Monday, August 18, 2014

Of value and wages

Back to work after a couple weeks on Holiday in which I had neither time nor desire to post (not for lack of ideas, as I was furiously engaged with my doctoral dissertation, which has received a substantial ooomph).

During this time I finished the "Principles of Political Economy and Taxation" by Ricardo, an almost neccessary sequel to my recent re-reading of Capital's first volume; the "Essays on Persuasion" by Keynes, and a quite stimulating book on essays about one of them ("Economic Possibilities for our Grandchildren"), edited by a couple of Italian proffessors with some very interesting contributions (those by Stiglitz, Phelps, Fitoussi and Boldrin come immediately to mind) and a very dissppointing one (by Gary Becker, no less).

Now what this relatievly intense dabbling in the arcane realm of classical (and in the last case, post-classical) economics has left me with is the fact that none of the authors mentioned (and, apparently, none of the ones they, in turn, reference) have the slightest explanation of what the value of merchandise is, or where it comes from. If you have no way of adscribe, calculate or anyhow assign a value to something, be it a material good or a service (labor) it is obvious that you will be hard pressed to come up with a plausible defence of whatever system to allocate those goods/ services you happen to favour, and it that sense both the Ricardian and the Marxian analyses of how society should be organized from an economic standpoint (i.e., how goods should be distributed, and what the proper wage level, interest paid to capital and rent should be) utterly lack plausibility (in favour of Ricardo we can say that when you are defending the status quo -a status quo that has been exceptionally favourable to you- you can at least claim that the onus of the proof lays on the other side... Marx can not claim such a defence). What has really surprised me is that they all fall back on the (quite unsubstantiated, if I recall correctly) claim originally made by Adam Smith in the "Wealth of Nations" that all value comes from labor...

Of course, such an origin flies in the face of our commonest experience: why would then more fertile land be more valuable than less fertile one, even before being worked on? (this is less of a problem for Ricardo than for Marx, as for him rent is a separate category, with its own separate explanation).  Why would gold be more valuable than iron (the explanation that Ricardo gives about it requiring so much more work for its extraction reminds me of the Aristotelian dictum that heavier objects fall so much faster than light ones, in proportion to their weight... it was not so difficult in both cases to disprove such easily quantifiable fallacies) Why would, of course, be some labor, according to the skill required to perform it, more expensive than other (if both took the same amount to reproduce, specially in an era of expanding mandatory education)?  My best attempt at an answer is that in the case of Ricardo it was due to intellectual laziness (surprising, I know... but the whole issue didn't interest him so much, as for him use value was a metaphysical abstraction, all he needed to care about was exchange value as expressed in prices, regardless of how it was originally justified), for Marx it was absolutely essential to substantiate his claim that only the proletariat creates value, that it was forced to undersell to the bloodsucking capitalists, and that being such a foundational feature of capitalism the only way to evercome such injustice was to overthrow the system wholesale and abolish exchange value altogether.

Which leaves us with the question of why Adam Smith, who was neither lazy nor interested in the system's overthrow, formulated the difference between use value and exchange value in the first place, and declared the only source of the second to be (in equilibrium conditions) the amount of labor required for the creation and transportation of the exchanged good... A question that will require a separate post (and a re-reading of the "Wealth of Nations", a perspective almost as dreadful as continuing with the 2nd and 3rd volumes of "Capital")

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