"Most people are in arrested development and cannot use logic." Jacob.
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Monday, July 4, 2011

Karl Marx Made Easy

'Tis a fortunate day for me and possibly the world. An intelligent Marxist has decided to visit the Mises.org forums, promising to explicate Marx's magnum opus, Kapital, chapter by chapter.

He lays it all out very clearly, so clearly that the sources of differences between Marxian and Austrian economics become obvious.

So lets give our man Pizza von Marx the floor in italics, with my comments interspersed, as he summarizes Chapter One of Kapital for us:
Marx starts by telling us what we will be investigating and later critiquing.
"The wealth of those societies in which the capitalist mode of production prevails, presents itself as “an immense accumulation of commodities,” its unit being a single commodity."
Here he also defines Capitalism. This is more usually known as "Generalised commodity production"

Pretty harmless, so far, although he has erred right from the start when he writes that the "unit" of wealth is "the single commodity".
A lot of care is devoted in the physics to carefully defining units. Here is Richard Feynman talking about what a kilometer is:

"It might be thought that it would be a good idea to use some natural length
as our unit of length—say the radius of the earth or some fraction of it. The
meter was originally intended to be such a unit and was defined to be (π/2) X 10~7
times the earth's radius. It is neither convenient nor very accurate to determine
the unit of length in this way. For a long time it has been agreed internationally
that the meter would be defined as the distance between two scratches on a bar
kept in a special laboratory in France. More recently, it has been realized that
this definition is neither as precise as would be useful, nor as permanent or universal as one would like. It is currently being considered that a new definition be adopted, an agreed-upon (arbitrary) number of wavelengths of a chosen spectral line."

Contrast this with Marx trying to sound scientific by writing "its unit being a single commodity", but not actually being scientific. What units are used to measure commodities? How many units of commodity are in an Iphone? One, because it's one Iphone? Is one Iphone equal to one apple, because they are both commodities? What about the parts of the Iphone that are sold separately to the factory that assembles them into an Iphone? Are they to be counted separately, making an Iphone 35 units, say, of commodity?

But let's move on.

Then we start analysing what IS a Commodity exactly? Throughout this chapter he tells us that a commodity is an average sample of its class, and that it has a two-fold character.
Commodities have both use-values (they are useful objects) and exchange-value.

I'm OK with that. Use value means "What can I do with it?" and exchange value means "What can I sell it for?" These are distinct and clear categories that none can deny. If you have an object, you can use it or you can sell it. So far so good. The mistakes will come when Marx tries to find what determines the exchange value, meaning the price, of a commodity. Let's hear him out:

I'll start by talking about use-value.
Use-value is often referred to by Marx as qualitative. It is the physical properties of a commodity, Marx also tells us that use-values are what constitute the "substance of wealth." Marx also mentions how an increase in material wealth corresponds with a DECREASE in exchange-value, this has its origin in the dual-nature of a commodity.

So far so good. In fact I like the point he is making, that the substance of wealth is commodities and the use they bring you. He also states what we would call today the law of supply and demand. The greater the supply of something, the cheaper it is. Karl, you're on a roll.

Exchange-value is what makes a commodity a commodity, nearly everything has some use-value, but not everything has an exchange-value, so, what is it? Exchange-value exists only when commodities stand in relation to one another. It is the proportion in which the two commodities exchange. Since use-value is everything that is the physical, exchange-value cannot be. Exchange-value is characterised as being quantitative, and an abstraction from use-value (with no use-value there is no exchange-value).

Right here is where the the Austrians say Marx has missed the boat. All you have to do is look at any commodities website for five minutes to see his mistake. The price of corn changes every few minutes, swinging up and down all the time, as does the price of cotton, of silver, of pork bellies, of everything listed on the commodities website, in fact. But I think we can agree that the use value doesn't change at all in five minutes. What you can do with corn now is the same at what you could do with it five minutes ago: eat it. The same is true for all the commodities traded.

So we have us a little mystery here. The exchange value of a commodity, according to Marx, comes from its use value and its supply. The use value of a commodity, say corn, does not change in minutes, nor does its supply.  If the use value and the supply have not changed an iota, why does the exchange value go up and down for no reason?

Austrian economics solves this riddle. No values of an object inhere in an object. Values, both what Marx calls use value and what he calls exchange value, come from human beings. Smith likes corn because he can eat it, and will pay a certain price for it right now. In five minutes, he may change his mind about how much he is willing to pay for it. Jones like corn because he will use it as a prop in a horror movie. Depending on how badly he needs the corn, how behind he is in the production schedule of his movie, he might agree to pay more or less for the corn needed to finish making his movie.

The intensity of how much a human likes a commodity also has its origin in the human, not in some intrinsic feature of the object. Adams likes the taste of corn a little bit more than that of an apple. Baker like corn a lot more than apples. Charlie likes apples much more than corn; in fact he hates to eat corn, and is unwilling to pay a dime for it. But if he finds out his girl friend likes corn, he might be willing to pay more for it than the biggest corn lover would, to buy some for her.

What led Marx to make such an idiotic, fatal, mistake, right on the very first page?
My guess is his lust to dehumanize. People don't count, according to Marx. What counts are powerful, blind, inexorable forces of nature. How embarrassing to a physicist it would be if he was forced to say that the laws of gravity, of the mighty solar system, of the electron and the nucleus, ultimately depend on the passing whim of an empty headed teenage girl with a few dollars in her purse. Equally embarrassing to some economists, Marx included, to contemplate that their science is the study of the effects of that silly little girl! And you definitely cannot rely on her to bring about Heaven on Earth, meaning the Dictatorship of the Proletariat.

So Marx had to send that poor girl to Siberia. She must be replaced by use value and exchange value and the next silly abstraction in Marx's repertoire, the labor theory of value, to be discussed in the next blog.

1 comment:

  1. hahahah nice. i supposed we shouldn't laugh...they try really hard to keep objective labor relevant