From: Paul Adler (padler@usc.edu)
Date: Wed Jan 22 2003 - 12:08:36 EST
I have been following the thred on Electronic and value, and would like to submit to the list a cluster of thoughts -- if I have things right in my reading of Marx, I am hoping this might make for a useful, empirical research agenda. So, with you forebearance, here goes: My starting point is the Grundrisse: "As soon as labour in the direct form has ceased to be the great well-spring on wealth, labour time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value." (705) That is: Science becomes increasingly central to productivity improvement, but that makes the market system of coordination increasing ineffectual. My hunch is that because of the public-goods nature of knowledge, the pricing of knowledge intensive goods/services/assets cannot be determined "economically" (classically, by socially-necessary labor time requirements, or even neoclassically, by supply and demand) -- because these requirements are essentially indeterminate. Instead, I conjecture, these prices will be determined by social convention. How does a law firm set fees? Or a commercial R&D company? I think these firms set prices by reference to non-economic norms. Expanding on this -- Is the following reasoning tenable? 1. Suppliers of knowledge-intensive goods are not sure what price would cover their costs, for two reasons. First, the main source of a firm's innovative ideas is society's total stock of knowledge rather than assets held privately by the innovating firm. Given the public-good character of much of that knowledge stock, identifying or justifying a "raw materials" cost for new ideas generated from this knowledge stock is difficult. Second, an innovative idea is just as likely to arise during free time as on the job, so identifying a "transformation" cost is difficult. Whereas competition between suppliers of most other types of goods drives prices toward their marginal costs, no comparably grounded "supply schedule" guides the price of knowledge. 2. The customer side is no easier. The potential customer for an innovation typically cannot judge the worth of the idea without having its secret revealed, and intellectual property protection is cumbersome and expensive (Arrow's old point). Moreover, intellectual property rights, compared to property rights in other kinds of assets, lack a legitimating material substratum. See (1) on the difficulty of determining the price of knowledge based on its production cost; the alternative basis would be rent, but rent is only a viable price-form when the asset in question is not reproducible and is rivalrous in use, whereas knowledge (at least in its codified forms) is reproducible at close to zero cost and nonrivalrous in use. Its price is therefore less grounded in any material considerations: it is purely a function of convention and relative power. Lacking a legitimating material basis, intellectual property is amongst the most contentious of forms of property (could we show this??). Perhaps that is why patent rights are so often bundled and bartered in dyadic trade rather than sold on open markets. Of these 2 sets of concerns, the supply schedule ones seem more troublesome and we could imagine that the demand schedule ones might not be insuperable. But even if only the supply schedule disappears, surely price formation will become very strange, no? 3. If this reasoning is approximately correct, the prices of knowledge-intensive goods should behave differently, be more "brittle," no? I imagine that we would find them more stable for longer periods, and changing thru radical breaks rather than gradual evolution. But I don't yet have a good theory with which to characterize the differences between conventionally-determined rather than economically-determined prices. Perhaps there is some literature that would serve as a starting point -- perhaps even the literature on land prices and absolute rent?? If we could straigthen out the theory -- and if there was anything left to my brittleness hunch when that was done -- then you could imagine testing that hypothesis on: * asset prices: compare the evolution over time of the stock prices of more vs less knowledge-intensive firms (as measured by R&D intensity or % of labor force in professional categories) * labor prices: compare the evolution over time of the prices of more vs less knowledge-intensive forms of labor (i.e. more vs less skilled and schooled) -- this complicating the list's discussion of the value of complex labor! * product prices -- compare the evolution over time of the market prices of more vs less knowledge-intensive commodities/products/services **** The basis motivation of a study of these issues for me would to show that capitalism encounters its own limits as the forces of production progress and become more socialized (i.e. become more knowledge intensive) and bump into the limits of capitalist relations of production (here: market based pricing). Marx's discussion on automation in the Grundrisse suggests that advanced capitalism poses challenges to the price system's ability to coordinate economic activity. The labor theory of value (Marx says) isn't his theory, but is rather the theory that capitalism itself relies on, and as capitalism develops, this theory becomes increasingly obsolete, because labor becomes a less significant and identifiable factor of production. As a result, he "value form" wobbles increasingly unstable on a narrowing base. Thus: "instability" -- leaving aside the question of macro economic crises (that's an open question!) then, I read him to say, growing instability in each specific market. -- * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Prof. Paul S. Adler, Management and Organization Dept, Marshall School of Business, University of Southern California, Los Angeles, CA 90089-0808 USC office tel: (213) 740-0748 Home office tel: (818) 981-0115 Home office fax: (818) 981-0116 Email: padler@usc.edu List of publications and course outlines at: http://www-rcf.usc.edu/~padler/ * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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