Monthly Review cites Fix

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Monthly Review cites Fix

Postby Ikonoclast » Tue Jun 11, 2019 4:45 pm

A Monthly Review article dated 01 June 2019, "Energy, Economic Growth, and Ecological Crisis" by Erald Kolasi, cites the work of Blair Fix in a long footnote:

Note 5 - "A major issue is the aggregation problem, one of the central weak points in all of macroeconomics. For an excellent, nontechnical introduction to the aggregation problem, see Blair Fix, “The Aggregation Problem: Implications for Ecological and Biophysical Economics,” BioPhysical Economics and Resource Quality 4, no. 1 (2019). For a more technical treatment, see Jesus Felipe and Franklin M. Fisher, “Aggregation in Production Functions: What Applied Economists Should Know,” Metroeconomica 54, no. 2 (2003): 208–62. The essence of the aggregation problem is the following question: Under what conditions can you add up a bunch of stuff and be certain that you have the right total value? The basic answer is that you can add things up when you have a stable unit of measurement, like mass or energy. In a natural science, like physics, unit stability is a critical requirement for measurement and aggregation. See Elizabeth Gibney, “Largest Overhaul of Scientific Units Since 1875 Wins Approval,” Nature, November 16, 2018. By contrast, aggregation is a meaningless concept with unstable units of measurement, such as commodity prices in economics. One cannot define or determine a “real,” inflation-adjusted aggregate through unstable units. Many economists find supposedly clever ways to get around this problem. In his famous 1956 paper, Robert Solow flatly declared: “There is only one commodity, output as a whole.… Thus we can speak unambiguously of the community’s real income.” In other words, he brushed aside the aggregation problem by creating an abstract economy with only one commodity. The flagrant absurdity of this move is par for the course in neoclassical theory, where ridiculous assumptions about the world are more common than breathing oxygen. See Robert M. Solow, “A Contribution to the Theory of Economic Growth,” The Quarterly Journal of Economics 70 (1956): 65–94. There are other critical concerns with using GDP as a measure of economic value, such as the fact that it does not take into account ecological degradation and vital social services. For more on this line of criticism, see James Ward et al., “The Decoupling Delusion: Rethinking Growth and Sustainability,” The Conversation, March 12, 2017."
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Re: Monthly Review cites Fix

Postby bfix » Tue Jun 11, 2019 5:30 pm

Thanks for posting this. Glad some Marxists are taking note of these problems. But are they aware that the aggregation problem applies equally to embodied labor? Meaning the aggregation problem brings Marxist theory to its knees?
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Re: Monthly Review cites Fix

Postby Jonathan Nitzan » Tue Jun 11, 2019 6:58 pm

1. Unlike neoclassical utility, Marx’s SNALT is a universal quantum. If that universal quantum is objectively measurable, there is no aggregation problem, at least not at any point in time.

2. Over time, though, changes in technology and workers' subsistence alter the SNALT of individual commodities, rendering Marxist growth accounting (M-C-P-P’-M’) meaningless.

3. In practice, none of this matter. Marxists do not measure SNALT directly. Like the neoclassicists, they derive it from prices – and when they do, they fall into the same aggregation trap.
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Re: Monthly Review cites Fix

Postby blairfix » Wed Jun 12, 2019 9:35 am

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Re: Monthly Review cites Fix

Postby Jonathan Nitzan » Wed Jun 12, 2019 10:51 am

I think both neoclassical utils and Marx’s SNALT are non-existent units, but for somewhat different reasons.

1. Consider the theoretical claims first. Like all fundamental units, neoclassical utils and Marx’s SNALT are abstractions – but they are very different abstractions.

In neoclassical theory, the utils derived from any given commodity are assumed unique to the agent consuming it and incommensurate with the utils derived by other agents. This is why economists, when they need to aggregate, drop the liberal credo of autonomy and liberty and assume that all agents are identical drones.

Not so with Marx’s SNALT. The socially necessary abstract labour time required to produce a commodity is constructed, from the very start, as a universal quantum. According to Marx, this quantum is comparable across all commodities, regardless of who produces/consumes them.

2. In practice, both abstractions fail.

Neoclassicists haven’t found a way to measure utils for any given agent, let alone to compare/aggregate utils across different agents.

Marxists haven’t found a way either to abstract concrete labour time or identify its socially necessary quantum.

As Shimshon and I explain in (2019, Chs. 5-8), these are not temporary obstacles but built-in impossibilities. And in our view, it is these impossibilities that make utils and SNALT non-existent entities.
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Re: Monthly Review cites Fix

Postby Ikonoclast » Wed Jun 12, 2019 6:46 pm

This is how I see these matters (which is not the same as me asserting that what I see is true). The aggregation problem indeed brings crude Marxist theory to its knees. However, Marx was a considerably more intelligent and subtle thinker than his more dogmatic followers. It is worth reading “The Fragment on Machines” from “The Grundrisse” (pp. 690-712).

Reading this fragment attentively we can see that the labor theory of value (LTV) is NOT put forward as a transhistorical verity. That is to say, the SNALT is not put forward by Marx himself as a universal quantum. It is not asserted as true for all societies in all epochs. Rather, it is asserted as true, to at least a first-order approximation, in the historical epoch of early capitalism. This was the era where crude industrialisation actually intensified labor. Men, women and children became wage-slaves and slaves to crude machines; the “dark, satanic mills” of Blake, and the blacking factories and counting houses of Dickens. The working day was lengthened, conditions made worse and new forms of poverty instituted. I mean slum living as opposed to “mere” vagrancy and imminent starvation, although unemployment and eviction could soon enough reinstate those conditions.

In this historical situation is it any wonder that labor appeared to the classical thinkers, after the Physiocrats, as the source of all production and hence the source of all value, outside the free gifts of nature? Is it any wonder that tools, machines and factories appeared quite clearly as congealed or embodied labor; wearing out (depreciating) in the course of production almost before one’s eyes, with the stages of production being relatively few and the crude machines frequently breaking down, clogging up and needing endless tinkering and attention to keep running? It (labor as the sole or main source of value) appeared so to the classical economists and also appeared so to Marx… at first. However, as Marx investigated and theorised further, “dialectical contradictions” arose to his view. We now call this arising of dialectic contradictions in a system, rational or real, “emergence”. The philosophical terminology changes, but the core concept remains the same. Marx makes all this clear when he imaginatively runs the clock forward to envision what history will bring and specifically how it will render obsolete the labor theory of value itself. I will come back to this point.

In the early industrial capitalist era, the LTV is instituted and socially instantiated in praxis by the very modes of wage labor AND value accounting by price founded by early industrial and finance capitalism and operating as a compounded socioeconomic or political economy whole. Labor IS creating most (use) value in that situation and is thus creating both reproduction value (for the reproduction of labor) and surplus value. It is the accounting by price, founded in turn on the laws of ownership, which is used as a control (capital as control or power) to apportion surplus real stuff (surplus to the subsistence and reproduction needs of labor) to enable a gross profit via sale of manufactured goods. Gross profit in turn may be apportioned to creating a fixed capital investment or to the creation of fictional capital (via capitalisation as CasP identifies) or to expenditure on elite, luxury consumption.

The LTV was not invented by the classical economists and Marx, it was discovered by them. It was instantiated in practice by the overall practices and systems of early industrial and financial capitalism. Labor was indeed creating all use value (to a first-order approximation and excluding free value from nature) as “measured” by price. A false, nominal or qualitative measure or belief (price in this case) nevertheless can inform real behaviour, as we know. People may act as if its true. People line up for the Eucharist, acting as if it is true. People line up for money, and with money, acting as if it is true in some way. In the case of money, no value is “but thinking makes it so” to reappropriate Shakespeare’s words.

The LTV is constructed immanently in functioning early industrial capitalism. Human labor at that time still makes most stuff directly or through machines as congealed labor. Price supposedly measures things but actually controls allocation. While the construction of prices varies in detail from the highly arbitrary (via the exercise of power), to the very rough heuristics of “general expected utility”, in terms of the prices allocated to myriads of items within the broad categories of labor, materials, fixed capital inputs, fictitious capital and owner/rentier “rights”, there are some real limits at the boundaries of some categories. Labor cannot be allocated less, via prices, than what the majority of labouring humans will tolerate in practice. This tolerance is highly variable but it has lower bounds set by the failure to socially reproduce labor (feed, house, rear and educate the next generation of labor) and even limits set finally by imminent starvation as a physiological bound.

The LTV was descriptive of real observables in the era of early industrial and financial capitalism. That is my contention here. The extant observables in turn were created by a complex amalgam of real processes and prescriptive rules (of ownership etc.) of the socioeconomic system itself. The LTV is however a general qualitative theory of one epoch. It is not a strict quantitative theory and it is not an epochally universal theory. In turn, the neoclassical utility theory of value is far more abstracted and removed from reality (of any and all eras) than is LTV when LTV is applied to its appropriate era.

Now, to get to the final crux of this post. How does Marx run the clock forward and predict the negation of the labor theory of value (hence demonstrating that he did not see the LTV as a transhistorical verity)? Consider these quotes:

“Once adopted into the production process of capital, the means of labour passes through different metamorphoses, whose culmination is the… automatic system of machinery… set in motion by an automaton, a moving power that moves itself; this automaton consisting of numerous mechanical and intellectual organs, so that the workers themselves are cast merely as its conscious linkages.”

“Rather, it is the machine which possesses skill and strength in place of the worker, is itself the virtuoso, with a soul of its own in the mechanical laws acting through it; and it consumes coal or oil just as the worker consumes food to keep up its perpetual motion.”

“Labour no longer appears so much to be included within the production process; rather, the human being comes to relate more as watchman and regulator to the production process itself… As soon as labour in the direct form has ceased to be the great well-spring of wealth, labour time ceases and must cease to be its measure.”
The above leads to:
“… the general reduction of the necessary labour of society to a minimum, which corresponds to the artistic, scientific etc. development of the individuals in the time set free, and with the means created, for all of them. Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth.”

The last phrase above commencing with “while it posits” is open to several interpretations. In what sense does capital (or capitalism) posit labor time as the sole source and measure of wealth? In the eyes of the classical economists it posits it. In my eyes (and probably Marx’s) it instantiates it in practice in one historical era. In the eyes of neoclassical economics something else is posited, namely the utility theory of value; a theory clearly meant to be transhistorical (axiomatic for all eras).

In the remainder of the Fragment, Marx almost retreats somewhat from the apotheosis of prediction he achieved in the above quotes. The conclusions seem almost too radical even to him as a dialectical thinker. He seems to be having trouble holding on to such a clarity of vision which portended the historically imminent overthrow of his earlier and laboriously derived theory. It perhaps proved hard to disavow LTV at a higher level of thinking when the rank and file “orthodoxy” had latched on to it for revolutionary justification and praxis. One could say that by the time Marx discovered and analysed the LTV (with its strangely composite objective/normative historically conditioned nature) it was already in the process of generating new emergent phenomena which would negate and obsolete it.
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Re: Monthly Review cites Fix

Postby Jonathan Nitzan » Wed Jun 12, 2019 8:16 pm

Jonathan Nitzan
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Re: Monthly Review cites Fix

Postby Ikonoclast » Wed Jun 12, 2019 11:17 pm

Jonathan Nitzan,

I agree with your caveats except perhaps for your last. The LTV has a qualitative ethical force in the era in question (and even in modern times in places like Apple's factory in China when at its worst). In addition, it had some empirical force as a central tendency (I think) in early industrial capitalism even though it and its ramifications did not prove fully or even substantially verifiable and quantifiable (and the theoretical target was constantly moving over time). We can completely agree that any objective central tendency validity of that kind (if any such validity did then exist) is lost in advanced capitalism.

Overall, I think political economy now needs to forget about quantifying economic values and specifically to forget about trying to compare or aggregate them by price (or any other) quantification. This means moving value judgements back into moral philosophy and out of economic costing rituals (as you correctly term them). There, I would adhere to a type of consequentialist ethics but that topic gets too big for this post.

Quantification should remain the realm of what can be empirically and scientifically measured and quantified. Hence, we might decide what level of dental health outcomes we want for the populace (in empirically measurable criteria). Then we allocate the real resources (including appropriately trained people) estimated to be necessary to reach that set of goals. Measure, review, reappraise standards, reallocate ... rinse and repeat... adding new methods, techniques, technologies as developed. Pragmatically and empirically, it's an iterative process.

Clearly, that ties us to an overall administrative state, with or without local cooperative governance, and to a very significant degree of statism and nationalisation in general. The dangers on that path are less, in my opinion, than those of oligarchic-corporate statism (which is what we have now) or warlordism (which is what I believe anarchy brings) provided that we effectively implement democracy, equal rights and tolerance.

This would not, by the way, imply that we educate citizens in STEM only. The Humanities are equally important. Professionals clearly need to specialize professionally while still needing a supplementary generalist and humanist education for their "duties" as informed citizens in a complex society. I have met relatively few practicing STEM professionals (as opposed to pure academic "STEMs" who can have a more philosophical bent to them) who can critique their own society and see through the obfuscations and fallacious reasonings of certain largely un-empirical endeavors like conventional economics and politics.

That's just my two bobs worth (twenty cents worth in dollar currencies).

As a footnote, I can certainly agree in the modern context that hunting for the SNALT is like "The Hunting of the Snark" by Lewis Carroll.

"They sought it with thimbles, they sought it with care;
They pursued it with forks and hope;
They threatened its life with a railway-share;
They charmed it with smiles and soap."
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Re: Monthly Review cites Fix

Postby Ikonoclast » Thu Jun 13, 2019 2:02 am

I entreat all in this discussion to read this carefully and in full if you have not come across it before.

“Marx’s Refusal of the Labour Theory of Value” by David Harvey. ... id-harvey/

This is the best short essay on, Marx's so-called "Labor Theory of Value" or really his "Value Theory of Labor" which I have ever read. David Harvey nails it in my opinion. It makes the theory as clear as possible in an astonishingly short space. Whether that clarity enables a judgement for validity or otherwise is another question. Certainly, Harvey ends up with a concluding statement of an almost complete CasP-like tone.

"Marx’s value form, I conclude, is not a still and stable fulcrum in capital’s churning world but a constantly changing and unstable metric being pushed hither and thither by the anarchy of market exchange, by revolutionary transformations in technologies and organizational forms, by unfolding practices of social reproduction, and massive transformations in the wants, needs and desires of whole populations expressed through the cultures of everyday life. This is far beyond what Ricardo had in mind and equally far away from that conception of value usually attributed to Marx."

I will reserve further thoughts at this stage until other comments are posted. I feel all my current thoughts are tentative rather than conclusive on the whole topic of "leftist" political economy, with my tentativeness rising in direct proportion to the expansion of my reading and thinking on the topic. (I am quite clear however on my rejection of orthodox, neoclassical and neoliberal modes of thinking. It is possible to be clear on what is wrong empirically, and even ethically, while still not being clear on precisely, and extensively, what is right.) What I do notice are clear indications that the most flexible and scientifically-conditioned thinkers on each side of the Marxist - CasP "divide" can get surprisingly conceptually close on certain some matters where they might still be thought to be rather far apart.
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Does this vector currency provide a solution?

Postby wayburn » Thu Jun 13, 2019 5:59 am

I am now 85 years old and I am beginning to forget things and to repeat things. I apologize for posting my ideas on a replacement for our failed old-fashioned monetary system in more than one place. I believe this vector-valued currency with the important component of eMergy solves the aggregate problem. Actually eMergy, by itself, solves most aggregate problems, does it not? I'm surprised that a forum that knows who Jay Hanson was is not familiar with eMergy. In any case, this is discussed under "Recommend a good political economy". I will replace it with a stub like this if I find it somewhere else.
Last edited by wayburn on Sun Jul 21, 2019 8:02 pm, edited 1 time in total.
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