The TSSI is an attempt to vindicate Marx by claiming previous orthodox interpretations of Marx’s theory are wrong (Nitzan and Bichler 2009: 106). But the essence of this is to simply re-intepret or redefine the meaning of labour value (Nitzan and Bichler 2009: 106).
Another crucial aspect of the TSSI is that it treats factor input prices in a temporal and not simultaneous manner (Nitzan and Bichler 2009: 106). The orthodox “simultaneous” treatment of the prices of factor inputs holds that they should be measured by current prices at the time of final production of the output commodity and not at their prices when purchased. The TSSI instead holds that prices and labour value of factor inputs should be measured at the time at which they were purchased (Nitzan and Bichler 2009: 107).
But, crucially, how does the TSSI relate labour value to price?
Nitzan and Bichler argue as follows:
“…[sc. the] TSSI really is more of an accounting device than a scientific proposition. The definitional nature of the TSSI is evident from its second assumption. According to this assumption, Marx had in mind not two systems, but one. Recall that, in the standard dual-system view as formalized by Bortkiewicz, labour values and prices of production are determined separately, each in their own distinct system, and that the question is whether or not the former can be mathematically ‘transformed’ into the latter. This question does not even arise in the TSSI. Here, there is only one system for both prices and values and therefore nothing to transform in the first place.Surplus value is then defined merely by subtracting the money value of constant and variable capital from total current money revenues (Nitzan and Bichler 2009: 108). Labour is by definition, in the TSSI, assumed to create the surplus value (Nitzan and Bichler 2009: 108). The whole system, Nitzan and Bichler rightly argue, is utterly circular.
The language of the last sentence is a bit deceptive. In fact, the single system articulated by the TSSI does not have prices and values. It has prices as values. The distinction is crucial. The conventional Marxist approach argues that labour values are the cause of prices. This causal link is meaningful because the definitions of the two magnitudes are different. Prices are counted in money, whereas values are counted in labour time. The two magnitudes could be used interchangeably – but only if the theory is correct.
The setup of the TSSI is completely different. Here, there is no point in asking whether or not prices are equal to values, simply because values are defined by market prices.” (Nitzan and Bichler 2009: 107–108).
Nitzan and Bichler point out how empirically worthless the TSSI is:
“… since value is made proportionate to both price and labour time, it follows that prices are proportionate to labour time and that the labour theory of value is true before we even begin. Kliman and McGlone (1999: 44) claim that this is a ‘circular, Hegelian type’ of explanation, although it isn’t clear how this supposedly dialectical technique differs from the positive neoclassical habit of defining the quantity of capital by its price or the marginal product of labour by the wage rate. Given these considerations, it is perhaps little wonder that, while the definition of force enabled Newton to accurately describe, explain and predict the movement of actual bodies, the concepts of utils and labour values enable their theorists to say pretty much nothing about the actual movement of prices.If the TSSI simply defines labour values as equal to price by definition then it has reduced Marxist theory to an empirically empty tautology. It has no explanatory power and adds nothing of any importance to economic science.
Proponents of the TSSI argue that this is what Marx had in mind. And maybe they are right. But if that was Marx’s intention, it seems unclear why he would bother to call the result a theory of value, let alone a labour theory of value. The TSSI says nothing about labour, save for asserting that labour creates all values. And it is not a scientific theory in the sense of cause X (value) explaining consequence Y (price). It merely states the truism that current money prices are the sum of past money prices, plus a deviation.
Writers who advocate this approach emphasize that they do not claim Marx’s value theory to be empirically valid. Their only purpose is to show that his framework is logically consistent and fully in agreement with his analytical claims. But in the process of achieving this purpose, they seem to have shifted into reverse. Whereas Marx’s labour theory of value claims to reason phenomena according to their ‘essence’, the TSSI advocates move in the very opposite direction. Not only have they turned his theory into an irrefutable tautology, but by defining labour values in price terms, they have made it practically impossible to transcend the very appearance they wish to explain. They have ended up with a dogma.” (Nitzan and Bichler 2009: 109).
By the same sleight of hand, we could claim that all money prices are all equal to the amount of socially necessary energy needed to produce them and that therefore all commodity prices are really just explained by quantities of energy. You could just as easily construct, in a manner similar to the TSSI Marxists, a set of tautologous propositions that prove that the sum of prices equals the sum of energy values by reducing this to an idiosyncratic and empirically empty pure mathematical identity (in other words, by an analytic mathematical proposition merely true by definition). But few intelligent people would be fooled by this rubbish, and I suspect not many are fooled by the TSSI.
BIBLIOGRAPHY
Nitzan, Jonathan and Shimshon Bichler. 2009. Capital as Power: A Study or Order and Creorder. Routledge, Abingdon, UK and New York.
From the top:
ReplyDeleteBut the essence of this is to simply re-intepret or redefine the meaning of labour value
Yes, that is what a different interpretation does. Re-interpret things.
Labour is by definition, in the TSSI, assumed to create the surplus value (Nitzan and Bichler 2009: 108). The whole system, Nitzan and Bichler rightly argue, is utterly circular.
No, it is not an assumption. He uses value in his accounting system only after he extensively argues and justifies its inclusion, which is the sort of thing one should be able to do for any accounting system. His arguments for its use are thus independent of this, and further remain the same across all the major interpretations.
The TSSI difference is that the system is treated in historical time (think along the lines of what Joan Robinson advocated), and that in Marx's mathematical examples, all the numbers in the same accounting matrix (none of which are labeled btw) have the same unit. Aside from being an entirely sensible way to read such a matrix, it is incidentally also the only way to reproduce his results. Hence why the three invariants hold under all single-system approaches (including the SSSI) and do not in the dual-system approach.
It's just not sensible to read Marx as claiming something he's explicitly not claiming, spelled out with bare math. Algebra, as many are fond of pointing out, does not lie.
"although it isn’t clear how this supposedly dialectical technique differs from the positive neoclassical habit of defining the quantity of capital by its price or the marginal product of labour by the wage rate."
This is absolutely shameful scholarship. First of all, neoclassicals lacked (note that present scholarship does not depend upon these aggregation techniques, though the modern methods that have replaced it are equally questionable) an independent variable; as Robinson pointed out, that measurement of capital requires the prior knowledge of equilibrium prices, which in turn requires an equilibrium rate of profit that requires the original measurement. The rate of surplus value (i.e. the proportion of unpaid to paid working time) allows us to avoid this circularity, since it is determined independently by the state of the class struggle, which in this case means "the relative bargaining positions of labor vs capital." Secondly, B&N appear to have simply forgotten about the distinction between labor and labor-power with this "marginal product of labor" business. I'm agog.
"Proponents of the TSSI argue that this is what Marx had in mind. And maybe they are right. But if that was Marx’s intention, it seems unclear why he would bother to call the result a theory of value, let alone a labour theory of value."
He didn't. Holy cow. This is basic due diligence stuff. It's very well known that what Marx describes is "the law of value"; the "LTV" is more a shorthand adopted by later theorists, that I've pointed out any number of times is frankly misleading and is better off discarded. In fact you have also pointed this out, LK. (I wish you had followed through on your intuition, instead of highlighting arguments that directly contravene it.)
I'd never read B&N before, but if this is seriously the state of their work, then it doesn't appear I'm missing much.
"And it is not a scientific theory in the sense of cause X (value) explaining consequence Y (price)"
Ugh. How on earth are we ever going to get across that a theory of VALUE is not the same thing as a theory of PRICE if nominally "Marxist" authors are spouting out "LTP" crap like this?
B&N drop the ball miserably. But, hey, they ultimately say the same thing you do, so they must be right. Case closed. Good hustle, everyone.
" How on earth are we ever going to get across that a theory of VALUE is not the same thing as a theory of PRICE"
DeleteSo, what, now you are trying to say that the LTV doesn't in any way function as an explanation of price?
No, I'm not saying that. Don't be disingenuous. After three months of this nonsense, you should know what I'm saying, because it's been said dozens of times. I'm bored of saying it, at this point. I'm sure you're bored of reading it, too, if that's what you've been doing.
DeleteNevertheless, for those just joining us: There is a common misconception that value theory is just a kind of price theory. That is, when we speak of a commodity's "value," many assume this is just a means to thereby explain price formation in a linear fashion. "This thing's value is X, and therefore its price is Y." This is absolutely false. The point is to ascertain the laws of motion of a capitalist economy: the law of value, the law of the tendential fall in the rate of profit, etc.
Now, these laws DO have important consequences for prices (for example, the law of value constrains the horizon of possible average prices), but there must still be a distinction made between a theory that describes capitalism as a system and a theory that describes why a given commodity has this and not that price.
" The rate of surplus value (i.e. the proportion of unpaid to paid working time) allows us to avoid this circularity"
DeleteAnd just like the neolcassical or Wicksellian natural rate of interest, it is an empirically worthless concept
It's an empirically measurable ratio that fills precisely the niche in this theoretical ecosystem we were discussing.
DeleteHow on earth are you defining "empirically worthless"? (Prediction: "a thing i am grouchy about for no reason I can articulate")
Empirically measurable? Don't give me that rubbish.
DeleteYou cannot even explain how all heterogeneous types of human labour can be aggregated by means of meaningful homogeneous SNLT units in the way precisely required by Marx to even get the LTV off the ground.
All you can do is hand wave and say that the market does it by means of some ineffable mysterious miracle.
Empirically measurable? Don't give me that rubbish.
DeleteAdmit it, you've never even looked at national accounts data. Otherwise you'd realize it's trivial to measure.
You cannot even explain how all heterogeneous types of human labour can be aggregated by means of meaningful homogeneous SNLT units in the way precisely required by Marx to even get the LTV off the ground.
I have explained it, numerous times. You dismiss my explanation for essentially ideological reasons, and the sum of your rebuttal is "nuh-UH." You insist that Marx must have meant something different than what I say, that his system MUST require some impossible condition because... well, just because! It's Marx! Ewwww! And you base all this on your three whole months of careful scholarship consisting of seeking out sentences, paragraphs and summaries that sing to your confirmation bias. I must admit that I'm honestly impressed by the elaborate fantasy you've constructed in which you've actually had anything of weight or merit to say on this subject.
But that's the whole of it. I've given an answer, and it is a correct answer, but the simple fact of the matter is that I have *not* given an answer that will satisfy *you,* because no answer can satisfy someone determined not to be satisfied. In other words, you fail at step one of having an actual honest scientific discussion.
All you can do is hand wave and say that the market does it by means of some ineffable mysterious miracle.
Quote where I've done any such thing, you shameless provocateur.
Yes, we've been through your incompetent attempts to deny all passages in Marx that refute your idiosyncratic readings.
DeleteMarx is clear:
"But the value of a commodity represents human labour in the abstract, the expenditure of human labour in general. And just as in society, a general or a banker plays a great part, but mere man, on the other hand, a very shabby part, 1 so here with mere human labour. It is the expenditure of simple labourpower, i.e., of the labour-power which, on an average, apart from any special development, exists in the organism of every ordinary individual. Simple average labour, it is true, varies in character in different countries and at different times, but in a particular society it is given. Skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour.""
Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York. p. 51.
--------------------
In other words, you cannot simply aggregate raw/concrete labours to get SNLT. Skilled labour -- and indeed all forms of labour from the least to most complex -- needs to be reduced simple abstract labour units and then aggregated.
Last time we had this discussion you continued to deny what is plainly said by Marx.
"Idiosyncratic" reading, says an ideologue who took more than a month to wrap his head around price/value deviation, whose interpretation of Marx is shared by no Marxian economist we've yet found. You don't even agree with the Marxist scholars you cite against me. (And, irony of ironies, whereas TSSI:Marx::PK:Keynes, you're even siding with an entrenched and benighted orthodoxy.)
DeleteAnd here you are dredging up for the umpteenth time one of the two paragraphs in Marx that you bothered to read, failing to grasp what it is actually saying, because you read into it whatever words are convenient for your point instead of viewing it in the context of the broader work (which you haven't read). At this point, the only thing I'm liable to "deny" is your sense experience of the world. It seems unreliable, prone to seeing words that aren't there.
Go on then. Work some of that magic you're always going on about. Show everyone how the phrase "[labor] needs to be reduced simple abstract labor units and *then* aggregated" maps into the passage you quoted. Diagram the sentences if you must. Find me *the sequence*, the clear A-before-B instruction that makes "reducing (via unexplained and likely impossible procedure) then adding" so much more obvious and apt than "aggregating then averaging" that your gall is in any way justified. Both, it should be noted, are consistent with "skilled labor > unskilled labor." So where is it, LK? Hm? Hic Rhodus, hic salta!
On the basis of this passage alone, your Idiosyncratic interpretation is not indicated more than mine. On the basis of the complete work, yours is patently inconsistent and unworkable, while mine solves neatly for x. If we treat these as two separate theories, I agree we should dismiss yours. It says nothing of mine, though.
If you can only argue by way of eisegesis using decontextualized quotes and invective, then you ain't much.
"whose interpretation of Marx is shared by no Marxian economist we've yet found."
DeleteWhat? No Marxist in human history has ever claimed that:
(1) SNLT is homogeneous unit that can measure all labour? and
(2) that SNLT is a determiner of prices, even if prices deviate from it?
Real slimy deflection, there. I'll let you try again.
DeleteKliman response: "Value and Crisis:
ReplyDeleteBichler and Nitzan versus Marx"
http://www.criticalglobalisation.com/Issue4/61_92_VALUE_CRISIS_JCGS4.pdf
Bichler and Nitzan's response to Kliman:
DeleteBichler, S. and Nitzan, J. 2011. "Kliman on Systemic Fear: A Rejoinder," Journal of Critical Globalisation Studies 1.4: 93–118.
Kliman response : "Marx, Systemic Fear, and Capitalists Convictions: A Reply to Bichler and
DeleteNitzan"
http://www.criticalglobalisation.com/Issue4/119_126_REPLY_JCGS4.pdf
Is there really no difference between claim prices = prices and prices = labor? There is a big difference. Second claim is cognitively interesting. MC
ReplyDeleteNot if you define prices = labour as an unproven analytic definition.
DeleteYes, but this is what Marxian economists do and they have no other choice. Marx's theory is richer and broader than that reduction. Economists have to make some additional assumptions to at least try to operationalize Marx's theory. This is normal procedure in science. Testing Marx's theory in a very strict, empirical way including SNLT is conceivable, but technically right now impossible. I don't think any economic theory would survive strict, Popperian empiricism. Even with that problem remaining Marxist economists manage to make some interesting predictions. MC
DeleteNitzan and Bichler are wasting their time at talking and writing about KM, maybe they could do better studying hard sciences. However, not being or feeling versed in hard sciences, it seems they think can do better in the social field and soft science, though the result is poor.
ReplyDeleteKM who is the greatest economist ever since had already solved the trasformation problem which emerges from the different organic composition of capital: in a communistic way capitalists divide te whole surplus value among themselves accordind to the rule of uniform rate of profit, and prices just get that possible and set what goes to workers too.
A Sraffian model can get prices from technical relations of production, however would loose what makes capitalism a social science and a political process and conflict.. And wouldn't say either much about how they got there and where they are heading to.
On the contrary a good differential equation can easily solve the problem of launching an object up or from a tower.
Maiko
lol.. So tell me something if Karl Marx was the "greatest economist ever": how come he was a metallist and thought money needs to be a producible commodity?
DeleteI tell you more, he is the only one who has understood, besides capitalism, money in capitalism.
DeleteAnd i am sorry but he was not that much metallist; neither has he anything to share with dumb quantitative theorists. Exchangeable value should lead and drive, and that is something that even Rudolph Hilferding understood well.
However, thanks for your courteous hospitality.
Maiko
Lord Keynes, I'm currently reading Capital as Power as well as other papers (and talks in youtube) by the authors, and I'm very interested to hear your thoughts on, apart from their very incisive and destructive critique of both marxist and neoclassical economics, their theory of capital as power and differential accumulation. Do you think that their theories could add to the Post-Keynesian paradigm?
ReplyDelete(Being my first comment on your blog, I also take the opportunity to thank you for your continuous effort in promoting, sharing and debating post-keynesian economics and social-science as a whole).
Francisco
Francisco,
DeleteThat book Capital as Power: A Study or Order and Creorder -- from what I have read of it -- is a very interesting one indeed, and it clearly does have constructive things to say about economics.
I really need to read the later chapters, though, and I hope to do so eventually.
LK,
DeleteThanks for the reply. It's very interesting indeed and it seems to explore uncharted territory, while drawing inspiration from, not only institutional economics, but also, similarly to Post-Keynesian economics, the work of Michal Kalecki.
I hope you do get to finish reading it and share your thoughts on the book.
I would also suggest you to explore the incredible work of Peter Turchin in Cliodynamics and Granovetter's studies in New Economic Sociology, in this search to revolutionize economics or, in the most broadest sense, Sociology as a whole.
Francisco