I haven’t noticed anyone avidly waiting for each Keynes post – but just in case, there has been a delay, a result of having too much other work to do. I’ll continue through the book but at a slower pace for the remaining few chapters.
The following is a comment I posted at Rough Theory – go there for context. As a comment, it is itself very rough, typed in a hurry on account of the above-mentioned too much other work. I wanted to post it here because I’d appreciate feedback on my interpretation of Capital and have not yet got around to posting the second part of my talk on Marx from earlier in the year, where I mentioned some of this stuff.
In the first chapter, Marx is trying to establish the form of value, against those who argued it was only determined by exchange. In early vol 1 (I’m a little hazy on which chapters exactly) Marx shows that we can speak of value as something seemingly inherent in the commodity only because of the social structure of production and exchange. The need to sell in competition with other producers rationalises the labour process but there is some minimum labour time necessary to produce a particular kind of commodity, and this will determine its value relative to other commodities, including money.
This was a simplification of what actually determines relative prices. Marx talks in vol 1 (and vol 2 for that matter) as if value is relative price. But he was well aware that commodities did not in fact exchange at rates determined entirely by the labour time required to produce them. (There is some dispute as to whether he thought that in reality labour-time gave a rough guide to relative prices, or whether there would be wide divergences.) He was well aware of this while writing vol 1, Engels urged him to clear this up at the beginning, but Marx deliberately left it to vol 3. (Though of course the later vols were never completed for publication, we only have drafts predating the final version of vol 1.)
I think the reason he left it out in vol 1 was that he first wanted to establish the social dimension of value – that it is determined by competition enforcing certain efficient production processes in a given historical context where one class monopolises ownership of the means of production. This is fundamental to Marx’s whole work and he needs to establish that before anything else. But he starts out simple because it would confuse people to introduce everything at once. The real nature of how relative price is determined cannot be explained until competition is investigated (vol 3), which first requires a comprehensive investigation of ‘capital’ (vol 1, 2 and 3), which in turn requires a rough concept of value.
When Marx finally deals with the detailed workings of competition, it modifies the simplistic vol 1 explanation of how the relative prices of commodities are determined. Marx continues to use the term ‘value’ in the original sense related to labour-time. He adds a new term, ‘price-of-production’, for actual relative prices, still denominated in value as measuring unit (rather than being observable money-prices). But in fact price-of-production is what most people think of as value, so it can be confusing.
Value then becomes a macroeconomic unit of labour-time, only relevant in talking about commodity relations as a whole. It is still useful in considering vol 1 concepts like surplus value, but only macroeconomically – i.e., it tells you the shares of the total product going to labour and capital, but not at the level of individual or firm. Price-of-production is the microeconomic concept for discussing relative prices – and for discussing concepts like the circuit of capital at the level of the firm.
The transformation problem (of labour-values into prices-of-production) is not a real issue. Except that Marx stuffed up the arithmetic – easily fixed. I think the Sraffians are right that prices-of-production can be determined for empirical work without reference to labour-time values. But the Sraffians then leave indeterminate the rate of profit and the distribution of the social product, although these are key determinants of relative prices. And good old concepts like ‘value’ and ‘surplus-value’, ‘labour-time’ and ‘the value of labour-power’ are useful for investigating the determinants of distribution. At a macro level, of course.
The trouble with this interpretation is how to treat skilled labour. Marx only treated skilled labour in value terms, and did not return to it later. In fact, it is treated very early in the piece indeed; as Isaak Rubin writes: “In the theory of value, when he explains the value of commodities produced by qualified labour, Marx analyses the relations among people as commodity producers, or the simple commodity economy; at this stage of the examination, the value of labour-power in general, and of qualified labour in particular, do not yet exist for Marx.” [Ch 15 of Essays on Marx’s Theory of Value]
But skilled labour can create commodities of higher price-of-production than those created by unskilled labour independently of the price-of-production of capital involved. How do we investigate this, and how do we deal with the resulting unequal distribution among the working class?
I think Rubin is on the right track in dealing with it as competition in the labour market (and the commodity market) – between workers; between labour and capital; and between capitals. This is consistent with the vol 3 discussion of competition, and it is realistic. But it must be admitted that we are now some distance from a ‘labour theory of value’ as is commonly understood. But then I don’t think Marx held a labour theory of value in that sense anyway.