ECONOMIC-PHILOSOPHIC MANUSCRIPT OF 1978 AS IT WERE PART III

III. The Meretricious Charms of Physical Quantities

            It is tempting – particularly if one is English – to make the sign of the Wiener Kries and exorcise these metaphysical spirits.  Look to the facts, and leave the philosophy for Germans, or academic Frenchmen!  Commodities are physical objects.  They are produced by physical processes, in which definite quantities of physical substances are combined by the labour of real individuals in specifiable ways.  An economy is a set, or system, of such processes – the sum total of them, in fact, no more nor less.  Performing a useful and permissible abstraction, for the purpose of bringing within manageable control a very wide variety of productive activities, we may represent a single industry by means of a list, or array, or vector showing the quantities of various physical substances that must be combined with a specified number of hours of labour in order to produce a single unity of the physical good, the commodity, that is the product of that industry.  So much iron, so much coal, so much rubber, so much glass, and so many hours of labour, to produce one automobile.  An entire economy is represented by a matrix of technical coefficients.  With the proper maneuvers, we may now introduce a system of prices, a wage, and a profit rate— Or, if our tastes incline us in that direction, we may calculate the quantities of labour, both direct and indirect, that are required for the production of a unit of each of the commodities produced [and consumed] in the system.

            As we all know, it is the custom to posit a system of n equations in n+2 unknowns – namely, the n prices, the wage, and the profit rate.  One of the prices is arbitrarily selected as standard of value, and we are then able to represent a system of relative prices in which there is one degree of freedom.  Fix either the wage or the rate of profit [or, for that matter, one of the (n+1) relative prices] and the system is determinate.  It is then a relatively simple matter to exhibit the inverse relationship between wages and profits, to prove unsettling theorems concerning switches from techniques with lower to techniques with higher capital/labour ratios, and back again, and even to demonstrate, under suitable conditions of joint production and with appropriate definitions, the possibility of a positive rate of profit conjoined to a negative rate of surplus value.  To be sure.  Very elegant, very compact, amusing perhaps, unexpected no doubt, and requiring for exposition and explanation only the most scientific of prose.  But what is the significance?

            Steedman’s thesis, stripped of its polemical elaborations, can be stated simply thus: value magnitudes, defined as quantities of embodied labour, can only be derived from the matrix of technical coefficients.  Prices, wage level, and profit level can be derived either from values, by means of a series of transformations, or directly from physical quantities by solution of the suitable system of simultaneous equations.  Since the values are derived from the physical quantities, there cannot be contained in the former any information not already contained in the latter.  [The entire series of causes is contained entirely in the immediate causes, etc etc].  Hence, value calculations are otiose; not meaningless, merely superfluous.  To be sure, we may – indeed we must – investigate the historical, social, technological, ideological, philosophical, and psychological causes for the states of affairs summarized in the matrix of technical coefficients.  But no such investigation can do more than explain what is already contained in that matrix.  And no labour theory of value, manifestly, will be of any use in accounting for the technical coefficients.

Thus much for the preconditions of the model.  Analogous conclusions can be drawn concerning its application.  From the structure of the system of equations, it follows that the pivotal indeterminacy is the degree of freedom relating the profit rate to the wage rate.  [We shall return much later to the question whether some one of the (n-1) relative prices might, in some manner, be determined exogenously].  Wages and profits are treated as a division [exhaustive in combination] of the net national product.  [If one selects some appropriate socially determined level of subsistence and incorporates it into the technical coefficients of production, then the share of net national income going to wages will, in some sense, be a luxury wage.  Maximum profit, π = Π, then corresponds to subsistence for the workers.]  The precise proportionality of the division, so far as the model indicates, is determined exogenously: by class warfare in the streets, by class struggle in the bargaining room, or on the picket line, by democratic vote of the electorate, by dictatorial fiat, whatever.

            Put to one side the mathematics, which is beguiling in its elegant complexity.  Consider simply the procedure of selecting one of the commodities arbitrarily as standard of value, and setting its price equal to unity.  In such a model, there is not, in the full sense, money.  Oh, there is money of account, in a manner of speaking.  If the k^th commodity has been chosen as standard of value, then everything has its k-price, the workers earn their k-wage, the profit rate is so much of a unit of k per unit of k invested, etc.  But money as value incarnate does not exist in the system.  Indeed, strictly speaking, so long as gold and silver enter into production processes as physical inputs, even they cannot serve adequately as money in the full requisite sense.  [It is not clear whether Marx himself understood this, although the Grundrissse suggests that he did].

            Capital as such – self-expanding value, money that has been freed from all natural encumbrances and can finally realize its true, insane [verrückt] destiny, which is to beget more money ad infinitum – does not exist in the physical quantities model.  The “metaphysical” objectification of exchange relationships, productive activities, and technical relations in money is an essential fact of capitalism.  It is not one of the historical, psychological, or political background conditions of that matrix of technical coefficients “to which, of course, much study must be devoted.”  Nor is it one of a number of arrangements that can be conjoined to the self-same matrix – as though a society were a modular construction of prefabricated units!  Capitalism requires commodity production, and wage labour, which presuppose money.  Money [exchange value per se] must be divorced entirely from any physical form, from any use value, from any particular system of production.  It must be available, promiscuously, instantaneously, unencumbered by religious, historical, cultural, linguistic, or geographical constraints.  The obsession with gold is a passing phase, a last clutching at the security blanket of economic infancy.  Only those whose minds have not transcended their senses require, from time to time, the sensory reassurance of clinking coins.  The true inhabitants of our brave new world can make do entirely with credits and debits in disembodied accounts.