Andaras
08-05-2008, 13:50
The following essay is basically my simplification of my understanding of Marxist economics generally, but specifically in relation to a firm grounding in the understanding of capital in relation to productivity of human labor. I actually wrote this some time ago, and although I will answer some questions relating to this essay, I do not intend to get into circular debates with right-wingers who I consider beyond such reason. I intend this for anyone of open mind who is willing to read my essay and then consider Marxist economics in a new way.
This is mainly because Das Kapital, despite all the many accompanying texts, still has the reputation of being unreadable to those with only rudimentary understanding of economics. The result of this is that instead of those of previous generations, people these days seem to have been exposed to the 'politics' of socialism before the economic basis for it's existance, just as Marxism was a scientific economic basis for then already existing labor movement of the time. This creates a distortion because people are exposed to socialism mostly through right-wing propagandists and a very dishonest way. I thought now that I would start from the ground up in constructing a view for people on the nature of the political movement in favor of the working class, by first giving it's economic base a thorough look at. Take note though that this doesn't intend to a complete analysis, just a simplification of the labor theory of value.
I thought to start we could use an example outside even the realm of economics, politics or whatnot to give a view of the labor theory of value, and this would be a psychological analysis. Imagine you are a teenage boy arguing with his mother about borrowing the car. A psychologist is watching their interaction, he doesn't pay attention to the specifics of the argument at all. To the psychologist it isn't important at all whether the boy did his choirs or his mother promised him he could borrow the car, the psychologist sees all these unconscious motivations in play: a struggle over control, the son wanting to leave the nest etc. These motives are the moder in the context of the entire interaction. Even though these motives do not enter into the surface substance of the interaction, which are just words about cars and choirs, the specific words are important if we want to know about cars and choirs, but if we want to know about their relationship, their behavior, their ego, then we need to ask deeper questions that penetrate beneath this surface froth of words.
Similarly, the substance of bourgeois theory, supply and demand, is important for understanding some things about the economy: price fluctuations, inflation, etc. But if we want to understand deeper issues about the economy we need other tools that are able to pierce through this surface substance to the underlying meanings. That is what the labor theory of value is all about.
All societies coordinate human labor in order to produce things. The total social product is divided about society.
When societies began producing a surplus ... who controls the surplus?
Under feudalism the social surplus was extracted from peasants by landlords. In slavery- from slaves by slave owners.
In both of these examples the economic act in which the surplus is passed from worker to exploiter is easy to see.
In both types of society it is clear to all involved that human labor is producing these goods and that it is the products of labor that are being appropriated by the dominant class.
Under capitalism the process of exchange makes it harder to see the passing of the surplus from exploited to exploiter. But it's still there. Workers are still producing the entire social product and another class, this time the capitalist class, is taking the surplus from them, selling it back to them and getting rich off it.
But what we see is money. We work and we are paid money for it. The capitalist sells the commodities we made and he gets money for it.
In this way. money- or the process of exchanging goods and services in a "free" market- obscures the underlying reality that what is really going on at a basic, societal level is that a dominant class is extracting the social surplus from a subordinate class.
This is basically what the labor theory of value is saying. Economists going all the way back to Ben Franklin realized that this theory helped answer a perplexing question in economic theory: why do heterogeneous commodities exchange?
Commodities are heterogeneous: They have different physical properties, different uses. Why is it that they can all be exchanged in the free market? What explains the ratios of their exchange?
The theory went on to postulate- all these commodities must be made up of a common substance, something that they all have to a greater or lesser degree, something that gives them value. This thing is their "embodied labor time".
The act of exchange obscures the underlying labor value of commodities. Though the labor value of a commodity may be the underlying substance to an economic interaction, it is the way this value is expressed through a money price that really effects the economic decisions people make. When you go to a store to buy something you want to know how much money it costs, not how much labor went into it. But the act of buying something with money implies the existence of value, whether or not you are aware of it.
Specific money prices are determined by supply and demand. I'll assume that that concept is simple enough that I don't need to explain it here. Money prices fluctuate- clothes and entertainment commodities come in and out of style, supplies of food temporarily change due to droughts, etc.
But underneath this day to day fluctuation lies a general equilibrium price- a price related to the amount of labor embodied in commodities.
Money prices are mathematical, quantifiable, observable things. We see dollar signs hanging off of price tags and they have a real effect on us. Not so with labor value: We don't see the people who make those commodities. Even if we could see them, quantifying the amount of labor time in a commodity is next to impossible: we'd have to figure out not just how much work went into a specific commodity in each stage of its making (and some commodities go through a lot of stages, through many firms, contain parts from all over the world, etc,) but also the labor behind each tool and machine used in the making of the commodity. (and divide the labor value of the machines by the amount of commodities produced over the life of the machine, etc.) It's virtually impossible.
Though there have been countless attempts to quantify this theory, labor value will never be as quantifiable as price is. This is because labor value only really find its expression in money. It would be impossible to have a capitalist economy where goods were traded according to exact measurements of labor time. Capitalist economies require flexibility, and they require liquidity. Money provides this. But in providing this flexibility money also deviates from being an exact measurement of labor time. It is, at best, an approximation.
Money fundamentally acts as a measure of value. It represents work people have done. When you work you are paid money. You are more or less frugal depending on how much work you have been paid for and saved up and how easy it would be to make more money working.The commodities you buy all cost money because someone had to be paid to make them. If a commodity didn't take any labor to make it would be free.
But commodities are constantly fluctuating in price as capitalists find cheaper ways to make commodities, better ways to exploit workers, etc. The supply of money is changing too- money itself is a commodity related to labor time. It has a supply and a demand. Money is also called upon to perform other social functions other than measure value: it lubricates exchange, it can become credit, etc. So money is needed to be much more flexible- to be sensitive to rapid economic changes. We say, though its fundamental role in society is a measure of value, its relationship to this value is a loose one as supply and demand force it to fluctuate above and below the equilibrium values of embodied labor time.
We said that commodities appear heterogeneous until we see that they have a common substance: labor. But isn't labor heterogeneous? This question makes important the concept of "socially necessary labor time". Just as in a capitalist society the process of exchange and competition tends to bring prices to a general equilibrium so to the process of exchange and competition create a social average of how much labor it takes to complete a task. Remember- value is a concept that only makes sense from a macro level. In this way we say that exchange exerts a homogenizing influence on labor.
This homogenizing influence is very strong in society. Capitalist want work to be standardized and reliable so that workers can be as productive as possible. Capitalists are constantly seeking ways to mechanize work in order to make it unskilled and uniform. This increases the potential supply of labor thus driving down wages.
But how strong is this homogenizing influence? We still have a lot of skilled labor which fetches a much higher price than unskilled labor. We could dismiss this as supply and demand casting its usual distorting influence over the law of value. And we would be justified to some degree. But we also might say that the need for skilled labor in society is indeed a countervailing influence against the homogenizing influence of capitalism on the labor process. We might even say that capitalism has a tendency to deskill/ homogenize most work, while making other work highly skilled.
Again, the homogenization of labor time (the "simplification" of labor) is not a quantifiable phenomena. We can observe it qualitatively as a tendency under capitalism, but there really isn't an objective way of measuring it.
Thus the labor theory of value has two "problems": 1.value's relationship to price can't be quantified. 2. simplification of labor is not quantifiable.
These two "problems" have caused debate. Is labor theory of value just a metaphysical concept?
Well... no. The labor theory of value is proven by asking the questions: "what does it help us explain?" The law of value helps us explain all sorts of things that bourgeois economic theory- with its narrow focus on supply and demand and personal utility- can't. An analysis of economic issues using the labor theory of value starts to lead us in all sorts of directions not approached by any other theory. Pretty soon we find we have a much wider, systemic understanding of capitalism- and understanding that no other theory of exchange gives us.
This broader, more profound understanding only comes about through a thorough investigation of all of the ways the law of value plays itself out in society. The labor theory of value is seeking to explain how the total economic product is produced and distributed. It is therefore a theory of social relations. It leads us to investigate the production of value BY workers FOR capitalists. This leads to an explanation of profit in the theory of exploitation. By investigating the way capitalists organize production in order to increase profits we come eventually to the theory of crisis. Along the way we learn about how wages are determined; what life is like as a worker, in and out of the workplace; the nature of capitalist competition, centralization and monopoly. This leads us to questions about the role of the state in maintaining capitalist accumulation and moderating crisis. We also start to learn about the way capitalism changes space through uneven geographical development, and time through its quest to shorten turnover times. In short, all of the social relations of society are laid bare before us, all because we asked "where does value come from?"
This is mainly because Das Kapital, despite all the many accompanying texts, still has the reputation of being unreadable to those with only rudimentary understanding of economics. The result of this is that instead of those of previous generations, people these days seem to have been exposed to the 'politics' of socialism before the economic basis for it's existance, just as Marxism was a scientific economic basis for then already existing labor movement of the time. This creates a distortion because people are exposed to socialism mostly through right-wing propagandists and a very dishonest way. I thought now that I would start from the ground up in constructing a view for people on the nature of the political movement in favor of the working class, by first giving it's economic base a thorough look at. Take note though that this doesn't intend to a complete analysis, just a simplification of the labor theory of value.
I thought to start we could use an example outside even the realm of economics, politics or whatnot to give a view of the labor theory of value, and this would be a psychological analysis. Imagine you are a teenage boy arguing with his mother about borrowing the car. A psychologist is watching their interaction, he doesn't pay attention to the specifics of the argument at all. To the psychologist it isn't important at all whether the boy did his choirs or his mother promised him he could borrow the car, the psychologist sees all these unconscious motivations in play: a struggle over control, the son wanting to leave the nest etc. These motives are the moder in the context of the entire interaction. Even though these motives do not enter into the surface substance of the interaction, which are just words about cars and choirs, the specific words are important if we want to know about cars and choirs, but if we want to know about their relationship, their behavior, their ego, then we need to ask deeper questions that penetrate beneath this surface froth of words.
Similarly, the substance of bourgeois theory, supply and demand, is important for understanding some things about the economy: price fluctuations, inflation, etc. But if we want to understand deeper issues about the economy we need other tools that are able to pierce through this surface substance to the underlying meanings. That is what the labor theory of value is all about.
All societies coordinate human labor in order to produce things. The total social product is divided about society.
When societies began producing a surplus ... who controls the surplus?
Under feudalism the social surplus was extracted from peasants by landlords. In slavery- from slaves by slave owners.
In both of these examples the economic act in which the surplus is passed from worker to exploiter is easy to see.
In both types of society it is clear to all involved that human labor is producing these goods and that it is the products of labor that are being appropriated by the dominant class.
Under capitalism the process of exchange makes it harder to see the passing of the surplus from exploited to exploiter. But it's still there. Workers are still producing the entire social product and another class, this time the capitalist class, is taking the surplus from them, selling it back to them and getting rich off it.
But what we see is money. We work and we are paid money for it. The capitalist sells the commodities we made and he gets money for it.
In this way. money- or the process of exchanging goods and services in a "free" market- obscures the underlying reality that what is really going on at a basic, societal level is that a dominant class is extracting the social surplus from a subordinate class.
This is basically what the labor theory of value is saying. Economists going all the way back to Ben Franklin realized that this theory helped answer a perplexing question in economic theory: why do heterogeneous commodities exchange?
Commodities are heterogeneous: They have different physical properties, different uses. Why is it that they can all be exchanged in the free market? What explains the ratios of their exchange?
The theory went on to postulate- all these commodities must be made up of a common substance, something that they all have to a greater or lesser degree, something that gives them value. This thing is their "embodied labor time".
The act of exchange obscures the underlying labor value of commodities. Though the labor value of a commodity may be the underlying substance to an economic interaction, it is the way this value is expressed through a money price that really effects the economic decisions people make. When you go to a store to buy something you want to know how much money it costs, not how much labor went into it. But the act of buying something with money implies the existence of value, whether or not you are aware of it.
Specific money prices are determined by supply and demand. I'll assume that that concept is simple enough that I don't need to explain it here. Money prices fluctuate- clothes and entertainment commodities come in and out of style, supplies of food temporarily change due to droughts, etc.
But underneath this day to day fluctuation lies a general equilibrium price- a price related to the amount of labor embodied in commodities.
Money prices are mathematical, quantifiable, observable things. We see dollar signs hanging off of price tags and they have a real effect on us. Not so with labor value: We don't see the people who make those commodities. Even if we could see them, quantifying the amount of labor time in a commodity is next to impossible: we'd have to figure out not just how much work went into a specific commodity in each stage of its making (and some commodities go through a lot of stages, through many firms, contain parts from all over the world, etc,) but also the labor behind each tool and machine used in the making of the commodity. (and divide the labor value of the machines by the amount of commodities produced over the life of the machine, etc.) It's virtually impossible.
Though there have been countless attempts to quantify this theory, labor value will never be as quantifiable as price is. This is because labor value only really find its expression in money. It would be impossible to have a capitalist economy where goods were traded according to exact measurements of labor time. Capitalist economies require flexibility, and they require liquidity. Money provides this. But in providing this flexibility money also deviates from being an exact measurement of labor time. It is, at best, an approximation.
Money fundamentally acts as a measure of value. It represents work people have done. When you work you are paid money. You are more or less frugal depending on how much work you have been paid for and saved up and how easy it would be to make more money working.The commodities you buy all cost money because someone had to be paid to make them. If a commodity didn't take any labor to make it would be free.
But commodities are constantly fluctuating in price as capitalists find cheaper ways to make commodities, better ways to exploit workers, etc. The supply of money is changing too- money itself is a commodity related to labor time. It has a supply and a demand. Money is also called upon to perform other social functions other than measure value: it lubricates exchange, it can become credit, etc. So money is needed to be much more flexible- to be sensitive to rapid economic changes. We say, though its fundamental role in society is a measure of value, its relationship to this value is a loose one as supply and demand force it to fluctuate above and below the equilibrium values of embodied labor time.
We said that commodities appear heterogeneous until we see that they have a common substance: labor. But isn't labor heterogeneous? This question makes important the concept of "socially necessary labor time". Just as in a capitalist society the process of exchange and competition tends to bring prices to a general equilibrium so to the process of exchange and competition create a social average of how much labor it takes to complete a task. Remember- value is a concept that only makes sense from a macro level. In this way we say that exchange exerts a homogenizing influence on labor.
This homogenizing influence is very strong in society. Capitalist want work to be standardized and reliable so that workers can be as productive as possible. Capitalists are constantly seeking ways to mechanize work in order to make it unskilled and uniform. This increases the potential supply of labor thus driving down wages.
But how strong is this homogenizing influence? We still have a lot of skilled labor which fetches a much higher price than unskilled labor. We could dismiss this as supply and demand casting its usual distorting influence over the law of value. And we would be justified to some degree. But we also might say that the need for skilled labor in society is indeed a countervailing influence against the homogenizing influence of capitalism on the labor process. We might even say that capitalism has a tendency to deskill/ homogenize most work, while making other work highly skilled.
Again, the homogenization of labor time (the "simplification" of labor) is not a quantifiable phenomena. We can observe it qualitatively as a tendency under capitalism, but there really isn't an objective way of measuring it.
Thus the labor theory of value has two "problems": 1.value's relationship to price can't be quantified. 2. simplification of labor is not quantifiable.
These two "problems" have caused debate. Is labor theory of value just a metaphysical concept?
Well... no. The labor theory of value is proven by asking the questions: "what does it help us explain?" The law of value helps us explain all sorts of things that bourgeois economic theory- with its narrow focus on supply and demand and personal utility- can't. An analysis of economic issues using the labor theory of value starts to lead us in all sorts of directions not approached by any other theory. Pretty soon we find we have a much wider, systemic understanding of capitalism- and understanding that no other theory of exchange gives us.
This broader, more profound understanding only comes about through a thorough investigation of all of the ways the law of value plays itself out in society. The labor theory of value is seeking to explain how the total economic product is produced and distributed. It is therefore a theory of social relations. It leads us to investigate the production of value BY workers FOR capitalists. This leads to an explanation of profit in the theory of exploitation. By investigating the way capitalists organize production in order to increase profits we come eventually to the theory of crisis. Along the way we learn about how wages are determined; what life is like as a worker, in and out of the workplace; the nature of capitalist competition, centralization and monopoly. This leads us to questions about the role of the state in maintaining capitalist accumulation and moderating crisis. We also start to learn about the way capitalism changes space through uneven geographical development, and time through its quest to shorten turnover times. In short, all of the social relations of society are laid bare before us, all because we asked "where does value come from?"