Hi Andy, Thanks for the reply--I am enjoying our exchange, so don't take the following the wrong way -:), but I'll use a riposte to your argument which Marx himself used against Ricardo: Summarising Ricardo, Marx says that in Ricardo's system: "The *value of labour* is therefore determined by the *means of subsistence* which, in a given society, are traditionally *necessary* for the maintenance and reproduction of the labourers. But why? By what law is the *value of labour* determined in this way? Ricardo has in fact no answer, other than --- the law of supply and demand --- He determines *value* here, in one of the basic propositions of the whole system, by *demand and supply*---as Say notes with malicious pleasure." TSV II, p. 400. Marx is also adamant that one has to have a logico-historical argument as to why labour embodied differs from labour commanded; you can't merely take it as a premise: "Ricardo starts out from the actual fact of capitalist production. The value of labour is smaller than the value of the product which it creates... The excess of the value of the product *over* the value of the wages is the surplus-value... For him, it is a fact, that the value of the product is greater than the value of the wages. How this fact arises, remains unclear. The total working-day *is greater* than that part of the working day which is required for the production of wages. Why? That does not emerge." TSV II, pp. 405-06. So Marx scoffs at the idea that "supply and demand" could be behind the divergence which exists between the use-value and exchange-value of the labourer, which in his system is the (or in my argument, a) source of surplus-value. I therefore hardly think that Marx could or would avail himself of the proposition that supply and demand would cause the use-value and exchange-value of a machine to be equalised. Marx put the incommensurability of use-value and exchange-value as a general phenomenon which applied to all commodities in capitalism, and used a logico-historical argument as to why this incommensurability exists. It therefore applies to all inputs the capitalist purchases, not just labour. In fact, Meghnad Desai--who was one of the few Marxists to realise how central this use-value/exchange-value logic was to Marx--attempted to reinterpret it in a way which did allow for the difference you are suggesting in his Marxian Economics. However, the way he did it effectively violated every one of Marx's strictures about the nature of exchange under capitalism (as well as contradicting Marx's key concept that use-value and exchange-value are incommensurable). Desai argued that, because of the power relations between capitalists and workers, the capitalist pays the exchange-value of the worker and gets the use-value. However, because a capitalist purchases a machine from another capitalist, the power relations are equal and the capitalist pays the use-value and receives the use-value, hence no surplus is generated from machines. This proposition runs completely counter to Marx's arguments that one should not even attempt to explain surplus on the basis of unequal exchange when one is attempting to deduce the general laws of capitalism: "A worker who buys commodities for 3s appears to the seller in the same fashion ... as the king who does the same." (Notes on Adolph Wagner in Carver, T., Karl Marx: Texts on Method, p. 241). That's *not* to say that machines--or labour--actually exchange at their values, because both are not true commodities. The use-value/exchange-value dialectic for commodities points to another for products which are both commodities and non-commodities. But this issue comes up at a later stage of the argument. At the stage of Capital I, Marx is treating everything--including money and labour--as commodities, and therefore abstracting from higher dialectics which attenuate the general rule in practice. When Marx allows that machines--or rather, capital in general--is not a simple commodity (something which applies strictly only to products on the C--M--C circuit), then it is possible that the use-value of capital does play a role in determining its price. But here this brings in issues of the role of expectations and uncertainty in determining asset prices. This is evident in another critique of Ricardo, this time over the issue of how is a price determined for undeveloped minerals: "Ricardo never uses the word *value* for utility or usefulness or "value in use". Does he therefore mean to say that the "compensation" is paid to the owner of the quarries and coalmines for the "*value*" the coal and stone have before they are removed from the quarry and the mine---in their original state? Then he invalidates his entire doctrine of value. Or does *value* mean here, as it must do, the *possible* use-value and hence the *prospective exchange*-value of coal or stone?" TSV II, p. 249 I have argued that this concept provides a foundation for a common proposition in Post Keynesian economics, that there are 2 price levels under capitalism--one for standard commodities, and one for assets and means of production. This might look like it completely counteracts the initial argument, somewhat in the manner you suggested, so that the exchange-value of a machine equals its use-value. But (a) this implicitly accepts that machines can produce surplus-value, in that their use-value exceeds their cost of production, and (b) this is a highly volatile price: when expectations of future profit are high, the price of an asset like that Marx discusses above could rise well above, not just its cost of production, but even its actual return (which can only be found out in the uncertain future), and in times of slump, it could fall well below its cost of production. Cheers, Steve At 04:00 PM 10/27/2000 +0100, you wrote: >Steve, > >Many thanks for the very interesting long post. A lot to chew on but >the key seems to be your view that the important distinction >between machines and labour does not entail that SV is only >produced by labour. The 'tortuous' argument of Marx, denying that >machines produce SV, that you refer to is difficult (though not >tortuous) only because Marx's prior notion of value and labour is >entailed, imo. Anyway Marx's argument seems to me to amount to >the following: > >IF a machine were, in general, to contribute more value in >production than it initially costs THEN the laws of free exchange - >ie. supply and demand - entail that its price will go up until equal to >the sum of (present) value contributed. This is simply the 'law of >one price': the machine and its contribution to production are >merely different forms of the same commodity (the potential form >and the realised form), rather than being two distinct commodities, >hence their price (present value) is the same. What do you think? > >Best wishes, >Andy > > Dr. Steve Keen Senior Lecturer Economics & Finance University of Western Sydney Macarthur Building 11 Room 30, Goldsmith Avenue, Campbelltown PO Box 555 Campbelltown NSW 2560 Australia s.keen@uws.edu.au 61 2 4620-3016 Fax 61 2 4626-6683 Home 02 9558-8018 Mobile 0409 716 088 Home Page: http://bus.macarthur.uws.edu.au/steve-keen/
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