the general rate of profit which implies a society of capitalist production not isolated producers.

Time-preference theory, usually associated with Bohm-Bawerk, attempts to work dig its way out of this hole by explaining profit not through the physical/technical aspects of production but through the differences in subjective time preference between those who want things now (workers desire wages) and those who are willing to wait (capitalists who wait for their profit).

But here too we can’t really understand a period of production time without recourse to the very social features that time-preference theory wants to abstract away. A production period is dependent on the rate of profit and of wage rates, both social phenomena that can’t be reduced to time preferences. Clarke argues that concepts like ‘marginal productivity of capital’ and the ’roundaboutness of production’ have no meaning abstracted away from the social relations of capitalism since the aim of capitalist production is to produce value, not physical quantities. We can’t measure productivity or roundaboutness in non-value terms because without value we have no standard of unit that all of these diverse inputs and outputs can be reduced to. Also, what reason do we have for being so sure that time preference is always positive and not negative? Sometimes, in conditions of uncertainty for instance, we prefer to delay gratification. This absolute assertion that we prefer present goods over past goods seems an indefensible assertion. Even further, capitalist investment strategies have nothing to do with delaying gratification or measuring investments against consumption. Capitalists constantly invest in production in pursuit of profit for profit’s sake, compelled on by competition not their subjective preferences.

Sneaking in the Back Door


In abstracting away the social relations of capitalism marginalism must assume that these abstract individuals enter exchange with given needs and given resources. Where do these needs and resources come from? The marginalist answer is that this question is outside the sphere of economics- that it doesn’t matter to economic theory where these needs and resources come from. But what if our economic system actually reproduced these needs and resources? If we could show that capitalism produced the hedonistic consumer as well as the conditions of scarcity the consumer confronts then we could expose a disastrous feedback loop at the core of marginalism. It seems that when we just assume given needs and resources we are actually only pretending to abstract away from capitalist social relations. While on the surface marginalists appear to be talking about a universal individual in universal conditions, in actuality they are sneaking all of the social relations of capitalism in the back door. This is very similar to the Bukharin critique I mentioned a few weeks ago.

I like the way Clarke develop his proof this problem: Commodity exchange presupposes individuals with different needs and different resources because if everyone had the same stuff there would be no reason for exchange. Thus exchange presupposes differences. If exchange is systematic these differences must also be systematic. Thus the formal equality and freedom of exchange is founded on different resource endowments. This means that the content of exchange can’t be reduced to its form (free, juridically equal relations between people) but must be found outside of exchange in the realm of production and property.

Scarcity

Scarcity relates to the application of labor to produce for need. The basis of exchange is the sale of the products of this labor. Thus the need for a theory of value based on human labor, not subjective whims.

Different types of exchange presuppose different production and property relations. The simple commodity exchange (independent producers exchanging the product of their labor in the market) is a popular image in marginalist accounts of exchange (as well as market-anarchism fantasies) yet such a system of exchange has only existed within larger societies dominated by other social relations (ie feudalism, capitalism, state-capitalism/20th century communism). Capitalist exchange presupposes social relations between two social classes, one owning the means of production, the other nothing. As we’ve seen, Marginalism tries to treat all factors of production with the same theoretical tools of subjective preference theory. But the division of the social product into rent, profit and wages actually presupposes antagonistic social relations between classes and thus requires different theoretical ideas.

Marginalists would like to treat the unequal resource endowments of individuals as due to extra-economic factors, consigning these concerns to the fields of history and sociology. But these inequalities don’t just proceed exchange historically. They are actually reproduced by exchange. Capitalism generates a world in which individuals must maintain a certain standard of living in order to survive (try paying the bills without a phone, house, car, work clothes, haircuts, health-care, etc.) and must engage in wage-labor. And wage-labor actively reproduced the two social classes of capitalist and worker and their violently divergent relationships to the means of production. Without scarcity we couldn’t have wage labor. There would be no reason to work. Thus capitalism must constantly reproduce scarcity.

Don’t Take My Word For It, Read the Book (5)


This is just a cursory synopsis of some of Clarke’s book. If readers are looking for some good, solid critiques of marginal utility theory, Clarke’s book is a great way to start.

 

 

Footnotes:

(1) Well… fetishism is more than just wrong ideas about the economy. It’s also about the way social relations take the form of material things, how material things obtain social power and dominate subjects. My critique of the subjective-objective value debate will directly relate the concept of fetishism of reframing this debate.

(2) This is not the only defect of the classical economics that motivated the marginalists. Another important one, mentioned by Clarke, is the contradiction in Ricardo’s theory of value: the problem of how to account for different organic compositions of capital under conditions of average profits. See my video “what transformation problem?” for an explanation, or my summaries of vol. 3 of capital.

(3) Here I intended to make a brilliant comparison between Clarke and Bukharin’s critiques of marginalism, one that caught some subtle yet meaningful distinction… but I didn’t get around to it.

(4) I would add that a great many aspects of the neo-Austrian argument are heavily based on “faith” and religious-y thinking. The market is this all-powerful, all-knowing entity that we as mere individuals can’t ever comprehend. Attempts to understand the market, control it or influence it are seen as foolish and arrogant. The fallibility of human understanding is stressed against this omnipotence of the market. Given these religious parallels it makes sense that this theoretical tradition has resonated so strongly with culturally-conservative politics.

(5) To the best of my recollection this is the famous slogan from the 80’s television show Reading Rainbow.

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29 Responses to Marginal Futility- Reflections on Simon Clarke’s “Marx, Marginalism and Modern Sociology”

  1. Royall says:

    Wait, how do I get this book? According to Google it’s $125! Or is this some capitalist trick to keep my class consciousness down?

    • Oops- forgot to post the link to the book! thanks for the reminder. I have just updated the post and added the link. Here it is:

      http://www.warwick.ac.uk/~syrbe/Publications.html

      Clarke has pre-publication versions of all his books on this site. This means that they are almost the same as the published book. Unfortunately it’s really hard for marxists, and many academics, to get their books published in affordable, mass-produced, paper-back versions. Publishers assume that there is not enough audience for this. So instead they make expensive hardback versions that they know they can sell to libraries. Publishing agreements prohibit authors from sharing digital versions of the book with the public but they are allowed to share pre-publication versions. I’ve discovered that many authors are willing to share these versions with you- all you have to do is ask! Or in Clarke’s case you just have to go to his site.

  2. It is worth to be translated.

  3. Oliver C says:

    I have to say I was happy to see you focus on this book. As a sociologist it provides a great deal of insight into the theories which underlie a lot of current American political economy.

    As you’ve mentioned in one of your posts (on the Transformation problem I think), its important to remember that academics and economists are also somewhat subject to ideologies of their era, and this book does a great job not only of elaborating the different ideas of different eras and how they relate to each other, but also showing the historical progression of this thought.

    Definitely a great book, especially if you want to grasp the basics of neoclassical economic thought, and understand its historicity.

    [Any academics interested should note that the pagination in the PDFS of clarke’s books do differ from the book form; I went to the library to confirm. This can be a problem for citation!]

  4. Everpresent says:

    Interesting author and article. I’m also encountering problems to get marxist criminological works (dead science). Their works are mostly pure instrumental marxism and needs correction.

  5. Wow great read. I’ve read some on marginalism but never gave it a study more then what Bukharin had to say. Great post, I look forward to the videos.

  6. Hello, I’m a big fan. I was wondering if you could offer a little more elaboration regarding this so-called “time preference” principle, because some Austrian schooler tried to whip out this “workers want their wages now, ergo they get less money” argument, and though I was able to shut him down, I know that most Austrian-fanboys you encounter tend to have a very weak understanding of their own ideology, ergo I could encounter someone else who presents the argument with more confidence and can try to defend it. I’m guessing their defense is going to involve Robinson Crusoe’s island or some other unrealistic model, but I like being prepared.

    I also have a question about scarcity. I understand the role capitalism plays in scarcity, but to what extent can scarcity actually be eliminated? What about resources which we understand are limited. Even if we talk about alternative energy, we’d still need petroleum for plastics and a host of other products. Agriculture and food doesn’t seem to be a problem; we could feed the whole world easily if it weren’t for the profit motive. So how close can we actually get to a world without scarcity, thus enabling us to take what we need(as in ‘to each according to his need’.)?

  7. Damn, nearly forgot one thing. What is your response to Mises and Hayek’s claim that without the market, socialist planners wouldn’t know how much things cost? Of course this presupposes money, and also private property, but there is this argument that says when faced with several choices, it isn’t possible to determine which would be the most cost effective. It is said that private property(according to Mises) and/or money prices in the market(Hayek) are needed to make that determination.

    W.P. Cockshott counters with the theory that labor time can be calculated via modern computers, and this would be the basis for calculating the most cost-effective methods for production. In other words, we choose the method which costs the least in terms of abstract human labor. Are you aware of this theory and if so, what do you think of it?

  8. Oliver C says:

    I have a question about a section/passage from this book: on Page 83 of the PDF draft (of the second 1991 edition) on his website, Clarke writes “It is only through the regular divergence of prices from values and of values from the labour-times embodied in particular commodities that the social regulation of production in a commodity-producing society is achieved…The divergence between price and value…is therefore a necessary characteristic of the alienated character of commodity production.”

    I take this to mean that, basically, the process of establishing the socially necessary time for producing a commodity occurs through the process of introducing privately produced commodities into the social market, whereby their divergence, either in price/value or in social necessity, comes to mark out what the socially necessary time IS? Or in mathematical terms, the only way to find the ‘mean’ is through the error-term? [Not sure if that makes any more sense].

    I’m trying to make sure I understand why he (and Marx) are saying that these divergences of price and value are not accidental but necessary…

    • Oliver,

      Good question. The reason that price and value must diverge is that prices are the mechanism by which the social labor process is apportioned to different tasks. We don’t decide directly to allocate so much labor to this or that activity. These decisions are made in the market. The specific market processes that make this happen work through the fluctuation of prices. If there is an excess of supply over demand for a certain commodity then prices fall below value and labor is withdrawn from the production of that commodity and vice versa. When prices are higher than value the seller receives super-profits through exchange. These super-profits attract investment into industries which eventually raises supply and lowers prices, eliminating super-profits in the industry.

      There are other price-value divergences, each explaining different aspects of the apportioning of social labor. Within an industry prices are set by socially necessary labor time (SNLT). But there are always firms which will produce below the SNLT an obtain super-profits this way.

      Monopoly pricing raises prices above values.

      There is also the issue of prices of production which Marx brings up in further levels of analysis. Prices of production more adequately explain the real process of price formation better than the simplistic value=price assumption of vol. 1 of Capital. My video “What transformation problem?” talks about this a bit, as do my posts on Vol. 3 of Capital (chapters 9 and 10 I believe).

      I hope this helps. What do you think?

      • Oliver C says:

        Brandon,
        Brilliant! I see it now. I’m half way through Vol. 3 and trying to finish on my Christmas break. Clarke of course is going back to discussions from Vol. I.

        I was thinking that Clarke was referring more directly to the establishment of value, and not the apportioning of labour within a system of commodity production. What you say makes even more sense when one thinks of the phrase ‘relations between people become relation between things’ – in the sense that the ‘social process’ (or would be social process) occurs through price fluctuations and through relations to prices – as opposed to a genuine social process between people.

        In this sense, commodity fetishism achieves its apotheosis in the ‘invisible hand’ of the market which, like a deity, represents human relations abstracted and attributed to things above and beyond human agency.

        Cheers!

  9. allan says:

    I think it would be more accurate to say that Marx and Adam Smith both recognized that prices regularly diverge from value, that some days the price is below, some days the price is above value; but that, on average, the “natural” (Smith’s word) price converges on the real price of a commodity. Marx went on to say that commodities, on average, are always sold at their value, but that the capitalist does not pay the full cost of the commodities’ production. And that this is how profit is made by the capitalist.

    Also, both Marx and Smith would have said that the price of a commodity is simply the monetary expression of its value. That kind of market setting of price, I think, exists only, as it were, at the margins of modern economies. Prices are now set by giant monopolies like Microsoft and Walmart. As Galbraith pointed out, the modern corporation exists for the purpose of avoiding the uncertainties of a free market.

    This is how Marx put it: “I repeat, therefore, that normal and average profits are made by selling commodities not above, but at their real values.”

    It seems to me that the real issue is not whether price and value diverge or converge, but rather who gets to keep the profit from the sale of the commodity.

    • Allan,

      I would say that the “real issue” in question of price-value divergence depends on what we are trying to explain. When in various places in Vol. 1 Marx asks the reader to assume that price=value he is doing so because this assumption makes the argument easier to follow and because it doesn’t really effect that truth of the argument at hand. For instance, to explain exploitation it makes it easier to assume that you can’t make a profit by selling at prices above value. However, at other places in volume 1 we see Marx explain how producing below the socially necessary labor time allows capitalists to make super-profits. Here the price-value divergence is important to the argument.

      In vol. 3 Marx will point out that prices almost never equal values, or if they do it is only by accident. This allows us to see value as a process and not as an accounting unit, the constant movement of prices and values explaining the constantly shifting social relations of capitalist society.

      • allan says:

        A couple of points….it may be true that an individual capitalist may produce below the socially necessary labor time and make super profits. This can happen when a new process of production increases productivity. However, at some point, capital will be attracted to the new production process and the level of profit will then return to its “normal” level. At least, I think that is what Marx meant.

        Secondly, how does the constant movement of prices and values explain the constantly shifting social relations of capitalist society? Wasn’t it one of Marx’s main points that the method of production of commodities (whether goods or services) determined the social relations of capitalist society? I wonder if you are saying that the market, the exchange of price and value, or maybe, the dialectic of price and value, is what determines the nature of society.

      • Allan,

        on the first point: I think it’s important to stress that this process is in constant flux. For one it’s not true that all industries produce at the SNLT. Usually some produce above it and make less profit. Others produce below it and get super-profit. The SNLT is the modal average of all firms within the industry. As they are all constantly competing over SNLT, SNLT is a moving point that constantly changes. There is never a point at which it stays still and in which all firms produce at it. This makes Marx’s theory of price not and equilibrium theory of price like the equilibrium theories of neoclassical econ.

        to the 2nd point: well my above discussion of the constantly evolving SNLT would be one example of this. The movement of price is part of the development of the forces of production as capital seeks to further subordinate labor. I am not talking about the basic social relation of capital-labor changing. I’m talking about changes within that relation: the movement of capital between industries, variations in the wage rate, trends in the profit rate, the development of the forces of production. All of these things are caught up in the movement of prices.

      • allan says:

        By the way, I think “Marginal Futility” would be a great title for a book on marginalism.

      • allan says:

        Thank you for your reply..I have been trying for years to understand what exchange-value is. I realize that it ultimately (I think) is socially necessary labor time. The problem I have is what exactly is exchange value. It sounds a lot like price. If you substitute price for exchange value in Marx’s Capital, Chapter One, it seems to me you can get a fairly understandable interpretation. Price appears to be relative and a non-instrinsic value…but yet it is inherent in commodities…thus a contradiction in terms…. one car=five diamonds=ten watches=100 ozs of gold=$25,000…all of these relations can be substituted for each other, but all of the commodities have one thing in common: labor.

        Thus, why not just substitute “labor theory of value” with the “labor theory of price?”

        Nobody really understands value anymore, it is all monetary theory and monetarism, price theory, interest rates, etc.

        As you say, the neo-classics argue an equilibrium model of price; shouldn’t Marxists argue that the equilibrium is based on necessary labor time? Also, it is sometimes more accurate to determine the price of a commodity by its “man-hours” of production time.

        I am stuck on the Adam Smith theory of price: prices go up and down all the time, but they gravitate to a “normal price;” this is the price or cost of labor….the capitalist sells his product at its true cost, but does not pay the full cost of the labor. The difference is profit. Otherwise, as Marx said, you can’t explain profit. (Wages, Price and Profit.)

        And (thank you for reading this) how do the marginalists explain profit anyway? The capitalist gets a profit because he risked his capital. And where does the profit come from? It come from risk. And how does risk create profit? Because profit comes from risk. Marx addressed this exact argument in Chapter Six of Capital. And 150 yrs later the argument is still around. It amazes me we still have a functioning economy.

      • Exchange value is simply the quantitative proportion at which one commodity exchanges with another. Price is a form of exchange value, the proportion with which a commodity exchanges with money. Both fluctuate for lots of reasons.

        I think it is more useful to think of marx’s value theory as a disequilibrium theory since things never reach a stationary state for Marx, unlike neoclassical econ.

      • allan says:

        “Exchange value is… the quantitative proportion at which one commodity exchanges for another.” So, one coat exchanges for 20 yds of linen; one coat costs (price) $20, 20 yds of linen cost $10.

        The coat has twice as much exchange value as the linen because the coat contains twice as much socially necessary labor as the linen.

        Thus, price, money, exchange-value, are all labor. How does labor create, originate, fix, or incorporate, price, money, and exchange value into an object?

        I can see how the neo-class economists would come to the conclusion that value originates in the market or in the exchange of the coat for $20. They obviously have an ideological motive to deny that the value of the coat comes exclusively from labor. The coat is just hanging on a rack and until it is sold, purchased by a consumer for a use or becomes a utility through demand, the coat appears not to have any real, objective value.

        Marx says in Chapter One of Capital that a commodity has use-value and exchange-value; that commodities are produced in a capitalist economy. But in a slave economy, a slave can produce an object, say cotton, which has both use-value and exchange-value. The slave owner can sell the cotton on the market. In feudalism, a serf can produce wheat, which has both use-value and exchange-value. The landlord can sell it for money.

        Would Marx say that just because an object of labor has use-value and exchange-value does not mean that it is necessarily a commodity? As, for instance, when he says that an independent peasant produces food and clothing for his family, he produces use-values, but does not produce commodities; but does he produce exchange-values?

        Or, a slave and a serf produce exchange-values, but these values do not belong to them…but slavery and serfdom do not produce commodities???!!!!

        So what, exactly, is a commodity?

  10. Oliver C says:

    Not to speak for Brendan, but with regard to your second point, I don’t think he is saying that the dialectic of price and value determine the nature of society so much as they represent the reified social processes through which the regulation of production occurs in a system of commodity production.

    • allan says:

      “they represent the reified social processes which…regulate… capitalist production.”

      Does this mean they represent social laws, social relations, social class relations, which regulate production? I would have thought it was the other way around, that production regulated social processes.

      • Oliver C says:

        So what I mean to say is that, the social processes are processes of production. If this makes sense. It is not that social X (relations, class relations) determine/regulate production. What I am saying is that the divergence of price and value is a social process, ‘reified’ or objectified. Price and value exist within a social dialectic within which they define one another, like female defines male and vis versa.

        Price as such is the process through which value is determined within a market system because, within such a system production is a private enterprise, but the product can only achieve value in the market. Value is a social relation and production occurs privately; this is a critical contradiction. The divergence of price and value is the [super extra flawed] process in capitalist production process through which there is defined a normative value or a socially necessary labour time for the product… At least, that’s my take.

      • allan says:

        “the divergence of price and value is a social process, ‘reified’ or objectified.”

        Say the value of a pair of shoes is $10 and the price is $12. This divergence is a social process? and is objectified as profit?

        I thought (obviously I am very confused) Marx said the value of the shoes is $10 and the price may vary from day to day or over some period of time, one day the price is $12, another day it is $8, but over time the price would come to the true value of $10. The shoes are sold, on average, at their true value of $10, and the shoe manufacturer still makes a profit. I thought Marx showed this was possible because the manufacturer did not pay the full cost of the labor.

        On the other hand, if the shoes sit on the shelf long enough their value (actual, true value) will decrease because shoe making has become more productive (through use of more sophisticated machinery, etc.) and labor time has decreased, thus cheapening the shoes.

        I’m listening to the David Harvey lecture, trying to work through Capital again…I thought I had some kind of understanding of it, but it seems to get more complicated every time I read it (the first few chapters.)

      • Allan,

        I don’t think you are that off. There are different levels of analysis that Marx is operating on at different moments in Capital. Sometimes he holds certain things constant so as to analyze other things. For instance he holds price=value for his discussion of the source of profit. This is because deviations of price from value would just confuse the issue and, more importantly, since total price equals total value these deviations can’t explain profit. But at other times in Capital Marx is clear that the deviation of price from value is a constant feature of the price form. The social processes whereby labor is apportioned through commodity exchange are what is being worked out through these price fluctuations. So understanding these fluctuations is an important part of value theory. These fluctuations do not tend to a stationary equilibrium state because SNLT is also constantly changing, capital is constantly rushing from one sector to another in search of profit, capital is constantly expanding, etc. But at certain levels of analysis Marx may hold these changing features constant in order to isolate certain movements within the price form. If we hold SNLT constant (and ignore prices of production) we can see how fluctuations in supply and demand balance each other out and price tends toward value.

  11. Oliver C says:

    At risk, enormous as it is on X mas eve, of being pretentious, I would suggest briefly that yes, you have it a bit off. Without the 12 or the 8 bucks one cannot establish the 10$ basic level. But I might be severely hammered at the moment.

  12. allan says:

    Your explanation of Marx’s analysis of price and value is very helpful. It’s not just a case of price=value/exchange value. Since labor itself is a commodity and subject to supply and demand then obviously it’s price will change and thus the price of its product, the commodity.

    So, the price of labor changes with the competition between workers? Some workers are forced to provide more labor in a shorter time than other workers.

    But then, aren’t you saying that prices fluctuate with the changes in wages? I am absolutely convinced that Marx would have disagreed with this, particularly in Wages, Price and Profit.

    Do modern Marxists agree that profit comes from unpaid labor? I.E, from surplus value?

  13. Oliver C says:

    Can anyone explain this aspect of Marginal Utility price determination for me? (Via Simon Clarke) “The individual will take up the opportunity to exchange if by so doing she can achieve an increase in the sum of utilities at her disposal. Faced with given exchange ratios (prices) the individual will choose to exchange goods until the relative marginal utilities of the goods possessed at the end of the transaction correspond to the exchange ratios in which they stand.”

  14. allan says:

    It seems to say to me:

    1.An individual will exchange if she can receive more value than when she started; she will exchange $10 if she can receive $20 in exchange.

    2. Individuals exchange only when goods possessed at the end of the exchange are relatively equal to their price.

    Case 1, the individual is a capitalist; she employs a worker for $10 and takes a product from the worker worth $20.

    Case 2, the individual is a worker; the worker sells her labor at its true (relative or marginal utility) price.

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