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RG1: Online reading group: Value, Price and Profit - Marx

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georgestapleton
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Dec 30 2005 03:41
JoeBlack2 wrote:

Two points.

1. Even on this thread we are not talking of just 'an individual commodity (Coca Cola)' seemingly escaping the LTV - at least two other examples have also been given. In that context what does overall mean - apart from a patch you seem to have decided must exist to fix the problem.

2. Maxism went on a lot about 'scientific socialism'. Well one part of the scientific method is the test of falsifiablity http://en.wikipedia.org/wiki/ and it seems replies like this respond to problematic false results by trying to redefine the LTV in a way that will mean it is no longer falseable. Which incidentaly is what creationists do with 'intelligent design'.

In other words while one way of dealing with examples that appear to escape the LTV are to dismiss them as irrelevant this is not scientific. While it might convince a true believer not to investigate further to a sceptic like myself it just looks like faith overcoming science.

Note the such escapes do not show that the LTV is wrong in all circumstances, just that, like Newtonian physics, it does not have the absolute explanatory power that was once believed. Given that capitalism did not develop the way marx expected it to there is something to be gained from considered the effects such fundamental flaws in the theories he used in constructing his theory may have generated.

But this is fucking ridiculous.

1. As you later say it was Engels who would never shut up about Scientific Socialism, not Marx. Anyway, if we are going to debate Engel's theory of 'Scientific Socialism'. I't's worth looking at Engel's theory of science and ignoring our own theory of science. So it's worth noting that Engels also wrote that social sciences and natural sciences are completely different forms of science.

2. Marx went on and on, forever attacking posivitist social theory or what might be called 'scientific' socialism. For Marx you didn't engage in rigourus analysis of society along popperian lines of putting forward falsifiable propositions you advance dialectically by looking at contradictions and how they work themselves out.

3. [Skip this if you want. Appeals to 'it's not scientific' are something of a bete noire for me so this is a bit ranty] One part of scientific method may be falsifiablity, but it is not what defines science. It can't be because for science to progress it has to contain contradictions otherwise it would have nothing to explain no problems to resolve etc. There was a big debate on this question of scientific methodology in the 50's and 60's with Popper (philosopher) on one side and Kuhn (physicist/philosopher), Lakatos(mathematician/philosopher), Quine (mathematician/philosopher), Duheim on the other. It was Popper who invented this idea that what defines science was falsifiabilty. And although this is still thought on science courses. It simply doesn't stand up to historical, logical, sociological and philospphical analysis. And i hoenestly have never met anyone who looked inot this debate who came out thinking that the falsificationist theory of science was anything but wishful thinking. Sorry that's kind of irrelevant, but it pisses me off the way people appeal to 'science'. It's nothing more than an appeal to authority. Disprove something though logic and analysis. Don't dismiss it because it's not 'scientific'.

JoeBlack2 wrote:

Yeah this is another good example but actually I suspect the energy sector in general operates outside of the LTV (oil price for instance seems to have little relationship with labour input). Without thinking hard in fact you can see vast sectors of the western economy that appear to have escaped the LTV (healthcare, education, defence, aerospace, agriculture etc) to a greater or lesser extent.

What does this mean? Oil operates outside the LTV? The value of oil isn't defined by socially necessary labour?

JoeBlack2 wrote:

Once you acknowledge this then the LTV looks increasingly less useful in predicting the real world - its use is really just in sketching how explotation works (which of course in not a minor thing).

Ahh but here you say it. IT'S USE REALLY IS JUST IN SKETCHING HOW EXPLOITATION WORKS. Well that's not a minor thing at all at all. LTV isn't meant to be used as a tool for predicting price movements. It's a part of a social theory. And it stands up.

JoeBlack2 wrote:

I'm not arguing against anything beyond a treating of marx as a prophet - and it is not just orthodox leninists who fall into that. Autonomists (in particular Negri in Marx beyond Marx) are terrible for it. Although actually I do find Cleaver and some of the people in that extended circle useful in part because they delibretly move away from the gospel according to marx and towards a more inclusive look at the development of socialist ideas

But I don't think anyone here is treating Marx as a prophet. Some of us think that he has offered the best critique of capitalism that has been put on the table. Some of us recognise that Marx's theory is so heavily interwoven with the labour movement that to ignore him becasue what some his followers advanced would simply be like ignoring your father because you don't like your brother.

As for the Negri Cleaver thing this is funny because Cleaver is a much more orthodox Marxist than Negri. Negri in the book you mention attacks LTV and says it no longer applies, and cleaver has critiqued him for that. i think Cleaver was right but it's still funny that you've got them backwards. Cleaver is easier to read and the way he writes seems more intuitive but Negri is and has always been the less orthodox and the quicker to abandon Marx.

JoeBlack2 wrote:
Jef Costello wrote:

Value is not necessarily defined by the market.

In the context of this reading group it is - Marx says in C5

Marx wrote:

Price, taken by itself, is nothing but the monetary expression of value

You are getting things backwards. Market prices for goods are determined in the market. The value of a good is better thought of as the production price. That is, completely seperate from the market. When Marx says "Price, taken by itself, is nothing but the monetary expression of value" he's clearly not saying that value is determind by price, i.e. by the market. He's saying that price as a social form, in otherwords as a property that a good can hold, price in abstract is nothing but the monetary expression of value, or as he puts it "Price, taken by itself, is nothing but the monetary expression of value".

cph_shawarma
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Dec 30 2005 09:25

Once again I must stress the importance of separating price from value, just as one must separate profit from surplus value and earth rent[1] from surplus value. The price must be considered as the realised value, if you produce 100 bikes for instance, they are thus value-bearing commodities, but if you are unable to sell them you will not be able to realise the value embedded in them through the social structuring of society. The profit and earth rent is similarly the realised surplus value, which Marx discusses in Capital vol. 3.

To answer JoeBlack2 I would agree to some extent that the price of a commodity will tend towards the value of the commodity, but specific historic conditions are important in the determination of the actual price of a commodity. As the LTV states, the place where value is determined is not the market, but the production process. Its realisation is however determined by the market and the historic conditions under which the commodity is sold. In a depression there is large problems to sell alot of commodities, this does not mean that they "lose their value" but that their value is impossible to realise.

1. There is a recent attempt by Per Henriksson in riff-raff to look upon oil as earth rent (or oil rent) rather than through the eyes of profit. Available in English at: http://www.riff-raff.se/en/3-4/war.php#part2

gurrier
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Dec 30 2005 11:07
georgestapleton wrote:
No he definitely means exchange value and not use value. Use value has nothing to do with price level that is exchange, use value plays a part in consumption but not in exchange. And exchange value is not a median around which price flutuates. It is the exchangability of a commodity. It relates closely to natural-price of classical economics but it has no parralel in the post marxian economic orthodoxies. The closest thing to a parrellel to exchange value in economics is the long run cost price in perfect competition. (Cost price is equal to market price in long run perfect competition, but I'm saying cost price and not simply price to emphasis the determining factor of price in perfect competition i.e. cost).

The notion of a commodity's exchange value being the median around which price fluctuates is taken directly from capital, but in the context of this pamphlet, you are still clearly contradicting marx:

Quote:
Price, taken by itself, is nothing but the monetary expression of value
georgestapleton wrote:
No it's not according to LTV, the value of a good is determined by the value of socially necessary labour to produce it. The price of labour-power is socially determined. And in the third world it's cheaper then in the first. LTV is a theory used to explain society it's not some theory of transcendent value. The entire point of it is to critique that. Labour has no value as Marx says.

Again, you are disagreeing entirely with marx and contradicting yourself. To Marx the value of a commodity is determined by the quantity of socially necessary labour used to produce it, not the value of the labour (which you then go on to contradict by claiming that labour has no value).

If you wanted to try to explain the low prices of third world commodities within Marx's LTV, you could claim that the labour used is of a very low average productivity and hence represents only a fraction of the socially useful labour that is embodied in the commodity. In many cases you'd have a good point as most third world agriculture uses 'backward' methods and does not take advantage of mechanisation, etc. However, it does not hold across the board since, for example, the Chilean Copper industry is the most advanced and mechanised in the world and the price of copper on the world market is still typically low compared to the labour embodied in it.

You could also argue that the labour is super-exploited and that the low prices reflect this - but once you go down that road you get into disagreements with Marx very quickly or into areas that he didn't consider and so it really isn't arguing within the LTV.

But attempting to claim that price and value are unconnected in order to explain away such awkward facts is both clearly contradicting marx and also an express ticket into mumbo-jumbo land.

georgestapleton wrote:
This is strange becasue I don't think Marx made this mistake, far from it, I think this was Marx's great achievement. That is exposing the power relations that lie behind the market, or rather ARE the market.

I agree about his acheivement, but the mistake that I refer to was an underestimation of people's ability to concsiously act against the prevailing logic of capitalist relations in order to maintain and extend power-relations.

gurrier
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Dec 30 2005 11:30
georgestapleton wrote:
2. Marx went on and on, forever attacking posivitist social theory or what might be called 'scientific' socialism. For Marx you didn't engage in rigourus analysis of society along popperian lines of putting forward falsifiable propositions you advance dialectically by looking at contradictions and how they work themselves out.

You're comparing apples and oranges, or more specifically you're comparing inductive and deductive methods of forming theories with respect to the falsifiability of the theories so formed. That's a category error - whatever theories emerge from the deductive process need to be just as falsifiable as those that emerge from the inductive process. Non falsifiable theories are equally worthless regardless of the method of inquiry that they emerged from.

georgestapleton wrote:
3. [Skip this if you want. Appeals to 'it's not scientific' are something of a bete noire for me so this is a bit ranty] One part of scientific method may be falsifiablity, but it is not what defines science. It can't be because for science to progress it has to contain contradictions otherwise it would have nothing to explain no problems to resolve etc. There was a big debate on this question of scientific methodology in the 50's and 60's with Popper (philosopher) on one side and Kuhn (physicist/philosopher), Lakatos(mathematician/philosopher), Quine (mathematician/philosopher), Duheim on the other. It was Popper who invented this idea that what defines science was falsifiabilty. And although this is still thought on science courses. It simply doesn't stand up to historical, logical, sociological and philospphical analysis. And i hoenestly have never met anyone who looked inot this debate who came out thinking that the falsificationist theory of science was anything but wishful thinking. Sorry that's kind of irrelevant, but it pisses me off the way people appeal to 'science'. It's nothing more than an appeal to authority. Disprove something though logic and analysis. Don't dismiss it because it's not 'scientific'.

Again, I think you are making a category error here. We are not trying to define what is science, we are borrowing concepts from science in order to understand the world. Appeals to science are not appeals to authority (as long as the concept appealed to is an accurate reflection of scientific method) they are a shorthand for appeals to logic and analysis, appeals which assume that the reader understands the scientific concept, thus avoiding the need to argue it from first principles.

If you like I can explain to you in detail, without any appeals to any of the universally accepted theories of science, exactly why non-falsifiable theories are useless in terms of understanding the world - and I'll introduce you to my 12 dimensional furry friend into the bargain.

georgestapleton wrote:
What does this mean? Oil operates outside the LTV? The value of oil isn't defined by socially necessary labour?

According to marx, the value of oil should be equal to the quantity of socially useful labour embodied in it - and the price of the commodity should closely reflect this underlying value. In this case, I think it is quite possible to put forward a case for oil respecting the LTV from Marx (he covers similar examples in capital), but you can't just dismiss the obvious fact that the price of the commodity appears to bear no relation to the amount of labour embodied in it - wild variations interspersed with periods of equilibrium but at hugely different levels - while the amount of labour required to extract and distribute it remains relatively constant.

georgestapleton wrote:
Ahh but here you say it. IT'S USE REALLY IS JUST IN SKETCHING HOW EXPLOITATION WORKS. Well that's not a minor thing at all at all. LTV isn't meant to be used as a tool for predicting price movements. It's a part of a social theory. And it stands up.

It is, or was intended to be a means of analysing value and where it comes from - far more ambitious than just a sketch of how exploitation works.

georgestapleton wrote:
You are getting things backwards. Market prices for goods are determined in the market. The value of a good is better thought of as the production price. That is, completely seperate from the market. When Marx says "Price, taken by itself, is nothing but the monetary expression of value" he's clearly not saying that value is determind by price, i.e. by the market. He's saying that price as a social form, in otherwords as a property that a good can hold, price in abstract is nothing but the monetary expression of value, or as he puts it "Price, taken by itself, is nothing but the monetary expression of value".

The point being that, according to marx, the price should closely reflect the value - nobody is putting forward an argument that the price determines the value. The problem being that in many cases we can observe prices which appear to bear no relation to the value of the goods - you need to explain why this occurs or you are left with a theory that has been falsified by reality.

Mike Harman
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Dec 30 2005 14:23

Alright I'm a bit behind. gurrier - yes I did mean exchange value, and George Stapleton has explained why.

Quote:
- its use is really just in sketching how explotation works (which of course in not a minor thing).

No it's not a minor thing at all is it? Marx's method (which isn't just LTV at all, I think you're confusing labour value for socially necessary labour time for exchange value for a start - more on this later), is the best I've seen put forward on understanding capitalism as a system of exploitation. It explains the underlying contradictions of capitalism - the exploitation which takes place between the fair and contractual exchange of money for commodities - particularly the commodity which is wage labour, and the way that capital makes waged labour the primary mode of work.

JoeBlack2 wrote:
Catch wrote:
"Prices" may differ widely from exchange value, but does that mean that price excapes value overall?

What meaning do you attach to 'overall'?

Catch wrote:
If you reduce Marx's analysis of capital to individual companies or individual sectors I think that misses the point.

If it fails to explain an individual sector than why assume it tells you anything about the sum total of several sectors added together (or indeed the average of all sectors). What is your basis for that assumption beyond liking the analysis?

Exchange value is determined by the socially necessary labour time required to produce a commodity.

The exchange value of labour is determined by the socially necessary labour time required to reproduce labour as a commodity. Note 'socially' - socially determined - cost of reproduction takes into account housing costs, education, leisure etc. etc. and as the SNLT required to produce those decreases, so does the SNLT of labour. The price of labour may fluctuate above and below its exchange value for any number of reasons - supply and demand for one.

Therefore, the relations of production in an individual company or sector depend both on the relative prices of machinery, raw materials (and the cost of labour to extract and refine those raw materials), and also on the cost of labour power which is determined by yet other commodities which allow for its reproduction. That's even before supply and demand and any number of other factors are included. But then you complain that it can't be used to explain one commodity in microcosm in terms of capitalist accounting - it's not supposed to, but it can explain the mechanism of exploitation within one company, to an extent, by looking at the tensions which arise of the duration and intensity of labour time, the introduction of new technology etc.

The labour theory of value is not equivalent to the categories of use-value, exchange-value to describe the two-sided nature of the commodity form, or for that matter socially necessary labour time or surplus value. Again George Stapleton put that bit of this argument quite well.

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AndrewF
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Dec 30 2005 16:31
georgestapleton wrote:

But this is fucking ridiculous.

This has been a fairly civil discussion so far, please don't try and derail it with insults - all the more so when you are only putting forward a different PoV. I think Gurrier has done a fairly good job in pointing out where you have read me wrong - apart from that whatever about what the philosphers think falsifiablity is pretty much a requirement of research in the natural sciences. Certainly if as here you attempted to redefine your theory so as to ignore counter evidence you'd be looked at a little oddly.

georgestapleton wrote:
What does this mean? Oil operates outside the LTV? The value of oil isn't defined by socially necessary labour?

The problem here is you and others are seeking to redefine value in a way that makes it unmeasurable. This and the insistence that you can't look at a particular industry appear to boil down to 'marx is right because marx is right and it is ridiculous to look for emperical evidence to demonstrate this'.

If however you follow Marx in this reading so that Price, taken by itself, is nothing but the monetary expression of value it should be easy to see why I say this about oil simply by looking at the bizarre fluctuations in oil prices. There really should be no controversy in the observation that oil operates outside the LTV, of all the commidities it be far the most openly subject to political and indeed military manipulation.

JoeBlack2 wrote:

Once you acknowledge this then the LTV looks increasingly less useful in predicting the real world - its use is really just in sketching how explotation works (which of course in not a minor thing).

georgestapleton wrote:
Ahh but here you say it. IT'S USE REALLY IS JUST IN SKETCHING HOW EXPLOITATION WORKS. Well that's not a minor thing at all at all.

Err isn't that what I just said which of course in not a minor thing. OK you spelt is right and added at all, at all but neither explains your shouting. I get the impression you are heroically battling strawman here and the making a lot of noise (and throwing around insults) to help it sound more like a real battle.

georgestapleton wrote:
LTV isn't meant to be used as a tool for predicting price movements.

Another straw man - no body has claimed it is meant to be used as a tool for predicting price movements . All we have done is point out that marx said Price, taken by itself, is nothing but the monetary expression of value

georgestapleton wrote:
It's a part of a social theory. And it stands up.

Thats an assertion, one you have yet to produce evidence for. So far your contribution has been to agree with those who insist (negative)evidence cannot be produced.

georgestapleton wrote:
But I don't think anyone here is treating Marx as a prophet.

I do and I've explained why.

georgestapleton wrote:
Some of us think that he has offered the best critique of capitalism that has been put on the table.

I'm not too sure what exactly you mean by 'the best', but I would say 'in his time he offered the best critique of capitalism that was put on the table'. The issue of prophecy starts to arise once you move beyond 'in his time' - that makes me nervous.

georgestapleton wrote:
Some of us recognise that Marx's theory is so heavily interwoven with the labour movement that to ignore him becasue what some his followers advanced would simply be like ignoring your father because you don't like your brother.

I'm not sure who you think is advocating ignoring him? Perhaps you could explain who you are arguing with here?

georgestapleton wrote:
i think Cleaver was right but it's still funny that you've got them backwards.

H'mm I fear you didn't understand me - probably as I didn't explain in detail what I meant. the problem I have with 'marx beyond marx' is that it is riddled with attempts to say 'what marx really meant was this' or 'marx can be understood to have said this'. Its use of marx to redefine marxism strikes me as what a religous person might do in order to defend Genesis once evolution appeared on the scene (and indeed you will find exactly such a method was and is used). But anyway arguing about Negri is getting a little ahead of this reading.

Quote:
Marx says in C5

Marx wrote:

Price, taken by itself, is nothing but the monetary expression of value

georgestapleton wrote:
You are getting things backwards.

I'm quoting Marx - don't shoot the messenger.

georgestapleton wrote:
When Marx says "Price, taken by itself, is nothing but the monetary expression of value" he's clearly not saying that value is determind by price, i.e. by the market.

That is a very interesting use of the word clearly but leaving that aside I'll suggest that under the normal rules of maths if price = value then value = price. But its not a question of price determining value, rather of price being a way of at least crudely measuring value in a commodity.

Which is the way I have been using it here. I say crudely because I'm not arguing that at every moment, every price is an accurate reflection of value because this is not what marx says. He quite clearly makes an argument however that this is what it tends to do and any disequilbrium that will arise will be quickly eliminated by the operation of capital itself (he explains that in some detail in relation to Westons argument).

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AndrewF
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Dec 30 2005 19:03
Catch wrote:
Therefore, the relations of production in an individual company or sector depend both on the relative prices of machinery, raw materials (and the cost of labour to extract and refine those raw materials), and also on the cost of labour power which is determined by yet other commodities which allow for its reproduction. That's even before supply and demand and any number of other factors are included.

Yeah so all this is already explained or partly explained in the section we are reading. In itself it doesn't come down on one side of the argument or the other - even more so because after outlining these considerations Marx writes Price, taken by itself, is nothing but the monetary expression of value. So essentially Marx is saying that price = exchange value. Various qualifiers can be added to this but they don't eliminate this relationship.

Catch wrote:
But then you complain that it can't be used to explain one commodity in microcosm in terms of capitalist accounting

I'm not sure what you mean by 'capitalist accounting' here but leaving that aside I'm not talking microcosm here. If I was demanding an explanation of the price of mars bars in a conor shop in Manchestar on Dec 12th you might have a point. But the 'microcosm' we are talking of includes oil which is one of the top ten commodities, and we are not talking of price at a particular date but averaged over months and looked at over decades. In that context I would expect excahnge value = price to be a correct interpretation of marxs Price, taken by itself, is nothing but the monetary expression of value

My fundamental concern here is that responses to these questions - which are the obvious ones to ask when reading this piece - boil down to asserting marx's brilliance on the one hand and trying to define his categories on the other in ways which rule out the possibility of emperically confirming his theories. I have far more respect for the attempt to argue oil price is determined by it being a rent then I have for what really looks like a bit of slight of hand.

There is a strong argument that in its time marxs description of the workings of capitalism was the best available. If this is still true 130 years later far from this being something to boast of it would be a reflection of the absolute and disasterous stagnation of leftist economic analysis.

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georgestapleton
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Dec 30 2005 20:19

First of all apologies Joe for saying 'fucking ridiculous'.

Joe and gurrier, it's kind of strange to have this argument on the internet when I've discussed it so many times with you over pints.

Anyway, you have to accept that the value of a good is not the same thing as the price of a good. Seeing as you two are the only people who are saying that it is. And if you want to prove that contrary to what everyone who agrees with the LTV on this board believes Mars said you will have to show where he says that the price of a good is the same thing as the vlaue of a good. In fact this would probably be wothwhile because it would give us something to discuss as oppoessed to assertions.

What I believe Marx held was that whereas price is determined by market structures and forces. Value is a category that does not come from consumption or exchange it is a category that come from production.

And the science thing is something I've argued with you gurrier and with jimmy too many times before and there's not really much point in arguing it again. Suffice to say that I don't think we can prove that Marx is or is not scientific. And saying that he is or is not scientific does not get us anywhere. If you say that Marx cannot be falsified, maybe you are right. But, who can be falsified? Can Adam Smith, JM Keynes, M Friedman? No not really. No social theorist can be falsified. Prediction can be wrong but that doesn't mean that a theory is abandoned. Why? Because if it remains the best theory available then it should still be used. The same applies with Marx's theory.

Marx worked before the emergence of keynesianism and he never accounted for the social changes that the emergence of keynesianims would bring about. Indeed he thought that the keynesian state could work. And because of that a lot of what he says is flawed. And needs to be adapted or moved beyond. This is why I don't call myself a Marxist.

But we make progress by reassesment, taking what is useful and changing what is wrong or flawed. If we abandon theories every time they are 'falsified' then we would never make progress. We abandon theories when a more useful one comes along.

As of yet, the best theory that can explain how capitalism works in terms of material human relationships is Marx's. The best theory that explain's how capitalism works without treating money/value as a thing and but instead a social relationship is Marx's. The best theory that explains how capitalism works in terms of class struggle is Marx's.

Has a lot of what he said been superseeded? Yes. However when Marshall's Principles of Economics was superseeded the core textbook of economics became Samuelson's book. (It's not anymore by the way). But unfortunately the attempts to go beyond Marx and offer a new core text book for example Mandels' Marxist Economics far from being an advance were a step backwards. So we are left with reading Marx. If you can offer me any work(s) that explain how market mechanism are social institutions that spring from class struggles better then the work of Marx then I'd be more than interested in reading it. Maybe we could have a reading group of that next but until then I'll study Marx. Not because he was perfect but because he's been developed on but to understand those developments you need to understand Marx himself.

And I know you're not saying we should abandon Marx. And I know you'll say I'm constructing a straw man. But I'm merely trying to explain where I'm coming from and why I think studying Marx is important and worthwhile.

And I think most people on this board are coming from a similar position in fact if you look at http://libcom.org/notes/about.php You'll find...

"We are also influenced by the specific theoretical and practical traditions of anarchist-communism, social ecology/communalism, anarcho-syndicalism, the situationists, autonomist-marxism, council communism, and writers including Marx, Kropotkin, Cleaver, Bookchin and Pannekoek. However, we recognise the limitations of applying these ideas and organisational forms to contemporary British society, and emphasise understanding and transforming the social relationships we experience in our everyday lives, whilst learning from the mistakes and successes of previous revolutionaries and revolutions."

So there you are the site explicitly states what interpretation of Marx it leans towards, a critical one that wants to move beyond Marx. It's also worth noting that it refernces Cleaver whose main contribution to our movement was explaing how Marx should be read a as revolutionary not an economist and how value was a class relation not a thing.

http://libcom.org/library/karl-marx-economist-or-revolutionary-cleaver

http://libcom.org/library/reading-capital-politically-cleaver

---

Hmm this post is a bit funny. It says we should study marx in a Marx study group which seems to be preaching to the converted. What I mean is that Marx can be useful to critique 'economics' and analysising capitalism and capitalist development. I think that is what we should be doing instead of trying to prove or disprove Marx, as if his theory stood up by itself. The only use of Marx is in using him.

And why I defend LTV is becasue I think it is useful is critiqueing economics and analysising capitalism.

I will do what I say should be done before the 9th. And I'll post up some notes on the actual text we are supposed to be reading instead of posting about the whether the great bearded one was 'right' or not.

---

P.S. gurrier and joe we're having some drinks at ours tonight. Tobie was organising it but so i don't know who'll be there maybe she's already invited you. But you are of course more than welcome to come round.

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georgestapleton
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Dec 30 2005 20:39
JoeBlack2 wrote:
georgestapleton wrote:
You are getting things backwards.

I'm quoting Marx - don't shoot the messenger.

Sorry, if that came across sharp or offensive. I didn't mean it to. Anyway, we all are comrades here and we should be able to state our opinions without worrying about whether they'll be taken as sharp or not. We should be able to speak frankly. With the exception of Jack and revol no-one is trying to be offensive. And neither have caused any troulbe on this thread so let's not cry wolf.

JoeBlack2 wrote:
georgestapleton wrote:
When Marx says "Price, taken by itself, is nothing but the monetary expression of value" he's clearly not saying that value is determind by price, i.e. by the market.

That is a very interesting use of the word clearly but leaving that aside I'll suggest that under the normal rules of maths if price = value then value = price. But its not a question of price determining value, rather of price being a way of at least crudely measuring value in a commodity.

It's might be 'a very interesting use of the word clearly' but its not an unusual one. 'An expression of' doesn't mean '=' or even 'is' and definitely doesn't mean 'determined by'. A song can be an expression of a songwriters feelings but that clearly doesn't mean that that song is that persons feelings. And if you or anyone said that that songwriters feelings are determined by that song then I think I could uncontroversially say that you or whoever is 'getting things backwards'.

I mean this may be hermenuetics and not a discussion of capitalism but I think it's important to note that this sentence can be read in a number of ways and it definitely doesn't show that Marx thought that the price of a good and its exchange value were equivalent terms or even that the price of a good necessarily tended towards it's value. Even with price in abstract being nothing more than the monetary expression of value.

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AndrewF
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Dec 31 2005 12:34
georgestapleton wrote:
Anyway, you have to accept that the value of a good is not the same thing as the price of a good.

1. Where there is a disagreement telling one side they simply have to accept the position of the other is seldom going to work.

2. In both you posts you use value but I'm not sure if you mean use value or exchange value or both - it would be helpful to qualify this.

For what its worth most of my arguement about price tending towards exchange value is a paraphrase of what marx is saying in these chapters so if you do mean exchange value your argument appears to be with marx rather than me - at least in terms of the section being read.

From the text under discussion (and this is marx not me, I've added emphais)

Marx chapter IV wrote:

You would be altogether mistaken in fancying that the value of labour or any other commodity whatever is ultimately fixed by supply and demand. Supply and demand regulate nothing but the temporary fluctuations of market prices. They will explain to you why the market price of a commodity rises above or sinks below its value, but they can never account for the value itself. Suppose supply and demand to equilibrate, or, as the economists call it, to cover each other. Why, the very moment these opposite forces become equal they paralyze each other, and cease to work in the one or other direction. At the moment when supply and demand equilibrate each other, and therefore cease to act, the market price of a commodity coincides with its real value, with the standard price round which its market prices oscillate. In inquiring into the nature of that VALUE, we have therefore nothing at all to do with the temporary effects on market prices of supply and demand. The same holds true of wages and of the prices of all other commodities.

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Felix Frost
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Dec 31 2005 15:59

On the more general question, I have to agree with JoeBlack2 that Marxists have an unfortunate tendency to treat Marx as a prophet, and his writings as the gospel. Thus Marxist discussions often boils down to arguing about 'what Marx really meant' rather than testing his ideas on the real world. I find that libertarian Marxists often have a better theoretical understanding of the world than my anarchist comrades, but their perspective is marred by this tendency to link every position with whatever Marx have said or can be constructed to have meant about this or that subject.

On the specific question about the labor theory of value, however, I feel that JoeBlack2's criticism is not very useful. Yes, Marx did think that the price of commodities would fluctuate around their exchange value, and this doesn't always turn out to be the case. But this in itself doesn't 'disprove' the LTV or make the theory less useful, as what Marx describes is how a hypothetical pure capitalist economy with perfect competition would work. Since this perfect competition doesn't exist in the real world, one shouldn't expect the theory to give accurate predictions of real life prices.

The reason why Nike can sell their sneakers at a price much higher than their 'labor value' is simply that Nike in most markets has a monopoly on selling 'Nike sneakers'. In a market where this monopoly doesn't exist, say a back street market in China, you can get 'Nike sneakers' real cheep. The question about why consumers are willing to pay more for Nike sneakers than just as good NoLogo sneakers, is in this discussion immaterial.

About oil, the reason why its price is so much higher than its 'labor value' is also very simple: It's because it's a scarce commodity. If it wasn't, one would expect that investments would flow to the oil industry because of the high rate of profit in this industry, and prices would then quickly come down as a result of the increased supply of oil.

I do think there are serious flaws in Marx's economic theories, and several of them appear in the text we are supposed to be discussing here. I'll get back to this later, though, as I think people should get a chance to actually read the text first.

-Felix

lem
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Jan 2 2006 23:31
JoeBlack2 wrote:
Well one part of the scientific method is the test of falsifiablity http://en.wikipedia.org/wiki/ and it seems replies like this respond to problematic false results by trying to redefine the LTV in a way that will mean it is no longer falseable.

To be fair this is only one view of what the scientific method entails, it is a consequence of philosophers being unable to justify inductive reasoning; despite this inability, we do still use inductive reasoning (with success) alot of the time. If we did not use inductive reasoning we would have starved to death a long time ago. And you never know but in the furture we may be able to (justify inductive reasoning)

lem
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Jan 3 2006 00:06

I would like to see Gurrier's explanation of why that to be comparable to a logical argument a method must be falsifiable - I have not read anything which attempts to put it so beyond doubt as how he seems to present his pov. Besides which some believe that marxism can be fallsified, and all theory is born refuted, so ignoring some contary eveidence is not sufficient to rubbish a theory.

JoeBlack2 wrote:
I'll suggest that under the normal rules of maths if price = value then value = price

I dunno if Marx is saying that value = price, just that the value of a commodity is X then price of a commodity is X; as anyone who has read any logic will tell you (I think) this does not mean that - if the price of a commodity is X then the value of a commodity is X.

If you really don't beleive the LTV then you have to put foward an alternative, something which you have not done. Value as a subjective appraisal (or something) is reasonably immediatley appealing, but I'm unsure that its any moire convincing... if pushed I will try and argue why, but I've never read anyhting criticising it.

And IMHO believing that the LTV is the best way of understanding value if not treating Marx as a prophet.

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Lazy Riser
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Jan 3 2006 01:12

Hi

Quote:
I dunno if Marx is saying that value = price, just that the value of a commodity is X then price of a commodity is X; as anyone who has read any logic will tell you (I think) this does not mean that - if the price of a commodity is X then the value of a commodity is X.

That’s terrible. I’m a professional logician and I can’t vouch for a single word of that.

Love

LR CEng

gurrier
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Jan 3 2006 16:44
lem wrote:
I would like to see Gurrier's explanation of why that to be comparable to a logical argument a method must be falsifiable - I have not read anything which attempts to put it so beyond doubt as how he seems to present his pov. Besides which some believe that marxism can be fallsified, and all theory is born refuted, so ignoring some contary eveidence is not sufficient to rubbish a theory.

Okay. I have a theory that everything in the world happens according to the will of a 12 dimensional bunny rabbit who is supremely powerful but wishes to remain in the shadows, hence it is impossible to prove or disprove his influence on any event in the world. This theory is sufficently powerful to explain everything in the universe, including the origin of 'value' - all of which comes from the whims of the bunny rabbit.

One objection to this theory is that it does not correspond with our subjective experiences of the world and that other theories resonate better with these experiences. However, given sufficent time and energy and insight into human experience I will be able to flesh out this theory to a point where it corresponds as closely as any other theory with human subjective experience and resonates in a similar way. As evidence of this I point to the 2,000 years of christian theology, which is essentially the history of fleshing out the details of the fantasy to make it as attractive as possible to the human psyche while still fulfilling its requirements. Theologians really did engage in debates about how many angels could fit on the head of a pin.

Therefore, without the notion of testability and its corrollary falsifiability, we would be left with no means of rejecting this theory and other such ridiculous ones. The whole basis of scientific thought and the thing that distinguishes it from the religious mindset is that theories are only considered useful insofar as the correspond with reality. In order to show that something corresponds with reality, we need a way of testing it. This means that we use our theory to make predictions about the world and compare them to reality. If there is no way of testing the predictions of our theory and showing them to hold or not hold in the real world, then our theory is equivalent to the 12 dimensional bunny rabbit theory and belongs in the realms of faith.

lem wrote:
If you really don't beleive the LTV then you have to put foward an alternative, something which you have not done. Value as a subjective appraisal (or something) is reasonably immediatley appealing, but I'm unsure that its any moire convincing... if pushed I will try and argue why, but I've never read anyhting criticising it.

And IMHO believing that the LTV is the best way of understanding value if not treating Marx as a prophet.

I don't think that anybody is rubbishing the LTV at all. Personally, I do think that there is a huge amount of basic truth in it and it is a very useful way of looking at the world. However, it is quite obviously limited and requires a much more developed and nuanced analysis on top of it in order to understand the nature of value in the world that we live in rather than in a hypotethical and non-existant world of pure capitalism.

Mike Harman
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Jan 3 2006 19:09

If value = price and price = value, why go to all the effort of using different terms very precisely throught most of Marx's work?

A couple of thoughts about oil. I'm sure gurrier and JoeBlack will dismiss these as patches, but they're just thoughts and I think they answer the questions partially.

When crude prices go up, this often puts a lot of pressure on petrol stations which have to absorb some of the increased raw materials cost from what would otherwise be profits. The fuel strike and similar mean that there's an upper (temporary at least) limit for petrol prices which people will not go above without the risk of a severe backlash (drive-aways being another example).

This particularly affects independent stations who even with very high prices, aren't able to cover costs. Rather than independent prices being artificially high, I think this is due to supermarkets being able to absorb the costs elsewhere in the business and remain competitive without actually running at a loss. Texaco has just closed down large numbers of its petrol stations, I'm not sure what the exact reasons were, but they said they were going to focus on selling oil to third parties rather than running their own stations. This suggests they're better off without the stations as oil goes up (whereas ASDA/TESCO needs the stations to provide its one-stop service and maintain customer loyalty in as many areas as possible).

Although the exchange value of the oil is the same (although higher oil prices also make things like oil sands more profitable, which require much more labour/infrastructure, and if these become a higher proportion of overall oil production then they'll increase the SNLT compared to wells), profits are pushed down at the pump, and potentially in other parts of the industry, while they go up for the extractors.

What you have then isn't necessarily increased profit overall taking into account the entire industry (although it might well be), but at least in part, a transfer of profit from one capitalist to another, or one section of a company to another.

This only deals with temporary price rises, but long-term you have the clearing out of inefficient capital as independent stations close down, and the rise of the supermarkets in recent years - which I'm sure have cut labour costs at retail level (for instance selling high volumes of supermarket goods using the same staff who'd otherwise be just selling petrol).

I've not checked out the oil as rent article yet, and I still need to catch up with a couple of chapters of VP&P to meet the 9th Jan deadline so that's all for now!

Suggest we start a fresh discussion after the 9th so other people can join in -doesn't stop this one from continuing.

dom
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Jan 3 2006 19:54
Quote:
Okay. I have a theory that everything in the world happens according to the will of a 12 dimensional bunny rabbit who is supremely powerful but wishes to remain in the shadows, hence it is impossible to prove or disprove his influence on any event in the world. This theory is sufficently powerful to explain everything in the universe, including the origin of 'value' - all of which comes from the whims of the bunny rabbit.

If instead of bunny rabbit you say string you would have a lot of physicists on your side.

Anyway my reading of Value, Price and Profit seemed to suggest the main point of it was to argue that fighting for wage rises was a good thing and would enable you to buy more things rather than cause inflation. It only briefly explains the LTV.

Also if price is based upon value it could still have a long term difference between them if there was a constant factor distorting it. Not quite sure what this would be though?

gurrier
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Jan 3 2006 20:40
dom wrote:
If instead of bunny rabbit you say string you would have a lot of physicists on your side.

I know - that's stage 2 of my argument - in which I argue that my theory is better than other similarly unfalsifiable ones as it is more universal and corresponds with string theory.

redtwister
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Jan 3 2006 21:58

Georgestapleton has most of it right, so I'm just going to add some quotes structured by key critiques made so far, to chew on, as this whole argument is a rehash of points made by afraser. Mostly, it takes the one quote made here ad nauseum regarding the relation of Value and Price and makes some more sense of it.

Also, as it is the new year and I had a vacation, which ended way the hell too soon, I'm going to make my New Year's resolution to not be a dick, to explore a more Zen-like patience and civility. I also promise to reserve any further comments on this thread to the pamphlet.

1. Was Marx a Ricardian with a Labor Theory of Value? No, Marx in fact never holds to classical political economy’s LTV.

"In his earliest work on political economy, in a formulation repeated and expanded throughout his life, Marx (1975:260) offers a root-and-branch critique of the Ricardian concept of ‘economic law’:

Both on the question of relations of money to the value of metal and in his demonstration that the cost of production is the sole factor in the determination of value Mill succumbs to the error, made by the whole Ricardo school, of defining an abstract law without mentioning the fluctuations or the continual suspension through which it comes into being.

If e.g. it is an invariable law that in the last analysis – or rather in the sporadic (accidental) coincidence of supply and demand – the cost of production determines price (value), then it is no less an invariable law that these relations do not obtain, i.e. that value and the cost of production do not stand in any necessary relation.

Indeed, supply and demand only ever coincide momentarily thanks to a previous fluctuation in supply and demand, to the disparity between the cost of production and the exchange value. This is the real movement, then, and the above-mentioned law is no more than an abstract, contingent as one-sided moment in it.

This counterposes two radically different treatments of the same issue: since value does not appear openly but in the form of price, and since value is unaffected by supply and demand whereas price itself fluctuates with their movement, what possible relation can there be between value and price?

The Ricardian answer, from which Marx demarcated himself for the rest of his life, is to enquire in what ratio goods must exchange in order to equalise demand to supply. Value then reduces to a special kind of price. Marx’s answer, the polar opposite, is to ask what relations make exchange possible, regardless of supply and demand. Price is then explained as a form of appearance of value.

The two conceptions stand opposed as the imaginary to the real. The Ricardian abstract law, supposing a relation that never happens, imposes ideal prices and values on reality. Marx’s ‘no less invariable law’, insisting on a motion which always happens, imposes real prices and values on the imagination.

Economic theory bifurcates with this critique...

… I will show that Marx’s difference with Ricardo goes beyond this qualitative distinction once the economy departs from stasis, that is, in any real economy. Any equilibrium approach then necessarily determines both price and value in the neoclassical manner, by quantity of use-value, and not in Marx’s manner, by quantity of labour time.

This is because neither equilibrium values, nor equilibrium prices, can actually function as prices: they cannot serve as the basis of any actual exchange. Claims that such ‘prices’ are concrete or empirically-accessible are false: equilibrium prices are a concealed value-concept, attempting to explain what is observed in terms of something not directly observed. However unlike Marx’s non-equilibrium values, whose point of departure is an actual market which exists through its motion, equilibrium prices presuppose an ideal market which cannot exist because has no motion. Whereas Marx’s values do exist and do underlie what is observed, equilibrium prices do not exist and cannot underlie what is observed.

This defines their ideological function, since market failure cannot be derived from a theory which assumes a priori that the market works. But it also renders them incapable of performing a scientific function, that is, representing reality.

The ‘transformation problem’ does not cease to exist. The relation between such prices and actual market prices must still be explained and measured. It is wished away by a dogmatic assumption, asserted without proof, that equilibrium prices approximate the behaviour of real prices. I will show this is necessarily false because no real prices could be approximated in this way. If, abandoning this dogma, we transform comparative static prices so that goods can exchange at these ratios, the amount of money for which they exchange is determined not by the labour expended in producing them, but by the magnitude of their use-value, directly contrary to Marx’s value-concept.

This problem simply does not arise with either Marx’s values or Marx’s prices of production which, when determined without assuming equilibrium, are perfectly capable of functioning as the basis of exchange and do not violate the determination of value by the magnitude of labour time…

… Marx’s mature work is a systematic critique of Ricardo’s exclusive concentration on the quantitative aspect of value at the expense of the qualitative:

Ricardo’s mistake is that he is concerned only with the magnitude of value. Consequently his attention is concentrated on the relative quantities of labour which the different commodities represent, or which the commodities as values embody. But the labour embodied in them must be represented as social labour, as alienated individual labour. In the price this representation is nominal; it becomes reality only in the sale. This transformation of the labour of private individuals contained in the commodities into uniform social labour, consequently into labour which can be expressed in all use-values and can be exchanged for them, this qualitative aspect of the matter which is contained in the representation of exchange-value as money, is not elaborated by Ricardo. This circumstance – the necessity of presenting the labour contained in commodities as uniform social labour, i.e. as money – is overlooked by Ricardo. (Marx 1972: 131)

A key formulation in Capital Volume I connects these two critiques:

In order to find out how the simple expression of the value of a commodity lies hidden in the value-relation between two commodities, we must, first of all, consider the value-relation quite independently of its quantitative aspect. The usual procedure is the precise opposite of this: nothing is seen in the value-relation but the proportion in which definite quantities of two sorts of commodity count as equal to each other. It is overlooked that the magnitudes of different things only become comparable in quantitative terms when they have been reduced to the same unit. Only as expressions of the same unit do they have a common denominator, and are therefore commensurable magnitudes.(Marx 1979:141)

Marx’s concern to reduce incommensurate magnitudes to a common denominator is often portrayed as metaphysical. And indeed, if supply did equal demand, the qualitative aspect could be safely ignored. When the scales balance, does it matter why? The measurement itself connects the measured objects: what they have in common is ‘being weighed’. We can build scales without a concept of mass, which is why they existed long before Newton.

The problem is what happens when they don’t balance. With any piece of machinery; you only really need the manual when it breaks. Awkward questions then arise like: how fast does it move? What force does the imbalance exert? What impact does the motion have on the requirements of balance in any case? We then have to connect its components to the rest of nature. Only when Galileo, Newton and their followers asked such ‘metaphysical’ questions could physics formulate general laws of nature with the general concepts of mass, energy and force.

Economics, when it worries about such matters, resorts to the metaphor of a pendulum, oscillating about a static position. But there is a vital difference. The pendulum can survive without moving, but the market cannot. Because it must move to exist, its existence can only be explained by its movement. So rast ich, so rost ich. A tornado in stasis is no longer a tornado. Like a tornado, an avalanche or indeed a living being, the market exists as a self-sustaining entity only in and through movement;

It is not just that markets fail: the point is that this is how they work. Only when supply differs from demand do the mechanisms which equate them come into play; moreover the very process of equalisation in one sphere disequilibriates all others, whereon eternally restless capital disrupts all balance as it scrambles for gains and stampedes from losses in its thirst for surplus profit, the life force of the market.

There is no economic pair of scales. A market is never in a state which permits exchange at equilibrium prices. From the very outset we have to follow Newton and Galileo, and study its motion with general concepts, the equivalent of mass and energy, which can express all possible exchange relations in terms of unifying concepts, so that we can compare them and say things about them which apply to all of them.

We need, in short, a way of talking about price which does not depend on the relation between supply and demand. We need to enquire qualitatively what the value of a commodity consists of, external to and independent of any subsequent exchange relations it enters into, before and in order to study the quantitative phenomenon of real market prices."

(from The Limits of Ricardian Value: Law, Contingency and Motion in Economics) by Alan Freeman, University of Greenwich , 1 November 1998, http://www.iwgvt.org/iwg_sessions.php?year=1999

2. Are Value and Price tending to come together? No, not in any meaningful sense.

c.f. Marx in Capital, Volume 1:

Even to that, however, I must object that from the beginning Marx recognizes that price and Value do not correspond because

“Magnitude of value expresses a relation of social production, it expresses the connexion that necessarily exists between a certain article and the portion of the total labour-time of society required to produce it. As soon as magnitude of value is converted into price, the above necessary relation takes the shape of a more or less accidental exchange-ratio between a single commodity and another, the money-commodity. But this exchange-ratio may express either the real magnitude of that commodity’s value, or the quantity of gold deviating from that value, for which, according to circumstances, it may be parted with. The possibility, therefore, of quantitative incongruity between price and magnitude of value, or the deviation of the former from the latter, is inherent in the price-form itself. This is no defect, but, on the contrary, admirably adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another.” (italics mine)

3. What is Value? Is it a property inhering within an object? No, value is a social relation between people that subsists through objects called commodities. Value is first and foremost a form of social relation, a very fucked up form of social relation. Value is a category of class conflict, of the split between labor and capital because it specifies the kind of abstract, objectified activity which produces a commodity. As such, use-value/exchange-value, concrete labor/abstract labor and private labor/social labor all go hand in hand, laying out a kind of way in which human beings relate to each other. This has to start in exchange because the relations themselves are established in the exchange of commodities as the fundamental social relation, as the way in which individuals are formed as asocial (the relation of buyer to seller, where all sociality between any two buyers is only indirect, mediated vis-à-vis one or more sellers, and vice versa) and money and commodities from the substance of community in capital. The analysis of value is central to this and since a critique of capital which tries to simply come up with a more rational economics merely repeats uncritically capital’s on presuppositions, Marx targets the hidden qualitative dimension of Value, commodity, money as forms of specific social relations. Please note that in this, forms are not mere appearances in the sense of illusions, but as the mode of existence of those relations. As such, the actual content of the capital-labor relation is only experienced in and through these forms. In order to get to the content, therefore, we have to interrogate the forms, find out what relations they are the mode of existence of.

4. Is Price Value?

“Price is the money-name of the labour realised in a commodity.” (Capital, ch. 3)

“The price or money-form of commodities is, like their form of value generally, a form quite distinct from their palpable bodily form; it is, therefore, a purely ideal or mental form. Although invisible, the value of iron, linen and corn has actual existence in these very articles: it is ideally made perceptible by their equality with gold, a relation that, so to say, exists only in their own heads. Their owner must, therefore, lend them his tongue, or hang a ticket on them, before their prices can be communicated to the outside world.” (Capital, ch. 3)

Footnote to chapter 9 of Capital

[9] The calculations given in the text are intended merely as illustrations. We have in fact. assumed that prices = values. We shall, however, see, in Book Ill., that even in the case of average prices the assumption cannot be made in this very simple manner.

5. Labor theory of Value or Value Theory of Labour?

to quote I.I. Rubin on Marx's value theory of labor:

"It is more accurate to express the theory of value inversely: in the commodity-capitalist economy, production work relations among people necessarily acquire the form of the value of things, and can appear only in this material form; social labor can only be expressed in value. Here the point of departure for research is not value but labor, not the transactions of market exchange as such, but the production structure of the commodity society, the totality of production relations among people. The transactions of market exchange are then the necessary consequences of the internal structure of the society; they are one of the aspects of the social process of production. The labor theory of value is not based on an analysis of exchange transactions as such in their material form, but on the analysis of those social production relations expressed in the transactions." (Section II, preface between Chapters 7 and 8 )

chris

redtwister
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Jan 3 2006 22:28

BEGIN QUOTE

"Looking somewhat closer into the monetary expression of value, or what comes to the same, the conversion of value into price, you will find that it is a process by which you give to the values of all commodities an independent and homogeneous form, or by which you express them as quantities of equal social labour. So far as it is but the monetary expression of value, price has been called natural price by Adam Smith, "prix necessaire" by the French physiocrats. What then is the relation between value and market prices, or between natural prices and market prices? You all know that the market price is the same for all commodities of the same kind, however the conditions of production may differ for the individual producers. The market price expresses only the average amount of social labour necessary, under the average conditions of production, to supply the market with a certain mass of a certain article. It is calculated upon the whole lot of a commodity of a certain description.

So far the market price of a commodity coincides with its value. On the other hand, the oscillations of market prices, rising now over, sinking now under the value or natural price, depend upon the fluctuations of supply and demand. The deviations of market prices from values are continual, but as Adam Smith says:

"The natural price is the central price to which the prices of commodities are continually gravitating. Different accidents may sometimes keep them suspended a good deal above it, and sometimes force them down even somewhat below it. But whatever may be the obstacles which hinder them from settling in this center of repose and continuance, they are constantly tending towards it."

I cannot now sift this matter. It suffices to say the if supply and demand equilibrate each other, the market prices of commodities will correspond with their natural prices, that is to say with their values, as determined by the respective quantities of labour required for their production. But supply and demand must constantly tend to equilibrate each other, although they do so only by compensating one fluctuation by another, a rise by a fall, and vice versa. If instead of considering only the daily fluctuations you analyze the movement of market prices for longer periods, as Mr. Tooke, for example, has done in his History of Prices, you will find that the fluctuations of market prices, their deviations from values, their ups and downs, paralyze and compensate each other; so that apart from the effect of monopolies and some other modifications I must now pass by, all descriptions of commodities are, on average, sold at their respective values or natural prices. The average periods during which the fluctuations of market prices compensate each other are different for different kinds of commodities, because with one kind it is easier to adapt supply to demand than with the other."

END QUOTE

in other words, while over a long period of time and taken for the world economy as a whole, market price and value qua natural price tend to converge. There is quite a wide range of fluctuation and it is in fact this that Marx tends to emphasize in Capital.

What is Marx really preparing us for in this? To argue against the idea that profits are determined by selling high and buying low, that profit comes from the act of exchange (which in fact must be an exchange of equivalents to be fair) In other words, profit or surplus value, not really even gotten to yet here, extends from somewhere other than the act of exchange, otherwise it is merely a question of robbing Peter to pay Paul.

"To explain, therefore, the general nature of profits, you must start from the theorem that, on an average, commodities are sold at their real values, and that profits are derived from selling them at their values, that is, in proportion to the quantity of labour realized in them. If you cannot explain profit upon this supposition, you cannot explain it at all. This seems paradox and contrary to every-day observation. It is also paradox that the earth moves round the sun, and that water consists of two highly inflammable gases. Scientific truth is always paradox, if judged by every-day experience, which catches only the delusive appearance of things."

Again and again, Marx will return to the point that without exploitation there is no capital, that capital exists only in and as class antagonism. This is his whole point, to show that any economics not situated upon this point is nonsense. And class conflict does not reside in that veritable Garden of Eden of the innate rights of Man, the market, but in the hidden abode of production. However, the market, the exchange relation, is what turns everything into a commodity, such that exchange and production form a total circuit, but also a total social relation.

Frankly, this is what is most of value in Marx and the point from which everything else he says is made worthwhile. Far from being something which one can take or leave in Marx, whether or not Marx contributes to the historical critique of capital and to communism entirely rests on the value of his critique of political economy.

Notes on the formulations re: falsifiability and science later, as it is predicated a) on a notion first formulated by Popper which under the criticism of Kuhn and Lakatos he later dropped, and b) as it is untenable in relation to natural science itself, as evolution is not falsifiable in Popper's empiricial sense, as Stephen J. Gould recognized in the 1980's, and c) a completely uncritical appraisal of natural science, as if it were not itself a product of class society, the specialization of knowledge, the definition of Nature as an object to be exploited by Man, etc. Again, George is completely on the right track here.

Chris

lem
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Jan 4 2006 01:28
gurrier wrote:
I know - that's stage 2 of my argument - in which I argue that my theory is better than other similarly unfalsifiable ones as it is more universal and corresponds with string theory.

I dunno but maybe your actually arguing for the testability of theorys, not their falsifiability - I think that people consider Marxism testable.

lem
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Jan 4 2006 04:18
Lazy Riser wrote:
Hi
Quote:
I dunno if Marx is saying that value = price, just that the value of a commodity is X then price of a commodity is X; as anyone who has read any logic will tell you (I think) this does not mean that - if the price of a commodity is X then the value of a commodity is X.

That’s terrible. I’m a professional logician and I can’t vouch for a single word of that.

Love

LR CEng

Well, it sounds like affirming the consequent. It is invalid to argue that If A then B, B is true, therefore A is true. Do you disagree that affirming the consequent is invalid?

Marx is not saying that value = price, just that if a commodity's value is X, that the commodity's price is X. For a start some people argue that vaue cannot be quantified. So value cannot = price. I think.

gurrier
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Jan 4 2006 16:10
lem wrote:
I dunno but maybe your actually arguing for the testability of theorys, not their falsifiability - I think that people consider Marxism testable.

They're the same thing - falsifiability just means that you can identify tests which might have results that contradict the theory's predictions. It doesn't mean that the theory is 'false' or can be rejected - just that the theory is not the complete picture (like Newton's laws wink )

lem
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Jan 4 2006 23:59
gurrier wrote:
falsifiability just means that you can identify tests which might have results that contradict the theory's predictions. They're the same thing

Maybe I meant verifiable and not "testable", though perhaps some would consider a test that could not contradict a theory's predictions, but still verify them, a test.

It has to be said that Marxism does have corroborating evidence (e.g. strikes as evidence of class struggle). As such it is possible for Marxism to be verified (and it not meaningless according the Logical Positivists). However (I think) that you could have no verifying evidence for the existence of a giant bunny rabbit, as it is a metraphysical statement, and not just a pseudo science according to Popper. IMO you have thus argued for the verifiability oif statements, not their falsification.

Quote:
It doesn't mean that the theory is 'false' or can be rejected - just that the theory is not the complete picture (like Newton's laws Wink )

Are arguing that your theory of a giant bunny rabbit is not false, just that it is not the full picture, like Newton's laws!

gurrier
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Jan 5 2006 09:50

I'd really prefer not to turn this into another long debate about science (they seem to flock around me like flies around shit), but I'll have one more go at making the point.

lem wrote:
Maybe I meant verifiable and not "testable", though perhaps some would consider a test that could not contradict a theory's predictions, but still verify them, a test.

If the test can only possibly produce positive results it's not much of a test is it?

lem wrote:
It has to be said that Marxism does have corroborating evidence (e.g. strikes as evidence of class struggle). As such it is possible for Marxism to be verified (and it not meaningless according the Logical Positivists).

No, strikes happen according to the moods of the 12 dimensional bunny - if you have a few centuries I can retro-fit the explanation of his changing moods to give a much closer match to the data than anything that Marx would have dared try.

lem wrote:
However (I think) that you could have no verifying evidence for the existence of a giant bunny rabbit, as it is a metraphysical statement, and not just a pseudo science according to Popper. IMO you have thus argued for the verifiability oif statements, not their falsification.

It's the same thing. My 12-d bunny is no more meta-physical than any other theory - in fact physicists are now beginning to discover that the laws of the universe really do work better when we have loads of dimensions, so my theory is 'verified' on a far more grandiose scale than any of the unfalsifiable opposition.

Anyhow, enough about science for now - it really is side-tracking the discussion at this stage. I suppose the important point is that Marx's economic theories do need to be shown to apply in reality. In the situations where they are shown not to correspond with reality, it is of course permissible to add some ad-hoc hypotheses to explain the special circumstances which have caused them to not hold, but there are only so many ad-hoc hypotheses that a theory can bear before it makes sense to rebuild it to incorporate the various special circumstances that it omits. I don't think we're there at all yet (joeblack might disagree with me on that). However, I think the advocates of Marxism should take such challenges seriously if they are to avoid the slide into theology.

afraser
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Jan 5 2006 10:25

Marx says here that socially necessary labour time determines equilibrium price.

He is wrong with that, it is false. It would be true only in an economy where the production process for every type of commodity utilised the exact same proportion of capital goods, which is to say never (the ‘transformation problem’). This has been well known and accepted since 1817 (48 years before Marx wrote) when David Ricardo spent almost the whole first chapter of his Principles of Political Economy and Taxation rubbishing that idea in detail with examples.

That wipes a large chunk of the preface–chapter 6 out of consideration - is there anything left that is worthwhile? I found some:

In Chapter 1, that profit and wages are shares of the same cake, so you can increase the proportion one gets by reducing the proportion of the other. In Chapter 2, that such a change would work through to change the amount of luxury goods produced instead of necessities (Although actually I think such a change may more impact luxury investment goods, especially property prices.)

In Chapter 2 there is the historical interest story of “the official economical mouthpieces of the middle class” agitating against the ten hours bill in 1848, and being proven completely wrong by events, exactly like the 1998 National Minimum Wage Act in Britain.

Quote:
In Manchester, at the meeting, in 1860, of the Society for the Advancement of Science, I myself heard Mr. Newman confess that he, Dr. Ure, Senior, and all other official propounders of economical science had been wrong, while the instinct of the people had been right.

Official economists wrong, instinct of the people right – good to keep that in mind when hearing pronouncements on the dire effects of inflation, the benefits of high interest rates, the necessity of keeping public spending within tight borrowing restrictions, the idea that you cannot spend your way out of a recession, and so on.

In Chapter 3 there is a nice description of the velocity of circulation and its potential effect on price levels, and an interesting historical reminder that paper money and cheque accounts dominated in the mid 19th Century just like today (there are sometimes misconceptions that these are new innovations), making monetarism as hopeless then as it is today.

In Chapter 6, that human labour along with natural resources creates everything that has value.

gurrier
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Jan 5 2006 16:55
afraser wrote:
Marx says here that socially necessary labour time determines equilibrium price.

He is wrong with that, it is false. It would be true only in an economy where the production process for every type of commodity utilised the exact same proportion of capital goods, which is to say never (the ‘transformation problem’). This has been well known and accepted since 1817 (48 years before Marx wrote) when David Ricardo spent almost the whole first chapter of his Principles of Political Economy and Taxation rubbishing that idea in detail with examples.

Oh come on, you're going to have to do better than that. Saying that his claim is simply false on the basis of a book written in 1817 is a pretty poor argument. On the other hand, your claim that this debunking of Marxism is well known and accepted since 1817 is demonstrably false. Ricardo's work was known to Marx and a great many marxists since, and they obviously don't accept it. In this case your 'commonly accepted' and hence needing no proper argument claim appears to be merely a rhetorical trick.

If you want to make a convicing case for Ricardo over Marx you're going to have to do a whole lot better than the above 2 lines - they don't prove your point to the extent that you would like. In fact, I don't even think it makes sense - if value is universally measurable in terms of socially necessary labour (as marx holds) then the proportion of capital goods (whatever that means) utilised in the production process is entirely irrelevant.

Perhaps I'm completely misunderstanding you, but in any case, consider this an invitation to eductate me as I can't make sense of the above at all.

afraser
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Jan 5 2006 21:05

Commonly accepted but yes not universally accepted, you are right that Marx knew and disagreed with Ricardo on this, and is the same with some Marxists (not all).

When the production processes of different goods have different organic compositions of capital (simply: have different proportions of capital input) then their equilibrium prices are not proportional to the socially necessary labour time expended on their production.

I appreciate that might be as clear as mud, but there are plenty of good simple discussions of this with examples, including:

A good short description of this at http://en.wikipedia.org/wiki/Transformation_problem

A better (but longer) treatment at http://www.simons-rock.edu/~eatonak/LTV-FAQ.html#Transformation

And Ricardo's original (even longer) chapter at http://www.marxists.org/reference/subject/economics/ricardo/tax/ch01.htm

Lazy Riser's picture
Lazy Riser
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Jan 5 2006 22:36

Hi

Quote:
It is invalid to argue that If A then B, B is true, therefore A is true

Oh. Now I see, I wasn’t reading it carefully enough, and didn’t cut everyone the slack they deserved. You’re right about the logic, but then you knew that. A predicates B does not imply B predicates A, where A and B are Boolean expressions.

Please accept my humble apologies.

However, value and price are not Boolean expressions but reals (or arbitrary scalars for the sake of argument). Where A and B are real, then A = B implies B = A.

Hope that clarifies, sorry for being so quick to condemn. Hope this is an OK post, lucy82.

Love

LR

redtwister
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Jan 6 2006 14:25
afraser wrote:
When the production processes of different goods have different organic compositions of capital (simply: have different proportions of capital input) then their equilibrium prices are not proportional to the socially necessary labour time expended on their production.

"The market price expresses only the average amount of social labour necessary, under the average conditions of production, to supply the market with a certain mass of a certain article. It is calculated upon the whole lot of a commodity of a certain description."

Marx clearly here is talking about Market Prices as Natural Prices, or where price = value (which he argues it almost never does, in Capital as I have pointed out above, and which is a supposition he makes explicitly at times in order to hold that constant to focus on another aspect of the problem) and in so doing, he clarifies the conditions of such a statement:

1. expresses only the average amount of social labour necessary

2. under average conditions of production (ie with uniform organic composition of capital)

3. For the mass of a single commodity, not a mass of or all commodities

4. And the whole mass of that single commodity, not for part of the lot.

Point two already makes clear that Marx is holding constant a variable and that he already knows what you say he doesn't know. So your argument does not fly on that ground alone. also, as you and I have gone over, equilibrium price is nonsense for Marx, pure bourgeois ideology. I cited arguments for it from people engaged in discussing the transformation problem at a sophisticated level with an international body of discussants.

Which brings me to a methodlogical point: citing Wikipedia is even less convincing than citing a regular encyclopedia, which as far as I remember my teachers had stopped allowing me to use in 8th grade. This is because Wiki, like an encyclopedia, is a condensed, Cliff Notes version of an argument, it is the McDonald's of knowledge: fattening, greasy, unhealthy and it makes you lethargic and less aware. I don't see the point of reading Marx or any serious thinker if all you are going to do is read a low budget, abridged Cliff Notes for commentary.

Chris