| Victor Magarino Debating "Ubersoy" On The Labor Theory Of Value |
The above is one in a series (Richard Wolff versus "Destiny", Slavoj Zizek versus Jordan Peterson) in which the pro-capitalist/anti-socialist side is represented by somebody seemingly almost completely ignorant of the topic they are pretending to discuss. Magarino needs a better interlocutor. I can find some related debates on YouTube with a more level playing field.
That said, I think Magarino needs a better answer to the question in this post title. I do not think that this question is answered by pointing out that some work is needed to maintain the vats while wine is aging. J. R. McCulloch was supposedly extremely confused on this question when it was first(?) posed.
Wine illustrates two challenges to the LTV: the use of natural resources in limited supply and the effects of time. Land poses some difficulties for the definition of prices of production, but these difficulties do not lead to the restoration of the marginalist theory of supply and demand. The latter challenge is addressed in the so-called transformation problem.
First, suppose that some high quality wine is made from varietal grapes grown on only certain lands of varying fertility, and these lands can be only used for these grapes. Oenophiles want a distinct terroir for this wine. If the amount of this wine that is in an economy's overall social product is taken as given, one can solve for prices of production with no problem. The rent of those lands fully under cultivation drops out of the price system. Labor values can also be calculated for the given production system, using the marginal land. Which land is marginal, however, is found endogenously with variations in the level and composition of final demand.
Now suppose lands of various qualities are not so rigidly specialized. Several production processes can be operated, in parallel, on different plots of land of a given quality, and some of these processes might produce different commodities. This is a problem of intensive rent. As I understand it some of the problems of joint production arise here. No system of prices of production might exist for a rate of profits of zero, even though a solution might exist for a range of postive rates of profits. The analysis of the choice of technique might yield a non-square Leontief matrix, and the system of prices of production need not be unique. The level and composition of final demand might enter into the determination of prices of production in a way that contrasts with how final demand does not matter for single production. I do not see any necessity, however, to address requirements for use by introducing unobservable utility functions.
I am not sure what these difficulties with intensive rent have to say about the LTV. As I recall, Ian Steedman's examples with negative labor values and positive prices arose in models of joint production.
But put these issues with land aside, and consider the issue of time. (I do not take this discussion to be about the time preferences of consumers.) First, the mere fact that some production process takes a long time to complete does not pose any difficulty for the LTV, in and of itself. Ricardo is quite clear on this in Section III, Chapter 1 of the third edition of his Principles. One way of understanding the LTV is as a theory of relative prices. Relative prices of production vary from relative labor values only if their capital-intensities (also known as the Organic Composition of Capital) vary from one another, in some sense. I gather that the point of the wine example is to suggest that here is a commodity that has a much higher OCC than the average. I agree that, in a simple analysis, this suggests that the LTV might not apply here. (In a full analysis, ranking commodities by the capital-intensities of their production methods poses some difficulties.) Once again, though, this analysis is fully consistent with a revived classical political economy. A much debated question is whether or not an analysis of prices of production receives support or needs to be supplemented by considering labor values.
One difficulty that I have with objections to the LTV based on this example of wine is that it is about an individual price of an individual commodity. The LTV is about the generality of produced commodities in a capitalist economy. Magarino tends to emphasize empirical results found from Leontief input-output matrices for empirical economies across specific countries and specific times. Whatever one might think of the level of aggregation, the methodologies of these investigations, the question of concrete versus abstract labor, and so on, this is the right setting for investigation. One might say it is a question of mesoeconomics. Based on my understanding of the transformation problem and of prices of production, I find surprising how well the LTV is supported empirically as a theory of relative prices.
Update (12 June 2021): I quickly read Chapter 13, production time, last night in volume 2 of Marx's Capital. It discusses how production time can be longer than the working period. He specifically mentions wine as an example of a commodity whose production process might require time for the forces of nature to act without labor being expended. Whatever interest this fairly concrete discussion may have, it does not address the question in the post title.
Posts
8 comments:
"In fact, Sraffa here proceeded directly to the one and only explicit and direct critique of neoclassical theory that can be found in his book. He formulated the “wine and oakchest” example, assuming that wine was produced a few years ago by an intermediate amount of labour and then was left to mature until it was ready for sale, whereas the oak-chest was produced by means of a small amount of labour, expended a long time ago (the planting of the tree) and then, in the present, the tree was harvested and transformed into the chest. Wine and oak-chest were non-basics, the wage rate, by contrast, was assumed to diminish according to the standard system of the basics, and the relative price fluctuated in such a way that wine and oak-chest had the same value at two different rates of profit. If the two commodities represented different capitals, and alternatives to be used for the same investment, the following paradox followed: one capital was cheaper and therefore more profitable to be used as capital at a low rate of profit, the other would become more profitable at an intermediate level, and the use of the first would again appear to be the more profitable investment at a higher level.
This was reswitching, but demonstrated for non-basics – basics came in only via the
assumption of the linear wage curve. Samuelson and his pupil Levhari then thought that this phenomenon could not occur if all commodities were basic and Levhari presented a non-reswitching theorem for basic systems, but this was a mistake. As we have already seen, Levhari’s proof contained an error."
https://www.wiwi.uni-frankfurt.de/fileadmin/user_upload/dateien_abteilungen/abt_ewf/Economic_Theory/publications/2021_Sraffa__s__Reduction__of_the_Prices_of_Basics.pdf
PS: The irony of Sraffa consists in refuting neoclassicals and austrians on the same ground where they wanted to refute the classics and Marx...Oh beloved wine!
I continue to think that the whole topic is based on a giant misunderstanding: it not about the "Labour Theory of Value", but the "Labour Definition of Value", that is in the classics "value" is simply defined as being labour, especially by Marx. This is rather clear in his pointing out that the labour of slaves and animals does not create any "value". The only things that create value are "land" (e.g. when a corn seed in planted, 100 corn seed are created), more properly called "rent" than "value", and "labor" (of free humans only), and "land" creates "rent" only in conjuction with labor, however minimal (e.g. to collect a fruit spontaneously grown by a wild tree before eating it).
The purpose of the definition of "value" as labor is simply cost accounting: it is not a theory of prices. The cost accounting is used to delve into distributional issues, not into price issues, that is to show how labor flows from employees to employers, because in conditions of capital being relatively scarcer to labor, the exchange-value of labor-power is lower than the "value" of labor (for example employers can buy 8 hours of work by offering commodities that cost 6 hours of labor to make). If the conditions were reversed, that is labor is relatively scarcer than capital, then the exchange-value of labor-power would be higher than the "value" of labor (for example employers to buy 8 hours of work most offer commodities that cost 10 hours of labor to make); this means that employers lose capital until conditions are reversed.
The above applies only to "economic goods" of course.
There have been attempts at turning the "labor definition of value" into a "labor theory of value" by asking whether exchange-values would converge to labor costs, but that is to say the least far from trivial, because mostly labor costs in most cases define a lower bound to prices, and not necessarily always, depending on the relative scarcities of labor and capital and land, and how they change with time. My personal impression is that in most cases prices are not too far for too long from labor and land "values".
I will repeat here my impression that the classicals wrote largely before it became evident just how enormous is the contribution of "land", in the form of coal and oil, to value added, that is how enormous is the consumer surplus of those fuels, so they blithely "labor" as the only source of "motive force"; for a wider approach to cost-accounting in modern economies some people think that instead of "labor" content it is more insightful to use "energy used". whether consumed by humans, animals, or coal and oil fueled machines.
PS: as to the the various reswitching issues I think that they are obvious as it is obvious that the optimization landscape in general case is "bumpy", that is it has various local maxima, which also move with time.
«asking whether exchange-values would converge to labor costs, but that is to say the least far from trivial, because mostly labor costs in most cases define a lower bound to prices»
Part of the story here is what determines consumer surplus, and why it exists at all (a good view of marxian "surplus value" is that it is the consumer surplus that employers get when purchasing the labor-power of free employees for (wage-commodities embedding) less labor than that labor-power can give).
To get a theory of prices one has to build both a theory of costs (in terms of the labor of free people or whatever else) and then along with it a theory of consumer surplus. I suspect that our dear dr. Sraffa when writing "Prelude to a Critique" was quite aware that his work was limited to the "cost accounting" topic only.
PS The funny thing is that neoclassical Economics does not have a theory of prices, even if ostensibly that is all that it has, because it does not have a theory of the price of capital, so it cannot even begin to do cost accounting.
«2021_Sraffa__s__Reduction__of_the_Prices_of_Basics.pdf»
Interesting, I read that without paying too much attention to the maths and my impression is:
* It has always been obvious to me that re-switching arises from path dependency which is inevitable if one allows "capital" to be a link between past and present and future, so the main effort of neoclassical theory is to in effect hand-wave away capital and time.
* My intuitive understanding of why in practice re-switching is often not a big deal is JM Keynes observation that almost all capital is long term.
* The paper to me seems to argue something similar, the way I summarize it to myself is that cumulative capital values decay at a fast enough rate for path-dependency to be not a big deal, because the older parts of the path have rapidly vanishing influence.
But these are just first impressions.
«The only things that create value are "land" (e.g. when a corn seed in planted, 100 corn seed are created), more properly called "rent" than "value"»
I feel ashamed (regardless of nobody reading that comment or this one) that I have not been clear in my naming convention, and the above can be read wrong: When I wrote "create value" I should have made it clear that I meant the intuitive meaning of the word "value", as "economic worth", not the technical meaning as in "the labor of free men". I try to remember using the convention of quoting terms-of-art that differ from the ordinary meanings, but I guess it was not clear,
So I should have written better: The only things that create economic worth called "exchange-value" are "land" (which really means "natural phenomena") and is then called "rent" and "labor" (of free humans only) and is then called "value" without qualifications.
«that re-switching arises from path dependency which is inevitable if one allows "capital" to be a link between past and present and future, so the main effort of neoclassical theory is to in effect hand-wave away capital and time.»
And that is why during the Cambridges Capital Controversy it was shown that Arrow-Debreu models works only with a single capital commodity, while they work even with multiple consumer commodities, and why JB Clark defined "capital" as a single metaphysical essence that imbues "capital" commodities: path dependency is then waved away as "capital" is then essentially "leets"/"putty".
«Does The Existence Of Wine Refute The Labor Theory Of Value?»
As a pithy summary, consider the similar question: "Does the fruiting of apples on a wild apple tree refute the Labor Definition of Value?".
«Part of the story here is what determines consumer surplus, and why it exists at all (a good view of marxian "surplus value" is that it is the consumer surplus that employers get when purchasing the labor-power of free employees for (wage-commodities embedding) less labor than that labor-power can give).»
That can be considered a theory of the exploitation of labor that any neoclassical Economist could propose, even JB Clark:
* Consumer surplus can be defined as the gap between the price of market commodity and the highest price the price would be willing to pay for it.
* When paying wages employers must have a consumer surplus, because the highest wage they would be willing to pay is the one that makes them merely break even, so they not not bother.
* That employers have a consumer surplus would not be considered "exploitation" because it is considered quite right for market participants to buy low and sell high, whether or not that is the result of adding value, or receiving rent.
* Regardless, employees also "exploit" in "consumer surplus" terms the employers, because as a rule they pay for the commodities they consume a price well below the highest that they would be willing to pay.
The last two points however are quite disingenuous because there is a very big difference between the "consumer surplus" of employers who buy labor from employees, and employees who buy commodities from employers:
* The "consumer surplus" that employees gain from buying commodities is *notional*, it is purely in terms of "utility", it is not additional money income, they cannot spend that "consumer surplus" to buy more commodities.
* The "consumer surplus" that employees gain from buying labor is not notional, it is in terms of money, it is actual money income, that they can spent do buy commodities. That is because employers buy labor from employees paying money to resell it to employees for money, embedded in the commodities the employees buy with their money wages.
The difference is obvious considering the ridiculous arguments of "tech cornucopian" who argues that thanks to web services the living standards of the working class have been booming, for example:
https://href.li/?https://www.theguardian.com/business/2018/jul/22/why-uk-economy-needs-leap-of-imagination-harry-potter
“our use of search engines, email and other products like social media and digital maps should cost as much as $25,700 (£19,560) a year”
The buyers of those web services are not actually receiving an extra $25,700 per year of money income, they cannot spend that "consumer surplus", but employers can surely spend their "consumer surplus", their profits are money income, to buy any commodities they want. The same of course for "land" (etc.) rentiers, their "consumer surplus" is actual money income.
While reading Cohen and Harcourt's "Retrospective" I noticed that the major example the give for Wicksell effect involves purely labour and time in wine-making:
https://www.aeaweb.org/articles?id=10.1257/089533003321165010
“Why do reswitching and capital-reversing occur? Samuelson (1966) provides the intuition using the Austrian conception of "capital as time", so that the productivity of capital is the productivity of time itself. Figure 1 illustrates two techniques for making champagne using only labor and time (and free grapes). In technique 'a', 7 units of labor make 1 unit of brandy in one period, which ferments into 1 unit of champagne in another period. In technique 'a', 7 units of labor make 1 unit of grape juice in one period, which ripens into wine in another period. Then 6 units of labor shaking the wine produce 1 unit of champagne in a third period.”
Note: as to “capital as time” while it is possible to *define* "capital" as "time", I don't think that it is useful to consider "capital" as "time", anymore than it is useful to imagine "capital" as the quality of "capitalness" as J. B. Clark did.
Post a Comment