November | 2015 | The Real Movement

November 29, 2015

“Schrödinger’s Capital”: How Michael Heinrich deliberately twisted Marx’s Grundrisse argument

NOTE 21: The collapse of production on the basis of exchange value

In my previous note, I argued the exchange value paid out as currency wages since the collapse of Bretton Woods in 1971 has been zero. My assertion is based on the consensus among scholars within both the value-form and MELT schools. This consensus among Marxist scholars assumes that, since 1971 and the collapse of the Bretton Woods agreement, the money we use to purchase commodities has no value of its own.

However, although both the MELT school and the value-form school generally agree the dollar does not represent any exchange value after 1971, both schools deny this change has any material impact on labor theory analysis.

Both the value-form school’s argument and the MELT school’s argument that nothing changed after 1971 should, in all honesty, require empirical evidence prices behave the same irrespective of the labor content of money. Yet neither school has ever once produced any evidence for this view. Despite the fact neither school has ever shown prices behave the same even if the labor content of the object serving as money is zero, this, it seems, has no effect on the discussion, for the simple reason that, surprisingly, no Marxist has ever demanded empirical proof from either school of their claims. You really have to wonder how Marxists can see one of the fundamental assumptions of their theory simply dismissed out of hand and not demand empirical proof.

Read the rest of this entry »

9 Comments

November 26, 2015

Schrödinger’s Capital: Wherein Heinrich explains profit as a price markup over costs

NOTE 20: The fiction of wages

In an excerpt from his book, The Science of Value, Michael Heinrich argues, “the independent existence of exchange value is only expressed adequately as self-valorizing value”.

I have no idea what Heinrich means by this nonsense statement, so let’s see if we can parse it.

In the first place, what is meant by “the independent existence of exchange value”? For exchange to have an independent existence can only mean that money, in the form of some particular commodity, has emerged as the universal equivalent of all other commodities. The problem with this view for the value-form school is that, according to the value-form school, no commodity has value, the latter being only an artifact of the exchange of commodities for money. If no commodity has value, including the commodity serving in the function of money, how can exchange value exist?

According to Arthur in his 2003 essay on the subject, we “posit the presupposition” use values have value by measuring their worth in units of a money. Money, says Arthur, creates the dimension of value and is the measure of value. The value of a commodity is nothing more than its money price.

Read the rest of this entry »

November 24, 2015

Schrödinger’s Capital: What is not forbidden by labor theory is compulsory

NOTE 19: The monetary expression of labor time (M.E.L.T.)

If we state the total product of labor produced in a given period of time in terms of the commodity money prices of those commodities, we are, at the same time, stating the aggregate socially necessary labor time of society in so many units of the socially necessary labor time required to produce a unit of the commodity money. If it takes one hour to produce an ounce of the commodity money, the total socially necessary labor time of society is equal to so many units of money.

The problem with MELT theory, however, is that it uses a unit of measure, fiat money, that has no socially necessary labor time. Its employment as a tool to measure the labor time of society is at least problematic.

This is one way to interpret the validity of the MELT function: nothing about fiat currency tells us anything about the socially necessary labor times of the commodities for which it is exchanged, because it does not share the common characteristic of being a product of labor. However, another more interesting and far more fruitful way to interpret the results of the MELT function is that a fiat currency always states the duration of socially necessary labor time as zero.

Read the rest of this entry »

4 Comments

November 21, 2015

Schrödinger’s Capital: All labor is necessary so long as someone pays for it?

NOTE 18: Is there a material limit to socially necessary labor time?

The charts I introduced in my last note on the value-form school raises an interesting question. If the charts provide two different measures of value — one drawn from Marx’s labor theory of value, the other drawn from value-form theory — they also provide two different measures of socially necessary labor time. If this is true, which measure of necessary labor time is accurate?

Let me restate Arthur’s argument this way: What we today call value is a mental abstraction that only develops after the emergence of money. Commodities do not have a common attribute called value; rather, our practice of attaching prices to commodities creates the notion they have value. We act on commodities as if they have value and thus “posit the presupposition” they are values.

Since value is a manifestation of the socially necessary labor times required for production of commodities, does money also determined social production times as well?

Read the rest of this entry »

2 Comments

November 16, 2015

Schrödinger’s Capital: A not very ‘useful’ definition of value

NOTE 17: Do trident nuclear missiles have value in the value-form argument?

The charts I published in my last post present a puzzle for any analysis rooted in historical materialism. This is because the two definitions of value offered by Marx and the value-form school result in two different pictures of the history of the US economy.

We have to ask ourselves which of these two definitions of value produces a valid picture of the actual history of the US economy? Read the rest of this entry »

5 Comments

November 15, 2015

Schrödinger’s Capital: Value theory and economic depressions

NOTE 16: Who are you going to believe? Your lying eyes or the BLS?

If not all labor creates value, how can we distinguish labor that creates value from labor that does not create value. Marx proposed that labor that creates value must be expressed as exchange value; which is to say, value producing labor contained in one commodity must be expressed in the bodily form of another commodity having value for which the first product of value creating labor is exchanged.

Marx’s definition provides a testable statement regarding value:

If a product of labor has value, this value must be expressed as exchange value.

An important caveat to Marx’s theory must be stated here: while the value of a product of labor must be expressed as exchange value, the converse statement will not necessarily be true: the value of a product of labor will be expressed in the form of exchange value, but not every object with exchange value actually has value.

The value-form school’s definition of value directly contradicts Marx’s argument in that, for value-form theory, value does not necessarily take the form of exchange value, but only some definite quantity of the material of a “value-form” (i.e., a money), irrespective of whether this material itself has value or not. Thus the value-form school also produces a testable statement:

If a product of labor has value, it will have a price denominated in some material granted forced circulation by the State, and having the key determination of immediate exchangeability. (Arthur, 2003.)

According to Heinrich in his Introduction to the three volumes of Capital, there is no reason to prove value exists. However, the problem we face is not whether we need prove value itself exists, but which of these two distinct and incompatible definitions of value is accurate.

Read the rest of this entry »

4 Comments

November 13, 2015

Schrödinger’s Capital: FYI, Marx NEVER said labor creates value

NOTE 15: Some labor creates value

So, here is the problem with Heinrich saying we don’t need proof for Marx’s propositions: Not all labor creates a product that contains value.

Think of it this way: According to Arthur, money is simply use value with no labor value whatsoever, just like all other commodities. According to the value-form school, it is the physical material of money that gives all other commodities their value, by serving as the form of value, the value-form, the money-form. Commodities, says Arthur, are the product of concrete useful labor, not abstract labor. It is not until these commodities are exchange for the value-form, that they are reduced to values.

In the value-form argument, commodities do not have a social property of value prior to exchange; they remain simply incommensurable use values — objects that cannot be compared as values, because they are of completely different qualities. Thus, before exchange, we cannot say 10 apples equal one hoe because the usefulness of apples cannot be quantitatively compared to the usefulness of hoes. Somehow, the exchange of the objects for the value-form strips the commodities of their useful qualities and reduce them to abstract labor values. Read the rest of this entry »

6 Comments

November 12, 2015

Schrödinger’s Capital: Michael Heinrich explains why Marxists don’t have to prove anything

NOTE 14: Proof is for real sciences, not labor theory?

What sort of science is this that Marxists believe in? According to Michael Heinrich:

“Tied up with the question concerning the difference between Marx’s value theory and classical value theory is the question of whether Marx had “proven” the labor theory of value, that is, whether he had established beyond the shadow of a doubt that labor and nothing else underlies the value of a commodity. This question has been frequently discussed in the literature about Marx. But as we’re about to see, Marx was not at all interested in such a “proof [value lies behind prices].”

That statement is from Michael Heinrich’s Introduction to the three volumes of Capital, chapter 3, section 2, and it is just astonishing.

To understand the flaw in Heinrich’s reasoning, remove Marx and insert Einstein: “Einstein was not at all interested in such a proof of the existence of space-time relativity.”

Or, remove Marx and insert Darwin: “Darwin was not at all interested in such a proof of evolution.”

Would physicists or biologists accept this argument from Heinrich? Why would anyone who calls herself a Marxist? We are discussing the whole underlying structure of a modern capitalist economy, but we don’t require proof for that structure? We can just wing it until we get to extremely complex questions like the transformation problem or whether there is a law of the tendency for the rate of profit to fall, where, all of a sudden, proof value is behind prices and profits is demanded?

And Marxists wonder why no one takes them seriously.

Read the rest of this entry »

2 Comments

November 10, 2015

Schrödinger’s Capital: Money, “technological unemployment” and the cold war

NOTE 13: Historical materialism minus the history part

I have been reading, “Marx and Monetary Theory”, by Matthijs Krul. At the outset, Krul makes this statement:

“In the context of the current crisis, with ‘quantitative easing’ to the tune of hundreds of billions of dollars on the one hand and the rush to liquidity that accompanies financial crises on the other, it may be useful to take a look at how Marx’s economic theory relate to issues of money and monetary policy. The aim here is to provide a clear and understandable overview of what Marx’s theory of money was, how it relates to our current-day monetary system internationally, and how this relates to his value analysis generally.”

According to Krul in this 2010 essay, the financial crisis makes it useful to compare Marx’s approach to money (and, by implication, value and exchange value) with bourgeois monetary theory. The problem, however, is that in Marx’s theory money is the expression of the values of commodities. By contrast, bourgeois theory lacks a theory of money and treats money as a mere system for counting up incommensurable use values.

Since the commodities themselves are incommensurable, what else the prices might represent is unclear from Krul’s discussion — he never mentions the word, value, until he discusses Marx. It is possible that bourgeois economics believes money is a system for counting itself. As Arthur puts, money is both the form and measure of value.

In any case, bourgeois theory bounces between two poles: in times of relative calm it adheres more closely to the Austrian theory. During times of crisis, it suddenly declares, in the words of Milton Friedman, “We are all Keynesians now.”

Read the rest of this entry »

1 Comment

November 8, 2015

Schrödinger’s Capital: Is the US dollar world money or the end of money?

It is important to say I want to preserve the science of historical materialism. To be clear, the outcome of this debate has nothing whatsoever to do with the outcome of the class struggle. Despite claims to the contrary by various vanguardist parties, no class in history ever made a revolution based on its theoretically accurate grasp of the society it was seeking to overthrow. The proletariat will not break that pattern. We can thus safely separate the issue of the scientific veracity of historical materialism from the social implications of its conclusions to answer the troubling questions raised by the value-form school argument.

I say this to emphasize I do not think Chris Arthur is “being revisionist” or some such nonsense. Instead, the science itself is being challenged by the appearance of something many people assume labor theory never predicted, a fiat currency filling the role of ‘world money’. Historical materialism has a big problem of explaining whether this fiat ‘world money’ is in fact money, and, if so, how it works.

NOTE 12: The end of exchange value?

According to Marx, a use value has value only if it is the product of human labor. The quantity of value contained in any product of human labor is the duration of socially necessary labor time required to produce the commodity. The value of a commodity is expressed as exchange value in a transaction in which the value of the first commodity is expressed in the use value of the second commodity. According to Marx the value of a commodity can only be expressed in the use value of another commodity also having value. The commodity socially recognized as playing the role of money is simply the one whose use value serves to express the values of all other commodities in the community.

This definition of money is commonly recognized by almost all Marxists. But if Marx is correct about this, the dollar, a valueless state issued inconvertible fiat paper currency, cannot be world money. The problem with the dollar serving in the role is that, as bitcoin shows, it can be produced with no expenditure of human labor whatsoever. And, it can be produced in whatever quantity is required almost instantaneously. This means the dollar is not a product of human labor and thus contains no value at all.

Which bring Marxists face to face with a paradox: If the dollar is world money, Marx must be wrong by his own definition. If Marxists recognize dollars as world money, they are — by the same definition — no longer Marxists.

Read the rest of this entry »

Month: November, 2015