[OPE] defining 'recession'

Paula,

You are correct, the boundaries of production are often difficult to define with great precision.

The general operational definition applied in social accounts is that of discrete resident units, with a recognisable postal address in domestic territory, which recognizably transform inputs into outputs of new goods and services, generating factor income through adding new value to output. Excluded are income-generating activities which only generate property income, trade in unmodified second-hand assets, sale of land, and unilateral transfers of funds. This defines the boundaries of gross output from which the net output (in aggregate, GDP) is inferred.

As I noted in my post on the "real economy", the concept of "economic activity" as trading activity makes it difficult to make a consistent basic distinction between production, distribution, circulation and consumption, which Marx took over from James Mill.

According to Marx, production in general can be viewed from the point of view of human work (the subject) or from the point of view of the product (the object). From the point of view of work, the production process is viewed as a work process, in which a worker or group of workers use means of work to work upon an object of work, transforming it to produce an externalised labour-product, and from the point of view of the product, it is a production process, i.e. simply any process which results in a recognizable product.

In the case of services (but also some goods) it is often difficult to define objectively what exactly the product or output should be understood to be, or if you like, what exactly you pay for (I will write another post on the concept of "services" when I get more time to do it). The definition may be customary but not objective. In general, if the production and consumption of a product coincide, it makes no net new addition to wealth. Work may be performed also without resulting in any recognisable product, in which case it is work, but not production.

However, for Marx the concept of production cannot really be defined in abstraction from the existing social relations of production (the relationships among producers, defined by property rights, income & product entitlements, workplaces, forms of organisation etc.). Social relations enter into the very definition of the product, and define which work contributes to its creation. Thus, in defining a mode of production (a way of producing) a distinction is typically drawn between the material (physical) process involved and the social process. Depending on how the producers are associated, the ways in which the product and the process leading to it are defined can differ. For example, in ancient society, the rainmaker "produces" rain, that is his job and he earns a living out of that.

When you go to marketing school, on of the things you learn is that it is important to define exactly what your product is, in terms of what you have for sale. In other words, you engage in an activity or process (or a series of them) which has different results, and you can combine or "package" the results in different ways, with different financial consequences, since different forms of packaging can have a different income-yield or sellability. Similarly in management theory, divisions of labour are endlessly redrawn in order to produce a certain range of products which conform to the goals of an organisation. This is sometimes specified in terms of "core business". In the case of joint production, it may not be possible to create one product, without also creating another one, but it may not be recognized as such, particularly if there is no demand for it. But all this is just to say that "products" are both materially and socially defined, and that knowing what the product is, can be difficult to define with exactitude. How the product is defined obviously has implications for the division of labour required to produce it, and vice versa, the division of labour limits what you can produce.

As I wrote in a wiki, the transformation of a labor-product into a commodity (its "marketing") is in reality not a simple process, but has many technical and social preconditions. These often include:

the existence of a reliable supply of a product, or at least a surplus or surplus product.
the existence of a social need for it (a market demand) that must be met through trade, or at any event cannot be met otherwise.
the legally sanctioned assertion of private ownership rights to the commodity.
the enforcement of these rights, so that ownership is secure.
the transferability of these private rights from one owner to another.
the (physical) transferability of the commodity itself, i.e. the ability to store, package, preserve and transport it from one owner to another.
the imposition of exclusivity of access to the commodity.
the possibility of the owner to use or consume the commodity privately.
guarantees about the quality and safety of the commodity, and possibly a guarantee of replacement or service, should it fail to function as intended. http://en.wikipedia.org/wiki/Commodity_(Marxism)

Thus, the "commodification" of a good or service often involves a considerable practical accomplishment in trade. It is a process that may be influenced not just by economic or technical factors, but also political and cultural factors, insofar as it involves property rights, claims to access to resources, and guarantees about quality or safety of use.

Jurriaan

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Received on Sat Dec 6 08:09:43 2008