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Saturday, May 3, 2014


Chris replied to my blog post about whether housing should be included in the category of capital, so I think I owe him [and others] a response, even though this is not something I feel strongly about.  In my response, I am going to refer to the essay I published many years ago called "A Critique and Reinterpretation of  Marx's Labor Theory of Value."  The arguments there are rather technical, but I really think they are central to my response here, so I invite interested readers to look the essay up either on [link at the top of the blog] or in From Each According to His Ability, Volume II of my collected papers, available on Amazon as an e-book.

Briefly, I think Marx's formal explanation of profit as surplus labor value is wrong, for reasons I set out at great length in the paper just referred to, but I think his central and underlying claim is correct, that profit arises out of the exploitation of workers who have been denied access to the means of production they require to live.  Workers are driven off the land on which their food is grown, they are forcibly denied access to the mines and forests where they might find the metals and wood they need for tools and to build their homes, they are even robbed of the craft skills they possessed and passed on to their children, skills that are now, as it were, embodied in the machines they operate.  At last, propertyless, they have nothing left but their capacity for labor, which they are forced to sell for an amount of money that is far less than the value equivalent of what their labor produces.

Over time, a struggle ensues between the workers and those who have seized control of the means of production and use the law, backed by the force of the state, to maintain that control.  The churches bless the capitalists' control, the universities rationalize their control, and the capitalists flourish while the workers, with luck, get by.  The struggle waxes and wanes.  Sometimes, the workers succeed in organizing and compel the capitalists to give them a somewhat larger share of what they, the workers, have produced.  Sometimes, the capitalists succeed in halting the progress of the workers, or even reversing it [as is now happening in America.]

At their most powerless and desperate, the workers lack all control over or access to the land, either to grow food on it or even to build and own and inhabit dwellings on it.  They barely own the clothes on their backs.  But sometimes, the workers are successful, for one reason or another, in gaining some measure of control over, and ownership of, a portion of what they need to live.  One form this partial success takes in modern capitalist economies is privately owned housing.

A working class family that owns its own home has, in this one small way, extricated itself from the total control of the capitalists, although this family is in all likelihood still in hock to the capitalist class for a mortgage, and risks losing even that home when times get hard [as we have seen during the collapse of the housing bubble and the Great Recession.]  The value of that housing, however it is calculated [a very complex problem, to be sure], is a quantum of wealth that the workers have seized back from the capitalists, a quantum of wealth that, were it in the hands of the capitalists, would produce profits for the capitalists and be counted as capital.

It is certainly possible to define capital in such a manner that this wealth in the hands of the workers does not count as capital, but I think that obscures rather than clarifies the situation.  The ability of workers to own their own homes, to command at least a minimum wage, and to claim health care as a right, constitutes a measure of their collective success in fighting back against their total expropriation.  To recognize this is not in any way to suggest that they should be satisfied with what they have thus far wrested from the capitalists.  It is simply to take cognizance of the fact that their struggles have had some success.

One last point.  It is always problematic to construct a scalar measure of a multi-dimensional vector of physical goods.  Even if we restrict the concept of capital to factories and tools and raw material, it is genuinely problematic how to translate a multi-dimensional list of such capital goods into a measure of value.  Should a privately owned automobile factory be valued at what it cost the corporation that owns it to build it?  If so, what depreciation schedule should be used to find its present value?  Or should it be valued at what it could be sold for, which is likely totally different than what it cost to build?  Or, should it be valued at some multiple of the amount at which the cars made in the factory can be sold?  Or should it be valued at some proportion of the market capitalization of the shares of the company's stock that are traded on the stock market?  Analogous problems exist in the valuation of raw materials and tools used in the factory, or of the land on which the factory stands.  As I argued at some length in my essay, "The Future of Socialism"  [available in the same two places as the essay referred to above], there are as a matter of Financial Accounting theory no satisfactory solutions to these problems.

Well, that, in a few words, is my reply to Chris, and implicitly to Marxist critics who have tasked Piketty for his use of what they consider an incorrect or unhelpful or ideologically encoded concept of capital.  I hope someone out there finds this of use.


Chris said...

In general I agree with almost everything you say after paragraph 2. But of course, as I believe you already know, we theoretically part company here: " I think Marx's formal explanation of profit as surplus labor value is wrong". I mean there's the quibble that again, profit, and surplus value are not to be equivocated. I can profit without producing a surplus, and I can produce a surplus that is never realized and thus doesn't lead to profit. But that said I think our core disagreement, and the one Michael Roberts (who I hesitate to speak for) would share, is that Marx's theory of surplus value is correct, and value is determined by socially necessary labor time. Otherwise we get it so frequent now in academia, Marxism without Marx. Marxian economics without value theory.

Our reading of Marx accounts for why you and I amicably disagreeing over various - let me call them for now - left liberal matters (i.e., Krugmanite, Keynesian, various thoughts along that spectrum). For instance I do agree that universal health care, increased minimum wage and an owned home are both class victories and not sufficient conditions for freedom. But I also think to raise the minimum wage, will costs the capitalist more in variable capital and hurt his rate of profit. And when the variable component is waged he will be incentivized to find alternatives to make up for his recently lost capital. I also think to set in place a corporate tax to fund healthcare is also to hurt the rate of profit, which in the long run will hurt the accumulation of capital. I basically think because Marx was right about his value theory, we can making a very historically and empirically accurate account of why the welfare state is constantly undermined, under assault, and a priori doomed to failure.

Now I think to really get into the meat of our disagreement would require a back and forth regarding the legitimacy of Marx's theory of value, since from our premises - I thinking Marx is right and you thinking Marx was in err - we necessarily reach different conclusions. On that matter I can only say what I've said in the past, that Andrew Kliman's work could go a long way towards changing your point of view, and what he says, and how he says it, is far better than anything I have to say on the matter.

tom llewellyn said...

Interesting discussion, and I'm going to side with Professor Wolff. The issue is very complicated. Let's just say that the rich have way too much money and the rest of us don't have enough. This is of course exactly the opposite of current Republican philosophy.

Chris said...

The disagreement requires taking sides regarding Marx's value theory. I'm always interested why people reject it. As of now I've never heard a good reason. And privately I'm a bit upset to hear people call themselves Marxists when they reject the fundamental and foundational aspect of Marxian economics: the creation of surplus value by exploitation. If you don't accept Chapter 1 of Capital, in my opinion, Chapter 2 to the end of Vol III do not follow.

The rest of Wolff's post I completely agree with. We agree that workers are disposed of the means of production, that capitalist exploit that, that workers only have their labor power to sell, and that various welfare programs are better than nothing, but certainly not sufficient conditions for freedom.

So just to repeat, and clarify, if there's something to side on, it's Marx's value theory, and I'm open to objections....

Chris said...

Coincidentally there was a blog post in the past 24 hours that offers a robust defense of Marx's theory of value against commonplace rejections: