Monday, March 30, 2015

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In an unpublished note of 1928, Sraffa gave his damning verdict on the labour theory of value: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 (Sraffa, unpublished note, D3/12/9: 89, quoted in Kurz and Salvadori 2010: 199).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 Some Notes on his unpublished Papers,” in Sergio Nistico and Domenico Tosato (eds.), Competing Economic Theories.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

22 comments:

  1. LK, nice finding! (i'm the same anonymous that has been arguing value = eq. price and Marxist price theory must be judged by empirical methods by adding additional assumptions) (like every other theory, by the way).

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  2. 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?

    Value is a social relation. It's an aspect of human society, based on the relations and conditions of production between humans.

    What about natural forces like winds driving windmills?

    At the risk of appearing trite: Wind is not a capitalist, and does not enter into a definite social relation. There's no intersubjective quality to human/wind relations.

    If all production were powered by wind without labor input, there would be no value of the sort Marx is describing. If there is still a system of prices in such a world, it'd have to find its basis through some other social construct or arrangement. In this imagined world without any need for labor, all wealth would boil down solely to how much self-productive property one owns, assuming it is not held in common. But this is getting a touch "magical" for my tastes -- and, one should think, yours.

    It's not surprising Sraffa would say that, anyway; his particular reading of Marx is among those classified as "physicalist," which tend to blur the line between value as a social relation and value as a physical quantity. The book I've linked (twice, now) breaks down how his interpretation compares to a number of others.

    Of course, if the quote you've provided is an adequate depiction of Sraffa's views in 1928, Ricardo Bellofiore indicates that he may have changed his mind subsequently anyway:

    "Once again, these bold conclusions [about the irrelevance of Marx's value theory] - whatever their merits - met the silence of Sraffa. They were in contrast with the anedoctical evidence put forward by friends and colleagues. So, for example, Joan Robinson (1977: 56) wrote: “Piero has always stuck close to pure unadultered Marx and regards my amendments with suspicion.” Similar recollections were written by Antonio Giolitti (1992: 80), who met Sraffa several times between 1948 and 1952: Sraffa, he says, was always urging him not to have doubts about Marx's theory of surplus value and also on the feasibility of Soviet planning. Adopting a very different reading (and rightly so!) of the Marxian labour theory of value, Paul M. Sweezy, one of the most important figures in what I’ve called Traditional Marxism, commented in 1987: '[Sraffa] always was a loyal Marxist, in the sense of himself adhering to the labor theory of value. But he didn’t write about that. Now that was Sraffa's peculiarity...' "

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    1. What Hedlund said. Marx's theory is a theory about the specific nature of social relations in capitalism.

      J.

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    2. That "Value is a social relation" doesn't answer my question. Parenthood is also a social relation, but it is not confined to humans. Nobody would be so stupid as to say that only human beings can be parents, when clearly some animals are known to nurture their young as parents too.

      As we have seen, human labour is not even a sufficient condition for value in any sense. Even Marx admits this. Why should I believe that only human labour creates labour value when clearly animal labour would seem to create it too?

      This is exactly the problem I described in my last post. You seem to want to make Marx's labour value theory a mere analytic proposition, true by definition. But your opponents have no reason to accept such definitional analytic concepts any more than they would accept the natural rate of interest -- unless you can show your analytic concept is coherent, sensible and of empirical relevance.

      Let's have less recycling of the same Marxist jargon at me, and more reasoned argument.

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    3. Well, owner of wind turbine enters a definite social relation. About readings of Marx, i think it's silly to attempt to read something different than what he was trying to write just because what he was trying to write doesn't seem right.

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  3. Parenthood is also a social relation, but it is not confined to humans. Nobody would be so stupid as to say that only human beings can be parents, when clearly some animals are known to nurture their young as parents too.

    Interesting. So you don't think any facet of human social life can be differentiated from the rest of the animal kingdom? You don't detect even a *slight* difference between parenthood and, say, market exchange?

    Why should I believe that only human labour creates labour value when clearly animal labour would seem to create it too?

    I've already explained this. You are not addressing what I said. Further, you're trying to poison the well by dismissing the phrase "social relation," but that is the answer. Capitalists don't pay wages to cattle, nor to wind.

    For all your bluster about kinds of propositions, you seem to have lost the thread here, since you are in fact arguing against a definition, looking for something to make it logically or even physically necessary. That's not how it works in any science.

    Look, we don't have to call it "value," if that word makes you nervous. Let's call it shhwygy. In this theory, shhwygy = SNLT. The specific word isn't important; what matters is the phenomena we're describing and the empirical content all these words indicate. And as much as you refuse to go look (surely you're not afraid of having your preconceptions challenged?), I've already presented a source in precisely that vein.

    For more, you might, y'know, avail yourself of it. Or you can continue to ignore it. Your call. I'm growing tired of rebuffing bad-faith argumentation, and some time soon I'm bound to just conclude you're content not understanding this subject, and leave you to your ignorance. If you've made up your mind that you won't learn, then it's not my place to insist upon it.

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    1. First, I am not demanding your definition of labour value be "logically or even physically necessary." If it is offered as a mere analytic proposition and definition it is ALREADY necessarily true, by definition.

      I am asking you to justify your definition as coherent, sensible and of empirical relevance.

      You say:

      "you seem to have lost the thread here, since you are in fact arguing against a definition, looking for something to make it logically or even physically necessary. That's not how it works in any science. "

      I'll take it you got confused and really meant "empirically relevant" for "logically or even physically necessary".

      So if I said:

      "Brotrinks are an alien species that secretly make the planets of our solar system move"

      And then said: I offer this as an analytic definition: it's true by definition. But some person said: "so what? What use is that proposition if you have no empirical evidence that those aliens exist?", I suppose -- under your bizarre reasoning -- I could say "you seem to have lost the thread here, since you are in fact arguing against a definition"!!

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    2. Relations of social labor (value relations) present definite constraints in which prices can move. Asset bubbles are good example. For a long time, asset prices, and the whole structure of credit relations based on these assets, develop quite independently of the underlying value relations. The bursting of a bubble, i.e., a crisis, is the violent process of forcing the prices into constraints. This is how the "law of value" operates and this is why Marx likens it to the law of gravity: it asserts itself independently of the will of individual agents of the economy. In other words, no economy can ever escape from the simple fact that it is a system of allocation the total productive activity of a society to the satisfaction of (some of) the needs of that society.

      Of course, one can counter this by saying that nothing more than relations of supply and demand are required to explain asset bubbles. To which Marx would retort: supply and demand themselves require explanation. Supply is a function of the accumulation process. Demand is a function of wages (and hence of the accumulation process), in the case of laborers, and of revenues and profits (and hence of the accumulation process), in the case of capitalists.

      Most "economics" begins at the level where Marx's exposition reaches its end: at the level of competition. But there's a host of relations presupposed by "competition", relations which are left completely unnoticed by "economics". Then you get the wisdom of money being "neutral" and a mere "lubricant of exchange", of Say's law, of "supply" and "demand" regulating prices and of wages being the "price of labor".

      J.

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    3. So, J, in other words, you can't explain to me why I should believe that only human labour creates labour value when clearly animal labour would seem to create it too?

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    4. You don't have any evidence of the aliens, but if you can derive other statements from that statement (probably with the help of some other statements), then perhaps those could be tested. That's precisely the case of Marx's theory. It predicts some definite trends in the long-term development of capitalism: concerning labor-saving capital investment, the regulation of the working day, the organization of the workplace, the expansion of credit and crises, the structure of a business cycle, the rate of profit, the expansion of capitalist production into new areas (both geographically and in terms of branches), the development of income etc. Of course, some of these phenomena present problems of their own (e. g., measuring the rate of profit). Some, though perhaps not all, of these phenomena are predicted by other, rival theories in the heterodox tradition. But it certainly isn't the case that they would be untestable.

      If it wasn't for these implications, Marx's theory would really be worthless. But again, you have to scrutinize the entire theory, not just some of its basic building blocks. With such an approach, one could disprove any scientific theory beside the most primitive ones which are based on direct observation (in fact, right now I can't think of a single theory in physics from which you couldn't cherrypick a single foundational statement and correctly pronounce it untestable by itself).

      "our statements about the external world face the tribunal of sense experience not individually but only as a corporate body.", W. V. O. Quine, 1951

      J.

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    5. If animals apportion their total social labor within a system of social relations of private producers entering into relations of exchange mediated by money, then sure, their "labor" creates value. If wind turbines do that, then their "labor" creates value, too.

      In other words, you are still completely in the dark as far as the difference between individual/concrete and social/abstract labor is concerned.

      J.

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    6. First of all, don't condescend to me. You haven't earned that, and even if you had it'd be lousy of you.

      You want me to justify the terms of the theory, but a theory is something that explains, not something to be explained. Insisting that all terms be justified will only lead us down the path of infinite regress. I know you like Popper, so it's reasonable to suspect you already know this -- which suggests that you're just bickering for its own sake.

      Secondly, the definitions are self-evidently coherent, as I have been able to describe them free of the contradictions you had originally supposed. That said, I don't know what combination of words will convince you that they are "sensible," since you appear quite invested in arguing the contrary. But that's okay, because where the rubber meets the road, the facts will decide the matter.

      Now: Quit stalling and go look at the text I linked that I've subsequently directed you to probably dozens of times now. You can't expect me to take your calls for empirical relevance seriously if you then refuse to look at an empirical study.

      If your next response continues to ignore it in favor of more of this "struggling to come up with even the least nit to pick" business, it will not reflect well upon you.

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    7. "If animals apportion their total social labor within a system of social relations of private producers entering into relations of exchange mediated by money, then sure, their "labor" creates value."

      So what you're saying is that the LTV is just analytic proposition -- true only as a statement by definition. You actually don't care that your opponents want a coherent empirical statement -- -- not lazy empirically-empty analytic statements -- and proof you can

      (1) define a meaningful, coherent abstract SNLT and show how to calculate SNLT from real examples, and

      (2) show how real world "natural" prices are determined by this SNLT.

      Your theory is on the level of theology. Post Keynesian economics has no need for such unsupported metaphysical foundational propositions, and it explains all the phenomena of real world capitalism -- such as prices, demand, investment, consumption, credit cycles, asset bubbles, the business cycle, profits, etc. -- far better and with far greater explanatory power than Marxism.

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    8. " Insisting that all terms be justified will only lead us down the path of infinite regress. "

      I am not asking all words or terms to be justified -- just foundational propositions to be empirically justified. That you think is an outrageous demand is very strange.

      As for links, you are referring to these?:

      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

      Of these, I see in Kliman's book in Chapter 2 there is a discussion of Marx's theory of value. If summarise this chapter tomorrow, and problems if and as I see them, will you be satisfied then?

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    9. LK:

      "Reclaiming" is the theoretical volume explaining the theory and its interpretations, and then arguing for the one I've been advancing; the Freeman paper provides non-equilibrium formalizations of the chief ideas of the theory (and also doubles as kind of a general takedown of equilibrium analysis at points). Neither is the empirical volume I mentioned, which can be found here. It is a sort of sequel to "Reclaiming," which takes the lens laid out there and applies it to the US BEA data (mostly the NIPAs).

      If, as you say, you take the time to engage with what I've shared, then yes, I will be satisfied. I've already said: I'm not out to make you discard your PK allegiance or whatever. I'm a diehard pluralist, and I count PK folks as fellow travelers. So, if you can restate the theory accurately, and still take issue with it, then that's really all I can reasonably ask.

      Of course, I reserve the right to engage in constructive debate about any subsequent criticisms, which I'm sure you'll have. However, at that point it'll purely be for enjoyment and possibly edification, rather than as a scramble to make sure yet another voice isn't adding to the decades and decades of confusion on this.

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    10. Incidentally, I forgot that Kliman also argues that "Value = SNLT" is not a definition on two grounds: one, being frequently represented in monetary terms instead of labor (a point on which I've been consistent), and two, that it is in principle falsifiable (see footnote 3).

      In fairness to my framing of it as a definition, I view the statement as a bit more modular; binding the concept of SNLT to the word "value" is analytical, and it takes separate proposition to attribute a specific function within the system, thereby creating an empirical statement. It's splitting hairs a bit, I admit, but I believe it does no particular violence to the theory, especially when the discussion is still fixated on the vicissitudes of the phrase.

      Nevertheless, for the sake of simplicity and focus I'll defer to the book's usage going forward.

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    11. Hedlund what you are saying sound similar to Thomas Sowell's exposition of Marxian value in chapters 6 & 7 of his book. From what I gather critics think it is a controversial opinion(that Marx had no theory of value). I picked out some relevant paragraphs bellow with a link to the pdf.

      The socially necessary labor was defined by Marx as "value." He repeatedly referred to his definition of value,and nowhere to a theory of value, despite a voluminous—and undocumented—interpretive literature to the contrary. The classical tradition in economics—notably Adam Smith and David Ricardo—had a theory that commodities tended to exchange in proportion to their laborcost, but according to Marx in the first volume of Capital, "average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe."Definitional values equal to empirical prices were a postulate serving as the "starting point" of the analysis of the first approximation of Volume I, but was not a theory to be proved or disproved. By the time Marx reached his final approximation onthe subject in Volume III, he could say that only in a "vague and meaningless form are we still reminded of the fact
      that the value of the commodities is determined by the labor contained in them."
      The definition of value and what Marx called the "law of value" were discussions of resource
      allocation problems under capitalism, not the determination of individual commodity
      prices (sometimes called "exchange—values"),
      which were repeatedly referred to in
      such terms as mere "appearances"
      or outward "phenomenal forms" of an underlying
      "essence" represented by "value.

      While others have interpreted Marx's "law of value"as a theory of individual commodity prices, Marx himself flatly contradicted this. Marx presented a picture of "the law of value enforcing itself, not with reference to individual commodities or articles, but with reference to the total products of the particular social spheres of production made
      independent by division of labour."
      The law of value was thus essentially a principle of
      resource allocation, rather than of price determination. The "law of value," according to
      Marx, serves to "maintain the social equilibrium of production in the turmoil of its accidental fluctuations.

      Chapter 6 Marxism philosophy & Economics - Thomas Sowell

      http://copyfight.me/Acervo/livros/SOWELL,%20Thomas.%20Marxism%20-%20Philosophy%20and%20Economics%20%28dig.%29.pdf


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    12. Value = exchange value = equilibrium price. Average price is not necessarily the same as equilibrium price.

      That's why Marx says "I say “ultimately,” because average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe."

      Volume 3 wasn't published by Marx but it's more a collection of his unpublished manuscripts. Therefore, it's hard to say volume 3 is more authoritative than volume 1. In volume 1, it's written very clearly that value is the "natural" price.

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    13. Hmm actually, my excuses, it seems Marx is saying that indeed value for him is not what value was for all others. So maybe what i was arguing for was wrong after all... :)

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    14. Nicholas: Yeah. I don't agree with Sowell's overall assessment of the school (obviously), but he does have the capacity to surprise on occasion, when writing in a historical capacity.

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  4. So, J, in other words, you can't explain to me why I should believe that only human labour creates labour value when clearly animal labour would seem to create it too?

    You're being obtuse to a degree I can scarcely fathom. Just sayin', it's not a good look.

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  5. Sraffa's views on Marx and the LTV changed significantly from his early work on the price equations in the late 1920s to his solution, achieved somewhere around the early to mid-1940s. In the final version, a story could be told in which the LTV survives, even if not in Marx's form. But notice that in Marx that is not central, despite some Marxists views on the issue. Vianello's paper in the Palgrave on the LTV is a very good discussion of the topic http://www.dictionaryofeconomics.com/article?id=pde2008_L000012

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