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The Law of Value: a Contribution to the Classical Approach to Economic Analysis

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The Law of Value: a Contribution to the Classical Approach to Economic Analysis The Law of Value: A Contribution to the Classical Approach to Economic Analysis Ian Paul Wright BSc (Dunelm), BSc (Open), PhD (Bham) A thesis submitted in accordance with the requirements of The Open University for the degree of Doctor of Philosophy Department of Economics, Faculty of Social Sciences The Open University June 2015 The Law of Value: A Contribution to the Classical Approach to Economic Analysis Ian Wright Abstract This thesis contributes to our understanding of the relationship be- tween the material activity of human labour and the monetary forms of an economy by examining the theoretical foundations of the classi- cal approach to economic analysis, in particular the objective costs-of- production approach to economic value. The classical labour theory of value suffers from two related prob- lems: David Ricardo’s problem of an invariable measure of value and Karl Marx’s transformation problem. This thesis proposes to resolve both problems by constructing a more general labour theory of value. The more general theory provides a new perspective on related issues in the classical theory, including Marx’s classification of money-capital as an irrational commodity, the meaning and significance of Piero Sraffa’s standard commodity and Luigi Pasinetti’s restriction of the labour theory to a normative role. According to the classical account of capitalist competition the scram- ble for profit causes market prices to “gravitate” to natural prices. This thesis proposes a nonlinear dynamic model of classical gravitation in which prices and labour costs converge to a state of mutual consistency in equilibrium. The dynamic model, combined with a general labour theory of value, establishes a lawful relation between prices and labour costs, which reconstructs Marx’s version of the classical “law of value”. Acknowledgements My warm thanks to my supervisor, Andrew Trigg, who steered me in the right di- rection at the start of my studies and has attentively and patiently supported my research throughout. Andrew, your feedback and guidance have been invaluable. Thank you! David Zachariah corrected a flaw in my early thinking about the relationship between classical and total labour-values, which helped me towards formulating my ideas in their full generality. Thank you, David. Many events and authors inspired me to embark on this area of research. I would like to specially thank Geoffrey Pilling, Anwar Shaikh, Emmanuel Farjoun, Moshe Machover, Paul Cockshott, Allin Cottrell and Duncan Foley for their seminal works on Marx’s theory of value, all of which I found deeply engaging and rewarding during my initial orientation in this area. The “Outline of Political Economy” (OPE) mailing list is an online forum for the discussion and development of Marx’s critique of Political Economy. My participation in OPE greatly influenced the development of this thesis. My thanks to Jerry Levy, the organiser, and all the contributors, both past and present, for sharing their thoughts and ideas online. Fernando Martins understood, from some early and imperfect working papers, the significance of the argument that ultimately became Chapter 2 of this thesis. My thanks to Fernando for his sympathetic and engaged reading, which helped me to develop and refine my argument. The Open University (OU) is an inspiring and important institution that has en- riched the lives of many millions. I am very grateful to the OU, especially the Depart- ment of Economics and the Department of Mathematics and Statistics, for teaching me the necessary skills and providing an environment in which I could pursue my i scientific interests, and the staff of the Research Degrees Office, for organising many of the practical steps necessary to pursue a research degree. I’m grateful to both Andrew and Mariana Mazzucato for taking a bet on an unlikely candidate with a background in a different science, only able to study part-time and based in another country across the Atlantic. The Open University is one of the very few universities in the world with the institutional capabilities to support this kind of arrangement. I owe the greatest debt of gratitude to my wife, Shariffa Karimjee, who has stead- fastly supported me in this endeavour, at no small personal cost to herself. This the- sis simply would not have been written without her help and influence. Thank you, Shariffa! I would also like to thank the following people for helpful feedback and dis- cussions along the way. My apologies if I have forgotten anyone: Phillip Adkins, Salvatore Baldone, Enrico Bellino, Jurriaan Bendien, Andrew Brown, Scott Carter, François Claveau, Paul Cockshott, Jonathan Cogliano, Allin Cottrell, Nigel Duffy, Gerard Duménil, Anders Ekeland, Howard Engelskirchen, Richard Evans, Emmanuel Farjoun, Peter Flaschel, Duncan Foley, John Funge, Nadia Garbellini, Steve Keen, David Laibman, Andrew Lainton, Dominique Lévy, Lin Lin, James Marshall, Fer- nando Martins, Moshe Machover, Mariana Mazzucato, Fred Moseley, Paul Ormerod, Michael Perelman, Angelo Reati, Eric Sheppard, Ajit Sinha, Aaron Sloman, Robert Vienneau, Michael Webber, Julian Wells, Geoff Willis, Ariel Luis Wirkiermann and Victor Yakovenko. A version of Chapter 2 appeared in the Erasmus Journal for Philosophy and Eco- nomics, Volume 7, Issue 1, Spring 2014 (Wright, 2014a). ii “Every child knows a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs required different and quantitatively determined masses of the total labor of so- ciety. That this necessity of the distribution of social labor in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance, is self- evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual prod- ucts of labor, is precisely the exchange value of these products. Science consists precisely in demonstrating how the law of value asserts itself. So that if one wanted at the very beginning to “explain” all the phenomenon which seemingly contradict that law, one would have to present science before science.” Letter from Marx to Kugelmann, July 1868 (Marx and Engels, 1975). iii Contents 1 Introduction 5 1.1 The classical approach . .6 1.2 The value question . 10 1.3 Objectives . 12 1.4 Outline . 15 2 A category-mistake in the classical labour theory of value 34 2.1 The definition of “labour value” . 36 2.2 Ricardo’s problem of an invariable measure of value . 39 2.3 Marx’s transformation problem . 44 2.4 Total labour costs . 49 2.5 Capitalist households . 52 2.6 The divergence of technical and total labour costs . 55 2.7 Total labour costs: super-integrated labour values . 57 2.8 The category-mistake: conflating technical and total labour costs . 60 2.9 Dissolution of the problem of an invariable measure of value . 63 2.10 Dissolution of the transformation problem . 64 2.11 Conclusion . 66 3 Marx’s irrational commodity 68 3.1 What is money-capital? . 70 3.2 Exchange-value regulated by labour time . 72 3.3 The costless nature of surplus-value . 74 3.4 The irrational commodity . 75 3.5 The rational commodity . 79 1 Contents 3.6 Marx’s problem of money-capital . 84 3.7 The empirical-normative content of historical materialism . 86 3.8 Marx’s empirical-normative analysis of the labour process . 88 3.9 An empirical analysis of the labour process . 90 3.10 A contradiction . 91 3.11 The nature of money-capital . 93 3.12 Conclusion . 94 4 Sraffa’s incomplete reductions to labour 96 4.1 Sraffa’s concept of surplus . 96 4.2 The “reduction to dated quantities of labour” . 99 4.3 The complete reduction to dated quantities of labour . 100 4.4 The standard commodity . 105 4.5 The reduction to a “variable quantity of labour” . 110 4.6 The complete reduction to a “variable quantity of labour” . 112 4.7 Sraffa’s proxy reference to total labour costs . 113 4.8 Conclusion . 116 5 Pasinetti’s vertically-integrated subsystems and Marx’s transformation problem 118 5.1 Hyper-subsystems and their natural prices . 120 5.2 A complete generalisation of the pure labour theory of value . 123 5.3 A complete generalisation of Marx’s transformation problem . 125 5.4 A general solution to the transformation problem . 127 5.5 Conclusion . 138 6 Substance or field? A note on Mirowski 139 6.1 The “swan song” of classical substance-based theories of value? . 139 6.2 Marx’s “social substance” . 140 6.3 Labour-value is a field property . 142 6.4 Integration over a field . 144 6.5 Substance and field . 146 2 Contents 7 The general law of value 149 7.1 Methodological preliminaries . 149 7.2 A nonlinear dynamic model of classical macrodynamics . 157 7.3 The substance of value . 183 7.4 Conclusion . 192 8 Conclusion 194 8.1 Contributions . 194 8.2 Further work . 201 8.3 Final remarks . 212 9 Appendices 214 9.1 Appendix to Chapter 2 . 214 9.2 Appendix to Chapter 4 . 215 9.3 Appendix to Chapter 5 . 216 9.4 Appendix to Chapter 7 . 218 10 References 230 3 List of Figures List of Figures 2.1 A technique for an example 3-sector economy depicted as a directed graph and a matrix. 38 2.2 A social accounting matrix for an example 3-sector simple production economy depicted as a directed graph.
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