WHAT I HAVE BEEN DOING -- PART FOUR

In the second paragraph of his Physica, Aristotle distinguishes between "things which are more knowable and obvious to us" and things which "are clearer and more knowable by nature"  Physics, 184^a16-18.  Aristotle begins his discussion with things that are more knowable and obvious to us, and Marx, following Aristotle's example, chooses to begin Capital in the same way.  So it is that he launches his extraordinary investigation with an examination of a single commodity.  Only after he has fully plumbed the mysteries and mystifications of the commodity does he reveal to us the underlying "laws of motion" of capitalist economy.  Strictly speaking, I ought to lay my own story before you in the same fashion, beginning with the opening pages of Capital and much later arriving at the underlying economic theory in terms of which those opening pages can be made transparently clear.  But I am going to reverse this order of exposition, first summarizing as best I can the very complicated theoretical evolution from the classical political economists to Marx's own theory, and then returning to Marx's account of the surface mystifications that concern him in the opening chapters of the first volume of Capital.  What I have to say is so complex, and involves so many seemingly unrelated matters, that it will take me a good deal of time to "connect it up," as trial lawyers say.

Two central problems confronted Smith, Ricardo, and the other classical political economists.  The first problem was to explain how the annual product of the farms, mines, and factories is divided among the three great classes of society -- the landed aristocracy, the entrepreneurs, or capitalists, and the workers.  The second problem was to identify the causes and conditions of economic growth, as well as the obstacles to continued expansion of the economy.  Distribution and growth -- these were the focus of the concern of the classicals, and they were to be Marx's theoretical concerns as well.  "Class warfare" is thus not the invention of Marx and his followers.  It was the centerpiece of the work of Smith and Ricardo.  Neo-classical economic theory, by contrast, concerns itself with "the relationship between ends and scarce means which have alternative uses," to invoke the famous definition of Economics offered by Lionel Robbins in his short but influential book, An Essay on the Nature and Significance of Economic Science.  [1932] 

Smith and Ricardo recognized that in a market economy, the division of the social product is mediated by the prices of land, capital, and labor, which is to say by rents, profits, and wages, and that to explain these three prices, a general theory of price would be  required.  In the language of the time, what was needed was a theory of value.  Smith began the solution of this problem by suggesting that goods trade in the market in proportion to the amount of labor it takes to produce them.  That is to say, Smith offered the first version of what came to be known as the Labor Theory of Value.  But Smith himself recognized that his simple answer held true only in what he described as "that early and rude state of society which precedes both the accumulation of stock and the appropriation of land," a time when there is neither capital to earn a profit nor privately owned land to earn a rent.

It was David Ricardo who managed to take account of both of these complications.  The distortions in prices introduced by capital are to be explained, he said, by recognizing that capital goods -- machinery, tools, and the like -- are themselves the products of labor expended in earlier cycles of production.  The labor expended in making capital goods is then carried forward to be transmitted to the commodities produced with their aid.  Prices are determined by the totality of the labor expended in the present production cycle plus all of the labor expended in earlier cycles and, as he rather picturesquely put it, "embodied" in the present product.

Rent presented a particularly vexing puzzle, because land, unlike machines and other capital, is not produced.  It is, as it was popular to say in those days, a free gift from God, Who first created the world and then created the men and women who inhabit it.  In England at that time, all the available land had long since been taken out of the commons and appropriated by private individuals, who erected on that appropriation a lavish life style that they passed on from generation to generation.  If the rent paid to the landed gentry by entrepreneurial agricultural investors was truly a component of the price of the corn grown on the rented land, then that price could not possibly be determined solely by the labor directly or indirectly expended in the production of the corn.  In what is widely acknowledged to be the theoretical highpoint of the classical period in Economics, Ricardo demonstrated that rent is not a component of the price of corn, contrary to all appearances, but is in fact a diversion to the landlords of a portion of the profit earned in the marketplace by the entrepreneurs.

["Corn, " by the way, for those of you who are not aficionados of classical Political Economy.  is the British word for whatever is the most common grain of a locality.  The English settlers to the New World found that the most common local starch was maize, so they called it corn, and we in America have ever since been stuck with the word.]