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I think I will continue with the "bare-bones" approach to summarizing my
interpretation of Marx's theory. This post will focus on Marx's theory of
surplus value in Volume 1 and in particular on the definition and
determination of the concept of "transferred value" in Marx's theory. This
is in response largely to the criticisms of Ajit and Rakesh, but put in a
larger context (thanks very much to Ajit and Rakesh for this stimulating
discussion). The post is long, for which I apologize, but this seems
necessary to respond to these criticisms. I would be happy to provide
supporting arguments and textual evidence on specific points. A subsequent
post will summarize my interpretation of Marx's theory of prices of
production in Volume 3.
1. DEFINITION OF SURPLUS VALUE
To begin with, surplus value is defined as the increment of money, dM, that
emerges at the end of the circulation of capital and that "transforms money
into capital".
In particular, Marx's theory of surplus value in Volume 1 attempts to
explain the TOTAL AMOUNT OF dM for the economy as a whole, not the surplus
value of an individual industry or individual firm; in other words, the
total surplus value of the TOTAL SOCIAL CAPITAL, not the surplus value of
an individual capital.
2. INITIAL GIVENS
C and V: I have argued in previous posts that: (1) constant capital and
variable capital are the two components of the initial money-capital, M,
that is invested in the first phase of the circulation of capital to
purchase means of production and labor-power, respectively; (2) the
initial money-capital, M, and hence also C and V, are taken as given, as
the actual money-capital invested (adjusted for capital gains/losses); (3)
the reason why C and V are taken as given is that their full explanation
involves the equalization of profit rates, and, according to Marx's
method, the equalization of profit rates cannot yet be explained at this
early stage of the analysis. Before the equalization of profit rates can
be explained, first the total amount of surplus-value and the general rate
of profit must be determined.
Lc: the quantity of current abstract social labor in the economy as a whole.
m: the new value (in terms of money) produced per hour of current abstract
social labor (which Marx often assumed in his numerical examples to be 0.5
shillings per hour).
3. THEORY OF VALUE
Marx's theory of value in Volume 1 is about the aggregate price of the
total social product. Marx often illustrated his theory with a single
capital, but this single capital, as different from other individual
capitals, is not the real subject of Marx's theory in Volume 1. Rather,
the real subject of Marx's theory in Volume is the total social capital,
which is illustrated by a single capital. The single capital is considered
only as an "aliquot part" of the total social capital.
In Marx's illustrations using individual commodities, the price of the
individual commodity (e.g. the price of 20 lb. of yarn in Marx's second
example in Chapter 7 is 30 shillings) is expressed as the "value" of the
commodity. As I discussed in a recent post, when Marx used the term, the
"value" of commodities, without further qualification, it usually refers to
the "form of appearance of value", i.e. money or prices. The "value" of an
individual commodity, such as the yarn, is the price that would occur if
prices were equal to their values. However, this equality is true only for
the total social capital. Therefore, the "value" of commodities really
refers to the aggregate price of commodities, or to the price of individual
commodities, considered as a part of the total price of the total commodity
product.
According to Marx's theory, the "value" (V), or aggregate price (P), of
commodities consists of two main components: transferred value (TV) and
new value (NV), which are in turn determined as follows (all these
variables are in defined terms of money):
V = P = TV + NV
TV = m Lp (where Lp = C / m)
NV = m Lc
The determination of TV is no doubt the most controversial point in my
interpretation, and the point that Rakesh and Ajit have criticized the
most. There are two main issues involved in my interpretation of TV: (1)
that TV is defined as a quantity of MONEY, not a quantity of labor-time;
and (2) that the "past labor" (Lp) that determines TV is not equal to the
labor-time embodied in the means of production, but is instead equal to the
labor-time represented by the given money constant capital ( = C / m); i.e.
that TV is in general not proportional to the labor-time embodied in the
means of production. In effect, since m(C/m) = C,
TV is equal to C, the given money constant capital.
I will provide textual evidence on this controversial point in a separate
companion post (and have already done so in recent papers). But first, I
would like to concentrate on the logical implications of this
interpretation of TV and Lp for the rest of Marx's theory.
According to my interpretation, the last equation above for the
determination of new value (NV = mL) is the fundamental assumption of
Marx's "labor theory of value". I agree with Duncan and other "new
solutionists" (as I understand them) on this all-important point. Where I
disagree with them is the determination of TV, which they determine as
proportional to the labor-time embodied in the means of production, as in
the "standard" interpretation of Marx's theory. According to my
interpretation, as just noted, TV is derived from the actual money constant
capital invested and hence is in general not proportional to the labor-time
embodied in the means of production.
4. THEORY OF SURPLUS VALUE
Surplus value (S), or dM, is by definition equal to the difference between
M' and M, or to the difference between the price and the costs (K = C + V)
of commodities:
S = P - K
The magnitude of surplus value is then determined by the following simple
and direct logical derivation from the above initial conditions and
fundamental assumptions:
S = P - K
= (TV + NV) - (C + V)
= NV - V (since TV = m Lp = m (C/m) = C)
= m L - m Ln (where Ln = V / m)
= m (L - Ln)
Finally, defining surplus labor (Ls) as (L - Ln), we have:
S = m Ls
In Marx's numerical example in Chapter 7,
Ls = 6 hrs.
m = 0.5 sh./hr.
and hence S = 3 sh.
The definition of Ln (necessary labor) presented here is another
controversial point, similar to the definition of Lp, discussed above.
Just as Lp is derived from the given money constant capital and is not
equal to the labor-time embodied in the means of production, so also Ln is
derived from the given money variable capital and is not equal to the
labor-time embodied in the means of subsistence. Duncan and the other "new
solutionists" also define Ln in this way.
5. IMPLICATIONS
As stated above, I will summarize my interpretation of Marx's theory of
prices of production in a subsequent post. But to anticipate: a
significant advantage of this macro-monetary interpretation of Marx's
theory is that NONE OF THE AGGREGATE VARIABLES (P, TV, NV, C, V, and
especially S) CHANGES with the determination of prices of production in
Volume 3. In addition, because none of these aggregate variables change,
the rate of surplus value (S/V) and the rate of profit (S/C + V) also do
not change. According to this interpretation, Marx's theory is about
actual quantities of money-capital, in both Volume 1 and Volume 3. The
main difference between Volume 1 and Volume 3 is that Volume 1 is about
actual AGGREGATE quantities of money-capital (and especially the total dM,
or surplus value) and Volume 3 is about actual INDIVIDUAL quantities of
money-capital (the individual parts of surplus value). But the sum of
these individual quantities of money-capital is by definition equal to the
aggregate quantities of money-capital. Therefore, the aggregate quantities
of money-capital (especially the total dM and the general rate of profit)
cannot change as a result of the determination of prices of production.
On the other hand, according to the "standard" interpretation of Marx's
theory, Volume 1 is not about these actual aggregate quantities of
money-capital. Instead, Volume 1 is interpreted to be about either
labor-times or hypothetical "direct prices" that are proportional to
labor-times. In particular, surplus value is not the actual dM, but is
instead defined as the labor-time embodied in surplus goods, or the
hypothetical "direct price" of these surplus goods. Therefore, when
prices of production are determined in Volume 3, it is not possible for all
the aggregate variables to remain the same, as they do in my
interpretation. The actual aggregate money variables determined in Volume
3 are not the same as the hypothetical aggregate variables determined in
Volume 1; therefore, the aggregate variables must change from Volume 1 to
Volume 3. One of the aggregate variables can be held constant, but then
all the rest will change. As a result, the rate of surplus value and the
rate of profit will also generally change.
This constancy of the key aggregate variables between Volume 1 and Volume 3
seems to me to be a significant advantage of the macro-monetary
interpretation of Marx's theory over the standard interpretation. Volume 1
is not about hypothetical variables, whose relation to actual variables is
unclear (and many would argue "redundant"); rather Volume 1 is itself about
actual aggregate money magnitudes, and especially the aggregate dM. Volume
3 is then about the division of this aggregate dM into individual parts
(average profit, merchant profit, interest, and rent), with the aggregate
dM taken as given, as determined by the prior analysis of the total social
capital in Volume 1.
This macro-monetary interpretation of Marx's theory seems to me to be much
more plausible, both as what Marx was doing and as the better way to
analyze capitalism.
I look forward very much to your comments and to continued discussion. I am
still up in Maine for another week, with access to email only Mon, Wed.,
and Fri mornings for a couple of hours, so my responses might be delayed
somewhat.
Comradely,
Fred
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