Further remarks on Phenomenology of Spirit

This simple infinity, or the absolute Notion, may be called the simple essence of life, the soul of the world, the universal blood, whose omnipresence is neither disturbed nor interrupted by any difference, but rather is itself every difference, as also their supersession;

§162

As flawless a description of capital as I have found anywhere. Capital is this simple infinity, the simple essence of life, the soul of the world, the universal blood, whose omnipresence is neither disturbed nor interrupted by any difference, but rather is itself every difference, as also their supersession . . .

It is this quality of capital that renders most Marxian interpretations of capital superficial and one-sided; superficial because they mistake surface forms of appearance for the processes they aim to critique, missing the underlying soulful, living, omnipresent, essence of life that is capital; one-sided because every strategy that focuses on this surface no more than introduces another level of difference on top of a social form that is neither disturbed nor interrupted by any difference, but rather is itself every difference . . .

The Conservative Anglican Church in Africa

The shift in perspective from the curative to the preventive was really one from rejuvenating to conserving society.

Mahmood Mamdani

If Mamdani is correct and the British are credited with constructing pre-colonial “native” tradition in colonial Africa in order to govern the colonized culturally, this may help to explain the anti-traditional, reactionary character of the Anglican Church in some, though hardly in all, parts of post-colonial Africa. That is to say, the “tradition” Africans learned was not only not African. Nor was it Christian in an traditional sense. Just as Anglicanism remade Christianity in the image of capital, so it introduced a capitalist Christianity into Africa; that is to say, a Christianity that owed more to the isolation of abstract value from its material forms of appearance, more to inner, personal experience and mortification of the flesh, e.g., discipline, than to the non-capitalist Christianity that had prevailed for fourteen centuries within the Church. That said, when reactionary Anglicanism confronts its liberal cousin, it is confronting a blood relative insofar as both are fully products of the value form of capital. Which helps to explain why its liberal cousin will not and cannot prevail until it explicitly disavows the capitalism by which liberalism is necessarily animated.

Braudel’s Hegemony

I am recalling a passage from F Braudel, cited by G Arrighi, and ubiquitous in systems theoretical literature, to the effect that rising hegemons are free traders, while declining hegemons are protectionists. This seems to be holding good, with the US and UK circling their wagons and China and the EU fanning out across the globe. But there are a couple of nuances it would be easy to overlook in this analysis: (1) since the investment community is international, it leverages legal and institutional differences to its own advantage, no matter that the community happens to be their community of origin or residence; and (2) investors will naturally restrict or constrain goods whose prices dip too low.

This second nuance is well-illustrated in the current scramble for oil producing nations to reduce refinement of crude in order to raise global prices in light of the demand shock caused by the pandemic. Even if in general terms we support the elimination of fossil fuel extraction, nothing in the logics, public or private, of the Saudis, Russians, or Americans suggests that a sustainable future is on any of their minds. The liberality of free traders finds its nemesis in the price that dips too low to justify the cost of bringing it to market. No one knows this more than Trump’s white nationalist advisor Steve Miller, within whose narrative lurks the ghost of dirt cheap Eastern and Southern European laborers, not to mention prison labor, the labor of the camps, whose value to investors is that it has no access to legal protections, civil rights, or the protections offered by association. Constrain this commodity, and its price will not rise, even in the face of a shortage, because, unlike oil, workers who are unemployed will die. They will therefore take to rafts, boats, deserts, and even face armed vigilantes in order to feed their families. Constraining commodities is among the tools investors enjoy to realize the most handsome returns possible.

National laws, polities, and publics are among the commodities investors are authorized to manipulate. When China or the EU move into Africa, pleading nothing more than good will and altruism, they are not employing a logic different from Trump’s or Johnson’s. The same investors who decry Trump’s extremist white nationalism will, out of the other side of their mouths, welcome the higher returns on commodities offered by what are in effect taxpayer subsidies to US producers. Protectionism is not the enemy of the investor, only the inattentive investor.

All of which is to say that F Braudel is both correct and incorrect. Yes. It is the great preditors who are responsible for the shape of late capitalism. But, no. This is not by contrast to markets and certainly not by contrast to everyday life. Markets under capitalism are composed by abstract value as it occupies and sloshes about among its material forms of appearance, including states and state forms. The liberality of the Chinese and EU is not driven by a different set of global investors than the reactionary protectionist UK and US. Investors are global. Everywhere, they leverage differences in surface forms of appearance to maximize their returns.

The wartime economy?

In 1935, six years before Pearl Harbor, the US Congress approved the largest peacetime allocation ever, nearly five billion dollars, for unemployment relief. Over the next decade, Congress would throw $350 billion taxpayer dollars into the war effort. Why?

The war to defeat fascism cost the United States 405,000 of its citizens, in four years. Too high a price to defeat the Germany’s and Italy’s fascists and Japan’s nationalists? Would Donald Trump’s white nationalist supporters think so?

Already in less than four months, Covid-19 has claimed over 60,000 lives, one seventh the number lost to European and Asian right wing extremists. In World War II terms, this would be the equivalent of losing 60,000 US lives before January 1942. Covid-19 is a super-killer. But it is also an economic killer.

Over 30M Americans have applied for unemployment benefits so far. That number only includes individuals eligible for apply for unemployment. And we are only in our third month.

If we think of the Coronavirus as a deadly killer, a foreign assailant, the republican-led Congress and White House should be allocating $5 trillion to wipe out this plague. So far, they have allocated less than half that number. Why?

A large part of the problem is ideological. Republicans are, well, anti-republican. They do not believe in res publica, the wealth we hold in common. They do not believe that publics should even exist. So, the very notion of a public entity appropriating and redistributing private wealth is inimical to the (anti-) republicans. Instead, what they believe in is the redistribution of public money into private hands. That is the whole idea behind public debt and why public debt is preferable (for anti-republicans) to taxing wealth. Public debt will have to be paid off, eventually, if in no other form then simply in debt servicing. And guess who will pay for that debt? Hint: the (anti-)republicans just gave their billionaire friends the largest tax break in history.

To put this all in perspective, in 1947, when US taxpayers began paying off their huge $5 trillion dollar war debt, the effective corporate tax rate in the US was close to 50 per cent — yes, corporations were taxed at 50 per cent and the US economy never had it so good. Today it is less than 20 per cent. So, again: who is going to pay off the debt? Working families. That’s who. Which, in effect, means that the (anti-)Republicans are fighting the most significant war since 1941 not only with the bodies of working families, but at the expense of working families. Where the 1938-1941 Congressional appropriations put working Americans back to work and put money in their savings accounts, the 2020 Congressional appropriation is largely aimed at “wealthcare,” caring for the wealthiest among us.

We need a Congress and a White House that once again serves the public interest, not private interest. We need to have the guts to make wealth bear its burden: restore tax burdens to their 1950s levels, Green New Deal, National Health Care (not “wealthcare”).

Globalization and Exchange

Globalization predates capitalism. Nevertheless, it has occasionally been argued that contemporary globalization is no more than the elaboration of the original chance exchange between two communities. In every standard economics textbook published since the eighteenth century, the simple exchange is counted the foundation for globalization. There are gains in trade.

Today critics of globalization, such as right wing white nationalist Steve Bannon, are eager to highlight not the gains, but the costs, from trade. Whenever an individual exchanges a good common in her community for a good rare in hers but common in another community, it is not only a foreign, alien, good that enters her community. In the exchange, she ties the fortunes of her community to the fortunes of the other. And, to this degree, she weds a foreign system of social production to the system of social production in her own community. Each community sacrifices some small quantum of its sovereignty. Each community joins a larger, more abstract, more universal, homogenized community. Globalization is predicated upon exchange.

Right wing white nationalists feel that exchange dilutes their racial and cultural pool. They feel there is a net loss, not gain, in exchange. In exchange, communities lose their particularity, their unique identity.

But right wing white nationalists are not the only political actors to advance this argument. Some individuals on the left take Karl Marx to have advanced a similar argument in volume 1 of Capital, part one, chapter two:

The exchange of commodities begins where communities have their boundaries, at their points of contact with other communities, or with members of the latter. However, as soon as products have become commodities in the external relations of a community, they also, by reaction, become commodities in the internal life of the community. Their quantitative exchange-relation is at first determined purely by chance. They become exchangeable through the mutual desire of their owners to alienate them. In the meantime, the need for others’ objects of utility gradually establishes itself. The constant repetition of exchange makes it a normal social process.

Capital 1.1.2

And we are off to the races, so to speak. That is to say, from the first chance exchange we see an unbroken line leading directly to the universal equivalent (whatever that might be) and, from there, to abstract value.

In the course of time, therefore, at least some part of the products must be produced intentionally for the purpose of exchange. From that moment the distinction between the usefulness of things for direct consumption and their usefulness in exchange becomes firmly established. Their use-value becomes distinguished from their exchange-value. On the other hand, the quantitative proportion in which the things are exchangeable becomes dependent on their production itself.

The particular kind of commodity to which it sticks is at first a matter of accident. Nevertheless there are two circumstances which are by and large decisive. The money-form comes to be attached either to the most important articles of exchange from outside, which are in fact the primitive and spontaneous forms of manifestation of the exchange-value of local products, or to the object of utility which forms the chief element of. indigenous alienable wealth, for example cattle.

It could therefore be argued that the Marxian critique of globalization begins not with labor, but with exchange; and not with exchange within a discrete community, but with exchange between communities. In other words, the exchange of commodities between communities initiates a dialectic that “bursts its local bonds . . . [and] expands more and more into the material embodiment of human labour as such.”

Even were Marx himself not critical of globalization (and there is no evidence that he was), contemporary Marxian theorists cannot ignore the implications of Marx’s analysis for “globalization and its discontents.” Is there not, at the very least, an implicit criticism of the destruction of “local bonds” and the impending transition into a “material embodiment of human labor as such”?

I actually don’t think so. First, insofar as Marx’s analysis contemplates working through the contradictions immanent to capitalism, it is not likely that in this instance he was contemplating a Rousseauean/Frankfurtschule restoration of antediluvian isolation. More importantly, if Marx grounded his dialectic of history in the production function — i.e., in the difference between any good’s material form of appearance and its abstract value — then it would be odd for him to revert in this instance to what could only be an uncritical reproduction of GWF Hegel’s Logic. Which is not to say that communities might not generate out of their own practical regimes certain kinds of directional dynamics not grounded in the commodity form’s immanent dialectic. Such directional dynamics, however, would be socially and historically specific, perhaps limited even to single communities. What distinguishes the dialectic immanent to the commodity from these others is the two-fold commodity form itself, which will not make its appearance, at the very earliest, before the fourteenth century.

Marx’s analysis in 1.1.2 points to transient, purely episodic, ephemeral encounters. “The universal equivalent form comes and goes with the momentary social contacts which call it into existence. It is transiently attached to this or that commodity in alternation.” Which distinguishes it qualitatively from capital. Capital acquires its universal, global, validity not in the act of exchange, but in the act of measuring the value of human action marginally, i.e. measuring the marginal product of labor as ΔQ [a change in some quantity] divided by ΔL or ΔK [a change in labor or capital]. Once measured marginally, as the ratio of a change in quantity divided by a change in labor and/or capital, investors are henceforth compelled to maintain or increase that ratio. This compulsion will bring them to cross every boundary, every border, raze every mountain top, fell every tree, and excavate every valley.

Gains in trade, or gains through exchange, therefore, does not merely indicate, as Carl Menger believed, that a good is valued more by one party than another. It means, first, that both parties value the goods they are exchanging in terms of the same abstract substance. But, second, unless the exchange is episodic, ephemeral, and transient, it also means that the communities are members of a social formation that includes both communities. Finally, in commodity societies, the abstract substance in which all goods are valued is the socially generalized, average of the aggregate cost of abstract labor: the cost of bringing any value-bearing good to market and placing it in relationship to other value-bearing goods (or the universal equivalent itself) with which it might be exchanged.

When right wing white nationalists invoke protectionism on goods and labor, they therefore do no more than change the rules by which investors will fleece consumers. A barrier on the southern border (for labor, not capital) will increase the marginal value of labor, which, in this case, is the constrained commodity. It will therefore increase the cost of producing the good dependent on that constrained commodity. Investors are perfectly happy to take advantage of the higher prices. But, even should we throw the borders open, flooding the market with lower-priced labor, lowering prices on goods produced by this labor, the increased volume of goods and lower labor costs will, in this case, attract investors to the higher returns. Protectionism is one way to generate returns. Free trade is another. In neither case, however, is the relationship between abstract value and its material form of appearance altered in any way.

At least where globalization and exchange are concerned, the real problem with extreme right wing white nationalism (and its left-wing cousins) is that both mistake surface forms of appearance for underlying social logics. Under capitalism, investors are as well equipped to value local idiosyncrasies as they are international law. They are masters of the art of arbitrage. Exchanges at borders often yield far higher returns for investors than exchanges where there are no borders. Borders have value. Which is why the one place working families need to go, is the one place extreme right wing nationalism will not take them. Working families need policymakers to decouple value from human action; they need policymakers to restore the public character of wealth: res publica.

To do so would not resolve the problems of globalization. But it would resolve the problem of homogenization and universalization. How? By eliminating the substance that all goods hold in common under capitalism. Once the values of goods are measured not in terms of their marginal product, but in terms of their satisfaction of human desire and need, we could then live into the highly differentiated world that capitalism promises, but never delivers.

Exchange must have appeared very early on the Savanah plains. Capitalism appeared in the fourteenth century at the earliest. We need ways to differentiate between what has happened to human beings over the past 2.4M years and what has happened to them in the last 500 years. Exchange is not the problem. Globalization is a problem, but it is not unique to capitalism. Capitalism is the problem.

Capital I.3.2. as “end time” text

I finished a draft today of “Christianity after capitalism,” which explores how Christianity might cope with the end of capitalism, assuming that it does not in fact go down with the ship. As with most classical texts, I have read Marx’s Capital several times. With each reading I discover something new. Such is the case with the text in volume 1, part 1, chapter 3, part 2:

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. 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, volume 1, chapter 3, part 2

Since they are predisposed to interpret Capital through the eyes of a thirty year old, if not a twenty-six year old, Marx, most interpreters of Capital miss many of its subtleties. In all likelihood they will therefore miss the theological dimensions of Marx’s analysis of the commodity. Hint: “immanent” (immanente) is not an economic category.

Perhaps it is not obvious, but religions in general and Christianity in particular are troubled by immanence, by the immediate presence of divine things in earthly things. It is important to note that Islam and Judaism will have nothing of it. God is transcendent. (Except when God is not. But we will not take that up here.) Christianity created a huge, perhaps insurmountable, problem for itself by highlighting not simply the immanence of God, but God’s arrest, incarceration, sentencing, and death.

Contemporary Christianity has overcome this problem by completely isolating Jesus’ material form of appearance (i.e., Jesus) from Jesus’ essence (i.e., Christ). In one among many comical passages in Capital, Marx dispatched this mental tick by crediting it to the commodified character of the contemporary Christian God:

For a society of commodity producers, whose general social relation of production consists in the fact that they treat their products as commodities, hence as values, and in this material form bring their individual, private labour into relation with each other as homogeneous human labour, Christianity with its religious cult of man in the abstract, more particularly in its bourgeois development, i.e. in Protestantism, Deism, etc., is the most fitting form of religion.

Capital, volume 1, chapter 1, part 4

Take that! You disembodied contemporary Christianity! Jesus had a body! Live with it!

Which leads me back to I.3.2.

Let us suppose that we — all of us whose lives are structured around the two-fold commodity form of capital — have grown accustomed to qualitatively differentiating the abstract values of things from their material forms of appearance. And let us suppose that it is around their abstract values that we all coordinate our decisions, judgments, prejudices, and turns of phrase. Since the world is, in fact, embodied and not abstract; since value is in fact substantive and not multivariate and abstract; does it not follow that bodies, real bodies, will find themselves in opposition to the abstractions dealt out by the abstract form of the commodity?

And might we not more accurately grasp this apocalyptic moment as “the end times”?

I do not promote this as a Book-of-Daniel-Revelations-Hal-Lindsey-End-Time-Prophecy. That clearly was not on Marx’s radar. What I am suggesting is that Marx discerned, in much the same way as the author of First Corinthians, that bodies were central to the stories that free people have to tell, and that the abstract value form of the commodity, much like the abstract laws of popular Roman Stoicism, was inadequate.

From this vantage point, the immanent tension between abstract value and its material forms of appearance counts as a kind of apocalyptic wake up call, an indication of the possibility, but no more than the possibility, that bodies might be resurrected after all.

Race and AI

In 1964 University of Chicago economist Milton Friedman faulted civil rights legislation barring discrimination because it was less efficient and less effective reducing discrimination. The example he gave was a restaurant that refused to serve African Americans. Such a restaurant, he argued, would lose the business not only of African Americans, but of civil rights advocates generally and would end up with an ever smaller clientele composed of racists and bigots. Private consumers would vote with their wallets.

A similar argument has been made for gender and race based hiring decisions. A firm that introduces race or gender into its criteria for hiring necessarily devalues the weight it places on criteria that measure competence and skill for the position the firm is trying to fill. In other words, discrimination does not pay.

In light of this free market analysis, some firms have moved entirely to double blind AI for their hiring decisions. Because AI doesn’t care. Or does it?

The assumption upon which this analysis is based is that the market is value neutral. But is it?

As an alternative, let me propose that, as Cornel West reminds us, “race matters.” Let me suggest, moreover, that race is valued differentially. Because, like all surface forms of appearance under capitalism, the differentia among and between things are indications of consumer preference. I like chocolate. You like vanilla.

Only in a market where ALL decisions are made by AI, would such differentia be of no consequence. But the moment private consumer preference is introduced, even as an algorithm, differentia flood back into the analytical frame.

So, for example, let us assume that I am an investor in a firm that sells high end automobiles. Data analysis suggests that consumers are marginally more likely to be white and that they are marginally more likely to purchase a car from a white male. That is to say, the marginal value of a white male sales force is higher than a white female, a black male, or a black female sales force. Were I to include this algorithm in my AI hiring choices, presumably the AI would yield “neutral” racist and misogynist decisions. That is to say, insofar as race has value — race matters — socially, an algorithm that measured value would necessarily give rise to racist outcomes.

But let us say that policy makers count race and gender equality non-negotiable, i.e., not subject to marginal analysis. And let us say, instead, that race and gender were weighted such that the disutility imposed on women and people of color were folded into the algorithm. And the social value of whiteness was discounted.

In effect, this would eliminate the market effect. Abstract value would, in that case, lose its function. It would be replaced by substantive right.

This, in fact, was the proposal against which Professor Friedman was arguing in Capitalism and Freedom. Any interference in the market undermines (market) freedom. Well, yes. By definition. But perhaps some things do not lend themselves to marginal analysis.

More immediately, in a racist and misogynist society, AI cannot but yield “neutral” racist and misogynist results.

Useless Labor

I am repeatedly struck by how poorly scholars, not all of them economists, grasp the most fundamental principles of economics. Even though I am not myself an economist. Let me hazard that one reason for the preponderance of sloppy analysis among economists is that, like children of the rentier, they know how to use the system, but they have little grasp for why it works.

Having taught this history of economic thought for more than twelve semesters, I have attempted to instruct the next generation of economists why the system works.

As you know, I have been working through Yuval Noah Harari’s three volumes. I took a brief break in order to read GWF Hegel’s Phenomenology and Slovoj Žižek’s Puppet and the Dwarf. But I am now back at it. Overall, Harari is well worth the read, all one thousand or so pages of him. But, along with most scholars, including many economists, Harari has a blind spot: economics. Here is what I mean:

The technological revolution might soon push billions of humans out of the job market and create a massive new “useless class,” leading to social and political upheavals that no existing ideology knows how to handle.

Harari, Yuval Noah. 21 Lessons for the 21st Century (p. 19). Random House Publishing Group. Kindle Edition.

Like most scholars, including most economists, Harari believes that people work in order to produce goods that people need, or, in any case, believe they need. Under capitalism, however, people work because they are part of what every economics textbook calls the Circular Economy. Here is how it works:

There is nothing specially mysterious about this system. People work in order to produce goods, which other people (or firms) purchase in order to generate returns for investors and satisfy consumer (or firm) need/want. The capitalist economy forms what since the 1850s (WS Jevons, K Marx) economists have characterized as a comprehensive, integrated, self-regulating system for distributing abstract value. In practice, what this means is that should any critical “link in the chain” (C Menger) fail, the entire system fails. But — and this is the linchpin — since abstract value is derived marginally, there arise no points within capitalism where any critical link in the chain gives rise to systemic failure.

Let us take Harari’s dire prediction. Machines are better equipped to perform nearly all of the tasks, now including the most sensitive tasks, humans perform. So, for example, Harari calls attention to the loan officer at a bank. The loan officer has access to all of the data that AI has. But, in addition to the data the loan officer enjoys, AI enjoys sensors that are able to detect heart beat, serotonin levels, pupil dilation, perspiration; and, besides, is not inclined to be side-tracked by the bad lunch the loan officer just ate, the fight she had with her girlfriend, the subconscious resentment she bears toward her employer, and so on. Moreover, in a comprehensive, integrated, self-regulating system, AI can simultaneously be purchasing and selling shares in assets that benefit shareholders in the loan-making institution. What is Harari missing?

Harari is missing the marginal value of uselessness. Because, remember, under capitalism, everything enjoys a marginal value. Which brings us to the marginal value of useless labor?

Here is what happened during the Great Depression. So little did human beings come to be valued that they collected and sold cigarette butts, sharpened pencils, earned money from dancing marathons; in short, anything. That is to say, the marginal value of human beings plummeted. But, as John Maynard Keynes pointed out, this was not evidence for market failure. To the contrary, it was evidence that the Circular Economy worked. It sent the value of the least valued goods downward until investors were ready, at a given price, to have their pencil sharpened.

But, of course, this also meant that the human pencil sharpener was purchasing goods only equal to her wage. In fairness, like Lord Keynes, Harari recognizes that capitalism is equipped with a nifty solution to this problem. Because the Circular Economy is not a temporally static system, a dollar today is not worth the same as tomorrow’s dollar. (Indeed, as Gary Becker noted in 1962, taking a page from Alfred Marshall’s 1891 Principles, a dollar here, today, is not worth the same as a dollar elsewhere or in someone else’s pocket today. $1≠$1.) This is because money is always a temporally and spatially constrained value, relative to the aggregate value of all dollars and dependent on questions of where and when. When I borrow $1 from the future to inspire a consumer to spend $1 today, that future dollar may be worth more, it may be worth less, than today’s dollar. But, if the economy is in a trough, then it is reasonable to assume that tomorrow’s dollar is worth more than today’s. How much more? Economists differ. But only marginally. Keynes’ point was that any debt accumulated today sufficient to stimulate economic growth over time greater than its cost is worth the investment.

The temporal and spatial envelope in which value modulates is social in character. This does not make it any less real. Rather does it make this envelope hyper-real. Consider, for example, the condition under which, as in Hunger Games or Drowned Cities, human beings have become little more than cockroaches. Their value reduced to virtually nothing. Their overlords invested with absolute power. There is still, here, a marginal calculation. How much value, if any, do I need to extract from the subject population? How much value do I spend policing the subject population? What is the risk of an uprising? What is the marginal cost of political stability? What die-rate will the subject population tolerate?

The point is, for economists who wish to reflect rigorously, there is absolutely no direct correlation of innovation to job loss. Not in the long run. Because the marginal calculation is a social calculation. Value is always, inevitably, social. But, if I have simply learned the formulas passed down and modified from Jevons to Marshall to Keynes to Krugman to Romer, how would I know that this is only social?

In 2018 the University of California, Berkeley, Department of Economics did three things: (1) they declared Economics a STEM major; (2) they eliminated the History of Economic Thought; and (3) they failed to renew my contract.

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.