Memo to Marxist and mainstream economists on utility and social labor

I spent the weekend at the EEA annual conference in Manhattan, and as usual when mainstream economists interact with Marxists, and vice versa, these gatherings become much like a Babel tower, where people exchange confused stares once the respective vernaculars fail to communicate.

So, here, let me attempt some translation and clarification of key concepts:

We Marxists believe that mainstream economists don’t get the point of Marx’s labor theory of value, which in fact is —duly generalized — a labor theory of any and all social structures.  The economists’ interest is limited to pinning down relative prices.  The issue of how much importance a society (almost entirely reduced to markets) attributes to one good in comparison to that of another good consumes all their curiosity.  (Among the economists who share the view that the theory of value is all about relative prices, one may include Joan Robinson, Piero Sraffa, and virtually the entire Cambridge UK crowd).  But the what, in the last analysis, is being compared appears irrelevant to them.  Samuelson (1952, “Economic Theory and Mathematics,” AER 42(2), pp. 62-63) famously quipped:

I suspect that certain cultures develop certain ways of tackling problems. In nineteenth century German economics it was popular and customary to ask about a problem like interest or value: What is the essence of interest or value? After this qualitative question is answered, then the quantitative level of the rate of interest or price-ratio can be settled. Now I happen to think that this is sterile methodology. But I cannot blame it on the German language. 
Menger said that mathematics was all very well for certain descriptive purposes, but that it did not enable you to get at the essence of a phenomenon. I wish I thought it were true that the language of mathematics had some special faculty of drawing attention away from pseudo problems of qualitative essence. For, unlike Menger, I should consider that a great advantage.

In spite of Samuelson (and Sraffa, etc.), I will argue that, when mainstream economics (from Pareto on) moved away from utilitarianism and emptied the concept of utility from any “metaphysical” content — i.e. it turned it into an abstraction that only represents a (binary) preference relation predicated on a set of alternative uses of wealth (as a premise on which to erect the demand relation, etc.), they made a fateful move that, on the one hand, got them closer to the true nature of social (e.g economic) relations, while, contradictorily, on the other hand, distanced them from such true nature rather drastically.

How did this operation get them closer to the truth?  They got closer to the truth because with their new formalization they were capable of clarifying more rigorously the quantitative structures involved — namely the determination in a highly abstract sense of the vector of relative prices that at each given time guides the allocation of (in Marxist terms) the productive forces of labor in a highly idealized capitalist setting.  And, a well-versed-in-Hegel Marxist would admit that a quality is a rather limited, one sided abstraction unless you determine its quantitative bounds — its measure.

How did they get further away from the truth?  Firstly, they revealed with their action how scared they were about touching up on the ultimate human substance involved in so-called “economic processes”: the qualitative aspect of value burned their hands.  And why wouldn’t that be a legitimate matter of inquiry?  The utilitarians, at least, had the notion that the calculus of human pleasure and pain underpinned the allocation of the productive forces of labor across alternatives and, in the last analysis, across the various human needs.  The use of this framework by Menger and the founders of the marginal approach was a natural step.  Their aversion to socialism may have prevented them from examining Marx’s propositions with an open mind.  The feeling was mutual.  On the other side of the divide, the Marxist response (by an overworked Friederich Engels,[*] and then by Werner Sombart, Rudolf Hilferding, Nikolai Bukharin, et alia) was one of impatience and rejection.  The socialist movement seemed to be in a roll: No time to doubt it’s own established doctrine.

As a result, the point was missed.  And for this, I address now my fellow Marxists.  With the benefit of hindsight: A more dialectical reply to the marginalist challenge would have pursued the thread of utility to its logical conclusion:

  1. To start, accept prima facie the notion that the determination of relative market prices (or, over the long run, as the noise of short term variations smooths out, of the relative prices of production) has some connection with what people anticipate to experience as they use or consume the goods involved. 
  2. Note that this type of subjective activity (the experience of consumption in the narrower sense, if limited to the sensations of pleasure and pain) is rather passive and doesn’t quite distinguish us, humans, from other animal species.  The higher functions of our bodies, those we convey in the category of rational thought, are absent or eclipsed.  In fact, what is specifically human in our metabolic exchange with the rest of nature is not consumption in that narrow sense, but production: the purposeful or conscious transformation of nature into a world for us, a world that fits our designs or serves our needs as humans.  
  3. Remark that, in this light, consumption is only specifically human as it becomes more purposeful and, hence, a mere subordinated element of the process of production considered in its recurrence and totality, i.e. an element of the process of reproduction.
  4. Point out that that the guiding force in the process of production is, indeed subjective activity: conscious human activity, i.e. human labor.
  5. Note also that, once consumption is viewed as a specifically human activity, then the whole point of consumption — i.e. of the personal production of oneself — is the expansion of that specifically human attribute: the productive force of our labor.  For, why do humans consume in the last analysis?   If it is for mere survival as our instincts dictate, then we are barely raising above the rest of nature.  So, what do we reproduce ourselves for, if our reproduction is to be mindful?  It stands to reason that qua humans we reproduce ourselves only to expand our humanity, which amounts to saying: we reproduce ourselves to expand the productive force of our labor.  As I like to put it, paraphrasing the title of Piero Sraffa’s main work, social life is the production of humanity by means of humanity, which is to say, the production of productive force of labor by means of productive force of labor.
  6. So, admit that the marginal school was right that value was about determining the relative importance of things for us, which indeed requires comparing their relative usefulness, but that this does not deny that the comparison is, ultimately, a comparison of relative “costs” and “benefits” in terms of the productive force of labor.  It is all about us. We cannot measure the importance of things for us but by reference to ourselves.  Things matter as a projection of our humanity. To paraphrase Protagoras: We humans are the measure of all things.
  7. Remark that since the division of labor, the existence of labor as a fragmented mosaic of diverse activities embodied by different individuals, is only an element or expression of the combination or social unity of labor.  No society and, hence, no humanity are possible if labor remains divided.
  8. So, note that the relative importance of goods, i.e. the determination of their value, is not individual, but social in character — that the social character of labor under capitalism is mediated by market exchange, that the aparent autonomy of the private producers from one another is relative and, even illusory, and thus that the values of commodities represent a synthesis expressing the social validation of individual valuations (of individual needs and powers).  Marx was entirely justified in presenting usefulness or use value as only a premise, but not the specific content or “substance” of value.  Value is, like Marx suggested in volume 3 of Capital, the particular historical form that the relative social importance of goods takes under capitalism — thus implying that deciding on the relative social importance of goods (and its proper practical quantitative determination)  will remain a task also in an organized, planned, socialist society.[**] 
  9. It is only in this sense, of not acknowledging the social character of seemingly independent private production under capitalism, not seeing that the division of labor imposed in fact a rigid interdependence among the different units and branches of production considered as a totality, that the dismissal of the determination of the content of value in terms of utility (in the utilitarian sense) as subjective and, hence, partial, and the affirmation Marxian determination of value in terms of social labor as (socially) objective and, hence, more comprehensive was apt.  Only in that sense: labor, at its point of direct existence as individual labor, is as subjective an activity as the enjoyment of consumption.
  10. Conclude that, if society is this small portion of the universe that has evolved dynamic, active self reflective properties that we characterize as human proper, then utility dissolves into labor.

[*] In the preface to the volume 3 of Capital (in M&E, Collected Works, vol. 37, p. 13), Engels devoted half a paragraph to, in passing, deride the “Jevons’ and Menger’s theory of use value and marginal utility.”

[**] Given the scant importance Marxists have paid to this passage, here is the quote (Marx, Capital, vol. 3, in M&E, Collected Works, vol. 37, p. 868), with my emphasis:

Although the form of labour as wage labour is decisive for the form of the entire process and the specific mode of production itself, it is not wage labour which determines value. In the determination of value, it is a question of social labour time in general, the quantity of labour which society generally has at its disposal, and whose relative absorption by the various products determines, as it were, their respective social importance.

And here is Engels (Anti-Duhring, in M&E, Collected Works, vol. 25, pp. 

Hence, on the assumptions we made above, society will not assign values to products. It will not express the simple fact that the hundred square yards of cloth have required for their production, say, a thousand hours of labour in the oblique and meaningless way, stating that they have the value of a thousand hours of labour. It is true that even then it will still be necessary for society to know how much labour each article of consumption requires for its production. It will have to arrange its plan of production in accordance with its means of production, which include, in particular, its labour-powers. The useful effects of the various articles of consumption, compared with one another and with the quantities of labour required for their production, will in the end determine the plan. People will be able to manage everything very simply, without the intervention of much-vaunted “value”.* 

* As long ago as 1844 I stated that the above-mentioned balancing of useful effects and expenditure of labour on making decisions concerning production was all that would be left, in a communist society, of the politico-economic concept of value. (Deutsch-Französische Jahrbücher, p. 95.a) The scientific justification for this statement, however, as can be seen, was made possible only by Marx’s Capital.

Is there something fundamentally important, not just formal but substantive, that Marxists miss by not taking seriously the mainstream approach to economics?  I believe so.  That is the concept of duality of resource allocation and value.  This, I will argue, is something that Marx did see (I will show evidence), but Marx’s followers (with the exception of Oskar Lange and the mathematical economic schools in the Soviet Union, Poland, etc.) by and large, couldn’t even see it go over their heads.  I will discuss that in my next post.


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