The Counterfactual Method of Marx's Theory of Surplus

The aim of this paper is to show that Marx supports his theory of surplus value by developing a counterfactual argument, that is, by comparing the 'normal' state of a capitalist economy against a hypothetical state in which no surplus is produced. Marx then divides his analysis of value into three successive steps. The first deals with the production of new value in the sphere of production; the second with the process of creation of surplus value, both in the sphere of production and in the sphere of circulation; and the third with the process of equalisation of the rate of profit, which is accomplished via capitalist competition in the sphere of circulation. The paper proposes a formalisation of the three-step analysis and of the counterfactual argument. Marx's three-step analysis is shown to be a scientific analysis of the hidden connections between social relations (expressed in labour flows) and commodity exchange; thus it is not a useless detour.     

Say’s Law,Marxian Crisis Theory and the Interconnectedness of the Capitalist Economy

ABSTRACT

Scholars have long debated exactly why Marx felt that general gluts were not just possible, but inevitable. This article argues that Theories of Surplus Value anchored that necessity in the complex interconnectedness that characterizes capitalist production. There, Marx’s criticism of Say’s Law builds on a version of crisis theory that begins with raw material shortages in a leading sector. The disturbance is then transmitted through the many inter-industry linkages in the capitalist economy. What starts as a supply-side shock in a leading sector is transformed into a broad crisis of aggregate demand as workers are laid off and businesses fall into insolvency. This article argues that Marx’s later discussion of other types of crises in Capital can be read as consistent with this approach. A severe profit squeeze in a leading sector (whether originating in intermediate good prices, market demand, rising wages or rising use of fixed capital) necessarily turns into a general glut. In this context, Say’s Law becomes an irrelevant theorem concerning an imaginary economy. What Marx sees as fundamentally new under capitalism is not the use of money and the separation of sale and purchase, but massive interconnectedness.     

Error or absurdity? A non-cognitive approach to commodity fetishism

Abstract

Karl Marx presented his theory of commodity fetishism as an explanation of the mysterious appearance of social relations in a system of commodity production as natural phenomena. The standard interpretation of this as a failure to perceive capitalist social relations correctly depends on a particular modern sense of ‘natural’. If classical political economy and Marx used ‘natural’ in the Aristotelian sense, commodity fetishism appears quite differently: not as a cognitive error but rather as a manner of living under commodity production, one that is not wrong but absurd, the word fetishism tying commodity production to pre-Enlightenment, preliterate peoples.     

Marx,Finance and Political Economy

ABSTRACT

Shortly after the publication of Volume I of Capital, the financial requirements of capitalist enterprise forced the financial innovation of bond and stock finance for joint stock companies. Marx intended to re-write Capital in order to incorporate this change. He did not achieve this. The economic analysis of capitalism with long-term finance was undertaken by Hilferding in his Finance Capital. Thereafter, a strand of economic analysis of production and distribution emerged in the work of the Austro-Marxists, Veblen, Keynes, Kalecki, Steindl and Sweezy, and the Italian Kaleckians, Joseph Halevi and Riccardo Bellofiore, which incorporated the change made to the structure and dynamics of capitalism by long-term finance. However, this shift in capitalist financing has largely been ignored in economic theory, while much of the heterodox analysis that seeks to challenge the role of finance in contemporary capitalism has not integrated finance consistently. The change from the classic capitalism to finance capital raises important questions about the meaning and relevance of Marx’s work today.     

Sraffa’s Constructive and Interpretive Work,and Marx

ABSTRACT

This article provides a summary account of Piero Sraffa’s constructive and interpretive work on the classical approach to the theory of value and distribution and its relationship with Marx’s contributions. It is shown that in the early phase of his constructive work Sraffa developed his equation systems by adopting a ‘physical real cost’ approach and a strictly objectivist point of view, and completely eschewed Marx’s labour-based approach and the related Marxian concepts. Only at a later stage did he explore systematically the relationship between his own modern re-formulation of the surplus approach to the theory of value and distribution and Marx’s contribution. He considered Marx’s most important analytical contribution to the further development of the surplus approach to consist of the re-integration of circular production relations, which allowed him to see the existence of a maximum rate of profits and its role in an analysis of accumulation and technical change.     

Shadow Money in the 19th Century: Is Marx Relevant for Understanding Contemporary Shadow Money?

ABSTRACT

The growth of shadow money, since the 1980s, has implications for both central bank policy and the theorization of money. However, modern shadow money has a historical analogue in the private bill market of 19th century England This article explores the relevance of Marx’s logical and historical analysis of the evolution of the forms and functions of money in capitalist economies, and his concrete analysis of the bill market in order to understand shadow money today.     

The physiocrats' concept of labour: A difficulty in Marx's interpretation

Abstract

This article explains the difference between the concept of labour developed by the Physiocrats and Marx. We show that Marx's interpretation based on Turgot is questionable. Whereas Marx bases his ideas on a Lockian definition of labour which puts labour at the origin of value, Quesnay and his disciples develop a mechanistic definition of labour established on Neo-Cartesian foundations. This particular concept of labour then combines with a bio-physical definition of production. The theory of the net product is therefore re-interpreted.     

The employment contract with externalised costs: the avatars of Marxian exploitation

Abstract

The paper pursues two aims. The first is to argue that the foundation of Marx’s theory of capitalist exploitation is to be found, not in the labour theory of value, but rather in the contract of employment, the legal frame of the capital-labour relation. The second is to suggest that the partial externalisation of the reproduction cost of labour power has been an important source of relative surplus value, along with the productivity increase, emphasised by Marx, in the industries supplying wage goods.     

Marx and Kalecki on aggregate instability and class struggle

Abstract

Michal Kalecki developed his original model of the business cycle in the early 1930s. Several versions referred as versions I, II and III have been developed until the late 1960s from which Kalecki draw three central propositions on instability and class struggle: (1) the capitalist system “cannot break the impasse of fluctuations around a static position” unless it is shocked by “semi-exogenous factors”, (2) the dynamics of the profit rate and investment – as in version I and II – may be disconnected from “class struggle” and (3) when class struggle impacts the dynamics of the economy – as in version III – this is happening in a context in which expected profitability of new investment projects is negatively related to the profit share. In this article, we want to show that each of these three proposals represents key differences with Marx.     

How did it all begin? Adam Smith on the early and rude state of society and the age of hunters

Abstract

Scholars tend to examine Smith's historical approach as a whole from the perspective of the four stages theory. This leads to a neglect of Smith's ability to use history in different ways as his different purposes require. This article distinguishes Smith's recourse to primitive society with respect to his purposes in Wealth of Nations and in Lectures on Jurisprudence. In the former, Smith analyses the capitalist economy, thereby laying emphasis on capital and the division of labour in his account of wealth. In the latter, he explains the evolution of institutions in order to challenge contractarian accounts of government.     

Class Struggle or Embedded Markets? Marx,Polanyi and the Meanings and Possibilities of Social Transformation

Marx and Polanyi both held that socialism, in one form or another, was a preferable and possible alternative to capitalism. Their ideas are seen to offer theoretical tools to understand the tensions and contradictions of capitalism, and to inform ways to overcome them. This paper discusses Polanyi's work from a Marxist perspective in order to illuminate his strengths and weaknesses. Its main focus is to discuss Polanyi's juxtaposing of commodification against exploitation, in diagnosing the problems of capitalist expansion. We suggest that by juxtaposing these two moments, Polanyi not only misses out on a crucial arena of capitalist activity (exploitation), but also undermines his own explication of processes of commodification. This has deleterious consequences for his understanding of the prevalence of poverty under capitalism. It also means that his vision of social transformation and of socialism is profoundly different, and potentially antithetical, to that of Marx. We suggest that for Polanyi's conception of de-commodification to gain greater traction it needs to be combined with Marx's analysis of exploitation and class struggle.     

Refugees as Surplus Population: Race,Migration and Capitalist Value Regimes

ABSTRACT

Refugees and migrants are often studied as though they have no relation to the racial and class structures of the societies in which they reside. They are strangers to be governed by ‘integration’ policy and border management. Refugees and migrants are, however, subjects of contemporary capitalism struggling to render themselves valuable capitalist modes of production. I study the government of refugees and migrants in order to examine capitalist value regimes. Societal values and hierarchies reflected in capitalist modes of production impact on struggles of racialised subaltern groups to translate body power into valued labour. Marx’s account of surplus populations points to the common marginalisations of people called ‘refugees’ and other subaltern groups struggling to translate their body power into valorised labour. The essay includes a study of the gentrification of a district in Budapest, and its transformation into a means for the reproduction of capital, leading to the marginalisation of groups who no longer fit the new value regimes. Studying refugees as surplus populations allows for a sense of the common marginalisations of subaltern and racialised groups before capitalism, and questions the treatment of refugees and migrants as ‘strangers’.     

Marx and Ricardo on machinery: a critical note

This article critically discusses the important and relevant—not to mention controversial— views of Ricardo and Marx on the impact of machinery on labor productivity, the organization of production and the wages and employment prospects of the working class during the capitalism of their day. First, the article turns to Ricardo’s assessment of the introduction of machinery and its likely effects on the laborer and the rate of profit and accumulation—one which went through a substantial revision (and reversal) between the first and third editions of his Principles of Political Economy and Taxation. Then, we discuss Marx’s own critical analysis of the historical development of machinery and its impact on the labor process, the so-called “compensation principle,” and how the rising organic composition of capital ostensibly generates a “redundant or surplus-population” during the course of capitalist development. We highlight Marx’s intellectual debt to Ricardo, John Barton (and George Ramsay) insofar as his theory of technological unemployment is concerned. Lastly, the article summarizes the views of Ricardo and Marx and offers some concluding remarks.     

The market and exploitation in Marx's economic theory: a reinterpretation

Adopting the view that Marx's notion of 'commodity' has a widerreach than is usually supposed, and that it is this notion,rather than a 'labour theory of value' that is the cornerstoneof his economic theory, this paper shows that Marx's accountof capitalist exploitation is one that accords equal priorityto the production and market domains. Central to this demonstrationis an unorthodox explanation as to why Marx posits two alternativerules of prices in Capital.     

Will the MEGA2 edition be a watershed in interpreting Marx?

Abstract

The MEGA² edition is a watershed in interpreting important aspects of Marx’s oeuvre, but not all of them. It provides hints as to why Marx failed to complete his magnum opus, Capital, and informs about his doubts regarding the “law of motion” of capitalism centred on the “law of the falling tendency of the rate of profit” he was keen to establish.     

The Books of Crisis and Tooke–Newmarch excerpts: a new aspect of Marx's crisis theory in MEGA

Abstract

The paper explores a new aspect of the development of the Books of Crisis: the fact that Marx’s empirical research on the 1857 crisis in these notebooks was undertaken as the direct continuation of his study of Thomas Tooke and William Newmarch's A History of Prices. Our investigation will provide clues to better understand the structure and contents of the documents. Particularly, we provide new evidence for why Marx started his research on the 1857 crisis with the French economy, which managed to steer clear of the crisis, rather than with England, which was already acutely affected by it.     

Keynes‐Marx and Keynes‐Wicksell Models of Monetary Growth: A framework for future analysis

This paper reconsiders and generalizes a dichotomizing two-sector real growth model of Marglin which claims that the steady state of capitalist economies is plagued by secular inflation. We show that this implication need not be true from the perspective of a more general steady state analysis and that the Marglin model can be embedded into a general Keynes‐Marx‐Friedman or Keynes‐Wicksell framework where money is superneutral, where therefore inflation is due solely to excessive monetary growth, where the private sector is basically asymptotically stable and where there is a steady state rate of employment that differs from the 'natural' rate of employment of monetarist models of inflation. We consider this model a benchmark model that requires equally general alternatives if the above implications are to be rejected.     

Austrian Economics,Socialism and Impure Forms of Economic Organisation

Modern supporters of the Austrian school of economics maintain that their critical stance towards impure forms of economic organisation - such as the mixed economy - grew out of the arguments of Mises and Hayek during the socialist calculation debate of the 1930s. The paper assesses the two theorists, contributions in the debate and argues that their ideas cannot provide the basis for a general rejection of impure forms of economic organisation. First of all, and contrary to most modern Austrians, who consider the contributions of Mises and Hayek as essentially consistent, it is argued that Hayek's critique of socialism is much more effective than Mises' as it rests on his concept of tacit knowldge and on an evolutionary account of the emergence of capitalist institutions. However, the paper goes on to argue that, if Hayek's critique of state intervention is to have any relevance for contemporary capitalist economies, it must be in a position to show the non-viability not only of a fully centrally planned economy of the Soviet type but also of the mixed economy. It is argued that it is precisely in this that Hayek's evolutionism fails, for his teleological approach is not persuasive in ruling out the possibility of impure forms of capitalism in a manner that is consistent with truly evolutionary - i.e. non-teleological - ideas.     

Searching for New Jerusalems: P.H. Wicksteed’s “Jevonian” critique of Marx’s Capital

Abstract

In 1884, P.H. Wicksteed published a critique of the first volume of Marx’s Capital, the first detailed analytical encounter in English between Marx’s value theory and the new discourse of “marginalism”. In revisiting that episode, this article has three principal objectives. The first is to show how Wicksteed developed his understanding of political economy, as he moved from initially following Henry George’s Progress and Poverty. The second is to examine why Wicksteed’s defence of George necessitated criticizing the Marxist Social Democratic Federation. The third is to show that Wicksteed’s criticisms of Marx were simply incorrect.