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, 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.

anwar shaikh, adam smith (lecture 02 – 09/07)

different questions of equilibrium ('turbulent regulation'), looking at industrial production index

1. growth is the normal state

2. growth is exponential (linear on a log scale)

3. growth is turbulent, too. the line is fluctuating

neoclassical economics does real violence to this graph and the trends it depicts.

then looking at US real investment index, which appears only more turbulent. “investment is more volatile than output” (based on looking further ahead, making a guess re: further prospects for profit—not simply prospects re: demand, as Keynesians would argue)

then looking at US real GNP per capita—the system has grown roughly ten fold in these terms. which is a feature, clearly, of productivity growth.

all this is built into the classical vision of political economy.

(for neoclassicals, growth occurs on a 'balanced growth model' – the premise is a static framework, in which growth enters as an 'addition' to the story)

fluctuations around an anticipated trend are called the 'business cycle'

looking at a business cycle graph—the first major depression was in the 1840s, setting the context for the revolutions of 1848; you also have a boom with the mexican war, and (dampened) boom with the civil war, WWI.

using the graph to draw the distinction between 'recurrence' and 'steady cycle' – booms give way to busts, and busts give way to booms. there is an already-discussed phenomenon of overshooting equilibrium, and then falling behind it, etc., etc.

(for neoclassicals, the mismatch between producer expectations and consumer preferences is assumed away, via perfect knowledge. the most sophisticated math cannot show stability—it can only make the assumption that equilibrium exists, and even then this entails its own assumptions. a lousy answer to a lousy question.)

- - - - - - - - -

how did the classical economists try to understand capitalism, given that they did not suffer from these sanitizing assumptions? they saw fluctuations and growth—this was Smith's premises.

not sanitizing, but analyzing.

Smith begins by arguing that “wealth of nations comes from labor which they apply to production.” (Chp 1, p. 1). annual labor is the fund which provides the nation with necessities and conveniences.

(for neoclassicals, its capital and labor—but, for classicals, capital is 'past labor'. labor is the active element. this is the sense in which Smith makes this claim).

Smith then goes on to say that not all labor is 'production labor' (“productive labor” is the term Smith uses—we will use 'production' vs. 'non-production' to remove the connotations of 'productive' vs. 'non-productive'). Smith mentions lords/king/army all as 'non-production' activities, not because they're worthless/'bad' but because it's defined on the basis of its 'effects.' in short, not defined on the basis of worth or even social necessity, but on the basis of its producing effects.

implication of this, of course, relates to social reproduction. production labor produces a certain amount—part of this goes to its own reproduction, and the remainder is a surplus product. this surplus product not only has to support re-investment, but has to support the king, the judiciary, the educational system, the army, the police, etc. the spending on non-productive activities can inhibit the growth of the economy (the means of violence, etc.--on this point of view, military activities may pump up demand, but they're also parasitic in this sense)

(for modern economics, anything supported by the market qualifies as productive. a Japanese minister made a claim about 'unproductive labor' and security in the USA)

given that production labor is the fund for new wealth, it's obvious that if you could increase the productivity of labor, you'd get more with the same labor. for Smith, the central factor in increasing productivity is the division of labor ('greatest source of increase in productivity')

comes, of course, from the natural propensity to 'truck, barter, etc.' this is 'mythic anthropology', and neo-classical economics will pick up on this part of Smith, in particular. (remember--one of the most elaborate form of the division of labor is a caste system; not driven by a caste system, but by social hierarchy. or gender, which also is not a choice; socially imposed. the idea that the division of labor may make you more productive is fine, but it should not excuse the mythic anthropology here).

in short: the social division of labor as voluntary choices made by free and equal human beings.

the division of labor leads to divisions in abilities—not due to inheritance, but due to training. Smith is clear that these are not natural traits, but socially given. (this is an important counter-point to conservative mythologies re: Smith)

also, the division of labor is limited by the extent of the market. how much can you increase the division of labor? well, if there's a limit to how many pins you can sell, so there's no point to try and make production more efficient. Smith is not very clear whether this is the pin market, or the aggregate market.

money, for Smith, arises from the division of labor—to facilitate the exchanges to which it gives rise. that special commodity which gets picked in the course of the development of exchange to facilitate the transactions (different times/places pick different commodities—furs were quite common, salt, tobacco, etc.).

value—Smith says that we want to distinguish between two different definitions. one is 'value-in-use'--the utility of some particular object. the other is 'value-in-exchange'--the quantity of other goods you can get for your particular object.

the former is about its usefulness, the latter concerns its exchange ratio

the world 'utility' for Smith does not mean what it means for 'neo-classicals.' today it means 'subjective satisfaction.' no way to compare across people—a psychological reaction to a commodity, or a thing. for Smith it simply means 'usefulness'--Smith says that air, for example, has great utility. doesn't want to confuse it with 'desirability.'

'value-in-exchange' is mediated by money, of course. if exchange rates are mediated by money, then you have 'price.' Smith's concern is to explain the laws of money price.

on the surface, the market price seems to be the issue. but classical economists thought that was trivial—we're looking for a central regulating mechanism. underneath the demand and supply is there a regular center of gravity to which price is attracted.

for Smith, that regulative principle is the amount of labor expended in the production of that commodity. next time we will pick this argument up.

isaac ilych rubin, a history of economic thought (1929)

part III: adam smith

(153): birth of classical school circa 1750 as science of industrial capitalism (this was their watchword and 'cause')

(155): seeing subordination of crafstman, rise of the putter-out and buyer-up. in short, the birth of the manufactory (1600s/1700s)

(156): important--but, at the end of the 1700s, the domestic system still competes with the manufactories (because they had not yet systematically begun to implement mechanization), and the former still had the advantage of no fixed-capital costs, and workers could have subsidiary income. more co-existence, than 'elimination'

(157-158): the manufactory did, however, signify the appearence of industrial capitalism and formaiton of an industrial proletariat, though it retained continuities with handicrafts in terms of technology

1. division of society into capitalists and laborers
2. comination of production based on division of labor

(160-161): protectionism/guilds were unable to stand in its way

(164): scotland was relatively advanced, economically, in the mid-18th century

(166): smith wasn't at all absent from the great practical debates of his day (rubin emphasizes this--mercantilists had been practitioners of economics, not theoreticians), even as he could be considered the forerunner of economics as a theoretical discipline. [he inveighed against protectionism, for example]

(167): importance of natural right to his doctrine (his moral doctrine, but also his economics)

(167-169): imp, natural right re: economics--economic progress will assert itself due to capitalist man being written in to the nature of things. Quesnay had a different conception, for which institutions were very important. but Smith was infused with optimism of his liberalism, in this sense. (this is the bedrock of Brenner's critique of neo-smithian marxists, remember)

(170): for Smith, economic intercourse is intercourse between commodity-owners. exchange, in short.

(171): an obvious tautology--Smith attributes to abstract man motives and aspirations that are in fact the result of institutions and history; he uses the motives and aspirations to 'prove' the necessity of these same institutions.

(173): Smith's optimism, for all his reservations, makes him the father of economic liberalism (ie, no state interference in ec. policy, free trade). but Rubin is arguing that this could only be unproblematic in the period of the 'revolutionary bourgeoisie'--his aim was not to defend the interests of capitalists.

(178): smith's assertion that division of labour is main source of productivity puts him squarely in the manufactory period.

(179-181): important--smith misses the distinction between the social division of labour (between occupations) and the technical divison of labour (within a firm). this represents a failure to distinguish between an economy of simple commodity exchange, and a capitalist economy.

(179): Rubin here speaks about two features of the classical school

1. not understanding the social forms of division of labour, because you are concerned with its material-technical aspects.
2. individuals enjoy a harmony of interests--spinner and weaver complement each other.
   

(181-182): apprehending the social division of labour did allow Smith to see our mutual interdependence, which was a 'great service'

(183): against mercantilists, Smith understood that money was merely a facilitator--it did not represent value, itself

(186-196): in short, Smith arrives at two conceptions of value. Rubin has a very lengthy argument re: why, having to do with Smith's 'methodological dualism'. but the main point is simple--this confusion is masked Smith is looking at a simple commodity economy; but when he looks at capitalism, he is unable to understand the 'exchange' of non-equivalents between capitalist and worker.

1. quantity of labour expended on production
2. quantity of labour which a given commodity can acquire or purchasee.
   

(198-201): important, Smith made a serious advance over the Physiocrats re: the concept of social classes, replacing a concpetion rooted in a conceptual division based on 'branches of industry' with a conceptual division based on revenue (profit, wages, and land rent). this meant he took a major step towards formulating the problem of surplus value, viz-a-viz the mercantilists (for whom it was commercial profit), and the physiocrats (for whom it was rooted in the nat. properties of the land)

(202): Smith 's picture of primitive accumulation is very benign; opposite of Marx's. root of capital is relative 'parsimony'

(202-204): important, Smith recognizes labour as the source of value of the product, which would mean wages is deduction. BUT he can't carry this through to its conclusion--he confuses 'theory of distribution' with 'theory of value', and begins to deduce value from profit/wages/rent. in other words, he starts with an understanding that profits and wages are exclusive, but then arrives at a position that sees higher profits mean more value.

(203-204): Smith's theory of general accumulation--doesn't accept the 'iron law of wages'/instead a confused position on the 'wage fund', Rubin is arguing. marked by an optimism about rising workers' wages, in contrast to Ricardo.

(206): unions not useful--for Rubin, this is because he predates the union movement

(209): theory of capital, 'private economy' (a private house rented out is capital) + 'national economy' (total productive stock in economy). BUT, according to Rubin, Smith is unable to reconcile these two definitions because of baseline confusions in his theory of surplus value.

(210-212): leaves out 'circulating capital' in his discussion of total reproduction (as does Ricardo, as does Say, as does Mill)

(214-215): Smith also misunderstands the distinction between unproductive and productive labour--for Rubin (Marx), it is about the relation of the labour to the production/expansion of surplus-value; for Smith, it is about the creation of a material object.

anwar shaikh, why classical political economy (lecture 01 - 08/30)

classical economists asked this question: how can we have patterns of recurrence? how can g. depressions recur?

the surprising answer, though, is that capitalism does not work through individuals' intentions. it runs 'behind their backs.'

the market possesses powerful internal structural patterns that emerge from the centrality of the 'profit motive'

what happened in the 1930's?

the system broke because the profit motive led it to that outcome.

the key point is that the classical tradition sees the system in these terms, in terms of a pattern (boom + bust)

classical economists do not mean the same thing as the modern orthodox economists by 'equilibrium'. they see boombs past it, and busts below it--whereas the orthodoxy is content to understand the economy at equilibrium.

neo-classical position--the idea is that equilibrium is a state of rest ("attained and held state"). a gravitational attractor. you're entitled to view equilibrium as a pretty good approximator of reality (analogy to a pendulum)

classical position--the equilibrium point is itself not fixed, and the system can itself move around it. we want to talk about equilibrium points, then, but as 'turbulent regulation.' order in and through disorder. the pattern occurs through overshooting and undershooting.

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what is it specifically about classical economists that distinguishes them from neo-classicals?

neo-classicals

1. self-interest as the primary human motive--rational economic man makes all decisions.
   
2. utility maximization--not just as a principle for understanding firm-level decisions, but also as a principle of behavior
3. firms are price-takers, they all take a common price. competition forces firms to produce at a common price (a competitive economy)
4. profits, wages, and technology is all equal between firms. everything is studied at equilibrium.
   
5. full employment is a stable and regular outcome. if there's unemployment, wages will be bid down, and workers will be hired (unemployment is a feature of government intervention, distortions, etc.) [remember, neo-classicals aren't worried about demand]

keynes and post-keynes

arose in a post-depression context. central argument is that economy can get stuck in a state of persistent unemployment, if there's a lack of demand. unemployment, in other words, is a feasible equilibrium state.

in this context you need the state. the state becomes an important complement to the market. to 'push' it up to a full employment state of existence, which can be a 'higher-level' equilibrium

classical

the inventors of modern economics, and in search of a deeper answer to these questions. unemployment, for example, can be sustained easily, if there aren't profits to be made.

you can't re-open factories if private profit is the dominant law, even if it's socially desirable.

a better understanding of the world we live in is offered by the classicals.

key features of classical political economy

1. economic acts are embedded in a social context. not abstract agents/firms, but embedded (this opens up possibility of thinking about race, gender, etc.)
2. focus is on industrial capitalism (not merchang capitalism, etc.)
3. emphasis is on the 'laws of motion'--patterns produced by capitalism. system is always 'changing and moving'
4. emphasis is also on competition, which has its own hierarchies and forms (amongst workers, between nations. the dominant form is between firms)
5. order in and through disorder
6. expansion and growth are inherent. the system is always moving.
   
7. incentive to mechanize is inherent in the system
8. conflict between private aims/incentives and social goals.
   
9. the state now appears in a very different light, as compared to both the neo-classical and keynesian models. classical economists are more likely to see the State as a State of the 'system.' a conflict between the profit motive and State intervention.
   

the main point--the purpose of the course is not to study dead economists, but about an alternative vision of the system we (today) inhabit.