HUMAN CAPITAL

My remarks on the subject of human capital have provoked some interesting comments and links, so it occurs to me that I ought to say  something more on what is actually a complex subject.  Let us begin with the fiction on which the ideological rationalization of capitalism is founded, namely that workers are petty capitalists who produce the commodity labor-power, which they bring to market and offer for sale, like other commodity producers, in competition with other producers of the same commodity.  Marx's anatomization of this fictio juris is exquisite, and cannot be improved upon.  The treatment of workers as producers of the commodity labor-power is of course crazy, as Marx very nicely shows us.  To think in that fashion is to suppose that the worker's body is her fixed capital and her food and clothing her circulating capital.  The problem is that a worker who notices that she is not earning the economy-wide equilibrium profit rate on her capital, "and who, like any prudent capitalist, wishes to shift to a more profitable line, will find it necessary to separate herself ("alienate herself," to use the technical legal term) from her body. And by a quite unfortunate metaphysical accident-which, however, can scarcely be blamed on capitalism itself! -she is unable to survive that particular liquidation of her investment!"  [to quote myself from my essay A Critique and Reinterpretation of Marx's Labor Theory of Value -- see the archive at box.net.]

Economic theory, of course, cooperates in the fantasy that workers run small businesses producing the commodity labor power.  And The Law in its majesty enforces wage bargains as though they were contracts between capitalists who meet as equal participants in the free market.  But The Law is not an ass, and when a worker with more book learning than is good for him comes before the bar and requests that he be permitted to deduct on his income tax return the cost of "doing business" -- which is to say, his food, clothing, shelter, and other expenses incurred in the course of producing his commodity for the market -- the Law sniggers behind its hand and denies his request.

Enter Gary Becker, who resurrected the concept of "human capital" to take account not of the worker's body or her food and clothing but rather to incorporate into Economic Theory the important fact that in a modern capitalist economy, some categories of workers regularly earn wages significantly higher than the standard pay for semi-skilled machine operatives, as a consequence of their educational credentials and the skills supposedly thereby represented.  These workers, it is suggested, have invested in themselves by holding themselves off the labor market while they acquire further education, often at considerable expense, thereby accumulating "human capital." .  They are thus like business owners who use a portion of their profits [or take loans] to purchase more sophisticated machinery, the cost of which, amortized over the life of the machines, is a good deal less than the market value of the additional product churned out by the improved capital goods.

This modern version of the old notion of human capital allows economists to blame the low wages of unskilled workers on their own improvident failure to invest rather than consume, an interpretation of poverty that is quite comforting to those sitting atop piles of accumulated capital.

But the analytical concept of human capital has other interesting uses in our attempts to understand modern capitalism, which exhibits a segmented and highly pyramidal wage structure.  It can, for example, be deployed to make sense of the notion of relative exploitation.  High wage workers can be understood as both exploited by their employers and exploiting lower wage workers, a construal that seems to comport with our intuitive sense that corporate executives, lawyers, professors, and such like high wage employees occupy a social position more akin to the owners of capital than to hourly wage earners at the bottom of the income pyramid.

In the essay referenced earlier, I tried to build a simple mathematical model that would capture some of these ideas formally, as a substitute for the classical labor theory of value, which, as I show, is fatally flawed.

COMMENT ON A COMMENT

Robert Vienneau's comment on a previous post exactly paralleled the points I am planning to make in the next lecture of my Marx course.  He writes:

"I thought Professor Wolff's discussion of the literary nature of Marx's Capital very apposite for that discussion.

Under capitalism, as far as a share holder is concerned, there is no difference, at a certain level of abstraction, in a corporation's expenditure on equipment or training for the workforce. Both are capital investments, with expected payoffs and risks (of obsolescence resulting from inventions during the life of the investment, of breakdown of equipment, of worker's changing their employment). So the phrase "human capital" captures a real illusion thrown up by capitalism.

But the phrase obscures the fact that workers laborer under the direction of others who are always trying to extract more value out of the worker. "

This is exactly right.  The entire comment is perfectly encapsulated in the phrase "a real illusion."

By the way, Robert Vienneau has a very interesting blog called "Thoughts on Economics."  It is not for the faint of heart, but he does some very interesting things there.  I recommend it.

THINGS COME TOGETHER [WITH APOLOGIES TO W. B. YEATS]

Last week, in an effort to introduce my students to the concept of ironic discourse, I began my lecture by quoting the famous opening sentence of Jane Austen's Pride and Prejudice:  "It is a truth universally acknowledged that a single man in possession of a good fortune must be in want of a wife."  Yesterday, having obsessed as much as was humanly possible over today's lecture, I repaired to Netflix for some amusement and stumbled on the lavish BBC miniseries of P. D. James' 2011 sequel to Pride and Prejudice, called Death Comes to Pemberley.  A murder is of course de rigueur in a murder mystery [if you will forgive the pun], so not very far into the first episode, we get a nice bloody murder, the unraveling of which will presumably occupy the remainder of the series.  Since I have not yet watched so much as the entire first episode, I cannot tell you whodunnit, but the production perfectly illustrated for me a central theme of Capital, so I thought I would take this opportunity to expatiate on it a bit.

The story opens with Elizabeth and Darcy preparing for a grand ball at Pemberley, which in this production is a magnificent stately structure with endless galleries and vast expanses of perfectly cared for lawn.  We see half a dozen young women in the kitchen preparing the goodies for the meal and liveried, bewigged servants serving a light repast to Darcy, Elizabeth, and the Bennetts, and various farmers -- what in the Old South of the United States would have been called "field negroes."  Darcy and Elizabeth are presented to us as a courteous, caring master and mistress, inquiring after the health of the servants and thanking them for their service.  The production manages to convey, quickly and convincingly, the absolute inviolability of the class structure of this world, made all the more manifest by the fact that Darcy, Elizabeth, and those of their class do not ever actually do anything in the way of productive labor, save, of course, to oversee their clouds of servants.  It is just as Adam Smith represented it in The Wealth of Nations, except of course for the fact that these are, after all, Elizabeth Bennett and Fitzwilliam Darcy, so clearly disapproving of them is out of the question.

Today, in my lecture, I come to the critical passage in Chapter IV at which Marx, for the very first time, introduces the phrase "surplus value."  With that, the argument is launched that arrives many pages later at Marx's central thesis:  capitalism rests on the exploitation of the working-class.  Stripped of its sometimes puzzling formal elaboration, Marx's claim is that the workers, denied immediate access to the means of production with which they could support themselves and their families, labor for wages, receiving what Marx, with bitter irony, characterizes as the full economic value of their labor, but despite that fact are forced each day to perform many hours of unpaid labor, the monetization of which is the capitalist's profit. 

This reality is plainly on view in the pre-capitalist world of Pemberley, but it is concealed today by the development of advanced corporate capitalism, and hence very smart professional economists, of whom I take Paul Krugman to be the exemplar, seem utterly incapable of understanding Marx's argument.  Even an ostensibly clued-up economist like Thomas Piketty, who makes disparaging remarks about the fiction of marginal productivity and Gary Becker's Nobel Prize winning innovation, "human capital," seems unable to penetrate the mystifications of capitalism.  Nor can I blame Piketty's failing on an unfamiliarity with Austen, inasmuch as he makes elegant use of her anatomization of the society of landed gentry in his Capital in the Twenty-First Century.

When I was a boy, novels like The Grapes of Wrath told the truth of capitalism.  Where is John Steinbeck when we need him?

DE GUSTIBUS

My first book, Kant's Theory of Mental Activity, was what literary critics would call a "strong reading" of the Critique of Pure Reason.  I willfully ignored passages that did not comport with my deep interpretation of Kant's argument, and made much of passages that other readers might have passed over without much noticing them.  In defense of this patently unscholarly way of proceeding, I argued that great philosophers sometimes see more deeply than they can say, requiring us as readers to make daring and controversial leaps of interpretation if we are to wrest from the texts something of great value.  I freely acknowledged that readers adopting this hermenautical dictate might, indeed certainly would, arrive at utterly incompatible strong readings.  I took this not as a failing of my efforts but as a testament to the greatness of the philosopher being thus interpreted.

I have oftentimes said here that I do not like Hegel.  That prejudice, openly confessed, has provoked more comment than anything else I have ever said.  Now the reader and commentator to this blog whose Internet handle is classstruggle has posted a series of extremely long comments which, taken together, constitute, as he himself wryly remarks, a short essay on Hegel rather than a blog comment.  Clearly he [?] has delved deeply into Hegel's writings and has found there much of value, which he strives to bring to light and state in his own words.  It would be rude, indeed churlish, for me to suggest that he ought not to have spent his time that way.  I invite classstruggle, should he wish, to compose an extended essay on whatever aspects of Hegel's writings he finds most rewarding.  I would be happy to present it to my readers as a guest post.

THE ROAD NOT TAKEN

Susie and I went to see Selma this evening.  I wept through much of the movie and came away feeling ashamed that I had not been there.

FELLOW SUFFERERS

People who know me personally are aware that I have a number of facial tics and twitches that, as I have explained in my Autobiography, have been with me since I was five years old.  This fact makes me sensitive to, and sympathetic with, others who have analogous minor afflictions that do not rise to the level of crippling disabilities.  I reflected on this today as I was reading Paul Krugman's latest blog post.  He and most of his colleagues in the Economics profession have a language disorder that manifests itself, so far as I am able to tell, not only in their speech but also in their use of written English.  I refer, of course, to their curious inability to pronounce or write the words "Karl Marx."  It is unlikely to be an inherited trait, and it seems equally unlikely that it is a consequence of their physical surroundings, but it may very well be something in their social environment.  My tics, I am told by doctors, can only be treated by medications whose side effects would be more serious than the tics themselves.  I suspect that Krugman and his associates confront a somewhat similar dilemma.  The impact on their economic well-being of overcoming the disability would probably be enormous, although simply being able to say the words from time to time might bring some immediate relief.  My heart goes out to them.

BIG NEWS

The world of art and literature has been rocked by two blockbuster announcements.  The first is the discovery of two hitherto unknown unfinished Cezannes.  The second is the discovery of a hitherto unknown Conan Doyle Sherlock Holmes story -- which, when added to the Canon, makes sixty-one.  I leave it to my readers to divine which of these bits of news has set my heart to fluttering.