THEORIESTHEORIES OFOF VALUVALUEE ANANDD ECONOMIECONOMICC CRISES:CRISES:

REVISITINREVISITINGG MAURICMAURICEE DOBBDOBB

bbyy

MichaeMichaell AbouzelofAbouzelof

A thesithesiss submittedsubmitted toto ththee facultyfaculty ofof ThThee UniversitUniversityy ooff UtahUtah inin partiapartiall fulfillmentfulfillment ooff ththee requirementrequirementss forfor ththee degreedegree ofof

MasteMasterr ooff ScienceScience

DepartmentDepartment ooff EconomicsEconomics

TheThe UniversitUniversityy ofof UtahUtah

MaMayy 20102010 CopyrighCopyrightt © MichaeMichaell AbouzeloAbouzelof2010f 2010

AlAlll RightRightss ReservedReserved THE UNIVERSITY OF UTAH GRADUATE SCHOOL

SUPERVISORY COMMITTEE APPROVAL

of a thesis submitted by

MichaelAbouzelof

This thesis has been read by each member of the following supervisory committee and by majority vote has been found to be satisfactory. .

. • . . - ,- �,

1-, \, \Cf,\ \ \ 0 i

L\\�\ \0 \ \ THE UNIVERSITY OF UTAH GRADUATE SCHOOL

FINAL READING APPROVAL

To the GraduateCouncil of the University of Utah:

I have read the thesis of MichaelAbouzelof in its final form and have found that (1) its format, citations, and bibliographic style are consistent and acceptable; (2) its illustrative materials including figures, tables, and charts are in place; and (3) the final manuscript is satisfactory to the supervisory committee and is ready for submission toThe Graduate School. �t Date E.K. Hunt Chair: SupervisoryCommittee

Approved for the MajorDepartment

Peter Philips ChairlDean

Approved for the Graduate Council

oar es A. Ight Dean ofThe Graduate School ABSTRACABSTRACTT

ThiThiss papepaperr reviewreviewss twtwoo areaareass ooff MauricMauricee Dobb'Dobb'ss contributioncontributionss ttoo ththee historhistoryy ofof economiceconomic thought,thought, specificallyspecifically hihiss essaessayy The Requirements of a Theory of Value andand variouvariouss writingwritingss oonn ththee classicaclassicall perspectivesperspectives ofof economiceconomic crisescrises.. TheThe firsfirstt sectionsection provideprovidess a biographbiographyy ofof Dobb,, ththee seconsecondd examineexaminess ththee requirementrequirementss DobbDobb feltfelt a theorytheory ooff valuvaluee musmustt fulfilfulfilll ttoo bbee consideredconsidered adequate,, followefollowedd bbyy a historicahistoricall recounrecountt ofof thethe originoriginss ofof ththee twtwoo maimainn competincompetingg theoriestheories,, ththee LaboLaborr TheorTheoryy andand ththee UtilityUtility Theory,, asas welwelll aass a discussiondiscussion ooff hohoww eacheach theortheoryy succeededsucceeded oror failedfailed ttoo meemeett thesthesee requirements.requirements.

ThThee thirthirdd sectiosectionn discussediscussess hohoww economiceconomic crisescrises werweree vieweviewedd bbyy politicapoliticall economistseconomists frofromm AdaAdamm SmitSmithh ttoo KarKarll Marx,, witwithh speciaspeciall attentioattentionn paipaidd ttoo ththee ratratee ooff profit,profit, proportionality,, anandd specificspecific characteristicscharacteristics ooff capitaliscapitalismm thatthat makmakee iitt aann ideologideologyy proneprone ttoo periodiperiodicc disruptionsdisruptions. I woulwouldd likelike toto recognizerecognize thethe friendsfriends whowho helpedhelped mmee throughthrough thisthis periodperiod ofof life:life

MikeMike Brown,, AyAymm Berges,, RorRoryy Mulhere,, AnnabellAnnabellee TranTran

I couldncouldn''tt havehave donedone iitt withoutwithout you.you. CONTENTCONTENTSS

ABSTRACABSTRACTT ...... iivv

BIOLOGICABIOLOGICALL PORTRAIPORTRAITT OOFF MAURICMAURICEE DOBDOBBB ...... 11

BiographBiographyy ...... 2

THTHEE REQUIREMENTREQUIREMENTSS OOFF AA THEORTHEORYY OOFF VALUVALUEE ...... · ...... 1111

IntroductioIntroductionn ...... 1122 ThThee RequirementRequirementss ooff a TheorTheoryy ooff ValuValuee ...... 1133 ClassicaClassicall PoliticaPoliticall EconomistEconomistss anandd ththee LaboLaborr TheorTheoryy ooff ValuValuee ...... 1199 Jevonialevoniann RevolutioRevolutionn anandd ththee UtilitUtilityy TheorTheoryy oofValuef Value ...... 2626 ThThee ProbleProblemm ooff SurpluseSurplusess ...... 2929 ContemporarContemporaryy TheorieTheoriess anandd CritiqueCritiquess ooff ththee ClassicalistClassicalistss ...... 3131 Conclusions ...... 37 Conclusions 37 ECONOMIC CRISES ...... 41 ECONOMIC CRISES 41 Introduction ...... 42 IntroductioClassical Perspectivesn of Economic Crises Before Marx ...... 4342 ·ClassicaUnderconsumption l Perspective ...s...... of Economi...... c.. .Crise...... s. ..Befor...... e Mar... .x...... 4743 MarxUnderconsumptio and Capital nAccumulation ...... 4947 ProportionalityMarx and Capita ...... l Accumulatio...... n ...... 5449 CapitalismProportionalit Is ...... y ...... 5654 TheCapitalis Industrialm Is Reserve Army ...... 5856 InTh Defensee Industria ofl MarxReserv ...... e Arm...... y ...... 6058 ConcIn Defenslusionse o .f. .Mar...... x...... 6460 Conclusions 64 SELECTEDSELECTED BIBLIOGRAPHyBIBLIOGRAPHY ...... 6767 BIOGRAPHICALBIOGRAPHICAL PORTRAIPORTRAITT OFOF MAURICMAURICEE DOBBDOBB 2

BiographyBiography

1th MauricMauricee DobDobbb wawass borbornn oonn JulyJuly 24 \ , 19001900 iinn a subursuburbb ofN.W.of N.W. LondonLondon.. HisHis fatherfather,, whwhoo hahadd inheritedinherited thethe familfamilyy businessbusiness,, wawass a retairetaill draperdraper,, whilwhilee hihiss mothemotherr camecame fromfrom a poopoorr Scottish-merchant'Scottish-merchant'ss familyfamily.. Dobb'Dobb'ss upbringinupbringingg appearsappears ttoo havhavee beebeenn fairlyfairly

'ordinary''ordinary' forfor ththee timtimee inin thatthat hihiss backgrounbackgroundd waswas botbothh religioureligiouss anandd conservative.'conservative.1 AAss a childchild,, MauricMauricee showedshowed littlelittle interestinterest inin academicsacademics whilwhilee attendinattendingg publipublicc schoolschoolss untiluntil arounaroundd ththee agagee ofof 17,17, whewhenn hhee wawass allowedallowed ttoo specializspecializee inin historyhistory.. HiHiss successsuccess inin thethe fieldfield provideprovidedd hihimm witwithh ththee impetusimpetus ttoo pursuepursue furtherfurther education,education, andand DobDobbb decidedecidedd toto studstudyy foforr a ScholarshipScholarship ExaminatioExaminationn aatt CambridgeCambridge University.University.

DobDobbb wawass unablunablee ttoo procurprocuree a fulfulll scholarship,scholarship, bubutt hhee diddid managmanagee ttoo getget intointo

CambridgCambridgee witwithh anan Exhibition.Exhibition?2 DobDobbb spenspentt ththee nexnextt threthreee quarterquarterss ofof a yeayearr betweenbetween schoolschool anandd collegecollege explorinexploringg thingsthings outsideoutside ooff mainstreamainstreamm academia.academia. IItt wawass duringduring thisthis timetime thathatt hhee firstfirst camecame intointo contaccontactt witwithh themesthemes likelike ththee LaboLaborr Movement,Movement, socialism,socialism, thethe ideasideas ofof thethe RussianRussian RevolutioRevolutionn (the(thenn onlyonly a yeayearr old)old),, asas welwelll asas ththee workworkss ofof unorthodounorthodoxx writerwriterss sucsuchh asas KarlKarl MarxMarx.. ThisThis timtimee perioperiodd greatlygreatly impacteimpactedd Dobb;Dobb; a largelarge numbernumber ofof ththee ideasideas hhee wawass exposeexposedd aatt thithiss ageage laterlater becambecamee maimainn themesthemes inin hihiss scholarlyscholarly career.career.

ThThee growtgrowthh ooff hishis interesinterestt inin socialissocialismm mighmightt seemseem surprisinsurprisingg atat first,first, especiallyespecially whewhenn ononee considersconsiders ththee politicapoliticall climateclimate surroundinsurroundingg DobDobbb aatt ththee timetime.. PerhapPerhapss itit wawass inin responseresponse toto ththee predominatelpredominatelyy pro-militarpro-militaryy studentstudentss actinactingg blindlblindlyy onon ththee fervofervorr ofof patriotismpatriotism throughouthroughoutt ththee CambridgeCambridge campus.campus. HHee wawass heavilheavilyy influenceinfluencedd bbyy aann idealisticidealistic lecturelecture givegivenn byby ProfessorProfessor GilbertGilbert MurrayMurray,, whwhoo spokespoke ooff ththee neeneedd foforr permanenpermanentt peace.peace.

1 1 Nonconformist-PresbyteriaNonconformist-Presbyteriann andand forcedforced toto readread patrioticpatriotic books.books. 2 2 AAnn ExhibitioExhibitionn iiss similarsimilar toto a scholarshipscholarship inin thathatt itit iiss a financialfinancial awardaward grantegrantedd onon groundgroundss ofof merit,merit, bubutt iitt isis typicalltypicallyy forfor a substantiallysubstantially lesserlesser amount.amount. 3

ThThee speech,speech, deliveredeliveredd onon ththee dayday thethe wawarr ended,ended, convincedconvinced DobbDobb ofof ththee necessitnecessityy ofof logicallogical planningplanning.. HHee startedstarted buyinbuyingg radicaradicall pamphletpamphletss andand reareadd bookbookss recommenderecommendedd toto hihimm bbyy a second-handsecond-hand booksellebooksellerr ofof leftistleftist materialmaterial.. HHee joinejoinedd a localocall brancbranchh ooff thethe

IndependenIndependentt LaboLaborr PartyParty,, anandd participateparticipatedd ttoo ththee poinpointt ofof speakingspeaking oonn a street-cornerstreet-corner meetinmeetingg atat leastleast onceonce.. TheThe larglargee laborlabor strikestrikess stagestagedd inin thethe postwarpostwar perioperiodd ooff rapidrapid inflationinflation caughtcaught Dobb'Dobb'ss attention,attention, andand hihiss interesinterestt iinn economicseconomics grew.grew.

Dobb'Dobb'ss politicapoliticall leaningleaningss compellecompelledd hihimm ttoo joijoinn ththee UniversitUniversityy SocialistSocialist SocietySociety asas soosoonn asas hhee begabegann hihiss studiesstudies aatt CambridgeCambridge iinn OctobeOctoberr 1919.1919. OtherOther membermemberss ooff thisthis illustriousillustrious societsocietyy includeincludedd H.DH.D.. DickinsonDickinson,, KingsleKingsleyy MartinMartin,, R.BR.B.. BraithwaiteBraithwaite,, andand

AllenAllen HuttHutt.C3 ThThee grougroupp wawass fairlyfairly smallsmall,, andand thetheyy generallygenerally reareadd theoreticaltheoretical paperspapers beforbeforee openlopenlyy discussindiscussingg themthem.. WithiWithinn a yeayearr oorr twotwo,, DobbDobb assisteassistedd iinn forminformingg thethe

CambridgeCambridge UniversityUniversity LaboLaborr Club,Club, whicwhichh hahadd widerwider scopescope thanthan thethe SocialistSocialist Society,Society, andand engagedengaged inin mormoree publipublicc activities.activities. HiHiss involvemeninvolvementt inin ththee clubclub increasedincreased asas hhee waswas electedelected Secretary,Secretary, andand byby hihiss finafinall yearyear,, hhee waswas electedelected chairman.chairman. ThThee youngyoung DobbDobb alsoalso tootookk parpartt iinn politicalpolitical debatesdebates inin ththee CambridgeCambridge UnioUnionn SocietySociety,, anandd forfor a shortshort timtimee editededited a studentstudent paperpaper calledcalled Youth. HeHe waswas a membermember ofof a pacifistpacifist societysociety calledcalled thethe UnionUnion ofof

DemocraticDemocratic ControlControl.. ThiThiss societysociety wawass opposeopposedd bbyy angryangry ex-servicemen,ex-servicemen, whwhoo violentlyviolently brokebroke uupp ththee society'society'ss firsfirstt meetingmeeting,, anandd almostalmost destroyedestroyedd Dobb'Dobb'ss rooroomm iinn hihiss dormitory.dormitory.

InIn hihiss secondsecond oorr thirthirdd yeayearr aass a student,student, DobDobbb helpehelpedd organizorganizee anandd addresaddresss a publicpublic meetinmeetingg inin LondoLondonn bbyy ththee UniversitUniversityy SocialistSocialist FederationFederation,, whwhoo werweree inin supporsupportt ofof ththee so-calledso-called TripleTriple AlliancAlliancee strike-movemenstrike-movementt ((aa generalgeneral strikestrike ofof MinersMiners,, Railwayman,Railwayman,

J 3 AccordingAccording ttoo CambridgeCambridge JournaJournall ofof EconomicsEconomics,, H.DH.D.. DickinsonDickinson becambecamee anan economisteconomist andand authoauthorr of The Economics ofo[Socialism, Socialism, KingsleKingsleyy MartiMartinn becambecamee ththee editoeditorr ooff ththee New Statesman,Statesman. R.BR.B.. BraithwaiteBraithwaite becambecamee a ProfessoProfessorr ofof PhilosophyPhilosophy aatt CambridgeCambridge,, anandd AlleAllenn HutHuttt becambecamee ththee chiefchief typographetypographerr anandd subsub­­ editoeditorr foforr ththee Daily Worker forfor severalseveral decadesdecades,, pp.. 111177 4

Dockers,Dockers, andand otherother transportransportt workers)workers).. AfterwardsAfterwards,, botbothh DobDobbb andand H.D.H.D. DickinsonDickinson werewere invitedinvited bbyy ththee UnemployeUnemployedd Worker'Worker'ss CounciCouncill ttoo a threthreee weeweekk intensivintensivee speakingspeaking andand organizingorganizing movemenmovementt aimedaimed aatt a badlbadlyy depresseddepressed partpart ooff BirminghamBirnlingham.. DobDobbb latelaterr spokespoke andand canvassedcanvassed forfor ththee labolaborr candidatcandidatee inin By-ElectionBy-Electionss foforr ParliamenParliamentt inin CambridgeCambridge town,town, providinprovidingg hihimm witwithh opportunitieopportunitiess ttoo meemeett figurefiguress liklikee BernarBernardd ShawShaw anandd G.D.H.G.D.H. ColeCole whilwhilee attendinattendingg "Summe"Summerr SchoolsSchools"" organizeorganizedd bbyy a left-winleft-wingg organizatioorganizationn knowknownn asas thethe

LaboLaborr ResearcResearchh DepartmentDepartment.. IInn thesthesee waysways,, DobDobbb managemanagedd ttoo obtaiobtainn practicalpractical experienceexperience inin botbothh politicpoliticss anandd ththee workinworkingg clasclasss movement.movement.

RegardinRegardingg hihiss academicsacademics,, DobDobbb studiedstudied economiceconomicss firstfirst anandd foremost,foremost, bubutt nevernever abandoneabandonedd hihiss interesinterestt iinn historyhistory.. HHee consideredconsidered himselhimselff a discipldisciplee ooff MarMarxx andand a supportersupporter ooff ththee SocialisSocialistt RevolutioRevolutionn iinn RussiRussiaa earlearlyy on,on, eveevenn thougthoughh thertheree wawass ververyy littlelittle ooff MarxisMarxistt writinwritingg availablavailablee inin EnglandEngland,, savesave Kapital anandd Lenin'Lenin'ss State and Revolution.Revolution.

HeHe didn'tdidn't shoshoww mucmuchh affinitaffinityy [orfor MarshallMarshall,, anandd wawass barelbarelyy ablablee ttoo makmakee hihiss wawayy throughthrough hishis Principles of Economics, a texttext requirerequiredd forfor testingtesting.. HHee becambecamee a membermember inin

Keynes'sKeynes's PoliticaPoliticall EconomEconomyy CluClubb inin hihiss secondsecond oorr thirthirdd yearyear,, wherwheree hhee reareadd a paperpaper onon

MarMarxx thathatt KeynesKeynes hahadd personallpersonallyy approvedapproved of.of. DobDobbb wawass furthefurtherr influenceinfluencedd byby thethe writingwritingss ofof WebbsWebbs anandd LabriolaLabriola,, GeorgesGeorges Sorel,Sorel, BertranBertrandd RussellRussell,, ththee GuilGuildd Socialists,Socialists, anandd Croce'Croce'ss essaessayy onon historicahistoricall materialismmaterialism.. HHee receivereceivedd firsfirstt clasclasss honorshonors inin botbothh partsparts ooff ththee EconomiEconomicc Tripos;Tripos; afteafterr graduatinggraduating,, hhee wawass offereofferedd a StudentshipStudentship foforr ResearcResearchh atat

4 thethe LondoLondonn SchooSchooll ofof Economics.Economics.4

ItIt wawass arounaroundd hihiss firstirstt yeayearr aass a researcresearchh studentstudent (1922(1922)) thathatt DobDobbb officiallofficiallyy joinedjoined

ththee CommunisCommunistt PartyParty,, aann organizatioorganizationn foundedfounded ththee previoupreviouss yearyear.. HHee startedstarted participatingparticipating

4 4 TheThe EconomiEconomicc TriposTripos isis a mandatormandatoryy exaexamm testintestingg understandinunderstandingg andand abilityability beforbeforee allowingallowing a studentstudent toto movmovee uupp ttoo ththee nexnextt levelevell ooff study.study. 5 inin ththee intellectualintellectual brancbranchh beforebefore transferrintransferringg toto thethe brancbranchh reservereservedd forfor thethe workinworkingg class.class.

HHee spokspokee ttoo CPCP branchesbranches,, workersworkers'' circles,circles, etc.etc.,, anandd becambecamee activactivee iinn ththee educationaleducational movemenmovementt callecalledd ththee CounciCouncill ooff LaboLaborr CollegesColleges.. FoForr a shortshort timtimee hhee editededited anandd wrotewrote forfor a monthlymonthly magazinemagazine calledcalled Plebs, a periodicalperiodical focusedfocused onon teachingteaching MarxistsMarxists principles.principles.

InIn hihiss twtwoo yearyearss aass a researcresearchh studentstudent,, DobDobbb workeworkedd undeunderr thethe supervisiosupervisionn ofof ProfessorProfessor

EdwiEdwinn CannanCannan oonn a thesithesiss aboutabout ththee historhistoryy anandd theortheoryy ooff capitalistcapitalist enterpriseenterprise.. HeHe receivereceivedd a Ph.D.Ph.D. foforr thithiss workwork,, whicwhichh hhee subsequentlsubsequentlyy formedformed intintoo ththee basibasiss ofof a ratherrather unsuccessfulunsuccessful boobookk calledcalled Capitalist Enterprise and Social Progress (1925)(1925).. ThisThis bookbook basicallbasicallyy attemptedattempted ttoo combinecombine ththee theoriestheories ooff MarshalMarshalll witwithh conceptconceptss suchsuch asas surplus-surplus- valuvaluee andand exploitation,exploitation, aass welwelll aass addressinaddressingg somesome ooff thethe historicahistoricall evolutionevolution ofof economicseconomics thathatt hhee woulwouldd elaboratelaboratee onon iinn latelaterr books.books.

DobbDobb returnereturnedd ttoo CambridgeCambridge iinn 19241924 afteafterr beinbeingg appointeappointedd asas LecturerLecturer inin

EconomicsEconomics iinn ththee FacultFacultyy ofof EconomicEconomicss anandd PoliticsPolitics.. HHee visitevisitedd ththee SovietSoviet UnioUnionn thethe followingfollowing yearyear,, stayingstaying oonn iinn MoscoMoscoww aass a teacheteacherr ooff EnglishEnglish.. TherTheree hhee gainedgained privilegesprivileges aass a visitovisitorr ttoo ththee BicentenarBicentenaryy CelebrationCelebrationss ofof ththee AcademyAcademy ofof SciencesSciences andand wawass presentpresent aatt a famoufamouss meetinmeetingg betweebetweenn KeyneKeyness anandd GosplaGosplann economistseconomists,, wherwheree KeyneKeyness waswas

5 presentepresentedd witwithh a copcopyy ooff ththee firstfirst 'control'control numbersnumbers'' fresfreshh frofromm ththee printer.printer. ThisThis periodperiod

stimulatedstimulated Dobb'Dobb'ss interestinterest iinn ththee developmentdevelopment ofof ththee SovietSoviet economy,economy, leadinleadingg hihimm toto writwritee a worworkk oonn theitheirr firstfirst tetenn yearyearss calledcalled Russian Economic Development Since thethe

Revolution (1928)(1928).. HeHe visitevisitedd ththee SovietSoviet UnionUnion againagain iinn botbothh 19291929 andand 19301930 duringduring thethe

beginningbeginning ooff ththee FirsFirstt FivFivee YeaYearr PlanPlan,, anan extremelextremelyy ambitiousambitious andand tumultuoutumultuouss perioperiodd forfor

5 5 GosplanGosplan economistseconomists referrefer ttoo SovietSoviet StateState PlanningPlanning officials.officials. 'Control'Control numbers'numbers' referreferss ttoo thethe annualannual economiceconomic planplanss ththee GosplaGosplann economisteconomistss werweree expecting/aiminexpecting/aimingg ttoo achieve.achieve. 6 thethe Soviets.Soviets. OnOn returnreturn toto EnglandEngland,, DobbDobb wrotewrote severalseveral pamphletspamphlets andand gavegave variousvarious lectureslectures aboutabout ththee USSR.USSR.

DuringDuring thethe GeneralGeneral StrikeStrike inin 1926,1926, mostmost studentsstudents leftleft schoolschool inin anan efforteffort ttoo breakbreak thethe strike.strike. InIn responseresponse,, DobDobbb andand a fewfew friendsfriends organizedorganized a publicitpublicityy serviceservice forfor strikersstrikers underunder thethe locallocal LaboLaborr andand TradesTrades Council,Council, anan assemblyassembly actingacting asas a localocall strikestrike committee.committee.

WhenWhen ththee TradeTrade UnioUnionn CongressCongress startedstarted itsits ownown nationanationall newspaper,newspaper, The British Worker,Worker,

DobbDobb helpehelpedd organizeorganize itsits collectioncollection andand regionalregional distribution.distribution.

Dobb'sDobb's timtimee fromfrom thethe earlyearly 1930s1930s toto thethe outbreakoutbreak ofof WorlWorldd WarWar IIII waswas largelylargely spentspent engagedengaged inin politicalpolitical activitiesactivities andand polemicapolemicall writingwriting.. ThisThis timetime periodperiod wawass markedmarked withwith thethe risrisee ofof FascisFascismm andand ththee wawarr danger,danger, alongalong withwith a growinggrowing interesinterestt amongamong intellectualsintellectuals inin ththee tenetstenets ofof Marxism.Marxism. HeHe organizedorganized andand becamebecame secretarysecretary ofof a locallocal

Anti-WaAnti-Warr CouncilCouncil ofof LaborLabor,, whosewhose maimainn achievementachievement waswas organizingorganizing a portablportablee Anti­Anti-

WarWar ExhibitioExhibitionn thatthat touredtoured thethe country.country. InIn 19361936 DobbDobb activelyactively organizedorganized a committeecommittee forfor aiaidd ttoo Spain,Spain, raisingraising fundsfunds toto sendsend a shiploadshipload ofof foodfood ttoo thethe wawarr tortornn country.country. AroundAround thisthis time,time, ththee Anti-WarAnti-War CouncilCouncil changedchanged itsits namename toto thethe CambridgeCambridge PeacePeace Council,Council, effectivelyeffectively broadeningbroadening itsits appealappeal toto a widerwider audience.audience. ForFor a while,while, DobbDobb wawass alsalsoo a committeecommittee membermember ofof thethe NationaNationall PeacPeacee Council.Council.

HisHis politicalpolitical activityactivity largelylargely separatedseparated hihimm fromfrom focusingfocusing onon mainstreammainstream theoreticaltheoretical work,work, aass welwelll asas stigmatizedstigmatized hihiss theoriestheories ttoo moremore traditionatraditionall economists.economists.

DobDobbb seemedseemed toto undertakundertakee ththee barbaree minimuminimumm ofof hishis academicacademic duties,duties, andand tooktook virtuallyvirtually

nono partpart inin ththee theoreticatheoreticall discussiondiscussionss amongamong CambridgeCambridge economistseconomists atat ththee timetime.. HisHis

lectureslectures concernedconcerned themselvethemselvess withwith appliedapplied problemproblemss (such(such asas povertypovcrty,, uncmployment,unemployment,

socialsocial problemsproblems,, etc.)etc.) insteainsteadd ofof conjecturalconjectural ones.ones. HeHe wrotwrotee anan elementaryelementary students'students' 7 textbooktextbook onon Wages forfor a seriesseries calledcalled thethe CambridgeCambridge EconomicEconomic HandbookHandbook andand activelyactively tooktook parpartt inin ththee debatedebate amongstamongst economistseconomists aboutabout socialistsocialist economies--buteconomies—but generallygenerally arguingarguing witwithh a polemicalpolemical andand pessimistipessimisticc tonetone.. HisHis boobookk Political Economy andand

CapifalismCapitalism (1937)(1937) criticizedcriticized ththee SubjectiveSubjective TheoryTheory ofof ValuValuee whilwhilee explainingexplaining andand defendingdefending MarxiaMarxiann approachesapproaches andand ththee laborlabor theorytheory ofof valuevalue.. ThisThis worworkk waswas conspicuouslyconspicuously MarshallianMarshallian inin formform,, asas itit wawass intendedintended toto conveyconvey anan argumentargument ttoo thosethose mormoree familiarfamiliar witwithh thethe MarshallianMarshallian traditiotraditionn thathann witwithh hereticalheretical methodologymethodology.. BuButt thethe bookbook wawass writtewrittenn totooo impatientlyimpatiently andand notnot basebasedd deeplydeeply enoughenough oonn theoreticaltheoretical thinking,thinking, makinmakingg muchmuch ofof itit superficial,superficial, asas wellwell asas somewhatsomewhat unconstructivunconstructivee fromfrom ththee stancestance ofof theoreticaltheoretical analysis.analysis. DobDobbb foundfound himselhimselff stuckstuck betweenbetween a proverbialproverbial rockrock andand a hardhard placeplace;; hhee wawass totooo polemicapolemicall andand negativenegative forfor mainstreamainstreamm academicacademic economists,economists, andand tootoo academicacademic andand MarshalliaMarshalliann forfor hard-linhard-linee Marxists.Marxists.66

DobbDobb underwenunderwentt a periodperiod ofof intenseintense academicacademic studystudy afterafter thethe war'war'ss end,end, resultingresulting inin thethe creationcreation ofof twtwoo books,books, Studies in the Development of Capital (1946)(1946) andand SovietSoviet

Economic Development Since 1917 (1948).(1948). TheThe latterlatter waswas anan enlargementenlargement ofof thethe fonner,former, andand itit appearsappears thesthesee workwork werweree instrumentalinstrumental inin hishis belatedbelated promotiopromotionn toto a FellowFellow andand

LecturerLecturer ofof TrinityTrinity College,College, CambridgeCambridge inin 1948.1948. DobDobbb alsoalso beganbegan hihiss collaborationcollaboration withwith

PierroPierro SraffaSraffa atat thithiss time,time, editingediting thethe 1010 volumvolumee editionedition ofof Works and Coorespondence ofof

David Ricardo, asas wellwell asas writinwritingg severalseveral editorialeditorial NoteNotess andand IntroductionsIntroductions (including(including thethe

6 6 InIn thethe wordswords ofof AmartyaAmartya Sen,Sen, "Maurice"Maurice Dobb,Dobb, whowho waswas anan astuteastute MarxistMarxist economist,economist, waswas oftenoften thoughtthought byby KeynesiansKeynesians andand neo-Keynesianneo-Keynesianss ttoo bbee 'quite'quite soft'soft' onon 'neo-classical''neo-classical' economicseconomics...... NoNott surprisingly,surprisingly, whewhenn ththee MarxisMarxistt DobDobbb defeateddefeated KaldoKaldorr inin aann electionelection ttoo thethe FacultyFaculty BoardBoard,, KaldoKaldorr declareddeclared itit ttoo bebe a victoryvictory ofof thethe perfidiousperfidious neo-classicaneo-classicall economicseconomics iinn disguise.disguise. 'Marginal'Marginal utilityutility theortheoryy hashas won,'won,' KaldorKaldor toltoldd SraffaSraffa thatthat evening,evening, iinn commentingcommenting oonn ththee electoralelectoral successsuccess ofof a MarxistMarxist economist!"economist!" Les PrixPrLt Nobel ((1998) 1998).. 8 introintro ofof ththee firstfirst volume). 7 HeHe visitedvisited IndiaIndia inin 19511951 asas a visitingvisiting professorprofessor atat thethe

UniversitUniversityy ofof DelhiDelhi SchoolSchool ofof Economics,Economics, lecturinglecturing extensivelyextensively throughouthroughoutt thethe country.country.

ThisThis periodperiod stokedstoked hishis interestinterest inin ththee economiceconomic problemproblemss ofof underdevelopeunderdevelopedd countries;countries; specifically,specifically, hhee waswas interestedinterested inin ththee growtgrowthh andand developmentdevelopment ofof thesethese states,states, a topitopicc hehe woulwouldd latelaterr writwritee severalseveral paperpaperss about,about, includingincluding thethe bookletbooklet An Essay on EconomicEconomic

Growth and Planning (1960).(1960). DobbDobb attendedattended thethe InternationalInternational EconomicEconomic ConferenceConference inin

MoscowMoscow inin 19521952 asas a membememberr ofof thethe EnglishEnglish delegation,delegation, andand inin 19561956 wenwentt toto PolandPoland withwith a partyparty ofof invitedinvited EnglishEnglish economists.economists. HereHere hehe witnessedwitnessed thethe 'Poznan'Poznan events'~aevents'—a seriesseries ofof eventsevents oftenoften consideredconsidered toto bebe thethe firstfirst clearclear economiceconomic contractioncontraction ofof a socialistsocialist economyeconomy.. HHee participateparticipatedd intenselyintensely inin discussionsdiscussions withwith BritishBritish CommunistsCommunists andand leftleft winwingg circlescircles aboutabout ththee eventsevents inin HungaryHungary laterlater thatthat year,year, andand inin 19571957 mademade a speechspeech secondingseconding anan amendmentamendment toto ththee mainmain resolutioresolutionn ofof thethe CongressCongress ofof thethe BritisBritishh CPCP thatthat statedstated dogmatismdogmatism waswas thethe mainmain dangerdanger ttoo bbee combated.combated. 8

TheThe PolisPolishh economists'economists' discussiondiscussion inin 19561956 revivedrevived Dobb'sDobb's interestinterest inin thethe problemsproblems ofof pricing-policypricing-policy inin a socialistsocialist country,country, asas welwelll asas ththee needneed forfor experimentingexperimenting withwith moremore decentralizeddecentralized modelsmodels.. AlthoughAlthough hhee wawass stillstill insistentinsistent onon thethe necessitnecessityy ofof planninplanningg 'macro-relations''macro-relations' inin socialistsocialist economics,economies, experienceexperience hahadd convincedconvinced himhim toto looklook atat ththee rolrolee ofof pricepricess andand economiceconomic incentivesincentives iinn a positivpositivee light.light. HHee focusedfocused hihiss studiesstudies oonn currencurrentt SovietSoviet discussions,discussions, penninpenningg articlesarticles forfor thethe periodicalsperiodicals Soviet Studies andand

Science and Society, andand laterlater writingwriting hishis Essay on Economic Growth and PlanningPlanning

((1960) 1960)..

7 7 GeorgeGeorge StiglerStigler famouslyfamously said,said, "Ricardo"Ricardo wawass a fortunatefortunate manman...... AndAnd now,now, 130130 yearsyears afterafter hishis death,death, hehe iiss aass fortunatefortunate asas ever:ever: hhee hashas beenbeen befriendebefriendedd byby Sraffa."Sraffa." HeHe woulwouldd havehave beenbeen moremore correccorrectt iifhef he hadhad said,said, ""...befriende ... befriendedd bbyy SratfaSraffa andand Dobb."Dobb." 8 8 Predictably,Predictably, thethe amendmentamendment waswas defeated.defeated. 9

DobbDobb becamebecame a membememberr ofof thethe EditorialEditorial BoarBoardd ooff Modern Quarterly andand laterlater ofof

Marxism Today, andand foforr a timtimee satsat onon ththee boarboardd ooff ththee historicahistoricall journajournall Past and Present.Present.

IInn 19591959 hehe wawass appointeappointedd a readereaderr inin economicseconomics,, a gradegrade betweebetweenn lecturelecturerr andand fullfull professorprofessor.. ToTo givgivee scope,scope, Dobb'Dobb'ss contemporarycontemporary ReaderReaderss includeincludedd Reddaway,Reddaway, Kaldor,Kaldor, anandd JoaJoann RobinsonRobinson.. IInn 19641964 hhee wawass awardeawardedd aann honorarhonoraryy degreedegree aass DoctoDoctorr ooff EconomicEconomic

ScienceScience aatt ththee CharleCharless UniversitUniversityy ofof PraguePrague.. HHee continuedcontinued writingwriting alonalongg ththee themthemee ofof planninplanningg foforr undevelopeundevelopedd economicseconomies witwithh hihiss Papers on Capitalism, Development, andand

Planning (1967(1967)) andand We{fareWelfare Economics and the Economics of Socialism (1969).(1969).

RevisitinRevisitingg hihiss worworkk witwithh Sraffa,Sraffa, DobDobbb wrotwrotee anan articlearticle forfor De Economist inin 19701970 calledcalled

"TheuThe Sraffa System and the Critique of the Neoclassical Theory of Distribution, Distribution, expressinexpressingg hihiss opinioopinionn thathatt PierPieroo SraffaSraffa hahadd provideprovidedd ththee groundworgroundworkk foforr callingcalling mucmuchh ofof neoclassicaneoclassicall rhetorirhetoricc intintoo question.question. LateLaterr thathatt samesame year,year, hehe turnedturned hishis criticalcritical eyeeye towardtowardss socialistsocialist economieeconomiess iinn a boobookk callecalledd Socialist Planning: Some Problems (1970).(1970).

InIn 1972,1972, DobDobbb wawass awardeawardedd aann HonorarHonoraryy DoctorateDoctorate ofof LetterLetterss frofromm ththee UniversitUniversityy ofof

LeicesterLeicester,, a degredegreee thatthat wawass consideredconsidered warrantewarrantedd basebasedd onon hihiss recorrecordd ooff publishedpublished workwork andand conspicuouconspicuouss abilityability,, nonott ttoo mentiomentionn originality.9originality.9

IInn hihiss laslastt bookbook,, Theories of Value and Distribution Since Adam Smith (1973),(1973),

DobDobbb readdressereaddressedd oneone ooff hihiss originaoriginall inquiries,inquiries, ththee historyhistory ofof classicalclassical economistseconomists andand theitheirr theorietheoriess ofof valuevalue.. HHee believebelievedd ththee appearanceappearance oofSraffa'sf Sraffa's The Production (~fof

Commodities by Means of Commodities (1960(1960)) representedrepresented a crucialcrucial turning-pointurning-pointt iinn thethe historhistoryy ooff economiceconomic thoughtthought,, anandd oneone thathatt paralleleparalleledd hihiss owownn interpretatiointerpretationn ooff thethe classicalclassical traditiotraditionn asas twtwoo distinctdistinct anandd opposinopposingg traditiontraditionss generallgenerallyy groupedgrouped undeunderr oneone headingheading.. ThisThis boobookk allowedallowed DobDobbb ttoo readdresreaddresss somesome ooff ththee maimainn themethemess founfoundd inin hishis

9 9 TheThe samesame degreedegree wawass givengiven ttoo SamuelSamuel Clemens,Clemens, thoughthough hehe receivedreceived hishis fromfrom Oxford.Oxford. 1010 earlieearlierr work,, Political Economy and Capitalism (1937),, iinn a farfar mormoree maturmaturee andand thoughtfuthoughtfull manner.manner.

UpoUponn Dobb'Dobb'ss deatdeathh inin 1976, CambridgCambridgee JournalJournal ooff EconomicsEconomics devotedevotedd a memorialmemorial issuissuee ttoo him,, asas thetheyy diddid witwithh otheotherr notablnotablee contemporariecontemporariess oofDobbf Dobb''ss suchsuch asas

JoaJoann RobinsonRobinson andand PierPieroo Sraffa.Sraffa. SinceSince then,, hihiss worworkk hahass largelylargely beebeenn relegaterelegatedd ttoo dustydusty sectionsectionss ooff academiacademicc libraries,, andand hihiss namnamee hahass fallenfallen ououtt ofof ththee lingualingua francafranca ofof mainstreamainstreamm economists.economists. HisHis reputatioreputationn withiwithinn heterodoheterodoxx circlescircles stillstill existsexists however,, aanndd hihiss influenceinfluence cacann stillstill bbee felfeltt throughouthroughoutt ththee fieldfield ooff thethe historhistoryy ofof economieconomicc thought.thought. THETHE REQUIREMENTSREQUIREMENTS

OFOF A THEORYTHEORY

OFOF VALUEVALUE 1212

IntroductioIntroductionn

ThThee searchsearch foforr ththee meaninmeaningg ofof valuvaluee hahass remaineremainedd a humahumann conundrumconundrum sincesince thethe dawdawnn ofof recorderecordedd history.history. WhaWhatt anandd whywhy isis valuevalue?? IIss valuvaluee aann objectivobjectivee entity,entity, oror iiss itit subjective?subjective? ThThee studystudy ofof valuvaluee beganbegan aass aann ethicalethical question,question, bubutt bbyy ththee nineteenthnineteenth century,century, ththee subjectsubject waswas treatetreatedd scientificallscientificallyy undeunderr ththee assumptioassumptionn thathatt empiricalempirical evidenceevidence coulcouldd providprovidee anan answer.answer. InIn ththee fielfieldd ofof economicseconomics,, valuvaluee wawass expresseexpressedd inin monetarmonetaryy form,form, andand thuthuss ththee questionquestionss poseposedd tootookk oonn a monetarmonetaryy quality.quality. WhWhyy werewere thingsthings exchangedexchanged aatt thethe rateratess thetheyy werweree exchangedexchanged for?for? WhWhyy werweree somesome peoplpeoplee tootoo impoverishedimpoverished toto survivesurvive whilwhilee otherotherss lavishelavishedd inin extraordinaryextraordinary wealthwealth?? WhaWhatt wawass ttoo bebe saidsaid aboutabout ththee movementmovementss ofof society'ssociety's fictionalfictional creation,creation, ththee economy?economy?

WheWhenn MauricMauricee DobDobbb openedopened hihiss boobookk Political Economy and Capitalism withwith hishis essayessay The Requirements of a Theory of Value, hhee setset ththee tontonee foforr anan unorthodoxunorthodox examinationexamination ooff ththee perspectiveperspectivess ofof classicalclassical politicapoliticall economistseconomists.. ContemporaryContemporary economistseconomists hahadd generallgenerallyy dismisseddismissed ththee neeneedd forfor suchsuch a theortheoryy iinn theitheirr ownown hypothesehypothesess byby thethe twentiettwentiethh centurycentury,, relegatinrelegatingg valuvaluee ttoo ththee fieldfieldss ooff sociologysociology andand philosophy.philosophy.

NonethelessNonetheless,, commoditiecommoditiess seemedseemed ttoo bbee exchangedexchanged atat relativrelativee valuevaluess thatthat hahadd nonott beenbeen fullfullyy accountedaccounted forfor.. ByBy reviewinreviewingg ththee historicalhistorical developmentdevelopment ofof classicalclassical perspectivesperspectives towardtowardss theorietheoriess ofof valuevalue,, DobDobbb attempteattemptedd ttoo reminremindd hihiss fellowfellow economistseconomists thathatt thethe probleproblemm ofof conceptualizingconceptualizing economieconomicc valuvaluee stillstill existed.existed. HHee thuthuss poseposedd ththee relevantrelevant question;question; ifif a theortheoryy ofof valuvaluee iiss ttoo bbee consideredconsidered adequateadequate,, whawhatt areare ththee requirementrequirementss itit mustmust firstfirst fulfill?fulfill?

DobDobbb diddid nonott explicitlexplicitlyy lislistt ththee requirementrequirementss hhee deemeddeemed necessarynecessary.. Instead,Instead, hehe interwovinterwovee ththee requirementrequirementss withiwithinn ththee texttext,, makingmaking itit somewhatsomewhat difficuldiHicultt forfor ththee novicnovicee toto 1313 decipher.decipher. ThusThus iitt isis a worthwhilworthwhilee endeavorendeavor toto compilcompilee anandd clarifclarifyy Dobb'Dobb'ss requirements.requirements.

TheThe papepaperr wilwilll follofolloww witwithh anan examinationexamination ooff ththee historicahistoricall developmendevelopmentt ooff ththee twtwoo mainmain competingcompeting theorietheoriess ooff valuevalue,, specificallyspecifically ththee labolaborr theortheoryy anandd ththee utilitutilityy theorytheory.. HoHoww diddid eacheach theortheoryy fulfillfulfill,, oror faifaill ttoo fulfillfulfill,, Dobb'Dobb'ss requirementsrequirements?? MorMoree importantlyimportantly,, iiss a theorytheory ofof economiceconomic valuvaluee stillstill a relevanrelevantt topictopic foforr politicapoliticall economists?economists? ThiThiss papepaperr wilwilll attemptattempt ttoo answeranswer thesthesee questions.questions.

ThThee RequirementRequirementss ooff a TheorTheoryy ooff ValueValue

DobbDobb thoughthoughtt theorietheoriess ofof valuvaluee hahadd specifispecificc guidelinesguidelines thatthat musmustt bbee satisfiedsatisfied beforbeforee thetheyy couldcould bbee deemedeemedd formallformallyy adequate.adequate. BByy formaformall adequacyadequacy,, DobDobbb meanmeantt thethe conditionconditionss whicwhichh a theorytheory musmustt fulfilfulfilll iiff iitt iiss ttoo bbee consideredconsidered "capable"capable ofof sustainingsustaining corollariecorollariess ofof a certaincertain typtypee ooff generalitygenerality...... ththee relationshiprelationshipss betweebetweenn propositionpropositionss andand thethe forecastsforecasts whicwhichh cancan bbee builbuiltt upouponn them". 1010 SucSuchh a theortheoryy musmustt containcontain a setset ofof statementsstatements thathatt isis capablecapable ofof accuratelyaccurately describindescribingg andand predictinpredictingg economiceconomic phenomenon.phenomenon.

DobDobbb consideredconsidered ththee adequacadequacyy ooff a theortheoryy ooff valuvaluee ttoo bbee "the"the conditionconditionss whicwhichh suchsuch a setset ofof statementsstatements musmustt fulfilfulfilll ifif iitt iiss toto bbee competentcompetent ttoo determinedetermine thethe equilibriumequilibrium oror movementmovement ooff ththee systemsystem asas a whole".llwhole".11

DobbDobb identifiedidentified fourfour distinctdistinct requirements:requirements:

1)1) TheorieTheoriess ofof valuvaluee mustmust havhavee anan 'earthly''earthly' charactercharacter

22)) TheyThey mustmust bebe capablcapablee ooff solvingsolving ththee probleproblemm ofof distribution/commodity-distribution/commodity-

valuevaluess

10 10 DobbDobb,, Political Economy£conomy and Capitalism, pp.. 44.. 11 II Ibid.Ibid.,, p.p. 55.. 1414

3)3) TheTheyy musmustt bbee quantitativequantitative inin form,form, existingexisting asas equationalequational systemssystems withwith

determiningdetermining independentindependent value-constants.value-constants.

4)4) TheyThey musmustt bbee ableable toto answeranswer thethe questionsquestions theythey seekseek ttoo answeranswer

LeLett uuss nownow examineexamine thesethese conditionsconditions inin detail.detail.

ToTo sustainsustain forecastsforecasts concerningconcerning thethe realreal worldworld thethe theortheoryy musmustt havhavee notnot onlyonly formform bubutt alsoalso content.content. ItIt mustmust havehave notnot onlyonly eleganceelegance butbut alsoalso "earthliness. 1212

The word"earthliness "earthliness". rests here in quotes. By using this term, Dobb was implying that economiesThe word "earthliness exist in a tangible" rests herreality.e in quotesAlthough. By economicusing this relationsterm, Dob areb waa socials implyin creation,g that iteconomie cannot bes exis deniedt in athat tangibl theye havereality an. impactAlthoug onh reality.economi Economicsc relations aroftene a sociarestsl ascreation the , differenceit cannot b ebetween denied thalifet andthey death.have an'Earthliness' impact on reality is required. Economic as a consequences often rest sof as the th e materialdifferenc enature betwee ofn the lif esubject. and death Dobb. 'Earthliness sees theories' is ofrequire valued asas attemptinga consequenc to emodel of th ereal materiaeconomicl natur phenomena,e of the subject and therefore. Dobb hesee thinkss theorie theys o shouldf value beas judgedattemptin ong theirto mode abilityl rea tol economimodel thec phenomenareal world. , Thisand thereforfirst prerequisitee he think hads the profoundy should effectsbe judge upond on thethei restr abilit ofDobb'sy to moderequirements.l the real worldIt is the. Thifirsts approximationfirst prerequisit ethat ha dall profoun other approximationsd effects upon th muste res satisfy.t of Dobb' In s requirements. It is the first approximation that all other approximations must satisfy. In other words. they must continually fulfill the 'earthly' condition as well as their own other words, they must continually fulfill the 'earthly' condition as well as their own particular prerequisites. for Dobb, 'earthliness' was the fundamental requirement all particular prerequisites. For Dobb, 'earthliness' was the fundamental requirement all other requirements were judged by . other requirements were judged by. ... an essential condition of a theory of value is that it must solve the problem... an essentia of distributionl conditio n(i.e. of adetermine theory of thevalu pricee is thaoflabor-power,t it must solv eof th capitale problem of distribution (/. e. determine the price of labor-power, of capital and of land) as well as the problem of commodity-values. 13 and of land) as well as the problem of commodity-values.13 A theory of value must be able to account for distribution and commodity-values. Dobb A theory of value must be able to account for distribution and commodity-values. Dobb considered this "essential" due to the practical questions that political economy attempts considered this "essential" due to the practical questions that political economy attempts to answer. Distribution and commodity-values are determinately linked, making it to answer. Distribution and commodity-values are determinately linked, making it

1212 Ibid.Ibid.,, p.p. 55.. 13 13 Ibid.,Ibid., p.p. 99.. 1515 impossibleimpossible ttoo determinedetermine oneone withoutwithout ththee otherother aass welwelll asas erroneouserroneous toto treatreatt eitheeitherr asas anan isolatedisolated systemsystem.. AnAnyy theortheoryy ofof distributiodistributionn musmustt concerconcernn itselitselff witwithh ththee creationcreation andand distributiodistributionn ofof surplusurpluss valuevalue,, aass welwelll aass witwithh accurataccuratee descriptiondescriptionss ofof ththee differentdifferent methodmethodss eacheach clasclasss useusess ttoo generatgeneratee incomeincome.. IIff a theortheoryy ofof valuvaluee cannotcannot explainexplain thethe allocatioallocationn ofof wealthwealth,, iitt isis inadequatinadequatee foforr solvinsolvingg ththee probleproblemm ofof distribution,distribution, anandd shouldshould thereforthereforee bbee considereconsideredd aann incompletincompletee theory.theory.

ItIt seemsseems clear,clear, frofromm ththee naturnaturee ofof itsits subject-mattersubject-matter andand ththee typtypee ofof statementstatement whicwhichh itit iiss requirerequiredd ttoo makemake,, thathatt aann economiceconomic theortheoryy musmustt bebe . . . c 14 quantitativquantitatIvee IIIin lorm.form. 14

DobDobbb thoughthoughtt thathatt iitt obviouobviouss thathatt aann economieconomicc theortheoryy musmustt bbee quantitativequantitative basebasedd onon thethe nature ofof ththee subject-matter.subject-matter. HHee dididd nonott qualifyqualify specificallspecificallyy whawhatt naturnaturee hhee wawass referringreferring toto.. HHee seeseess aann economieconomicc theortheoryy existinexistingg asas anan equationalequational systesystemm witwithh defineddefined relationshiprelationshipss thathatt connecconnectt alalll ththee variablevariabless withiwithinn ththee structurestructure.. EquationaEquationall systemssystems allowallow ononee ttoo examineexamine economicseconomics mathematicallymathematically,, a platforplatformm thathatt abstractsabstracts allall worldlyworldly characteristiccharacteristicss ooff ththee elementselements.. ThiThiss iiss nonott ttoo sasayy thathatt ananyy setset ooff numbersnumbers wilwi 11l suffice;suffice; thethe necessitnecessityy ofof 'earthliness''earthliness' requirerequiress quantitativquantitativee relationshiprelationshipss ttoo bbee perceptibleperceptible.. AllAll quantitativquantitativee elementselements withiwithinn ththee systesystemm musmustt bbee translatabletranslatable intointo actuaactuall anandd observableobservable elementselements inin reality.reality.

AAnn equationaequationall systemsystem meansmeans thathatt certaicertainn relationshiprelationshipss araree defineddefined whichwhich governgovern,, oorr connectconnect,, alalll ththee variablevariabless withiwithinn ththee system.system. 1515

EquationalEquational systemssystems refereferr toto a mathematicamathematicall organizationorganization ofof multiplemultiple,, interrelatedinterrelated modusmodus operandi.operandi. SuchSuch systemssystems requirrequiree ththee numbenumberr ooff knowknownn elementselements ttoo bbee equalequal ttoo ththee numbernumber ofof unknowunknownn variablevariabless ththee systesystemm aimsaims ttoo determine.determine. ThiThiss iiss essentiaessentiall forfor mathematicallymathematically calculatincalculatingg a uniquuniquee solutionsolution.. EquationaEquationall systemssystems alsalsoo implimplyy ththee presencpresencee ofof certaincertain

14 i4 Ibid.Ibid.,, pp.pp. 10-110-11 I.. 15 i) Ibid.,Ibid., pp.. 66.. 1616 constantsconstants whichwhich,, whewhenn known,known, alloalloww oneone toto calculatcalculatee ththee positiopositionn ofof ththee unknownunknown variablesvariables.. DobDobbb consideredconsidered thesthesee constantsconstants ttoo bbee ththee kekeyy ttoo providinprovidingg 'numerical'numerical valuesvalues ttoo ththee whole'.whole' .1616 WithouWithoutt thesthesee constants,constants, anyany relationshiprelationshipss withiwithinn thethe equationalequational systemsystem laclackk precisprecisee meaningmeaning.. IItt iiss necessarnecessaryy foforr elementselements ttoo bbee reduciblreduciblee toto a commoncommon tertern1m ifif ananyy fullfull quantitativquantitativee statementsstatements araree ttoo bbee made.made.

A principlprinciplee ofof valuevalue iiss nonott adequateadequate whicwhichh merelmerelyy expressesexpresses valuevalue iinn termsterms ooff somesome ononee oror otherother particulaparticularr valuevalue:: lhethe determining constants mustmust 17 express a relationship with some quantity which is not itselfit,s'ef! a value.value.17

OneOne maimainn featurefeature ofof thesthesee constantsconstants iiss theitheirr independenceindependence fromfrom ththee resrestt ooff ththee variables,variables, wherwheree thethe unknownsunknowns araree expresseexpressedd througthroughh theitheirr relatiorelationn toto thethe constants.constants. TheseThese constantconstantss musmustt bbee unequivocallunequivocallyy exclusive;exclusive; thetheyy cannotcannot bbee expressedexpressed asas a functionfunction ofof anyany dependentdependent variablevariable.. TheyThey areare broughbroughtt in,in, aass iitt werewere,, frofromm outsidoutsidee ththee system.system. TheThe quantityquantity thetheyy represenrepresentt isis determiningdetermining bubutt nonott determineddetern1ined.. IInn ththee casecase ofof a theortheoryy ofof valuevalue,, ththee determiningdetermining constantconstantss cannotcannot bbee valuevaluess themselvesthemselves,, bubutt musmustt existexist asas somesome distinctlydistinctly autonomouautonomouss unit.unit.

OneOne cacann constructconstruct equationalequational systemssystems aboutabout eventsevents,, anandd makmakee themthem coherencoherentt anandd solvable,solvable, merelmerelyy bbyy observinobservingg ththee formaformall ruleruless andand inventinginventing ththee necessarynecessary constantconstantss whicwhichh areare requirerequiredd ttoo determinedetermine ththee whole~bywhole—by assuminassumingg certaincertain thingthingss ttoo bbee independentindependent,, whethewhetherr thetheyy araree iinn facfactt soso oror not. IS18

Dobb'sDobb's choicechoice ofof ththee phrasphrasee "formal"formal rulesrules"" impliesimplies ththee existencexistencee ofof informalinformal rulesrules.. ItIt appearappearss DobDobbb wawass referrinreferringg ttoo ththee neeneedd foforr economiceconomic equationaequationall systemssystems ttoo fulfillfulfill nonott justjust thethe formalformal ruleruless ofof mathematicsmathematics,, bubutt ththee 'earthly'earthly'' requiremenrequirementt aass wellwell.. IItt iiss allall totooo easeasyy toto devisedevise anan abstractabstract modemodell thathatt satisfiessatisfies allall ththee necessarnecessaryy requirementsrequirements,, regardlesregardlesss ofof itsits validitvalidityy iinn modelinmodelingg ththee reareall worldworld.. ThereThere areare nnoo 'isolate'isolatedd systems'systems' iinn ththee reareall worlworldd ofof

1166 Ibid.,Ibid., p,p. 66,. 17 17 Ibid.Ibid.,, p.p. 1010 (Dobb'(Dobb'ss italics)italics).. 18 18 Ibid.,Ibid., pp.pp. 7-87-8.. 1717 coursecourse,, anandd ttoo attempattemptt ttoo modemodell realitrealityy inin ththee abstractabstract cacann onlonlyy givegive approximationapproximationss atat bestbest.. WhenWhen tryintryingg ttoo discoverdiscover generalizationsgeneralizations abouaboutt anyany systemsystem,, itit iiss necessarnecessaryy ttoo isolateisolate ththee systesystemm awayaway fromfrom ititss interconnecteinterconnectedd positionposition iinn realityreality;; thuthuss a certaincertain levelevell ofof abstractioabstractionn iiss essentialessential.. IInn ththee abstract,abstract, iitt isis quitquitee possiblpossiblee ttoo creatcreatee anyany numbenumberr ofof isolated,isolated, equationalequational systemsystemss witwithh variouvariouss independenindependentt constants.constants. HoweverHowever,, iiff a theortheoryy ofof valuvaluee iiss ttoo bbee regarderegardedd asas adequate,adequate, ththee equationaequationall systemsystemss musmustt represenrepresentt ththee realitrealityy ofof economiceconomic relationshipsrelationships,, wherwheree elementelementss areare dependendependentt andand interconnected.interconnected.

ThThee truttruthh ooff aann economieconomicc principlprinciplee musmustt liliee iinn whetherwhether,, inin makingmaking abstractioabstractionn ofof certaicertainn aspectsaspects ofof ththee problemproblem,, iitt doedoess soso inin orderorder ttoo foeusfocus upouponn featurefeaturess whicwhichh araree iinn facfactt cruciacruciall andand fundamentafundamentall featuresfeatures ooff thatthat slicslicee ooff ththee reareall worlworldd ttoo whicwhichh ththee theortheoryy iiss intendeintendedd toto apply.19apply.19

ThisThis statemenstatementt suggestssuggests ononee cancan judgjudgee ththee 'truth''truth' ooff aann economieconomicc principlprinciplee bbyy thethe elementselements itit abstractsabstracts outout.. AAss a sagacioussagacious professoprofessorr onconcee toltoldd meme,, "Ockham's"Ockham's RazorRazor iiss a powerfupowerfull tooltool,, providinprovidingg iitt doesn'doesn'tt cutcut totooo deeply.dceply."" ThThee risriskk ofof a deepdeep cutcut referreferss toto potentiallpotentiallyy removinremovingg relevanrelevantt layerlayerss thathatt mighmightt neeneedd ttoo bbee includedincluded iinn a modelmodel.. AnyAny representatiorepresentationn ooff ththee reareall worlworldd musmustt inherentlyinherently bbee abstractabstract iinn formform;; bubutt iiff ththee abstractionabstraction doedoess notnot relatrelatee ttoo realityreality,, iitt cannocannott bbee considereconsideredd anan accurataccuratee representation.representation.

OftenOften generalizationgeneralizationss areare madmadee witwithh specificspecific conditionconditionss iinn mindmind,, renderinrenderingg thethemm unableunable ttoo makmakee generagenerall forecastforecastss foforr otheotherr partpartss ofof ththee wholewholc.. ItIt isis mucmuchh easieeasierr ttoo finfindd a fitfit forfor a smallersmaller generalitygenerality thathann foforr overloverlyy encompassinencompassingg onesones,, asas particulaparticularr problemproblemss assumeassume mormoree constantconstantss thanthan generagenerall problemsproblems.. ThThee probleproblemm ooff determinindeterminingg resultresultss iiss relativelyrelatively easyeasy onconcee oneone knowknowss enougenoughh aboutabout ththee surroundingsurrounding conditionsconditions.. HencHencee iitt becomebecomess simplesimple ttoo predictpredict a certaicertainn resultresult,, givegivenn a simplesimple enougenoughh setset ofof conditions.conditions. BuButt aass moremore constantsconstants becombecomee unknownsunknowns,, ththee simplesimple resultresultss breabreakk down,down, complicatingcomplicating ththee equations.equations. OneOne iiss atat

1199 Ibid.Ibid.,, p.p. 1818.. 1818

libertyliberty ttoo useuse a simplesimple explanationexplanation foforr uncomplicateduncomplicated isolateisolatedd systems,systems, butbut asas complexitycomplexity increases,increases, ththee numbenumberr ofof variablevariabless thatthat cancan bbee consideredconsidered constantsconstants necessarilnecessarilyy decreases.decreases.

VariableVariabless thathatt werweree treatetreatedd asas independenindependentt inin thethe firstfirst approximationapproximation mighmightt becomebecome dependendependentt iinn ththee secondsecond approximation.approximation.

TheThe ultimatultimatee criterioncriterion ofof a lawlaw ofof valuvaluee toto bebe thethe requirementrequirementss ofof practice:practice: ththee typtypee ofof practicapracticall questionquestion whicwhichh oneone requiresrequires toto answer,answer, ththee purposepurpose ofof ththee inquirinquiryy atat hand?Ohand.

AtAt firstfirst glanceglance,, itit appearsappears thathatt DobbDobb thoughthoughtt ththee 'ultimate''ultimate' requiremenrequirementt ofof a theortheoryy ofof valuevalue isis ititss abilityability ttoo accuratelaccuratelyy predicpredictt whawhatt itit isis aimingaiming ttoo do.do. ThisThis seemsseems toto bebe a proverbialproverbial trumtrumpp card.card. SuchSuch a statementstatement couldcould bbee interpretedinterpreted asas weakeninweakeningg thethe needneed forfor a theortheoryy ooff valuevalue.. IIff ononee couldcould accuratelyaccurately predictpredict economiceconomic movementmovementss withouwithoutt it,it, doesdoes thathatt makemake a theortheoryy ofof valuvaluee irrelevant?irrelevant? Presumably,Presumably, DobbDobb thoughthoughtt practicalpractical economiceconomic forecastsforecasts couldcould notnot bebe madmadee withouwithoutt a theorytheory structuredstructured alongalong hihiss outlineoutlinedd requirements.requirements.

EvenEven ifif a theortheoryy ofof valuvaluee wawass ableable ttoo satisfysatisfy allall ththee necessarnecessaryy conditions,conditions, formaformall oror otherwise,otherwise, thetheyy musmustt bebe judgejudgedd onon theirtheir abilityability toto answeranswer ththee questionsquestions theythey pose.pose. InIn thethe casecase ofof anan economiceconomic theory,theory, thithiss meanmeanss thethe modelmodel mustmust bbee ableable toto makemake accurateaccurate predictionpredictionss andand sufficientlysufficiently explainexplain ththee relationshipsrelationships betweenbetween variouvariouss clementselements withinwithin thethe

system.system. If r itit cannotcannot ddoo so,so, thethenn iitt musmustt bbee regardedregarded asas inadequate,inadequate, regardlesregardlesss ofof itsits

compositioncomposition.. ItIt appearsappears thathatt thisthis 'ultimate'ultimate criterioncriterion'' isis reallyreally referrinreferringg toto Dobb'sDobb's

aforementioneaforementionedd 'earthly''earthly' quality.quality. IIfthef the purpospurposee ofof ththee inquiryinquiry isis seenseen asas explainingexplaining

movementsmovements withiwithinn politicalpolitical economy,economy, iitt mustmust findfind a practicapracticall answer.answer.

ThisThis representsrepresents alalll ofof Dobb'Dobb'ss requirementrequirementss forfor a theortheoryy ofof value.value. SummarizedSummarized onceonce

again,again, DobbDobb identifiedidentified fourfour distinctdistinct requirements:requirements:

20 Ibid.,Ibid., pp.. 88.. 1919

1)1) TheoriesTheories ofof valuvaluee musmustt havehave anan 'earthly''earthly' charactercharacter

22)) TheTheyy musmustt bbee capablecapable ofof solvingsolving thethe problemproblem ofof distribution/commodity-distribution/commodity-

valuevaluess

3)3) TheyThey mustmust bbee quantitativequantitative inin form,form, existingexisting asas equationalequational systcmssystems withwith

determinindeterminingg independentindependent value-constants.value-constants.

44)) ThcyThey musmustt bbee ableable ttoo answeranswer ththee questionsquestions theythey seekseek toto answeranswer

NoNoww wewe wilwilll examineexamine ththee historhistoryy ofof ththee twtwoo contendingcontending theorietheoriess ofof valuvaluee ttoo seesee howhow politicalpolitical economistseconomists havehave sculptedsculpted modelmodelss withwith regardsregards toto ththee aforementionedaforementioned requirementsrequirements..

ClassicalClassical PoliticaPoliticall EconomistEconomistss andand thethe LaborLabor TheoryTheory ofof ValueValue

BeforeBefore thethe publicatiopublicationn ofof AdaAdamm Smith'sSmith's groundbreakinggroundbreaking workwork WealthWealth ofof Nations,Nations, politicapoliticall economyeconomy hadhad failedfailed toto progresprogresss furtherfurther thanthan a stagestage ofof descriptiondescription andand classification?'21 For the most part, those attempting to decipher an explanation of classification. For the most part, those attempting to decipher an explanation of economic phenomena lacked the ability to make accurate statements about the general economic phenomena lacked the ability to make accurate statements about the general relationships in the system. Smith's insight provided political economists with a new relationships in the system. Smith's insight provided political economists with a new format for perceiving economic generalities. Economists like David Ricardo and Karl format for perceiving economic generalities. Economists like David Ricardo and Karl Marx rigorously systemized Smith's approach, and within a century of the publishing of Marx rigorously systemized Smith's approach, and within a century of the publishing of Wealth of Nations, political economists had created "unifying quantitative principles Wealth of Nations, political economists had created "unifying quantitative principles which enabled it to make postulates in terms of the general equilibriums of the economic which enabled it to make postulates in terms of the general equilibriums of the economic system-to make deterministic statements about the general relationships which held system—to make deterministic statements about the general relationships which held

21 21 FoForr thosthosee whowho havhavee a deeperdeeper interesinterestt inin ththee historicahistoricall developmentdevelopment ofof politicapoliticall economy,economy, I recommendrecommend a thoroughthorough readinreadingg ofof E.KE.K.. Hunt'Hunt'ss History of Economic Thought. 2200 betweenbetween thethe majomajorr elementselements ooff thethe system."system."n22 ThiThiss unifyinunifyingg principleprinciple,, wherwheree commodity-commodity- valuesvalues werweree relaterelatedd ttoo ththee amountamount ofof labolaborr needeneededd ttoo producproducee themthem,, camcamee ttoo bbee knowknownn asas ththee laborlabor theorytheory ofof value.value.

WhaWhatt ledled classicaclassicall politicapoliticall economistseconomists ttoo thithiss particulaparticularr theorytheory?? DobDobbb thoughtthought thethe problemproblemss ofof wealtwealthh distributiondistribution,, thethe creationcreation ofof surplus-valuesurplus-value,, anandd decipherindecipheringg thethe formationformation ooff exchange-ratioexchange-ratioss werweree ooff centracentrall concern.concern. ClassicaClassicall politicapoliticall economyeconomy describeddescribed ththee value-constanvalue-constantt governinggoverning exchange-ratioexchange-ratioss iinn a relationshirelationshipp ooff costcost,, wherewhere ththee exchange-valueexchange-value ofof a commoditycommodity wawass expresseexpressedd relativelrelativelyy aass ththee amountamount ooff otherother commoditiescommodities thethe firsfirstt couldcould bbee exchangedexchanged forfor.. HoweverHowever,, thithiss definitiodefinitionn alonealone waswas incapablincapablee ooff explainingexplaining whatwhat determinedeterminedd exchangexchangee ratesrates.. ThThee necessarnecessaryy determinatedeterminate solutiosolutionn foforr thisthis systemsystem wawass founfoundd inin thethe quantitquantityy ooff labolaborr requirerequiredd foforr productioproductionn ofof commoditiescommodities.. ThiThiss theortheoryy wawass vaguelvaguelyy describedescribedd bbyy AdaAdamm Smith,Smith, bubutt iitt wasn'wasn'tt untiluntil

RicardoRicardo thathatt thithiss principlprinciplee wawass describedescribedd clearlyclearly.23. RicardRicardoo considereconsideredd labolaborr ttoo bbee anan objectivobjectivee entity,entity, specifyingspecifying itit asas 'the'the expenditureexpenditure ofaof a givegivenn quantuquantumm ooff humahumann energy'.energy'.

"Viewed"Viewed objectivelyobjectively inin thithiss wayway,, ththee determinindeterminingg relatiorelationn wawass a technicatechnicall oneone,, anandd nonott a value-relation."value-relation.,,2424 SuchSuch a classificatioclassificationn madmadee laborlabor independentindependent ooff ththee valuvaluee ooflabor-f labor- power,power, ththee pricpricee ofof ththee commodity,commodity, andand ththee wagwagee levellevel.. ItIt alsalsoo wawass capablcapablee ofof beingbeing expressedexpressed inin termtermss ofof mormoree anandd less,less, anan extremelyextremely usefuusefull characteristiccharacteristic forfor thethe purpospurposee ofof quantification.quantification. UndeUnderr conditionsconditions ofof constanconstantt returnsreturns,, labolaborr wawass alsoalso independenindependentt ofof demand,demand, fulfillinfulfillingg a majomajorr conditioconditionn foforr a theortheoryy ooff value.value.

22 DobbDobb,, Political Economy and Capitalism, pp.. 55.. 23 23 FoForr instanceinstance,, SmithSmith wrotwrotee iinn thethe Wealth q(of Nations thatthat,, "Th'Thee valuvaluee ooff ananyy commodity..commodity .... ttoo ththee persopersonn whwhoo possessepossessess itit,, andand whwhoo meanmeanss nonott ttoo ususee oror consumeconsume iitt himselfhimself,, bubutt ttoo exchangexchangee itit foforr otherother commoditiescommodities,, iiss equaequall ttoo ththee quantityquantity ooff laboulabourr whicwhichh iitt enableenabless hihimm ttoo purchaspurchasee oorr command.command. Labour,Labour, thereforetherefore,, iiss ththee reareall measurmeasuree ofof thethe exchangeablexchangeablee valuvaluee ooff alalll commodities. 24 24 Dobb,Dobb, Political Economy and Capitalism, pp.. 1313.. 2121

RicardRicardoo seemsseems ttoo havehave onlonlyy faintlyfaintly sensedsensed ththee requirementrequirementss ooff a value-theory,value-theory, althoughalthough DobDobbb consideredconsidered hishis instinctinstinctss andand 'analytically'analytically robusrobustt mindmind'' asas essentiallyessentially

'right'.'right'. HiHiss defensedefense ofof thethe newlnewlyy formeformedd capitaliscapitalistt clasclasss againstagainst thethe landelandedd gentrygentry compellecompelledd himhim ttoo examineexamine ththee inner-workinginner-workingss ooff economieseconomies iinn detail.detail. NotablyNotably,, RicardoRicardo wawass interesteinterestedd inin determiningdetermining ththee differencedifference betweebetweenn ththee valuvaluee ofof labor-powelabor-powerr andand thethe valuevalue ofof allall otherother commoditiescommodities.. IIff valuvaluee originateoriginatedd frofromm ththee amounamountt ooff labolaborr necessarynecessary forfor productioproductionn ofof a good,good, hohoww coulcouldd a capitalistcapitalist sellsell ththee commoditcommodityy forfor mormoree thathann thethe laborlabor embodiedembodied iinn it?it? IfIf wagewagess werweree increased,increased, whawhatt woulwouldd happehappenn ttoo ththee pricpricee ooff allall commodities?commodities? WoulWouldd thethe differencdifferencee betweebetweenn thethemm decreasedecrease,, oorr woulwouldd ththee pricpricee ooff allall otherother commoditiescommodities risrisee proportionally?proportionally?

MultiplMultiplee politicapoliticall economisteconomistss hahadd attempteattemptedd ttoo formulatformulatee solutionssolutions ttoo thesethese questions.questions. Mill'Mill'ss cost-of-productioncost-of-production theortheoryy attempteattemptedd ttoo explaiexplainn pricesprices asas determineddetermined byby thethe technicaltechnical conditionsconditions ooff productionproduction,, includinincludingg givegivenn wagewagess plupluss aann averagaveragee ratratee ofof profitprofit.. HoweverHowever,, MilMilll failefailedd toto explainexplain ththee origioriginn ooff profitprofit,, lelett alonalonee providprovidee anan explanationexplanation foforr whatwhat specificallyspecifically determineddetermined ththee profit-rate.profit-rate. MarxMarx laterlater realizerealizedd thatthat

Mill'Mill'ss theortheoryy wawass uselesuselesss unlessunless ththee ratratee ooff profiprofitt coulcouldd bbee defineddefined.. BotBothh wagewagess andand

profitprofitss areare derivationsderivations ooff otherother pricesprices,, makinmakingg iitt impossiblimpossiblee ttoo explaiexplainn generagenerall pricesprices

withouwithoutt a determinindeterminingg constantconstant thathatt wawass nonott a pricpricee itselfitself.. A competencompetentt theortheoryy ooff valuevalue

wawass thereforthereforee necessarnecessaryy foforr unveilinunveilingg ththee causescauses ooff pricpricce determinationdetermination.. MarxMarx

recognizerecognizedd thathatt ifif ththee raterate ooff profiprofitt couldcould bbee determinedeterminedd withiwithinn ththee frameworkframework ooff thethe

labor-theorlabor-theoryy ofof valuevalue,, Mill'Mill'ss cost-of-productioncost-of-production coulcouldd bbee useusedd ttoo sufficientlysufficiently explainexplain

pricespnces.. 2222

ThereThere cacann bebe littlelittle doubtdoubt thathatt MarMarxx wawass fafarr mormoree awareaware ofof thethe methodologicalmethodological problemproblemss thathann hihiss predecessorspredecessors,, nonott ttoo mentiomentionn ththee overwhelminoverwhelmingg majoritmajorityy ooff hishis successors.successors. DobDobbb describedescribedd Marx'Marx'ss backgroundbackground aass "approached"approached frofromm thethe standpointstandpoint ofof a generagenerall philosophphilosophyy ofof historyhistory,, bbyy whicwhichh iitt cacann bbee saidsaid thathatt ththee descriptivedescriptive andand classificatorclassificatoryy emphasisemphasis ooff thethe historicahistoricall schooschooll andand ththee analyticalanalytical anandd quantitativequantitative emphasisemphasis ofof abstractabstract PoliticaPoliticall EconomEconomyy werweree combined."combined.,,2525 HHee wawass deeplydeeply concernedconcerned witwithh thethe movementsmovements ooff ththee mainmain classclass revenuerevenuess ofof society,society, whicwhichh hhee considereconsideredd kekeyy toto

'the'the lawslaws ooff motiomotionn ooff capitaliscapitalistt society'.society'. HHee wawass alsalsoo troubledtroubled bbyy thethe so-calledso-called transformatiotransformationn problem—specificallproblem-specificallyy thethe transformatiotransformationn ooff valuevaluess intintoo pricepricess ofof production.production. MarMarxx foundfound ththee labor-theorylabor-theory ooff valuvaluee essentiaessentiall forfor decipherindecipheringg thesethese relationshipsrelationshi ps..

RicardRicardoo hahadd basebasedd hihiss theortheoryy ooff valuvaluee upouponn laborlabor,, bubutt withouwithoutt firsfirstt definingdefining anan independentindependent value-constantvalue-constant,, hhee wawass unableunable toto explainexplain ththee probleproblemm ofof hohoww surplus-valuesurplus-value couldcould arisarisee fromfrom ththee exchangexchangee ofof capitalcapital anandd labor.labor. MarxMarx understoounderstoodd ththee necessitnecessityy ofof

independenindependentt value-constants,value-constants, emphasizingemphasizing iinn ththee openingopening chapterchapter ooff Das Kapital "the"the

neeneedd forfor somesome uniforuniformm quantityquantity,, nonott itselitselfaf a valuevalue,, iinn termsterms ooff whichwhich thethe exchange-valuesexchange-values

ooff commoditiecommoditiess couldcould bbee expressed."expressed.,,2626 TheThe essentiaessentiall importanceimportance ooff usinusingg laborlabor aass a

value-constanvalue-constantt wawass thathatt itit couldcould bbee useusedd ttoo determindeterminee ththee valuvaluee ooff labor-powerlabor-power itself.itself.

ThiThiss isis thethe reasoreasonn whwhyy MarMarxx spentspent soso mucmuchh timtimee separatingseparating labor-powerlabor-power frofromm labolaborr iinn hishis

firstfirst volumevolume,, divorcindivorcingg ththee former,former, a commodity,commodity, frofromm ththee latter,latter, a representatiorepresentationn ofof

humahumann activityactivity thathatt iiss objectivobjectivee bbyy naturenature.. MarMarxx considereconsideredd laborlabor ttoo bbee ththee actuaactuall activityactivity

ooff worworkk whilwhilee labor-powerlabor-power ttoo bbee ththee ability ttoo laborlabor.. ThisThis separationseparation wawass a crucialcrucial stepstep

25 25 Ibid.,Ibid., pp.. 23.23. 2266 Ibid.,Ibid., pp.. 1212.. 2323 foforr thethe laborlabor theortheoryy ofof valuevalue;; withouwithoutt aann independenindependentt value-constant,value-constant, ththee theortheoryy woulwouldd bebe incapableincapable ofof explaininexplainingg phenomenphenomenaa liklikee wageswages,, pricesprices,, anandd surpluses.surpluses.

ValuValuee wawass thereforthereforee seenseen asas anan objectiveobjective entitentityy originatingoriginating iinn ththee productionproduction processprocess.. ThThee labolaborr theortheoryy ooff valuvaluee implieimpliedd thathatt exchange-valueexchange-valuess werweree relaterelatedd ttoo thethe outpuoutputt anandd using-uusing-upp ofof humahumann energies,energies, providinprovidingg aann explanatioexplanationn thathatt gavegave somesome meaninmeaningg ttoo ththee distinctionsdistinctions betweebetweenn grossgross anandd net-productsnet-products,, ththee surplussurplus ooff laborlabor,, andand difTeringdiffering formsforms ofof incomeincome.. ItIt becambecamee possiblepossible ttoo distinguishdistinguish exchangexchangee relationshipsrelationships whicwhichh represenrepresentt a passinpassingg ofof value-equivalentvalue-equivalentss fromfrom oneone factiofactionn ttoo ththee nextnext.. ThThee labor­labor- theortheoryy alsalsoo provideprovidedd a platforplatformm foforr distinguishingdistinguishing ththee productivproductivee contributiocontributionn ooff a person.person. SuchSuch a distinctiondistinction hahadd crucialcrucial implicationimplicationss forfor determinindeterminingg ththee behaviobehaviorr ofof differendifferentt incomincomee classesclasses anandd theitheirr reactioreactionn ttoo economieconomicc changes.changes. BByy relatinrelatingg exchange­exchange- valuevaluess ttoo ththee outpuoutputt anandd usingusing ofof humahumann energies,energies, ththee laborlabor theorytheory ofof valuvaluee gavegave meaningmeaning ttoo conceptconceptss suchsuch aass surplussurplus thathatt woulwouldd otherwisotherwisee bbee inexplicable.inexplicable.

YeYett thethe determinationdetermination ofof labolaborr aass ththee fundamentafundamentall value-constanvalue-constantt bbyy classicalclassical politicalpolitical economistseconomists wawass stillstill onlyonly addressinaddressingg ththee formalformal requirementrequirementss ooff thethe theory.theory.

WhWhyy shouldshould a costcost theorytheory focusfocus onlonlyy oonn ononee ooff ththee factorsfactors iinn wealtwealthh productionproduction?? IIff a theorytheory thathatt ignoreignoress capitacapitall oror landland inputsinputs andand focusesfocuses onlyonly oonn labolaborr isis,, asas DobDobbb puputt it,it,

'surely,'surely, arbitraryarbitrary dogmatism',dogmatism', iiss itit nonott subjectsubject ttoo seriousserious question?question? ThiThiss isis a practicalpractical

questionquestion,, nonott a formalformal oneone.. "The"The truttruthh ooff anan economieconomicc principlprinciplee musmustt liliee iinn whetherwhether,, inin

makinmakingg abstractionabstraction ooff certaicertainn aspectaspectss ofof thethe problemproblem,, itit doedoess soso iinn orderorder ttoo focufocuss uponupon

featuresfeatures whicwhichh areare iinn factfact cruciacruciall andand fundamentalfundamental featuresfeatures ooff thathatt sliceslice ooff ththee reareall worldworld

97 ttoo whicwhichh ththee theortheoryy isis intendedintended ttoo apply."napply."

27 27 Ibid.,Ibid., p.p. 1818.. 2424

DobDobbb listedlisted somesome practicapracticall objectionsobjections toto takingtaking landland oror capitalcapital asas thethe basis,basis, issuesissues thathatt werweree fafarr moremore damningdamning thathann thosthosee foundfound inin ththee laborlabor theorytheory ofof valuevalue.. TheThe dissimilaritdissimilarityy ofof landland hahadd alreadyalready beebeenn noticednoticed bbyy ththee classicalclassical PoliticalPolitical Economists,Economists, andand wawass alreadalreadyy beinbeingg useusedd inin thethe classicalclassical determinatiodeterminationn ofof rent.rent. IInn Dobb' ss words,words, "acres"acres areare mormoree dissimilardissimilar thanthan man-hourman-hourss oflabor.,,28of labor."28 CapitalCapital wawass eveneven mormoree problematicproblematic inin thatthat iitt wawass a valuevalue,, andand dependeddepended upouponn otherother value,value, particularlparticularlyy profitprofit earned.earned. IfIf theythey tooktook representationsrepresentations ofof capitalcapital (machines,(machines, structures)structures) instead,instead, thetheyy couldcould "only"only havehave quantitativequantitative significancesignificance inin thithiss contextcontext asas stored-upstored-up labor."labor." A combinationcombination ofof thethe threethree isis meaninglesmeaninglesss asas therethere existsexists nono commoncommon termterm betweenbetween them.them.

MostMost importantly,importantly, laborlabor hahadd a practicalpractical qualityquality ttoo it.it. DobbDobb thoughtthought thatthat thethe ideaidea thathatt laborlabor constitutedconstituted a costcost wawass a uniquuniquee assumption,assumption, butbut oneone thatthat waswas borbornn frofromm thethe specificspecific viewview ofof thethe essencessencee ofof thethe economiceconomic problem.problem. ItIt waswas nonott anan arbitraryarbitrary choice,choice, butbut oneone thatthat wawass attemptingattempting toto depictdepict thethe essentialessential shapeshape ofof thethe reareall world.world. DobbDobb said,said, "The"The cruxcrux ofof thethe economiceconomic problemproblem...... laylay inin thethe strugglestruggle ofof manman withwith naturnaturee toto wrestwrest a livelihood for himself under various forms of production at various stages ofhistory.,,2929 livelihood for himself under various forms of production at various stages of history." Human activity versus the process of nature is seen here as afimdamental relationship, Human activity versus the process of nature is seen here as & fundamental relationship, with human activity acting as the impetus for altering the natural world. The economic with human activity acting as the impetus for altering the natural world. The economic problem in real terms almost assuredly must include the contrasting relationship between problem in real terms almost assuredly must include the contrasting relationship between labor and nature as a necessary factor. If we are then to give a quantitative expression to labor and nature as a necessary factor. If we are then to give a quantitative expression to this relationship, it is hard to think of any other expression than the expenditure of human this relationship, it is hard to think of any other expression than the expenditure of human energy for production. "The essence of value, in other words, by contrast with riches, energy for production. "The essence of value, in other words, by contrast with riches, was conceived to be cost, and the essence of cost to lie in labor, by contrast with nature. was conceived to be cost, and the essence of cost to lie in labor, by contrast with nature.

28 28 Ibid.,Ibid., p.p. 1818.. 29 29 Ibid.,Ibid., p.p. 1919.. 2525

LaborLabor,, conceivedconceived objectively, aass ththee outputoutput ooff humahumann energy,energy, wawass ththee measurmeasuree andand thethe essence of Ricardo' s 'difficulty or facility of production' .,,3030 essence of Ricardo's 'difficulty or facility of production'." By describing the human effort that goes into production, the classical economists By describing the human effort that goes into production, the classical economists were making a description that was far from metaphysical. Proponents of the labor were making a description that was far from metaphysical. Proponents of the labor theory of value do not doubt the worth of the fertility ofland or the organized means of theory of value do not doubt the worth of the fertility of land or the organized means of production, but they do not grade the ownership of these resources in describing production, but they do not grade the ownership of these resources in describing participation of production on level with the personal participation found in labor. They participation of production on level with the personal participation found in labor. They couldn't see worth in ascribing value to mere use. As Bohm-Bawcrk put it, "there is no couldn't see worth in ascribing value to mere use. As Bohm-Bawerk put it, "there is no other sense of the word 'use' than the 'putting forth of physical powers', or energy.,,3l other sense of the word 'use' than the 'putting forth of physical powers', or energy." Basing itself on a fundamental characterization of economic activity, the labor-theory of Basing itself on a fundamental characterization of economic activity, the labor-theory of value was going beyond the formal requirements: "it was making an important qualitative value was going beyond the formal requirements: "it was making an important qualitative (often confused with ethical) statement about the nature of the economic problem, and (often confused with ethical) statement about the nature of the economic problem, and imparting the implications of this statement to its corollaries.,,32 imparting the implications of this statement to its corollaries."32 In summary, the classical political economists found the labor-theory of value to In summary, the classical political economists found the labor-theory of value to be capable of explaining distribution, surplus-value, commodity-values, and exchange- be capable of explaining distribution, surplus-value, commodity-values, and exchange- ratios. By choosing objective labor as their invariant, classical political economists were ratios. By choosing objective labor as their invariant, classical political economists were able to distinguish a value-constant that was independent of value itself, and could be able to distinguish a value-constant that was independent of value itself, and could be used to determine cost and exchange-ratios. They were also able to describe a used to determine cost and exchange-ratios. They were also able to describe a quantitative system in an 'earthly' manner, where real economic phenomena and quantitative system in an 'earthly' manner, where real economic phenomena and relationships were represented elements. Most importantly, they were able to use the relationships were represented elements. Most importantly, they were able to use the labor theory of value to answer the economic questions they originally sought to answer. labor theory of value to answer the economic questions they originally sought to answer.

30 Ibid.,Ibid., pp.. 2020,, mmyy italicsitalics.. 3311 Ibid.Ibid.,, pp.. 21.21 . 3322 Ibid.,Ibid., pp.. 21.21 . 2626

JevoniaJevoniann RevolutionRevolution andand thethe UtilityUtility TheorTheoryy ooff ValueValue

ButBut withiwithinn tetenn yearyearss ofof Marx'Marx'ss thorougthoroughh analysianalysiss ofof politicapoliticall economy,economy, a newnew value-theorvalue-theoryy wawass borbornn thatthat brushedbrushed ththee labor-theorlabor-theoryy asidasidee witwithh seeminglyseemingly littlelittle resistance.resistance.

ThiThiss so-calledso-called utility-theorutility-theoryy waswas apparentlyapparently conceiveconceivedd simultaneouslysimultaneously iinn variouvariouss minds,minds, includingincluding ththee EnglisEnglishh economiseconomistt WilliaWilliamm levons,Jevons, aass welwelll aass MengerMenger,, WieserWieser,, anandd Bohm­Bohm-

BawerBawerkk ofof ththee AustriaAustriann School.School. TheThe neneww theortheoryy wawass elegantelegant anandd novelnovel,, owinowingg itsits inventioninvention partiallpartiallyy ttoo ththee conceptconceptss ofof differentialdifferential calculuscalculus,, witwithh emphasiemphasiss oonn marginalmarginal incrementincrementss andand rateratess determineddetermined througthroughh differentiadifferentiall calculuscalculus.. Bohm-BawerBohm-Bawerkk seemseemss toto havhavee understoounderstoodd ththee probleproblemm classicalclassical PoliticalPolitical EconomEconomyy hahadd trietriedd ttoo solvesolve,, anandd itit appearsappears thethe formulationformulation ooff hihiss theorytheory waswas aatt leasleastt partiallpartiallyy writtewrittenn asas a direcdirectt responsresponsee toto ththee conclusionconclusionss MarMarxx hahadd postulatedpostulated.. AAss DobDobbb ssoo elegantlelegantlyy said,said, "if"if onlyonly bbyy ththee effeceffectt ofof negationnegation,, thethe influencinfluencee ofof MarMarxx onon ththee economieconomicc theortheoryy ooff ththee 19thth centurcenturyy woulwouldd appearappear ttoo havhavee beebeenn mucmuchh mormoree profounprofoundd thathann iitt iiss fashionablfashionablee ttoo admit".33admit". ThThee materializationmaterialization ofof thisthis newnew theortheoryy ofof valuvaluee appearappearss ttoo represenrepresentt Dobb'Dobb'ss demarcatingdemarcating linlinee betweenbetween

classicaclassicall politicalpolitical economyeconomy andand ititss successorsuccessor.. TheThe hastilhastilyy erectederected Jevonialevoniann RevolutionRevolution provideprovidedd thethe theoreticaltheoretical basisbasis foforr bothboth neo-classicalneo-classical andand KeynesiaKeynesiann economics.economics.

UtilityUtility,, ththee anchoanchorr ooff thithiss neneww theorytheory,, representerepresentedd somethinsomethingg individuaindividuall andand

subjective.subjective. InIn thithiss case,case, valuvaluee wawass expressedexpressed aass 'th'thee incremenincrementt ofof utilitutilityy oonn thethe margimarginn ofof

consumption'.consumption'. InsteadInstead ofof aann objectiveo~jective cost-relatiocost-relationn originatinoriginatingg iinn productionproduction,, a su~jectivesubjective

relationrelation betweebetweenn commoditiecommoditiess anandd ththee individuaindividuall mindmindss ooff consumerconsumerss wawass taketakenn aass thethe

determiningdetermining constanconstantt iinn ththee equationalequational system.system. BotBothh ththee utility-theorutility-theoryy andand ththee labor­labor-

theorytheory madmadee qualitativqualitativee statementsstatements abouaboutt ththee naturnaturee ooff economieconomicc activityactivity througthroughh formform

anandd concept,concept, bubutt thesethese statementsstatements werweree ofof differentdifferent ordersorders.. UnlikUnlikee ititss predecessorpredecessor,, thethe

33 33 Ibid.,Ibid., p.p. 2525.. 2727 utility-theorutility-theoryy wawass "concerned"concerned nonott witwithh relationsrelations ooff productionproduction,, bubutt witwithh thethe relatiorelationn ofof commoditiescommodities ttoo ththee psychology ofof consumers.,,34consumers."34 BByy expressingexpressing valuvaluee aass a functiofunctionn ofof utilityutility,, iitt wawass characterizingcharacterizing ththee equilibriuequilibriumm inin a specificspecific fashion,fashion, relatinrelatingg thethe balancbalancee ttoo a relativrelativee 'maximum''maximum' ofutility.35of utility. ValuValuee wawass seenseen asas existingexisting aass a functionfunction ooff ththee incrementincrement ofof utilityutility onon ththee marginmargin ooff consumption.consumption. FroFromm thithiss vantagvantagee pointpoint,, economieconomicc conceptsconcepts werweree seenseen aass dependendependentt onon humahumann consciousnessconsciousness,, providinprovidingg ththee theortheoryy witwithh justificationjustification foforr claimingclaiming a levellevel ofof greategreaterr generalitgeneralityy thathann ththee labor-theorylabor-theory.. ThThee utility-theorutility-theoryy waswas

seeseenn asas applicableapplicable regardlesregardlesss ofof ththee makeumakeupp ofof ththee factorsfactors ooff productionproduction,, allowinallowingg itit toto

shrugshrug offoff ththee restrictivrestrictivee assumptionsassumptions aboutabout ththee 'organic'organic compositioncomposition ofof capital'.capital'. ThisThis madmadee ththee utilitutilityy theortheoryy jusjustt asas competentcompetent inin determiningdetermining microscopimicroscopicc problemproblemss aass iitt waswas forfor macroscopimacroscopicc problemsproblems.. ManManyy proposeproposedd thathatt sincesince fundamentafundamentall instinctsinstincts ofof humanhuman consciousnessconsciousness hahadd remaineremainedd relativelrelativelyy constanconstantt throughouthroughoutt differendifferentt epochsepochs ooff humanhuman development,development, ththee utilitutilityy theortheoryy couldcould bbee applieappliedd regardlessregardless ofof ththee organizatioorganizationn ofof

economieconomicc society.society.

However,However, thertheree werweree limitinglimiting assumptionsassumptions withiwithinn ththee utility-theorutility-theoryy asas wellwell.. SinceSince

statesstates ofof humahumann consciousnessconsciousness couldcould onlonlyy bbee expressedexpressed iinn termsterms ofof valuevalue,, differentdifferent

income-positionincome-positionss werweree nnoo longelongerr determining,determining, andand coulcouldd thereforthereforee bbee abstracteabstractedd out.out.

ConsumersConsumers werweree abstractedabstracted awayaway fromfrom theitheirr positiopositionn aass producersproducers,, andand vicvicee versaversa.. TheThe

classicalclassical politicapoliticall economistseconomists sawsaw incomincomee distributiondistribution asas ththee resulresultt ooff socialsocial institutionsinstitutions

andand relationsrelations whilwhilee supplysupply anandd demanddemand theoristtheoristss thoughthoughtt iitt wawass determinedeterminedd bbyy exchange.exchange.

IInn ththee formerformer approachapproach,, profiprofitt isis seeseenn asas parpartt ooff ththee surplus,surplus, whilwhilee ththee lattelatterr approacapproachh gavegave

thethemm ththee appearancappearancee ofof ththee resultresultss ofof ththee capitalist'capitalist'ss nenett contribution.contribution. ThThee probleproblemm ofof

34 34 Ibid.,Ibid., pp.. 21.21 . 3355 Ibid.Ibid.,, p.p. 2222.. 2828 valuvaluee hadhad ttoo bebe treatedtreated asas thoughthough itit waswas independentindependent fromfrom ththee effectseffects onon demandemandd ofof incomeincome distribution,distribution, "otherwise"otherwise a demand-scheduledemand-schedule couldcould nonott bbee regardedregarded solelysolely asas a functionfunction ooff utilitutilityy anandd asas independentindependent ofof ththee valuvaluee ofof commoditiescommodities andand ofof productive-productive- agents.,,36agents."36 ThisThis hahass ledled somesome ttoo sasayy thatthat ththee theorytheory isis applicableapplicable onlyonly ttoo a societysociety ofof equalequal incomesincomes,, wherwheree thertheree isis nnoo questionquestion ofof distributiondistribution leftleft ttoo explain.explain. BByy consideringconsidering individualindividual consciousnessconsciousness asas fundamentalfundamental toto thethe theory,theory, ththee utility-approachutility-approach mademade abstractionsabstractions ofof allall social influencesinfluences upouponn individualindividual character-ofcharacter—of allall reactionreactionss ofof societysociety ofof whicwhichh hhee wawass a partpart,, letlet alonealone ththee economiceconomic relationsrelations intointo whicwhichh hihiss subjectivitysubjectivity waswas formed.formed. 37 DobbDobb sayssays itit isis clearclear thathatt ththee corollariescorollaries shouldshould havehave anan individualistindividualist bias,bias, asas anan individualistindividualist descriptiondescription ofof humanhuman societysociety wawass containedcontained inin thethe assumptions.assumptions. "Whether"Whether suchsuch a descriptiondescription isis justifiejustifiedd oror notnot isis notnot a formalformal oror logicallogical questionquestion butbut a questionquestion ofof fact."fact. ,,3838

CanCan utilityutility bbee treatetreatedd asas a quantityquantity atat all?all? DobDobbb thoughthoughtt itit possiblepossible toto conceiveconceive utilitutilityy asas KantKant wouldwould havehave,, givinggiving itit 'intensive'intensive magnitude'magnitude',, allowingallowing iitt ttoo bbee conceivedconceived ofof aass 'greate'greaterr oror less'.less'. WhetheWhetherr thithiss considerationconsideration isis justifiejustifiedd isis anotheranother mattematterr entirely.entirely.

EitherEither wayway,, DobbDobb thoughthoughtt thethe questionquestion ofof itsits existenceexistence asas anan entityentity waswas irrelevant.irrelevant. IfIf itit doesdoes existexist,, itit cancan havehave economiceconomic significancesignificance onlyonly througthroughh itsits objectiveobjective expressionexpression asas anan individual'sindividual's behaviobehaviorr onon a marketmarket.. TheThe termterm "desire""desire" isis usedused ttoo expressexpress thethe immediateimmediate mentalmental activityactivity behinbehindd suchsuch aann actact ofof purchasepurchase.. HereHere isis ththee oftenoften unnoticeunnoticedd 'slender'slender pediment'pediment' thatthat ththee utilityutility theorytheory restsrests uponupon.. ThisThis premispremisee identifiesidentifies 'desire''desire' withwith

'satisfaction','satisfaction', anotheanotherr subjectivesubjective termterm thathatt appearsappears difficult,difficult, iiff notnot impossible,impossible, toto

36 36 Ibid.,Ibid., pp.. 2626.. 37 37 AAss E.K.E.K. HuntHunt wrotewrote,, "The"The latterlatter theory'theory'ss greategreaterr generalitygenerality isis purchasedpurchased aatt a ratherrather highhigh price.price."" History of Economic Thought, p.p. 100100.. 8 38' Dobb,Dobb, Political Economy and Capitalism, p.p. 27.27. 2929 quantifyquantify.39. ProfessorProfessor PigouPigou defendeddefended thithiss conceptualizationconceptualization asas a sufficientsufficient approximationapproximation thatthat isis truetrue ofof 'most'most commodities';commodities'; withouwithoutt thisthis assumption,assumption, thertheree iiss nnoo groundground forfor expressingexpressing demanddemand asas a functionfunction ofof utilityutility,, therebtherebyy removingremoving anyany possiblepossible connectionconnection betweebetweenn value-phenomenvalue-phenomenaa andand utility.utility.

InIn sum,sum, thethe utilityutility theorytheory ofof valuevalue chosechose thethe subjectivesubjective tertermm 'utility''utility' toto actact asas theirtheir independentindependent value-constantvalue-constant.. ByBy focusingfocusing onon exchange,exchange, thethe utilitutilityy theoriststheorists werweree onlyonly ableable ttoo definedefine productiveproductive contributionscontributions bbyy whatwhat eventuated.eventuated. TheThe conceptconcept ofof satisfactionsatisfaction existingexisting asas ththee mainmain influenceinfluence oonn pricepricess couldcould easilyeasily bbee describeddescribed asas a circularcircular

4o40 tautology—whertautology-wheree pricesprices determinedetermine prices. TheThe totaltotal contributedcontributed wawass seenseen asas equalequal toto ththee totaltotal returnreturn,, andand anyany participantparticipant thatthat requirerequiredd a priceprice musmustt havhavee thereforetherefore madmadee a contribution,contribution, therebtherebyy removinremovingg anyany coherentcoherent conceptconcept ofof incomeincome distributiondistribution andand surplussurplus otherother thanthan explainedexplained asas 'deserved.''deserved.' ItIt isis nonott convincinglyconvincingly clearclear thatthat thethe utilityutility theorytheory isis capablecapable ofof accuratelyaccurately explainingexplaining economiceconomic movementsmovements.. OnOn ththee otherother handhand,, ifif theirtheir goalgoal wawass describingdescribing a systemsystem wherwheree appropriatingappropriating surplusessurpluses forfor ththee capitalistcapitalist classclass waswas consideredconsidered bothboth warrantewarrantedd andand justifiedjustified,, thetheyy succeededsucceeded spectacularly.spectacularly.

ThThee ProbleProblemm ofof SurplusesSurpluses

TheThe conceptconcept ofof surplussurplus hashas nnoo meaninmeaningg outsideoutside ofof a cost-principlecost-principle asas a basibasiss ofof

interpretation.interpretation. WithouWithoutt a cost-principle,cost-principle, nnoo criterioncriterion existsexists ofof didifferentiatio fferentiationn betweenbetween

class-incomes.class-incomes. TheThe reasoreasonn forfor thisthis isis thathatt a cost-principlecost-principle makesmakes "some"some statementstatement

concerningconcerning thethe naturnaturee ofof productivproductivee activities-ofactivities—of thethe relatiorelationn betweebetweenn memenn inin thethe

activityactivity ooff production—whereaproduction-whereass a demand-theorydemand-theory isis a generalizationgeneralization aboutabout consumptionconsumption

andand exchange—abouexchange-aboutt thethe relationrelation betweenbetween memenn quaqua consumersconsumers andand thethe commoditiescommodities

39 39 Ibid.,Ibid., pp.. 2727.. 40 40 ItIt isis a questionquestion oofcausality~pricesf causality—prices cannotcannot bebe thethe causecause ofof pricesprices.. 3300

whichwhich resulresultt fromfrom production."production. ,,4141 A questionquestion containingcontaining ththee conceptconcept ofof surplusurpluss concernsconcerns itselitselff witwithh ththee connectioconnectionn betweebetweenn a givegivenn incomeincome andand productivproductivee activityactivity,, aann ipsofactoipso facto concepconceptt ooff costcost.. CosCostt anandd surplussurplus araree correlativecorrelative termsterms.. TheThe labor-theorlabor-theoryy ofof valuevalue provideprovidedd politicapoliticall economistseconomists witwithh a templattemplatee foforr explainingexplaining ththee existencexistencee andand originorigin ofof surpluses.surpluses. Ilfthef the laborlabor embodieembodiedd inin ththee commoditcommodityy iiss greatergreater thathann ththee laborlabor needeneededd toto replacreplacee itit,, a surplusurpluss emergesemerges.. UndeUnderr sucsuchh conditionsconditions,, ononee cacann attemptattempt toto determindeterminee whowho isis ththee recipientrecipient ooff thithiss surplus-value,surplus-value, asas welwelll asas whywhy thetheyy receivereceivedd it.it.

OOnn ththee otheotherr handhand,, "a"a principlprinciplee whicwhichh interpretinterpretss valuevalue purelpurelyy iinn termtermss ofof demanddemand cancan definedefine ththee productivproductivee 'contribution''contribution' ofof a persopersonn oror a clasclasss onlyonly accordingaccording ttoo thethe valuevalue ofof whawhatt eventuates"; iitt cannotcannot taltalkk abouaboutt whawhatt originatesoriginates,, asas itit includeincludess nnoo sucsuchh statementstatement aboutabout anyany productivproductivee relationshirelationshipp ooff thithiss kindkind.. "Hence"Hence anyany participanparticipantt inin productionproduction whicwhichh acquiresacquires a price—anprice-anyy agentagent whicwhichh figurefiguress onon ththee markemarkett atat all-mustall—must ipso factofacto havhavee madmadee a "contribution."contribution." ,,4242 ThisThis makesmakes servicesservices likelike 'the'the loaloann ooff scarcscarcee resources'resources' contributionscontributions ttoo ththee productivproductivee process.process. IfIf somethingsomething acquireacquiress a priceprice,, itit musmustt thereforetherefore perforperformm a service.service. UndeUnderr competitivcompetitivee conditionsconditions,, ththee sumsum totaltotal ooff valuevaluess musmustt equalequal thethe valuvaluee ooff thethe resultresult,, andand ththee inquiryinquiry intintoo surplus-valuesurplus-value becomesbecomes meaningless.meaningless.

ThThee inquirinquiryy becomebecomess meaninglesmeaninglesss nonott becausbecausee itit doesn'doesn'tt exist,exist, bubutt becausbecausee ofof thethe forformm iinn whicwhichh ththee probleproblemm wawass stated.stated. ConceptConceptss ooff costcost andand surplussurplus areare nonott abstract.abstract.

WhyWhy doesdoes a value-differencvalue-differencee exisexistt atat allall,, anandd ifif iitt persistspersists,, whawhatt causescauses iitt ttoo ddoo so?so? WhyWhy doesn'tdoesn't competitiocompetitionn equalizequalizee ththee originaloriginal andand finalfinal valuesvalues?? AnAnyy theortheoryy ooff distributiondistribution musmustt concernconcern itselfitself witwithh ththee probleproblemm ooff ththee creatiocreationn anandd disposaldisposal ofof thithiss surplussurplus valuevalue,, asas ththee classicaclassicall PoliticaPoliticall EconomistEconomist realizedrealized.. ThThee laborlabor theortheoryy ofof valuvaluee gavgavee "a"a quantitativequantitative

41 Ibid.,Ibid., pp.. 3030.. 42 Ibid.Ibid.,, pp.. 3030.. 3311 meaningmeaning toto ththee originaloriginal value-contributiovalue-contributionn madmadee ttoo ththee productivproductivee procesprocesss iinn a sensesense whichwhich enabledenabled iitt ttoo bbee differendifferentt fromfrom ththee finafinall valuvaluee ooff ththee product."product.,,4343 AAss a cost-principle,cost-principle, itit evaluateevaluatess a productivproductivee contributiocontributionn inin termtermss ooff ththee physicaphysicall usinusingg uupp ooff somethingsomething thatthat hashas ttoo bbee replacereplacedd bbyy humahumann activity.activity. "If"If ththee labolaborr oorr activitactivityy requirerequiredd ttoo replacreplacee whawhatt isis useusedd uupp iiss leslesss thathann ththee labolaborr embodieembodiedd iinn ththee totatotall productproduct,, a surplusurpluss emerges."emerges." IsIs thisthis surplussurplus thethenn distributedistributedd iinn proportioproportionn ttoo ththee productivproductivee contributiocontributionn ooff ththee participantparticipantss inin ththee productionproduction,, oorr iiss somesome clasclasss thatthat diddid relativelrelativelyy littllittlee harvestinharvestingg somesome ooff thethe surplus?surplus?

If f so,so, hohoww doedoess thithiss happenhappen,, andand whywhy?? ThiThiss iiss leslesss aann ethicaethicall questioquestionn thathann ononee ofof rigorourigorouss scientificscientific inquiryinquiry,, yeyett iitt iiss aann inquirinquiryy thatthat hahass largelylargely beebeenn eliminateeliminatedd bbyy modernmodern economics.economics. DobbDobb thoughthoughtt iitt wawass eliminatedeliminated nonott bbyy accidentaccident,, bubutt purposefullpurposefullyy forfor a cruciacruciall reason:reason: "namely,"namely, thathatt subjectivesubjective economics,economics, iinn itsits obsessionobsession witwithh demandemandd andand exchangeexchange,, postulatepostulatess littlelittle oror nothinnothingg aboutabout ththee activityactivity ooff productioproductionn excepexceptt thathatt certaincertain agentsagents ofof productioproductionn existexist whichwhich areare necessarnecessaryy anandd areare scarce."scarce. ,,4444 TheThe modermodernn subjectivesubjective theortheoryy ofof valuvaluee removeremovess allall meaningmeaning fromfrom thethe concepconceptt ofof surplus,surplus, aass welwelll asas distinctionsdistinctions betweebetweenn incomeincome classes.classes. TheThe labor-theorylabor-theory focusefocusedd onon ththee productionproduction processprocess,, providingproviding a platformplatform forfor explainingexplaining howhow thethe capitalistcapitalist classclass profitedprofited offtheoff the laborlabor theythey employed.employed.

"Without"Without somsomee suchsuch value-conceptionvalue-conception,, fundamentalfundamental distinctionsdistinctions ooff thithiss kinkindd cacann havhavee nono placplacee iinn economieconomicc theory.theory. WitWithh a differendifferentt value-principlvalue-principlee theythey disappear.,,45disappear."45

ContemporaryContemporary TheoriesTheories andand CritiquesCritiques ofof ththee ClassicalistsClassicalists

ItIt hahass becombecomee increasinglyincreasingly fashionablefashionable ttoo disregarddisregard utilitutilityy aass 'eithe'eitherr shadowyshadowy oorr a superfluoussuperfluous entity'entity'.. ThThee tertermm 'satisfaction''satisfaction' hahass beebeenn throwthrownn ttoo otherother fields.fields. PricePricess areare

4433 Ibid.,Ibid., p.p. 3232.. 44 401 Ibid.Ibid.,, pp.. 3333.. 4455 Ibid.,Ibid., pp.. 2222.. 3322 nonoww considereconsideredd ththee resultanresultantt onon certaincertain schedulesschedules ooff demand-pricesdemand-prices,, ooff empiricallyempirically observeobservedd market-offersmarket-offers;; "and"and economicseconomics aass a sciencescience ooff "catallactics""catallactics" iiss presentedpresented asas thethe laslastt worwordd ooff amoralamoral puritpurityy anandd scientificscientific objectivity.objectivity." ,,4646 DobDobbb questionequestionedd ththee legitimacylegitimacy oofthisf this escape,escape, particularlparticularlyy itsits consistencconsistencyy witwithh ththee requirementrequirementss ooff a theortheoryy ooff value.value.

EquationEquationss mighmightt appearappear adequatadequatee onon a purelpurelyy formaformall stage,stage, wherwheree constantconstantss cancan simplsimplyy bebe defineddefined asas constantsconstants.. However,However, cacann suchsuch equationsequations holholdd uupp frofromm a realisticrealistic interpretation;interpretation; cacann thetheyy sustainsustain ththee necessarnecessaryy corollariecorollariess thatthat araree requiredrequired?? WhaWhatt quantityquantity independentindependent ofof value-movementvalue-movementss cancan ththee systemsystem resrestt on?on? DemanDemandd iiss nonott ttoo resrestt onon utilityutility,, bubutt onon 'empiricall'empiricallyy observedobserved preference-scales'preference-scales'?? HoHoww cacann wwee assumassumee thathatt theythey araree ththee creators,creators, nonott ththee creationscreations,, ooff markemarkett pricesprices?? IIff thithiss criticiscriticismm iiss validvalid,, thethenn wwee areare leftleft witwithh a 'forma'formall techniquetechnique'' thathatt iiss capablcapablee ofof makinmakingg certaicertainn definitiondefinitionss andand makemake realisticrealistic propositionpropositionss aboutabout certaicertainn problemproblemss treatedtreated separatelseparatelyy iinn isolationisolation;; bubutt iitt isis impotentimpotent ttoo pronouncepronounce judgmenjudgmentt onon macroscopimacroscopicc phenomenphenomenaa ofof economieconomicc society.society. AnAn economiceconomic lalaww cannocannott jusjustt bbee a conditionaconditionall sentence,sentence, foforr thithiss woulwouldd makmakee iitt nnoo mormoree thanthan a meremere tautology.tautology. ItIt mustmust statestate thethe probabilityprobability ofof somesome actualactual coursecourse ofof eventsevents occurring;occurring; andand iitt isis ttoo permipermitt suchsuch statementstatementss foforr a lalaww ofof valuvaluee ttoo bbee adequateadequate.. OtherwiseOtherwise itit isis worthlessworthless,, regardlesregardlesss ooff formaformall elegance.elegance.

DobDobbb sawsaw a cleaclearr tendencytendency ofof modermodernn economiceconomicss ttoo regarregardd somesome ofof thethe fundamentafundamentall questionsquestions askedasked bbyy classicaclassicall politicapoliticall economistseconomists asas nnoo longelongerr relevant.relevant.

PreviouslPreviouslyy vitavitall conceptsconcepts suchsuch asas ththee neeneedd forfor a theortheoryy ooff valuvaluee nnoo longelongerr actact asas a basisbasis

foforr economieconomicc theoriestheories.. AlthougAlthoughh thesthesee antiquateantiquatedd mastermasterss certainlycertainly askeaskedd manmanyy correctcorrect

46 46 Ibid.,Ibid., pp.. 28.28. Catallactics isis defineddefined aass ththee praxeologicapraxeologicall theortheoryy ooff ththee wawayy ththee freefree markemarkett systemsystem reachesreaches exchangeexchange ratioratioss anandd pricesprices.. SuchSuch a theortheoryy aimsaims ttoo analyzanalyzee alalll actionsactions basebasedd oonn monetarmonetaryy calculation,calculation, tracintracingg thethe formationformation ofof pricepricess bacbackk ttoo ththee poinpointt ofof choicchoicee foforr anan economieconomicc agentagent.. CatallacticCatallacticss doesdoes nonott attemptattempt ttoo makmakee valuvaluee judgmentsjudgments,, bubutt aiaimm ttoo bbee exact,exact, objectivobjectivee anandd ofof universauniversall validity.validity. 3333 questions,questions, asas welwelll asas occasionallyoccasionally guessingguessing rightlrightlyy atat ththee answers,answers, thethe analyticalanalytical toolstools atat theirtheir disposaldisposal werewere insufficientinsufficient forfor ascertainingascertaining ththee actualityactuality ofof thethe economiceconomic worldworld,, andand thuthuss theirtheir precisioprecisionn wawass hamperehamperedd bbyy 'elementary'elementary confusion'confusion'. .4747 ItIt hashas becombecomee quitequite fashionablefashionable toto dismissdismiss theorietheoriess ofof valuvaluee asas unnecessaryunnecessary andand false,false, andand thatthat allall thatthat isis necessarnecessaryy forfor economicseconomics isis a theorytheory thathatt representsrepresents exchange-relationshipsexchange-relationships asas "functions"functions ofof humahumann preferences,preferences,"" a generalizedgeneralized consequenceconsequence ofof scarcityscarcity andand limitedlimited possibilities.possibilities.

DobDobbb citedcited a contemporarycontemporary economist,economist, ProfessorProfessor Myrdal,Myrdal, asas describingdescribing thethe searchsearch ofof previousprevious economistseconomists forfor a theortheoryy ofof valuvaluee representerepresentedd anan obsessionobsession witwithh ethicalethical andand political questions,• thereby limiting the scientific validity of the field.4488 political questions, thereby limiting the scientific validity of the field. Common critiques of Ricardo include his lack of understanding of differential Common critiques of Ricardo include his lack of understanding of differential calculus and misguided allegiance to the labor theory of value stymied his analysis. calculus and misguided allegiance to the labor theory of value stymied his analysis. Current economists often dismiss Ricardo's work based on his inability to determine Current economists often dismiss Ricardo's work based on his inability to determine particular commodity prices. Modern economists are quite concerned with predictive particular commodity prices. Modern economists are quite concerned with predictive qualities of economic theories and models, much more so than they are with descriptive qualities of economic theories and models, much more so than they are with descriptive qualities. Dobb reminded us that Ricardo was not concerned with specific problems to qualities. Dobb reminded us that Ricardo was not concerned with specific problems to begin with. "It is too seldom remembered today that the concern of classical Political begin with. "It is too seldom remembered today that the concern of classical Political Economy was with what one may term the "macroscopic" problems of economic society, Economy was with what one may term the "macroscopic" problems of economic society, and only very secondarily with "microscopic" problems, in the shape of the movements and only very secondarily with "microscopic" problems, in the shape of the movements of particular commodity prices.,,49 He was more interested in problems with distribution, of particular commodity prices."4 He was more interested in problems with distribution, with the movements of rent, wages, and profits, and was therefore more concerned with with the movements of rent, wages, and profits, and was therefore more concerned with the broad generality of commodities than with the movements of a particular commodity. the broad generality of commodities than with the movements of a particular commodity. Ricardo had focused on the forces affecting capital accumulation, and for such a general Ricardo had focused on the forces affecting capital accumulation, and for such a general

47 47 DobbDobb,, Political Economy and Capitalism, p.p. 1I.. 48 48 GG.. Myrdal,Myrdal, Das politische Element in der NationalokonomischenNationa/okonomischen Doktrinbilditng,Doktrinbildung, ChaptersChapters 3 andand 44.. 4949 IbidIbid,, pppp.. 15-1615-16.. 3434 questionquestion,, RicardRicardoo foundfound hihiss approximationapproximation ttoo bbee botbothh adequateadequate anandd justifiedjustified.. AlthoughAlthough ththee utility-theorutility-theoryy woulwouldd latelaterr claimclaim ttoo havhavee a superiorsuperior generality,generality, itit wawass incapablincapablee ofof providinprovidingg ananyy insightinsight intointo thethe phenomenophenomenonn ooff capitacapitall accumulation.accumulation.

Marx'Marx'ss theortheoryy hahass sufferedsuffered mormoree direcdirectt attacksattacks thathann ananyy otheotherr economieconomicc theorytheory postulatepostulatedd thusthus farfar.. HeHe iiss ofteoftenn criticizedcriticized asas lettinlettingg hihiss 'sympathie'sympathiess witwithh suffering'suffering' dictatedictate hihiss linlinee ooff inquiry,inquiry, dullindullingg hihiss otherwisotherwisee razorazorr sharpsharp mindmind.. Similarly,Similarly, hihiss ususee ofof abstractionabstraction hahass beebeenn useusedd aass a basibasiss forfor rejectinrejectingg hihiss theorytheory.. IIss thithiss a reasonablreasonablee sourcesource ofof attack?attack? AfterAfter all,all, Dobb'Dobb'ss firstfirst requiremenrequirementt forfor a theortheoryy ofof valuvaluee wawass 'earthliness''earthliness';; diddid

Marx'sMarx's abstractionabstractionss violatviolatee thithiss requirementrequirement?? LeLett uuss examineexamine thithiss questioquestionn iinn moremore detail.detail.

Marx'Marx'ss firstfirst approximatioapproximationn studiedstudied iinn VolumVolumee I ooff Capital,Capital, wherwheree pricepricess areare proportionalproportional toto valuevaluess andand ththee priceprice oflabor-powerof labor-power isis givegivenn bbyy ththee labor-contenlabor-contentt ooff itsits productivproductivee consumption,consumption, wawass nonott meanmeantt ttoo bbee a predictivpredictivee modelmodel.. ItIt describedescribedd a specialspecial casecase wherewhere allall commoditiescommodities areare exchangeexchangedd foforr theitheirr values,values, raisinraisingg ththee questionquestion ooff ifif exploitationexploitation andand profitsprofits coulcouldd actuallyactually exisexistt iinn thithiss modelmodel,, givegivenn ththee restrictionsrestrictions.. WhatWhat madmadee thithiss speciaspeciall casecase specificallspecificallyy interestinginteresting ttoo MarxMarx iiss thathatt itit wawass fafarr fromfrom favorablefavorable forfor labolaborr theorists—quittheorists-quitee ththee oppositeopposite.. ItIt challengedchallenged politicapoliticall economisteconomistss ttoo explaiexplainn thethe existencexistencee ofof capitacapitall accumulationaccumulation whewhenn everything,everything, includinincludingg labor-powerlabor-power,, isis exchangedexchanged atat ititss actualactual valuevalue,, wherwheree pricepricess araree proportionaproportionall ttoo values.values.

TheThe principlprinciplee ofof ththee identityidentity ooff value-ratiovalue-ratioss witwithh labor-ratioslabor-ratios resterestedd onon ththee dominantdominant tendenciestendencies inin aann exchange-societexchange-societyy characterizedcharacterized bbyy ththee divisiodivisionn ofof laborlabor,, competition,competition, andand ththee mobilitmobilityy ooff resourcesresources.. PresumablyPresumably,, competitiocompetitionn shoulshouldd ensureensure thatthat labolaborr waswas distributedistributedd iinn equalequal ratiosratios.. TheThe principlprinciplee wawass dependentdependent onon a specifispecificc conceptioconceptionn ooff thethe 3355 equilibriuequilibriumm ofof sucsuchh a society,society, upouponn ththee conceptioconceptionn ooff wagewagess beinbeingg uniform, thougthoughh notnot necessarilnecessarilyy constant. ThiThiss statementstatement wawass subjecsubjectt ttoo twtwoo importanimportantt qualifications:qualifications:

1)1) WitWithh respecrespectt ttoo landland,, iitt onlonlyy helheldd trutruee undeunderr marginamarginall conditionsconditions ofof production.production. ThisThis musmustt bbee ththee cascasee iinn anyany formform ooff cost-theory.cost-theory.

2)2) ItIt implieimpliedd ththee simplifyinsimplifyingg assumptionassumption thathatt ththee ratiratioo ofof labolaborr ttoo capitacapitall iiss equalequal acrossacross ththee boardboard,, iinn evereveryy linlinee ooff productioproductionn (equality(equality iinn ththee organiorganicc compositioncomposition ooff capitalcapital,, a.k.a.a.k.a. uniformituniformityy ofof technicatechnicall coefficients).coefficients). 5050

SamuelsonSamuelson challengedchallenged ththee labolaborr theortheoryy ooff valuvaluee bbyy proclaiminproclaimingg ththee simplifyinsimplifyingg firstfirst approximationapproximationss mighmightt bbee welwelll anandd good,good, bubutt areare ofteoftenn founfoundd ttoo bbee inferioinferiorr ttoo secondsecond approximationapproximationss onconcee greategreaterr particularitparticularityy isis examinedexamined.. DobDobbb dismissedismissedd thithiss critique,critique, pointinpointingg ououtt thathatt sucsuchh a challengchallengee fallfallss oonn ititss facfacee wherwheree thertheree iiss somethinsomethingg containecontainedd inin

51 ththee firstfirst approximationapproximation thathatt iiss lackinlackingg iinn latelaterr approximations.5 CriticsCritics suchsuch aass Bohm-Bohm-

BawerBawerkk declareddeclared thithiss approximationapproximation ttoo bbee a fatafatall flaflaww iinn Marx'Marx'ss theorytheory.. DobDobbb disagreeddisagreed witwithh thithiss objection,objection, pointinpointingg ououtt thathatt "all"all abstractionabstractionss remairemainn onlonlyy approximationapproximationss toto realityreality:: thithiss iiss theitheirr essentiaessentiall naturenature;; andand iitt iiss nnoo criticiscriticismm ofof a theortheoryy ooff valuvaluee merelmerelyy toto sasayy thathatt thisthis isis so.so.'° ,,522 HHee recognizedrecognized thathatt ththee seconsecondd assumptioassumptionn meanmeantt ththee valuvaluee waswas onlyonly aann abstractabstract approximationapproximation ttoo concreteconcrete exchangexchangee valuesvalues.. ThereforThereforee suchsuch criticiscriticismm onlyonly holdholdss truetrue iiff ththee limitinlimitingg assumptionassumptionss prevenpreventt ththee generalizationgeneralizationss fromfrom sustainingsustaining thethe resultsresults iitt hahass attemptedattempted ttoo explain.explain. MarxMarx wawass nonott tryintryingg ttoo creatcreatee a perfectlperfectlyy predictivepredictive modelmodel througthroughh hishis abstractabstract exampleexample.. InsteadInstead,, hhee wawass attemptinattemptingg ttoo lifliftt ththee veiveill cloakingcloaking ththee fundamentalfundamental movementmovementss ofof capitaliscapitalistt society.society. MarMarxx wawass welwelll awareaware ooff ththee limitationslimitations andand requirementrequirementss inhereninherentt inin ththee abstractionabstractionss hhee usedused.. TToo formulateformulate aann exacexactt picturpicturee ofof ththee worldworld systesystemm iiss impossibleimpossible;; mankinmankindd alwayalwayss wilwilll neeneedd furthefurtherr knowledgknowledgee ooff thethe

50 50 DobbDobb,, Political Economy & Capitalism, p.p. 1414.. 51 51 Dobb,Dobb, TheuriesTheories of Value & DistributionDistrihution Since Adam Smith,S'mith, pp.. 148148.. 52 52 DobbDobb,, PoliticalPulitical EconomyEconumy & Capitalism, p.p. 1515.. 3366 worldworld inin anan infinitinfinitee cyclecycle ofof pushinpushingg ththee boundariesboundaries,, exposingexposing ththee existencexistencee ooff furtherfurther unknownsunknowns.. AlAlll mentamentall imageimagess arcare inherentlinherentlyy abstractionsabstractions,, approximations.approximations.

PurePure mathematicmathematicss dealdealss witwithh ththee spacespace formsforms anandd quantitquantityy relationrelationss ofof ththee realreal world-thatworld—that isis,, witwithh materiamateriall whicwhichh iiss ververyy reareall indeedindeed.. InIn ordeorderr ttoo makmakee iitt possiblepossible ttoo investigateinvestigate thesthesee formformss anandd relationrelationss iinn theitheirr purpuree state,state, iitt isis necessarnecessaryy ttoo abstractabstract them entirely from their content, to put the content aside as irrelevant. 5533

Althoughthem entirel a conceptiony from theiis thereforer content never, to pu reality,t the conten the practicalt aside a smodel irrelevant political. economy aimsAlthoug to createh a conceptio necessitatesn is therefor abstractionse neve tor realityrepresent, the tangible practica lsubjects. model politica l economy aimsWhen to creat Marxe necessitate approacheds abstraction the problems to of represen the pricet tangibl of a particulare subjects commodity. in volume

III, heWhe didn Marso basedx approache on the dfirst the approximation problem of the of pric volumee of a I,particula namelyr thatcommodit "profity dependingin volume onIII, thehe disurplusd so base or differenced on the firs betweent approximatio the valuen ooflabor-powerf volume I, namel andy thetha tvalue "profi oft finisheddependin g commodities."s4on the surplus or differencThe seconde betwee dependedn the onvalu thee firstof labor-powe approximation,r and thande valu thuse wasof finishe not a d

54 commodities."contradiction. As Th Dobbe secon says,d dependethe solutiond on ofthe the firs microscopict approximation problem, and dependedthus was noont thea contradictionsolution to the. macroscopicAs Dobb says problem., the solutio Justn obecausef the microscopi the theoryc probleneededm modificationdepended on toth e solutioexplainn elementsto the macroscopi acting differentlyc problem than. Jus withint becaus thee firstthe theorapproximationy needed modificatio does not maken to the theoryexplain useless.element s acting differently than within the first approximation does not make the theorAsy uselessfor claims. that Marx's sympathies for the working class dictated his approach, one has Aonlys fo tor claim recalls thetha t fundamentalMarx's sympathie relationshipss for th eof workin a capitalistg clas ssociety dictate tod hifinds approach an answer., on e

Ashas previouslyonly to recal stated,l the fundamentathe dominantl relationship tendencies sin o fan a exchange-societycapitalist society tareo fin characterizedd an answer.

Abys thepreviousl divisiony stated of labor,, the competition,dominant tendencie and thes mobilityin an exchange-societ of resources. yIn ar suche characterize a society,d bwealthy the divisiodisparitiesn of laborbetween, competition classes exist., an d Includingthe mobilit thesey of disparitiesresources. withinIn suc han a economicsociety, wealtmodelh isdisparitie far froms arbitrary;between classe indeed,s exist an economic. Includin theoryg these that disparitie abstracteds withi outn asuchn economi divisionsc modeis far lmore is fa rsusceptible from arbitrary to claims; indeed of, impartiality.an economic theorWealthy tha disparitiest abstracte existd ou int sucreality.h division It s seemsis far mor cleare susceptibl that differente to claimclassess oderivef impartiality their income. Wealt inh strikinglydisparitie sdifferent exist in andreality. often I t seems clear that different classes derive their income in strikingly different and often 53 Engels, Anti-Diirhin, pp. 46-47. x' Engels, knti-Diirhin, pp. 46-47. 54 Dobb, Political Economy and Capitalism, p. 17. 54 Dobb, Political Economy and Capitalism, p. 17. 3737 contradictingcontradicting waysways.. IfweIf we abstractabstract clasclasss positionpositionss ououtt ofof ththee economiceconomic theorytheory,, araree wewe violatingviolating thethe informainfonnall bubutt cruciacruciall requiremenrequirementt ooff 'earthliness'?'earthliness'? AnAnyy economieconomicc modemodell thatthat attemptedattempted ttoo removremovee sucsuchh a crucialcrucial detaidetaill isis openinopeningg itselfitself upup ttoo farfar mormoree critiqucritiquee thanthan model'smodel's thathatt includeinclude ththee objectivobjectivee actuality.actuality. SeenSeen frofromm thithiss poinpointt ooff viewview,, iitt appearsappears thatthat

Marx'Marx'ss theortheoryy competentlycompetently fulfillefulfilledd ththee requiremenrequirementt ooff 'emihliness''earthliness' farfar bettebetterr thathann hishis detractorsdetractors wouldwould prefepreferr toto assume.assume.

ModemModern economistseconomists tentendd ttoo concernconcern themselvethemselvess witwithh hohoww accurataccuratee ththee predictivepredictive qualitiesqualities ooff economiceconomic theorietheoriess are,are, farfar mormoree thathann thetheyy distresdistresss oveoverr descriptivdescriptivee qualities.qualities.

PauPaull SamuelsonSamuelson challengedchallenged ththee labolaborr theortheoryy ooff valuvaluee bbyy proclaiminproclaimingg ititss simplifyingsimplifying firstfirst approximationsapproximations ttoo bbee welwelll andand good,good, bubutt ofteoftenn inferioinferiorr ttoo seconsecondd approximationsapproximations onceonce greatergreater particularitparticularityy areare examinedexamined.. DobDobbb dismisseddismissed thithiss critiquecritique,, pointinpointingg ououtt thathatt suchsuch a challengechallenge fallsfalls onon itsits faceface wherwheree thertheree iiss somethingsomething containedcontained iinn ththee firsfirstt approximationapproximation thatthat iiss lackinlackingg iinn laterlater approximations. 5555 Dobb'Dobb'ss replreplyy highlighthighlightss hihiss concerconcernn witwithh thethe descriptivdescriptivee naturnaturee ooff ththee labolaborr theortheoryy ooff valuevalue,, wherwheree latelaterr approximationapproximationss mightmight bebe bettebetterr predictorpredictorss ofof relativrelativee prices bubutt laclackk ththee descriptiodescriptionn ooff personapersonall participation.participation. 5656

DobbDobb,, liklikee ththee classicaclassicall politicapoliticall economistseconomists whwhoo influenceinfluencedd himhim,, appearsappears farfar moremore concernedconcerned witwithh descriptiondescription thathann prediction.prediction.

ConclusionsConclusions

OncOncee againagain,, DobbDobb identifieidentifiedd foufourr distincdistinctt requirementrequirementss foforr a theortheoryy ofof valuvaluee ttoo bebe

consideredconsidered passable:passable:

1)1) TheorieTheoriess ofof valuvaluee musmustt havehave aann 'earthly''earthly' charactercharacter

55 DobbDobb,, Theories of Va/lieValue and DistributionDistrib1ltion Since Adam Smith, pp.. 148148.. 56 CambridgeCambridge JournaJournall ofof EconomicsEconomics,, 1980;4,1980;4, p.p. 217217.. 38

22)) TheyThey mustmust bebe capablecapable ooff solvinso~vingg thethe probleproblemm ooff distribution/commodity­distribution/commodity-

valuevaluess

33)) TheTheyy mustmust bbee quantitativequantitative iinn formform,, existingexisting asas equationalequational systemssystems withwith

determiningdetermining independentindependent value-constants.value-constants.

44)) TheyThey musmustt bbee ableable toto makemake answeranswer ththee questionquestionss thetheyy attemptattempt

TheThe formatformat botbothh ththee laborlabor theortheoryy anandd utilitutilityy theortheoryy attemptedattempted ttoo fulfillfulfill thesethese requirementsrequirements differedifferedd quitequite dramaticallydramatically.. ThThee mosmostt immediateimmediate differencdifferencee wawass theirtheir particulaparticularr selectionsselections ofof value-constantsvalue-constants.. ThThee labolaborr theortheoryy founfoundd theitheirr constanconstantt inin objectivobjectivee labor,labor, a constantconstant independentindependent ooff valuvaluee itselfitself~, whilwhilee ththee utilitutilityy theortheoryy selectedselected a farfar moremore subjectivsubjectivee constantconstant,, namelnamelyy utilityutility.. ThThee formeformerr allowedallowed classicalclassical politicalpolitical economisteconomistss ttoo determinedetermine distribution,distribution, surplus-valuesurplus-value,, commodity-valuescommodity-values,, coscostt andand exchange-ratiosexchange-ratios;; ththee latterlatter wawass onlonlyy ableable ttoo defindefinee productivproductivee contributioncontributionss bbyy whatwhat eventuateeventuatedd outout ofof thethe productioproductionn processprocess.. ThThee subjectivitsubjectivityy ooff 'utility'utility'' wawass associatedassociated witwithh a vaguvaguee 'satisfaction','satisfaction', makinmakingg ththee utilitutilityy theortheoryy a tautologicatautologicall conjectureconjecture,, wherewhere pricesprices werweree seenseen aass determinindeterminingg pricesprices.. DobDobbb thoughthoughtt ththee selectionselection ooff thesthesee valuevalue constantsconstants wawass a criticalcritical differencedifferencc.. BByy choosinchoosingg laborlabor aass theitheirr constantconstant,, labolaborr theoriststheorists werewere ablablee ttoo describedescribe a quantitativequantitative systesystemm iinn anan 'earthly'earthly'' mannermanner,, providinprovidingg a platformplatform forfor answeringanswering ththee questionquestionss thetheyy werewere makingmaking.. ItIt iiss unclearunclear iiff ththee samesame coulcouldd bbee saidsaid forfor thethe utilitutilityy theory.theory.

BotBothh theorietheoriess havehave evolvedevolved greatlygreatly oveoverr timetime,, witwithh ththee labolaborr theortheoryy ooff valuvaluee gaininggaining ththee mostmost prominencprominencee inin ththee worworkk ofof KarKarll MarxMarx.. ItsIts replacementreplacement,, ththee utilitutilityy theorytheory,, nownow provideprovidess thethe frameworkframework forfor ththee vasvastt majoritymajority ooff economieconomicc modelsmodels,, whethewhetherr KeynesiaKeynesiann oror neo-classical.neo-classical. ItIt coulcouldd bbee arguedargued thathatt politicapoliticall economistseconomists woulwouldd bbee forceforcedd ttoo recognizerecognize thethe wolwolff iinn sheep'ssheep's clothinclothingg iiff thetheyy continuedcontinued ttoo adheradheree ttoo ththee laborlabor theorytheory.. IIff soso,, itit 3939 comescomes aass littllittlee surprisesurprise thathatt theythey rapidlyrapidly developeddeveloped andand defendedefendedd a theortheoryy thathatt justifiedjustified ththee continuatiocontinuationn ooff capitaliscapitalistt exploitation.exploitation.

AlthougAlthoughh DobDobbb neveneverr explicitlexplicitlyy passepassedd judgmenjudgmentt onon eithereither theortheoryy inin anan attemptattempt toto maintaimaintainn ththee pretenspretensee ofof objectivityobjectivity,, bubutt hihiss rhetoricarhetoricall statementsstatements implicatimplicatee hihiss personalpersonal opinionopinion.. IInn particularparticular,, DobDobbb appearedappeared extremelyextremely criticacriticall ofof ththee utility-theory'sutility-theory's failurfailuree toto explainexplain ththee existencexistencee ooff surpluses.surpluses. IIff surplusessurpluses cannocannott bbee explainedexplained withiwithinn ththee contexcontextt ofof a certaincertain theorytheory ofof value,value, doesdoes thisthis thereforetherefore makemake thethe theorytheory inadequate?inadequate? CertainlyCertainly therethere areare groundgroundss forfor makinmakingg suchsuch a claimclaim.. TheThe dismissaldismissal ofof sucsuchh a significansignificantt characteristicharacteristicc ofof a capitalistcapitalist societysociety couldcould easilyeasily bebe seenseen asas removingremoving a necessarynecessary andand determiningdetermining economieconomicc relationshirelationshipp fromfrom a modemodell attemptingattempting ttoo representrepresent reareall economieconomicc connections.connections.

IIss itit appropriatappropriatee toto makemake sucsuchh anan abstraction?abstraction? ItIt isis mmyy opinioopinionn thathatt DobbDobb wouldwould undoubtedlyundoubtedly answeanswerr no.no.

IIss iitt safsafee ttoo assumassumee eithereither theortheoryy ofof valuvaluee asas correct?correct? ThThee answeanswerr appearsappears ttoo bebe ambiguous.ambiguous. SurelySurely wwee cancan examinexaminee iiff theoriestheories fulfillfulfill ththee necessarnecessaryy requirementsrequirements,, formalformal oror otherwise-butotherwise—but cancan wwee realisticallrealisticallyy consideconsiderr eithereither ttoo bbee bulletproofbulletproof?? BotBothh theorietheoriess ofof valuvaluee contaicontainn ambiguitieambiguitiess thathatt coulcouldd nonott bbee avoided,avoided, ssoo iitt shouldshould comcomee asas nnoo surprissurprisee thatthat theitheirr conclusionsconclusions areare ambiguouambiguouss asas wellwell.. NonethelessNonetheless,, iitt iiss ththee lineline ooff questioninquestioningg thathatt isis mosmostt relevantrelevant,, ththee examinatioexaminationn ooff whwhyy humahumann beingsbeings interactinteract iinn ththee waywayss thathatt thetheyy do.do.

WithouWithoutt introspectionintrospection,, wwee cannocannott havhavee thoughtfuthoughtfull progressionprogression.. AAss ofof yetyet,, nnoo ononee theorytheory ooff valuvaluee hashas proveprovedd itselitselff ttoo bbee beyonbeyondd question,question, andand thuthuss politicapoliticall economistseconomists shouldshould bebe hesitanhesitantt ofof simplysimply shrugginshruggingg ofofTf ththee existenceexistence ofof competincompetingg theorietheoriess foforr thethe unsubstantiateunsubstantiatedd acceptanccacceptance ooff oneonc.. UncoverinUncoveringg ththee originsorigins ooff economieconomicc valuvaluee appearappearss toto bbee anan importantimportant tastaskk foforr ththee field ofof economics,economics, bubutt iitt iiss a subjecsubjectt oftenoften lefleftt untouched.untouched. 4400

FroFromm thithiss perspectiveperspective,, ththee pursuipursuitt ooff a unifieunifiedd theortheoryy ooff economieconomicc valuvaluee becomebecomess anan extremelextremelyy relevanrelevantt anandd essentiaessentiall quarry.. ECONOMIECONOMICC CRISESCRISES 4422

IntroductioIntroductionn

ThThee globagloball economiceconomic crisiscrisis ofof 20082008 tootookk mosmostt mainstreamainstreamm politicapoliticall economisteconomistss byby surprisesurprise.. TheirTheir beliefbelief thathatt a firfirmm monetarmonetaryy policpolicyy woulwouldd bbee sufficiensufficientt foforr maintainingmaintaining balancbalancee hahadd beebeenn treatetreatedd asas dogma,dogma, andand crisescrises werweree largellargelyy regarderegardedd anan extinctextinct trendtrend.. InIn aann instantinstant,, everythineverythingg changedchanged.. MacroeconomiMacroeconomicc textbookstextbooks becambecamee antiquatedantiquated asas theirtheir predictionpredictionss proveprovedd inaccurate,inaccurate, andand mainstreamainstreamm economisteconomistss founfoundd themselvethemselvess scramblingscrambling ttoo makmakee adjustmentadjustmentss ttoo theitheirr failefailedd theoriestheories.. ManyMany economisteconomistss founfoundd themselvesthemselves examiningexamining thethe workwork ofof precedinprecedingg politicapoliticall economists,economists, lookinlookingg foforr forgottenforgotten perspectivesperspectives thathatt mighmightt bbee relevantrelevant ttoo ththee situation.situation.

InIn ththee yearyearss followinfollowingg ththee GreaGreatt DepressionDepression,, MauricMauricee DobDobbb hahadd donedone ththee samesame thing.thing. BByy describindescribingg ththee progressioprogressionn ooff conceptualizinconceptualizingg economiceconomic crisecrisess frofromm AdamAdam

SmithSmith ttoo KarKarll MarxMarx,, DobDobbb wawass ableable ttoo describedescribe a fluifluidd transitiotransitionn fromfrom vaguvaguee thoughthoughtt toto criticalcritical analysisanalysis.. UltimatelyUltimately,, DobDobbb agreedagreed withwith Marx'Marx'ss perspectivperspectivee ooff economiceconomic crises,crises, specificallyspecifically thathatt thetheyy areare aann inhereninherentt resulresultt ofof capitalismcapitalism.. DobbDobb diddid nonott lelett hihiss opinionsopinions dictatdictatee hihiss workwork;; hhee simplsimplyy recounterecountedd ththee historyhistory anandd letlet ththee factfactss speaspeakk foforr themselves.themselves.

MainstreamMainstream economistseconomists havhavee undoubtedlundoubtedlyy spenspentt mosmostt ofof theitheirr timtimee consultingconsulting thethe worworkk ofof economistseconomists withiwithinn ththee intervaintervall betweebetweenn JohJohnn MaynarMaynardd KeyneKeyness andand MiltonMilton

FriedmanFriedman,, leavinleavingg thethe worworkk ofof ththee classicalclassical politicapoliticall economistseconomists largellargelyy ignored.ignored. ThusThus itit appearappearss ttoo bbee a poignanpoignantt timtimee ttoo revierevieww thesthesee giantsgiants,, whoswhosee conceptconceptss provideprovidedd thethe foundationsfoundations foforr economicseconomics asas a study.study. ThiThiss tastaskk iiss herheree undertakeundertakenn asas a revierevieww ofof

MauricMauricee Dobb'Dobb'ss historicahistoricall recounrecountt ooff ththee perspectiveperspectivess ooff classicaclassicall politicapoliticall economistseconomists andand theitheirr taketakess onon economiceconomic crises.crises. 4433

ClassicalClassical PerspectivePerspective ofof EconomiEconomicc CrisesCrises BeforBeforee MarxMarx

ItIt iiss wellwell knowknownn thathatt disruptionsdisruptions occuroccur iinn a cyclicalcyclical fashionfashion (th(thee inevitablinevitablee busbustt toto ththee proverbiaproverbiall boom),boom), bubutt ththee causescauses foforr sucsuchh reoccurrencereoccurrencess araree stillstill openlopenlyy debated.debated.

IndeedIndeed,, ththee perceptionperceptionss ooff ththee impacimpactt araree highlhighlyy subjective,subjective, witwithh variouvariouss interpretationsinterpretations indicatingindicating variouvariouss originaloriginal perspectivesperspectives.. BeforBeforee ththee groundbreakinggroundbreaking analysisanalysis ooff KarlKarl

Marx,Marx, politicapoliticall economistseconomists couldcould bbee describeddescribed aass havinhavingg onlyonly addressedaddressed ththee probleproblemm ofof economieconomicc crisescrises iinn a superficialsuperficial anandd underdevelopeunderdevelopedd fashionfashion.. FeFeww hahadd seriouslyseriously pondereponderedd potentiapotentiall causescauses ofof ththee phenomenonphenomenon,, focusinfocusingg insteadinstead almosalmostt exclusivelexclusivelyy onon equilibratinequilibratingg forceforcess iinn ththee system,system, ignorinignoringg oror disregardingdisregarding contrarycontrary movements.movements.

AlthougAlthoughh therethere hahadd beebeenn a widelwidelyy observeobservedd discussiodiscussionn betweebetweenn RicardRicardoo andand MalthusMalthus regardinregardingg glutsgluts andand depressiondepressionss aass potentiallpotentiallyy causecausedd bbyy under-consumptionunder-consumption,, iitt iiss alalll tootoo apparenapparentt thatthat earlyearly membermemberss ofof thethe RicardiaRicardiann SchoolSchool diddid nonott concernconcern themselvethemselvess withwith crisecrisess whewhenn formulatingformulating theitheirr systemsystem ooff thoughtthought.. ThiThiss traditiotraditionn generallygenerally shruggeshruggedd offoff depressionsdepressions aass eithereither ththee producproductt ofof externalexternal interferencesinterferences ttoo ththee freefree workinworkingg ofof economiceconomic forces,forces, oorr anan expectedexpected resulresultt ooff ththee progressprogress ooff capitacapitall accumulationaccumulation.. LaterLater adherentsadherents toto ththee RicardianRicardian traditiotraditionn werweree consumeconsumedd witwithh findinfindingg anan explanatioexplanationn foforr crisescrises inin eitheeitherr ththee notoriounotoriouss veiveill ooff monemoneyy oror througthroughh 'natura'naturall causes'.causes'.

WhileWhile classicalclassical economistseconomists hahadd ignoreignoredd economieconomicc crisescrises almosalmostt entirelyentirely,, theythey hadhad focusefocusedd a googoodd dealdeal ooff energenergyy treatintreatingg anotheanotherr seeminglyseemingly ododdd characteristiccharacteristic ooff capitalism,capitalism, namelynamely thethe allegedalleged tendenctendencyy ofof ththee ratratee ofof profiprofitt ttoo declinedecline oveoverr timetime.. AAss MarMarxx noted,noted,

"the"the differencedifference betweebetweenn ththee variouvariouss schoolsschools sincsincee AdaAdamm SmitSmithh consistconsistss inin theitheirr differentdifferent attemptsattempts ttoo solvsolvee thithiss riddle."riddle."s757 ApproacheApproachess ttoo thithiss phenomenophenomenonn hadhad changedchanged quitequite dramaticallydramatically overover timetime,, witwithh evolvingevolving perspectiveperspectivess givinggiving risrisee ttoo differendifferentt interpretations.interpretations.

57 57 MarxMarx,, Capital, Vol.llI,Vol.111, p. p250.. 250 . 4444

IInn ththee 18thth century,century, whewhenn politicapoliticall economisteconomistss liklikee AdaAdamm SmithSmith anandd DaviDavidd HumeHume werewere viewingviewing ththee mattematterr frofromm ththee stancstancee ofof ththee borroweborrowerr ooff capitalcapital,, thethe declinedecline wawass seenseen aass a healthyhealthy indicationindication ooff a smoothlsmoothlyy operatingoperating economyeconomy.. SmithSmith wrotewrote iinn The Wealth ofof

Nations, "The"The increaseincrease ofof stockstock,, whicwhichh raiseraisess pricesprices,, tendtendss ttoo lowelowerr profitprofit.. WheWhenn thethe stocksstocks ofof manmanyy ricrichh merchantmerchantss areare turneturnedd intintoo ththee samsamee tradetrade,, theitheirr mutuamutuall competitioncompetition naturallnaturallyy tendtendss ttoo lowelowerr ititss profitprofit;; andand whewhenn thertheree iiss a liklikee increaseincrease ooff stockstock iinn alalll thethe differentdifferent tradestrades carriedcarried onon inin thethe samsamee societysociety,, ththee samesame competitiocompetitionn musmustt producproducee thethe samesame effecteffect inin alalll ofthem."s8of them."58 SmithSmith undoubtedlyundoubtedly believebelievedd ththee declinedecline ofof ththee ratratee ooff profitprofit wawass attributedattributed ttoo ththee competitioncompetition ooff capitalcapital,, providinprovidingg hihimm witwithh subjectivesubjective evidencevidencee thatthat unfetteredunfettered healthhealthyy competitioncompetition woulwouldd eventualleventuallyy lealeadd ttoo a lowerlower profiprofitt ratratee thathann woulwouldd bebe foundfound iinn a monopolistimonopolisticc system.system.

ThiThiss perceptioperceptionn ooff ththee phenomenophenomenonn underwentunderwent a radicaradicall shiftshift witwithh ththee revolutionrevolution ooff a neneww influentiainfluentiall clasclasss primarilyprimarily composedcomposed ofof merchantmerchantss andand thethe middlmiddlee classclass.. TheseThese neneww 'bourgeoisie'bourgeoisie'' politicapoliticall economistseconomists vieweviewedd ththee decliningdeclining raterate ooff profiprofitt asas significantsignificant causcausee forfor alarm,alarm, anandd rightfullrightfullyy soso;; ththee capitaliscapitalistt clasclasss thetheyy representedrepresented derivedderived theirtheir revenuerevenue fromfrom profitprofit,, anandd thuthuss a reductioreductionn ofof incomeincome wawass seenseen aass a threathreatt ttoo theirtheir increasinglincreasinglyy influentiainfluentiall statusstatus.. TheThe controversycontroversy oveoverr ththee ComCorn LawLawss hahadd broughbroughtt thethe conflictconflict betweenbetween ththee landedlanded interestinterest anandd ththee neneww capitaliscapitalistt clasclasss ttoo a criticacriticall levellevel,, andand profiprofitt wawass nonoww seenseen asas ththee centralcentral issue.issue. FoForr ththee bourgeoisiebourgeoisie,, profiprofitt constituteconstitutedd mormoree thanthan meremere revenuerevenue;; itit wawass ththee raison d'etre, ththee incentiveincentive forfor progressprogress anandd invention.invention. Ricardo,Ricardo, whwhoo tootookk uupp ththee theoreticatheoreticall argumenargumentt oonn behalbehalff ooff ththee capitalistscapitalists,, focusefocusedd intentlyintently onon defendingdefending ththee profiprofitt ofof thithiss merchantmerchant class.class. ThusThus itit becambecamee necessarnecessaryy forfor RicardRicardoo toto addressaddress a questionquestion thathatt DobDobbb sawsaw arisingarising 'naturally':'naturally':

58 rd 58 SmithSmith,, Wealth ofojNations, Nations, 3'."3 edition, pp.. 8989.. 4S45

HoHoww cacann a fallfall inin thithiss revenuerevenue bbee a conditioncondition favorablfavorablee ttoo progressprogress?? IfIf thethe systemsystem,, bbyy ititss owownn developmentdevelopment,, generategeneratess a tendenctendencyy forfor ProfiProfitt ttoo fall,fall, isis thertheree nonott somethingsomething strangelystrangely contradictorcontradictoryy abouaboutt ththee systemsystem:: iiss itit notnot therebtherebyy definedefinedd asas transitorytransitory,, generatinggenerating ththee seedsseeds ooff ititss owownn retardationretardation andand decay?59decay?59

MarMarxx woulwouldd laterlater sasayy thathatt whawhatt worrieworriedd RicardRicardoo wawass thathatt ththee ratratee ooff profiprofitt mightmight bbee endangereendangeredd bbyy thethe developmendevelopmentt ofof productioproductionn itself. 6060 RicardRicardoo dididd notnot denydeny thathatt a tendenctendencyy forfor thethe ratratee ofof profiprofitt ttoo declindeclinee existed,existed, bubutt hihiss defensedefense ooff ththee capitaliscapitalistt classclass forcedforced hihimm ttoo limilimitt hihiss searchsearch ttoo externalexternal factorfactorss outsidoutsidee ththee capitaliscapitalistt system.system. ThcThe

RicardianRicardian SchoolSchool dismisseddismissed Smith'sSmith's theortheoryy implyingimplying competitiocompetitionn (a(ass welwelll asas anan increaseincrease inin wageswages)) wawass ttoo blamblamee forfor a declinedecline inin profitprofit,, assigninassigningg ththee blamblamee ttoo ththee decreaseddecreased productivitproductivityy ofof capitalcapital inin agriculturagriculturee insteadinstead.. RicardoRicardo,, anan adherenadherentt ttoo ththee labolaborr theorytheory ofof value,value, thoughthoughtt valuevalue itselfitself dependeddepended upouponn ththee difficultdifficultyy ofof productionproduction.. HHee thereforetherefore conceptualizedconceptualized a relationshirelationshipp wherwheree ththee valuvaluee ooff ththee nenett producproducee dependedependedd oonn thethe

"proportion"proportion ooff thethe sociasociall laborlabor whicwhichh wawass requirerequiredd ttoo procureprocure ththee laborer'slaborer's subsistence";subsistence";

61 i.e.,i.e., thethe differencedifference betweebetweenn wagewagess andand ththee valuvaluee ofof ththee product.61 ThiThiss theorytheory becamebecame knownknown asas ththee lawlaw ooff diminishindiminishingg returns.returns. 62

Ricardo,Ricardo, whwhoo disagreeddisagreed widelwidelyy witwithh ThomasThomas MalthusMalthus oonn severalseveral economiceconomic issues,issues, acceptedaccepted,, adoptedadopted,, andand applieappliedd MalthusMalthus'' lalaww ooff populatiopopulationn ttoo hihiss owownn analysisanalysis.. RicardoRicardo wrote:wrote: "Whether"Whether increasedincreased productions,productions, anandd ththee consequenconsequentt demanddemand whicwhichh thetheyy occasion,occasion, shallshall oror shallshall nonott lowelowerr profitsprofits,, dependsdepends solelysolely onon ththee risrisee ooff wageswages;; andand ththee risrisee ooff wages,wages, exceptingexcepting forfor a limitelimitedd periodperiod,, oonn ththee facilityfacility ooff producinproducingg ththee foodfood anandd necessarienecessariess ooff thethe laborers.laborers. I saysay exceptingexcepting foforr a limitelimitedd periodperiod,, becausbecausee nnoo poinpointt iiss bettebetterr establishedestablished thanthan

59 59 DobbDobb,, Political Economy and Capitalism, pp.. 8383.. 60 60 MarxMarx,, Capital, Vol. Ill,III, pp.. 304304.. 61 61 DobbDobb,, Political Economy and Capitalism, pp.pp. 84-8584-85.. 62 62 ThThee lalaww ofof diminishingdiminishing returnreturnss referreferss ttoo hohoww ththee marginamarginall contributiocontributionn oofaf a factofactorr ooff productionproduction generallgenerallyy decreasesdecreases asas mormoree ooff ththee factofactorr iiss usedused.. 4466 thathatt thethe supplysupply ooff laborerslaborers wilwilll alwaysalways ultimatelultimatelyy bbee iinn proportioproportionn ttoo ththee meanmeanss ofof supportingsupporting them."them.,,6363 IIff profiprofitt itselitselff dependeddepended oonn botbothh ththee costcost ofof producinproducingg productproductss forfor subsistencesubsistence anandd ththee coscostt ooff producinproducingg productproductss iinn generalgeneral,, thethenn iitt isis reasonablreasonablee toto considerconsider ththee ratratee ofof profiprofitt aass determinedeterminedd bbyy ththee samesame twtwoo quantitiesquantities.. IInn Dobb'Dobb'ss words,words,

"any"any factorfactor whicwhichh influencedinfluenced ththee ratratee ooff profiprofitt couldcould ddoo ssoo onlonlyy inin ssoo fafarr asas iitt alterealteredd thisthis ratiratioo ofof wagewagess ttoo ththee value ofof ththee grosgrosss produce."produce.,,6464 IIff thethe demandemandd foforr capitalcapital hahass infiniteinfinite rooroomm forfor growth,growth, thanthan therethere isis nnoo fundamentafundamentall necessitnecessityy demandingdemanding anan inhereninherentt checcheckk onon ththee increaseincrease ofof thethe ratratee ofof profitprofit.. LikeLike ththee lalaww ofof populatiopopulationn itselfitself,, profiprofitt woulwouldd bebe affectedaffected bbyy "the"the risrisee inin ththee pricpricee ofof foodfood andand ththee consequentconsequent risrisee iinn ththee valuvaluee ooff laborlabor itself'.itself,.6565 ThusThus RicardRicardoo sawsaw nono reasoreasonn forfor ththee pricpricee ooflabor-powerf labor-power ttoo increasincreasee duduee ttoo a deficiendeficientt labolaborr supplysupply ("at("at leastleast,, nonott iinn ththee lonlongg run")run"),, choosinchoosingg insteainsteadd ttoo speculatespeculate thatthat ththee laboringlaboring populatiopopulationn woulwouldd gladlgladlyy accepacceptt ananyy increasedincreased employmenemploymentt opportunityopportunity whicwhichh mightmight accompanyaccompany anan increasincreasee iinn capitacapitall investmentinvestment.. IInn thithiss casecase,, thertheree appearedappeared nono reasoreasonn whwhyy anan increaseincrease inin investmeninvestmentt capitacapitall shouldshould nonott bbee ablablee ttoo extracextractt atat leasleastt ththee samesame ratratee ooff profitprofit asas beforebefore,, ifif notnot mormoree profit.profit.

TheThe onlonlyy sufficiensufficientt cause,cause, thereforetherefore,, ooff a/alla fall iinn ththee raterate ofof profiprofitt aass capitalcapital accumulatioaccumulationn proceedeproceededd couldcould bbee ththee operatiooperationn ooff somesome factofactorr whichwhich tendetendedd ttoo raisraisee thethe priceprice ooflabor-powerf labor-power bbyy raisinraisingg ththee valuvaluee ooff thethe workersworkers'' subsistencesubsistence;; anandd suchsuch a factofactorr hhee sawsaw inin thethe lalaww ofof diminishingdiminishing 6666 returnreturnss onon land.land.

ThiThiss conclusioconclusionn complementecomplementedd Ricardo'Ricardo'ss defensdefensee ofof ththee capitaliscapitalistt clasclasss versuversuss thethe landelandedd gentrgentryy quitquitee nicelynicely.. IInn Ricardo'Ricardo'ss opinionopinion,, iitt hahadd beebeenn 'satisfactoril'satisfactorilyy provedproved'' thatthat thethe declindeclinee iinn profitprofitss woulwouldd naturallnaturallyy arisarisee withouwithoutt agriculturaagriculturall improvementsimprovements oror ththee

63Ibid.Ibid.,, pp.. 86.86 . 64 64 Dobb.Dobb, Political Economy and Capitalism, p.p. 8585 (Dobb'(Dobb'ss italics)italics).. 65 65 Letters of Ricardo to Malthus,Malthlls, 1810-23, pp.. 101.101 . 66 66 DobbDobb,, Political Economy and Capitalism, p.p. 87.87 . 4477 importationimportation ooff foodfood,, twtwoo conditionsconditions contrarycontrary ttoo ththee landowners'landowners' interests.interests. HeHe woulwouldd gogo oonn ttoo saysay thathatt "the"the interesinterestt ooff ththee landlorlandlordd isis alwayalwayss opposedopposed ttoo ththee interesinterestt ofof evereveryy otherother clasclasss ofof thethe community.community. HiHiss situationsituation iiss neveneverr aass prosperouprosperouss aass whewhenn foodfood isis scarcescarce andand dear: whereas all other persons are greatly benefited by procuring food cheap.,,6767 dear: whereas all other persons are greatly benefited by procuring food cheap." Malthus, who had taken up the position of defending the agricultural class against the Malthus, who had taken up the position of defending the agricultural class against the capitalists, disagreed with Ricardo's conclusion. He saw profits falling as a result of the capitalists, disagreed with Ricardo's conclusion. He saw profits falling as a result of the fall in the price of commodities due to deficient demand-the result of capital fall in the price of commodities due to deficient demand—the result of capital accumulation proceeding too rapidly. His views, combined with the writings of accumulation proceeding too rapidly. His views, combined with the writings o68f Sismondi, became the main theme for various doctrines ofunderconsumption.68 Sismondi, became the main theme for various doctrines of underconsumption.

UnderconsumptionUnderconsumption

WheWhenn Political Economy and Capitalism wawass firstfirst published,published, economiceconomic underconsumptiounderconsumptionn doctrinesdoctrines hahadd becombecomee soso populapopularr thathatt DobDobbb referrereferredd ttoo thethemm asas

'vogue'.'vogue'. InsteaInsteadd ofof simplysimply takintakingg thithiss theoreticatheoreticall canoncanon foforr grantedgranted,, DobDobbb askedasked a pertinentpertinent question;question; araree economiceconomic crisecrisess causecausedd bbyy conditionsconditions ofof underconsumption?underconsumption?

DobDobbb thoughthoughtt thathatt commoncommon sensesense woulwouldd logicallylogically leadlead thosthosee "untouched"untouched bbyy learnedlearned sophistries"sophistries" ttoo a similasimilarr conclusion.conclusion. ButBut wawass iitt correct?correct?

DobDobbb assumedassumed consumptionconsumption ttoo bbee ththee ultimatultimatee endend ooff productionproduction,, anandd thathatt thethe producer'producer'ss realizatiorealizationn ofof profiprofitt wawass dependendependentt oonn ththee salesale ofof goodgoodss aatt ththee marketmarket.. IfIf thethe developmentdevelopment ooff individuaindividuall industriesindustries wawass alloweallowedd ttoo expandexpand beyondbeyond ththee demandemandd foforr theirtheir articlesarticles ooff productioproductionn (goods)(goods),, iitt isis reasonablreasonablee ttoo assertassert ththee possibilitpossibilityy ofof a generalgeneral disproportiondisproportion arisingarising inin ththee effectiveeffective demandemandd betweenbetween allall consumablconsumablee commoditiescommodities.. InIn

67 67 Ricardo,Ricardo, Essay on the Influence ofola a Low Price of Corn on the Profits ofolS{ock, Stock, pp.. 2222.. 68 68 Sismondi,Sismondi, whwhoo iiss creditecreditedd witwithh ththee discoverydiscovery ooff economieconomicc cycles,cycles, thoughthoughtt unrestricteunrestrictedd competitiocompetitionn woulwouldd forceforce employeremployerss ttoo cucutt pricepricess andand lowelowerr worker'worker'ss wageswages,, leadinleadingg ttoo ththee overproductiooverproductionn anandd underconsumptionunderconsumption ooff goodsgoods.. 4488 otheotherr wordswords,, iiff ththee markemarkett couldcould onlonlyy sustainsustain a certaicertainn demanddemand thathatt alalll industrieindustriess werewere producinproducingg beyondbeyond,, thethenn itit isis possiblpossiblee ttoo conceptualizconceptualizee a situationsituation witwithh insufficientinsufficient demandemandd foforr alalll commoditiescommodities.. UnderconsumptioUnderconsumptionn woulwouldd presumablpresumablyy follow.follow.

HoweverHowever,, thithiss wawass nonott ththee onlonlyy causcausee ofof underconsumptionunderconsumption.. ClassicaClassicall politicalpolitical economistseconomists hahadd abstractlyabstractly describedescribedd a relationshirelationshipp betweebetweenn incomincomee anandd production,production, wherewhere totatotall incomeincome wawass alwayalwayss proportionatproportionatee ttoo totatotall costscosts.. IInn suchsuch a scenario,scenario, whawhatt cancan bbee saisaidd abouaboutt savesavedd andand investeinvestedd income?income?

TotaTotall incomincomee mightmight bbee sufficientsufficient ttoo covercover ththee totatotall coscostt ooff alalll consumptionconsumption goodgoodss produceproducedd iiff ththee wholwholee ooff thathatt incomeincome wawass iinn facfactt spentspent onon consumptioconsumptionn goods.goods. BuButt iiff partpart ooff thathatt incomincomee wawass nonott spentspent,, bubutt saved,saved, thithiss savesavedd portioportionn ofof incomincomee wenwentt ttoo purchasepurchase,, nonott consumptionconsumption goods,goods, bubutt producer'producer'ss goodgoodss whicwhichh woulwouldd furtherfurther augmentaugment ththee flofloww ofof consumptionconsumption goodgoodss iinn ththee futurefuture.. IfIf savinsavingg continued,continued, wherwheree wawass thcthe markemarkett ttoo bbee foforr thithiss additionaadditionall flowflow ooff finafinall productsproducts,, unlesunlesss pricepricess werewere ttoo declindeclinee ttoo a poinpointt wherwheree profitprofit felfelll oorr eveneven disappeared?69disappeared?69

DobDobbb identifiedidentified twtwoo traditionatraditionall answers.answers. ThThee firsfirstt camcamee asas a replreplyy bbyy RicardRicardoo inin responsresponsee ttoo a propositiopropositionn bbyy MalthusMalthus.. RicardRicardoo thoughthoughtt thathatt consumptionconsumption wawass transferredtransferred frofromm oneone sesett ofof consumersconsumers ttoo another-thatanother—that savingsaving couldcould bbee equateequatedd ttoo anan extensioextensionn ofof thethe productioproductionn processprocess,, whicwhichh iinn turturnn woulwouldd providprovidee employmenemploymentt foforr mormoree workers,workers, whosewhose increasincreasee iinn incomincomee woulwouldd compecompell thethemm ttoo consumconsumee further.further. HencHencee savinsavingg doesdoes nonott automaticallyautomatically meameann a declinedecline iinn ththee demandemandd foforr consumablconsumablee goodsgoods.. EvenEven iiff oneone separatedseparated fixedfixed capitacapitall fromfrom circulatingcirculating capitalcapital,, consumptioconsumptionn coulcouldd potentiallpotentiallyy remainremain stable.stable. AfteAfterr all,all, ththee purchasepurchase ofof a machinmachinee implieimpliess a transfetransferr ofof capitalcapital ttoo ththee capitalistcapitalist andand laborerslaborers whwhoo producedproduced ththee machine.machine. SucSuchh anan implicatioimplicationn ultimatelultimatelyy renderrenderss savingsaving andand consumptioconsumptionn asas synonymousynonymouss termsterms,, anan allusionallusion thathatt hashas beenbeen centralcentral ttoo politicalpolitical economeconomyy forfor hundredshundreds ofof yearsyears.. AAss AdaAdamm SmithSmith hahadd previouslpreviouslyy saidsaid,, "what"what isis annuallyannually

69 DobbDobb,, Political Economy and Capitalism, pp.. 91.91 . 4949 savedsaved iiss asas regularlregularlyy consumedconsumed asas whawhatt isis annuallyannually spent,spent, andand nearlynearly inin ththee samesame timetime too; but it is consumed by a different set of people." 7700 too; but it is consumed by a different set of people." If saving meant an investment in the extension of the production process, it would If saving meant an investment in the extension of the production process, it would result in an increase in the production of consumable goods beyond what was originally result in an increase in the production of consumable goods beyond what was originally demanded. Dobb found the second traditional reply in the answer to the following riddle: demanded. Dobb found the second traditional reply in the answer to the following riddle: "what was to happen to the additional goods produced by the extra machines or the extra "what was to happen to the additional goods produced by the extra machines or the extra laborers?,,71 The logical answer implied that either the income of society was enlarged laborers?"71 The logical answer implied that either the income of society was enlarged through the process, providing more revenue for all involved (i.e., higher wages and through the process, providing more revenue for all involved (i.e., higher wages and profits), or that investing in machinery would increase the output of goods while profits), or that investing in machinery would increase the output of goods while decreasing the cost of production. This would make consumable goods cheaper for decreasing the cost of production. This would make consumable goods cheaper for consumers who could now purchase more of the goods, and thereby keep consumption consumers who could now purchase more of the goods, and thereby keep consumption steady. Of course, this theory implied the maintenance of a vague level of proportionality steady. Of course, this theory implied the maintenance of a vague level of proportionality between the fall in price and the fall in production cost, but it worked sensibly within the between the fall in price and the fall in production cost, but it worked sensibly within the abstract context the question was originally posed. abstract context the question was originally posed.

MarxMarx anandd CapitalCapital AccumulationAccumulation

ThenThen,, howeverhowever,, asas seemsseems ththee casecase withwith mostmost economiceconomic conundrumsconundrums ofof ththee age,age,

MarxMarx appearedappeared andand turneturnedd everythingeverything onon itsits headhead.. MarxMarx diddid notnot bothebotherr formulatinformulatingg a thoroughthorough responsresponsee toto whawhatt hehe consideredconsidered ththee 'superficial''superficial' underconsumptiounderconsumptionn theorytheory.. HeHe recognizedrecognized SismondiSismondi andand RodbertuRodbertuss hadhad isolateisolatedd demanddemand fromfrom itsits multifacetedmultifaceted relationshiprelationship withwith production,production, andand hahadd therebtherebyy ignoredignored ththee factfact thatthat conditionsconditions ofof distributiondistribution werweree thethe samesame asas conditionsconditions ofof productionproduction,, simplysimply vieweviewedd fromfrom a differentdifferent angle.angle. InIn thisthis case,case, underconsumptionunderconsumption couldcould onlyonly bbee consideredconsidered oneone facetfacet ofof thethe problem.problem.

70 70 Smith,Smith, Wealth of Nations, p.p. 319.3 19 . 71 71 DobbDobb,, Political Economy and Capitalism, p.p. 9393.. 5050

MarxMarx stressedstressed ththee neeneedd forfor politicapoliticall economistseconomists ttoo undergundergoo a mormoree rigorourigorouss analysianalysiss ofof capitalcapital accumulationaccumulation.. HoHoww coulcouldd ononee assumassumee capitacapitall accumulationaccumulation wawass ththee determinatedeterminate ofof ththee ratratee ofof profiprofitt withoutwithout firstfirst understandingunderstanding capitalcapital accumulatioaccumulationn itselfitself?? AlthoughAlthough

Marx'sMarx's owownn examinationexamination ofof ththee probleproblemm ofof capitalcapital accumulationaccumulation wawass lefleftt unfinished,unfinished,

DobbDobb founfoundd iitt ttoo bbee 'sufficiently'sufficiently epoch-making'epoch-making' ttoo renderenderr iitt essentialessential ttoo ananyy examinationexamination ooff economiceconomic crises.crises.

Marx'sMarx's critiquecritique restedrested onon twtwoo cruciacruciall notionsnotions:: 1) ththee separationseparation ofof capitalcapital intointo

"constant""constant" andand "variable""variable" capitalcapital;; 2)2) ththee concepconceptt ooff anan "increas"increasee ooff relativrelativee surplus-surplus- value."value."n72 EarlierEarlier economistseconomists hahadd somewhatsomewhat understoodunderstood ththee differencdifferencee betweebetweenn fixefixedd andand circulatingcirculating capitalcapital forfor a singlesingle industryindustry,, bubutt whewhenn viewinviewingg ththee economyeconomy aass a whole,whole, theythey tendedtended ttoo reverrevertt backback ttoo ththee ideideaa thathatt allall capitacapitall wawass reduciblreduciblee ttoo a simplesimple advancadvancee ofof wagewagess toto laborerslaborers.. MarMarxx distinctldistinctlyy understoounderstoodd ththee differencedifference betweebetweenn fixefixedd andand circulatingcirculating capital,capital, butbut hehe consideredconsidered thithiss distinctiondistinction lessless importanimportantt thathann thathatt whichwhich existeexistedd betweebetweenn constantconstant andand variablvariablee capitalcapital.. DobbDobb explainedexplained constant capitacapitall asas thatthat

"invested"invested inin equipmentequipment oror iinn stocksstocks ofof raraww materialmaterial"" whilwhilee variable capitacapitall wawass capitalcapital

"devoted"devoted toto ththee purchaspurchasee ofof labor-powelabor-powerr aass a currencurrentt wages-fund.,,73wages-fund." ThisThis crucialcrucial distinctiondistinction allowedallowed MarMarxx ttoo statestate thathatt ththee ratratee ooff profiprofitt wawass nonott dependentdependent solelysolely onon thethe ratiratioo ofof profiprofitt toto wageswages.. FoForr instanceinstance,, ththee influencinfluencee ooff technologicatechnologicall progresprogresss coulcouldd leadlead ttoo machinermachineryy replacingreplacing laborlabor.. ThisThis woulwouldd changchangee ththee organicorganic compositiocompositionn ooff capital,capital, effectivelyeffectively alteringaltering ititss proportioproportionn iinn ththee directiodirectionn ofof raisingraising constanconstantt capitacapitall ttoo variablevariable

72 Ibid.Ibid.,, pp.. 9494.. 73 Ibid.,Ibid., pp.. 9696.. 5151 capitalcapital.. HencHencee ththee tendenctendencyy ofof industriaindustriall progresprogresss wawass ttoo lowelowerr ththee ratratee ofof profitprofit,, eveneven

7474 thoughthough therethere wawass nnoo decreasedecrease iinn ththee ratratee ofof surplus-value.surplus-value.

IInn otherother wordswords,, MarxMarx thoughthoughtt a decreasdecreasee iinn ththee ratratee ooff profiprofitt wawass ththee generalgeneral resultresult ooff industrialindustrial progressprogress,, bubutt thathatt thithiss relationshirelationshipp dididd nonott necessarilnecessarilyy havhavee ttoo bbee so.so. HHee waswas awareaware ofof ththee existenceexistence ooff certaicertainn offsettinoffsettingg tendencietendenciess thathatt couldcould puspushh ththee ratratee ooff profiprofitt inin anan oppositeopposite direction,direction, therebtherebyy increasinincreasingg relativrelativee surplus-valuesurplus-value.. ThiThiss resulresultt coulcouldd comecome aboutabout bbyy improvinimprovingg ththee productivitproductivityy ofof industriesindustries engageengagedd iinn producinproducingg ththee articlesarticles ofof humanhuman subsistence.subsistence. A decreasedecrease iinn ththee necessarnecessaryy proportioproportionn ofof ththee labor-forclabor-forcee requirerequiredd toto produceproduce ththee subsistencesubsistence ooff ththee entireentire labolaborr populatiopopulationn woulwouldd leadlead toto anan increasincreasee iinn thethe raterate ofof surplus-valuesurplus-value.. ThiThiss increasedincreased ratratee woulwouldd leadlead ttoo a declinedecline ofof ththee valuvaluee ofof commoditiescommodities inin generalgeneral,, includingincluding ththee valuevalue ooff labor-powerlabor-power.. MarMarxx explainedexplained thathatt thethe increaseincrease iinn surplus-valuesurplus-value woulwouldd comecome,, 'b'byy reasoreasonn ooff ththee factfact thathatt a smallersmaller portioportionn ooff thethe laborer'slaborer's working-daworking-dayy requirerequiredd ttoo bbee employedemployed iinn replacingreplacing ththee valuvaluee ofof hihiss ownown labor-labor- powerpower andand a largelargerr portioportionn ooff ththee working-daworking-dayy remaineremainedd ttoo producproducee surplus-valusurplus-valuee forfor thethe capitalist'.capitalist'.7575 SinceSince thethe effecteffectss ooff technologicatechnologicall progresprogresss couldcould bbee felfeltt iinn agricultureagriculture asas welwelll aass industry,industry, MarMarxx wawass ableable ttoo dismissdismiss ththee implicatioimplicationn ofof thethe impacimpactt ofof diminishingdiminishing returnreturnss onon thethe ratratee ofof profiprofitt andand ththee appearancappearancee ofof economieconomicc crises.crises.

TheThe presencpresencee ofof counteractincounteractingg tendencietendenciess leledd DobDobbb toto questionquestion ifif ononee tendencytendency wawass moremore likelylikely toto prevaiprevaill oveoverr thethe otherother.. TToo answeanswerr thithiss queryquery,, DobbDobb examineexaminedd twotwo differentdifferent scenarios.scenarios. TheThe firsfirstt assumeassumedd ththee existencexistencee ooff aann infinitelinfinitelyy elasticelastic andand unorganizedunorganized labor-suppllabor-supplyy wherwheree "the"the fielfieldd ooff exploitatioexploitationn couldcould extendextend pari passupassu withwith

7474 Ibid.Ibid.,, pp.. 9797.. 75 7S Ibid.Ibid.,, pp.. 9797.. RicardRicardoo hahadd hintehintedd aatt thithiss prospecprospectt previouslypreviously,, bubutt hahadd beebeenn ssoo involvedinvolved witwithh ththee debatedebate againsagainstt ththee agriculturaagriculturall landland ownersowners thathatt hhee failefailedd ttoo consideconsiderr ththee possibilitpossibilityy seriously.seriously. 5252 capitalcapital accumulation."accumulation.,,7676 ThiThiss elasticitelasticityy woulwouldd eliminateliminatee ththee necessitnecessityy forfor thethe raterate ofof profitprofit ttoo declindeclinee aass industrindustryy progressedprogressed.. ItIt alsalsoo provideprovidedd nnoo impetusimpetus foforr alteringaltering thethe organiorganicc compositioncomposition ooff capitalcapital.. AAss thethe scenarioscenario repeaterepeatedd itselfitself oveoverr multiplmultiplee cyclescycles,, thethe productioproductionn procesprocesss woulwouldd grogroww largerlarger,, bubutt ththee proportioproportionn betweebetweenn variablvariablee anandd constantconstant capitacapitall woulwouldd remairemainn unchangedunchanged.. ThThee introductiointroductionn ooff a mormoree efficienefficientt piecpiecee ofof machinermachineryy woulwouldd acactt aass a motivmotivee foforr alteringaltering ththee compositioncomposition ofof capitalcapital,, leadinleadingg ttoo anan increasincreasee ooff constanconstantt capitacapitall anandd a reductioreductionn ooff variablvariablee capital.capital. HoweverHowever,, thithiss changchangee inin compositioncomposition doedoess nonott necessarilnecessarilyy guaranteguaranteee a fallfall iinn ththee ratratee ofof profitprofit.. IIff wewe assumeassume thisthis technologicatechnologicall advancadvancee wawass applieappliedd throughouthroughoutt alalll productivproductivee industriesindustries,, includinincludingg thosethose thathatt producproducee ththee meanmeanss ooff subsistence,subsistence, conditionconditionss forfor ththee ratratee ofof profitprofit ttoo rise mightmight appearappear.. A stablestable real-wagreal-wagee woulwouldd lealeadd ttoo ththee coscostt ooflabor-powerf labor-power decliningdeclining alongalong withwith thethe costcost ooff alalll otheotherr commodities,commodities, includinincludingg thethe newlnewlyy introducedintroduced labor-savinglabor-saving machines.machines.

AAss DobDobbb puputt itit,, "the"the counteractincounteractingg tendencietendenciess towardtowardss aann increasincreasee ofof 'relativ'relativee surplus-surplus- valuevalue'' anandd ttoo a 'cheapenin'cheapeningg ooff thethe elementelementss ooff constanconstantt capitalcapital'' mamayy overbearoverbear thethe tendenctendencyy ttoo a declinedecline iinn ththee ratratee ooff profiprofitt latenlatentt iinn ththee initiainitiall changechange iinn ththee ratiratioo ofof constanconstantt ttoo variablvariablee capital."capital.,,7777 Furthermore,Furthermore, ththee labor-savinglabor-saving innovationsinnovations woulwouldd havhavee thethe additionaadditionall effecteffect ooff displacindisplacingg laborerslaborers,, resultinresultingg iinn aann increaseincrease iinn ththee amountamount ofof labor-labor- powepowerr iinn ththee markemarkett anandd a downwardownwardd pressurpressuree oonn ththee wage-rate.wage-rate.

Dobb'sDobb's seconsecondd examplexamplee assumeassumedd ththee exactexact oppositoppositee labolaborr markemarkett scenarioscenario.. ITnn thisthis casecase,, 'relative'relative over-populationover-population'' wawass mucmuchh smallersmaller thathann iinn ththee firstfirst exampleexample,, resultinresultingg inin anan inelastiinelasticc labolahorr supply.supply. DobDobbb thethenn addedadded ththee additionaadditionall assumptioassumptionn thathatt ththee laborlabor supplsupplyy wawass welwelll organizedorganized,, highlhighlyy resistanresistantt ttoo wagwagee reductionsreductions,, andand capablcapablee ofof increasingincreasing

76 Ibid.,Ibid., pp.. 111111.. 77 Ibid.,Ibid., pp.. 113113.. 5353 theitheirr wagewage whewhenn ththee situatiosituationn permittedpermitted.. IfIf thisthis scenariscenarioo wawass applieappliedd ttoo ththee conditionsconditions commonlycommonly founfoundd neanearr ththee peapeakk ooff aann industriaindustriall boomboom,, specificallspecificallyy whewhenn capitalcapital accumulationaccumulation wawass increasinincreasingg anandd ththee labolaborr supplysupply wawass becominbecomingg exhausted,exhausted, thethe priceprice ofof labor-powerlabor-power iiss expectedexpected ttoo risrisee (althoug(althoughh nonott necessarilnecessarilyy universally). "Capital"Capital accumulation,accumulation,"" DobDobbb observedobserved,, "is"is tendintendingg ttoo outruoutrunn ananyy possiblpossiblee extension ofof ththee fieldfield ooff exploitationexploitation;; anandd shortshort ooff somsomee meanmeanss ooff intensifyingintensifYing ththee exploitatioexploitationn ooff ththee existingexisting fieldfield,, ththee ratratee ofof profiprofitt peperr uniunitt ooff capitacapitall musmustt fall.,,78fall." IInn thithiss case,case, ththee laclackk ooff variablevariable labor-suppllabor-supplyy wilwilll onconcee agaiagainn shifshiftt ththee organicorganic compositioncomposition ooff capitacapitall towardtowardss constantconstant capitalcapital.. IIff ththee machinermachineryy wawass nonott timetime savingsaving oorr mormoree efficientefficient thanthan laborlabor (and(and oneone mightmight assumeassume iitt wawass notnot,, otherwiseotherwise iitt woulwouldd havhavee beebeenn introducedintroduced previously),previously), thenthen iitt isis likelylikely thathatt ththee introductionintroduction ooff ththee necessarnecessaryy machinermachineryy wilwilll turtumn ououtt ttoo bbee leslesss profitableprofitable thathann itit woulwouldd havhavee otherwise.otherwise.

ExpectedlyExpectedly,, ththee differentdifferent scenariosscenarios leledd ttoo differentdifferent resultsresults.. BecauseBecause neitheneitherr scenarioscenario accuratelaccuratelyy describedescribess ththee conditionconditionss oonn ththee ground,ground, neitheneitherr shouldshould bbee considereconsideredd correctcorrect.. ThuThuss wwee cannotcannot predicpredictt whicwhichh tendenctendencyy woulwouldd rulrulee thethe otherother.. Dobb'sDobb's interpretatiointerpretationn ooff Marx'Marx'ss visiovisionn wawass thathatt hhee "saw"saw tendenctendencyy andand counter-tendenccounter-tendencyy aass elementelementss ooff conflicconflictt ououtt ooff whicwhichh ththee generalgeneral movemenmovementt ofof ththee systemsystem emergedemerged:: thithiss conflicconflictt ooff forceforcess achievinachievingg a balancebalance,, andand hencehence aann eveneven movementmovement,, onlonlyy "b"byy accident,accident,"" anandd henchencee promotinpromotingg thosthosee sharpsharp breakbreakss ofof equilibriumequilibrium,, andand theitheirr accompanyinaccompanyingg fluctuations,fluctuations, whicwhichh iinn ththee concreteconcrete circumstances• of capitalist economy showed themselves as crises.,,7979 In other circumstances of capitalist economy showed themselves as crises." In other words, equilibrium between the two forces is achieved almost mistakenly, as one words, equilibrium between the two forces is achieved almost mistakenly, as one

78 7R Ibid.Ibid.,, pp.. 114114.. 7979 Ibid.,Ibid., pp.. 110110.. 5544 tendencytendency acceleratesaccelerates paspastt ththee otherother,, movinmovingg frofromm oneone disequilibriudisequilibriumm pointpoint toto another.another. WhaWhatt DobDobbb isis tryingtrying toto saysay isis thathatt withiwithinn ththee confinesconfines ooff capitalism,capitalism, equilibriuequilibriumm isis reachedreached botbothh haphazardlhaphazardlyy andand temporarily.temporarily.

ProportionalityProportionality

AlthougAlthoughh Marx'Marx'ss visualizationvisualization ooff capitaliscapitalismm involveinvolvedd conflictioconflictionn andand disproportiondisproportion,, iitt alsoalso impliedimplied thathatt capitacapitall accumulationaccumulation couldcould proceeproceedd withouwithoutt causingcausing anyany exchangeexchange issuesissues asas lonlongg aass certaincertain relationshiprelationshipss werweree observed.observed. HHee wawass quickquick toto pointpoint outout thathatt capitalism,capitalism, defineddefined bbyy ththee anarchanarchyy ofof productioproductionn anandd absencabsencee ofof centralizedcentralized controlscontrols,, lackedlacked anyany sufficientsufficient mechanismmechanism ttoo makmakee sursuree thesthesee relationshiprelationshipss werewere maintainedmaintained.. ThThee necessarnecessaryy relationshiprelationshipss woulwouldd onlonlyy bbee preservepreservedd bbyy 'accident';'accident'; anyany changchangee inin ononee ooff ththee maimainn economieconomicc forcesforces,, suchsuch aass changechangess iinn techniquetechniquess oorr ththee ratratee ofof

80 profit, would 'tend as a normal result to a rupture of equilibrium' .80 The atomistic nature profit, would 'tend as a normal result to a rupture of equilibrium'. The atomistic nature of capitalism keeps each producer blind to the decisions of each other, making market co- of capitalism keeps each producer blind to the decisions of each other, making market co­ ordination impossible before crises. In capitalism, market coordination can only work to ordination impossible before crises. In capitalism, market coordination can only work to prevent crises after they have begun. prevent crises after they have begun. A crisis appears as catharsis as well as retribution: as the sole mechanism A crisis appears as catharsis as well as retribution: as the sole mechanism by which, in this economy, equilibrium can be enforced, once it has been by which, in this economy, equilibrium can be enforced, once it has been extensively broken. 81 extensively broken.81

IfIf capitalcapital accumulationaccumulation iiss plagueplaguedd witwithh a discontinuousdiscontinuous increase,increase, thertheree willwill undoubtedlundoubtedlyy bbee a perioperiodd wherwheree ththee demandemandd foforr consumerconsumer goodgoodss declines,declines, leadinleadingg ttoo a declindeclinee inin profiprofitt andand aann increasincreasee iinn unemploymentunemployment.. IIff ththee fallfall iinn activitactivityy occursoccurs acrossacross thethe boardboard forfor consumptionconsumption industries,industries, iitt wilwilll impactimpact ththee manufacturinmanufacturingg industriesindustries.. TradeTradess thatthat manufacturmanufacturee instrumentsinstruments ooff productionproduction forfor industrieindustriess producingproducing consumablconsumablee goodsgoods relyrely

80 80 Ibid.,Ibid., pp.. 102102.. 81 81 Ibid.,Ibid., pppp.. 102-103102-103.. 5555 onon ththee demandemandd forfor ththee latter.latter. AAss DobDobbb realizedrealized,, "when"when a falfalll inin profiprofitt occuroccurss iinn thethe consumptionconsumption tradetradess thithiss iiss likelylikely ttoo meameann a falfalll iinn ththee demanddemand forfor instrumentinstrumentss ofof productioproductionn inin a mannemannerr capablecapable ofof resultinresultingg iinn a generalgeneral crisis."s2crisis." IInn thithiss aspect,aspect, thethe under-consumptionunder-consumption theortheoryy hahass validityvalidity.. CapitalCapital iiss oftenoften crystallizecrystallizedd iinn particulaparticularr formsforms thathatt araree adaptedadapted forfor specificspecific usesuses,, andand iiff thesthesee useusess araree nnoo longelongerr iinn demand,demand, thethe capitalcapital imbeddedimbedded iinn thethemm becomebecomess irrelevantirrelevant.. IInn sucsuchh a system,system, ththee effectseffects ofof a changchangee inin consumptionconsumption araree transmittetransmittedd "back"back alonalongg thethe streamstream ofof demanddemand ttoo allall ththee intermediateintermediate and constructional processes connected with it and adapted to it."s383 Yet it• is• •important to and constructional processes connected with it and adapted to it." Yet it is important to realize that although this series of event might very well be the origin of a general crisis, realize that although this series of event might very well be the origin of a general crisis, there is no guarantee that it must be so; there is a chain of events that can lead to a crisis there is no guarantee that it must be so; there is a chain of events that can lead to a crisis starting within the manufacturing trades themselves. After reviewing American starting within the manufacturing trades themselves. After reviewing American economic data, Dobb noted Professor lM. Clark as concluding that observations tended economic data, Dobb noted Professor J.M. Clark as concluding that observations tended to give weight to theories of consumers' demand following movements in production of to give weight to theories of consumers' demand following movements in production of consumable goods. The main point is that the originating factor in a general crisis is consumable goods. The main point is that the originating factor in a general crisis is disproportion; if either side of the equation becomes unbalanced, the entire system disproportion) if either side of the equation becomes unbalanced, the entire system becomes susceptible to falling into a state of prolonged disequilibrium. becomes susceptible to falling into a state of prolonged disequilibrium. Was capital accumulation to blame for theses disproportions? Marx implicitly Was capital accumulation to blame for theses disproportions? Marx implicitly provided an answer by showing that capital accumulation could proceed without causing provided an answer by showing that capital accumulation could proceed without causing any problems within the sphere of exchange provided certain relationships held true. any problems within the sphere of exchange provided certain relationships held true. These relationships included those between the capital-goods and consumption-goods These relationships included those between the capital-goods and consumption-goods industries, the correlation of investment and consumption, as well as the link between the industries, the correlation of investment and consumption, as well as the link between the replacement-demand of industries and the division of income between workers and replacement-demand of industries and the division of income between workers and

8822 Ibid.Ibid.,, pp.. 104104.. 8833 Ibid.Ibid.,, pp.. 104104.. 5566 capitalists.8484 IInn otheotherr wordswords,, capitacapitall accumulatioaccumulationn coulcouldd continuecontinue withouwithoutt necessarilynecessarily leadingleading ttoo crisecrisess bbyy maintaininmaintainingg a certaicertainn levelevell ooff proportionality betweebetweenn certaincertain elementselements withiwithinn ththee system.system. HoweverHowever,, capitalismcapitalism,, witwithh ititss distincdistinctt laissez-fairlaissez-fairee approach,approach, isis characterizecharacterizedd bbyy qualitiequalitiess thathatt impedimpedee structuralstructural proportionalityproportionality.. ThereforThereforee capitalismcapitalism lackslacks ththee abilityability ttoo keepkeep certaincertain necessarnecessaryy relationshiprelationshipss proportional,proportional, makinmakingg crisecrisess anan inhereninherentt side-effectside-effect ofof ththee ideology.ideology.

CapitalisCapitalismm IsIs......

EarlEarlyy politicapoliticall economisteconomist diddid nonott consideconsiderr crisecrisess ttoo bbee causedcaused bbyy ananyy inherentinherent instabilitinstabilityy withiwithinn ththee capitalistcapitalist modelmodel,, bubutt MarMarxx founfoundd thethemm ttoo bbee directldirectlyy associateassociatedd withwith thethe essentialessential featuresfeatures ofof capitalism.capitalism. MarMarxx distinguishedistinguishedd twtwoo essentiaessentiall characteristiccharacteristicss ofof capitaliscapitalistt economieseconomies thathatt causedcaused imbalanceimbalancess thathatt couldcould potentiallpotentiallyy lealeadd ttoo economiceconomic crisescnses..

TheThe twtwoo fundamentalfundamental characteristicscharacteristics ooff thithiss economyeconomy werweree whawhatt hhee termedtermed ththee "anarch"anarchyy ofof production"—thproduction"-thee atomisticatomistic diffusiodiffusionn ooff productiveproductive decisionsdecisions amongamong numerounumerouss autonomousautonomous entrepreneurs-andentrepreneurs—and ththee facfactt thathatt itit wawass a systemsystem ooff productioproductionn nonott foforr consciouslconsciouslyy designedesignedd socialsocial endendss butbut forfor profitprofit.. 855

TheThe firstfirst characteristiccharacteristic,, thethe so-called'so-called 'anarch anarchyy ooff production'production',, dididd nonott implimplyy a productioproductionn processprocess thatthat operateoperatedd capriciouslycapriciously anandd chaotically.chaotically. ItIt simplsimplyy referrereferredd ttoo a Of. process that operated without any central planning or direction. 86 In other words, process that operated without any central planning or direction. In other words, production decisions are determined independently by individual producers. It is as if production decisions are determined independently by individual producers. It is as if each producer were blind and isolated. Of course, they do not operate in isolation, so each producer were blind and isolated. Of course, they do not operate in isolation, so treating the conditions as such could lead to unexpected results, including periodic treating the conditions as such could lead to unexpected results, including periodic

8484 Ibid.Ibid.,, pp.. 101101.. 8585 Ibid.Ibid.,, pp.. 8080.. 86 86 Dobb,Dobb, Capitalism Yesterday and Today, pp.. 15J 5.. 5757 disruptions.disruptions. ItIt wawass alsalsoo ththee mediumediumm foforr ththee so-calleso-calledd 'invisible'invisible handhand'' ttoo appear,appear, andand waswas thereforthereforee responsiblresponsiblee forfor ththee classicalclassical lawslaws ooff ththee markemarkett ttoo bbee describedescribedd iinn theirtheir particulaparticularr form.form.

ThThee seconsecondd fundamentafundamentall characteristic,characteristic, thathatt capitaliscapitalismm existsexists aass a systemsystem ofof productioproductionn ofof profiprofitt insteainsteadd ofof forfor socialsocial development,development, iiss a criticacriticall featurefeature.. MarMarxx thoughtthought thisthis aspecaspectt wawass directldirectlyy responsiblresponsiblee foforr ththee pursuipursuitt ooff surplus-valuesurplus-value,, aass welwelll aass thethe circumstancecircumstancess favorinfavoringg itsits augmentationaugmentation oonn behalbehalff ofof ththee dominatingdominating clasclasss thathatt useusedd thisthis surplussurplus asas personalpersonal revenuerevenue.. IInn thethe capitalistcapitalist modelmodel,, profiprofitt iiss seenseen aass ththee singulasingularr motivemotive foforr production.production.

TToo studstudyy economiceconomic crisescrises iiss ttoo studystudy ththee dynamicdynamicss ooff ththee economiceconomic systesystemm asas a whole.whole. MarMarxx thoughthoughtt thathatt ththee onlonlyy wawayy ththee systemsystem couldcould bbee properlproperlyy treatetreatedd wawass byby examininexaminingg thethe formform anandd movementmovementss ooff specificspecific clasclasss relationsrelations,, aass welwclll asas ththee classclass revenuesrevenues whicwhichh actedacted asas theitheirr market-expressions.market-expressions. 87 MarxMarx felfeltt RicardRicardoo andand SaySay hadhad neglecteneglectedd thethe facfactt thatthat capitalismcapitalism waswas nonott a systemsystem ooff sociasociall production,production, bubutt ooff productionproduction ofof profit.profit. TheTheyy hahadd concentrateconcentratedd exclusivelyexclusively oonn ththee interdependenceinterdependence ofof supplysupply andand demand,demand, andand ooff productioproductionn anandd consumption,consumption, treatintreatingg thethemm asas wholwholee identities,identities, ignoringignoring theirtheir indepcndentindependent naturenature.. TheyThey hahadd speciouslyspeciously depicteddepicted ththee exchangexchangee procesprocesss aass C-M-C—M—

CC' insteadinstead ofof accuratelyaccurately describingdescribing thethe capitalistcapitalist exchangeexchange ofof M-C-M',M—C—M', wherewhere capitalcapital

88 entered the production process specifically for an increase in capital. 88 This process is entered the production process specifically for an increase in capital. This process is suspendedsuspended asas soosoonn asas ththee conditionsconditions forfor realizinrealizingg aann expecteexpectedd profiprofitt araree limited.limited.

HenceHence iitt wawass nonott ththee abstracabstractt limitslimits ttoo exchangeexchange,, bubutt ththee limitlimitss toto investmentinvestment anandd productioproductionn atat a certaincertain ratratee ooff profitprofit thathatt wawass ththee relevantrelevant consideration. 8989

87 Dobb,Dobb, Political Economy and Capitalism, pppp.. SO-SI.80-81. 88 MM'' referreferss ttoo ththee originaloriginal capital-valuecapital-value plupluss somesome levelevell ofof surplus-value.surplus-value. 89 Ibid.,Ibid., pp.. 115115.. 5858

CapitalistCapitalist productioproductionn isis ththee productioproductionn ooff profitprofit.. ThisThis hahass seriousserious implicationimplicationss forfor capitalistcapitalist societies.societies. AAss MarMarxx puputt itit,, "there"there isis periodicallperiodicallyy a productioproductionn ooff totooo manmanyy meansmeans ooff productioproductionn anandd necessitienecessitiess ofof lifelife ttoo permipermitt ooff theitheirr servinservingg aass meanmeanss forfor thethe exploitatioexploitationn ofof ththee laborerslaborers at a certain rate of profitprofit...... (Th(Thee capitalistcapitalist modmodee ofof production)production) comescomes toto a standstillstandstill aatt a poinpointt determined by the production and realizationrealization ofofpY(~fit, profit, nonott bbyy ththee satisfactionsatisfaction ofof socialsocial needs."needs.,,9o90 IIff investmentinvestmentss loslosee eveevenn aann iotiotaa ofof profitabilityprofitability,, capitalcapital tendtendss ttoo flockflock awayaway iinn searchsearch ofof another,another, mormoree profitablprofitablee investment.investment.

AAnn overalloverall declindeclinee inin thethe ratratee ofof profiprofitt coulcouldd easilyeasily lealeadd ttoo a scarcityscarcity ofof investmentinvestment capital,capital, resultinresultingg inin a rupturrupturee ofof ththee overaloveralll systemsystem.. ThereforThereforee ththee ratratee ooff profitprofit,, anandd itsits tendencytendency ttoo fallfall,, provideprovidess ththee impetusimpetus foforr haltinhaltingg productioproductionn inin capitaliscapitalistt economies.economies.

ProfitProfit foforr thethe fewfew replacereplacess progresprogresss forfor ththee entirety.entirety.

TheThe IndustriaIndustriall ReservReservee ArmyArmy

ThThee sizesize ofof thethe labor-suppllabor-supplyy actactss asas a limitinlimitingg factorfactor foforr ththee creatiocreationn ooff surplus-surplus- valuevalue,, andand thuthuss MarMarxx treatetreatedd itit aass fundamentalfundamental.. Marx'Marx'ss taktakee oonn crisescrises wawass nonott thathatt ofof

'transitiona'transitionall dislocationdislocation'' bubutt ofof shapingshaping thethe subsequensubsequentt long-terlong-termm trentrendd ofof ththee system,system, largelylargely througthroughh ththee influencinfluencee ooff ththee crisicrisiss onon ththee industrialindustrial reservreservee armyarmy.. IInn Marx'Marx'ss eyes,eyes,

"crises"crises araree alwaysalways momentarmomentaryy anandd forciblforciblee solutionssolutions ooff existingexisting contradictions,contradictions, violentviolent eruptionseruptions whichwhich restorrestoree ththee disturbeddisturbed equilibriuequilibriumm forfor a while."while.,,9191 ThThee sizesize ofof thethe industrialindustrial reservereserve armyarmy increaseincreasess duringduring crisescrises duduee ttoo ththee lossloss ofof cmploymentemployment fromfrom thethe halthalt ooff productionproduction.. ThisThis leadsleads ttoo a cheapeningcheapening ooff ththee pricpricee 0o ff labor-powelabor-powerr atat a ratratee thathatt isis dependendependentt oonn ththee strengthstrength ooff ththee workersworkers'' resistancresistancee ttoo wagwagee cutscuts.. AlthougAlthoughh suchsuch wagewage reductionreductionss maymay deepedeepenn ththee crisiscrisis througthroughh deflationardeflationaryy effectseffects ooff reducereducedd demanddemand forfor

90 90 MarxMarx,, Capital,Capital. Vol. 11/,Ill, p.p. 303303.. 91 91 Ibid.Ibid.,, pp.. 292292.. 5959 consumableconsumable goodsgoods,, itit woulwouldd alsalsoo createcreate thethe conditioconditionn foforr aann increasedincreased ratratee ooff surplus-surplus- valuevalue,, thuthuss preparinpreparingg ththee systesystemm forfor ththee resumptioresumptionn ofof investmentinvestment.. ItIt alsoalso actsacts aass a counter-tendencycounter-tendency forfor ththee previoupreviouss adjustmenadjustmentt inin ththee organiorganicc compositiocompositionn ooff capital,capital, shiftinshiftingg awayaway frofromm machinermachineryy towardtowardss now-profitablnow-profitablee labor.labor.

ThiThiss periodiperiodicc ususee ofof thethe industriaindustriall reservreservee armarm appearappearss ttoo actact aass resistanceresistance towardstowards anyany 'seriou'seriouss encroachmentencroachment oonn capital-values'capital-values',, compensatingcompensating itselfitself forfor ththee declinedecline iinn thethe ratratee ooff profiprofitt duduee ttoo capitalcapital accumulationaccumulation.. MarMarxx considereconsideredd itit capitalism'scapitalism's ownown lawlaw ofof populationpopulation..

[This][This] explainedexplained unemploymenunemploymentt andand povertpovertyy asas existing,existing, nonott becausebecause humanhuman productivproductivee powerpowerss werewere insufficieninsufficientt ttoo wreswrestt a livelihoolivelihoodd frofromm naturenature,, bubutt byby reasoreasonn ofof ththee limitslimits sesett ttoo employmenemploymentt andand ttoo wagewagess bbyy ththee conditionconditionss forfor thethe extractionextraction ooff surplus-value;surplus-value; nonott becausbecausee populatiopopulationn wawass redundanredundantt inin ananyy absoluteabsolute sensesense,, bubutt becausbecausee capitalcapital wawass redundanredundantt relativelrelativelyy ttoo ththee possibilitiepossibilitiess ofof reapingreaping an expected rate of profit.9209 an expected rate of profit.

DobDobbb implieimpliedd thatthat humanhuman beingbeingss coulcouldd solvsolvee ththee problemsproblems ofof unemploymenunemploymentt andand poverty,poverty, bubutt choschosee nonott toto.. CapitalismCapitalism,, bbyy designdesign,, ensureensuress ththee continuatiocontinuationn ooff thesethese socialsocial ills.ills.

DobbDobb thoughtthought ththee distinctiodistinctionn betweebctwcenn extensive anandd intensive developmentdevelopment ofof thethe field ofof investmentinvestment wawass ooff 'crucia'cruciall importanceimportance'' forfor ththee historyhistory,, developmentdevelopment,, andand circumstancescircumstances surroundinsurroundingg crisis.crisis. IItt wawass alsalsoo responsiblresponsiblee foforr ththee changinchangingg formform ofof thethe proletariaproletariann strugglestruggle aatt differendifferentt stagesstages ofof developmentdevelopment.. DurinDuringg ththee GoldenGolden AgAgee ofof capitalismcapitalism,, ththee periodiperiodicc recruitmenrecruitmentt ooff ththee industriaindustriall reservreservee armyarmy waswas sufficientsufficient foforr thethe intensiveintensive growtgrowthh ofof capitacapitall accumulationaccumulation.. TheThe procesprocesss ooff so-calledso-called 'primitive'primitive accumulation',accumulation', wherwheree smallsmall producersproducers,, peasantrypeasantry,, andand artisanartisanss werweree dispossessedispossessedd ooff theirtheir meansmeans ofof productionproduction,, allowedallowed foforr capitalistcapitalistss ttoo operateoperate withouwithoutt fearfear ofof anan increasincreasee iinn thethe wage-ratewage-rate.. DobDobbb thoughthoughtt thathatt whewhenn recruitmenrecruitmentt intintoo ththee industriaindustriall reservreservee armyarmy waswas

92 92 Dobb,Dobb, Political Economy and Capitalism, p.p. 123123.. 6060 easyeasy,, crisecrisess 'while'while sharsharpp andand violentviolent'' werweree relativelyrelatively short-livedshort-lived anandd 'eas'easyy ttoo cure'cure'.. ButBut aass ththee systemsystem developeddeveloped,, soso dididd labolaborr organizationorganization andand classclass tensiontension,, complicatingcomplicating thethe progresprogresss ofof exploitationexploitation.. BByy ththee endend ofof ththee 19thth century,century, workerworkerss hahadd becombecomee sufficientlysufficiently organizeorganizedd aass ttoo resisresistt periodiperiodicc cheapenincheapeningg ooflabor-power.f labor-power. NeNeww socialsocial arrangementsarrangements becamebecame necessarynecessary,, andand aass thesthesee neneww methodmethodss becambecamee redundanredundantt andand ineffectiveineffective,, furtherfurther developmentdevelopment wawass needeneededd ttoo ensureensure ththee ratratee ooff profiprofitt remaineremainedd relativelrelativelyy highhigh.. WhenWhen brutbrutee forceforce becambecamee tabootaboo,, coerciocoercionn becambecamee voguevogue.. InIn Dobb'Dobb'ss wordswords,, "To-day"To-day capitalcapital sowssows dragons'dragons' teethteeth,, alikealike iinn ththee homhomee anandd inin ththee colonialcolonial field;field; anandd ththee peoplpeoplee reareapp thethe harvest.harvest." ,,9393

IInn DefensDefensee ooff MarxMarx

AlthoughAlthough ththee tendenctendencyy foforr ththee ratratee ofof profitprofit ttoo falfalll hahadd capturecapturedd ththee attentionattention ofof latelaterr theoriststheorists,, includinincludingg Dobb'Dobb'ss famefamedd contemporarcontemporaryy 1.M.J.M. KeynesKeynes,, DobDobbb dididd nonott feelfeel itit necessarnecessaryy ttoo describedescribe theitheirr approachesapproaches iiss hihiss treatmentreatmentt ofof economiceconomic crisescrises.. InsteadInstead,, DobbDobb chosechose ttoo criticallcriticallyy responrespondd ttoo Marx'Marx'ss detractorsdetractors.. ItIt hahadd beebeenn saidsaid thathatt MarMarxx hahadd failedfailed toto explaiexplainn whwhyy a decreasedecrease inin investmeninvestmentt shouldshould resulresultt fromfrom a fallfall iinn ththee profit-rateprofit-rate,, asas wellwell asas whwhyy crisescrises shoulshouldd bbee attributeattributedd ttoo ththee failurfailuree ooff ththee ratratee ofof interesinterestt ttoo fallfall,, nonott ttoo a fallingfalling ratratee ofof profitprofit.. DobDobbb quicklquicklyy pointepointedd outout,, "the"the practicapracticall implicatioimplicationn ofof thisthis emphasisemphasis presumablpresumablyy beinbeingg thathatt thethe troubltroublee isis nonott attributableattributable ttoo capitalismcapitalism per .'Ie,se, butbut cacann bbee remediedremedied byby anan appropriateappropriate monetarmonetaryy policpolicyy whichwhich,, aass investmeninvestmentt proceeds,proceeds,

94 permitpermitss ththee raterate ooff interesinterestt ttoo fallfall pari passu. ,,94" MainstreaMainstreamm contemporarycontemporary economistseconomists hadhad rejecterejectedd Marx'sMarx's critiqucritiquee onon capitalism,capitalism, optingopting insteainsteadd ttoo apologizeapologize foforr andand shroudshroud thethe

failingfailingss ofof theirtheir ideologyideology.. TheTheyy limitedlimited theirtheir searcsearchh foforr causescauses ofof economiceconomic crisescrises toto

93 93 Ibid.Ibid.,, pp.. 126126.. 94 94 Ibid.,Ibid., p.p. 117117.. 6611 variablevariabless withiwithinn thethe system,system, therebythereby protectinprotectingg ththee systemsystem frofromm criticacriticall examination.examination.

TheyThey focusefocusedd theitheirr attentioattentionn oonn hohoww ttoo solvesolve a crisicrisiss onconcee itit hahadd begunbegun,, andand unsurprisinglyunsurprisingly,, thetheyy foundfound theitheirr answeranswerss iinn variablevariabless withiwithinn ththee systesystemm itself.itself. DobbDobb thoughthoughtt thethe attackattack oonn MarMarxx hahadd mormoree ttoo ddoo witwithh defendindefendingg capitaliscapitalismm thathann intellectualintellectual progressIOn.progression.

AAtt nnoo poinpointt diddid MarMarxx proclaiproclaimm thathatt highehigherr wagewagess woulwouldd prevenpreventt crisecrisess anandd curecure depressions,depressions, oorr thatthat insufficientinsufficient consumptioconsumptionn wawass ththee maimainn causcausee ooff economiceconomic slowdowns.slowdowns. HHee alsalsoo neveneverr claimeclaimedd thathatt crisecrisess werweree causecausedd bbyy under-consumption.under-consumption.

NonethelessNonetheless,, hihiss analysisanalysis wawass anandd isis ofteoftenn mistakemistakenn aass aann underconsumptiounderconsumptionn theory.theory.

AlthoughAlthough itit couldcould nonott bbee deniedeniedd thathatt MarMarxx hahadd assumedassumed ththee levelevell ooff consumptioconsumptionn wawass a limitinglimiting factofactorr oonn ththee realizationrealization ooff profits,profits, hehe alsalsoo thoughthoughtt thathatt over-productionover-production onlyonly occurredoccurred whewhenn investmentinvestment appeareappearedd withouwithoutt aann accompanyinaccompanyingg neneww sourcesource ofof consumption.consumption. DobDobbb brokbrokee dowdownn twtwoo oftenoften citecitedd passagepassagess bbyy thosthosee whwhoo interpretedinterpreted

Marx'sMarx's theorytheory aass oneone ooff under-consumptionunder-consumption.. ThThee firsfirstt passagpassagee states:states: "Th"Thee laslastt causecause ofof alalll realreal crisecrisess alwaysalways remainsremains ththee povertypoverty andand restricterestrictedd consumptionconsumption ooff ththee massesmasses,, asas comparedcompared witwithh ththee impulsimpulsee ofof capitalistcapitalist productioproductionn ttoo develodevelopp ththee productivproductivee forcesforces asas ifif onlonlyy ththee absolutabsolutee powepowerr ooff consumptioconsumptionn ooff societsocietyy werweree theitheirr limit."limit.,,9595 ThiThiss statementstatement onon itsits ownown couldcould certainlycertainly bbee construedconstrued aass aann under-consumptiounder-consumptionn theorytheory,, bubutt DobDobbb thoughtthought thathatt iinn vievieww ofof allall thathatt MarMarxx hahass writtewrittenn elsewhereelsewhere,, specificallyspecifically hihiss repudiatiorepudiationn ofof thethe

RodbertuRodbertuss vievieww ofof under-consumptionunder-consumption,, thethe assumptioassumptionn wawass falsefalse.. TheThe seconsecondd passagepassage goegoess asas follows:follows:

ThThee conditionsconditions ofof directdirect exploitatioexploitationn andand thosthosee ooff ththee realizatiorealizationn ofof surplus-valuesurplus-value areare nonott identical.identical. TheyThey areare separatedseparated logicallylogically aass welwelll asas bbyy timtimee andand spacespace.. TheThe firsfirstt isis onlonlyy limitedlimited bbyy thethe productivproductivee powepowerr ooff societysociety,, ththee lastlast bbyy thethe

95 95 MarxMarx,, Capital.Capital, Vol. Ill,III, pp.. 568568.. 6622

proportionaproportionall relationrelationss ooff ththee variouvariouss lineslines ofof productioproductionn anandd bbyy ththee consumingconsuming powepowerr ooff society.society. ThThee lattelatterr iiss nonott determinedeterminedd eitheeitherr bbyy ththee absoluteabsolute productiveproductive powepowerr nonorr bbyy absoluteabsolute consumingconsuming powerpower,, bubutt bbyy consumingconsuming powepowerr thathatt iiss basedbased oonn antagonistiantagonisticc conditionconditionss ooff distributiondistribution,, whicwhichh reducreducee ththee consumptionconsumption ooff thethe greagreatt masmasss ooff ththee populatiopopulationn ttoo a variablvariablee minimuminimumm withiwithinn mormoree ooflessf less narrownarrow

· . 9696 1limits.Imlts.

AlthoughAlthough hhee diddid sasayy ththee realizatiorealizationn ooff surplus-valusurplus-valuee waswas determinedeterminedd bbyy consumingconsuming power,power, MarMarxx wawass alsalsoo sayingsaying consumptioconsumptionn waswas onlonlyy ononee variablvariablee ofof thethe equation.equation.

EconomistEconomistss coulcouldd nonott properlproperlyy examinexaminee ththee relationshirelationshipp betweebetweenn levellevelss ofof consumptionconsumption anandd economiceconomic crisecrisess withouwithoutt consideringconsidering distribution.distribution.

ThatThat said,said, DobDobbb dididd thinthinkk MarMarxx hahadd assumeassumedd anan increaseincrease iinn consumptionconsumption ttoo bbee thethe mostmost endurinenduringg wawayy ooff increasinincreasingg profitprofit.. ThiThiss wawass partlpartlyy duedue ttoo aann increasincreasee iinn thethe demanddemand foforr futurfuturee capital-goodscapital-goods,, whicwhichh tendetendedd ttoo deladelayy ththee tendenctendencyy foforr neneww technologtechnologyy ttoo lowerlower thethe ratratee ooff profitprofit.. AnAn increasincreasee inin masmasss consumptioconsumptionn througthroughh anan increaseincrease inin wageswages wouldwould havhavee ththee effecteffect ooff raisinraisingg costscosts,, therebtherebyy limitinlimitingg ththee possibilitpossibilityy forfor consumptionconsumption toto increaseincrease proportionatproportionatee ttoo productivityproductivity.. IncreaseIncreasedd investmeninvestmentt alteredaltered ththee organicorganic compositioncomposition ooff capitalcapital,, a fallingfalling profit-ratprofit-ratee foforr ththee neanearr futurefuture.. VieweViewedd frofromm thisthis perspectiveperspective,, consumptionconsumption becambecamee anan 'incident'incident'' iinn ththee totatotall setting.setting. AlthougAlthoughh ththee conflictconflict betweenbetween productivitproductivityy anandd consumptioconsumptionn wawass ononee facefacett ooff crisescrises,, DobDobbb thoughthoughtt itit waswas simplsimplyy oneone elemenelementt ooff ththee capitaliscapitalistt contradictiocontradictionn thathatt foundfound expressionexpression iinn a periodicperiodic breakdownbreakdown ofof ththee system.system.

[Marx][Marx] consideredconsidered ththee contradictioncontradiction withiwithinn ththee spheresphere oofproduction~thef production—the contradictioncontradiction betweenbetween growinggrowing productivproductivee powerpower,, consequenconsequentt onon accumulation,accumulation, andand fallinfallingg profitabilitprofitabilityy ooff capital,capital, betweebetweenn ththee productiveproducliveforces forces andand thethe productive relations of capitalist society~as the essence of the matter. 9797 productive relations of capitalist society—as the essence of the matter.

96 Ibid.,Ibid., p.p. 287287.. 97 Dobb,Dobb, Political Economy and Capitalism, pp.. 121121.. 6363

ThereThere areare somesome whowho presumpresumee MarxMarx basedbased hihiss theortheoryy ofof wageswages onon thethe MalthusianMalthusian lawlaw ofof populationpopulation likelike RicardoRicardo hadhad,, bubutt thisthis iiss anan incorrectincorrect assessment.assessment. Marx'sMarx's assumptionassumption thatthat wageswages stoodstood atat thethe subsistencesubsistence levellevel waswas onlyonly a 'first'first approximation'approximation' andand nnoo wawayany an 'iron'iron law'law'.. InIn thisthis case,case, thethe relevanrelevantt questionquestion is;is; whatwhat areare ththee conditionsconditions ofof thethe secondsecond approximatioapproximationn thathatt preventsprevents thethe priceprice ofof labor-powerlabor-power frofromm increasingincreasing toto thethe pointpoint wherwheree itit equaledequaled ththee valuvaluee ofof thethe product?product?

WhatWhat waswas ttoo prevenpreventt capitalcapital accumulation,accumulation, witwithh thethe increasingincreasing demanddemand forfor labolaborr whicwhichh itit engendered,engendered, fromfrom raisingraising thethe wagwagee levellevel untiuntill surplus-valuesurplus-value disappeared,disappeared, soso thatthat capitalismcapitalism ooff itsits ownown momentummomentum shouldshould extinguishextinguish the class inequality on which it was reared?9898

thMarxe clas thoughts inequalit capitalismy on whic hadh builtit wa sin reared defensive? mechanisms that protected the ideologyMar fromx though its ownt capitalis self-extinctionm had buil andt protectedin defensiv thee mechanism status quo sof tha thet protecteexistenced thofe ideologclass divisions.y from it sSpecifically, own self-extinctio Marx thoughtn and protecte the periodicd the staturecruitments quo of ofth ethe existenc industriale of clasreserves divisions army kept. Specifically social stratification, Marx though alivet andthe periodiwell. Thisc recruitmen was not t anof ethicalthe industria conclusionl reservof a morale arm questiony kept socia as muchl stratificatio as a descriptionn alive an ofd thewell system. This itself.was no Capitalistt an ethica reactionsl conclusio n oincludedf a mora "thel questio tendencyn as muc of capitalisth as a descriptio economyn o tof thhavee syste a biasm itself towards. Capitalis "labor-saving"t reaction s changes,included "thi.e. einvesting tendency ino fmachinery capitalist economthat decreasedy to hav thee a numberbias toward of necessarys "labor-saving laborers," as changeswell as "the, i.e. tendencyinvesting forin machineraccumulationy tha tto decrease be retardedd the and numbe for rinvestment of necessar toy recoillaborers when, as well as "the tendency for accumulation to be retarded and for investment to recoil when signs of any appreciable fall in the rate of profit appeared. ,,99 From the standpoint of

99 capital,signs of crisesany appreciabl occur whene fal wagesl in th eare rat tooe o fhigh, profi butt appeared." this stance assumesFrom th ea standpoincertain minimumt of capitalreturn ,of crise capitals occu as rnecessary when wages for productionare too high to, bubegint thi swith. stanc eSuch assume an assumptions a certain minimujustifiedm returthe policiesn of capita thatl depressedas necessar wagesy for productio to a pointn whereto begi then with rate. ofSuc profith an couldassumptio be consideredn justified th'tolerable'e policie sto tha thet depresse capitalists.d wage s to a point where the rate of profit could be considered

'tolerable' to the capitalists.

98 Ibid.Ibid.,, pp.. 124124.. 99 Ibid.Ibid.,, p.p. 125125.. 6464

ConclusionConclusionss

InquiriesInquiries intintoo ththee causecause ofof a declinindecliningg ratratee ooff profiprofitt leledd earlyearly politicapoliticall economistseconomists ttoo visualizvisualizee crisecrisess aass ththee resulresultt ooff underconsumptionunderconsumption.. ThiThiss consideratioconsiderationn provideprovidedd a foundatiofoundationn forfor futurfuturee mainstreamainstreamm economistseconomists,, whwhoo havhavee continuedcontinued ttoo treatreatt economiceconomic crisecrisess alonalongg similarsimilar lineslines.. MarMarxx realizerealizedd thathatt ththee rootrootss ooff ththee probleproblemm lalayy nonott withwith consumptionconsumption,, bubutt witwithh ththee systemsystem ooff capitaliscapitalismm itselfitself.. KarKarll Marx'Marx'ss groundbreakinggroundbreaking analysianalysiss wawass perceiveperceivedd aass a direcdirectt threathreatt ttoo capitaliscapitalistt productionproduction,, andand thuthuss hhee wawass vilifiedvilified bbyy botbothh capitalistscapitalists anandd ththee intellectualsintellectuals thetheyy employedemployed.. BeforBeforee Marx,Marx, economistseconomists hahadd a limitedlimited perspectivperspectivee onon whwhyy crisescrises occurred,occurred, bubutt afteafterr MarxMarx,, economistseconomists dididd whateverwhatever theythey coulcouldd ttoo figurefigure outout hohoww ttoo recoverecoverr frofromm crisescrises.. TheyThey werewere unablunablee ttoo prevenpreventt themthem fromfrom occurrinoccurringg aass thetheyy failefailedd ttoo addressaddress ththee fundamentafundamentall reasonreasonss whwhyy thetheyy happenehappenedd iinn thethe firsfirstt place.place.

CapitalismCapitalism iiss a collectiocollectionn ofof contradictorcontradictoryy anandd conflictinconflictingg forceforcess thathatt cancan onlyonly achievachievee balancesbalances accidentlyaccidently.. ItIt isis a systemsystem thathatt lacklackss coordinationcoordination,, witwithh traitstraits suchsuch asas thethe anarchanarchyy ooff productionproduction prohibitinprohibitingg iitt tromfrom keepinkeepingg anyany coherencoherentt structure.structure. CapitalisCapitalismm byby definitiodefinitionn isis a productioproductionn procesprocesss intendeintendedd forfor profitprofit,, nonott socialsocial progressionprogression.. BecauseBecause ofof thisthis,, productioproductionn stopsstops aatt a poinpointt determinedeterminedd bbyy profitabilityprofitability,, nonott functionalityfunctionality.. EvenEven iiff anan industrindustryy iiss stilstilll seeinseeingg a profitablprofitablee returnreturn,, thertheree iiss nnoo guaranteeguarantee thathatt capitalcapital wilwilll fundfund itsits existence,existence, aass iitt iiss nonott profitabilitprofitabilityy bubutt ththee ratratee ofof profiprofitt thathatt isis crucialcrucial.. IfIf a returreturnn oonn anan investmentinvestment iiss expectedexpected toto bbee leslesss profitablprofitablee thathann itit useusedd ttoo bebe,, manmanyy capitalistscapitalists willwill chooschoosee ttoo holholdd oonn ttoo theitheirr capitalcapital,, waitinwaitingg untiuntill a timtimee whewhenn ththee ratratee ooff profiprofitt forfor theirtheir investmeninvestmentt isis 'sufficient'.'sufficient'. DobDobbb thoughthoughtt iitt correccorrectt ttoo saysay crisescrises occuoccurr becausbecausee thethe expecteexpectedd ratratee ofof profiprofitt wawass totooo highhigh,, agreeingagreeing witwithh MarMarxx thathatt "the"the reareall barriebarrierr ofof capitalistcapitalist 6565 productioproductionn isis capitalcapital itself."looitself."100 ThThee periodiperiodicc recruitmenrecruitmentt ofof thethe industriaindustriall reservreservee armyarmy helphelpss ttoo keekeepp capitalismcapitalism frofromm goingoingg extinct,extinct, bubutt iitt iiss reallreallyy onlyonly effectiveeffective foforr ensuringensuring capitalistcapitalistss reareapp wherewhere thetheyy havhavee neveneverr sown.sown. WheWhenn ththee systemsystem crossecrossess ththee thresholthresholdd ofof disproportiondisproportion,, crisescrises actact aass equilibratinequilibratingg forces,forces, movinmovingg ththee systesystemm bacbackk ttoo a poinpointt ofof functionalityfunctionality.. CriseCrisess areare thereforthereforee a necessarnecessaryy phenomenophenomenonn inin capitalism.capitalism. WithouWithoutt them,them, ththee systemsystem woulwouldd stostopp functioninfunctioningg entirely.entirely.

MauriceMaurice Dobb'Dobb'ss revierevieww ooff classicalclassical taketakess onon economiceconomic crisescrises wawass importanimportantt iinn thathatt iitt reminderemindedd ththee readereaderr thathatt thingthingss diddid nonott simplsimplyy appearappear asas thetheyy are,are, bubutt evolvedevolved slowlyslowly overover timetime,, changinchangingg ttoo reflecreflectt differendifferentt thoughtthoughtss anandd conditionsconditions.. PoliticalPolitical economisteconomistss ofteoftenn thinthinkk crisescrises cacann bbee avoideavoidedd througthroughh monetarmonetaryy policiepoliciess anandd changechangess iinn interesinterestt ratesrates,, butbut thesthesee areare onlonlyy seconsecondd approximationsapproximations.. TheThe firstfirst approximationapproximation musmustt bebe thathatt capitalismcapitalism cacann iinn factfact worworkk uninterrupteduninterrupted.. IfIf ththee goagoall ooff capitaliscapitalismm isis simplysimply harvestingharvesting surplus-valusurplus-valuee frofromm ononee grougroupp foforr another,another, thethenn iitt doedoess workwork.. HoweverHowever,, ifif thethe objectivobjectivee ofof capitalismcapitalism iiss ttoo brinbringg prosperitprosperityy forfor allall,, iitt appearappearss ttoo havhavce totooo manymany inconsistenciesinconsistencies andand contradictionscontradictions ttoo makmakee achievinachievingg ththee goalgoal realisticrealistic.. BByy reviewingreviewing historicahistoricall perspectivesperspectives,, DobDobbb callecalledd intintoo questioquestionn thosthosee failefailedd ttoo understanunderstandd theitheirr ownown self-imposedself-imposed limitelimitedd scope.scope.

ToTo studystudy economicseconomics iiss ttoo studystudy ththee systesystemm iinn ititss entiretyentirety,, includinincludingg distribution.distribution.

BByy ignorinignoringg fundamentafundamentall variablesvariables,, mainstreamainstreamm economistseconomists havhavee failefailedd ttoo seesee ththee forestforest forfor ththee trees.trees. TheTheyy havhavee operatedoperated quitquitee elegantlyelegantly withiwithinn ththee boxbox,, bubutt allall ofof theirtheir movementmovementss havhavee becombecomee dependendependentt onon ththee confinesconfines ofof thethe boboxx itselfitself.. CharleCharless DarwinDarwin onconcee said,said, "Mathematicians"Mathematicians areare likelike blindblind memenn inin a darkdark rooroomm lookinglooking forfor a blacblackk catcat whicwhichh isn'isn'tt there.there."" I thinthinkk ththee samesame couldcould bbee saisaidd abouaboutt economists,economists, exceptexcept thathatt thethe catcat

100 100 Marx,Marx, Capital, Vol. 1/1,Ill, p.p. 293.293 . 6666 does exist.exist. CapitalismCapitalism isis anan ideology,, a setset ooff abstracabstractt beliefsbeliefs,, bubutt a systemsystem thathatt hahass a ververyy reareall impactimpact onon ththee liveslives ofof everyoneeveryone involved.involved. ItIt iiss thereforthereforee anan ideologideologyy thathatt shouldshould bbee critiquecritiquedd necessarily. IIfwef we araree ttoo assumeassume ththee poinpointt ofof educationeducation iiss progressionprogression,, thenthen capitaliscapitalismm shoulshouldd notnot bbee defendedefendedd blindlblindlyy bbyy ththee politicalpolitical economistseconomists whwhoo attemptattempt toto describedescribe it.it. SELECTEDSELECTED BIBLIOGRAPHYBIBLIOGRAPHY

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