david ricardo, on the principles of political economy and taxation

(xxxv-xxxvi): key--Ricardo correcting Smith's 'original error respecting value'. for Ricardo, the value of a thing was regulated by the quantity of labour required for its production -- not by the remuneration of that labour (this was Smith's 'adding up' wages, profits and rent, and saying all enter as component parts). Smith, Ricardo argued, limited his theory to the 'early and rude state of society', before capital had accumulated and private property appeared. This was wrong.

(11): definition--value of a commodity depends on the relative quantity of labour that is necessary for its production (not, as Smith argued, on the greater or less compensation paid for its labour).

(11): all he's adding, about use-value, is that use-value is a prerequisite for something to have an exchange-value.

(12): commodities derive their exchange value from two sources:

1. scarcity (some commodities get their value from scarcity alone: rare statues, scarce books, wines, etc. -- their value is independent of the quantity of labour required to produce them; nonetheless this is a very small part of the mass of commodities daily exchanged in the market)
   
2. quantity of labour required to obtain them
   

(14): Smith's confusion--his first standard (which Ricardo shares) is invariable; but the second (what it will fetch) varies with fluctuations in the exchange-value of the commodities to which it's being compared.

(22): constant capital--not only the labour being applied immediately affects commodities value, but also labour in the form of implements/tools/buildings (like Smith, understands it as 'past labour')

(24, 27): for relative prices, Ricardo is arguing, it doesn't matter whether profits are high or low, or whether wages are high or low, since this operates equally on both employments [this, of course, is modified when we consider the impact of K-L ratios]

(30): introducing the question of machinery and other fixed capital -- now introducing different K-L ratios, which becomes another cause for variations in relative prices.

(31): fixed/circulating distinction, for Ricardo, is all about durability

(32-35): key--a rise in wages (i.e., declining profit rates) will affect two employments with different K-L ratios differently. the relative value of those employments with lower K-L ratios will rise (so, in the example here, corn vs. cloth/cotton goods). in other words, commodities produced by very valuable machinery would fall in relative value, whereas commodities chiefly produced by labour would rise in relative value.

(36): this effect, though, is comparatively 'slight'

(38): what follows from the above, of course, is the recognition that durability and rapidity with which fixed capital is worked up matters also--the closer something gets to being circulating capital, the more its price will rise relative to commodities produced in manufactures involving fixed capital.

(43-44): an invariant measure of value -- closest thing to this is relative labor costs, but this, of course, is subject to variations on account of different proportions of K-L ratio (and the impact of rising/falling prices, then)

(46): so, unlike Smith, a rise in the price of labour is not uniformly supposed to lead to a rise in prices. relative prices will depend on K-L ratios

(48): rise/fall in the price of money should not be treated as affecting the value of other commodities; should be understood as a rise/fall in the value of money

(49): similarly, we should not judge the share going to rent/profit/wages in money, since money is variable--we should have some sense of the real quantities going to each.

(67): rent as that portion which is paid to the landlord for the use of the original and indestructible powers of the soil [Smith, Ricardo will add, despite having this kind of a definition, will often confound rent with profit (example of the forests in Norway; Smith thinks rent is involved, whereas it is clearly profit)--pg 68]

(69): if there is bountiful land, there will be no rent (this is why there is rent on land, and not air/water, etc.)

(70): key--differential fertility begets rent (it is when land of inferior quality is called into cultivation)

(71): rent is the difference between the produce obtained by the employment of two equal quantities of capital and labour

(74) : imp--a progressive rise in prices is the effect of the fact that more labour is employed in the production of the last portion obtained (not because a rent is paid to the landlord). the value of corn is regulated by the quantity of labour bestowed on its production. 'corn is not high because a rent is paid, but a rent is paid because corn is high'

(75): Ricardo solely sees natural factors

(77): imp--the rise of rent is the effect of the increasing wealth of the country (i.e., via increassing pressures on the land); a symptom but never a cause of wealth.

(79): Ricardo does acknowledge that productivity gains can offset the rise in rents (because less fertile land can be called back from cultivation. but this takes two forms: (1) increase in prod. of land, and increase in (2) prod. of labour. the former allows us to cultivate less land; the latter matters, but only if it narrows the difference between the least and most productive. [confusing, though, because wouldn't absolute gains in the productivity of labour go some way towards calling back land from cultivation, thus decreasing rent in this way, too?]

(83): the landlord gets a double benefit: (1) a greater share, due to increasing differentials between lands in cultivation; (2) commodity he's getting is of greater value.

(88, 91): the equalization of profit rates (i.e., competition) is critical in ensuring balance\

(93): natural price of labour is the subsistence price (needed to perpetuate their race without increase or diminuation

(93): with the progress of society ,there is a tendency for the natural price of labour to rise, because the principal commodities by which its natural price is regulated has a tendency to become more expensive

(94): when mkt price is above nat price, workers are flourishing; when market price is below natural price, condition of labourers is wretched.

(95): capital can increase in quantity when:

1. value of capital is rising (because of additional quanity required to produce food/clothing), so wages will rise, but the condition will not be improved dramatically because of greater costs
2. value of capital is stagnant, so wages will rise, and condition of the labourer will be greatly improved.
   

(96): imp--in other words, the permancence of the rise of wages will depend on whether the natural price of labour has also risen.

(97): natural price also depends on habits and customs (a 'moral' component)

(97): rise/fall of wages have two causes:

1. supply/deman of labour
2. natural price of labour (price of the commodities on which the wages of labour are expended)

(98-99): enter Malthus -- power of production will soon be superseded by the power of population, which means that the tendency to an increase of capital diminishes (only remedies are reduction of people, or a more rapid accumulation of capital--the latter is difficult in rich countries, where fertile land is already cultivated)

(101): thus, natural advance of society displays tendency for wages to fall -- for the supply of labourers will continue to increase, while demand will increase at a slower rate.

(102, 112): important--the advance of society will also tend to raise wages, of course, because the costs of reproduction are higher as productivity in wage goods declines due to pressures on the land. this is true of rent too, Ricardo's noting. but rent and wages are also different. landlords will be gaining real advantages, because it is not just money rent that is increasing--they're also getting more stuff. wherease workers are getting higher money wages, but not more stuff (nominal rise)

(106): against the poor laws, of course

(107): but in favor of population control

(111): discussion of why a capitalist farmer's profits would be affected by the gradual rise in the value of raw produce--the explanation is that the possible gains in his profits (because of a higher price, despite higher wages) would be captured by an increasing rent burden. this, of course, is the result of the equalization of profit rates: farmers on lands of lower fertility are paying the high wages that have resulted from bringing new land into cultivation. the farmers can't make more profit than this new competitor, of course. [sharpen with the shaikh email]

(114): the real value of the farmer's share is stagnant -- and then, of course, he has to pay an increasing sum to his labourers. this is the crux of the falling rate of profit argument in Ricardo -- a secular rise in the price of raw produce.

(124): this doesn't mean that the total social product is decreasing--in fact it is increaseing even if profits are declining.

(126): the laws of nature are the ultimate arbiter, insofar as the argument hinges, in the last instance, on the limits to the productive powers of the land.

(289-290, 296): imp--responding to Adam Smith's argument re: the falling rate of profit, Ricardo is clear that the mechanism is actually the rising price of raw produce due to pressures on the land. Smith has an argument rooted in increasing competition, etc., but Ricardo uses Say's law to dispute this.

(388): machinery can actually be injurious to the interests of w-class (not for capitalists, not for landlords. seems like the argument depends on the degree of productivity that comes from implementation of machinery--Ricardo's concern is that the 'boost' might not be enough to compensate for the diversion of capital into machine-production/constant capital [I think this is the argument]

(400): rent is a creation of value, not wealth (as in, when it gets more difficult to produce raw produce, you have an increase in the value of raw produce, but not an increase in actual wealth)

(404): against Malthus, who thinks rent rises and falls with absolute fertility; Ricardo has an argument about relative fertility

(418): Corn Laws debate with Malthus

adam smith, the wealth of nations

(104): annual labour fund supplies the nation, and will bear a smaller or greater proportion in relation to

1. productivity;
   
2. proportion of population employed in useful (production) labour

(110): pin-factory

(111): impossibility of extending the division of labour in agriculture (because its nature doesn't admit of subdivisions) is the reason why productivity growth in agriculture won't keep pace with productivity growth in industry

(112-114): three reasons that the division of labour advances productivity:

1. increase of dexterity;
2. saving of time from task-to-task
3. invention of machines (a great part of which are actually the invention of common workers)

(116): observing a thoroughgoing interdependence

(117): European prince vs. African king

(117): origin of the division of labour has its roots in a 'propensity of human nature' [enter Smith's mythic anthropology]

(120): difference in natural talents is actually an effect (not the cause) of the division of labour

(121): the extent of the division of labour, of course, will always be limited by the extent of the market

(122): hint that the division of labour expands with better technology (the water-carrier opened up new markets, for example)

(126): again, assuming a petty-bourgeois economy of small producers (every man becomes a merchant--a 'commercial society') [here, of course, we see hte obvious flaws of conflating the social division of labour with the technical division of labour]

(131): value in use (the utility of an object) and value in exchange (the power of purchasing other goods which the possession of the object conveys) [water-diamond paradox demonstrates well the fact that they can be quite distinct]

(150): starting with the rude and early state -- it is obvious, here, that the proportion between the quantities of labour necessary for aquiring differnet objects seems to be the only circumstance that can dictate 'exchange-values' (based on the comparative hardships in production)

(151): now Smith introduces profits -- certain individuals emerge, having accumulated a stock, and deploy it in the employment of other industrious people. 'something must be given for the profits of the undertaker of the work.' so the value which the workmen produce [here he says add to the materials, but presumably also he would have to include that which carries over from the materials] resolves itself into two parts: wages, and profits. [a non-answer]

(151-152): profits are not wages (since they bear no relationship to the supposed hardship of this labour of inspectioin/direction). instead they are regulated by the value of the stock employed -- the more stock employed, the more profits made.

(152): now, with this argument, he suggests that the quantity of labour that goes into a commodity is not the only thing that regulates its exchange-value (i.e., the quantity of labour it will exchange for). we now have to make an allowance, also, for profit. [this is, again, just an assertion--and gives rise to a contradiction, in Smith]

(152-153): rent also enters the picture (by virtue of a landlord's right over property -- after the disappearence of land in common), and allowance will be have to made for it, as well.

(153): thus we get a (revised) statement of the determination of exchange-value -- the real value is measured by the quantity of labour each component part of price can command (so not only labour, but also rent and profit). all three will enter into the price of the 'far greater part' of commodities.

(156): three economic categories (not necessarily mapping onto class structure)

(157): a concluding passage that embodies Smith's confusions -- his double conclusions, re: exchange-value

(157-8): imp--natural rate of rent (1. depends on neighborhood in which the land is situated; 2. the fertility of the land) , wages, and profit (both rates regulated by 1. general condition of society; 2. advance/decline of society; 3. particular nature of each employment)

(160): Smith's discussion of the importance of competition--the notion of a 'central price', around which mkt prices will fluctuate; i.e., an equilibrium, but dynamically determined

(162): rent fluctuating least (but no real reason given--'by convention' of leases, etc.)

(167-168): in the rude and early state, the question of rewards to labour is all about relative labour costs. with the introduction of rent/profit, he's suggesting, it becomes a bit more complicated. both rent and profits make their respective deductions.

(169): Smith noting that the capital-labour relation is being generalized (i.e., you have fewer and fewer independent workmen who collect both wages and profit)

(169): Smith also noting that masters have a decisive advantage in negotiations

(170): spectre of the capitalist state

(170): imp--however, wages cannot sink below a certain level -- wages must be at least sufficient to maintain the worker, to reproduce him.

(171-2): imp--at the same time, certain circumstances can raise wages above or below this rate. namely, when demand increases. and demand can increase only when the funds for the payment of wages increases, as well: 1. revenue on the up; 2. stock on the up. wages cannot increase without an increase in revenue and stock--critically, it is not the size of the revenue/stock that matters, but rather "its continual increase" (Smith is giving the example of the US, vs. England--it's growth, not opulence, that produces a scarcity of labour)

(176): Smith's critique of the British in India

(181): Smith on the w-class

(183): of course, population is re-introduced into Smith's argument--so wages will only grow temporarily in the event of generally rapid accumulation growth. population will catch up, bringing wages down to their 'natural' level.

(187): alluding to the importance of exercising control over one's labour.

(188): in sum, then: the money price of labour will be regulated by

1. the demand for labour
2. the price of the necessaries and conveniences of life

(430): distinction between productive and unproductive labour rests on the question of whether the labour in question realizes itself in a commodity (for Smith, manufacture does; servants don't). it is not, then, a question of the class relations governing the labour, at all. also independent -- of course -- of usefulness.

(431-433): everyone has to be maintained, though, by the annual labour fund, which is exclusively produced by productive labour. rents and profits are the primary sources that sustain unproductive labourers.

(435): perfect Smith: "our ancestors were idle for want of a sufficient encouragement to industry."

(437): distinction between capital and revenue -- the former is deployed to expand production

(442): great nations are never imperiled by private decision -- it is the unproductive public sector that we ought to be concerned about

(446): more classic Smith -- together with a critique of the extravagance of the King

(459: Smith introduces the K-L ratio -- in different industries, the proportion of labour that capital is able to put into motion varies

(462, 465): here there's a story of progressively more productive labour being put into motion as you get towards agriculture (here a cow is treated as a productive labourer!?)

(463): rent can be considered as the produce of the productive powers of nature, lent to the farmer by the landlord.

(474): the economy is 'profit-driven' [which should orient our analysis, a la Shaikh's central contribution]

anwar shaikh, karl marx (lecture 8 – 10/19)

For Smith and Ricardo, the argument about the rude and early state grounds the discussion of value and labour-time. They complicate this, insofar as different capital-labor ratios affect relative prices, once you allow for the equalization of profit rates, etc. Marx proceeds very differently (and takes three volumes to get to the discussion of capital-labor ratios)—he begins by looking at exchange.

The argument, of course, is the that abstraction from use-values is necessary to exchange also implies an abstraction from concrete forms of labour.

The strange part about this is that capitalism regulates its reproduction through exchange—through prices. That's the immediate regulator (Marx will argue, later, of course that profits are really the regulator; nevertheless). Demand determines the quantity; but the structure of cost determines the price. These aren't immediately linked, as neo-classical economics imagines them to be.

Individual labour is assessed as social labour only through its being sold on the market (under 'objectified huk'--the commodity)

With this in mind, then, what stands behind the common property of commodities is 'abstract labour'. It is the inner-basis of exchange-value (an analogy to mass and weight—abstract labour plays the same role that mass does, and weight is the expression of that abstract quality in the concrete and in relation to other objects).

From this, a series of properties follow ('The fetishism of commodities')

It seems that commodities possess quantitative worth 'naturally'. This is, of course, not true—they only do this under particular social circumstances. It is social'.

This position, though, leads to an inversion—exchange becomes primary (since it's on the surface), and the social division of labour becomes secondary.

A further implication of the inversion argument is that the relationship amongst people becomes a relationship mediated by 'things' (your worth is only the worth of the commodities that you bring to the market).

No one mandates that you have to produce water bottles/pencils, etc. You can choose to move from bottles to pencils—you're formally free, in this sense. But there has to be a mechanism that can assert itself on your decision (the market, of course, is this mechanism). So the social division of labour, which appears to be just an agglomeration of individual decisions, asserts itself on the social structure. This is the way that capitalism balances social demand and production (disarticulation becoming articulation)

Orthodox economics goes out of its way to claim perfect articulation (or, 'general equilibrium'). Everyone fully employed, all resources in use: classical view is of forcible articulation, but the neo-classical vision is of immediate articulation (the trick is to assume that capitalism is a mechanism in which there is a person who articulates your demands: you start with an auctioneer, who has perfect knowledge. everyone gets up in the morning and says how many hours they'll work, how much they'lll consume, etc. I offer to work so much, etc. A series of buy offers and demand offers—the giant computer adjusts prices, according to what doesn't work. You arrive at a situation, then, after this adjustment. Only once it's adjusted, the computer says 'go!' [The foundation of modern economics—and some hesitate to engage with it because it's opaque, he's suggesting])

Intrinsic value – the amount of socially-necessary abstract labor-time which stands behind a commodity. Abstract labour means that something is being produced by exchange—the average is what counts. 'Value', in this sense of Marx, is different then from Ricardo and Smith, insofar as it invovles a claim about the inner determinant—the inner-basis.

It's not a mystery where he's going to go from this. He's going to argue that prices are regulated by this inner basis.

Marx's answer, also, to the question of the foundation of profit is very different from Ricardo.

With this concept of value in hand, exchange-value gets 'dissolved', and is replaced by these two form: the inner-basis, and also the 'form' of value.

Assuming that goods exchange at their value, his immedate question is where does profit come from.

The process of exchange itself raises questions. If a commodity has many forms, I have to know its exchange with every other commodity. So the number of 'bits of information' required to understand the the exchange process becomes increasingly difficult. You need, therefore, a reference commodity—and that, thus, becomes a general form of money.

Three Properties of Money

1. Measure of Pricing: 1. Measure of Value—the substance of pricing (silver); 2. Standard of Pricing—the units (lb.)

Same as the concept of weight/length. Everything is compared to something common – so say you use a piece of iron (gives the substance, and the unit)

If over time, I had a department of weights and measures which changed the standard of pricing (cut it by half, say – since this is socially and historically mandated), it is possible that the unit can change and the substance stay the same (Rulers, especially, find it convenient to keep the money name--'pound'--but reduce the silver content. So one money pound, say, becomes half a weight pound, in terms of the weight of silver it 'equals'. Why would they do this? Well, to finance their wars, etc.--it's a tremendously useful way to pay off debts). In short, the money name might change, to give the illusion of rising prices misleads—it's a reflection of the 'change' in the money name.

Whether or not something has risen in price, then, depends on how you measure it.

Price, in Marx, is not just the form of value—it is the 'money' form of value. Expressed, in other words, in terms of the money commodity. Price as 'the ticket', which is hung on a commodity. Pricing is an 'ideal' act.

2. Medium of Circulation

Now, money needs to appear in person.

(a) Money as means of purchase (has to be present, to function in this way)

(b) Money as means of payment (validation of the debt, or validation of the price of the commodity)

3. Money as Money

Money which functions as validation 'in the last instance' (hoards, including bank reserves)

You've worked, got a $1000 in your bank account—you do that because you believe that your money is actually there. The bank has to have something to back up all the money it owes, and all the money it doesn't have. It has to keep reserves, of course (distinct from deposits).

World money is a similar issue—if I want to go on the world stage, it might not be useful to use your own national currency. You need to convert your money into a universal equivalent—but, this raises the question of what stands behind those currencies? It's not the State, Shaikh is arguing, but it's the market (before every crisis, the price of gold shoots up).

The State tends to back it through a fixed exchange rate; the market tends to back it through a flexible exchange rate.

4. Possibility of Crisis Within Simple Commodity Production

(a) C – M – C = Circuit of Revenue (you sell in order to buy; the money goes away from you)

(b) M – C – M' = (start with money, invest it, in order to accumulate more money)

In circuit (a), a crisis can only happen if, when you sell, you don't buy again. In other words, a crisis is possible, if C – M does not lead to M – C. If you decide to hoard your money, then you must be cutting back on your expenditure ('effective demand' drops, etc.). There's no necessity, though, because there's nothing that would tell you that this would happen—this kind of a crisis would be abnormal/accident.

One thousand pages later, Marx is going to focus on the necessary reasons for crisis in the second circuit, due to the falling rate of profit.

- - -

Marx argues throughout that money is 'endogenous' – the quantity of money in circulation adapts to the requirements of effective demand (this is true of credit today, most obviously).

anwar shaikh, karl marx (lecture 8 – 10/19)

For Smith and Ricardo, the argument about the rude and early state grounds the discussion of value and labour-time. They complicate this, insofar as different capital-labor ratios affect relative prices, once you allow for the equalization of profit rates, etc. Marx proceeds very differently (and takes three volumes to get to the discussion of capital-labor ratios)—he begins by looking at exchange.

The argument, of course, is the that abstraction from use-values is necessary to exchange also implies an abstraction from concrete forms of labour.

The strange part about this is that capitalism regulates its reproduction through exchange—through prices. That's the immediate regulator (Marx will argue, later, of course that profits are really the regulator; nevertheless). Demand determines the quantity; but the structure of cost determines the price. These aren't immediately linked, as neo-classical economics imagines them to be.

Individual labour is assessed as social labour only through its being sold on the market (under 'objectified huk'--the commodity)

With this in mind, then, what stands behind the common property of commodities is 'abstract labour'. It is the inner-basis of exchange-value (an analogy to mass and weight—abstract labour plays the same role that mass does, and weight is the expression of that abstract quality in the concrete and in relation to other objects).

From this, a series of properties follow ('The fetishism of commodities')

It seems that commodities possess quantitative worth 'naturally'. This is, of course, not true—they only do this under particular social circumstances. It is social'.

This position, though, leads to an inversion—exchange becomes primary (since it's on the surface), and the social division of labour becomes secondary.

A further implication of the inversion argument is that the relationship amongst people becomes a relationship mediated by 'things' (your worth is only the worth of the commodities that you bring to the market).

No one mandates that you have to produce water bottles/pencils, etc. You can choose to move from bottles to pencils—you're formally free, in this sense. But there has to be a mechanism that can assert itself on your decision (the market, of course, is this mechanism). So the social division of labour, which appears to be just an agglomeration of individual decisions, asserts itself on the social structure. This is the way that capitalism balances social demand and production (disarticulation becoming articulation)

Orthodox economics goes out of its way to claim perfect articulation (or, 'general equilibrium'). Everyone fully employed, all resources in use: classical view is of forcible articulation, but the neo-classical vision is of immediate articulation (the trick is to assume that capitalism is a mechanism in which there is a person who articulates your demands: you start with an auctioneer, who has perfect knowledge. everyone gets up in the morning and says how many hours they'll work, how much they'lll consume, etc. I offer to work so much, etc. A series of buy offers and demand offers—the giant computer adjusts prices, according to what doesn't work. You arrive at a situation, then, after this adjustment. Only once it's adjusted, the computer says 'go!' [The foundation of modern economics—and some hesitate to engage with it because it's opaque, he's suggesting])

Intrinsic value – the amount of socially-necessary abstract labor-time which stands behind a commodity. Abstract labour means that something is being produced by exchange—the average is what counts. 'Value', in this sense of Marx, is different then from Ricardo and Smith, insofar as it invovles a claim about the inner determinant—the inner-basis.

It's not a mystery where he's going to go from this. He's going to argue that prices are regulated by this inner basis.

Marx's answer, also, to the question of the foundation of profit is very different from Ricardo.

With this concept of value in hand, exchange-value gets 'dissolved', and is replaced by these two form: the inner-basis, and also the 'form' of value.

Assuming that goods exchange at their value, his immedate question is where does profit come from.

The process of exchange itself raises questions. If a commodity has many forms, I have to know its exchange with every other commodity. So the number of 'bits of information' required to understand the the exchange process becomes increasingly difficult. You need, therefore, a reference commodity—and that, thus, becomes a general form of money.

Three Properties of Money

1. Measure of Pricing: 1. Measure of Value—the substance of pricing (silver); 2. Standard of Pricing—the units (lb.)

Same as the concept of weight/length. Everything is compared to something common – so say you use a piece of iron (gives the substance, and the unit)

If over time, I had a department of weights and measures which changed the standard of pricing (cut it by half, say – since this is socially and historically mandated), it is possible that the unit can change and the substance stay the same (Rulers, especially, find it convenient to keep the money name--'pound'--but reduce the silver content. So one money pound, say, becomes half a weight pound, in terms of the weight of silver it 'equals'. Why would they do this? Well, to finance their wars, etc.--it's a tremendously useful way to pay off debts). In short, the money name might change, to give the illusion of rising prices misleads—it's a reflection of the 'change' in the money name.

Whether or not something has risen in price, then, depends on how you measure it.

Price, in Marx, is not just the form of value—it is the 'money' form of value. Expressed, in other words, in terms of the money commodity. Price as 'the ticket', which is hung on a commodity. Pricing is an 'ideal' act.

2. Medium of Circulation

Now, money needs to appear in person.

(a) Money as means of purchase (has to be present, to function in this way)

(b) Money as means of payment (validation of the debt, or validation of the price of the commodity)

3. Money as Money

Money which functions as validation 'in the last instance' (hoards, including bank reserves)

You've worked, got a $1000 in your bank account—you do that because you believe that your money is actually there. The bank has to have something to back up all the money it owes, and all the money it doesn't have. It has to keep reserves, of course (distinct from deposits).

World money is a similar issue—if I want to go on the world stage, it might not be useful to use your own national currency. You need to convert your money into a universal equivalent—but, this raises the question of what stands behind those currencies? It's not the State, Shaikh is arguing, but it's the market (before every crisis, the price of gold shoots up).

The State tends to back it through a fixed exchange rate; the market tends to back it through a flexible exchange rate.

4. Possibility of Crisis Within Simple Commodity Production

(a) C – M – C = Circuit of Revenue (you sell in order to buy; the money goes away from you)

(b) M – C – M' = (start with money, invest it, in order to accumulate more money)

In circuit (a), a crisis can only happen if, when you sell, you don't buy again. In other words, a crisis is possible, if C – M does not lead to M – C. If you decide to hoard your money, then you must be cutting back on your expenditure ('effective demand' drops, etc.). There's no necessity, though, because there's nothing that would tell you that this would happen—this kind of a crisis would be abnormal/accident.

One thousand pages later, Marx is going to focus on the necessary reasons for crisis in the second circuit, due to the falling rate of profit.

- - -

Marx argues throughout that money is 'endogenous' – the quantity of money in circulation adapts to the requirements of effective demand (this is true of credit today, most obviously).

anwar shaikh, karl marx (lecture 7 – 10/12)

Four General Themes in Marx and Marxist Works

1. Laws of Motion –whether there's a necessary pattern, vs. whether there is conjunctural determination (discussed last week)

2. Competition vs. Monopoly – pivoting around the issues of concentration/centralization, and what they portend. For Marx, this intensifies competition, Shaikh is arguing. For 'Marxists' (Hilferding and Lenin), this weakens competition—this association of scale with lack of competition, Shaikh is suggesting, actually comes from neo-classical economics (via the importation of notion of 'perfect competition'--each firm has to be infinitesmal, thus effectively powerless). This would have been anathema to Marx, for whom capital is master and consumer subservient. It is the opposite, in neo-classical economics). Implication of the 'monopoly'argument, of course, is that the immediate solution is the restoration of competition. 'Power' becomes the regulator/destabilizer of capitalism.

3. Economic Crises – have to distinguish crises from cycles, and how we understand them. Necessary? As in falling rate of profit arguments, etc. Or, conjuncutral? A balance of things happening at any given time (here citing Lenin and Luxemburg's dismissal of Engel's presentation of the argument. Until Henryk Grossman, no one from the Marxist tradition really looked at the problem of the falling rate of profit.

4. The State—State as dominated by capitalism (limits imposed upon it) vs. State as autonomous (people focused on specific policies, Gov't sometimes stupid sometime smart)

Marx's Thoughts on Value

Smith and Ricardo begin with the distinction between use-value and exchange-value. Use-value, for them, is a social thing. Smith and Ricardo argue that the natural rice, of course, is regulated by its natural costs (direct and indirect labor time, secondary effect of capital-labor ratios). Law of relative price. They use the term value to mean exchangeable value, basically (different from big V value that Marx wants to discuss).

Marx begins by addressing something else. Smith and Ricardo don't tell you why things have value. Marx will say that a whole set of social relations undergird the fact that certain goods have value. The starting point is, in this sense, why are there commodities.

Commodities have a dual character: use- and exchange-value.

The Capitalist Mode of Production presents itself as an 'immense accumulation of commodities'

What is a commodity? [Shaikh using a two-column display, to go through 'use-value' and 'excange-vaue?]

Use-value is material with an effect that satisfies human wants (not all services count, though, even though it doesn't have to involve 'physical labor')

Unproductive/productive labor as a shaded discussion, when you get to the concrete (connects to the above discussion via the 'production of use values.' So types of labor mentioned here are distribution, guarding, administration – they don't produce use-values but produce an effect to facilitate smooth production of the use-values. [Interesting—transportation can be production labor, if it's part of the loop of production. But if it's part of the distribution process, or whatever else, we can it non-production labor.

In short, the purpose of this section of the lecture was to say that labor and use-values don't necessarily map-on.

1. properties that are relevant to it and its use-value (Oranges and their sweetness, etc.)

2. properties that are socially relevant (Oranges and pesticides, child labor, migrant labor, etc.)--these can become Category One, dependent on whether these properties are 'recognized'

Use-values are the product of what Marx will call concrete labor. The social division of concrete labor is central to the production of use-values (this is Adam Smith's theme, of course). Throughout human history, the institution that established this division of labor was not the market. And thus, exchange-value did not play a big role.

Well, what is exchange-value? Marx's first answer is that it arises only under particular circumstances. Smith makes it seem as if exchange-value emerges out of the propensity to truck and barter. In fact history shows us something quite different, which is that exchange typically only happened on the periphery of societies (where it did happen, as in under feudalism, it was highly regulated/restricted).

It is only the capitalist mode of production that makes trade central to the existence of the average individual. Important point is that this is a specific historical circumstance. Very recent, historically-speaking [Jared Diamond's metaphor of the 24-hr clock—agriculture comes in at ten minutes to midnight]

What does exchange do? It reduces qualitatively different use-values to a common aspect, according to which they can be quantitatively compared. This is a process of social abstraction. It only functions if it takes things that are not the same, and reduces them to some kind of sameness. Qualitative equalization of different use-values. Marx will jump on this—in other words, when you're exchanging two things, they share some property that allows them to be compared.

The question immediately arises. How can this be?

Marx is careful to say that standing behind the possibility of comparing two commodities is a history of social development. This is the sense in which the importance of labor costs to a theory of value is a historically specific feature of capitalism (he does have some account of a rude and early state, remember, which parallels Ricardo and Smith's claims).

Once we come to the point where you have regular exchange, it becomes clear that the process of exchange converts different use-values into common units: quantitative worth. These units may not exist as such, in the sense that they are visible, but they are implicit.

Using the analogy of weighing different objects in terms of a common object, in order to speak about how standards of measurement are relational. Weight as the relative amount of paper needed to arrive at equal mass as is embodied in an eraser.

Exchange-value is also a relation between two objects (between the object you use as a standard, and the object you are measuring).

The question Marx now wants to ask, of course, is what stands behind the comparison of exchange-values?

The same abstraction process that puts two use-values into a comparison also compares the labors which stand behind these use-values (that produce these use-values). In other words, the process abstracts which from the concrete qualities of the use-values also implicitly abstracts from the concrete qualities of the labor. So you get abstracted labor.

Abstract labor is the inner basis of exchange-value. He calls this VALUE—the quantity of abstract socially-necessary labor time required for the production of a commodity (for exchange).

Marx isn't yet saying the value regulates price. He's only saying that value stands behind exchange-value (we'll develop the relationship between these two, after doing the theory of money).

The two conditions here are commodities that can be reproduced (so no old paintings, old wines—like Ricardo), and under conditions of competition.

Note also, as we said, exchange requires a social matrix in which people have rights to dispose of commodities.

anwar shaikh, lecture 6 – ricardo and marx (10/5)

for Marx, in response to Ricardo's argument about rent, will make a distinction between the hierarchy (of lands of different productivity) and the temporal movement. Marx doesn't think that the temporal movement will have to be towards lands of lesser productivity (this is where technology will become very important). this obviously has implications for Ricardo's argument re: falling rate of profit.

to Marx!

Marx did not live to complete his life's opus.

In the introduction tos A Contribution to the Critique of Classical Political Economy, two central propositions of historical materialism enumerated:

1. Neither legal or political forms can be comprehended with reference to the mind; but only with reference to the “material conditions of life.”

2. The anatomy of this material conditions of life has to be sought in political economy. The real structure of the economy on which the legal/political superstructure is erected (i.e., the forms of exploitation through which the surplus is extracted correspond to a certain arrangements of legal/political life).

Analytical Stages

1844-1845 – approach issues as 'philosophers' (Marx rejects LTV, writes treatise on alienation, etc.)

1846-1848 – beginning to develop their own economic concepts (surplus labour isn't there yet, etc.)

1848 – Revolutions in Europe (postdated the Second Great Depression of capitalism, 1844-1848; a period of tremendous revolt), which fail. Around this time, they're members of the League of Communists—there's a debate over the relationship between politics and economics, whether you need propitious conditions, or not. This incurs a charge of lack of radicalism, and they're expelled (is this true?)

1850-1857 – from this period comes the Grundrisse, which was unpublished

1857 – Gets a contract for two books, and plans on publishing “On Money” and then “On Capital”. First one does badly so contract is cancelled. These can be thought of the 'first drafts' of DK Vo. 1

1867 – Marx publishes Vol. I, DK (talking about his plan of capital – there's a loose movement from the abstract to the concrete, starting with 'value' and moving, eventually, to crisis)

1885/1893 – for Luxemburg/Kautsky, Shaikh is arguing, don't take Vol 2 and Vol 3 terribly seriously. They were content to use a few elementary propositions, but they cast aside the insights of the later volumes.

Example of 'immiseration' as showing you the importance of setting Marx's work in context.

Question, here, about how you go from theory to concrete. You have to decide whether you tweak theoretical apparatus when confronted with problems making sense of the concrete, or whether to dispose of the theoretical apparatus entirely. You need to have this dialogue.

The Marxist movement didn't have this dialogue. They substituted the idea of 'monopoly capital' for the unfinished tasks of Marxist economics—Kautsky and Bernstein had begun to introduce the notion of capitalism having entered a new stage ('the suspension of the laws of competition').

This had devastating consequences for Marxism, Shaikh is arguing. Competition is actually central. The laws of motion are derived from competition (the monopoly school will have to speak about 'power').

Four critical general themes, in Marx's work and Marxist arguments

1. The Laws of Motion:

1. Long waves are caused by conjunctural factors—due to a balance of forces at a given period of time. Shaikh calls these “coordinate tendencies,” and the movement will come from the balance of these forces. “Possibility theory.” Class struggle determines the rate of exploitation (Glynn and Sutcliffe, in the 1980s), or the State as asserting itself on these dynamics (Keynesian arguments). In this way of thinking about capitalism, Shaikh is arguing, are not “laws of motion” as much as they are historical tendencies. A wide range of paths are possible.

2. Overriding factors—a hierarchy of forces/tendencies, in which some are dominant. “Necessity Theory.” In contrast to the first way of thinking about capitalism, here there is a very strong sense in which laws will assert themselves over contingency.

2. Competition—Marx calls it the locomotive force of 'bourgeois economy', though competition will give rise to concentration (increasing capital-intensiveness) and centralization (more and more things coming under the aegis of a single capital)

1. Marxist traditon (competition and centralization leads to monopoly, which leads in turn to the end of competition)

2. Shaikh's view of Marx (concentration/centralization in turn intensify competition—they don't negate competition, in other words, but intensify it. 'bigger and better' weapons, in effect—the war becomes more intense.)

3. Crises—a confusion between 'cycles' and 'crises' (or Great Depressions). Marx and Engels themselves shared this confusion. Here, there's also the question of the loss of the falling rate of profit from Marxist accounts of crisis (the Marxist tradition rejects it)

4. Role of the State—Marx didn't himself write about the State in tremendous detail, but things like 'budget deficits', etc. can be derived from propositions in Marx. If you don't do that, though, then the State becomes incorporated into one of these 'power' conceptualizations—you are a Keynesian, in effect. Marx has an argument about capitalism's perpetual failure to generate “full employment” on a world scale--this is directly contrary to the Keynesian notion that full employment is a stable state. This is a foundational contrast.

anwar shaikh, lecture 6 – ricardo and marx (10/5)

for Marx, in response to Ricardo's argument about rent, will make a distinction between the hierarchy (of lands of different productivity) and the temporal movement. Marx doesn't think that the temporal movement will have to be towards lands of lesser productivity (this is where technology will become very important). this obviously has implications for Ricardo's argument re: falling rate of profit.

to Marx!

Marx did not live to complete his life's opus.

In the introduction tos A Contribution to the Critique of Classical Political Economy, two central propositions of historical materialism enumerated:

1. Neither legal or political forms can be comprehended with reference to the mind; but only with reference to the “material conditions of life.”

2. The anatomy of this material conditions of life has to be sought in political economy. The real structure of the economy on which the legal/political superstructure is erected (i.e., the forms of exploitation through which the surplus is extracted correspond to a certain arrangements of legal/political life).

Analytical Stages

1844-1845 – approach issues as 'philosophers' (Marx rejects LTV, writes treatise on alienation, etc.)

1846-1848 – beginning to develop their own economic concepts (surplus labour isn't there yet, etc.)

1848 – Revolutions in Europe (postdated the Second Great Depression of capitalism, 1844-1848; a period of tremendous revolt), which fail. Around this time, they're members of the League of Communists—there's a debate over the relationship between politics and economics, whether you need propitious conditions, or not. This incurs a charge of lack of radicalism, and they're expelled (is this true?)

1850-1857 – from this period comes the Grundrisse, which was unpublished

1857 – Gets a contract for two books, and plans on publishing “On Money” and then “On Capital”. First one does badly so contract is cancelled. These can be thought of the 'first drafts' of DK Vo. 1

1867 – Marx publishes Vol. I, DK (talking about his plan of capital – there's a loose movement from the abstract to the concrete, starting with 'value' and moving, eventually, to crisis)

1885/1893 – for Luxemburg/Kautsky, Shaikh is arguing, don't take Vol 2 and Vol 3 terribly seriously. They were content to use a few elementary propositions, but they cast aside the insights of the later volumes.

Example of 'immiseration' as showing you the importance of setting Marx's work in context.

Question, here, about how you go from theory to concrete. You have to decide whether you tweak theoretical apparatus when confronted with problems making sense of the concrete, or whether to dispose of the theoretical apparatus entirely. You need to have this dialogue.

The Marxist movement didn't have this dialogue. They substituted the idea of 'monopoly capital' for the unfinished tasks of Marxist economics—Kautsky and Bernstein had begun to introduce the notion of capitalism having entered a new stage ('the suspension of the laws of competition').

This had devastating consequences for Marxism, Shaikh is arguing. Competition is actually central. The laws of motion are derived from competition (the monopoly school will have to speak about 'power').

Four critical general themes, in Marx's work and Marxist arguments

1. The Laws of Motion:

1. Long waves are caused by conjunctural factors—due to a balance of forces at a given period of time. Shaikh calls these “coordinate tendencies,” and the movement will come from the balance of these forces. “Possibility theory.” Class struggle determines the rate of exploitation (Glynn and Sutcliffe, in the 1980s), or the State as asserting itself on these dynamics (Keynesian arguments). In this way of thinking about capitalism, Shaikh is arguing, are not “laws of motion” as much as they are historical tendencies. A wide range of paths are possible.

2. Overriding factors—a hierarchy of forces/tendencies, in which some are dominant. “Necessity Theory.” In contrast to the first way of thinking about capitalism, here there is a very strong sense in which laws will assert themselves over contingency.

2. Competition—Marx calls it the locomotive force of 'bourgeois economy', though competition will give rise to concentration (increasing capital-intensiveness) and centralization (more and more things coming under the aegis of a single capital)

1. Marxist traditon (competition and centralization leads to monopoly, which leads in turn to the end of competition)

2. Shaikh's view of Marx (concentration/centralization in turn intensify competition—they don't negate competition, in other words, but intensify it. 'bigger and better' weapons, in effect—the war becomes more intense.)

3. Crises—a confusion between 'cycles' and 'crises' (or Great Depressions). Marx and Engels themselves shared this confusion. Here, there's also the question of the loss of the falling rate of profit from Marxist accounts of crisis (the Marxist tradition rejects it)

4. Role of the State—Marx didn't himself write about the State in tremendous detail, but things like 'budget deficits', etc. can be derived from propositions in Marx. If you don't do that, though, then the State becomes incorporated into one of these 'power' conceptualizations—you are a Keynesian, in effect. Marx has an argument about capitalism's perpetual failure to generate “full employment” on a world scale--this is directly contrary to the Keynesian notion that full employment is a stable state. This is a foundational contrast.

anwar shaikh, david ricardo (lecture 5 – 09/28)

Ricardo wants to know how to establish the relative influence of the relative capital-labor ratios (viz-a-viz the Z_ij term which involves the calculation of average profit-wage ratios)

(1) Numerical illustration (so the spreadsheet shows that K/L difference of 100% translates to a price difference of 10%)

(2) Z_ij depends on the profit rate. So let me hold everything constant, but vary the wage rate; even if you bring the profit rate down, enormously, relative prices will still not vary much more than 7%. The change in the relative price, in percentage terms, is going to be less than roughly 7%. [Here we have the discussion of Schwartz and the ingenious idea to compare peak to trough, which has the effect of keeping technology constant amidst turbulence—profit rates drop in a recession, but he showed that relative prices aren't terribly sensitive to a drop in profit rates]

Ricardo says that the market wage oscillates around a 'natural price of labour'--what is this natural price? It depends on the quantity of food, necessary, and conveniences which have come to be habit for the reproduction of labor. It's not a physical subsistence wage; it's a social process of producing a standard of living (pg. 96-97).

Ricardo's Theory of (Differential) Rent

We are not discussing the 'leasing' of produced goods (that's going to be derivative of the 'selling' of produced goods).

Ricardo proceeds instead in the following way.

At the beginning of the story, the price of corn is based on the cost plus the natural profit rate. But as you proceed towards less and less convenient and then fertile land, the productivity of labour will fall. The costs of production on less fertile and more fertile land will be different. Those on good land, of course, will then be able to mark up a bit. This is where rent, for Ricardo, arises. (Note that the transition from Land A to Land B depends on the price having increased enough to make it possible to make normal profits on Land B, which is a result of demand putting ever-increasing pressure on supply)

What about technical change? Well it will lower the price of corn—but it will also lower the price of steel. But there is still something specific about the price of agricultural goods, because of relative differences in fertility on land (is this why? Marx will object to this, arguing that technical change can obviate differences in fertility). For this reason, though there are various forces on this ratio, the ratio of price of agricultural goods to the price of industrial goods will rise (because the price of corn is on an upward tick, all else being equal).

The connection to rent, then, is fairly clear. It is the landlord's charge for the 'excess profits' (I can't charge you more, of course, otherwise you'll pick up and leave). The question of the length of the lease, of course, relates to this dynamic—for the producer it's better to have a longer lease b/c prices will be rising (a fixed rent), but for landlords it's the opposite.

Rent, remember, is not just affiliated to a specific class—it's an economic category. So even if I'm my own landlord, I will get an abnormal return (it will be profit + rent).

(There's a question, also, of what determines 'rent' on the very first plot—Marx will speak about this as 'absolute rent')

(A link to the question of excess profit between firms, too—can treat 'new lands' as 'new investment'. So if you want to measure the rate of profit you want to look at the rate of return on new investment, Shaikh is arguing).

If you follow the 'tiered' logic of Ricardo's argument, you will see that rent is going to rise persistently (as you move to less and less fertile land). So we've established that (1) the price of corn is going to rise, that (2) rent is grounded in the difference between ruling natural price and natural price on better lands, and that (3) rent is going to rise.

Now we may want to know about the price of land. It is, for Ricardo, the presently-discounted value of expected income from that land. It is not from the cost of land, of course, which is effectively zero, (The price of land, of course, will as a result be dependent on the interest rate. If you have land that yields rent of $100 and the interest rate is 10%, you'll sell it for the equivalent of a bond equivalent in years to the expected longevity of the land)

There is also, in Ricardo, an acknowledgement that an element of 'risk' enters into the calculation of the profit rate.

Finally, for Ricardo, the thing that makes landlords richer and richer also kills capitalists. This is Ricardo's theory of the falling rate of profit (Smith saw this, but didn't have an explanation). Because of the diminishing fertility of land, the ruling profit rate will fall (since it's set at the margin).

[There's a claim, here, about the determination/identification of the profit rate that I don't fully understand—which presumably explains how the profit rate in corn ramifies throughout the economy -->The answer to this last question, of course, is through the wage-basket. The productivity is declining in wage-basket production, which means that the price of labour will rise. And this will be behind the declining rate of profit.]

[Also interesting question regarding the relationship of the profit rate to the interest rate. Smith will argue that they're proportional. Shaikh is making the point that it will depend centrally on inflation/the price level].

anwar shaikh, adam smith/david ricardo (lecture 04 – 09/21)

key, Smith's argument re: labor and price: the ratio of the price of two commodities will be equal to ratio of labor time of these two commodities if (a) all value added goes to labor; (b) part of value added goes to labor, rest goes to capital/landlord, but in the same proportion for both. (c) but natural profit in a sector is not determined in proportion to its labor time but rather in proportion to its capital (because the natural profit in any sector is the uniform rate of profit multiplied by the amount of capital invested. So obviously, if the capital labor ratios are equal across sectors, then the natural profit is also to proportional to labor in each sector, which means that natural prices are still proportional to labor time) [the equation is: natural profit = rate of profit multiplied by capital invested ]

1. what determines the uniform rate of profit? we want to know what determines the size of this difference, which will be influenced by the rate of profit?

2. what causes the difference in capital-to-labor ratio? differences in the capital labor ratio can cause differences between relative prices and relative labor-times – how do they do this?

There is a deep logic to this. Ricardo is going to answer these two questions that Smith leaves unanswered (indeed, he's going to start with them).

- - - - -

the first question that Ricardo addresses: what determines the profit rate? let's suppose that we abstract away from differences in capital-labor ratios, and think of the output as one whole (made of parts of the same substance). Ricardo will argue that this is justified, because you can represent things in terms of common inputs/outputs.

this is where we get Ricardo's corn-corn model (economy as a single sector).

Ricardo's answer is that it will depend on the conditions of production in corn (abstracting, remember), and the wage rate.

you have a hundred workers, and your wage rate is .008 corn bushels/worker

you will need .8 bushels of corn in advance, of course.

you will employ these .8 bushels in the course of production

your output for these hundred workers is 1 bushel of corn (remember, your output must be greater than your cost, for this to make sense)

the profit is .2 bushels of corn.

your profit rate (profit divided by capital) is 25%

here it's very clear, then, that the profit rate is dependent on the level of technology and the wage rate. he's solved the first problem in Adam Smith, which is the question of the determination of the profit rate.

we have more.

what happens if I was to raise the wage rate, to .009? profit goes down, as does your profit rate. So Ricardo establishes the antagonistic relationship between wages and the profit rate.

economists will say, “but the economy is not one sector?”

Sraffa's reply was simple. think of this model as an average sector, which becomes the center of gravity of a complex economy (any given wage in that sector will give you the profit rate). this sector will have the property that outputs and inputs will be made of the substance.

so we have an argument not just about a single sector, but about a general sector (Marx has a concept of the “standard industry,” which he doesn't develop).

the second question relates to the issue of relative prices. when we have acknowledged that capital-labor ratios are not equal, how do differences in the capital-labor ratios affect relative prices? (see spreadsheet—the difference between the capital-labor ratios is 'muted' in the difference in relative prices)

to look at the effects of differences in the wage rates, you increase the wage rate in the corn sector (which raises the prices). But you will see that this doesn't greatly affect relative prices.

having done this reasonsing and analysis, Ricardo's hypothesis is that relative prices are not very sensitive to distributions in the changes of income. the dominant determinant is the capital-labor ratio, and the secondary element is the distributions of income.

(NB: the natural price is not necessarily the price you will get on the market, remember—you have to fight for the natural price)

Ricardo couldn't run this whole thing empirically, because he didn't have any information on direct and indirect labor time. We, however, have input/output tables, which were started by the Soviets, but are now published regularly.

the main point of all of this is that the center of gravity is set, structurally. the second row in Shaikh's table (Price of Production vs. Market Price) would suggest that supply/demand, taxes, monopoly, etc. can only explain 8.2% of the deviation from Mkt Price.