Kliman’s Explanation of Marx’s Labour Theory of Value

Chapter 2 of Andrew Kliman’s Reclaiming Marx’s ‘Capital’: A Refutation of the Myth of Inconsistency (2006) is a summary of Marx’s labour theory of value (LTV). Kliman is an advocate of the Temporal Single System Interpretation (TSSI) of Marxist theory.

Kliman (2006: 19) states that “Marx’s value theory is not a general explanation of why goods and services have prices, nor of why they have one price rather than another.” This seems like an odd statement, but Kliman apparently means that the labour theory is strictly limited to certain goods only: that is, Marx’s value theory applies only to commodities, which are goods or services intended for market exchange (Kliman 2006: 19–20). Therefore when we find things produced but not for market exchange, Marx’s theory doesn’t explain these, is inapplicable to them, and doesn’t explain how their prices are determined (Kliman 2006: 20).

When production produces commodities for the purpose of exchange, then

“… workers’ labor acquires the same dual character. As an activity that produces a specific useful good or service, it is what Marx calls concrete labor. As an activity that produces value—abstract wealth, wealth as such, considered without regard to its specific physical form—it is what he calls abstract labor.” (Kliman 2006: 20–21).

The value of a commodity is “determined by the average amount of labor currently needed to produce it” (Kliman 2006: 21).

In Marx, this is called abstract socially necessary labour time (SNLT), and Kliman explains this as follows:

“The phrase ‘average amount of labor’ is also significant. Marx (1990a: 129) holds that labor creates value only to the extent that it ‘is necessary on an average, or in other words is socially necessary’; any labor spent on the production of a commodity in excess of what he calls the socially necessary labor-time does not count as value-creating labor. This is his way of expressing the idea that less efficient producers cannot get higher prices for their products simply because their costs of production are above average, nor must more efficient producers charge less than others simply because their costs of production are below average.” (Kliman 2006: 21).

The total SNLT is a sum of two components, as follows:

(1) the value transferred from the SNLT embodied in non-labour factors both used up in production and the durable capital goods used in production (whose value is transferred as the capital goods depreciate in value, though how you properly calculate this is left unexplained), and

(2) the SNLT added by living labour, or the human beings labouring in production (Kliman 2006: 22).

Even more than this, the value of the most recently newly-produced commodities of a particular type will determine the value of ones that already exist (Kliman 2006: 21). But already we have a problem in Kliman’s analysis. He speaks of abstract labour value, but then talks of money prices on this point:

“If wheat harvested last year had a value of $4/bushel, while wheat harvested today has a value of $3/bushel, then any wheat that remains from last year likewise has a value of $3/bushel today.” (Kliman 2006: 21).

Kliman has switched to talking of money values. He hasn’t explained at all how abstract SNLT determines such prices. The idea here, which I examined in this post, doesn’t make any sense. Agricultural good prices, both old and newly-produced goods as sold in flexprice markets, are plainly determined by supply and demand, not some nebulous SNLT. The Marxists haven’t explained how the SNLT determines the price.

Matters are no better when we get a truly confused passage attempting to explain the difference between value and price:

“Marx (1990a: 188) holds that value has two measures, money and labor-time. He generally measures commodities’ values in terms of money, but he sometimes measures them in terms of labor-time, and occasionally he compares the two (see, e.g., Marx 1991a: 266). When measuring a commodity’s value in money terms, he often calls it simply the ‘value,’ while at other times he calls it the ‘monetary expression of value’ or, equivalently, the price. ‘Price, taken by itself, is only the monetary expression of value’ (Marx 1971: 35, emphasis omitted; cf. Marx 1990b: 1068). In this sense, then, “price” refers to value measured in terms of money rather than in terms of labor-time.

The other distinction between ‘value’ and ‘price’ is quantitative. In this context, if we are speaking of a firm’s or industry’s output, ‘value’ refers to the sum of value produced within a firm or industry—the value transferred plus the new value added—while ‘price’ refers to the sum of value received by the firm or industry. Similarly, if we are speaking of a single commodity, ‘value’ refers to the commodity’s actual value, determined by the labor-time needed to produce it, while ‘price’ refers to the sum of money that the commodity’s owner can receive in exchange for it.

Note that we can meaningfully discuss these quantitative differences only if we are measuring price and value in the same units. It makes no sense, for example, to say that the $5400 a firm receives for its output is greater or less than the 100 hours of labor needed to produce that output. This shows that the two value-price distinctions are indeed wholly independent of one another.” (Kliman 2006: 24–25).

So does SNLT determine individual “natural prices” or not?

At one point, Kliman (2006: 32–33) discusses the so-called “dual-system interpretations” of Marx in which labour values and prices are actually “determined independently of one another” (Kliman 2006: 32). But he does not seem to support this, but the simultaneous single-system interpretation (SSSI).

But then Kliman states that there is a “conversion factor” between labour time and price called the “monetary expression of labor-time” (MELT), which can translate one hour of socially necessary labor time directly into a monetary value (Kliman 2006: 25). How we calculate this MELT is left unexplained.

Kliman (2006: 23) notes how in the production process capitalists advance “sums of value” to buy non-labour factor inputs (or “constant capital”) and “sums of value” to buy labour (or “variable capital”). The value in the final produced commodity above the total original value is “surplus value” (Kliman 2006: 23). Because workers are the only source of this “surplus value” it follows, according to Marx, that workers are robbed of this surplus value by capitalists. The “rate of surplus-value or rate of exploitation” is simply the ratio of the surplus-value to variable capital (Kliman 2006: 24).

There is also a difference between (1) “value rate of profit” (total surplus value produced in a year as a measure of SNLT) and (2) the “price rate of profit” (the mere total monetary price of profits) (Kliman 2006: 26). The rates of profit tend to equalise throughout an economy (Kliman 2006: 27), because of free competition.

The value total in an industry consists of cost price (or sum of labour value from constant capital and variable capital) and surplus-value, and the “price of production” is equal to cost price plus average profit (Kliman 2006: 27).

Here we see how the Marxist theory of prices and profits is really just another species of the false Classical and neoclassical view:

“In the hypothetical case in which rates of profit were exactly equal—that is, in which all industries realized the general rate of profit—they would each receive what Marx calls average profit and each industry’s output would sell for what he calls its price of production (Marx 1991a, chap. 9). He stressed that this situation never occurs in reality. Instead, he argued, actual market prices fluctuate around prices of production, and thus actual profits fluctuate around average profit, given a sufficiently competitive (non-monopolistic) environment.” (Kliman 2006: 27).

In fact, most prices do not fluctuate around prices of production, and the reason for this is not monopoly, but the fact that the real world contains widespread use of mark-up pricing and strong barriers to entry through capacity utilisation and other factors.

However, Kliman holds that Marx’s theory does not imply that “the rate of profit will actually display a falling trend in the long run” (Kliman 2006: 30).

It is only in the aggregate in a situation in which the rate of profit has equalised throughout the economy that (1) price and value rates of profit are equal, (2) total profit and total surplus-value are equal, and (3) total price of production and total value are equal (Kliman 2006: 28). But profit rates do not equalise in real world capitalism and if Marxists cannot even justify the LTV in the first place there is no reason to believe any of the subsequent propositions of Marxist value theory.

Kliman makes a crucial epistemological point about how to understand the LTV:

“Marx’s theory that a commodity’s value is determined by the amount of labor needed to produce it has often been construed as a definition of the commodity’s value (see, e.g., Mongiovi 2002: 397–98), but this is incorrect for two reasons. First, Marx usually expressed commodities’ values in monetary terms, which would not be possible if values were defined as amounts of labor. Values in that case would have to be expressed exclusively in terms of labortime. Second, the theory can in principle be falsified, while definitions cannot.” (Kliman 2006: 21).

It would appear that Kliman is saying that Marx’s LTV is an empirical proposition. If this is so, then there are a number of empirical tests that the LTV must pass to be taken seriously. On this interpretation, Marxists cannot retreat into a defence of the LTV as mere analytic definition to defend it. They must face the hard test of empirical reality.

Quite simply, as an empirical proposition, there is no convincing reasons why I should believe that LTV, for the following reasons:

(1) the LTV is concerned with establishing the labour value of commodities expressed in SNLT. But why is human labour special, as Sraffa noted? Animal labour is still important in many countries even to this day. It should be possible to measure animal labour in terms of SLNT, since in many cases human labour could even be substituted for animal labour. It is no good for Marxists to fall back on an analytic definition of the LTV, where it is just true by definition. I have no reason to accept an analytic definition I think is incoherent and not empirically relevant.

(2) Marx already admits that “nothing can be a value without being an object of utility” (Marx 1982: 131). If labour value is totally worthless and cannot confer exchange value when the object has no utility (“use value”), then the whole labour theory of value is undermined. For labour is not even a sufficient condition for economic value or exchange value. Clearly use value is also a necessary condition for economic value or exchange value.

(3) it is still never explained how to define and calculate SNLT. How is heterogeneous labour reduced to a common measure?
How to define “simple labour-power, i.e. of the labour-power possessed in … [sc. the] bodily organism by every ordinary man, on the average, without being developed in any special way” (Marx 1982: 135).

(4) it is still unexplained how the SNLT determines individual natural prices. How, for example, do equal labour quantities determine equal natural prices when there are, and have always been, such radical differences in wage rates by sector, profession, skill, experience, privilege or competence? For if, at the natural price, equal labour quantities do not cause equal prices, how can anyone take the labour theory seriously? And worse than this, we need extensive empirical evidence of real world prices where SNLT has been independently defined and found to be equivalent and the prices are the same.

(5) finally, we have the overwhelming empirical truth that prices are not determined by abstract SNLT. Businesses do not price products in terms of SNLT. Businesses do not even calculate it. Instead, we know the nature of price determination. In any given capitalist economy, commodity markets (defined as those for newly-produced goods and services) are divided into (1) flexprice and (2) fixprice markets. Flexprice markets are prevalent in primary commodities and asset markets, while newly produced goods and services tend to be fixprices. A “flexprice” market – as the name suggests – indicates that prices are generally flexible and are determined by the dynamics of supply and demand, either in (1) competitive auction-like markets or (2) markets where a buyer and seller haggle and negotiate an individual price for an individual exchange (as in the oriental bazaar). The labour hours are not relevant for price determination here, nor necessarily are wages. In fixprice markets, mark-up prices are the major form of prices. And here SNLT just isn’t what determines prices.

I have no reason to accept anything deduced or developed from an assumption of the LTV in Marxism if you cannot convince me that it is a real phenomenon with causal power observable in a capitalist economy.

The utter failure of the Marxist program can be seen in the fundamentally incompatible and endless schools and heresies: dual-system interpretations, simultaneous single-system interpretation (SSSI), physicalist interpretations, or social paradigm/abstract labor approaches.

Finally, if Marxists want to defend value in some labour–defined form, then the “physicalist” interpretation is about the only sensible view: this holds that the physical factors of technology and real wages determine concepts like “value, surplus-value, prices of production, average profit, and rates of profit” (Kliman 2006: 35). But this is just a type of Sraffianism, and there are serious problems with Sraffianism as described here and here.

BIBLIOGRAPHY
Kliman, Andrew. 2006. Reclaiming Marx’s ‘Capital’: A Refutation of the Myth of Inconsistency. Lexington Books, Lanham.

Freeman, Alan. “Price, Value and Profit – A Continuous, General, Treatment,” MPRA Paper No. 1290, April 1996
http://mpra.ub.uni-muenchen.de/1290/1/MPRA_paper_1290.pdf

Kliman, Andrew. 2012. Failure of Capitalist Production: Underlying Causes of the Great Recession. Pluto Press, London.

Piero Sraffa’s Damning Verdict on the Labour Theory of Value

Kurz (2002: 184) notes the debates and confusion over whether Piero Sraffa accepted the classical or Marxist labour theory of value and used it as a starting point for his theories.

Kurz (2002: 184–185) and Kurz and Salvadori (2010) prove that this is not the case, even if some Post Keynesians sympathetic to Marxism argue that Sraffa showed how to determine the rate of profit independently of prices as a share of a particular composite commodity (akin to Smith’s idea of labour commanded).

But with respect to the classical and orthodox Marxist labour theory of value, Sraffa in fact thought that it was a “corruption” of an earlier and better “physical real cost theory” (Kurz 2002: 185).

In an unpublished note of 1928, Sraffa gave his damning verdict on the labour theory of value:

“There appears to be no objective difference between the labour of a wage earner and that of a slave; of a slave and of a horse; of a horse and of a machine, of a machine and of an element of nature (?this does not eat). It is a purely mystical conception that attributes to human labour a special gift of determining value. Does the capitalist entrepreneur, who is the real ‘subject’ of valuation and exchange, make a great difference whether he employs men or animals? Does the slave-owner?” (Sraffa, unpublished note, D3/12/9: 89, quoted in Kurz and Salvadori 2010: 199).

Bravo, Piero. Michał Kalecki had a similarly negative view and rejected the labour theory as utterly metaphysical. So did Joan Robinson, whose rejection of it was scathing (Robinson 1964: 28–46).

The point Sraffa made is a profound one too. Why should human labour have a special status when animal labour has been – and in some countries still is – a fundamental factor of production? (as a kind of special category of capital good). What about natural forces like winds driving windmills? All these things produce labour power too, and if Marx’s abstract socially-necessary labour time (SNLT) units were meaningful measures of every type of heterogeneous, concrete human labour, then the labour power done by animals or nature ought to be measurable in terms of SNLT units too.

So why is human labour the sole source of value? Why not animal labour time too, but translated into abstract SNLT? Why not wind power translated into abstract SNLT?

BIBLIOGRAPHY
Kurz, Heinz D. 2002. “Sraffa’s Contributions to Economics. Some Notes on his unpublished Papers,” in Sergio Nistico and Domenico Tosato (eds.), Competing Economic Theories. Essays in Memory of Giovanni Caravale. Routledge, London. 177–195.

Kurz, Heinz D. and Neri Salvadori. 2010. “Sraffa and the Labour Theory of Value: A Few Observations,” in John Vint et al. (eds.), Economic Theory and Economic Thought: Essays in Honour of Ian Steedman. Routledge, London and New York. 189–215.

Robinson, Joan. 1964. Economic Philosophy. Penguin, Harmondsworth.

Vernengo, Matias. 2012. “Sraffa and Marxism or the Labor Theory of Value, what is it good for?,” Naked Keynesianism, August 14
http://nakedkeynesianism.blogspot.com/2012/08/sraffa-and-marxism-or-labor-theory-of.html

The Two Epistemological Ways to Interpret the Labour Theory of Value

The labour theory of value can be expressed as the following proposition:

“The labour theory of value (LTV) is an economic theory of value that states that the economic value of a good or service is determined by the total amount of socially necessary labour required to produce it.”
https://en.wikipedia.org/wiki/Labour_economics#Labour_theory_of_value

There are two ways in which, epistemologically speaking, we could interpret this proposition, as follows:

(1) as a synthetic a posteriori proposition (= an empirical proposition), or

(2) as an analytic a priori proposition.

If we interpret it as (1) an empirical proposition, then the LTV is not necessarily true, but contingent and known as true only a posteriori by experience, empirical evidence, and inductive argument. As a matter of historical fact, Marx took the LTV from Ricardo, who in turn took it from Adam Smith, and these men seem to have taken it as an empirical statement.

But now any Marxist who defends the LTV as an empirical proposition faces the demand to prove by experience, empirical evidence, and inductive argument that such a type of value really exists. They have to show us how abstract socially necessary labour time (SNLT) can be actually and meaningfully defined as a real measure of heterogeneous labour. They have to show how to calculate the abstract socially necessary labour time (SNLT) unit values of commodities. They need to show how these SNLT values map onto, or correspond to, the “natural” or “true” exchange values or prices of commodities, and identify real world prices that are direct examples of such SNLT values.

Alternatively, if we interpret the LTV as (2) an analytic a priori proposition, then the LTV is necessarily true and known a priori (not by any empirical evidence), but strictly speaking as a proposition it is a mere definition or tautologous statement. It is an analytic statement like:

(1) all bachelors are unmarried.

Even if there were actually no bachelors in the world, this proposition would still be necessarily true, but it is a mere analytic truth, that is, a mere definition or tautologous statement.

Experience teaches us of course that there are things in the world that are men who are not married, and so can be classified as unmarried men or bachelors.

But we make a deep mistake if we do not scrutinise analytic statements carefully to see if they are coherent, consistent, meaningful and useful, and – above all – whether they actually refer to things that have real existence and empirical relevance. The analytic proposition “all bachelors are unmarried” fulfils these criteria. It is a coherent and useful analytic proposition that can be used to classify objects in the real world into a class.

But we could for example propose the following analytic statements:

(1) all unicorns have horns.

(2) All dragons are able to fly and breathe fire.

It is obvious that the real world does not contain unicorns or dragons (at least we have no rational reason to think so). But these are still valid and true analytic propositions because there are worlds of human fiction where these things are imagined to exist, e.g., the dragons in the Lord of the Rings novels and films. Now an imaginary world is analogous to a highly artificial model that does not explain or relate to anything in the real world.

The propositions above about dragons and unicorns are only useful and relevant as analytic statements referring to a purely imaginary or hypothetical world in our minds – say, the world of human fiction or fantasy writing.

If the Marxists wish to interpret the LTV as analytic a priori proposition, then they could defend it as a merely empirically-empty and tautologous definitional statement. But they would still face the tremendous hurdle of proving that their analytic definitions are something more than analytic statements referring to a purely imaginary or hypothetical world in our minds, on a par with “All dragons are able to fly and breathe fire.”

That is to say, they still face the same severe empirical challenges that they would face if they choose to interpret the LTV empirically.

If Marxists cannot do this, and they retreat to a defence of the LTV as an analytic truth, it seems to me the only sensible way to treat the LTV is as a purely imaginary or hypothetical, useless proposition that adds nothing to economic knowledge. It has no explanatory power in the analysis of a real world economy. As a postulated phenomenon, it cannot be found in the real world and has no discernible causal power as a factor in a real world economy, unlike real higher-level emergent properties like the general state of expectations or aggregate demand.

And, finally, what would even be the point of asserting the LTV as some analytic concept? It would be nothing but a pointless and worthless idea, with no explanatory or causal power, tacked on to real economic science, which is at least a body of empirical truths and defensible, empirically-tested theories.

The LTV is, quite simply, on a par with the Austrian and neoclassical concept of the “natural rate of interest” or Milton Friedman’s “natural rate of unemployment”: we are dealing with concepts only conceivable in wholly higher-level abstract models that are so unrealistic and so remote from, and so irrelevant to, the real world that they are nothing but fictions.

More Mystical Labour Theory of Value Nonsense

It can be found in volume 1 of Marx’s Capital:

“The value of a commodity is certainly determined by the quantity of labour contained in it, but this quantity is itself socially determined. If the amount of labour-time socially necessary for the production of any commodity alters – and a given weight of cotton represents more labour after a bad harvest than after a good one – this reacts back on all the old commodities of the same type, because they are only individuals of the same species, and their value at any given time is measured by the labour socially necessary to produce them, i.e. by the labour necessary under the social conditions existing at the time.” (Marx 1982: 318).

In other words, what Marx is saying here is that when, say, 1000 abstract labour hours produce 1000 units of cotton, then the labour value of 1 unit of cotton would equal 1 abstract labour hour (how this labour value is mapped onto the “natural price” is never adequately explained by Marxists).

But if 1000 labour hours are expended on production but some natural disaster means only 200 units of cotton can be produced, then the labour value of 1 unit of cotton would now equal 5 abstract labour hours. The “natural price” corresponding to the labour value would rise too. Older and previously produced units of cotton would now fetch a price at this new labour value. This, for comrade Marx, explains why prices of agricultural goods rise when floods, droughts or other crop failures occur. Clearly, this is how Heinrich (2012: 43) interprets Marx.

As an explanation or even as a coherent theory, it is so patently absurd.

Why? The reason is that such an interpretation requires that abstract labour-power or abstract socially necessary labour time used in producing cotton has been magically or mystically transferred from the cotton crops that died or were destroyed into the ones that survived. It is even worse than the mystical nonsense about labour being objectified or materialised in commodities described here.

It is quite obvious that the labour expended in planting and maintaining crops that spoilt or were destroyed in some natural disaster was in vain. In retrospect, it was simply wasted labour. Wasted labour – whether concrete or abstract – cannot be some magical quantity that flows into the crops that survive.

Knut Wicksell, in an 1886 debate with the Marxist Atterdag Wermelin, made another criticism of this aspect of Marx: Wicksell pointed out that, when the price of cotton soars after bad harvests, it is the case that the amount of labour required to harvest the smaller crop can actually fall below that needed for a full crop, but this blatantly contradicts the labour theory of value (Lönnroth 1995: 104).

That is undoubtedly another devastating problem: just as Wicksell suggested, what if total abstract labour time for an industry-wide crop falls dramatically after a natural disaster early in the season such that unit labour values fall in relation to a good harvest, since considerably less labour is now needed to bring it to market (e.g., we know that for many crops picking and harvesting is very labour intensive). The labour theory of value requires that the natural price falls. We all know this doesn’t happen. In flexprice markets for agricultural goods not affected by commodity stabilisation programs, we all know the price would soar. It soars even though total labour time – whether concrete or abstract socially necessary labour time – would have fallen.

We see time and again the insuperable difficulties with and absurdities of the labour theory of value. I expect some Marxists in the comments section will tell me that no price ever corresponds to its labour value (in which case what is the use or explanatory power of this stupid theory at all?). Or I need to consult the right Marxist interpreting priest to understand the writings of the Master (though I did consult Heinrich 2012, but maybe he is just a plain heretic and doesn’t understand the Master’s work after all!!). Or maybe I need to read it in the original German. Or maybe I just need to take it on faith.

BIBLIOGRAPHY
Heinrich, Michael. 2012. An Introduction to the Three Volumes of Karl Marx’s Capital (trans. Alexander Locascio). Monthly Review Press, New York.

Lönnroth, Johan. 1995. “Swedish Model Market Socialism,” in Ian Steedman (ed.), Socialism and Marginalism in Economics 1870–1930. Routledge, London. 102–115.

Marx, Karl. 1982. Capital. Volume One. A Critique of Political Economy (trans. Ben Fowkes). Penguin Books, Harmondsworth, England.

The Foundation of Marx’s Labour Theory of Value in Ricardo

It can be seen in David Ricardo’s On the Principles of Political Economy and Taxation (3rd edn.; 1821):

“In making labour the foundation of the value of commodities, and the comparative quantity of labour which is necessary to their production, the rule which determines the respective quantities of goods which shall be given in exchange for each other, we must not be supposed to deny the accidental and temporary deviations of the actual or market price of commodities from this, their primary and natural price.

In the ordinary course of events, there is no commodity which continues for any length of time to be supplied precisely in that degree of abundance, which the wants and wishes of mankind require, and therefore there is none which is not subject to accidental and temporary variations of price.

It is only in consequence of such variations, that capital is apportioned precisely, in the requisite abundance and no more, to the production of the different commodities which happen to be in demand. With the rise or fall of price, profits are elevated above, or depressed below their general level, and capital is either encouraged to enter into, or is warned to depart from the particular employment in which the variation has taken place.

Whilst every man is free to employ his capital where he pleases, he will naturally seek for it that employment which is most advantageous; he will naturally be dissatisfied with a profit of 10 per cent., if by removing his capital he can obtain a profit of 15 per cent. This restless desire on the part of all the employers of stock, to quit a less profitable for a more advantageous business, has a strong tendency to equalize the rate of profits of all, or to fix them in such proportions, as may in the estimation of the parties, compensate for any advantage which one may have, or may appear to have over the other.” (Ricardo 1821: 80–81).

Ricardo refers to the “comparative quantity of labour” necessary for production as a foundation of the value of commodities. There is a “primary and natural price” at which exchange value or price somehow equals the “comparative quantity of labour.” But how this happens and how the quantity of labour maps onto, or corresponds to, natural price is left unexplained.

How, for example, do equal labour quantities determine equal prices when there are, and have always been, such radical differences in wage rates by sector, profession, skill, experience, privilege or competence? For if, at the natural price, equal labour quantities do not cause equal prices, how can anyone take the labour theory seriously? I don’t think Marx ever adequately explained this either.

Ricardo is also clear that market prices are driven away from “natural prices” because of supply and demand discrepancies in production. As those individual market supply or demand disequilibria are eliminated, prices move back towards “natural prices” in a type of equilibrium process.

But, as in Marx, the Ricardian labour theory of value is ill-defined and under-determined. How do you properly define the “comparative quantity of labour which is necessary” for production as a homogeneous unit that can function as a universal measure of the labour value of all commodities?

BIBLIOGRAPHY
Ricardo, David. 1821. On the Principles of Political Economy and Taxation (3rd edn.). John Murray, London.

Marx’s Labour Theory of Value and Rothbard’s Homesteading Property-Rights Theory: Peas in a Pod

Marx in the first volume of Capital makes it quite clear that human labour is the sole, fundamental source of value:

“But the value of a commodity represents human labour pure and simple, the expenditure of human labour in general. And just as, in civil society, a general or a banker plays a great part but man as such plays a very mean part, so, here too, the same is true of human labour. It is the expenditure of simple labour-power, i.e. of the labour-power possessed in his bodily organism by every ordinary man, on the average, without being developed in any special way. Simple average labour, it is true, varies in character in different countries and at different cultural epochs, but in a particular society it is given; More complex labour counts only as intensified, or rather multiplied simple labour, so that a smaller quantity of complex labour is considered equal to a larger quantity of simple labour. Experience shows that this reduction is constantly being made. A commodity may be the outcome of the most complicated labour, but through its value it is posited as equal to the product of simple labour, hence it represents only a specific quantity of simple labour.” (Marx 1982: 135).

“Let us now look at the residue of the products of labour. There is nothing left of them in each case but the same phantom-like objectivity; they are merely congealed quantities of homogeneous human labour, i.e. of human labour-power expended without regard to the form of its expenditure.” (Marx 1982: 128).

“Human labour-power in its fluid state, or human labour, creates value, but is not itself value.” (Marx 1982: 142).

“We know that the value of each commodity is determined by the quantity of labour materialized in its use-value, by the labour-time socially necessary to produce it.” (Marx 1982: 293).

This is how Marx is conventionally interpreted too: that economic value is created only and solely by human labour.

Also, for Marx, there is a mystical element to labour value that manifests itself in the goods produced:

“A use-value, or useful article, therefore, has value only because abstract human labour is objectified [vergegenständlicht] or materialized in it.” (Marx 1982: 129).

Elsewhere, Marx speaks of the value of all goods as “merely congealed quantities of homogeneous labour” (Marx 1982: 135–136).

Since workers have created the value in commodities and indeed the commodities themselves appear to be materialised human labour, capitalists exploit them by robbing them of it. Everyone is familiar with this Marxist idea.

But look at how absurd its foundation is. It makes sense to say that labour produces commodities that are useful or that create subjective utility. Labour is an act or activity. Commodities are the product of labour. It makes no sense to say that labour is somehow magically transferred into commodities and “objectified” or “materialised” in them. This is so blatantly like a religious statement, it’s embarrassing. It’s like the opening of the Gospel of John: “In the beginning was the Word , and …. The Word became flesh” (John 1:1, 1:14). In Marx, human labour is “incarnated” in commodities. We are dealing with mysticism here.

Next, let us look at Rothbard’s justification for absolute ownership of external objects or external property rights by homesteading:

“Let us take, as our first example, a sculptor fashioning a work of art out of clay and other materials; and let us waive, for the moment, the question of original property rights in the clay and the sculptor’s tools. The question then becomes: Who owns the work of art as it emerges from the sculptor’s fashioning? It is, in fact, the sculptor’s ‘creation,’ not in the sense that he has created matter, but in the sense that he has transformed nature-given matter—the clay—into another form dictated by his own ideas and fashioned by his own hands and energy. Surely, it is a rare person who, with the case put thus, would say that the sculptor does not have the property right in his own product. Surely, if every man has the right to own his own body, and if he must grapple with the material objects of the world in order to survive, then the sculptor has the right to own the product he has made, by his energy and effort, a veritable extension of his own personality. He has placed the stamp of his person upon the raw material, by ‘mixing his labor’ with the clay, in the phrase of the great property theorist John Locke.” (Rothbard 2006 [1973]: 36–39).

“Put this starkly, there are very few people who would deny the monstrous injustice in either a group or the world community seizing ownership of the sculpture. For the sculptor has in fact ‘created’ this work of art — not of course in the sense that he has created matter, but that he has produced it by transforming nature-given matter (the clay) into another form in accordance with his own ideas and his own labor and energy. Surely, if every man has the right to own his own body and if he must use and transform material natural objects in order to survive, then he has the right to own the product that he has made, by his energy and effort, into a veritable extension of his own personality. Such is the case of the sculptor, who has placed the stamp of his own person on the raw material, by ‘mixing his labor’ with the clay. But if the sculptor has done so, then so has every producer who has ‘homesteaded’ or mixed his labor with the objects of nature.” (Rothbard 2002: 48).

The mysticism in Rothbard’s homesteading property rights argument lies in the idea that homesteading involves “mixing your labour” with some materials or land and the result is a “veritable extension” of your “own personality” such that some mysterious, universal, absolute cosmic right to property is created. This argument is plainly unsound, untrue and reeks of mysticism.

For Rothbard, labour on materials by a person involves “mixing of labour” with objects and makes the goods produced “a veritable extension of his own personality,” while for Marx the “abstract human labour [sc. by workers] is objectified or materialized” in commodities produced. In both cases, the people who produce goods have some kind of mystical or natural right to the goods produced or their value.

The Marxist labour theory of value and of worker exploitation is the mirror image of the Rothbardian notion of absolute property rights by homesteading. They are two sides of the same coin, but the coin is the same quasi-religious nonsense.

Perhaps Marxists and Rothbardians should put aside their differences and join together in one economic school. After all, the classical Marxists’ ultimate aim is a stateless, utopian paradise, and Rothbardians want the same thing. They just have to put aside their differences on how to get there.

We could call the new faith “Marxbardianism” – and at the same time it would save us all the trouble of having to refute the Marxists and Rothbardians separately in their two mirror image schools.

BIBLIOGRAPHY
Marx, Karl. 1982. Capital. Volume One. A Critique of Political Economy (trans. Ben Fowkes). Penguin Books, Harmondsworth, England.

Rothbard, M. N. 2002. The Ethics of Liberty. New York University Press, New York, N.Y. and London.

Rothbard, M. N. 2006 [1973]. For a New Liberty: The Libertarian Manifesto (rev. edn), Ludwig von Mises Institute.

Marx on the Labour Theory of Value in Volume 1 of Capital

I refer to Chapter 1, Section 1 of volume one of Capital (Marx 1982).

Here Marx gives his definition of a commodity:

“The commodity is first of all, an external object, a thing which through its qualities satisfies human needs of whatever kind. The nature of these needs, whether they arise, for example, from the stomach, or the imagination, makes no difference. Nor does it matter here how the thing satisfies man’s need, whether directly as a means of subsistence, i.e. an object of consumption, or indirectly as a means of production” (Marx 1982: 125).

This is already somewhat problematic: does it include and encompass what neoclassicals call subjective value too? If so, Marx’s economics badly neglects the reality of subjective value, and how it is just as much a source of price determination as labour expended in the production of the good.

When Marx speaks of the “use value” of commodities, he seems to have in mind the physical usefulness of goods, and does not include subjective pleasure or, for example, delusional “use value” in his definition:

“The usefulness of a thing makes it a use-value. But this usefulness does not dangle in mid-air. It is conditioned by the physical properties of the commodity, and has no existence apart from the latter. It is therefore the physical body of the commodity itself, for instance iron, corn, a diamond, which is the use-value or useful thing. This property of a commodity is independent of the amount of labour required to appropriate its useful qualities. When examining use-values, we always assume we are dealing with definite quantities, such as dozens of watches, yards of linen, or tons of iron. The use-values of commodities provide the material for a special branch of knowledge, namely the commercial knowledge of commodities. Use-values are only realized [verwirklicht] in use or in consumption.” (Marx 1982: 126).

But the usefulness of a commodity need not be limited to the “physical properties of the commodity.” People can buy things like magic charms or magic potions (and certainly people in the past did this in large numbers) or psychic readings. Some small numbers of people today probably think these things can give some kind of magic effect, but clearly there is no rational reason to think any such thing. The value or usefulness of such goods doesn’t lie in the “physical properties of the commodity.” People just mistakenly think the goods do certain things. But let us put all these points aside.

Marx further defines “exchange-value” as something that “appears first of all as the quantitative relation, the proportion, in which use-values of one kind exchange for use-values of another kind” (Marx 1982: 126). Marx admits readily that exchange values constantly change and are not fixed (Marx 1982: 126). But the exchange value is a “form of appearance” (Marx 1982: 127) concealing something deeper.

Marx sees exchange values in barter trades as being equivalent values (Marx 1982: 127). But this does not necessarily follow at all. In fact, when one person exchanges one good for another, it seems likely that in many cases he values the good he receives more highly than the good he gives up in the trade, and vice versa. Marx never considers this.

Marx assumes that, since goods must be equivalent in value during barter exchanges, therefore they must be reducible to some common value:

“… the exchange values of commodities must be reduced to a common element, of which they represent a greater or a lesser quantity.” (Marx 1982: 127).

We can quote his argument at length:

“This common element cannot be a geometrical, physical, chemical or other natural property of commodities. Such properties come into consideration only to the extent that they make the commodities useful, i.e. turn them into use-values. But clearly, the exchange relation of commodities is characterized precisely by its abstraction from their use-values. Within the exchange relation one use-value is worth just as much as another, provided only that it is present in the appropriate quantity. Or, as old Barbon say: ‘One sort of wares are as good as another, if the value be equal. There is no difference or distinction in things of equal value … One hundred pounds worth of lead or iron, is of as great a value as one hundred pounds worth of silver and gold.’

As use-values, commodities differ above all in quality, while as exchange-values they can only differ in quantity, and therefore do not contain an atom of use-value.

If then we disregard the use-value of commodities, only one property remains, that of being products of labour. But even the product of labour has already been transformed in our hands. If we make abstraction from its use-value, we abstract also from the material constituents and forms which make it a use-value. It is no longer a table, a house, a piece of yarn or any other useful thing. All its sensuous characteristics are extinguished. Nor is it any longer the product of the labour of the joiner, the mason or the spinner, or of any other particular kind of productive labour. With the disappearance of the useful character of the products of labour, the useful character of the kinds of labour embodied in them also disappears; this in turn entails the disappearance of the different concrete forms of labour. They can no longer be distinguished, but are all together reduced to the same kind of labour, human labour in the abstract.”

Let us now look at the residue of the products of labour. There is nothing left of them in each case but the same phantom-like objectivity; they are merely congealed quantities of homogeneous human labour, i.e. of human labour-power expended without regard to the form of its expenditure. All these things now tell us is that human labour-power has been expended to produce them, human labour is accumulated in them. As crystals of this social substance, which is common to them all, they are values – commodity values [Warenwerte].” (Marx 1982: 127–128).

As a defence of the labour theory of value, this argument is a non sequitur. It simply does not necessarily follow. There is no necessary reason to think there must be an underlying universal, single objective value to all commodities. In fact, we need not even assume that in all trades the people value the goods exchanged equally at all, as we have seen.

Even worse, it is also very clear how Marx must ignore the reality of different types of labour, whether of different professions but more generally of differences in skilled, professional, or unskilled labour, even though Marx himself understands that there are “heterogeneous forms of useful labour, which differ in order; genus, species and variety” (Marx 1982: 132).

Nevertheless, Marx is forced to reduce all labour to a homogeneous abstract unit.

Marx is adamant that labour time is the quantitative measure of labour value:

“A use-value, or useful article, therefore, has value only because abstract human labour is objectified [vergegenständlicht] or materialized in it. How, then, is the magnitude of this value to be measured? By means of the quantity of the ‘value-forming substance’, the labour, contained in the article. This quantity is measured by its duration, and the labour-time is itself measured on the particular scale of hours, days etc.” (Marx 1982: 129).

But immediately Marx hits up against the problem of why heterogeneous human labour can be meaningfully reduced to mere labour time as an objective measure of economic value. Why is this homogenous unit a truly accurate measure of labour value when everyone knows that workers work at different professions, speeds, levels of competence, and have different skills and expertise?

Quite frankly, Marx’s answer does not solve this devastating problem, but mostly just evades it:

“It might seem that if the value of a commodity is determined by the quantity of labour expended to produce it, it would be the more valuable the more unskilful and lazy the worker who produced it, because he would need more time to complete the article. However, the labour that forms the substance of value is equal human labour, the expenditure of identical human labour-power. The total labour power of society, which is manifested in the values of the world of commodities, counts here as one homogeneous mass of human labour-power, although composed of innumerable individual units of labour-power. Each of these units is the same as any other, to the extent that it has the character of a socially average unit of labour-power and acts as such; i.e. only needs, in order to produce a commodity, the labour time which is necessary on an average, or in other words is socially necessary. Socially necessary labour-time is the labour-time required to produce any use-value under the conditions of production normal for a given society and with the average degree of skill and intensity of labour prevalent in that society. ….

What exclusively determines the magnitude of the value of any article is therefore the amount of labour socially necessary, or the labour-time socially necessary for its production. The individual commodity counts here only as an average sample of its kind. Commodities which contain equal quantities of labour, or which can be produced in the same time, have therefore the same value. The value of a commodity is related to the value of any other commodity as the labour-time necessary for the production of the one is related to the labour-time necessary for the production of the other. ‘As exchange-values, all commodities are merely definite quantities of congealed labour-time.’” (Marx 1982: 129–130).

Marx evades the severe problem of heterogeneous human labour by simply reducing all labour time to an abstract, homogenous unit: socially-necessary labour time. But this doesn’t solve the problem. It attempts to ignore the issue by means of wishful thinking.

Marx assumes that total labour power of a nation can be aggregated by reducing all labour to a “socially average unit of labour-power.” This won’t do. Labour is too heterogeneous and too radically different in terms of profession, skill, competence, experience, and skills to be aggregated in such a crude manner. Highly skilled labour (e.g., a professional surgeon) produces more subjective value and to most people more objective value than unskilled manual labour (e.g., a person who mops floors). That is why a surgeon is paid more than a janitor. What Marx calls “labour-power” can be very different in different cases, and Marx’s attempts to reduce labour to an abstract unit is as unconvincing as any neoclassical who reduces real capital to a homogeneous putty.

And matters are no better when Marx later argues that the value of a commodity made by “complicated labour” can be reduced to quantities of “simple labour,” which seems to be defined as “simple labour-power, i.e. of the labour-power possessed in … [sc. the] bodily organism by every ordinary man, on the average, without being developed in any special way” (Marx 1982: 135). Here once again heterogeneous labour has to be reduced to a common measure, but what is it? It sounds rather like energy expended by human beings in their labour, but I see no reason why this should be an eternal source of economic value and the price determination of goods.

Neither the abstract “socially-necessary labour time” solution nor the “simple labour” unit reductionism can really solve the problem of heterogeneous human labour. On these grounds alone, the labour theory of value is unsound and unconvincing.

Finally, we have another utterly devastating problem with the labour theory of value:

“A thing can be a use-value without being a value. This is the case whenever its utility to man is not mediated through labour. Air, virgin soil, natural meadows, unplanted forests, etc. fall into this category. A thing can be useful, and a product of human labour, without being a commodity. He who satisfies his own need with the product of his own labour admittedly creates use value, but not commodities. In order to produce the latter, he must not only produce use-values, but use-values for others, social use-values. (And not merely for others. The medieval peasant produced a corn-rent for the feudal lord and a corn-tithe for the priest; but neither the corn-rent nor the corn-tithe became commodities simply by being produced for others. In order to become a commodity, the product must be transferred to the other person, for whom it serves as a use-value, through the medium of exchange.) Finally, nothing can be a value without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.” (Marx 1982: 131).

If labour value is totally worthless and cannot confer exchange value when the object has no utility (“use value”), then the whole labour theory of value is undermined.

For labour is not even a sufficient condition for economic value or exchange value. Clearly utility is also a necessary condition for economic value or exchange value, along with (1) labour time and (2) use value. And once we add subjective value into the mix, the Marxist labour theory of value becomes even more unsound. For now it is not even necessary for a commodity to have use value for it to command exchange value. Plenty of goods have no use value, e.g., pet rocks, but fetch an exchange value.

If Marxists want to argue that the Marx’s definition of “use value” includes “subjective value” as well, matters are no better. We are still left with the same devastating problem: labour time is not the only necessary condition for economic value or exchange value.

So Marx’s “labour theory of value” is obviously a blatantly one-sided and incomplete theory of both value and price.

And, finally, notice how all these issues are so devastating even before we get to yet another damning point, which I have made time and again, but which Marxists can never answer.

Most prices in modern economies are mark-up prices. It is not labour time per se but average unit cost of labour along with the average unit cost of all other non-labour factors at a given quantity of output that is used to calculate most prices. Given differing economies of scale, if you change the given quantity of output, then total average unit costs radically change, regardless of the total number of labour hours. After they calculate total average unit costs, businesses add a profit mark-up to this, nearly always. The profit mark-up can vary and is not related to labour.

Once again, on straightforward empirical grounds, we have no rational reason to accept the Marxist mystical dogma that “socially-necessary labour time” determines exchange value or prices in modern capitalism.

Further Reading
“Marx’s ‘Socially Necessary Labour Time’: A Quick Overview and Critique,” March 26, 2015.

“Progress in Marxism on the Labour Theory of Value?,” March 18, 2015.

“Mysticism and the Labour Theory of Value,” May 7, 2014.

“Lavoie on ‘Should Sraffian Economics be dropped out of the Post-Keynesian School?,’” June 19, 2014.

“Sraffians versus Kaleckians versus Fundamentalist Post Keynesians,” June 17, 2014.

“Did Kalecki Accept the Labour Theory of Value?,” April 18, 2014.

“Automation and Robots in the News,” February 23, 2015.

“Adam Smith on the Labour Theory of Value,” April 20, 2014.

BIBLIOGRAPHY
Marx, Karl. 1982. Capital. Volume One. A Critique of Political Economy (trans. Ben Fowkes). Penguin Books, Harmondsworth, England.

Marx’s “Socially Necessary Labour Time”: A Quick Overview and Critique

I have one question for Marxists. Where in Marx’s works does Marx give us a clear, explicit, detailed, and unambiguous definition of the crucial concept of “socially necessary labour time”?

I am not even sure Marx ever did this, but I will take this passage in a letter that Marx wrote to Louis Kugelmann as my source for what follows in this post:

“Every child knows a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs required different and quantitatively determined masses of the total labor of society. That this necessity of the distribution of social labor in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance, is self-evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products.”
Marx to Kugelmann, Letter, London, July 11, 1868.
https://www.marxists.org/archive/marx/works/1868/letters/68_07_11-abs.htm

Though Marx does not explicitly use the phrase “socially necessary labour time” it seems clear that he is referring to it here.

The first idea is that human labour is necessary for production and human survival, or at least for advanced industrial societies. That is true.

Then we have the crucial statement. The different types of goods that a capitalist economy produces require “different and quantitatively determined masses of the total labor of society.” So here labour is assumed to be an aggregate (admittedly of heterogeneous types of labour) and we can quantitatively measure how much of the aggregate is needed for the production of each type of good produced.

I assume Marx is thinking of labour time as the homogenous unit by which we measure the aggregate of the “total labor of society” and the parts therefore. If he is not, then what is he thinking of? Labour measured as the total number of workers?

I will continue to assume that labour time is the relevant concept. But immediately problems arise. If the car manufacturing sector takes 100,000 hours of total labour to produce 5000 cars, then is the value of an individual car 20 hours of labour time? What if this average conceals significant differences in various companies in terms of productivity and speed of the workforce? Is the average really justified as a measure of labour value?

And isn’t there a problem of aggregation of labour? If labour value is measured by labour time by means of the homogenous unit of hours worked, aren’t we faced with radically different types of labour value? Highly skilled labour (e.g., a professional surgeon) seems more valuable than unskilled manual labour (e.g., a person who mops floors). Does Marx’s labour theory of value make any allowances for this, or just regard one hour of doctor’s labour as equivalent to that of a janitor?

And, fundamentally, Marx makes it clear that he thinks his “social labour” proportions determine the exchange value (whether barter prices or money prices) of goods exchanged on the market:

“ And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products.”
Marx to Kugelmann, Letter, London, July 11, 1868.
https://www.marxists.org/archive/marx/works/1868/letters/68_07_11-abs.htm

So here we have the “transformation problem” right before our eyes. I can’t understand Marxists who tell me that there is no transformation problem in Marx’s work or that Marx never said that labour value determines exchange value or money prices. Clearly, he did.

But how on earth do Marxists solve the problem of how labour value as measured by “socially necessary labour time” determines prices on the market, and then empirically prove the values map to real world prices in real capitalist economies?

Actually, the Marxists have never solved these problems. And they never will.

The utter failure of the classical Marxist project is in the very assumption that “socially necessary labour time” determines exchange value or prices on the market. It does not.

This is an empirical fact. Most prices in modern economies are mark-up prices. It is not labour time per se but average unit cost of labour along with the average unit cost of all other non-labour factors at a given quantity of output that is used to calculate most prices. Given differing economies of scale, if you change the given quantity of output, then total average unit costs radically change, regardless of the total number of labour hours. After they calculate total average unit costs, businesses add a profit mark-up to this, nearly always. The profit mark-up can vary and is not related to labour.

There is, on straightforward empirical grounds, no rational reason to believe the Marxist mystical dogma that “socially necessary labour-time” determines exchange value or prices in modern capitalism.

Foucault’s Truth Relativism

This seems like a pretty clear statement of Foucault’s truth relativism to me:

“The important thing here, I believe, is that truth isn’t outside power, or lacking in power: contrary to a myth whose history and functions would repay further study, truth isn’t the reward of free spirits, the child of protracted solitude, nor the privilege of those who have succeeded in liberating themselves. Truth is a thing of this world: it is produced only by virtue of multiple forms of constraint. And it induces regular effects of power. Each society has its regime of truth, its ‘general politics’ of truth: that is, the types of discourse which it accepts and makes function as true; the mechanisms and instances which enable one to distinguish true and false statements, the means by which each is sanctioned; the techniques and procedures accorded value in the acquisition of truth; the status of those who are charged with saying what counts as true.” (Foucault 1984: 72–73).

According to this, truth is “produced only by virtue of multiple forms of constraint.”

Is there anyone who really believes this nonsense?

We can clearly get numerous straightforward, objective empirical truths as conveyed by synthetic a posteriori propositions in everyday life: e.g., “I am wearing a pair of socks now,” “I have two hands,” “there is no cat sitting on my kitchen table now” etc. Is the empirical fact that I am wearing socks now a truth made “by virtue of multiple forms of constraint”? If so, how? Can any supporter of Foucauldian truth relativism explain this?

As we have seen in the last post, what about historical truths like the Holocaust or Armenian genocide? Were these facts made “by virtue of multiple forms of constraint”? If so, how and why? Isn’t it obvious that the Foucauldian truth relativist would end up like some kind of lunatic Holocaust denier if he took Foucault’s ideas seriously?

This is why I laugh every time someone tells me that Michel Foucault was one of the greatest philosophers of the 20th century: if you really pursue the “truth is only made by power” mantra, you would quickly be driven to the most bizarre and, quite frankly, insane conspiracy theories, in your attempts to demonstrate how every truth is just made “by virtue of multiple forms of constraint.”

BIBLIOGRAPHY
Foucault, Michel. 1984. “Truth and Power,” in Paul Rabinow (ed.), The Foucault Reader (interview with Alessandro Fontana and Pasquale Pasquino). Pantheon, New York. 51–75.

A Challenge to Truth Relativists

People on the Left who deny objective truth are a plague these days.

I should also point out that I am firmly a person of the Left, and the Right holds no serious attraction for me at all, so my criticisms below do not stem from political Conservatism.

Truth relativism on the Left mostly stems from the fashionable French Poststructuralist and Postmodernist philosophies, from which we get other such comical nonsense, including the following:

(1) the idea that no text can have a fixed meaning intended by its author (from Roland Barthes and endorsed by Michel Foucault);

(2) that language can only refer to itself and not to objects or to reality (from Structuralism and that master charlatan and disgusting fraud Jacques Derrida), and

(3) extreme hostility to the natural sciences (from assorted Postmodernist buffoons).

But there are powerful arguments against the truth relativists.

We have overwhelming empirical evidence that we inhabit a world in which there are objects independent of our feelings, wishes and desires: any people in the same room can sense and describe the world they see and their testimony can be compared, and we can see they describe the same world with the same objects. Likewise, we can all see and experience the same events, processes and actions in this world.

It actually doesn’t matter whether there is an external world of physical matter that is the causal origin of our sensations (although that is the best explanation of the evidence), because even under an idealist ontology we already have overwhelming empirical evidence that there is a reality that objectively exists independently of our own subjective feelings or wishes or desires with a high degree of regularity, consistency and order.

Once we admit that there is an ordered reality independent of our thoughts about it, and that language and propositions can refer to this reality, then it is but a short step to objective truth under the correspondence theory of truth.

Moreover, there is another reason why any sensible, decent left-wing person should vehemently oppose truth relativism – and all its disgusting supporters and apologists on our own side of the political spectrum amongst Poststructuralists and Postmodernists. This is that truth relativism has consequences that quickly lead to plain moral degradation and moral nihilism.

If there is no objective truth and no objective truth about what happened in the past, then why and how does any left-wing person believing this truth relativist nonsense oppose, say, Holocaust denial or Armenian genocide denial? And come to think of it, is it an objective historical fact that adults have been persecuted for same-sex sexual activity in many societies down through history, or not? (As an aside, incidentally, if you are gay, I cannot think of anything more disgustingly insulting than a Postmodernist calmly telling you that objective truth does not exist. If so, then it follows that it is not even objectively true that persecution of gay people is a reality of history!)

As for the consequences of truth relativism, they can quickly be seen. If it is not an objective historical fact that the Holocaust happened, then why is there so much evidence that it happened? Why the numerous eyewitnesses and survivors and their testimony that we can still read today? Why the huge physical evidence? (e.g., the death camps, gas chambers, etc.)

Either (1) the Holocaust happened or (2) it did not as an objective fact, and any left-wing person who denies objective truth has got no business opposing, criticising and condemning the disgusting, shameful and ignorant fringe of Holocaust deniers we see today.

If you seriously deny objective truth and take your insane Postmodernist truth relativism seriously, then you have no business attacking or opposing Holocaust deniers as being wrong. In fact, you have no business opposing neoclassical economics, libertarianism, or Austrian economics as false and untrue economic theories either.

Rather, you should be saying that “all truth is made by power,” no objective truths exist, and our “truths” are invented and not determined by some objective reality.

By this point, however, you have – without a doubt – just proven to everyone else on the decent Left that you are a disgustingly, intellectually and morally bankrupt fool who has no business even being on the Left at all.

So for all you deniers of objective truth out there, answer me these questions:

(1) Is the proposition that “the Holocaust happened” just a truth made by power? If “yes,” what power system “made” it and why?

(2) If you think it is not an objective truth that “the Holocaust happened,” then explain why we have overwhelming evidence that it did.

(3) if you accept the overwhelming evidence that the Holocaust happened, then explain why you would persist in denying the reality of objective truth.

Please do enlighten me, because your truth relativism, frankly, is an absurdity and a shame and disgrace to the decent Left, and I know from experience that there are a lot of people on the Left like me who think so too.

Progress in Marxism on the Labour Theory of Value?

Well, yes, but only if Marxists throw the mystical labour theory of value aside and abandon it.

I point readers to this article by Ernesto Screpanti:

Ernesto Screpanti, “The Demise of Marx’s Labour Theory of Value and the ‘New Interpretation’: A Recap Note,” n. 708, March 2015.
http://www.deps.unisi.it/sites/st02/files/allegatiparagrafo/14-03-2015/708.pdf

David Fields on the Naked Keynesian blog also refers to it here.

Screpanti wishes to show the following:

“Marx’s theory of labour value is flawed. This note summarizes the main reasons why this is so. At the same time, it claims that the theory of exploitation does not depend on a labour embodied valuation and can be expounded by resorting to the theory of production prices. Almost all Marxists have now accepted this truth. Most of them have been convinced by a ‘new interpretation’ which has been able to translate the price of net output into an amount of ‘living labour’ and the rate of exploitation into a ratio between unpaid and paid labour. What produced such a surprising result is the use of labour productivity as a numeraire.” (Screpanti 2015: 1).

He then expounds a corn model economy in which he analyses the relationship between labour and output (Screpanti 2015: 2–4). Screpanti also notes that many Marxists have abandoned Marx’s theory of value for Piero Sraffa’s theory of production prices, yet the so-called “new interpreters” also distance themselves from Sraffa too, even though Screpanti apparently thinks they can be reconciled (Screpanti 2015: 7, 9).

Let Marxists argue over the merits of this paper, because ultimately I wonder why they even bother to continue calling themselves Marxist at all. If you repudiate major defining aspects of your Marxist economic theory (such as the labour theory of value or historical materialism), then why even cling to the name “Marxist”? Could it have something to do with the fact that what you belong to is actually a cult and you have profound difficulties escaping from your cult?

For I have no doubt that the central aspect of classical Marxism – the labour theory of value – is a mystical and metaphysical dogma that requires faith to believe in.

For Marx, money prices/exchange values are determined by the socially necessary labour-time occurring in production:

“The production of commodities must be fully developed before the scientific conviction emerges, from experience itself, that all the different kinds of private labour (which are carried on independently of each other; and yet, as spontaneously developed branches of the social division of labour, are in a situation of all-round dependence on each other) are continually being reduced to the quantitative proportions in which society requires them. The reason for this reduction is that in the midst of the accidental and ever-fluctuating exchange relations between the products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him. The determination of the magnitude of value by labour-time is therefore a secret hidden under the apparent movements in the relative values of commodities.” (Marx 1982: 168).

So money prices are determined and driven by a “magnitude of value by labour-time” and this is a type of anchor around which money prices might fluctuate, even though they are supposed to be driven back to the socially necessary labour-time anchor when they deviate from it.

Yet Marxists have devoted decades and dozens of books to attempting to solve their notorious transformation problem, and they have never solved it, because it is a complete pseudo-problem.

Missing in modern Marxism is hard empirical study of how most prices are actually determined in capitalist economies and the willingness to formulate theories based on the empirical evidence, not on a prior quasi-religious belief in the labour theory of value.

Nor will basing modern Marxism on Sraffian economics save Marxism, because Sraffian economics has serious problems, as outlined here and here.

Human labour has historically been required and is still required to engage in production and creation of output (though we will probably reach a time in the next 100 years when only minimal human labour is required to run an advanced capitalist economy). In this utilitarian sense, of course labour has value. Obviously it is a necessary factor of production, but then so are non-labour factor inputs too.

But the trouble is: this doesn’t take you very far. It is almost a trivial truth.

For example, without the sun and the energy it provides, there wouldn’t be any production either. Maybe we could even invent an economic cult based on a “sun theory of value”: we could argue that all commodities are just embodiments of the “physically-necessary sun energy” required to produce them. Therefore all prices must really just be reducible to and determined by “physically-necessary sun energy.” We could waste our lives desperately trying to solve our “transformation problem”: how is the quantity of “physically-necessary sun energy” transformed into money prices of goods on the market? We could also argue that we are all – workers and capitalists – ruthlessly exploiting the poor, oppressed and innocent sun!, and so on and so forth. The trouble is, it would all be a lot of nonsense.

Let us now return to the real world. Why is the labour theory of value wrong? Most prices in modern economies are mark-up prices. Fundamentally, there is no reason to think that some mystical “socially necessary labour-time” determines prices in modern capitalism. First, it is not labour time per se but average unit cost of labour along with the average unit cost of all other non-labour factors at a given quantity of output that is used to calculate most prices. Then businesses add a profit mark-up to this, nearly always.

There is no universal tendency towards cost of production prices and zero profits throughout a competitive capitalist economy. Even if there was, there is no reason to think that “cost of production” prices would embody socially necessary labour-time involved in producing them. Most mark-up prices do not gravitate towards cost of production (whether based on total average unit costs or marginal cost), and mark-up pricing and highly imperfect competition in any real world market economy therefore badly undermine the Marxist, Classical and Sraffian view that there exists a tendency towards zero or a uniform rate of profit throughout a competitive capitalist economy.

The labour theory of value is mystical nonsense and the whole Marxist project is just another example of how people on the Left have wasted their lives and careers on an utterly embarrassing cult, when they could have been doing constructive things with their time.

It is good news that economic Marxism has become a fringe movement. It is bad news, however, that the Left is still ridden with lots of other outrageous nonsense too, and large numbers of other modern left-wing people have also wasted their lives on cultural Marxism, Poststructuralism, and Postmodernism.

Further Reading
“Mysticism and the Labour Theory of Value,” May 7, 2014.

“Lavoie on ‘Should Sraffian Economics be dropped out of the Post-Keynesian School?,’” June 19, 2014.

“Sraffians versus Kaleckians versus Fundamentalist Post Keynesians,” June 17, 2014.

“Did Kalecki Accept the Labour Theory of Value?,” April 18, 2014.

“Automation and Robots in the News,” February 23, 2015.

“Adam Smith on the Labour Theory of Value,” April 20, 2014.

BIBLIOGRAPHY
Marx, Karl. 1982. Capital. Volume One. A Critique of Political Economy (trans. Ben Fowkes). Penguin Books, Harmondsworth, England.

Screpanti, Ernesto. 2015. “The Demise of Marx’s Labour Theory of Value and the ‘New Interpretation’: A Recap Note,” n. 708.
http://www.deps.unisi.it/sites/st02/files/allegatiparagrafo/14-03-2015/708.pdf

Did Austrian Libertarians Read The Forgotten Depression: 1921: The Crash That Cured Itself Properly?

The libertarian blogosphere has been spruiking a recent book by James Grant called The Forgotten Depression: 1921: The Crash That Cured Itself (2014) for some time now.

Right now libertarian blogs are gushing over how the book has won the Hayek Prize of the Manhattan Institute. Well, it is not surprising that the conservative/libertarian Manhattan Institute gave a prize named after Hayek to the book, and, quite frankly, I couldn’t care less.

But what does interest me is this: have the Austrians who are spruiking Grant’s book actually read it properly?

The Austrian libertarians are adamant that US monetary policy did not play a significant role in the recovery from this 1920–1921 recession, which lasted from January 1920 to July 1921. (That, incidentally, was a period of 18 months, which is not particularly short as compared with the average length of recessions in the post-WWII era.)

But right on p. 179 of Grant’s The Forgotten Depression: 1921: The Crash That Cured Itself, there is this statement:

“Public policy made one signal contribution, at least, to the improvement in American finances. This was in the all important matter of interest rates. It was welcome news when the Federal Reserve Bank of Boston cut its main discount rate to 6 percent from 7 percent, effective April 15. It was the first easing move by any Federal Reserve bank since the previous spring. The Federal Reserve Bank of New York followed on May 4 with a reduction to 6.5 percent from 7 percent. This move the market correctly interpreted as the beginning of the end of the era of ultrahigh interest rates (high enough in nominal terms, extra lofty when adjusted for the declines in prices and wages).” (Grant 2014: 179).

Although Grant points to the inflow of gold as a more important factor (in his view) for the recovery in the passage that follows this (Grant 2014: 179–180), he clearly does acknowledge the role of Federal Reserve monetary policy too.

The key element in monetary policy in 1921 was interest rates, and there was a clear sea-change in Federal Reserve rate policy from May 1921 before the start of the recovery in July 1921, when in May they signalled that the high rate policy had ended and began to lower rates. The rate cuts beginning in May 1921 had a great influence on the economy by way of expectations and business confidence – especially by helping to create confidence and expectations of continuing rate cuts and looser monetary policy in the future, as indeed did happen.

Even Grant seems to admit this. But Austrians still deny it – at the same time they point to the book as if it vindicates their views. Let’s see: what would be an appropriate expression for this?… Hoist with your own petard, perhaps?

Anyway, if you want an analysis of the recession of 1920–1921 free from Austrian mythology and ignorance, I refer you to my posts on the subject below:

“The US Recession of 1920–1921: Some Austrian Myths,” October 23, 2010.

“There was no US Recovery in 1921 under Austrian Trade Cycle Theory!,” June 25, 2011.

“The Depression of 1920–1921: An Austrian Myth,” December 9, 2011.

“A Video on the US Recession of 1920-1921: Debunking the Libertarian Narrative,” February 5, 2012.

“The Recovery from the US Recession of 1920–1921 and Open Market Operations,” October 4, 2012.

“Rothbard on the Recession of 1920–1921,” October 6, 2012.

“The Recession of 1920–1921 versus the Depression of 1929–1933,” February 2, 2014.

“Debt Deflation: 1920–1921 versus 1929–1933,” February 3, 2014.

“US Wages in 1920–1921,” February 10, 2014.

“The Causes of the Recession of 1920–1921,” February 11, 2014.

“The ‘Depression’ of 1920–1921: The Libertarian Myth that Won’t Die,” October 31, 2014.

“US Monetary Policy and the Recession of 1920–1921,” December 5, 2014.

BIBLIOGRAPHY
Grant, James. 2014. The Forgotten Depression: 1921: The Crash That Cured Itself. Simon & Schuster, New York and London.

The BBC’s Great European Disaster Movie – A Weird Piece of Pro-EU Propaganda

The BBC recently broadcast its documentary (or perhaps mockumentary) called the Great European Disaster Movie, an alleged prophetic vision of what would happen if the Eurozone and European Union (EU) broke up. The executive producer was Bill Emmott, the English journalist and former editor of The Economist.

Though it has some good aspects, the documentary still presents a utopian and one-sided view of the EU. The documentary predicts disaster, catastrophe, and horrors if the EU were to be disbanded. It is so bizarrely unrealistic and paranoid it is comical.

The opening scenes imagine Europe around 2017 to 2020: Greece is defaulting on debt, the abolition of the Euro has occurred, the far-right National Front under Marine Le Pen has taken power in France, national tensions are rising, mass rioting is in progress and the EU is formally disbanded. Some years later two people on a plane discuss the history of the EU, but Europe has collapsed into chaos at that future date – apparently all because the EU doesn’t exist. You can get a feel for the documentary in the trailer below.



It is also proclaimed that the fall of the EU would trigger a world economic collapse. That might well be true, but it would probably be no worse than the financial collapse of 2008 to 2009, and could easily be contained and dealt with by the right policy interventions.

In fact, in the event of EU breakup, newly independent, national European governments would have the space for fiscal stimulus, so that recovery could in theory be much faster than the one after 2009. There would be disaster only if grossly incompetent national governments pursued what the EU has already pursued all these years: austerity, budget balancing and neoliberalism.

But don’t get me wrong: the documentary does have praiseworthy aspects and good points to make. The documentary quickly shifts to focussing on some of the economic and social problems in the Eurozone and EU today, including the crisis of mass mortgage foreclosures in Spain, tax evasion by the wealthy, the failure of bank reform, and the dangers of austerity.

At one point, Martin Wolf appears and gives a Keynesian warning against austerity in the EU, and even Bill Emmott seems to propose a German-led Keynesian stimulus program throughout Europe.

But the documentary never addresses the question: what if a radical change in fiscal policy never happens? Why not break up the EU? Why should people continue to suffer under such a rotten system?

Totally missing is the understanding that the EU’s extremely anti-democratic nature makes it highly unlikely that elected governments can do anything to change it. Moreover, there is no central, democratically-elected EU government that can implement fiscal policy anyway, so how can anybody directly vote to change EU policies?

At this point, the Great European Disaster Movie just turns to scaremongering and fear-mongering about why the EU should not be broken up. The arguments presented are feeble, laughably irrelevant or plainly untrue.

Fortunately, the BBC had a decent discussion on Newsnight about the documentary in which some decent critics of the EU were allowed to speak and point to its faults, as we can see in the video below.



Sadly, it was mostly left to the conservative Peter Hitchens and the UKIP MP Mark Reckless to point out the serious flaws in many of the pro-EU arguments.

Where on earth is the anti-EU Left in this debate? Most recently, we just learned that Greece has fallen back into recession and I do not see any signs that Syriza has done anything but fold in its conflict with the Eurozone. When is the Left going to wake up?

Foucault’s The Archaeology of Knowledge: A Quick Summary

In 1969, Foucault published the following book:

Foucault, Michel. 1969. L’archéologie du savoir. Gallimard, Paris. = Foucault, Michel. 1972. The Archaeology of Knowledge (trans. Allan Sheridan). Harper and Row, New York.

It seems to mark a new methodological perspective in his work (Merquior 1991: 77) and the point when Foucault was turning to Poststructuralism.

The Archaeology of Knowledge is an clear attempt to state and expound the fundamental “archaeological” method Foucault used in The Order of Things, History of Madness and The Birth of the Clinic. Foucault came in his later works to have a new method called “genealogy” (supplementing “archaeology”), which was supposed to show how systems of thought unearthed by “archaeology” were merely contingent accidents of history.

The emphasis in The Archaeology of Knowledge now seems to be on discourses or discursive formations (practices or statements that reign in a particular time), and the influence of Friedrich Nietzsche’s “genealogical” philosophy has become very important (Merquior 1991: 77).

Another new concept in The Archaeology of Knowledge is the archive, but one will be hard pressed to actually understand what Foucault means by this.

Let Foucault – in that wonderfully lucid prose for which he was famous – explain it to you:

“Between the language (langue) that defines the system of constructing possible sentences, and the corpus that passively collects the words that are spoken, the archive defines a particular level: that of a practice that causes a multiplicity of statements to emerge as so many regular events, as so many things to be dealt with and manipulated. It does not have the weight of tradition; and it does not constitute the library of all libraries, outside time and place; nor is it the welcoming oblivion that opens up to all new speech the operational field of its freedom; between tradition and oblivion, it reveals the rules of a practice that enables statements both to survive and to undergo regular modification. It is the general system of the formation and transformation of statements.

It is obvious that the archive of a society, a culture, or a civilization cannot be described exhaustively; or even, no doubt, the archive of a whole period. On the other hand, it is not possible for us to describe our own archive, since it is from within these rules that we speak, since it is that which gives to what we can say – and to itself, the object of our discourse – its modes of appearance, its forms of existence and coexistence, its system of accumulation, historicity, and disappearance. The archive cannot be described in its totality; and in its presence it is unavoidable. It emerges in fragments, regions, and levels, more fully, no doubt, and with greater sharpness, the greater the time that separates us from it: at most, were it not for the rarity of the documents, the greater chronological distance would be necessary to analyse it.” (Foucault 1972: 130).

Was that clear? Well, yes: about as clear as mud.

Here was a man trying to explain a crucial concept of his work, but does very little except reveal to everyone watching that the pretentious French emperor has no clothes.

The archive is not, apparently, our faculty of language. But, according to Foucault, the archive is “the general system of the formation and transformation of statements” (Foucault 1972: 130). But transformation of statements into what? Even more shockingly, we cannot even “describe our own archive”! So how do we know one even exists?

Merquior, who tries hard to see through the fog of Foucault’s gibberish, thought that the archive is a system for generating social meaning (Merquior 1991: 81), whatever that means. Foucault also regarded the archive as the historical a priori (Merquior 1991: 81), so whatever it represents it seems to be analogous to the epistemes of his previous work The Order of Things.

It seems that Foucault was soon arguing that “discourses” in any society were the product of control and rules and access to knowledge (Merquior 1991: 84). The stage was now set for Foucault’s idea that power creates knowledge.

Further attempts to make sense of The Archaeology of Knowledge seem like a complete waste of time to me – or at least I think there are probably much more productive things you could be doing with your waking hours.

Gilles Deleuze – another grand Poststructuralist charlatan – apparently drew the lesson from Foucault’s Archaeology of Knowledge that one should make no distinction between science and poetry! (Merquior 1991: 84). If anyone believes this outrageous idiocy, then by all means act on Deleuze’s sage advice and seek the services of a poet instead of using science-based medicine when you get sick! I am sure that will fix you right up...

Links
Gutting, Gary. 2003 (rev. 2013). “Michel Foucault,” Stanford Encyclopedia of Philosophy
http://plato.stanford.edu/entries/foucault/

Kelly, Mark. “Michel Foucault (1926–1984),” Internet Encyclopedia of Philosophy
http://www.iep.utm.edu/foucault/

“Michel Foucault,” Wikipedia
http://en.wikipedia.org/wiki/Michel_Foucault

BIBLIOGRAPHY
Merquior, José Guilherme. 1991. Foucault (2nd edn.). Fontana, London.

Foucault, Michel. 1972. The Archaeology of Knowledge and the Discourse on Language (trans. A. M. Sheridan Smith). Pantheon Books, New York.

UKIP and the British General Election of 2015

The United Kingdom is due for a general election on 7 May, 2015, and there are signs that the British political landscape may be transformed by the UK Independence Party (UKIP) at this election:

Toby Helm, “Ukip on track for 100-plus second places across England,” 8 March, 2015.

The UK Independence Party (UKIP) is, according to some analysts, set to become a major political force, because it will come second in as many as 100 seats in the election. That means in subsequent local and general elections after 2015 it could then be on the point of gaining large numbers of seats – perhaps even becoming a coalition partner in any government elected in the general election of 2020.

That in turn will mean a strong impetus to take Britain out of the EU in the coming years.

A lot of people on the British Left seem to think taking Britain out of the EU would be a bad idea, but they are mostly deluded Leftists who have an unrealistic, utopian and even quasi-religious faith in the European Union. In reality, the Eurozone and European Union are in an existential crisis today, because they really are failed states.

The Eurozone and EU were constructed on the bankrupt ideas that (1) you can have a monetary union without a fiscal union, (2) you can run a successful economy on the fraud of New Consensus neoclassical economics and harsh neoliberalism, and (3) national democracy doesn’t really matter anymore.

This is why the Eurozone is the train wreck it is today. Peripheral nations have had depressions (e.g., Ireland and Greece) or severe recessions (e.g., Italy and Spain). Eurozone unemployment stands at about 11.2%. That is depression-level unemployment. And if you think this is bad, just look at Eurozone youth unemployment: it stands at about 22.9%. This is a catastrophe and outrage. It is sheer destruction of future generations.

Moreover, large numbers of Europeans – both on the Left and Right – are coming to hate the Eurozone and are increasingly skeptical about the European Union as well, because the EU is rightly perceived as being extremely anti-democratic and taking away the sovereignty of member states, even those states that do not use the Euro.

The rise of the UK Independence Party (UKIP) is largely a symptom of the collapse in public confidence in the Eurozone and EU.

A large part of UKIP’s new base of supporters seems to come from disaffected Conservative party voters. We can get a feel for why this is happening in the video interview below of Neil Hamilton, Deputy Chairman of UKIP.



It is obvious that opposition to the EU, its anti-democratic nature and mass immigration from the EU to Britain are major issues for the Conservative base of UKIP.

UKIP inspires an irrational hysteria from the British Left, and usually it is accompanied by cries of racism. No doubt there are some UKIP voters who are racist or xenophobic, but frankly I think the Left overestimates the numbers and influence of such people in UKIP. The British Left’s response to UKIP is often infantile.

Even UKIP’s hostility to immigration – at least by the leadership and in its party platform – is almost completely about open door, mass immigration from the EU nations, and how this poses economic and social problems for Britain. Those concerns do not prove everyone or most people in UKIP are racists or xenophobes, even though nobody denies that some such vocal and ugly people really do vote for the party. In reality, UKIP’s proposed reforms on immigration, as described on its party website here, would make the UK have an immigration policy rather like that of Canada or New Zealand. The last time I checked these nations were tolerant liberal democracies – not racist, fascist states. The fact is that the truly sinister far-right party in the coming election in the UK is the British National Party (BNP), not UKIP. I have little doubt that a UKIP government would be ugly, mainly because of its free market and Thatcherite bent, but things need to be kept in perspective.

The two issues that seem to concern most UKIP votes – the failed Eurozone and EU and its anti-democratic nature – should be of extreme concern to people on the Left.

For the fact is that UKIP’s rise is a sign of the utter bankruptcy of the British New Labour party as well – not just the Conservative party.

Everyone knows New Labour sold out and became a neoliberal party a long time ago (apart from a brief flash of sanity from about 2008–2010 when the party rediscovered some of its Keynesian heritage). But it is clear that New Labour supports the failed EU with a utopian passion too, and this will probably start hurting it politically in a serious way in the coming years.

Why, you ask? What should sound alarm bells is that Labour voters in significant numbers are abandoning the party and are now willing to vote for UKIP, as we can see here, here, here, here, and here.

A brief summary of this phenomenon can be seen in the video below with respect to the (1) Clacton and (2) Heywood and Middleton by-elections on 9 October, 2014 last year.



The Labour party needs radical reform. It needs to utterly abandon neoliberalism and rediscover Keynesian economics and social democracy. It needs to commit to creating full employment again. It also needs – at the very least – to support a fair referendum on Britain’s EU membership and most probably move to opposing the EU and accept that a majority of people in Britain probably want out of the EU completely. It needs to stand up for national economic and political sovereignty – not failed, anti-democratic, neoliberal utopian experiments like the EU.

If the Labour party does not change, it will become totally worthless, and a new left-wing party will have to rise to replace it. But there is no sign whatsoever of this happening.

More likely, the Left in Britain is doomed if New Labour continues down its path of neoliberalism and pro-EU fantasies.

The future of politics in Britain may well be a UKIP and anti-EU Conservative coalition, which will be ugly indeed since UKIP is likely to be Thatcherite on economics and will have a crazy libertarian wing.