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This is a partial response to Ajit's (3817). I hope to follow with
another post or two on other issues. This post focuses on one key
criticism by Ajit of "my theory" (which I insist is an interpretation of
Marx's theory): because "my theory" does not explain the determination of
m (money new-value produced per hour of abstract labor), it cannot be a
theory of surplus-value, or of anything else. I have already explained in
(3815), which Ajit chooses to ignore, how the main conclusions of Marx's
theory of surplus-value do not depend on a full determination of m.
Let my put it another way: As I have summarized several times, the basic
conclusion of Marx's theory of surplus-value is that the magnitude of
surplus-value (or dM) is PROPORTIONAL to the quantity of surplus
labor-time, with m as the FACTOR OF PROPORTIONALITY; i.e.
S = m Ls
= m (L - Ln)
where Ln = V / m.
Now of course it would be preferable to be able to determine the factor or
proportionality m and thus have a more complete theory of the magnitude of
S. However, even if we are not able to determine the specific factor of
proportionality, we still have a theory that S is PROPORTIONAL to
Ls. Furthermore, since a change of m affects all monetary variables
proportionally, the ratios among these monetary variables are not affected
by a precise magnitude of m.
This is a perfectly acceptable theory, especially in light of its
impressive explanatory power. Even if a theory is not able to explain
such a factor of proportionality, this does not mean that it is no theory
at all, as Ajit asserts. Rather, it means that it is a theory whose
results are determinant only up to a factor of proportionality (or only up
to a "scalar multiple"), as are many other economic theories. Indeed,
many economic theories are not able to be even that specific. Assumptions
are often expressed in general functional forms (e.g. the neoclassical
production function Q = f(K,L)), and the theory is not able to say
anything more precise about the specific functional form. Marx's theory
of surplus-value is able to be more precise than that about the functional
form; it is able to conclude that S is PROPORTIONAL to Ls, even though it
is not able to explain the specific factor of proportionality (at least
not yet). And on the basis of this theory of surplus-value, one can
explain many important phenomena of capitalist economies (e.g. conflict
over the working day, inherent technological change, etc.)
Ajit did not respond to my argument in (3815) about COMPARED TO WHAT? So
I repeat a part of that argument, and then continue.
Ajit criticizes "my theory" because it does not explain the determination
of m. However, if Marx's theory is weak, COMPARED TO WHAT? Sraffian
theory cannot even explain money, period; i.e. it can not explain the
necessity of money, why money must exist in a commodity-producing
economy. At least Marx's theory can explain, as a logical deduction from
the fundamental assumption of the theory (the "labor theory of value"),
that money has to exist, in order to function as the special commodity in
which all other commodities express their labor-value. This is not an
ad-hoc explanation of the necessity of money, based on the "difficulties
of barter", but a deduction from the fundamental assumption of the
theory. In other words, the necessity of money is explained in an
integrated way, along with the explanation of lots of other phenomena
(e.g. conflict over the length of the working day), all derived from this
fundamental assumption. I think this is a very significant theoretical
accomplishment that no other economic theory has been able to achieve.
Furthermore, it just occurred to me yesterday: Sraffa's theory does not
explain absolute prices either, but only RELATIVE prices! The Sraffian
system of equations has an extra unknown. The system can be solved if the
price of one of the commodities is set equal to 1 (i.e. is TAKEN AS
GIVEN!). This one commodity, called the numeraire, is arbitrarily chosen
and is not necessarily real money. (Indeed in a system of paper money,
the numeraire commodity cannot be real money). Sraffa's innovation was to
take as the numeraire the "standard commodity", which is a composite
commodity with peculiar characteristics and which has no relation to real
money at all. Sraffa's relative prices in terms of the ideal "standard
commodity" have nothing to do with real world prices; they are only a
solution to a logical problem with Sraffian theory ("the invariable
measure problem" in order make prices invariant to changes in the
distribution of income between wages and profits).
Therefore, we can see that Sraffa's theory is also determinant "only up to
a scalar multiple", just like Marx's theory. In this respect, so roundly
condemned by Ajit, Marx's theory is no worse than Sraffa's theory. And
the fact that Marx's theory is trying to explain real world prices and
real world profit makes it preferable to Sraffa's theory, which is only
trying to determine hypothetical numeraire-prices, which have no relation
to real world prices and profit.
How can anyone who accepts such a highly unrealistic theory like Sraffa's
criticize Marx's theory for failing to provide a complete explanation of
the determination of the value of money in his theory of real world prices
and profit? I think it is far better to have a partial explanation of
reality than a partial explanation of hypothetical
numeraire-prices. Especially when Marx's theory has such substantial
explanatory power of important phenomena of real capitalist economies.
I look forward to further discussion.
Comradely,
Fred
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