Some Assertions Of Marx And Some Remarks On The Labor Theory Of Value

1.0 Introduction

I have been reading fools in other parts of the Internet. Hence this post.

2.0 Assertions

Marx says the following (I am least sure of 6):

1. Both sides to an exchange gain. (Capital, volume 1, chapter 5)
2. Nobody, neither consumers, nor workers, nor investors, nor the managers of firms, make decisions on the grounds of the labor time embodied in commodities. (Capital, volume 1, chapter 1, section4)
3. Surplus value (dividends, interest, rent, etc.), in an ideal competitive capitalist economy, is not stolen from the worker. (Capital, volume 1, chapter 7, section 2)
4. Relative prices do not tend towards relative surplus values. (Capital, volume 1, chapter 5, last footnote; Capital, volume 3, part II)
5. After the revolution, workers will not receive equal wages. (Critique of the Gotha Program)
6. After the revolution, the planning authority should not necessarily set prices equal to labor values. (Critique of the Gotha Program, Poverty of Philosophy)?
7. Labor is not the source of all wealth.

3.0 On The Labor Theory Of Value

Consider a capitalist economy. At the start of a year, say, firms own certain plants and goods in process in their inventories. During the year, laborers working with this plant and inputs for energy, lubricants, semi-finished goods, and so on, work up these goods to produce an immense quantity of commodities, the gross product for the year. Firms, who own this gross product, buy and sell some of these commodities among themselves or retain some to replace used up plant and inventories. The renainder is the net product. This net product consist of goods in the form that can be used to expand the plant, including the capital goods needed to work with this plant, and the necessaries and conveniencies of life.

This net product, at a certain level of abstraction, can be seen as divided into wages and income for the owners. The overall rate of profits is the ratio of the net product to the sum of the capital goods used up in production and wages, if one treats wages as advanced.

The above is the perspective of classical political economists such as Adam Smith and David Ricardo. But the above summary is of an approach that needs better definition. I have defined the rate of profits as a ratio between heterogenous quantities, a nonsense quantity. One needs prices or some other way of forming a single number out of the large mish mashes of commodities.

Following Sraffa, assume that a uniform rate of profits is made in each line of production. Then, still at a very abstract level, one can set up a system of equations for prices of production. "...the distribution of the surplus must be determined through the same mechanism and at the same time as are the price the price of commodities" (Sraffa). And this system of equations can be solved.

Ricardo and Marx did not have available the concept of an eigenvalue. They had a conjecture. The ratio defining the rate of profits can be found by evaluating large aggregates of commodities with the labor embodied in each commodity. They knew and said that there was some error here. Nevertheless, this approach attempts "to penetrate the inner physiology of bourgeois society," as Marx put it. Ricardo correctly identified the trade-off between proportional wages and the rate of profits, a trade-off later rediscovered by Nicholas Georgescu-Roegen and taken up by Paul Samuelson under the moniker of the 'factor price frontier'.

Ricardo and Marx both focused on a good of average capital-intensity, in some sense. Ricardo sought a measure of value that somehow did not vary with distribution or improvements in technology. If the ratio of a price of production to the price of such a commodity varied with distribution, that variation was supposed to be caused by the invidual commodity, not by stretching or shrinking of the yardstick. One of Ricardo's insight was that a higher wage could be accompanied by a lower price of production of some commodities.

Sraffa identified a 'standard economy' built into the quantity flows for his system of equations. In the standard system, which has the same level of employment as the actual system, capital goods, gross output, and net output are all composed of commodity baskets in which the quantities of commodities enter in the same proportion. Suppose the net product of the standard system is adopted as the numeraire for the wage, which, therefore, ranges from zero to unity. Then one can calculate the rate of profits as a ratio of homogeneous quantities, without ever evaluating commodities at prices.

This rate of profits is not a price phenomenon insofar as it does not depend of relative prices. The general rate of profits is unchanged by evaluating commodities at market prices, at prices of production with a uniform rate of profits, at prices of production with varying markups among industies refracting market power, at labor values, or at energy values. It just does not matter.

This perspective on the labor theory of value, which I mainly take from Pierangelo Garegnani, presents it as a technical solution to a technical problem in trying to understand capitalist economies. Fratini and Ravagnani has some interesting work on the standard system. Whatever socialogical insights one may take from Marx's early writings on alienation or Lukacs writings on reification does not seem to have much to do with the matter.

Garegnani notes how little understanding some critics of Marx had of what they were attempting and failing to criticize:

"We find instead no mention whatsoever, in Böhm-Bawerk, of the correct proposition that the rate of profit is determined when the real wage is specified, or of the ensuing inverse relation between the wage and the profit rate which the labour theory of value had allowed Ricardo and Marx to establish, overcoming the deficiencies of Smith’s determination of profits..." (Garegnani 2018)

and

Two observations seem sufficient to indicate how Böhm-Bawerk coped with Marx’s Volume III prices of production, without essentially changing his conclusions about Marx’s work. The first is that Marx’s idea that the rate of profit and, therefore, the prices of production originate from a redistribution of aggregate surplus value is broken down by Böhm-Bawerk into a 'premise' and no less than four distinct 'arguments', thus rendering Marx's reasoning practically incomprehensible. The second observation is that the crux of Böhm-Bawerk's argument, contained in ten out of the essay's 110 pages, shows some awareness of the true difficulties besetting Marx's theory of prices of production, centring around the use of 'values' rather than 'prices of production' in the price equations themselves. [footnote:] See Böhm-Bawerk’s criticism of what he reconstructs as Marx's 'fourth argument' on labour values in Böhm Bawerk (1896). In the course of his criticism, Böhm-Bawerk notices that the determination of aggregate surplus value cannot ignore the fact that wage goods can be sold at 'prices' of production which deviate from 'values', the same point, we may recall, made by Marx in his sketch of a theory of prices." (Garegnani 2018)

References

• Saverio M. Fratini and Fabio Ravagnani, Sraffa and the 'slogans not used'.
• Pierangelo Garegnani. 2018. On the labour theory of value in Marx and in the Marxist tradition Review of Political Economy