From: Paul Adler (padler@usc.edu)
Date: Mon Jan 27 2003 - 11:29:55 EST
Thx Jerry. The general idea of my post was this: that Marx seems to be suggesting that as direct simple labor recedes in importance to the production of goods -- to be benefit of (a) very "complex" labor (that embodies in "living" form society's accumulate scientific and technical knowledge) and (b) automated equipment (that embodies, in "dead" form, a growing body of science and technology) -- the the yardstick of (exchange) value on which the functioning of the capitalist systems function relies -- socially necessary labor time -- loses its ability to effect the essential coordinating function. We should therefore observe a growing reliance on conventional, rather then "economically determined" prices. You seem to think such a shift is inconsequential. My hunch is that this would have several consequences that add to the instability of capitalism. _ At 10:05 AM -0500 1/23/03, gerald_a_levy wrote: >Re Paul A's [8373]: > >I don't understand why you interpreted the following: > >> 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) > >as: > >> That is: Science becomes increasingly central to productivity >> improvement, but that makes the market system of coordination >> increasing ineffectual. > >Please explain. [Note: for the benefit of others who prefer the MECW >translation, see Volume 29, p. 91.] > >> 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. > >It is entirely possible that individual prices are established "by social >convention" peculiar to 1 or more specific branches of production. >This can then give the appearance that prices no longer have a >relation to the law of value. However, there is the question of how >surplus value is distributed among capitalists, e.g. does the >establishment of the arbitrary 'convention' by some capitalists come >at the expense of other capitalists? There is also the possibility, if >the 'knowledge' commodities are means of consumption purchased >by the working class, that there could be a redistribution of value >from the working class to a segment of the capitalist class. There is >also the question of rent which you discuss below. > >> 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. > >Yet, there is also proprietary information held by corporations which >is only indirectly part of the social 'stock' of knowledge. The cost of >that internal information is accounted for internally or at least can be >estimated. > >> 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. > >An "innovative idea" is not the same as innovation. I gather you are >referring to "discovery" (as distinct from innovation). While it is >conceivable that the discovery of a new process or product can >occur during one's free time, it is certainly _not_ just as likely >to occur during free time as it does during working time. That is, >both discoveries and innovations are overwhelmingly produced >during working time (and one could argue that if one is thinking >about an "innovative idea" during one's "free time' then it really >isn't free time at all but rather unaccounted for working time. Yet, >this working time disguised as free time _could_ then be >accounted for as a cost.) > >> 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). > >True, but there is no way that consumers can know for any class >of commodity to what extent individual prices differ from values. >Putting it in similar terms to what you expressed above, consumers >are familiar with 'conventions' for the pricing of individual commodities, >i.e. they have historical experience purchasing different classes of >commodities, but they still have no way of _knowing_ whether those >prices established by convention are equal to the value of those >commodities. > >> 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. > >We briefly discussed (in December, 2002?) the question of whether >rent theory could be used to comprehend the value of software. It >was a short exchange as I remember (with Paul C participating). Perhaps >we should return to that question. > >> 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? > >Yes, very strange. > >> 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. > >Re brittleness: this sounds like something that could be empirically >investigated. > >> Perhaps there is some literature >> that would serve as a starting point -- perhaps even the literature >> on land prices and absolute rent?? > >Didn't you suggest above that for determining the price of knowledge >commodities, rent theory was inadequate? > >> 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) > >This could probably be done if, as you say, your theory is >straightened out. > >> * 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! > >Well, this could be done empirically perhaps, but what would it tell >us in the absence of a class analysis of struggles by different segments >of workers? > >> * product prices -- compare the evolution over time of the market >> prices of more vs less knowledge-intensive >> commodities/products/services > >Could be done subject to straightening out first. > >> Marx's discussion on automation in the Grundrisse suggests that >> advanced capitalism poses challenges to the price system's ability >> to coordinate economic activity. > >More anarchy? > >> 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. > >Some empirical work, e.g. by Allin and Paul C, suggests that >underlying labor value is a good predictor of commodity prices >in contemporary advanced capitalist nations, e.g. the UK >and US. This doesn't seem to me to be consistent with your >assertion. [NB: I am not endorsing the conclusions of the AC/PC >empirical work here, I am simply noting that there are empirical >studies which do not seem to be consistent with your thesis.] > >> 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. > >I'm not sure of a way that we could test that proposition, but I am >skeptical of the idea that there has been increasing instability >over the long term in "each specific market". > >Solidarity, Jerry -- * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 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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