Technology, Employment and Abstract Value

I remain utterly baffled with how poorly otherwise highly educated individuals grasp the most basic principles of economics. Scholars persistently, repeatedly, habitually mistakenly think that economics is about things. It is not. Economics is about value.

The latest occasion for my befuddlement are the works of Israeli historian Yuval Noah Harami. I am now finishing the third of Harami’s trilogy, not a small feat for a severe dyslexic, given the length of each of Harami’s volumes. (I only read books that I have really good reason to believe are significant.) Central to Harami’s dystopic narrative — he also has a positive narrative — is an economic analysis that is as bad, or perhaps worse, than the worst Silicon Valley techno-optimist analysis. It is astonishingly bad. In his defense, it is an analysis that is disturbingly common, although not among economists, to be sure.

If you have followed this blog for any time at all, then you will be familiar with Adam Smith’s story about the fire engine boy.

In the first fire-engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve, which opened this communication, to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his play-fellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour.

A Smith, Wealth of Nations, Book 1, Chapter 1 ¶8.

And, just like that, the founder of classical economics reverts to mercantilism. Mercantilism, because the efficiencies generated by the fire engine boy’s innovation, while contributing to the wealth of the nation, far from leaving him “at liberty to divert himself with his play-fellows,” instead leave him out of work and in search of another job. Mercantilism, because the marginal product of his innovation is not any thing, but is value. Mercantilism, because this marginal product does not accrue to the fire engine boy at all, but to investors in the fire engine venture.

In Smith’s defense, his error was repeated by classical economists on up to the 1850s when, among others, Karl Marx showed that the driving impulse behind economic activity in capitalist societies was not any thing, but relative, abstract, universal, homogeneous value.

Consider, for example, GWF Hegel’s equivalent to the Smith’s story about the fire engine boy, told forty-five years later. With Smith, Hegel also notes that the division of labor gives rise to efficiencies; that, as manual tasks are reduced to their simplest components, these tasks lend themselves to mechanization, “until finally man is able to step aside and install machines in his place” (Philosophy of Right §198).

But, clearly, this would only hold true were workers, producers and consumers trading in things, whose volume increases relative to the time (capital, labor, resources) devoted to them. However, the production function does not measure things. It measures a ratio: MPL = ΔQ/ΔL (or ΔK). So fundamental was this principle to neoclassical economic theory, that, at roughly the same time, it poured from the pages not simply of Karl Marx (Grundriße, 1858), but also of William Stanley Jevons (1862), Leon Walras (1874), and John Maynard Keynes’ professor Alfred Marshall (1890). Here, for example, is Jevons: “Value in exchange expresses nothing but a ratio, and the term should not be used in any other sense. To speak simply of the value of an ounce of gold is as absurd as to speak of the ratio of the number seventeen” (78). Walras’ Elements of Pure Economics is a lengthy, dense, tightly argued, demonstration of the multivariate, abstract, universal character of value. For, as Marshall showed, “the value of a thing, though it tends to equal its normal (money) cost of production, does not coincide with it at any particular time, save by accident” (Book V, Chapter 7, §5). Which is to say, the value of all things, including no thing, is relative neither to the cost of the specific labor expended in its composition, nor to the costs of the materials out of which it is composed, but, rather, is relative to the value of the whole. “We must go to the margin to study the action of those forces which govern the value of the whole” (Book V, Chapter 8, §5).

Innovation may lower the costs of production. It may render labor on that specific good obsolete. And it may, therefore, reduce the disposable income of the specific workforce that formerly had produced that specific good without the assistance of that innovation. But, now, let us assume that that redundant workforce also composes the consumers of that good. So, for example, prior to the innovation total costs of production of a good might have been $10. Now they are $5. And let us suppose that the workforce, composed of ten workers, is now reduced to five. Where, without the workforce reduction, ten workers were ready to spend $100, $10 each, purchasing the good in aggregate, they are now ready to spend only $50 in aggregate, which is still $10 each. Which means no marginal gain arises for investors from the innovation. Which means that the investors, in hindsight, should not (and probably would not) adopt the innovation. They would adopt the innovation only if reducing the cost of production increases the market of consumers up to or beyond the $100 the original ten workers were prepared to spend. But, again, if this additional $50 is at the expense of some other sector, then the aggregate market value remains stagnant. Only where innovation generates an increase in “the value of the whole” will an innovation generate aggregate growth.

What Harari imagines is a cascade of innovations that (1) deprives markets of consumers/workers and thus reduces aggregate marginal gains; or (2) relies solely upon investors themselves to consume the products they produce equal to or greater than their aggregate market value; or (3) steadily reduces the value of labor to a point where its value in production is equal to or greater than the marginal returns realized by the innovation.

This is not a speculative problem. In California’s Central Valley, farmers are in a race with human and mechanized pickers in which the value of human pickers must be forced ever lower in order to maintain their value relative to automated pickers. The poverty of the Central Valley is equal to this marginal decline in aggregate wages, which is equal to the spread of minimum wage, no benefit non-agricultural employment in the Valley. But, that is not all. This race between humans and machines finds its way into urban centers in the form of the $2 apple or peach. (A living wage for human pickers would (a) force growers to adopt mechanized pickers; or (b) raise the price of the apple to $10 per apple. In either case, markets would be depressed.) Only under the condition that innovation increases the “value of the whole” will it be adopted.

But let us suppose that the value of human labor is isolated from the right to a quality life. That is to say, let us suppose that the marginal product is distributed socially up to a predetermined level. This is actually how social democracies work. The social distribution of this marginal product places downward pressure across the board on the marginal returns investors might enjoy. In this case, innovation might take the form of leisure time. The more the innovation, the more leisure time. Moreover, if the value of the admittedly reduced marginal product is still measured abstractly, we could say that its socially distributed portion is measured both (a) as a fraction of the total abstract marginal product; and (b) in terms of the goods — health, education, leisure, housing, art, music, nature — it purchases; things that might still be abstract, but that are isolated from the abstract value of the whole.

In this case, making the human population redundant, rather than a cruel judgment, might instead be cast as release from the compulsion to work for a living.

For nearly 2.4M years, human beings worked out of necessity, but not out of compulsion. Yes. Human beings must change the world they find around them to make it usable, up to the margin. But, where value is abstract, humans have no reasonable way to measure when they have sufficient value. Is $50K enough? Is $200K? Is $1.5M? Is $1B? How much is enough?

If I were to translate this into personal pairs of shoes, most of us would say that two, or five, or maybe 20 pairs of shoes are enough. The problem with abstract value, however, is that it knows no ceiling. And, this, precisely is where Harari also becomes a mercantilist. He reverts to thinking about value as some thing. But, where there is no upward limit, neither is there a limit on employment, even if that employment is simply digging up bottles of cash buried precisely in order to be dug up (the example John Maynard Keynes uses in his General Theory), so deeply ingrained is the compulsion to work. In other words, we are working not out of necessity, but out of compulsion.

Technological innovation, under capitalism, cannot lead to unemployment. That is the bad news.

Mitch McConnell, the Keynesian

In 1971, after taking the US dollar off the gold standard, President Richard Nixon is said to have famously quipped, “I am now a Keynesian in economics” (NYT Jan 4, 1971). A half century later, it would appear, the entire Republican delegation is ready to make the same confession.

In his General Theory (1935), Lord Keynes told the story:

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.

Chapter 10, “The Marginal Propensity to Consume”

The US Congress is currently preparing to do precisely what Lord Keynes jokingly advised. It are preparing “to fill old bottles with banknotes, bury them at suitable depths in disused coal-mines . . . and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again.” Because the fact is, whenever a capitalist economy is performing at below industrial capacity, borrowing from tomorrow’s healthier economy to jump-start today’s sick economy is always a good bet. And, while “it would, indeed, be more sensible to build houses and the like,” so long as digging up the bottled bank-notes creates jobs and stimulates spending, “it would” — still — “be better than nothing.”

But now let’s say, hypothetically, that Donald J. Trump were an African American Democrat. And let us say that the United States had just experienced the largest drop in value since the Great Depression. I am sure that Mitch and his buddies would ignore the fact that Donald J. Trump is an African American. I am sure they would ignore the fact that he is a Democrat. And, yet, faced with this choice in 2008, Mitch and his buddies unilaterally placed race and party ahead of nation (see “Death of an Omnibus”). Why? Because economists — all economists — had assured Congress that it would take $1.2T to restore the US economy. And because Mitch and his friends knew that an African American Democratic President would receive all of the credit. Instead, the approved a paltry $800M, which proved enough, but only enough, to set the economy on track to realize the so-called “Trump Boom.”

Twelve years later, Mitch is back at it. But now he and his buddies are now all Keynesians, in economics. Not that any of them would say so publicly. Instead, they will say that, beyond the pocket change they will toss to working families, the lion’s share of the money must be allocated to sectors that will invest it most wisely: private industry, finance, and banking. That is to say, banknote filled bottles. What is more, it is likely that consumers will begin to feel the effects of this boondoggle sometime in late September or early October, just in time for the Presidential election. (Assuming the election has not been called off.) Sure. It would be better “more sensible to build houses and the like.” But, however spent, $1.2T will restore stability to global markets.

But that’s not all. That $1.2T does not come out of thin air. It comes in the form of bonds; bonds which, when mature, will be paid for out of taxpayers wages. Does it matter where the money Congress appropriates tomorrow is spent? It might be spent on a Green New Deal which would employ working families saving the futures of their children and our planet; or, it might be spent giving tuition relief to countless millions of college students, money that could be better spent creating a new generation of workers, researchers, and innovators; or, it might be spent giving real relief to overtaxed healthcare workers and extending real, universal single-payer healthcare — the same healthcare Mitch and his buddies enjoy — to every American. All of which would be “more sensible.” And all of which would place American taxpayers in a better position to settle the debt incurred by the sale of bonds when they come due.

But Mitch and his buddies are not idiots. They know they can have their cake and eat it too. They can fleece future taxpayers to pay for Donal J. Trump’s reelection campaign. But, can they count on the support of Nancy and her cronies? You can bet on it.

Stoicism: A Heresy for the Ages

“So the law is holy, and the commandment is holy and just and good” (Romans 7:12). And, yet, as every Christian knows, not only is the law insufficient. It actually points us in precisely the opposite direction. How can this be?

I was again reminded of this heresy — for that is what it is — by Attorney General William Barr’s invocation of God’s so-called “moral order.” Christians will be familiar with this moral order primarily from the Apostle Paul’s Letter to the Romans, where the Apostle lays out the grounds for God’s condemnation of “the nations,” i.e., peoples to whom God did not deliver Torah. What is less often noticed is that the Apostle places the “natural order” on a par with Torah. Both Torah and natural law are sufficient only to condemn, not to redeem. Nowhere is this parity clearer than where the Apostle claims that Nero and his Empire are “servants of God,” whom God has sent to administer justice. Therefore ought “all people” to obey the authorities whom God has established (Romans 13:1-7).

Paul’s counsel was inspired by the universally acclaimed ground of first century Roman jurisprudence. If Jews and non-Jews could agree upon anything it was the well-ordered, moral character of the natural world, which, of course, included the political world. It especially was natural.

Yet, the warrants Paul set forth in Romans were not particularly Christian. Indeed, they were not particularly Jewish. They were pagan. In fact, they were Stoic. But before we fault Paul for drawing upon pagan authorities, we might bear in mind that for first century Romans, Stoicism was the equivalent of contemporary science. It did no more, but also no less than accurately describe how the universe worked.

And, how does the universe work? The universe is composed of being. Literally, the universe is composed of ουσίες, beings. Each being, each ουσία, enjoys power. If a being enjoys no power it does not exist. Of course, the being that enjoys the greatest power is God. Do you want to know why beings influence one another? It is because they exist. They have being. Do you want to know why one is subordinate to and another is superior to another? It is because they possess greater and lesser being.

And it is precisely here that Attorney General Barr’s heresy fits. These relationships of subordination and domination also characterize the moral order. Here is how Paul put it in his Letter to the Romans:

Let every person be subject to the governing authorities; for there is no authority except from God, and those authorities that exist have been instituted by God. Therefore whoever resists authority resists what God has appointed, and those who resist will incur judgment. For rulers are not a terror to good conduct, but to bad. Do you wish to have no fear of the authority? Then do what is good, and you will receive their approval; for they are God’s servants for your good.

Romans 13:1-4a

Did God establish this “natural order”? That seems clear. Is it specially moral or Christian? Ideally, yes. But, as the Apostle had already noted, the natural order was fundamentally distorted. “What then should we say? That the law is sin? By no means” (Romans 7:7)! “Did what is good, then, bring death to me? By no means” (Romans 7:13)!

No. No. No. But the relationships of domination and subordination visible from creation are therefore an unreliable guide. Or, to be more accurate, they can be relied on for condemnation, but not for redemption.

Stoicism held good, everywhere, except in communities of faith:

Consider your own call, brothers and sisters: not many of you were wise by human standards, not many were powerful, not many were of noble birth. But God chose what is foolish in the world to shame the wise; God chose what is weak in the world to shame the strong; God chose what is low and despised in the world, things that are not, to reduce to nothing things that are, so that no oned might boast in the presence of God.

I Corinthians 1:26-30

In communities of faith a different order rules, not the order of domination and submission, but of service and care. And had the natural order understood this other order, history might have looked very different. “None of the rulers of this age understood this; for if they had, they would not have crucified the Lord of glory” (I Corinthians 2:8).

Nevertheless, the early church folded Stoicism into its theological foundations, baptizing the orders of domination and submission that, for purely heuristic purposes, the Apostle Paul had invoked in his Letter to the Romans. Tragically, the Apostle’s endorsement of Stoicism was perceived by non-diaspora Jews — the Jerusalem community — as an olive branch extended in peace to Christians who still observed ritual purity. This clearly lies behind the Apostle Peter’s backhanded complement:

So also our beloved brother Paul wrote to you according to the wisdom given him, speaking of this as he does in all his letters. There are some things in them hard to understand, which the ignorant and unstable twist to their own destruction, as they do the other scriptures

II Peter 3:15b-16

“Hard to understand” is, of course, a euphemism. Peter, a Jerusalem Jew, had very little truck with the liberties taken by Pharisees such as Saul — or “Paul,” as he was now calling himself. But, yes, “the ignorant and unstable” were, in Peter’s view, twisting Paul’s words “to their own destruction.”

By the fourth century, this deep divide had been completely papered over by Luke-Acts, enabling Stoicism to establish itself firmly at the foundation of Christian theology and moral teaching.

Bob Barr, the Roman Catholic Attorney General, is an heir to this dubious legacy. But, ask yourself, does Bob Barr bear a closer resemblance to Jesus or to Nero? Just asking.

Cold Warriors Still

I get it. In 1989 we should have enjoyed a peace dividend. The Cold War was over. The End of History had arrived ahead of schedule. It followed that there was significantly less demand for the gadgets and toys Pentagon brass demand and the military industrial complex is only too happy to supply. All, of course, at taxpayer expense.

I get it. The former Soviet Bloc was supposed to blossom into a family of Benelux-type social democracies. Gone were the days when KGB and Stasi agents monitored the behavior of citizens eager to enjoy their freedoms to speech, press, and association.

I get it. Precisely with the heavy-handed help of World Bank and IMF “experts,” gangster capitalism — which looked a whole lot like Soviet era socialism — the Eastern Bloc and Russia instead seamlessly transitioned into the dystopic oligarchies so familiar in the Americas and Southeast Asia.

What I don’t get is why my fellow lefty friends feel obligated to defend the oligarchic, expansionist, militarist, homophobic, ultra-nationalist, misogynist, anti-democratic former Soviet Bloc nations who are a spitting image of the oligarchic, expansionist, militarist, homophobic, ultra-nationalist, misogynist, anti-democratic western nations they have no problems laying into daily, hourly, on social media.

It strikes me that this might be the perfect moment to take Russia and its extensive worldwide intelligence community as a perfect illustration of how free market capitalism reshaped (and didn’t reshape) the former Soviet Bloc. Instead, much of the left appears to have taken the bait. They end up defending the indefensible (Putin and Russia) so as not to give the appearance of defending the indefensible (Trump and the USA).

It is deja vu all over again. 1968. We are cold warriors still.

A Commodified Earth

As a young thinker and activist, circa 1844, Karl Marx saw in the industrial working class universal humanity and saw in industrial production the means through which humanity would fulfill its highest aspirations of prosperity and freedom. Over the course of the 1850s, Marx came to question “the standpoint of the industrial proletariat,” taking up instead the value form of the commodity as the vantage point of his critique. Yet, as far as I can tell, he never explicitly called into question industrial production as the principle means for achieving the efficiencies upon which, he believed, “freedom from labor” could eventually be realized.

This deficiency is odd. In mainstream neoclassical economic thinking, labor remains bound to the production process through its contribution to the marginal product. This is because the marginal product of labor is equal to the ratio Δ Q/ Δ L, where Q represents some quantity of anything (or no thing) and where L represents some quantity of labor. Productivity arises whenever the change in Q is greater than the change in L: whenever more is produced for less. On its face, this appears to show why, eventually, the contribution of labor must become negligible when compared to a volume of goods. Obviously, however, since we are considering a ratio and not a quantity, it is just as reasonable to suppose that the quantity increases exponentially while the contribution credited to labor holds constant or, perhaps, even increases. This would be the case whenever the marginal product is distributed to an ever smaller portion of the population: to individuals at the very top of the income hierarchy. When therefore economists show that western European social democracies perform less efficiently than Great Britain or the United States, they are simply pointing out that the marginal product is distributed far less equally in Great Britain and the United States; i.e., that investors are credited with far more of the marginal product than working families.

While agreeing broadly with this analysis, Marx showed why, on its face, it meant that working families might never enjoy the benefits arising from their increased productivity. In order for working families to benefit from increasing productivity, the value of workers’ labor would have to be completely separated from the marginal product: Δ L would have to be eliminated from the formula for marginal productivity; leaving, e.g., ΔQ/ΔT, where T represents time and/or technology, but not actual labor. Did this hold true, then the goal of industrial production would no longer be coordinated with labor time. But, in that case, labor time expended would no longer mediate social relations.

Assuming that ΔQ was no longer correlated to labor, we might then wonder how investors would earn ever higher returns. Put bluntly, if the increase in goods were not relative to a change in labor, with what would consumers purchase the marginal product? Or, more generally, how would we value their contribution to the marginal product — and thereby compensate them — were their contribution no longer a factor in its production? In other words, what would mediate social relations under conditions where labor was factored out of the marginal product?

These questions strike at the heart of catastrophic climate change for the following reasons. While consumers purchase, trade, and consume what Marx called a commodity’s “surface form of appearance,” surface forms of appearance are valued differentially in terms of their contribution to the aggregate, i.e., gross, domestic product. We could say that consumer demand is the engine of production; i.e., that production, innovation, and investment are no more than responses to consumer demand. Or, in the alternative, we could say that for investors to realize ever increasing returns on their investments, they must generate ever increasing consumer demand for products produced ever more efficiently.

This might appear to be a “chicken-and-egg” argument: which is the driver and which the destination? Do we produce in order to consume? Do we produce in order to realize returns?

But the answer is clear. Were we able to produce without counting ΔL, the system would collapse. It would collapse because either L would acquire the means of consumption apart from its contribution to goods; or it would collapse because absent the ever increasing marginal returns they win from the marginal efficiency of labor, investors would no longer invest. But, in either case, it is the marginal profit investors win from labor that accounts for economic growth.

From this vantage point, the Earth in all its complexity can be seen as the surface form of appearance of a comprehensively integrated and commodified ecosystem and its subsystems. The Earth exists in order to win returns for investors. Or, in Marx’s terms, the Earth’s “surface forms of appearance” are mediated by abstract value.

This also means, however, that the Earth’s surface forms of appearance could be understood as a “fetish,” a social form whose “natural” powers and meanings are masked and overridden by the social power granted to the abstract value form of the commodity. Their fetishized form means that we cannot even recognize in these surface forms of appearance what they could possibly even be for — what their meanings might be — apart from their contribution to the marginal product. So that, even when we attempt to “balance” the Earth’s “non-economic value” against its “economic value” we cannot do so without reverting to marginal analysis.

The virus that has infected the Earth — that has hacked into and overridden its codes — is the commodity form and, in particular, the abstract value of this form. To restore the original code would require that we eliminate the ΔL from our model.

To this extent, Marx’s critique of the capitalist social form offers us a valuable insight into the reason why addressing merely surface forms of appearance — insurance schemes, tax schemes, regulatory schemes — without addressing the underlying model of economic expansion may not prove sufficient to prevent the impending climate change catastrophe.

Graeber’s Economics

I have every reason to be sympathetic with David Graeber’s review, “Against Economics” (NYRB 12/5/2019). After teaching the history of economic thought in the top-ranked UC Berkeley Economics Department for six years, I fell victim to two of my departments leading monetarists, Marty Olney and Christy Romer, who personally took it upon themselves to oust me, ostensibly because I am not “an economist”; which, of course, they had known for six years. I should have been sympathetic with Graeber’s review. I was not. Here’s why.

At the most general level, money is a socially and historically specific social form. Therefore, while I have no problem with someone writing a transhistorical history of, say, debt, I do have serious problems with writing this history as though he was always talking about the same thing; which, anthropologically speaking, would be absurd. Money comes to be what it is in contemporary capitalist political economies beginning in roughly the fourteenth century. But it is not really until the seventeenth century that it “comes into its own” so to speak. What does this mean?

With the mature Karl Marx of Capital, I assume that prior to the emergence of capitalism social action was mediated by a wide variety of social forms. (Obviously, the young Marx of, say, the 1844 Economic and Philosophical Manuscripts or the Communist Manifesto was still too taken by Hegel’s concept of “species being,” and, to this extent, was himself a victim of transhistorical human ontology.) Or, as French medieval historian Geoff Le Goff noted over a half-century ago, capitalism was born when the value of productive human action was measured in the equal units of time marched out on mechanical time pieces; which was in the parish of St John, Ghent, in 1324. This does not mean that money, labor, and time suddenly snapped into place. As EP Thompson has noted, social actors fiercely resisted the new regime of time and labor. Yet, enough of the new regime was in place by the seventeenth century for natural philosophers to appreciate some of the new patterns it was generating across society, where it was beginning even to penetrate the otherwise stable landed estate.

By the time we reach Locke and Hume, we are therefore already a good ways into the journey. But the issue is not, as Karl Polanyi believed it to be, whether the landed estate of gentry and peasantry should be deemed “natural” and — I don’t know — “non-fictional” (!?) when compared to the artificial and fictitious arrangements of the late seventeenth century. On the mature Marx’s assumptions, all social formations are — well — social; i.e., none is natural. The issue is: how are we to account for the “anomalies” that have begun to proliferate across the Western European social landscape; anomalies of which William Blake or Bernard Mandeville’s Grumbling Hive can only give us a taste. Natural philosophers were reaching for straws; but it is interesting the straws they selected.

If, as Marx argues, time is the category upon which capitalism turns, then the laser focus on material forms of appearance, no matter the commodity, will never give rise to a satisfying analysis. Late seventeenth and early eighteenth century critiques of mercantilism were, to this extent, spot on. If the central category is time — or, more precisely, MPL = Δ Q / Δ L, the change in some quantity of any thing, or no thing, over the change in the amount of labor (or capital) that corresponds to that change in quantity — then fixation upon surface forms of appearance, be they even the surface form of specie, missed the point entirely. So long as equal, abstract units of time dominate the social landscape, it does not even matter whether a good is or is not itself a product of labor: Karl Polanyi’s error.

And, yet, it was not until the 1860s that the capitalist social formation was sufficiently integrated and extensive for economic thinkers to “see” the “substance” that all commodities shared: abstract value.

It hardly matters who hit upon the insight first; was it William Stanley Jevons in 1858? Jevons thinks so. Was it Karl Marx in his Grundriße? Was it Leon Walras? Clearly by the 1860s all economic thinkers, including Marx, recognized the comprehensive, integrated, quasi-rational character of the capitalist social formation. Once recognized, it no longer made sense to qualitatively differentiate among the many expressions of value — interest, rent, wages, investment, land, stocks, insurance, etc. All expressions had come to be differentially related to one another in such a manner that each could be measured in terms of the others; the money commodity not excluded.

(By the way, anyone wishing to tackle John Maynard Keynes’ General Theory might just as well read his professor, Alfred Marshall’s, Principles of Economics (1890), since Lord Keynes really says nothing that Marshall had not already said.)

Graeber is surely correct to deny money the independent status granted to it by pundits for the Washington consensus. Money is no less, but also no more, flexible than any other commodity. But he is incorrect to think about the flexibility of money apart from the capitalist social formation, as though the value or quantity or distribution of money were merely a matter of policy. Because the capitalist social formation — which includes its laws and regulations and institutions — is thoroughly integrated; because policy enjoys “value” in precisely the same sense as a race or immigration status or stock or gender enjoys “value” (i.e., in its relations to all other commodities, individually and in aggregate); any change in “the universal equivalent” sends waves throughout the social formation. In this sense, I would go further than Graeber. Neoclassical economists are not too mathematically rigorous, but insufficiently rigorous. In a thoroughly integrated capitalist society, all things, including things that are not things, have value. (See, e.g., These values are differentially related to one another, such that, for example, investors in the Central Valley of California know that fruit pickers earning .25/hr. make manual harvesting more efficient than automation (where automation costs roughly $500K/year); they know that both a porous southern border and laws restricting immigration maintain wages at .25/hr.; and therefore they know the value of campaign contributions that promise to stigmatize brown complexioned, Spanish-speaking, migrant laborers. Since the value of California’s ag product is roughly $60B, this is not a negligible figure.

Stated differentially, a blight on California’s Central Valley could be expected to give rise to shifts in a whole range of complimentary and substitute goods and, caeteris paribus, give rise to shifts in investors’ asset preferences accordingly.

Which is not the same thing as “fairy dust.” In fact, it strikes me that it is the opposite of “fairy dust.”

There is a totally bizarre chapter in economic history that illustrates precisely this point. Many Marxian social theorists are familiar with Oskar Lange, whose On the Economic Theory of Socialism became the “bible” of economic policy for much of the Comintern from 1948 forward. Many are also familiar with Friedrich von Hayek, the Austrian School author of (among other atrocities) the Road to Serfdom. Few know that von Hayek was Lange’s dissertation advisor at LSE and that the dissertation he advised was “On the Economic Theory of Socialism.” In his Socialism, Lange proposed an objectivist approach to monetary theory. Under capitalism, Lange claimed, the value of money was relative to market fluctuations, which the decisions of the central monetary authority would then attempt to take into account. Under socialism, market fluctuations would disappear, leaving the central planning committee free to establish any relationship they liked between the monetary unit and the goods to which that unit applied.

Von Hayek, too, was a monetary objectivist. In a series of editorials written to the London Times in 1938, he and other LSE economists debated with Lord Keynes and his Oxbridge colleagues over the merits of relativist and objectivist monetary policy. The relativists held that it really didn’t matter where you picked up this hydra, since all of its heads were the same beast. Expand the monetary supply, loosen interest rates, raise wages — it did not matter. Not so the objectivists. Goods had real, objective, values, which Keynes and his colleagues were treating as mere toys. Objectivism lost in Western Europe. It won in Eastern Europe, Russia, and among the Comintern partners, with, I would argue, disastrous results.

The disaster followed from the thoroughly integrated character of the fully elaborated capitalist social formation — even in its Soviet form — on account of what I would call the imperfect correspondence between any commodity’s value and its material form of appearance. In his notes, Marx captured this imperfect relationship as follows:

Circulation bursts through all the temporal, spatial and personal barriers imposed by the direct exchange of products, and it does this by splitting up the direct identity present in this case between the exchange of one’s own product and the acquisition of someone else’s into the two antithetical segments of sale and purchase (Capital, vol. 1, p. 209).

This is where Lange and his Comintern friends believed they could intervene: at the point of sale and purchase.

To say that these mutually independent and antithetical processes form an internal unity is to say also that their internal unity moves forward through external antitheses. These two processes lack internal independence because they complement each other. Hence, if the assertion of their external independence [äusserliche Verselbständigung] proceeds to a certain critical point, their unity violently makes itself felt by producing — a crisis (Ibid.).

Here Marx took the argument from Hegel’s Logic and reembedded it back into the social formation, capitalism, in which it enjoys social validity.

There is an antithesis, immanent in the commodity, between use-value and value, between private labour which must simultaneously manifest itself as directly social labour, and a particular concrete kind of labour which simultaneously counts as merely abstract universal labour, between the conversion of things into persons and the conversion of persons into things; the antithetical phases of the metamorphosis of the commodity are the developed forms of motion of this immanent contradiction (Ibid.).

To be clear, much like other neoclassical economic thinkers in the 1860s and 1870s, Marx theorized that the capitalist social formation formed a comprehensive, integrated totality. And, like them, Marx drew a distinction between abstract value and its material forms of appearance. But, unlike his contemporaries, Marx took the immanent contradiction between any commodity’s value and its material forms of appearance as an historical and social anomaly, whereas they took it to be a feature of general, universal social ontology.

In the case of the money commodity, it is therefore not the case — at least not on Marxian grounds — that the value of the money form is arbitrary. (Oddly, this was both von Hayek’s and Lange’s position. But they differed over the arbiter whose arbitrium would arbitrate — market or council — over the monetary unit’s value.) When we shift the quantity or the value of the monetary unit, we also simultaneously change the values of all other commodities. As Marx noted, this is not a flaw, but a feature.

The possibility, therefore, of a quantitative incongruity between price and magnitude of value, i.e. the possibility that the price may diverge from the magnitude of value, is inherent in the price-form itself. This is not a defect, but, on the contrary, it makes this form the adequate one for a mode of production whose laws can only assert themselves as blindly operating averages between constant irregularities (Capital, vol. 1, p. 196.).

Graeber, by contrast, notes the apparently (but only apparently) arbitrary relationship between value and its material forms of appearance, but fails to grasp the internal, social identity between the two; which, for Marx, was the ground not only for crisis, but also for social transformation.

These forms therefore imply the possibility of crises, though no more than the possibility. For the development of this possibility into a reality a whole series of conditions is required, which do not yet even exist from the standpoint of the simple circulation of commodities (Capital, vol. 1, p. 207).

Upon this reading the crises to which Graeber calls attention could instead be taken as instances where value and its material forms of appearance displayed their social dependence upon one another, but also displayed the wheel around which their dependence turned: the universal valuation of productive social action in terms of abstract time and abstract value.

From this vantage-point, absent radical changes in social mediation — reflected, for example, in the distribution of the social product, the independence of the social product from labor time, the independence of health, education, and welfare from abstract labor time — a change in monetary policy cannot give rise to the kind of emancipatory social change we have reason to value.

It is not, as Skidelsky claims, that economists are drawing upon “a shed full of broken tools.” As Marx noted:

The categories of bourgeois economics . . . are forms of thought which are socially valid, and therefore objective, for the relations of production belonging to this historically determined mode of social production, i.e. commodity production (Capital, vol. 1, p. 169).

The tools work exceedingly well so long as they are used. My objection to my colleagues at Berkeley and Harvard is not that neoclassical economic theory is obsolete, but that its practitioners are. Lord Keynes was sufficiently circumspect to recognize the historically and socially embedded (and therefore constrained) character of the tools he was using. But he also used them in a manner that, say, Alfred Marshall and, certainly, Arthur Cecil Pigou, had not. That is, he recognized the social character of value; which, in the end, made him a far better, more rigorous, mathematical economist. My colleagues at Berkeley, by contrast, keep their noses to the ground, noting every detail, but without ever lifting their heads to view the worlds in which these details fall. To use Skidelsky’s tool shed metaphor, they keep tightening and loosening the screw on the plane (raising and lowering interest rates, increasing and decreasing the volume of the currency), and are confounded when their actions fail to produce a useable piece of furniture.

So, yes, economists need to reflect critically on “how to deal with increasing technological productivity, decreasing real demand for labor, and the effective management of care, without also destroying the Earth.” And when they do so, they will use the tools of “bourgeois economics”; though I hope they will do so with better awareness of the socially and historically specific nature of the capitalist social form.


I awoke this morning listening to BBC and Radio Deutsche Welle commentary on the fortieth anniversary of the fall of the Berlin Wall.

Angela Merkel and Wolfgang Schaeuble place roses into a portion of the wall at Bernauer Strasse on Nov. 9. 
Angela Merkel and Wolfgang Schaeuble place roses into a portion of the wall at Bernauer Strasse on Nov. 9.  Photographer: Krisztian Bocsi/Bloomberg

The accounts left me despairing over our current world.

The wall fell after I was already accepted into graduate school, but a year before I took up residency in modern European history. Even at the time, New German Critique and Telos (my go-to journals back then) were describing a “new class” of entrepreneurs fanning out across Eastern Europe and Russia, privatizing public entities and occupying the skeletons of remaining public ones. Their authors had little hope that Eastern Europe would follow the examples of Sweden or Norway or the Netherlands. No, this “new class” would strike a more sinister pose: the pose pounded into them by half a century of free market, anti-communist propaganda. They genuinely believed, as President Reagan genuinely believed, that “government is not the solution to the problem; government is the problem.” Markets work best when publics are reduced to a cipher. And so the “new class” set to work dismantling the very institutions that might have arrested, tried, and convicted them for seizing the wealth their citizens so desperately needed and deserved. Absent functioning public institutions, they got off Scot-Free.

Capitalism is grounded on MPL = ΔQ/ΔL, where the marginal product of labor (or capital) is held to be equal to the change in a quantity (of anything, or no thing) over the change in the labor (or capital) required to generate that change. It was this product that proved exceedingly problematic for soviet planners. How do we get more with less?

Some goods should never be subject to marginal analysis: health, education, and welfare, for example. If not constitutionally memorialized (as rights), these goods quickly succumb to the bottom line. What is the value of health? If subject to marginal analysis, the value of health is its value relative to all other value generating goods. In a free market, the value of health is whatever consumers of this good will pay and whatever producers of this good can charge. What is the value of education? Again, if subject to marginal analysis, the value of education is its value relative to all other value generating goods. The same holds true for welfare, which actually is memorialized in the US Constitution; or, in any case, in its Preamble.

Nor do we escape marginal analysis when we account for the marginal benefit society derives from good health, education, and welfare. At some point well short of perfect health, superior education, and sound public welfare, the costs exceed the benefits. One could argue of course that cost should not be the gate-keeper for an education good, or for health, or for welfare; one could argue that their is a category mis-match when health, which is measured in other ways, comes to be measured by cost, or when a citizen’s grasp of what citizenship even is depends upon whether they are sufficiently wealthy. In a world that universally valued superior education, the value of education in monetary terms would drop precipitously; just as in a world where pure water and air were universally available, their cost would drop to zero. But, in a world, such as our own, where health, education, and welfare are subject to marginal analysis, their benefits will be distributed differentially based on the wealth of the individuals who desire them.

Soviet planners wanted to deliver the goods, and they wanted to bypass MPL=ΔQ/ΔL. But they couldn’t. The goods require labor. There is simply no way around it. But that means that people must work, in order to generate the marginal product. Why will they work? In traditional societies, people work because they need to eat. Anyone familiar with farming knows that sustainable farming does not actually take much time. What takes time is farming enough to purchase the equipment, the seed, the materials, and finding the markets willing to pay sufficiently for your goods to pay for the equipment, seed, etc. Traditional societies don’t have this problem because they are producing solely for themselves (and for their lord). But, the soviet planners rejected serfdom and they rejected free markets.

So, the question is: how do you produce any good efficiently? The answer is MPL=ΔQ/ΔL. And this is the definition of capitalism.

Soviet planners could not not be capitalists. They thought their problem was a political one. Achieve power, eliminate the bourgeoisie, and enforce socialist laws and regulations. But their problem was actually a social problem. They needed to find out why, if not for MPL, social actors might want and work for the things we haver reason to value: such as, health, education, and welfare. They never figured this out.

But, evidently, we have not figured it out either. Why, if not for the marginal product, would we want superior education, good health, and secure welfare?

When the wall fell, Eastern Europe and the Soviet Union did not become better. They did not even become better capitalists. They became oligarchs, plutocrats, and tyrants — because they believed in the propaganda dished out to them by defenders of free market capitalism who still have no idea why we might value health, education, and welfare apart from their marginal product.

The Best Things in Life . . .

The best things in life are free, But you can keep them for the birds and bees. Now give me money. The Beatles.

Yesterday once again the bumper sticker caught my eye: “The best things in life aren’t things.” Yesterday, however, for the first time it struck me as terribly reactionary.

There is, of course, a trivial interpretation of the aphorism: when we fixate on surface forms of appearance, we overlook their underlying significance. So true. But it strikes me that in a world where social actors and voters are increasingly inclined to ignore facts, or, rather, to view facts as mere subject-effects — products of ideology, culture, or community identity — it is precisely things that might save us.

Think about it for a moment. What so deeply disturbs industrial polluters about Bill McKibben’s “ppm” (parts per million) is that it is a hard, solid, measurable figure. According to McKibben, scientists know what happens when there are more than 350 ppm CO2 in the atmosphere. Industrial polluters, by contrast, want us to think about CO2 “marginally.” When we think about CO2 marginally, we “weight” a wide variety of variables (e.g., employment, wages, marginal costs, marginal profits, etc.) and determine the optimum level of CO2 relative to these other variables. Marginal analysis will result in a figure far in excess of 350 ppm. But, it will be said, “we cannot simply pass a law restricting carbon emissions to 350 ppm and expect polluters to comply. Were they to comply, en masse, it is argued, the consequences would be catastrophic.” Think Brexit on a global scale.

The point is that, although we may lie or may simply be ignorant about things, things themselves do not lie. Things tell the truth. But, under capitalism, things are fetishized along highly specific lines. Under capitalism, we experience things in terms of their abstract value, which connects all things to one another, and their empirical surface forms of appearance.

I have just reread a brilliant article by my dissertation advisor Moishe Postone, “Anti-Semitism and National Socialism: Notes on the German Reaction to “Holocaust” (in A. Rabinbach and J. Zipes (eds.), Germans and Jews Since the Holocaust, New York: Holmes and Meier, 1986). Postone points out how anti-Semites are inclined to interpret Jewish social being through the components that make up the commodity: its surface form of appearance and its abstract value form. Antisemites fetishize the outward form of appearance; they find meaning along these surfaces that are socially valid, but whose meaning is in fact socially generalized. So, for example, every commodity is connected to every other commodity through the abstract value that mediates their social existence. The abstract value form creates a web or network of value that is co-extensive with the capitalist social form. During economic booms, social actors are scarcely aware of this abstract form of social mediation. During depressions, however, social actors feel as though they are being controlled by occult forces beyond their control. Antisemites fetishize Jews and the cultural “spirit” of Jews as expressions of the abstract value form of the commodity. On the other hand, they fetishize European “nordic” bodies as rooted, natural, and grounded.

The best things in life are not things. In antisemitism, neither the fetishized Jewish body, nor the fetishized Aryan body, are things only. They are material forms of appearance invested with underlying social meanings. The meanings of Jews and non-Jews transcend the bodies of both. A careful examination of the history of antisemitism in Afro Eurasia, and specially modern Afro Eurasia, reveals a social form eager to find meaning and significance beyond surface forms of appearance.

Antisemitism perfectly embodies the aphorism: the best things in life are not things. But also the worst things. Perhaps it is time we paid more attention to things.

What Top CEOs Don’t Understand

Since they have not studied anything remotely similar to economic history, it is understandable that top CEOs don’t get it. I get it. But Vanderbilt economist Margaret Blair should know better. 

According to Professor Blair, capitalists in the 1930s, 1940s, and 1950s reflected an interest in the public. “It was around ’88 or ’89 that their tone changed and they started advocating shareholder primacy.” Really?

Yes, in the shadow of the worst global economic downturn in history, with fascism and nationalism breathing down their necks, elected officials radically overhauled the regulatory frameworks that governed private corporations. But do not think for a moment that capitalists woke up one day in the 1930s and decided that the bottom line was no longer the bottom line. That never happened.

What did happen was that the United States spent some $14.63T defeating fascism and nationalism. Thanks to union activism, big government and big government contracts lifted working families up from the bottom. When, in the early 1970s, this huge multiplier ran out of steam, corporations began working assiduously to deregulate industry and shift the tax burden back onto working families.

Investors are not evil people. They are, however, not the same as the public. Consumers are not the same thing as citizens. CEOs are not the same thing as public servants. The very fact that we are looking to private business to change its tune displays a profound misunderstanding of republican values and institutions, on the one hand, and of private equity on the other.

Do private investors care about their world? Of course they do. But, to the extent that they believe its future lies in their private market decisions, to this extent they fundamentally misunderstand the problem.

Immigration and The Post-Constitutional President

On Thursday (May 17), the liar-in-thief outlined an immigration overhaul that promised to “protect American wages, promote American values, and attract the best and brightest from all around the world.” I am going to ignore the deceit underlying the President’s proposal: the false assertion that low-wage foreign victims of violence and abuse are the cause for crime in the US. Those who have made it their lifelong pursuit to understand and document crime disagree: undocumented immigrants are overwhelmingly less likely to commit violent crimes than full-blown, domestically grown and raised citizens (LIGHT, M. T. and MILLER, T. (2018), DOES UNDOCUMENTED IMMIGRATION INCREASE VIOLENT CRIME?*. Criminology, 56: 370-401. doi:10.1111/1745-9125.12175); also Anyone who expects this President to tell the truth about anything is fooling themselves.

Instead I want to focus on the real heart of this proposal; the aim to overturn the citizenship clause in the Fourteenth Amendment to the US Constitution.

For the most part, the US Constitution is an exceptional document. But in one respect it is deeply and fundamentally flawed. In order to bring delegates from southern states to support the new Constitution, northern delegates were forced to concede that each souther slave would count as 3/5ths a non-slave for purposes of representation in the House of Representatives. The notorious 3/5ths clause established (1) that African slaves were private property (no path to citizenship); and (2) that private property would enjoy a seat and a say in the United States House of Representatives.

That is the legacy of Dread Scott v Sanford (60 U.S. (19 How.) 393 (1857)), which denied personhood to Mr Scott, a slave.

When the Fourteenth Amendment affirmed that “[a]ll persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside” its intention was not simply to overturn Dread Scott, but also to eliminate the seat that private property had enjoyed in the US Congress since 1787.

Uniquely in 1868, but still rare among the nations, the United States elected not to base citizenship on the unique qualities, qualifications, or wealth an individual brought to the table. If a person is born here, they belong here. That person enjoys all of the rights, privileges, and obligations of every other citizen, without distinction. Period.

The liar-in-thief’s immigration proposal, which aims to link immigration not to what unites us — our humanity — but to what distinguishes individuals from one another, is a bald attempt to reinstate Dread Scott. Persons fleeing violence, oppression, war and poverty need not apply. Only persons who enjoy wealth, education, and privilege are welcomed.

But the liar-in thief is also dead wrong on the fundamental economics of his proposal. If the President genuinely wished to “protect American wages” he would vigorously promote a strategy similar to his German counterpart who has made high quality, affordable education available to all German citizens, but without the debilitating debt that loan-sharks pile on every new generation of wage earners. Instead, the President is willing to concede defeat and allow highly skilled, well-educated foreigners take the high-wage positions that Americans are no longer qualified to fill. More poorly educated and trained Americans will then be forced into the low-wage, low-skill positions for which they are now uniquely qualified.

In the past, each new wave of immigrants stepped into the labor market at or near the bottom. The liar-in-thief wants to change that. He wants each new wave to step in at the top. An alternative strategy would be to make sure that the Americans who are already here are already “the best and the brightest from around the world.”

Finally, brandishing his post-Constitutional credentials, the liar-in-thief substitutes one lone “American value,” wealth, for the love of liberty, democratic process, and republican institutions and values. Because that is precisely how southern delegates saw things back in 1787 when they insisted that their private wealth — the private market value of their slaves as property — gain a seat in the House of Representatives.

In one matter alone is the President telling the truth: by playing H1Bs against asylum-seekers, he is openly admitting that its not about crime and not about freedom, but about money.