theories of value

4/8/2015 Theories of Value

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Value of Knowledge Reference

Theories of ValueWhat do we mean by value? Everyone, it is said has their own values. I value truth for

example, I value my mother. Is it legitimate to ask "How much?" ? Or is it legitimate toinsist that there is a meaning to value for which the question of "How much?" ismeaningless, a qualitative sense of value. If I had to lie in order to save my mother's life,or if she was kidnapped and I had to pay a ransom, wouldn't I then be forced to recognisethat my values were quantifiable? Indeed, value is meaningless outside of the act orpossibility of exchange.

But more than this: history has for a long, long time been bringing everything humaninto a relation of exchange with everything else. In days long ago the question ofexchanging something rarely arose, and the concept of value could not exist in such asociety. "Thou shalt" certainly existed. A society without values is not an unethical orimmoral society. But the question of value poses itself when the things produced byhuman labour (and I include here even the most intangible as human products) becomethe subject of exchange. We live in a time when few corners of life remain untouched bythe possibility or actuality of exchange.

In Section 3 of Chapter One of Capital Marx traces the development of the valuerelation from the "Elementary or Accidental Form of Value" through 12 different formsup to the "Money Form" as exchange becomes more extensive in social life. Marx'sCapital remains the definitive work on value as it developed up until the 1860s. The aimof this work is to trace the development of the valueform and the concept of value sincethen.

In the article on "Ethical Values", I pay attention to the development of Ethics and theplace of value in Ethics. If there ever was any doubt about the legitimacy of equating themeaning of value in these two contexts, then John Stuart Mills' Utilitarianism despatchesthat doubt. The Ethics of Utilitarianism is the mirror image of his political economy, andbourgeois ethics has not developed one iota past Utilitarianism in the 150 years since,despite the development of the productive forces which continue to pose ever morefundamental challenges to Utilitarianism.

Preamble

My object is to study the historical course of the concept of "value" in bourgeoiseconomic theory, and

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1. Correlate the phases in this history to the trends of bourgeois philosophy,principally epistemology, which coincide with them, and where possibleestablish the historical connections in the domain of theory between thetheory of knowledge and the theory of economic value, and

2. Correlate the phases in the history of the value concept with the actualhistory of economic value itself.

In this way I wish to explore the concept of value as a mediating point in a threadconnecting the development of the capitalist economy and the development of bourgeoisthought.

One of the problems in achieving this is that from a certain point, the word "value"actually disappears from bourgeois economic theory altogether, as if the word had been"given a bad name", so it is with a little licence that it is possible to trace the concept ofvalue during a long period in which it goes by another name. "Value" reappears intwentieth century economics as in the expression "valueadding".

Also, if I am to be able to talk about the fate of value itself in the growth of the globaleconomy, how can I do this without relying on some specific concept of value myself? Ingeneral I intend to let the history itself guide me so far as possible.

I am motivated in this study partly by the observation that Marx's Capital was subtitled Critique of Political Economy, and was in as large a measure a study of thedevelopment of the concepts of bourgeois political economy as it was of the working ofthe capitalist system of economics itself. I want to continue Marx's study of "Theories ofValue".

However, I do not intend to recapitulate Marx's study of classical political economy orgive an exposition of Marx's own ideas, both of which have been better done by othersbefore me. I want to study the fate of the concept of value from John Stuart Mill (acontemporary of Marx) up till today (the Postmodern Philosophers and the Complexitytheorists).

Classical Political Economy

William Petty

(1623 1687), founder of English Political Economy, successively seaman, physician,Professor of Anatomy, Professor of Music, inventor, surveyor, landowner, member ofParliament and statistician, whose main contribution to political economy, Treatise ofTaxes and Contributions (1662), considered the role of the state in the economy andtouched on the labour theory of value. A founder of the Royal Society, he was aprotagonist of the empirical scientific doctrines. Petty favoured giving free rein to the



natural forces of individual selfinterest. Unlike liberals after Adam Smith, however,Petty considered the maintenance of a high level of employment by monetary and fiscalpolicies and by public works to be a duty of the state. Marx argued that the bourgeoisie ofthis time needed the force of the state, via taxation or other means, to create conditions forcapitalist accumulation. In the Treatise, he argued that the labour necessary forproduction was the main determinant of value.

The Physiocrats

Quesnay and other French writers of the 1750s and 1760s were the first economists tobegin to analyse production rather than simply circulation in the endeavour to find thesource of surplus value. They believed however that only agricultural labour was trulyproductive. Value extracted from Nature by agricultural labour is distributed bycirculation and manufacturing is simply the utilisation of labour supported by the surplusproduct of the land for other activities more or less akin to circulation, in much the wayMarx regarded domestic service as expenditure of surplus rather than productive labour.

"As the actually first systematic spokesmen of capital, [the physiocrats] attempt to analysethe nature of surplusvalue in general. For them, this analysis coincides with the analysis ofrent, the only form of surplusvalue whch they recognise. Therefore, they consider rentyielding, or agricultural, capital to be the only capital producing surplusvalue, and theagricultural labour set in motion by it, the only labour producing surplusvalue, which from acapitalist point of view is quite properly considered the only productive labour. .. pushinginto the background in favour of its own practical interests the beginnings of scientificanalysis made by Petty. ... The physiocrats, furthermore, are correct in stating that in fact allproduction of surplusvalue, and thus all development of capital, has for its natural basis theproductiveness of agricultural labour". [Capital Vol III, Ch XLVII]

In the Physiocrats we see the naïvematerialist conception that only Nature, not humanlabour, can be the source of value; it is this naïveté which is criticised in Hume'sscepticism. Also, we see the Physiocrats promoting what Marx refers to as their "ownpractical interests". The promotion of their specific property as the source of value by thetheoretical representatives of a class is also seen in the early Merchantile and Monetaristsystems, and to this day, for instance, among finance capitalists who believe that "moneymakes money" or industrialists who see all the service sectors as parasitic in relation totheir own "real" productivity. For French political economy of the late eighteenth andearly nineteenth century, no distinction was made between the capitalist farmer and theagricultural labourer or between the industrial worker and the industrial capitalist; thecapitaist was everywhere taken as the producer, in the way that we say "Hadrian built awall".

Adam Smith



Adam Smith (17231790), the first to complete a comprehensive theory of politicaleconomy, saw labour as the sole source and measure of value:

Labour is the real measure of the exchangeable value of all commodities. The real price ofeverything, what everything costs to the man who wants to acquire it, is the toil and troubleof acquiring it. What everything is really worth to the man who has acquired it, and whowant to dispose of it or exchange it for something else, is the toil and trouble which it cansave to himself, and which it can impose upon other people. ... Labour alone, therefore, nevervarying its own value, is alone the ultimate and real standard by which the value of allcommodities can at all time and places be estimated and compared. It is their real price;money is their nominal price only. (The Wealth of Nations, 1776)

and according to Smith, price was determined by relation of value to the amount ofmoney in circulation.

A lifelong friend of David Hume and part of the "Scottish Enlightenment", Smith wasalso acquainted with Voltaire and others of the French Enlightenment. Smith came to thetheory of political economy expressed in The Wealth of Nations from a study of "humannature" and consideration of how the innate passions of human beings becametransformed into socially productive cooperation in laissez faire capitalism. Hedeveloped a "four stage" theory of history tracing how social institutions respond todevelopment of the productive forces and culminate in preIndustrial Revolutioncapitalism. Consistent with the theory of knowledge of David Hume, Smith regards valueto be exclusively the product of human labour, which in turn has its source in humannature. The institutions of society and the division of labour arise historicallyindependently of the will and understanding of human beings, but as the natural outcomeof the clash of their individualism. Smith wrote in the very earliest days of the industrialrevolution, but it was not the large, steampowered industrial enterprises which were toemerge which formed the context of his thinking, but rather the smallscale manufactureof the early eighteenth century.

David Ricardo

David Ricardo (1772 1823) attempted to construct a political economy consistentlycentred upon this labour theory of value, but according to Marx's critique, Ricardo failedto recognise that the workers sold not labour itself but labour power (Marx's term), withcosts of production which differ from the quantity of labour realised by use of labourpower in the process of production and embodied in the production owned by theemployer. Thus, any attempt to locate the source of surplus value was bound to run intocontradictions, and indeed, Ricardo's theory was riven with contradictions. Marx regardedthis as its strength rather than its weakness!

It was largely upon the basis of Ricardo's efforts that Marx began his work on political



economy. Marx not only distinguishes between labour power (with its own costs ofreproduction) but between exchangevalue (value in the sense of Ricardo and Smith) andusevalue, which is concrete, qualitative, not quantitative. Marx is a contemporary with JS Mill, Jevons, Say, Walras and subjects the theories of Mill and Say as well as theclassical political economists to critique, though there is no evidence that Marx knew ofJevons and Walras. My concern here is chiefly with the development of the theory ofvalue beginning with Marx's contemporaries and in bourgeois political economy up to thepresent day.

I do not wish to enter into a consideration of Marx's theory or that of Smith andRicardo. Suffice it say that Ricardo is the last bourgeois political economist to attempt toconsistently apply a labour theory of value. The conception of labour as an activity arisingby the combination of labour power and the products of past labour in the labour process,and that labour power itself is a product with its own costs of production is unique toMarx. In the history of bourgeois philosophy it was Hegel who understood the importanceof conceiving of human labour as also a product of labour, and that human needs are notonly satisfied but produced by labour. While Hegel was familiar with the politicaleconomy of Adam Smith and incorporated what he learnt from Classical British PoliticalEconomy in his own system, there was no direct influence in the other direction.

John Stuart Mill

In his Principles of Political Economy John Stuart Mill (1806 1873) presents theconcept of Value roughly as follows:

(1) there are two kinds of value, use and exchange value, but these are commensurable.Use value is what you would be prepared to pay for something, and exchange value is theaverage market value; usevalue can be less but never more than exchange value;(2) usevalue is not of concern to political economy;(3) (exchange) value is a relative, not an absolute concept.(4) value is distinguished from price because of the variable "purchasing power ofmoney" and may be measured against an overall general average of other commoditiesrather than just one (i.e. money);(5) value fluctuates according to supply and demand around a "natural value".

He goes on to reduce the concept of value to a nothing, without actually dismissing it.It is a kind of "proper price", since if price differs from value it is because someone hasbeen "rooked" or there is a temporary distortion in the market. Mill says in 1848: "Thereis nothing in the laws of value which remains for the present or future writer to clear up".

Mill is very much a part of the traditional of classical political economy, and consistent



with that tradition. Mill adheres to an objective or "costofproduction" conception ofexchange value. Mill speaks however, as an apologist for capital and has abandoned theproject of scientifically accounting for the wealth of nations. He rejects the labour theoryof value, allowing all factors brought to the production process a proportional share in theformation of a new value. Wages are what a capitalist is prepared to pay for labour, andwhat the labourer deserves.

Context

Philosophy: Along with his contemporaries Auguste Comte and later HerbertSpencer, Mill is a part of the First Positivism, and part of the "expurgation ofHegelianism" dating from Mills' System of Logic, Comte's Course in Positive Philosophy,and also Feuerbach's Essence of Christianity, Schelling's Philosophy of Revelation,Kierkegaard's Concept of Dread and Schopenhauer's World as Will and Representation.[See "1841"] This time marked a sharp break with the "speculative" or "metaphysical"philosophy of the preceding 250 years, giving priority either to positive scientificinvestigation or on the other side, towards inner concern with Faith, Love, Will, Sin andso forth.

For the First Positivism, sociology was seen as the central science, and society and itsintellectual superstructure is seen as evolving towards rationality and science withreligion dying away; social science aspired to emulate the methods and achievements ofnatural science, conceiving society as an object which can be studied and understood bythe same methods as developed so successfully by natural science. Primacy is given to thedata of perception and rational means of comprehending that data.

Economy: The middle of the nineteenth century, the period of Mills's writing, is thatof the growth of finance capital which continues up until the beginning of this century,which is generally recognised as the beginning of the epoch of imperialism, characterisedby the domination of finance capital over industrial capital. In Britain, the IndustrialRevolution is more or less complete and the British Empire is expanding to its peakaround 1900.

Mill represented a degeneration from the political economy of Smith and Ricardoinasmuch as he rid political economy of the contradictions of Ricardo's theory. Mill tookan approach to these contradictions which was opposite of Marx's (and Hegel's). Hesimply eliminated one side of the valuecontradiction (usevalue) from political economy.In so doing, he effectively abandoned the quest which drove Smith and Ricardo tounderstand the source of wealth in bourgeois society. For Mill, and all subsequentbourgeois economists wealth is a given, it is the "endowment" of the economic agents, orwhatever. That does not have to be explained.

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On the other hand, Mill has laid the basis for the future development of the concept ofvalue in bourgeois political economy in his reduction of usevalue to a quantitycommensurate with exchangevalue and his advice to abandon the study of value infavour of the study of price. Britain is, in Mills' day, still the dominant industrial power inthe world, but it is in his period that the finance sector is moving into a predominantposition. It seems appropriate that the spokesperson of an emerging financial powershould minimise the importance of value by comparison with price and would see allfactors of production as contributing equally to the creation of value. This is after all thebanker's view. "Invest money wisely, and you'll make a profit". The concrete activity ofhuman beings, labouring in the production and reproduction of the means of life are to thebanker merely objects, equally as much as the natural materials consumed in production.Value has lost its qualitative side and is now purely quantitative.

In the System of Logic, in accord with the spirit of his time, Mill minimises theimportance of "metaphysical" questions, but remarks::

"... the great and much debated questions of the existence of matter; the existence of spirit,and of a distinction between it and matter; the reality of time and space, as things without themind, and distinguishable from the objects which are said to exist in them. ... in the presentstate of the discussion on these topics, it is almost universally allowed that the existence ofmatter or of spirit, of space or of time, is in its nature insusceptible of being proved; and thatif anything is known of them, it must be by immediate intuition."

In politifcal economy, Mill has prepared the way for a radical break from objectiveconceptions of value which characterised all theories of value up to and including hisown, by introducing the concept of a measure of the utility of a commodity, even thoughhis own theory places this utility measure "outside" of political economy.

Mill's Principles of Political Economy was published in 1848, the same year as theCommunist Manifesto. His Utilitarianism (1861) is the translation of his politicaleconomy into ethics. [See "Ethical Values"]

The "Marginal Revolution"

The English logician and economist William Stanley Jevons (1835 1882),expounded in his book The Theory of Political Economy (1871) the marginal utilitytheory of value. With the Frenchborn economist Léon Walras (1834 1910), one of thefirst to propound a comprehensive mathematical analyses of general economicequilibrium, and Karl Menger in Vienna (1871), Jevons opened a new period in thehistory of economic thought.

The "marginal revolution" in natural science began with Isaac Newton 150 yearsearlier. All the laws of nature elaborated during that period are expressed in differentialform. Jevons introduced the differential to political economy under the name of "margin"

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and this truly made a revolution.

With Elements of Pure Economics (1874), Walras is generally credited with havingfounded the "Lausanne school" of economists later led by Vilfredo Pareto (1848 1923).Walras applied to the economic universe techniques for treating systems of simultaneousequations that were wellknown in classical mechanics. Assuming a "regime of perfectlyfree competition," Walras constructed a mathematical model in which productive factors,products, and prices automatically adjust in equilibrium.

But the introduction of the differential was not the only revolution which takes placewith "Neoclassical political economy".

For Jevons, the utility or value to a consumer of an additional unit of a product isinversely related to the number of units of that product he already owns. For Jevons"value" picks up on Mills' concept of usevalue what you would be prepared to pay forsomething as the concept of value. Here then is a move from viewing "value" assomething objective in relation to both to producer and consumer, to subjective. Thissubjective value now forms the substratum determining the actions of agents in themarket as purchasers.

From here on then, the problem of value is that of the mind, of the value placed uponthis or that object by a person, and price is the outcome of the interaction of "marginal"values between suppliers and consumers of the various commodities, including factors ofproduction such as capital and labour, which appear sidebyside in the equation of price.It should be pointed out that this is not a shift of value from "supply side" to "demandside". Each side in an exchange perceive in the commodity offered in exchange a value,be it money or product, but what matters is "in the eye of the beholder", not in the actualor potential cost of bringing the commodity to market. This concept is quite distinct fromSmith's idea of the labour one is saved by purchase, since though this is still expressedfrom the point of view of the purchaser, it remains an objective concept.

Alfred Marshall

Next in the genealogy of British Political Economy after J.S. Mill, is Alfred Marshall(1842 1924). For Marshall, marginal utility on the demand side and marginal effort onthe supply side jointly determine price. By considering the time periods over whichvarious factors operate, Marshall sought to apply this approach to determine conditions ofpartial equilibrium of a finite market and developed an approach to solving problems ofprice formation. Marshall differs somewhat from the mainstream of neoclassical politicaleconomy in that he sees price as an outcome of the joint action of marginal costs ofproduction and marginal utility (or usevalue measure) and thus still retains somewhat of



the tradition of classical political economy.

Marshall however, never mentions the word "value", and assumes for the purpose ofanalysis that the purchasing power of money is a constant (something his successorswould hardly find a satisfactory "assumption" upon which to build a system of politicaleconomy!). He is thus able to rely upon money as the exclusive measure of "wealth",under which everything contributing to wellbeing is included, be it tangible or intangible,artificial or natural. Marshall substitutes for value the notion of price at equilibrium of aspecific market, but in fact we have made no advance from the perceptually given priceand measures abstracted from that; we have no "value" as such. Marshall is trying, in thisway, in the spirit of his times, to eliminate any kind of "metaphysics" from his science.

Marshall's magnum opus, Principles of Economics, was written in 1890, at a timewhen the Second Positivism ruled the philosophical roost. The functionalist TalcottParsons characterises Marshall's philosophy as empiricism and summarises hiscontribution to economic theory as follows:

1. "the edifice is built essentially on a competitive basis. He considersmonopoly, but separately. ...

2. It assumes that wants are given independently of the utility aspects of theprocesses leading to their satisfaction, i.e., that they are constants in theproblem of economic equilibrium. The whole concept has reference to thesatisfaction of given wants and not to the explanation of their existence.

3. It assumes that all movable economic resources are effectively mobile anddivisible.

4. Action must be rationally directed toward want satisfaction. It is to benoted that it is the wants of people as consumers and not as producerswhich are considered as being satisfied" (The Structure of Social Action,1937)

Thus, Marshall achieves the ideal of science for his time, only by placing outside thescience everything that matters human needs and their origin, human labour, the valueof money and "imperfections" (i.e the reality) of the market. But of course, such awonderfully sanitised universe is eminently suitable for the application of mathematics!

John Neville Keynes (1852 1949) mentions the word "value" only in passing as anexample of a word in the common language which is ambiguous after J S Mill, the wordhas disappeared from the landscape of political economy.

By the turn of the century, Britain is already in decline. It is on the continent that neoclassical political economy is more fully and consistently developed.

Vilfredo Pareto

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Building on the work of Jevons and Walras, Pareto developed the application ofmathematics to economic analysis. Economics has now become a science of input andoutput equations. His Mind & Society, published in 1916, reflects his own problem withthe inhumanity of these conclusions. Pareto has laid the foundation for a structural orfunctional approach to economics by consistently developing the implications of pursuitof individual ends by rational means within the context of social action. While Paretohimself remained within the domain of the Second Positivism, his application of themethods of simultaneous equations taken from the analysis of mechanical structures, toeconomics brings us to the brink of structuralism.

The average of measurements of a datum is just another perception. But as soon as weconceive of such an "average" in relation to something else, such as the average ofanother datum, then we have transformed it into a "metaphysical entity", which affectsnot only our senses and measuring instruments, but something else, outside of oursensation but given to us in sensation.

Context

This period of the closure of the nineteenth century is the period of the SecondPositivism, in which is associated with Ernst Mach (Analysis of Sensations) and others,who renounced even formal recognition of objectively real objects. The problems ofcognition were interpreted from the viewpoint of extreme psychologism, which wasmerging with subjectivism. The Positivists of this time sought to expel all "metaphysical"concepts from science and "value", in the sense of an objective substratum of valueadhering in a commodity, was precisely one such concept. Only value "in the eye of thebeholder" was acceptable as genuinely scientific in this view.

The turn of the twentieth century marks the exhaustion of source of raw materials andthe capacity for expansion of capital and the opening of the period of imperialism, thestruggle for mastery between rival imperial powers. The basis of value has shifted fromthe object and its production, to the subject (the market), and its consumption. Inapproaching nature, one confronts not just an already humanised nature, but one's rivals.

These conceptions of laissez faire capitalism lasted only so long as the developedcapitalist economies which were their basis had access to unlimited room for expansionand raw materials. As these conditions became exhausted, economy came more and moreunder the sway of finance capital.

The measure of utility laid the basis for the use of mathematical methods importedfrom mechanics to analyse the dynamics of supply and demand in establishing a networkof relative values in terms of the marginal utility of product and money. But "value" is

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here exclusively used in the sense of the subjective utility of the product to the buyer or ofmoney to the seller.

Insofar as "value" is mentioned in subsequent economic literature at all, value refers tothe subjective value of a commodity in the mind of she who wishes to acquire it and thereis nothing of Adam Smith's conception of the purchaser being "saved the labour ofproducing it herself", something inconceivable in an already highly developed industrialeconomy.

And the mind that formulates this value is the individual, isolated, autonomous beingwho draws her values from her inner personality. This political economy is consistentwith the sociology of Max Weber which seeks to consider the interaction of the rationalaction of many independent wills and passions without regard to any objective criteria ofvalues of each actor.

The Economic Model of NeoclassicalEconomics

The neoclassical economists of the "marginal revolution" were able to build a coherentmathematical framework for economic science using the concept of utility within acertain model of the economy:

independent, individual agents in the economy (individual consumers orfirms) were presumed to be blessed with absolute rationality inmaximising their utility through buying and selling on the market, andif there is an equilibrium state for the market (in which any agent suffersa reduction in her utility if she acts differently), then in a shorter or longertime, by one or another route, it does not matter which, the economywill find its way to this equilibrium.

These two assumptions are absolutely crucial to the whole science. The "agents"effectively "search" for buying and selling prices, investment policies, etc., until they finda situation where their aggregate "utility" is optimised. The general principle that there isa declining utility in buying more and more of a useful product and an escalating effort insupplying more and more of a product (or declining net earnings from total sales) meansthat it is possible to conceive of a partial equilibrium state where there is a balancebetween supply and demand. Any variation in the policy of any single agent reduces theirown net utility. Accordingly the state of the market will "gravitate" towards this marketequilibrium. The assumption that the market equilibrium which is also an equilibrium foreach agent, makes it possible to construct a selfcontained "science" of economy. Thepath by which this equilibrium is arrived at need not be considered; like a "magic hand"the market ushers the traders into the market equilibrium, while the auctioneer calls the



market price out until demand matches supply.

It is known empirically that markets may be in reality very unstable and mobile, but itis wellknown in the natural sciences that complex dynamical systems can be veryintractable for analysis. So, economic science has for long contented itself with dealingwith the economy as a series of "partial equilibrium" markets; that is, prices, etc. move asa result of changed inputs from production, weather conditions, etc and interactionbetween different markets at their interfaces (changing "boundary conditions"), but withinthe constraints of these "disturbances", are in equilibrium: "partial equilibrium". Thedistinction between partial (changing and not affecting the whole economy) equilibriumand dynamic situations, is that the rate of change is not itself a factor in determining theoutcome, such as is the case when there is a "run on the market" or loss of confidence inthe currency, etc.

While it is irrelevant to the theory in what the "utility" is constituted, should it beallowed that the agents do not act consistently and rationally in pursuit of maximumutility, then the behaviour of the economy is entirely unpredictable and "outside thedomain of science". [Why any of these "rational" agents don't make a million by sellingtheir advance knowledge of market values is a mystery!] Equally "outside" of economicsis how the hell each of the citizens involved in the economy acquired their respective"endowments"; while these "endowments" are obviously the outcome of the previoushistory of the same economy, to the positivist it is a given, in "input", not an output. Eachtrader, be she labourer or banker, is free to save or trade what she brings to the marketplace ... as "equals".

Up to the turn of the century, this view of the economy as the sumtotal of millions ofeconomic agents independently optimising their selfinterest, giving rise to a graduallyevolving partial equilibrium, seemed pretty plausible.

The Rise of Structuralism

Emile Durkheim

Emile Durkheim (1858 1917) while himself a positivist, laid the basis for structuralistsociology and his direct follower was Claude LeviStrauss (b. 1908) who is alsoinfluenced by Roman Jakobson (1896 1982), a student of Ferdinand de Saussure. WhileDurkheim avoided the dogmatic generalisations of Auguste Comte, he claimed that it isfrom a construction erected on the inner nature of the real that knowledge of concretereality is obtained, rather than by simple generalisation of the immediate data ofperception. Durkheim pointed out that reality is reflected by means of concepts which aresocial constructions. In his criticism of James' and Dewey's Pragmatism, Durkheim dealt



with how sociallyheld beliefs (myths), which have no practical or scientific validity inthemselves, may nevertheless constitute an approach to reality, and he rejected thepragmatists' dismissal of truth as individual utility. With Durkheim, we see the beginningof the idea that materially different ideas, beliefs or practices have validity within a giventotal social structure, rather than being assessable as true or false "in themselves". Thus,if a myth forms the substratum rationalising a set of social taboos and practices, then thereal meaning of the myth lies in the social practices it is regulating; to assess such a mythby normatively comparing it to, for example, a modern scientific worldview, would missthe actual validity of the myth in its social context. Thus an individual proposition hasmeaning only within the whole structure of belief.

Durkheim's sociology created the basis for transcending the economics in which theends of action must be simply taken as given or "constant", since he drew attention to thefact that ends as well as means are socially constructed, and further that such ends (utility)are constructed socially and have meaning only within a given social structure, not interms of individual voluntary action.

Ferdinand de Saussure

Meanwhile, Ferdinand de Saussure (1857 1913) found the positivist standpoint quiteincompatible with any possibility for the foundation of a scientific Linguistics and it isSaussure who is generally credited with being the first to consistently elaborate themethodology of structuralism.

Positivism had attempted to unlock the mystery of language by investigating the soundunits that composed the spoken languages and trying to build up an understanding of alanguage from the study of these sensuous components. Saussure says that the soundswhich compose a language are "arbitrary" in the sense that the only significance of asound being attached to a meaning is the similarity and difference it has to other equallyarbitrary sounds. Not exactly arbitrary, since the sounds do have a history. But the soundonly matters in its relation of similarity of difference or combination to other sounds, notas such; it only has meaning as part of a structure. Thus "structuralism".

And Saussure, without giving any particular significance to it, notes the analogy of the"value" of a sound to the value of a coin in economics. A 10 Franc coin has on the onehand its relation to 10 onefranc coins, and on the other a relation to the commodity it canbuy. But its value derives from its relation to the other coins in the currency. Only bybeing exchangeable with moneythings can an object have value in relation tocommodities.

Functionalism (Talcott Parsons) may be regarded as an American pragmatist



version of European structuralism, and I do not intend to give special attention tofunctionalism at this point, taking it up elsewhere as part of the development of AmericanPragmatism. Functionalism simply asks what function a social formation or concept playswithin a whole system; functionalism emphasises the tendency of social forces to functionto maintain the stability of social structures. It is the "other side" of structuralism.

Context

Already under severe strain with the crisis that has affected the whole scientific andideological world at the turn of the century, bourgeois social theory reached an impassewith the Russian Revolution and the Great War. The interwar crisis Fascism, the GreatDepression, not to mention the various crises of psychology, mathematics and physicsproduced a myriad of conflicting theories in almost every domain. Generally speaking, itis only the outcome of these crises after the War that has lasting significance. Saussureanticipated this development in his linguistics, but it is from the 1930s that structuralismbegins to form itself and develop.

All the theories of the preWorld War I period are associated in one degree or anotherwith acceptance of laissez faire concepts of the market, i.e. that any force which disturbsthe independent action of agents on the market optimising their marginal utility withinherently perfect rationality is ipso facto interfering with the inherent capacity of themarket to allow the participants to do just that get the best possible deal for everyone.The crisis of European civilisation of the first part of this century is also a crisis of themarket.

The Depression demonstrated irrefutably that the market failed to deliver the best of allpossible worlds to the "economic agents"; that the dynamics of the market were asimportant as its equilibria, if not more so, and that dynamics were driven possibly byperceived selfinterest, but certainly not by rational selfinterest, that rationality was inany case not a phenomenon of individual consciousness but of collective conception, thatthe economy was itself a whole and not just an average and that human needs could notbe taken for granted since the market was as capable of destroying human needs as it wasof satisfying them.

The Great Depression was for economics what the MichelsonMorley experiment wasfor physics and geometry, and Gödel's theorem was for mathematics. The capacitydemonstrated in the Russian Revolution for society to operate by entirely different laws,and the capacity demonstrated by Fascism for capitalism to eradicate liberal valuescreated a serious impulse for radical change.

J M Keynes



John Maynard Keynes (1883 1946), is the founder of postDepression economics. Inhis prior work on probability, Keynes makes the point that even a vanishingly smallprobability attached to a fundamental hypothesis can through extensive ramification leadto certainty (and vice versa). Keynes uses this observation to counter Humean scepticism.In relation to the capacity of the market, Keynes observes that there is no level belowwhich the value of a commodity may not fall in circumstances of depression, and no levelbelow which wages may not fall in circumstances of mass unemployment.

With Keynes, there is a serious beginning to the study of economic policy aimed atstate action to regulate or control the market. Also beginning from the October 1929 crashis the period of the fixed rate of exchange between the US dollar and gold. Beginningwith the efforts to lift the world economy out of depression and prepare for war also is thewidespread recognition of the efficacy of conscious manipulation of "utility" byadvertising and henceforth "demand" is as much a variable in economics as "supply" andthe state has a preeminent role in generating demand a concept of course unthinkablesince William Petty in the days of "primitive accumulation" in the seventeenth century.

John Hicks' (1939) concept of the marginal rate of substitution allows the modelling ofconsumer actions across various markets and is an essential component for a fullystructural conception of economics, putting finally to bed Marshall's "hybrid"conceptions. Implicit in this concept is the equation of subjective value between differingcommodities, together with the supposed perfect rationality of the "economic agents".Despite all the lemmings of Wall Street, economics still rests on the supposed"rationality" of economic agents, and in fact this supposed rationality is now infinitelyextended as it must now account for the actions of speculators wielding enormouseconomic power.

Whereas neoclassical economics required only that a person should buy more or lessto rationally fulfil her needs in a given market, the coherence and determinacy of thetheory requires that people buy insurance policies, invest in shares, buy futures, etc.,rationally, that is with perfectly rational knowledge of the vicissitudes of the market. Noone can pretend that this is actually the case, but there was no alternative foundation uponwhich a theory could be based. They relied upon the tried and tested method ofprofessional thinkers to ignore what you cannot rationalise.

From the end of the War, digital computers became available for governments,universities and large corporations. The movement of prices and the ups and down ofsupply and demand are now calculated on larger and larger computers using simultaneousequations built on the supposed ratios of interdependence between more and more andmore economic indices. The number of coefficients which must be plugged into suchcalculations increases with the square of the number of factors correlated. [My ownprofessional training was as a Civil Engineer. I never fail to be amused by the fact that for



this type of economics, the world is just a "structure" in exactly the sense that a steelframe is a structure, and the approach and method of analysis is the same. Only no civilengineer in the world would be so stupid as to imagine that these methods would beadequate to a structure with 4,000,000,000 "degrees of freedom" the term by which werather cutely refer to the "independent variables" of a system]. As the system becomesmore and more complex, it becomes more and more obvious that in all but the mostlimited shortterm prediction (for which differential equations would not be needed in anycase), the result of economic analysis is more a function of programming errors than ofany degree of reflection of reality.

The now predominant operational notion of conception allowed that an entity can bedeemed to be objective to just the extent that it is possible to define the effectiveprocedure by which the entity is determined. Thus, an average of some economic indexcan be deemed not only to be a datum of perception, but also an "input", an independentvariable both determined by and determining other such data. In the language of structuralanalysis, a structure is "deficient" is the number of independent variables or "degrees offreedom" exceeds the number of determinant relations between them; it is "overdetermined" if the number of independent constraints exceeds the number of independentvariables. The good programmer knows how to build a set of good equations. This is purenonsense if applied in respect of the world economy. But it's a view which fits well withthe world view of the managers of institutions which are managing a world economy,manipulating the supply and price of whole markets and whole countries.

There is a new criterion of truth that has arrived here: so long as the system can be keptworking, then any particular part of the whole system is justified truth is in the system.

So long as there were enough dollars to keep pumping into the system, the system heldup. This story came to an end in 1968, when the postWar hegemony of the US wasterminated with the ending of the fixed rate of exchange between the dollar and gold.From then began the period of runaway inflation and "stagflation". The structure beganto collapse.

Milton Friedman

Milton Friedman (b. 1912), architect of the post1968 reaction against Keynesianism.Friedman is at pains to point out that it is irrelevant whether an "assumption" of a theoryis true or not, only whether it is sufficiently and effectively true to allow valid deductionsto be made from the theory. I.e., whether or not economic modelling is "realistic" is astupid question. This is the last gasp of structuralism. It may be "unrealistic" but it is theawful reality for millions!



From this period, with the breech in the fixed rate of exchange between the dollar andgold, the "purchasing power of money" is a variable which floats on the market like anyother. The "marginal rate of substitution" of any two commodities is but one link in anetwork of relations on which there is no longer any fixed point.

Friedman was the guru of "Monetarism", the economic doctrine which was adopted byReagan's America and Thatcher's Britain, and was until fairly recent times, the dominanteconomic theory. It shares with Keynesianism a focus on "macroeconomics" but reservesfor government the role of regulating the money supply and represented a significantmove back to reliance on "market forces". It was the first step by rightwing capitalistgovernments towards addressing the delayed confrontation with organised labour andmeant allowing unemployment to grow again to weaken the power of organised labour,cutting all public spending and allowing the market to do its work of strengthening thehand of the more powerful "economic agents"

Keynes' fall from grace meant not only the end of governments with aggressive publicworks and social agendas, but the end of belief in the capacity of society to control oreven predict the course of economic events; governments are no longer really blamed foreconomic malaise, the more so since they have become minor players in the marketplacethe more so since the end of Keynesian public enterprise, unless it is for intervening toomuch or for not doing enough to ameliorate the suffering of the losers. While themainframe computers of the largest economic players are not able to predict the course ofthe economy, computers are beginning to proliferate and become workaday tools ofeconomic agents.

Microeconomics and Economic Rationalism

The continued failure of monetarism to rectify the problems inherited fromKeynesianism led the bourgoisie to the conclusion that the problems could not be solvedby "macroeconomics", but need a turn to "microeconomic reform". This turn to Microeconomics marks the end of structuralism in bourgeois economic theory. The conceptionof value as something which can be manipulated by "structural" means governmenteconomic activity has been given up. The focus returns again to the workplace, theworkers who refuse to work harder, the businessperson who refuses to modernise, habitsof work, "human nature" is dominating the economy. This turn is consonant with the lossof confidence in "grand narratives". The hard work has to be done "get into theworkplaces and change how people work!". The role of government now shifts to givingthe capitalists the legal and cultural as well as general economic means to break organisedlabour, change workpractices and increase productivity. No longer is it thought thatprofitability will flow naturally from a good average rate of profit; rather, the rate ofprofit can only be restored by boosting the profit in each individual workplace.



"Valueadding" becomes a popular term in this period. "Valueadding" is economicactivity which adds to the price something can attract on the market, be it advertising,R&D or manufacture. Agriculture, mining and lowtech. manufacture or manual labourare "low valueadding" while software, advertising, consultancy are considered high"valueadding" but it really doesn't matter what, so long as you can get people to pay forit. Value is a social construction built on nothing but the activity of the dominant socialplayers and the imagemakers.

As if the Wall Street Crash, the Great Depression and all the mayhem of a couple ofcenturies of laissez faire capitalism had never happened, the luminaries of economicrationalism spout their postmodern truisms, which sound suspiciously like the truths ofnineteenth century liberalism. The sole exception to this comparison is that the quantity offictitious value circulating in the latetwentieth century so vastly outweighs the quantityof gold held by reserve banks, that governments must walk a knife edge to balance themoney supply and prevent descent into runaway inflation or depression.

PostStructuralism

Context

Economics: The breakup of the postwar boom in the late 1960s, coincided with theend of the convertibility of the dollar and the opening of the period of rising structuralunemployment. The service industries are overshadowing the "rust industries" andtechnology moved into the "information age" and later the "Knowledge Age", with newproducts moving from the physics lab to the living room in a few short years andtelephone and data communications networks proliferating across the globe.

By the 1980s, the failure of all macroeconomic schemes of economic management tocreate stability or eliminate structural unemployment led to a concentration on "microeconomic reform" and incessant change in work practices and the demolition of all formsof legal regulation or constraints on exploitation. Economic theory moved away fromreliance on macroeconomics, concentrating on the application of games theory andsociological tools to systematise the understanding of organisational behaviour and ratherthan placing hopes in the manipulation of global factors, there is a return to concentrationon increasing the rate of productivity workplacebyworkplace.

Politics: The 1960s mark the historic breech between the working class and the leftintelligentsia (witness the Polish workers and students action, the French General strike,Czechoslovakia and subsequent events) and the beginning of the breakup of Stalinism(Maoism, Eurocommunism, etc), the disillusionment of a generation of radicalintelligentsia, the highpoint of the national liberation movement (the Tet offensive) and



the beginning of the rise of the women's movement.

Philosophy: this time marks the end of Structuralism; in culture the end ofModernism. In psychology we see the move to prominence of cognitive theories andwhile its opposite, behaviourism, embraces the theories of Gödel and Turing and artificialintelligence merges computer science of cognitive psychology and in turn with thestructural linguistics of Noam Chomsky. While linguistics gives birth to Semiology (thestudy of signs) Roland Barthes asserts that semiology is but a part of linguistics. Thetriumph of the digital over the analogue computer coincides with the return to dominanceof finite mathematics and mathematical concepts which defy imagination: categorytheory, string theory, fractal geometry, Catastrophe theory and Complexity theory. Thegreat social and political structures disappear, just like the solids and geometric figures ofordinary experience disappear into discontinuity of atoms and digits. Rationality isreduced to algorithms and effective procedures, knowledge to information processing.Foucault's "poststructural" historicism does to structuralism in his field what the categorytheory, etc. has done to analysis.

The Economics of Complexity

Beginning in the early 1980s, a new economic theory began to take shape, in responseto the patent in adequacy of theories of general equilibrium, and is associated with theAmericans Peter Albin, Duncan Foley, Janos Kornai, Brian Arthur and others. The newschool has not yet produced results which would allow it to supplant the dominant trendsin government Finance Ministries, but it aims to describe the dynamics of the market bysubstituting for the presumed absolute rationality of agents an intelligence equivalent to acomputer of finite memory a Turing machine, which can attempt to maximise its utilityby executing a procedure on the basis of data derived from signals from other agents inthe economy.

Taking seriously the speculator or manufacturer's problem of predicting the future of aneconomy and the real cost of collecting and processing the information, and the fact thatthe course of events depends on their own action and that of other agents also usingcomputers to optimise their gain, before attempting a solution of the problem, theArtificial Intelligence Economists subject the problem to an analysis of the kind to whichKurt Gödel subjected mathematical theories and Alan Turing applied to computationalprocedures. They show that, in general, the problem of optimising an agent's action in thecontext of many other agents optimising their actions with the power of a Turing machineis formally not computable, is undecidable in the sense of Gödel's theorem the courseof events can only be simulated.

Further, they utilise Noam Chomsky's categorisation of the complexity of language



structure to provide a hierarchy of complexity for the economic problems and economicactivity which results from the actual interaction of intelligent economic agents (or atleast maybe a hundred of them).

A formal language is defined by a grammar, an alphabet, a finite set of variables and afinite set of productions which define how to make new "sentences" in the language and a"full stop". [The "full stop" is the most important bit of all!] The potential complexity of aformal language generated by a grammar depends on what restrictions, if any, are placedon the production rules. Unrestricted languages are the most complex.

1. A regular language is composed of a series of simple unlinkedconstructions.

2. A contextfree language is such as a computerprogramming languagewhich can be interpreted and implemented one instruction at a time as aregular language.

3. A contextsensitive language is like a computer language in which aninstruction can be interpreted and implemented only in the light ofpreceding instructions.

4. The highest in Chomsky's hierarchy is the general or unrestrictedlanguage of which ordinary human languages are examples.

The behaviour and computability of economic models may in turn be classifiedaccording to corresponding levels of complexity which are associated with the samehierarchies of linguistic complexity:

1. Systems which have a "point attractor", that is, there exists a singleequilibrium state of the system to which the system will "gravitate" intime. In general, this equilibrium state is computable by neoclassicalmeans of economic theory.

2. Systems which exhibit cyclical behaviour such as is seen in businesscycles, the parameters if which can be computed by the methods ofstructural economic theory.

3. Chaos (also known as "strange attractor"), the quasiequilibrium of thesystem is chaotic behaviour in which there is no stable equilibrium stateand no detectable periodic behaviour.

4. Complex behaviour in which the system moves sharply and unpredictablytowards different equilibrium states, periodic behaviour or chaos but theoutcome is indefinitely sensitive to initial conditions and formallyunpredictable, like the notorious butterfly which "causes" a tornado.

The Artificial Intelligence Economists demonstrate that even highly formalised andrestricted models of economic behaviour which allow independent economic agents toimplement procedures commensurate with a Turing machine (i.e type 3 linguistically)necessarily give rise to economic behaviour which is in general complex (type 1, 2 or 3outcomes are included as possible outcomes) and cannot be computed; the only way ofknowing what even a 100agent model with only 2states each will do is to simulate it on



a computer and watch what happens. Or, the only way to know what a real economy willdo is to watch it happen. Comforting, isn't it.

And it must be emphasised that these conclusions are not in the form of an "openverdict", but are proven by the same methods that Gödel used to prove the existence ofundecidable statements in a mathematical theory! Further, the complexity does not arisefrom the unpredictable nature of "outside forces" or in the mass of data: even the simplecomputer model is formally unpredictable!

The growing complexity of the world economy is a direct reflection of the growingsophistication of business organisation, telecommunications, the use of computers,modern methods of management and financial practice and the nearinfiniteinterconnectedness of the global division of labour. Other things being equal, a complexorganisation or economy is inherently stronger than one less powerful. But it is alsoinherently and irreducibly unpredictable, uncontrollable and given to sudden, unexpectedrapid and catastrophic global change. The very power of the developed market economyis the root of its inherent and irreducible unpredictability.

Now, the Artificial Intelligence Economists have moved substantially in the directionof realism when they model economic agents with Turing machines. Alan Turing, as thefounder of Artificial Intelligence research, was fond of challenging anyone to tell himhow you could tell him the difference between a wellprogrammed computer and a humanbeing using the same inputoutput devices, and this is of course the same position as thatheld by behaviourist psychologists. So, they have broad support for a claim to realism.However, it should be emphasised that with their economics, as with Alfred Marshall's:

The formation of value (utility) is "outside of economics";The production process itself is "outside of economics";The "agents" are still presumed to be operating independently, accordingto their own intelligence, though the theory allows for the government toact as an agent with a significant but not dominant specific weight, orprovide centralised information to all agents;the fiction that labour and capital come to the market as "equals" ismaintained, "wasteful workers" do not "allocate enough of their income tofuture consumption", and therefore fail to get rich.the "endowments" of the various "agents" are just "initial conditions", theinput to economics, not its output.

It is a theory of "bounded rationality". All the agents act according to their own finiteintelligence to optimise something, it matters not what. It does not take the notion ofvalue any further than structural economics. Further, the modelling of people as littleTuring machines takes a step towards "realism" is some respects, (notably in the light ofthe fact that finance houses program computers to do their speculating on the shorttermmarkets), but the modelling of interactions between people in terms of various patterns of



signalling between "cells" is desperately remote from realism, and it turns out that thisaspect of the models makes all the difference in outcome. This kind of ArtificialIntelligence economics is still lagging a long way behind even structural economics inpredictive utility.

Nevertheless, the most impressive result of this economics is its prediction of essentialinstability, and the study of the factors contributing to instability is worth looking at.

Complexity and Development

Capitalist development has brought about a gigantic simplification of the world:1,000s of distinct peoples have been dissolved into a single worldwide division of labour(even the Bushmen where Nike shoes and watch NBC); qualitative human labour has beenreduced to simple quantity of abstract labour called value (spouses, holidays, goodfortune, education, health and fantasy are all commodities purchased on the market);insideoutside, Monday/Sunday, London/Alice Springs, day/night it doesn't matter, youcan no longer tell the difference.

But this "simplification" is also an immense increase in complexity: the mostinsignificant product reaches the consumer after passing through the hands of 1,000workers; interpersonal relationships build networks that are said to link any two people inthe world by only six links and the speed of information flow a young person entersthe workplace just as her parents take early retirement and takes a job that didn't existwhen she started school; work organisation is changed annually in a given workplace andproducts go from fundamental research to the mass market in a few years.

An interesting outcome of empirical complexity research concerns a factor normallyrepresented by the Greek letter lambda, but which I will call þ. þ is the probability that a"cell" which is "on" at a given time will be "on" in the next cycle. þ close zero or 1correspond to processes which rapidly reach stable equilibrium after any disturbance; þnear to 0.5 corresponds to chaotic processes; þ = 0.273 is known as the "edge of chaos", arate of information transfer at which a complex process no longer has an equilibrium andbecomes subject to rapid and unpredictable transformation. That is, an economy inrelative partial equilibrium which simply reproduces itself faster and faster, sooner orlater descends into catastrophe, either rapidly moving into a new equilibrium in acompletely different configuration or into unending chaotic variation.

It is just these horrific characteristics of capitalism that make it like a plague whichdestroys and consumes any society that comes in contact with it an economic systemthat can tolerate no vacuum.



The increasing complexity is inseparable from the increasing homogeneity.

The Green Theory of Value

Responding to the global crisis, the Club of Rome was founded in 1968 by leadingcapitalist politicians and economists. Particularly during the period 1972 1980 itpublished influential reports on problems of the global economy and development,including Limits to Growth in 1972. Efforts to predict the course of the global economyby computer simulation reached a highwater mark with this group, but the Club of Romeis most famous for its doomsday warnings to world capitalism on exhaustion of naturalresources and the growing gap between "North" and "South" and a critique of the conceptof "value" implicit in the calculation of the GDP.

They point out (correctly) that the tearing down of a forest is counted as adding to theGDP, as is filling the atmosphere with pollution, while the production of garbage disposalunits necessary to restore the damage is counted as adding even further value. Thesolution seriously proposed is to recalculate the GDP by counting as negatives thevarious factors of environmental degradation and counting the cost of restoring thatdamage as a deduction from the profits made in causing the damage.

Whereas a wellmeaning government that applied tax penalties for the cutting down oftrees (thereby increasing the addedvalue of treefelling though effectively reducing thenumber of trees felled) or providing taxdiscounts for production of pollutionreducingtechnology (increasing the profitability of protecting the environment), they proposeinstead that financial services such as insurance are undervalued (since insuranceprovides the service of increasing the feeling of security which "isn't counted"). Theyassert that the calculation of value, as the sum of all incomes or expenditures in the actualeconomy, reflects ideological prejudices inherited from the rise of manufacture in theeighteenth century, and that "nowadays" we should be assigning more value to servicesand the environment and less to manufacture, which does such evil to lifestyle and theenvironment.

"Enlarging on the implicit and exclusive paradigm of economic theory, still predominantlyconnected, as it were, to the industrialisation process, may contribute towards a more positiveview of what the future wealth and welfare could be". [The Notion of Economic Value inthe Postindustrial Society]

These arguments can be read in full in Cycles, Value and Employment, Responses tothe Economic Crisis, 1984. Incidentally, the same "prophetic" work promotes the "longwave" theory of economic cycles, which it credits to Kondratieff and Ernest Mandel.Writing in 1984, they predict an end to the crisis in 1991, according to the "longwave"theory. I prefer crystal balls.



The same argument that if only the economists would do different sums, then theefforts of governments would be concentrated on increasing the newlycalculated GDP,and we could save the environment and solve the crisis is still popular in sections of theGreen movement, and it can often be heard that the problem with the world today is thatwe have a wrong idea about value, and that if we could decide upon a better definition ofvalue, then things could be better.

It is just like trying to convince people to give up their dangerous belief in the force ofgravity, in order to avoid drowning [Preface to The German Ideology]. This theory is somisconceived that it reflects only the depth of despair and confusion that infect even thecommanding heights of the world economy.

Feminist Theories of Value

The article, "Liberation Epistemology" deals ni more depth with the various ways inwhich women have dealt with the problem of the undervaluing of their labour. Here Iwant to look at a couple of theories which bear directly on the theory of value in the senseconsidered above.

(1) Female professional economists have asserted that the absurd mathematisation ofeconomic theory represents a male bias "a boys game in a sandbox". A fair comment.However, if in the 1980s and 90s we counterpose to this "people grappling with realeconomic problems that are out there" [Myra Strober] we could be in danger of simplyjoining the move to microeconomics from the other side. It's OK to be on the other sideof course, but that does not constitute a new theory, just being on the other side and usingthe same economic tools as became fashionable everywhere after the failure ofstructuralism.

(2) In the mid1960s, the University of Chicago's Gary Becker applied "rational choicetheory" to the analysis of women's domestic labour; he went on to create the theoreticaltools for dealing with the penetration of the commodity relation into criminal behviour,drug addiction, romance, and so on without limit. He got a Nobel Prize for this theoreticalwork which fairly accurately reflected the development of capitalism during the postwarperiod, and in particular the penetration of the comodity relation into domestic life as aresult of the socialisation of women's labour. At the level of economic theory this doesnot go beyond Hicks' marginal rate of substitution, but lends itself well to Game theoryand the range of mathematical methods associated with the breakup of structuralism.

(3) The same theory mentioned above in relation to the Club of Rome has,unsurprisingly, support amongst feminist economists: if only the government wouldcalculate the GNP inclusive of women's unpaid labour, the this would give womenrecognition for their otherwiseunpaid labour. Personally I'd rather be paid! According to

https://www.marxists.org/archive/marx/works/1845/german-ideology/ch01.htm

https://www.marxists.org/reference/subject/philosophy/help/lib.htm



an article in The Australian Higher Education Supplement, 20 January 1999, theCanadian and Australian governments are conducting surveys "with an eye to towardsincorporating household production into their official statistics". Interesting problemsarise. How do we estimate the hourly rate for having sex or cleaning toilets? Sex has anhourly rate of at least $100 per hour, while toilet cleaning is worth about $10 per hour.Unsurprisingly again, these ideas do not gain universal support.

(4) Barbara Bergmann, an editor of the magazine Feminist Economics, argues that"High commodification is the path to liberation". The profound truth in this is of coursethat this is exactly what women have been doing of the past thirty years, and in theadvanced capitalist countries nowadays, the majority of women are in the workforce andmore and more formerly domestic labour is purchased on the market. Interestingly, whenI tried to further investigate Prof. Bergmann's ideas on the Internet, I found that everytime I got to an actual text written by her (rather than a passing reference to her name), Icame across a passwordaccess key, requiring me to pay up via credit and beforeproceeding any further. Prof. Bergmann has ensured that her labour feminist economictheory will be available only at a price, so she has the virtue of consistency! I remain ofthe view however, that commodification is a necessary preparation for liberation, but onlya highly paid, privileged academic could believe that it constitutes liberation.

The Future of Value

The complexity people have discovered a new gravedigger for capitalism: the verycomplexity which makes the world economy of today qualitatively more "intelligent"than any dictator or bureaucracy or any computer program, in other words, more powerfulthan any "planned economy" (in the sense that Lenin described in State & Revolution), isnot only essentially unpredictable and uncontrollable but inherently prone to catastrophe.The forces of production, the accumulated products of our own labour, have grownbeyond the power of even our understanding let only our control and threaten to destroyhumanity altogether.

The measure of the usefulness of human labour, value, a social construction whichbegan life as a measure of how human beings spend their time, became a measure of theusefulness of things, has lost all contact with human labour or needs, but dominates ourlives.

As always, value arises only through the medium of exchange. A thing which is notput up for exchange has no value in the sense of economics. The fact that there isincreasingly little relation between value and usefulness or human happiness or anythingelse, is a fact; a fact which can be deplored but cannot be redefined. The real fictionwhich is value can only be transformed by eradicating the conditions upon which it rests production for exchange.



Recognising that value is a social construct, we have to socially construct a new systemof productionconsumption relations in which human time is consciously allocated inaccordance with a person's need to live humanly, without the aid of commodity exchange,without concern for efficiency or profit margins; at the same time, we must eschew thenotion of centralised planning which is a step backwards, but unleash the full potential ofcomplexity of 4,000,000,000 human wills acting under their own creative directiontowards collective ends. This means terminating exchangevalue altogether: to eachaccording to her needs, from each according to her ability.

It is a daunting task, but it is the only task worth doing. I don't know just now how thatcan be done, but I believe this defines the problem to be solved, for the moment.

Marx's Theory of Value

Anyone genuinely familiar with Marx's critique of political economy will know howpowerful is his analysis of commodity production and the labour theory of value which isat the heart of that analysis and the many great insights that this analysis has given usabout the essential nature and historical trajectory of capitalism. However, whatever theclaims, I do not know of a single Marxist who can claim, hand on heart, that they havedone better than a capitalist thinktank in predicting the ups and downs of capitalism inthe short or long term. And complexity economics shows how desperately inadequatebourgeois economics remains.

The "labour theory of value" disappears with value itself, as soon as people stopexchanging commodities. We do not need a new theory of value. We will demonstrateour values when we can decide how to spend our time and the sooner we can decide whatto do with our own time, the better. So long as we still want something in exchange, solong are we enslaved. So long as we have to spend out time doing one thing in order toget something else in exchange, so long are we enslaved.

One point which may need to be made about Marx's theory of value arises becauseErnest Mandel, who was regarded by many as the foremost expert on Marx's politicaleconomy, held that for Marx, a commodity could only have value unless it was a tangible"material" object. This is completely false. If it were true, the whole of this work would ofcourse fly in the face of Marxism.

In Chapter One of Capital, Marx points out that (exchange)value has no connectionwith the physical properties of a commodity, and value is "the very opposite of the coarsemateriality of their substance". The most important commodity of all, labourpower, is a"service" not a good. In the Grundrisse, Marx deals with a woodcutter, a porter and awandering tailor, all of whom are stated not to create value, because, as selfemployed



contractors, they sell not labour power but the product.

In discussing the lot of a school teacher, Marx says:

"So far as the labour process is purely individual, one and the same labourer unites in himselfall the functions, that later on become separated. When an individual appropriates naturalobjects for their livelihood, no one controls them but themself. Afterwards they arecontrolled by others. A single person cannot operate upon Nature without calling their ownmuscles into play under the control of their own brain. As in the natural body, head and handwait upon each other, so the labourprocess unites the labour of the hand with that of thehead. Later on they part company and even become deadly foes. The product ceases to be thedirect product of the individual, and becomes a social product, produced in common by acollective labourer, i.e., by a combination of workers, each of whom takes only a part, greateror less, in the manipulation of the subject of their labour. As the cooperative character of thelabourprocess becomes more and more marked, so, as a necessary consequence, does ournotion of productive labour, and of its agent the productive labourer, become extended.

"In order to labour productively, it is no longer necessary for you to do manual workyourself; enough, if you are an organ of the collective labourer, and perform one of itssubordinate functions. The first definition given above of productive labour, a definitiondeduced from the very nature of the production of material objects, still remains correct forthe collective labourer, considered as a whole. But it no longer holds good for each membertaken individually.

"On the other hand, however, our notion of productive labour becomes narrowed. Capitalistproduction is not merely the production of commodities, it is essentially the production ofsurplus value. The labourer produces, not for themself, but for capital. It no longer suffices,therefore, that they should simply produce. They must produce surplusvalue.

"That labourer alone is productive, who produces surplusvalue for the capitalist, and thusworks for the selfexpansion of capital. If we may take an example from outside the sphere ofproduction of material objects, a schoolteacher is a productive labourer, when, inaddition to belabouring the heads of their scholars, they work like a horse to enrichthe school proprietor. That the latter has laid out their capital in a teaching factory, insteadof in a sausage factory, does not alter the relation. Hence the notion of a productive labourerimplies not merely a relation between work and useful effect, between labourer and productof labour, but also a specific, social relation of production, a relation that has sprung uphistorically and stamps the labourer as the direct means of creating surplusvalue. To be aproductive labourer is, therefore, not a piece of luck, but a misfortune." [Capital Volume I,Part V, emphasis added]

Thus makes it abundantly clear that it is not the material (or immaterial) form of theproduct, but the prodcution relations within which it is produced that invest a commoditywith value.

Postscript: Economic Modelling



Economic modelling is all about making a metaphor with the idea of reducing theproblem of economic theory thereafter to a mathematical one of solving the equations.The formation of the models depends on guesses about those factors which may bedeemed to be decisive and guesses about the factors connecting the inputs and outputs.Despite the mathematical appearance, the procedure is in the first place conceptual(visualising the metaphor) and thereafter predominantly empiricist, since the results ofeach model cannot be predicted other than by simply trying a model and seeing if itproduces "predictions" which confirm past observations, and then hoping that it willpredict the future.

Development of the model takes place in great measure through development ofmodelling of the relations and supposed action of the economic agents. It is a particularlypure expression of the Ethics of the society modelled.

From the time of the introduction of these models, the concept of value becomeseclipsed in economic theory, as a "metaphysics", replaced by average prices and otherquantities which are both inputs and the outcome of interaction with other factors in theequations forming the economic model.

These "input variables" become the new metaphysical entities, but metaphysicslacking any theoretical foundation. For example, instead of social classes, we haveincome groups or occupational groups. In these models, the material world is reduced to"outside" factors which are beyond analysis and in the domain of trialanderror.

The inhuman character of social relations in the view of the various bourgeoiseconomists is put in particularly stark relief by their economic models. Basically they aresaying: "the world is like a cloud of atoms", "the world is like a mechanical structure","the world is like a chemical reaction" or "the world is like a computer". Models come tohand when the mathematical techniques for describing the behaviour of a given model ismade available. This happens as a result of developments in the appropriate branch ofnatural science and the relevant mathematics. This in turn is intimately linked to thedevelopment of industry and technique. So for the economists of the mechanical age, theworld is a giant machine, for the economists of the information technology age, the worldis a giant computer.

Thus in a certain bizarre sense, the economic models accurately reflect the "humannature" of people at successive stages of the development of capitalism.

Postscript: Barthes, Derrida and Value

Roland Barthes (1915 1980, French social and literary critic whose writings on



semiotics helped establish structuralism and the New Criticism as leading intellectualmovements.) began as a disciple of Saussure in the 1950s, but in his 1964 Elements ofSemiology, "turns Saussure on his head". Barthes is a decisive influence on Lacan,Foucault and Derrida in short bears some considerable responsibility for the dominantphilosophical trend of today.

Whereas Saussure saw language as a part of semiology, Barthes says that semiology isa part of linguistics. Given that to these guys "signs" cover anything that we do in relationto other people, this is tantamount to saying that language forms the world not the otherway around.

Further, Barthes picks up Saussure's offhand remark about an analogy between thevalue of a word and the value of a coin and restates it after 50 years during which "value"has disappeared from political economy. We are dealing here with much more than an"analogy". At about the same time, Lyotard points out that knowledge itself has become acommodity like any other, or rather, not just like any other, but the most importantcommodity in relation to the development of the world economy, since the means ofproducing it tends to be monopolised by the dominant world powers.

Epistemologically speaking we have in Saussure's structuralist linguistics a fairly naivematerialism which understands language as indicating something, albeit "structurally"rather than "atomistically"; with Barthes the linguistic structure is the absolute, and allother forms of human practice merely indicate language. A linguistic element thereforecannot have value; on the contrary, value exists only in the relation of one signifier toanother (100 cents makes a dollar, 100 yen makes a pound sterling) and other objects canonly have value insofar as they can be equivalent to a signifier and be part of theeconomy. In economic terms, the monetary system is the only substance of value, andonly by its own internal "logic" may it be indicated by other commodities.

Derrida turns Barthes' linguistic value around again and also makes a critique of Marx'stheory of value. (see "Derrida")

For Derrida value exists as a "potential" from the very beginning of human production,before the emergence of the exchange of commodities. Likewise, language, grammar, issomething which exists in nature (in the same sense that "information" is a category ofphysics, thermodynamics, etc.), and human language is a development of what exists as"potential" within inorganic nature. Derrida accepts that the objects which we perceive incapitalist society (jobs, state, supplyanddemand, etc.), but also equally all the objects ofthe material world, are "ghosts" summoned up by the very process of labour it is allmental construction.

This is mostly a very negative critique which leaves one wondering on what basis if

https://www.marxists.org/reference/subject/philosophy/works/fr/derrida1.htm



any price exists. Derrida argues (by implication) that this system of values is implicit inthe historical development of the production process itself, rather than being somethingwhich arises through the process of exchange.

Another tendency in this period, a rather a very broad group of tendencies, is that ofConstructivism which builds upon cognitive theories and genetic epistemology. Piaget'soriginal genetic epistemology is quite consistent with a materialist view, though lacking asocialhistorical conception of the formation of knowledge, but essentially a step forwardfrom Kantianism. However, those who have come after the pioneers of Constructivismsee the world as nothing but an individual's mental construct.

Sidebyside with this is Behaviourism which rejects consciousness altogether andaccepts behaviour only as valid. Both these approaches lend themselves to analysis of thedevelopment of complex systems and are beginning to be influential in economics.

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