Sunday, March 29, 2015

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.

45 comments:

  1. "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."

    With Keynes is not the same? All Keynesians have the same views ?

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    1. The difference is that Keynesians can readily acknowledge errors and mistakes by Keynes. And there isn't the ludicrous nonsense in Keynes that you find in Marx.

      Modern Post Keynesianism isn't just an attempt to re-interpret Keynes over and over again. It has moved on. And I would say there is broad agreement about what Keynes said by Post Keynesians.

      Keynesians don't argue about whether fundamental ideas of their school like aggregate demand or expectations even exist -- unlike Marxists who are still involved in internecine feuds over whether the LTV exists or whether the falling rate of profit law is true.

      And, even more, most neoclassical Keynesians don't even care what Keynes said at all. Their theory comes just as much from Walras or Marshall than Keynes.

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    2. I for one would argue aggregate demand is another mystical and too vague to be useful concept. What's it useful for?

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    3. Clearly you never heard of GDP. Or its components. Or the way this AD spending drives production and employment. A slight oversight?

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    4. I've heard of GDP and its components. How is this related to AD?

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    5. Aggregate Demand (AD) = C + I + G + (X-M).

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  2. "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."

    ~So true. I asked myself the same thing, when a marxist told me that Keen was misrepresenting LTV in his book. I asked myself, what is the use (practical use) of LTV? What does LTV tell us? It simply allows marxists to invoke "the breakdown of capitalism" every time there's a private debt deflation cycle made worse by incompetent - pro-cyclical government fiscal policy. Furthermore, if the LTV only applies in describing capitalist relations between people and within society, then when does capitalism start historically and when does it end or change into something else - another type of system that LTV cannot be applied to. Can LTV tell us something of antiquity? If not, then at what arbitrary point in time can we all decide that capitalism started? I don't know, to me LTV is like trying to apply a 6 physical dimensions mathematical model to the real world - an exercise in futility.

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    1. Keen's reading of it is frankly terrible. He draws upon Arun Bose and makes the mistake of conflating "commodity" (a specific social form) with any material good, and then draws a bizarre conclusion about "commodity residue." He also uses a sloppy reading of the Grundrisse to argue that use-value is somehow numerically comparable with value.

      I enjoy a fair bit of Prof. Keen's work, and the time I met him he was extremely friendly and gracious, but his work on value theory should be approached with a critical eye. Here's an article that goes into more depth on it.

      What does LTV tell us?

      Basically, "how capitalism works." Over the years I've gradually come to view it as half accounting system, half realist retroductive analysis of structural mechanisms.

      It simply allows marxists to invoke "the breakdown of capitalism" every time there's a private debt deflation cycle made worse by incompetent - pro-cyclical government fiscal policy.

      Well, the value theory had already determined that said cycles are endogenously generated by the workings of the system. Not to knock subsequent PK work delving into the credit system at all (quite a lot of it is splendid, and wholly compatible!), but Marxists argue they stop their analysis too soon. The growth of debt is an important thing to watch, but even more fundamental are movements in the general rate of profit.

      Can LTV tell us something of antiquity? If not, then at what arbitrary point in time can we all decide that capitalism started?

      1) Not really, no. Materialist analysis can in general, but you'd be studying a completely different social organism, so to speak.

      2) The capitalist mode of production can be seen through quite a lot of history, but it only became the dominant mode of production over the last few centuries. The enclosure and game laws are generally seen as some of the key devices, for example, that led to the solidification of mobile wage labor as a distinct class in England. M. Perelman wrote a book called The Invention of Capitalism that goes into greater depth.

      I don't know, to me LTV is like trying to apply a 6 physical dimensions mathematical model to the real world - an exercise in futility.

      Well, to me this is a very odd thing to say. To each his own.

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  3. 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.

    There is no magical mystical transfer. It is actually very simple. The cotton-producing capitalists had invested money into means of production (including the seeds, but also the machinery etc.) and labor power to plant and take care of the cotton. The sum total of this money is an expression (not a 1:1, mind you) of a part of the social labor expended so far on cotton. Now the drought comes, half of all of the cotton plants in the world don't survive. However, some of the social labor had already been spent. The seeds, the machines and at least part of the living labor had already been paid for, some of the work had alrady been done. The idle machines need some maintenance. The storage space for seeds had to be paid for, there were transport costs etc. Sure, it may be the case that there is now less social labor to be spent on harvesting the crops (because the crops are smaller, although I'm not sure that in real-world agriculture it would be directly proportional – but let's suppose it is), but the original outlays of social labor were relatively greater, i.e., with the expectation of twice the crop. (See, this is where Wicksell's "argument" is based on another misunderstanding of Marx's theory. No surprise there, Marx is often misinterpreted.) Greater per ton produced, for example, when compared to wheat or potatoes. To make up for the loss (and to make some profit), the individual cotton producer has to sell the cotton for more than before or she'll go under. This last sentence expresses what she sees on an "empirical" level; for her, it's a revenue minus costs thing, and she does no labor-time calculations (Marx knows this).

    But Marx's theory of value is a theory about how social labor is allocated in capitalism. In any society, a sudden drop in productivity in some branch (for whatever reason, including natural disaster) means that more labor has to be allocated to that branch (if people still want products of that branch) now or (ceteris paribus) in the future than before. I.e.: in the past, you needed a total amount X of social labor to produce Y tons of cotton; but now, the amount X only yields Y/2 tons of cotton. So to get Y, you need to double the amount X of social labor expended. This, for Marx, is a trivial truth. How different types of societies make this decisions and organize this allocation is what distinguishes them as modes of produciton.

    In capitalism, the way this "requirement" of more or less social labor is signalled, is through price. Prices and price relations are relations of amounts of social labor. It is not that to any amount X of social labor corresponds a market price (or even price of production) Z that can be calculated from X. The changes in prices depend on other factors besides productivity, and a change in productivity might not always affect prices (this depends on the extent of the change within a branch; if it's a branch well-populated with producers, then a change in one enterprise will not necessarily affect the social average; this is explained in a quite clear way in Ch10 of Volume 3 of Capital; this then explains how more productive producers can at least temporarily profit from their advanced methods of production – they produce more efficiently than what the social average is, and so they earn what Marx calls an "extra profit").

    J.

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    1. "Greater per ton produced, for example, when compared to wheat or potatoes. To make up for the loss (and to make some profit), the individual cotton producer has to sell the cotton for more than before or she'll go under"

      In flexprice markets, farmers are not selling as pricemakers, but price takers. What you say is manifestly untrue.

      The price of many agricultural goods sold in auction-like markets is determined by supply and demand and scarcity, and that is why prices can be so volatile. This is so obvious to anyone not blinded by Marxist dogma.

      And, no, you have not addressed Marx's claim that "a given weight of cotton represents more labour after a bad harvest than after a good one " -- unless he means that wasted labour value on lost crops transfers into ones finally brought to market.

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    2. Of course supply and demand affect prices as well. As regards value, remember that for a commodity to have value, it has to be recognized as use-value. So, for example, if there's more cotton than the market can stomach, the value (not just the price) of cotton will fall as well. That's not really an issue, I suppose – Marx discusses this at length in Volume 3, and we've already established the value - use-value relation in a previous thread. See, for example, Chapter 10 that I mentioned before.

      The wasted labor is not "transferred". It is simply the case that all of that labor spent on producing cotton (planting and taking care of, the diminished amount required to harvest it notwithstanding) resulted (due to drought) in a relatively diminished amount of cotton. Every ton of cotton on the market now represents more social labor than in the previous season. I don't see what's so hard to understand about that.

      Anyway, don't you think that societies need to apportion their productive activity, i.e., social labor? And you don't think the market has anything to do with that?

      J.

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    3. "The wasted labor is not "transferred". It is simply the case that all of that labor spent on producing cotton (planting and taking care of, the diminished amount required to harvest it notwithstanding) resulted (due to drought) in a relatively diminished amount of cotton. Every ton of cotton on the market now represents more social labor than in the previous season."

      So what you're saying is

      (1) no labour is transferred, but

      (2) actually all labour value expended now is included in the diminished final output which "represents more social labor than in the previous season"
      -------------------
      You have just denied but then conceded what I just said.

      The next question is: how can wasted labour value on crops lost still included in the diminished final output which "represents more social labor than in the previous season" without being transferred?

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    4. And to clarify: when you say all labour value expended now is included in the diminished final output which "represents more social labor than in the previous season", you must admit that the unit labour value of each unit of diminished final output has increased.

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    5. Sure, but this does not constitute any mystical "transfer" of anything. You have to rid yourself of the idea that Marx's is a labor-embodied approach. Marx's "value" is defined as amount of social labor expended in the production of a use-value. This is a matter of definition. Marx says that value ultimately regulates exchange proportions, and that this is the specific mechanism which apportions social labor in a capitalist society. This is not a matter of definition, it's an empirical statement. It is difficult to test due the "indirect" way in which this regulation, in Marx's view, operates. But it entails some other statements that can be tested more easily. But we've been over this already.

      There's no mysticism, only incomprehension.

      J.

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    6. If you eliminated the words "magically or mystically" from my post above, you would still have the same devastating problem: how does wasted labour transfer into the unit labour value of each unit of diminished final output after a crop failure or drought etc?

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    7. It's not devastating at all. Every society apportions social labor. Capitalism does it through prices. End of story.

      In practical terms, the mechanism through which value regulates exchange proportions is, first and foremost, competition, which forces each capital to economize (on means of production and on living labor) and to maximize (profit). In the example of cotton, the price goes up if the cotton producers want to survive. The result is that a ton of cotton now represents more social labor than before. So it's the producers themselves, competing on the market, who execute the "law of value".

      For now, this is all from me. I don't think I have a better way of explaning this than what I've already written. Try reading all of Heinrich's book.

      J.

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    8. "... In the example of cotton, the price goes up if the cotton producers want to survive."

      Once again, this is complete nonsense.

      The cotton producers aren't raising the price: they are price takers. The price if it is determined in auction-like markets will be driven by supply and demand and scarcity. It doesn't matter how much labour time was wasted or not in total labour used, the price is driven by reduced supply relative to demand.

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    9. Your example is wrong because LVT applies only at *equilibrium*. There are no shocks or surprises in equilibrium. And yes, obviously it's a simplification.

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    10. But Marx is not referring to equilibrium prices here at all: he is quite clearly trying to explain the *visible market prices* of agricultural goods after natural disasters in terms of abstract labour values.

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    11. LK, I agree this has nothing to do with equilibrium prices.

      To go back to the point, you seem to accuse Marx of metaphysics, yet you talk about "supply" and "demand" as if they were some forces completely independent of the fact that if the cotton producers can't sell for a price which will at least cover their costs, they won't be able to produce in the next period (disregarding credit and other complicating conditions, of which Marx was aware, but does not discuss them at the point at which he gives the example of cotton). They can't (and won't) take just any price.

      Note that none of this precludes the additional influence of supply and demand on the price at which the cotton will sell:

      "Every individual article, or every definite quantity of a commodity may, indeed, contain no more than the social labour required for its production, and from this point of view the market-value of this entire commodity represents only necessary labour, but if this commodity has been produced in excess of the existing social needs, then so much of the social labour-time is squandered and the mass of the commodity comes to represent a much smaller quantity of social labour in the market than is actually incorporated in it. (It is only where production is under the actual, predetermining control of society that the latter establishes a relation between the volume of social labour-time applied in producing definite articles, and the volume of the social want to be satisfied by these articles.) For this reason, these commodities must be sold below their market-value, and a portion of them may even be altogether unsaleable. The reverse applies if the quantity of social labour employed in the production of a certain kind of commodity is too small to meet the social demand for that commodity." (Ch10, Capital vol. III)

      However, for Marx, both supply and demand are magnitudes that are ultimately determined by relations of social labor. The extent of supply depends on the volume, productivity and intensity of social labor expended. The extent of (effective) demand is ultimately also determined by value relatione, not least because demand is only effective when it's backed with money, and that money must derive from one of the forms of income (in Volume 1, Marx narrows this down to profits and wages).

      J.

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    12. "They can't (and won't) take just any price."

      You should tell that to thousands of farmers every year who go bankrupt because they are forced to accept prices that cause losses.

      Also, the Marx quote you cite is just as mystical as the one above: now labour value is destroyed even when it has clearly been used to bring goods to markets that won't sell, so that the unit labour of value of goods sold falls.

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    13. Well, the fact that they go bankrupt means that a huge part of their labor was not validated as part of social labor. In other words, they weren't able to sell for a price that would be an adequate expression of the value of (or the amount of social labor expended on) the cotton. This is exactly what the theory is about.

      In your reply to the quote, it seem that you're confusing market price with (market) value.

      J.

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    14. So after all your statements above trying to prove that rising market prices of cotton after a bad harvest are actually caused by rising unit labour value of the diminished output (and trying bizarrely to argue that farmers are price-makers when they are blatantly not), you're now saying that market prices aren't in fact caused by SNLT?

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    15. LK, value is equilibrium price, full stop.

      If the bad harvest is "permanent enough", all prices (and quantities and methods of production) will change and it's very well possible that they'll be LOWER than before. Neoclassical supply and demand analysis is simply wrong.

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    16. "value is equilibrium price, full stop."

      That is nothing but an empty assertion. An analytic tautology. First you define value in a way that has no convincing empirical support.

      Then say equilibrium price (cost of production price?) is equal to it. Unprovable, metaphysical, worthless, useless, and it adds nothing to economic science, except religious dogma.

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    17. It is just like saying: the natural rate of interest is the uniform rate of return on barter loans in equilibrium!! Full stop. That's fine as long as you acknowledge that is true only in a totally fictitious imaginary world in your head, with zero relevance to the real world.

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    18. I agree that "value is equilibrium price, full stop." is an analytic tautology. I repeat it because some people want to hijack the word value to mean something else.

      There is no single rate on barter loans, we all know this, so no need to discuss. And that's not even definition of natural rate, which requires some kind of averaging between different kind of loans, and i agree it's a flawed concept.

      Note i'm not saying Marxian LVT has any truth. I'm just saying it should be interpreted using the classical terminology, and then tested. And i don't expect it to perform well at all, to be honest.

      And let me repeat previous argument. If the bad harvest causes relocation of labor away from harvesting, and then prices have time to update, then it looks to me that it's very well possible that prices will lower.

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    19. LK, just to be clear. The situation that I think we're discussing is this:

      1. All cotton producers are affected by crop failure. Say, half of the total labor (not just direct labor) expended on grwoing cotton has gone to waste. There is now half as much cotton than the year before.

      2. The cotton producers would really need to get a higher price to cover the wasted costs. Whether they can get it depends on many things. Their position is perhaps slightly improved by the fact that the crop failure affects everyone.

      3. If however, no such price offers come, or if the cotton is requisitioned at gunpoint for old prices, then (at least a part of) the labor expended on cotton is not validated as social. The producers go bankrupt and the farms are sold off. This creates potential issues with future cotton production, not to mention the reproduction of cotton producers (capitalists and their employees alike).

      4. If the price rises (to which the buyers are motivated by the lack of cotton on the market), then at least a part of the wasted labor is validated as social. Depending on the extent, this makes future production of cotton, as well as the reproduction of cotton producers, their payment of loans etc., possible.

      Now, whether 3. or 4. occurs, and what exactly happens, is difficult to tell. It depends on a host of other conditions apart from the fact that a huge amount of labor had already been spent on growing cotton. Marx gives the example of cotton to illustrate a general point, not as part of a study of commodity markets. (To see Marx's approach to empirical studies, you can take a look at Part V of Capital Vol. III where Marx studies crises).

      However, the general point, which I think stands no matter what, is this: the conditions of social labor, i.e., the conditions of the reproduction of a society, present certain constraints within which prices and all the other "empirical forms" can move. True, these constraints are flexible, and are made even more flexible by things like credit. But the world of prices can never completely detach itself from these conditions. In our case, the producers go bankrupt, which causes an array of problems in reproduction (and perhaps also creates opportunities for buying land and farm equipment on the cheap). Or they don't and reproduction is possible at least on some scale. In other words, in the long term, relations of social labor regulate what goes on on the visible level. This is what Marx thought counts as a scientific discovery and this is what he'd been primarily interested in -- NOT a theory of relative prices.

      J.

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  4. Former Neo LiberalMarch 29, 2015 at 12:32 PM

    Commodity markets are not auction like and never have been. Understanding why this is will open your eyes to the fallacy of your own doctrines.

    When you reach that point you will stop using words like nonsense, and start thinking like a grown up.

    Good luck with that.

    Incidentally, I disagree with J. that Capitalism apportions social labour via prices, I would say it does it through profits.

    LK - I do not detect any post Keynesian ideas in your explanation of prices, rather a crude and simplistic version of neo classical explanations.

    Finally, your moderation allows you to distort discussion. You should allow all comments and then delete post facto any comments that are deemed inappropriate.

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    1. You clearly know very little about my blog or my views on economics. You say:

      "I do not detect any post Keynesian ideas in your explanation of prices, rather a crude and simplistic version of neo classical explanations."

      Rubbish. I'll bet you there is no better resource on the whole bloody internet than my blog pages on the Post Keynesian theory of mark-up pricing:

      http://socialdemocracy21stcentury.blogspot.com/p/below-is-list-of-links-on-my-blog-to.html

      http://socialdemocracy21stcentury.blogspot.com/p/there-is-mountain-of-empirical-evidence.html

      I'd read those pages carefully before you open your big fat mouth and make a fool of yourself in the future.

      Oh, and many agricultural commodities do -- as I say above -- have flexprices in auction-like markets.

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  5. "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."

    Yes, you're absolute right, LK. No scientific theory ever generates multiple similar camps that disagree on minutiae. Post-Keynesians are a homogeneous school, for example. As are neoclassicals.

    This is totally not just an axe you're grinding. You definitely made a good-faith effort to understand any of this.

    I thought you were a lot better than this, LK. Hypothesis falsified, I guess.

    Though I no longer have any reason to expect you're receptive to counterarguments, I'll nevertheless include a link to a comment containing several documents that explain these matters better than you do, so those who do actually approach this in the spirit of open-minded inquiry may have the matter clarified rather than butchered and ridiculed.

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    1. You'd do better to just explain to me how the quote from Marx above does not require that abstract socially necessary labour time used in producing cotton has been transferred from the cotton crops that died or were destroyed into the ones that survived -- despite the fact that this idea is blatantly unreasonable and absurd and hardly anyone would believe who is not a Marxist.

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    2. Let me make sure I understand your objection: You're asking why, if cotton one year costs five times as much to produce per unit as the year before, the price would rise on existing stocks as well as on new stocks, instead of presenting as two different market prices for cotton? If so, the short answer there would be "arbitrage." Insofar as the price rises to 5x but the difference in production costs are much less, per Wicksell, then that indicates that cotton is realizing a price significantly higher than value (basically, price gouging in consideration of supply far below demand), and thus cotton farmers are earning superprofits -- in effect, flows of value from other sectors that realize a profit level below the general rate.

      As long as we bear in mind the sharp distinction between value and price, this is easy to frame in a wholly reasonable way.

      Whether you LIKE the framing is, of course, another matter entirely. As a proponent of pluralism in economics, I don't care one whit if you disagree with this theory. Its correctness is a separate matter from its logical consistency, and I am focused more on the latter. I have no stake in convincing you my favored theory is right, so long as you are able to restate it correctly.

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    3. "Let me make sure I understand your objection: You're asking why, if cotton one year costs five times as much to produce per unit as the year before, the price would rise on existing stocks as well as on new stocks, instead of presenting as two different market prices for cotton?"

      That is not the question I asked you.

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    4. Most helpful clarification.

      The question you asked didn't make a whole lot of sense to me, so I tried to get down to the bare bones of it, but apparently it was always boneless.

      More specifically: You asked me to explain how a quote does not say a thing that I can't find anywhere in it. I guess the simple answer is "use reading." Of course, that approach doesn't work so well if one goes into it determined to find patently ridiculous things. It's an exercise in eisegesis.

      One last try: The thing he's claiming is not the thing you highlighted, but occurs right after: "their value at any given time is measured by the labour socially necessary to produce them." If the conditions change such that less labor is needed to produce them, then their value (remember: not necessarily price!) is lessened. This says nothing about grain dying. If grain is left to die but is no more costly or difficult to produce than normal otherwise, its value has not changed, though some of said value has been destroyed.

      What matters here is how much product comes from X hours of SNLT. That's all.

      I feel pretty good about the thoroughness of this answer, but I'll nevertheless brace for another vague rejection.

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    5. "What matters here is how much product comes from X hours of SNLT. That's all.

      Including -- in Marx's example -- WASTED hours on crops that died. Explain how wasted hours magically flow into unit labour value of reduced output.

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    6. No, I will not explain anything "magical"; that's on you. Similarly, the quote you've provided makes no mention of dead crops -- that was your insertion.

      Go look at chapter 2 of the book I linked the other day, since it expresses all of these same concepts in a different writing style, since Marx's doesn't seem to be a match for you. I believe you'll find fewer places to read "magic" into it.

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  6. Hi LK. As a Post Keynesian myself although someone who has read a lot of Marxian economics, I have to say that most of your criticism are just plain wrong. I actually don't understand your hostility toward Marxism since many PKs have had a close relationship with Marxists. For instance, Kalecki came from the Marxists school and there wasn't much that he claimed that Marx didn't already say. Marx had already made an underconsumptionist theory of crisis and his price theory is almost the same as Post Keynesianism - although you don't seem to realize it. Marx basically reached the same conclusion although in a different way. Even people like Keen, Joan Robinson, and Michael Hudson have been influenced by Marx. There are also plenty of Marxists who have been influenced by Keynes including the entire Monthly Review branch of Marxism. Even from a methodological perspective, both Marxists and PKs have been influenced by critical realism.

    As some others have suggested, you seem to be ideologically influenced. I'm guessing this is because you come from the US where saying Marxian economics is like saying Hitler Economics. You are criticizing something you clearly don't understand. I would highly suggest David Harvey's video series covering Capital. Every criticism you have claimed, Harvey has explained. https://www.youtube.com/user/readingcapital

    Steve.

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    1. I am not saying there is nothing worthwhile or useful in Marxism at all: clearly there is.

      But all my recent posts have been only on the LTV, not Marxism as a general theory or all aspects of Marxism.

      I rarely see Post Keynesians (PKs) who defend the LTV. Most PKs seem to reject it and rightly so.

      Note that not even Kalecki did.

      In fact, we have it on the very good authority of the Polish Marxist economist Włodzimierz Brus and friend of Kalecki that

      “While recognizing the enormous significance of the Marxist approach and of many Marxian tools of economic analysis, Kalecki never felt that he had to accept every component of Marxian economics or to retain those parts of it which have become obsolete in view of new experience and of the progress of economic theory. He felt, for example, a strong distaste for the Marxian theory of value, which he considered metaphysical and (if I am not mistaken) never wanted to discuss.” (Brus 1977: 59).
      http://socialdemocracy21stcentury.blogspot.com/2014/04/did-kalecki-accept-labour-theory-of.html

      My final question to you: do you accept the LTV?

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  7. How are "capitalist relations" quantifiable & different than say hunter-gatherer societies, subsistence agriculture societies, feudal societies, or marxist-leninist style planned economies? How are they (those relations) quantifiable in the production of goods (labor and resources employed for that) after those goods have been destroyed (via locusts, drought, flood whatever)?
    If value is the amount of socially employed labor for production of use-value, and if in a negative supply shock scenario the value of the respective commodity rises (due to scarcity vs demand) then how do we end up with more socially employed labor (more capitalist relations) over time? That's simply not true. People will try to import to cover for the domestic shortage, those who can't do that will simply resort to foraging (survive as best they can / no capitalistic relations here) in any way that they can. Farm owners won't employ more people, simply because their problem is not a labor input problem and they won't be able to produce more anyway, until the supply side problem has been dealt with.

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    1. "Value" = "equilibrium/natural price". There are no shocks or surprises in determination of value.

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    2. Surely pollution and climate change came as a shock or surprise to those who observed it/ recognized it.
      Here's a critical paper by Ernst R. Berndt 1982
      FROM TECHNOCRACY TO NET ENERGY ANALYSIS: ENGINEERS,
      ECONOMISTS AND RECURRING ENERGY THEORIES OF VALUE
      http://dspace.mit.edu/bitstream/handle/1721.1/2023/SWP-1353-09057784.pdf
      It criticizes both LTV and Energy Theory of Value (Howard Scott and the other Technocrats) and it's a great read. Mayhaps Lord Keynes will even quote this paper in his future post about this topic.

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    3. Interesting link, i think i will read it. I don't deny the real economy is a dynamical system and there are always new surprises for people within it. The point is, the classical economists just didn't want to deal with all these complications, and therefore invented this equilibrium method of analysis. Marx followed them and adopted their method.

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  8. The "law of value" (an expression Marx took from Proudhon, like so much else) simply says that market prices oscillate around their price of production.

    In the example of a bad harvest, it means that the commodity's market price would increase due to less supply. This would mean that compared to the costs of production, there would be a higher profit -- which would draw in competitors, so increasing supply until the price drops back down to the production price.

    Marx, it is far to say, made what is a relatively sensible analytical tool much more complicated and obscure. Thus while Smith, Ricardo and Proudhon were pretty clear on what they meant, Marx invoked labour, abstract labour, value, exchange value, market value, prices of production, etc., etc., etc.

    Still, it keeps Marxist academics in a job...

    Why? Partly to counteract perceived threats from other socialists (misnamed "Ricardian" socialists who advocated Labour-Notes -- please note, regardless of Marx's claims Proudhon did not). Partly because the labour theory of value does not work directly under capitalism (as can be seen from the existence of non-labour income).

    So always remember -- even if Marx did not make it clear! -- volume 1 of Capital abstracts from reality by assuming an equal level of capital investment (i.e., one industry) and that demand equals supply (i.e., one consumer). He does this to show that labour is the source of increased value and is exploited in production due to wage-labour (Proudhon does the same thing in "System of Economic Contradictions")

    Anyway, you may find this of interest -- an uncompleted appendix to "An Anarchist FAQ" on the labour theory of value which seeks to explain it in simple terms:

    http://anarchism.pageabode.com/blogs/afaq/secCapp.html

    I wrote this a while ago, so I may phrase things a bit different now...

    While, say, Proudhon used the labour theory of value to show how prices were regulated, that non-income labour is exploitation, and that the worker was entitled to the full product of their labour, other anarchists argued for all these without accepting it. Kropotkin, for example, considered wage-labour as exploitative and oppressive just as much as Proudhon did but rejected the labour theory of value.

    Iain
    http://www.anarchistfaq.org.uk

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    1. Thank you, will read. I asked a marxist who said that he wished to end wage labor - with what are you going to replace wages with? And his answer was "with planning in general". I told him that no matter the socio-economic system in place, you've got to have an accounting system that facilitates economic activity. I explained of course that money is just records and that even the Technocracy movement of the '30s who wanted to abolish the price system - they wanted to replace it with a system of energy accounting (energy certificates). His reply was "Why does anyone have to issue these records?" I felt that was a troll question...

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