Commodities as Products of Capital: A Reply to Skillman’s Review of Money and Totality

Abstract

This paper responds to the most important criticism in Skillman’s review of my book Money and Totality: A Macro-Monetary Interpretation of Marx’s Logic in Capital—that I misinterpret the fundamental concept of the “value” of commodities in Marx’s theory in Volume 1 of Capital. My reply emphasizes the difference between “simple commodities” and “commodities as products of capital.” I argue that Marx’s theory of value is about the value of commodities produced by capital, which is the macroeconomic total price of all commodities, and which is equal to the sum of the actual constant capital advanced at the beginning of the circuit of money capital and the new-value produced by labor of the current period (P = C + N = C + m L_c).

JEL Classification: B51; B14

Keywords

Marx commodities as products of capital circuit of money capital macroeconomic

1. Introduction

This paper is a response to Gil Skillman’s review of my recent book Money and Totality: A Macro-Monetary Interpretation of Marx’s Logic in Capital in a recent issue of the Review of Radical Political Economics (Skillman 2018). I appreciate very much Skillman’s substantial review of my book (Moseley 2016) and I would like to respond to his most important criticism—that I misinterpret the fundamental concept of the “value” of commodities in Marx’s theory in Volume 1 of Capital.

Skillman interprets the value of commodities in the standard way: First of all, the value of commodities is interpreted as microeconomic unit values of individual commodities. And second, the value of an individual commodity is interpreted as either the labor time required to produce a unit of the commodity (Lⁱ), which is the sum of the labor required to produce the means of production consumed in the production of the commodity ( $L_{m p}^{i}$ ) and the current labor time required to produce the commodity ( $L_{c}^{i}$ ),

L^{i} = L_{m p}^{i} + L_{c}^{i},

or a price (Pⁱ) that is proportional to that quantity of labor time,

P^{i} = k (L_{m p}^{i} + L_{c}^{i}),

with k as an unexplained proportionality factor.

2. Marx’s Theory of the Value of Commodities as Products of Capital

I argue that this simple standard version of the labor theory of value is not an accurate interpretation of Marx’s more complicated theory of value in Volume 1 of Capital. In the first place, the “value” of commodities in Marx’s theory is a complicated concept that has three interrelated aspects—the substance of value (abstract labor), the magnitude of value (socially necessary labor time [SNLT]), and the necessary form of appearance of value (money and prices; see, the titles and the contents of the sections of chapter 1 of Volume 1 of Capital). After section 3 of chapter 1, the “value” of commodities without further attribution usually refers to the third aspect—the form of appearance of value in terms of money and prices. For example, in the key chapter 7 of Volume 1, in which Marx presents his basic theory of surplus value, the value of the cotton and the yarn is always stated in terms of shillings (e.g., 15 shillings, 30 shillings, etc.). In what follows, “value” refers to the price form of value unless otherwise noted.

Second, Marx’s theory of value in Volume 1 is a macroeconomic theory of the total value and the total surplus value produced in the economy as a whole, not a microeconomic theory of the values or prices of individual commodities. The microeconomic prices of individual commodities cannot be explained in Volume 1 because individual prices also depend on the distribution of surplus value (i.e., the equalization of the profit rate), and before the distribution of surplus value can be explained, first the total amount of surplus value must be determined and that is the task of Volume 1 at the first level of abstraction in Marx’s theory of the production of surplus value. Individual prices with equal rates of profit are abstracted from in the macro theory of the total surplus value in Volume 1 and these individual prices are eventually explained in Volume 3 at the second level of abstraction of the distribution of surplus value, with the predetermined total surplus value taken as given. The individual commodities that are discussed in Volume 1 are representatives of the total commodity product (e.g., the yarn in chapter 7 of Volume 1). (See, chapter 5 of my book for eighty pages of textual evidence to support this interpretation of the two levels of abstraction in Marx’s theory.)¹

Third, the analytical framework of Marx’s theory of the total surplus value in Volume 1 is the circuit of money capital, expressed by the familiar formula:

M - C \dots P \dots C^{'} - M^{'} M^{'} = M + Δ M .

The framework of the circuit of money capital (what Marx called the “valorization process”) focuses Marx’s theory on the most important phenomenon of capitalist economies and the most important question in Marx’s theory of capitalism: what is the origin of ΔM and what determines its magnitude?

Fourth, the quantities of money capital in the circuit of money capital refer in principle to actual quantities of money capital advanced and recovered in the actual capitalist economy, not to hypothetical quantities in a hypothetical “value economy” that would later have to be “transformed” into the actual quantities of money capital. Thus the initial M = (C + V) refers to the actual quantities of money capital advanced to purchase means of production and labor-power at the beginning of the circuit of money capital (equal to the prices of production of the means of production and means of subsistence) and the final ΔM refers to the actual total ΔM recovered at the end of the circuit in the economy as a whole.

Fifth, to explain the actual total ΔM at the end of the circuit of money capital, the actual initial M at the beginning of the circuit is taken as given, along with the labor theory of value. The initial M exists as a definite quantity of money capital at the beginning of the circuit of capital, prior to the recovery of M′ and ΔM, and this preexisting quantity at the beginning of the circuit is taken as given to explain the M′ and ΔM at the end of the circuit. Another reason that the initial M is taken is given is that (as mentioned above) the initial M refers to the actual quantities of money capital advanced to purchase means of production and labor-power which are equal to prices of production of the means of production and means of subsistence, and prices of production cannot be explained in the macro theory of the total surplus value in Volume 1,

Finally, Marx distinguished between what he called “simple commodities” and what he called “commodities as products of capital.” Marx’s theory of value in Volume 1 of Capital is about commodities as products of capital. The value of commodities as products of capital consists of two main components: constant capital and new-value, and these two components are determined in entirely different ways. Constant capital already exists at the beginning of the circuit of money capital as the actual quantity of money capital advanced to purchase means of production, prior to production, and this previously existing actual quantity of money capital is taken as given and transferred directly, as this actual quantity of money capital, to the value of commodities as products of capital. On the contrary, the new-value component did not exist prior to this period production but is instead the result of the labor of the current period, and this new-value component is added to the preexisting constant capital to determine the macro value of commodities as products of capital (P = C + N).

Within the context of the circuit of money capital, the constant capital component of the value of commodities as products of capital is the actual constant capital advanced at the beginning of the circuit to purchase means of production; constant capital is not a hypothetical value of the means of production without reference to the circuit of money capital. The labor time required to produce the means of production has already acquired the general social form of money, as the actual quantity of money constant capital advanced to purchase the means of production, and it is through this already-existing actual quantity of money constant capital (equal to the price of production of the means of production) that the labor time required to produce the means of production plays a partial indirect role in the determination of the value of commodities as products of capital. Even though this actual money constant capital is not proportional to the labor time required to produce the means of production, this labor time is the main determinant of the price of production of the means of production (but not the only determinant), and thus is the main determinant of constant capital and the main cause of changes of constant capital.

By contrast, the current labor required to produce the current output plays a direct proportional role in the determination of the new-value component of the value of commodities as products of capital; that is, the new-value component is proportional to the quantity of current labor-hours, with the factor of proportionality (in a gold money economy) determined by the quantity of gold produced per hour (which Marx derived in section 3 of chapter 1):

N = m L_{c} .

For example, in the key chapter 7, m is assumed to be equal to 0.5 shillings per hour, and thus a quantity of current labor of six hours produces new-value = 3 shillings and a quantity of current labor of twelve hours produces new-value = 6 shillings.²

Thus, the macro value of commodities as products of capital is determined the sum of these two components:

P = C + m L_{c} .

The main difference between the value of commodities as products of capital and the value of simple commodities (as in Skillman’s interpretation) is the first component. The first component of the value of simple commodities is equal to (or proportional to) the labor time required to produce the means of production. On the contrary, the first component of the value of commodities as products of capital is equal to the actual money constant capital advanced at the beginning of the circuit of money capital to purchase the means of production (which is equal to the prices of production of the means of production, not their values). As mentioned above, the labor time required to produce the means of production has already acquired the social form of money, as this actual quantity of money constant capital advanced, and it is this actual quantity of money capital already advanced that becomes the first component of the value of commodities as products of capital.

It follows from this “macro-monetary” interpretation of the value of commodities as products of capital in Volume 1 of Capital that there is no “transformation problem” in Marx’s theory of prices of production in Volume 3; that is, Marx did not “fail to transform the inputs of constant capital and variable capital,” as is commonly alleged (including by Skillman). In Marx’s micro theory of prices of production in Volume 3, the inputs are the same actual quantities of money capital as in the macro theory of the total surplus value in Volume 1, which are equal to the prices of production of the means of production and means of subsistence. The only difference between the two volumes with respect to the inputs of constant capital and variable capital is the level of aggregation. The economy-wide actual totals of constant capital and variable capital in Volume 1 are disaggregated into individual industry actual subtotals in Volume 3. Thus, no “transformation” of the quantities of constant capital and variable capital is necessary or appropriate in Marx’s theory, because these quantities are the same actual quantities of money capital at both levels of abstraction.

Michael Heinrich stated in a cover note for my book:

Moseley presents an entirely new “macro-monetary” interpretation of Marx’s theory which finds the solution for the “transformation problem” already in Volume 1 of Capital

—really exciting.

I am glad that Heinrich emphasized that a reconceptualization of Volume 1 is the key to the solution of the “transformation problem” in Volume 3.

3. Textual Evidence

Unfortunately, Marx tried to simplify the published version of Volume 1 (at the constant urging of Engels), and in particular he tried to finesse the distinction between simple commodities and commodities as products of capital and the difference between constant capital and the labor time required to produce the means of production as the first component of the value of commodities as products of capital. There are fewer methodological comments in the published editions of Volume 1 than in the earlier drafts in which Marx stated that the means of production enter the labor process (i.e., the valorization process) as commodities, and thus with already existing prices that are presupposed. (Please see Moseley 2016: sections 1–4 of chapter 4) Marx wanted to make Capital more accessible to workers, but capitalism is a complicated economic system and theoretical complications are inevitable. Marx tried to simplify these complications, which from the point of view of rigorous theory was a mistake, and it has left a legacy of ambiguity and misunderstandings.

However, if one studies all the four drafts of Capital, as I have done in chapter 4 of my book, and if one considers the determination of constant capital (and variable capital) within the broader context of the key aspects of Marx’s logical method that I have discussed above (the two levels of abstraction [production and distribution of surplus value], the circuit of money capital, the actual capitalist economy from the beginning in Volume 1, and commodities as products of capital), I think a strong case can be made for this macro-monetary interpretation of the determination of the macro value of commodities produced by capital.

Chapter 4 of my book presents one hundred pages of textual evidence related to this “money capital” interpretation of the macro value of commodities as products of capital, and I hope that interested readers study this textual evidence. Because of a space constraint, I give just a few examples.

One of the most important discoveries in Marxian scholarship in recent decades is that there was a second draft of Volume 1 in the Manuscript of 1861–63, in between the Grundrisse and the final published editions. The Manuscript of 1861–63 consists mainly (about two-thirds) of the Theories of Surplus Value (TSV), which are of course well known, but this manuscript also begins with a second draft of parts 2 through 4 of Volume 1 (before he broke off to write TSV) and also includes, toward the end, about 250 pages on parts 1, 3, and 4 of Volume 3, which is also very interesting.³

The following passages come from Marx’s draft of his theory of the “valorization process” (which later became chapter 7, section 2 of Volume 1) in which Marx emphasized that means of production enter the valorization process as commodities, and thus with already existing prices, and these already existing prices of the means of production, which are equal to the constant capital advanced to purchase the means of production, become a presupposed constituent of the value of the product:

All the prerequisites of the labor process, all the things that went into it, were not just use values but commodities, use values with a price expressing their exchange value. Commodities were present in advance as elements of this process, and must emerge from it again. Nothing of this is shown when we look at the simple labor process as material production. We assume that the elements of the labor process are not use values to be found in the possession of the money owner himself, but were originally acquired as commodities by purchase and that this forms the prerequisite of the entire labor process. (Marx and Engels 1988 [1861–1863]: 67–68; bold emphasis added)

A few pages later, Marx stated that the price of the means of production that is transferred to the value of the output is presupposed because the means of production are themselves commodities which are purchased at the beginning of the circulation of capital, and thus the labor time contained in the means of production has already been expressed as the price at which the capitalist purchased them. This already existing actual price of the means of production, which is equal to the constant capital advanced to purchase the means of production, is presupposed and is transferred directly to (“re-appears” in) the value of the output and becomes a “constituent” of the value of the output:

This value [of the raw material] is however already expressed in the price at which the material of labor was bought, say e.g. a price of 100 thalers. The value of this part of the produce enters into it already determined as price. . . [The means of labor are] equally purchased. Hence the labor time contained in it, say of 16 working days, is expressed in its price of 16 thalers. (Marx and Engels [1861–1863] 1988: 70; bold emphasis added)

The values of the material and means of labor therefore appear again in the product as constituents of its value. This value is presupposed, since the labor time contained in the material and means of labor was expressed in their prices in its general form, as social labor; these are the prices at which the money owner bought them as commodities before he began the labor process. (Marx and Engels [1861–1863] 1988: 73–74; italicized emphasis in original; bold emphasis added)⁴

In Theories of Surplus Value (in a discussion of Samuel Bailey), Marx stated that, in the determination of the value of commodities as products of capital, the constant capital component is equal to the price of production of the means of production, not equal to their values (and similarly for variable capital; Marx called this point Bailey’s “only contribution”):

It is clear that what applies to the difference between the cost price and the value of the commodity as such—as a result of the production process—likewise applies to the commodity insofar as, in the form of constant capital, it becomes an ingredient, a pre-condition, of the production process. Variable capital, whatever difference between the value and the cost price it may contain, is replaced by a certain quantity of labor which forms a constituent part of the value of the new commodity, irrespective of whether its price expresses its value correctly or stands above or below the value. On the other hand, the difference between the cost price and value, insofar as it enters into the price of the new commodity independently of its own production process, is incorporated into the value of the new commodity as a presupposed element. (Marx [1861–1863] 1971: 166–67; italicized emphasis in original; bold emphasis added)

Next, in section 1 of the “Results” manuscript entitled “Commodities as the Product of Capital,”⁵ Marx stated again that, since the “elements” (i.e., the inputs) of capitalist production enter the process of production as commodities with specific prices, the constant capital component of the value of commodities as products of capital is given by the specific prices at which the inputs were purchased (e.g., £80):

Since. . . the elements of capitalist production already enter the process of production as commodities, i.e. with specific prices, it follows that the value added by the constant capital is already given in terms of a price. For example, in the present case it is £80 for flax, machinery, etc. (Marx [1863] 1977: 957; bold emphasis added)

Finally (for now), the clearest and most succinct statement of the two main components of the value of commodities as products of capital is a summary statement in chapter 1 of Volume 3 of Marx’s theory of value in Volume 1:

We know from Volume 1. . . that the value of the product newly formed, in this case £600, is composed of (1) the reappearing value of the constant capital of £400 spent on the means of production, and (2) a newly produced value of £200. (Marx [1863] 1977: 119; bold emphasis added)

4. Conclusion

Controversies over different interpretations of Capital are of course notoriously difficult to resolve. I hope that readers read my chapter 4 and consider the substantial textual evidence that I provide (much of it unfamiliar and some of it published for the first time in recent decades) to support the monetary aspect of my interpretation, including my interpretation of the value of commodities as products of capital (P = C + m L_c) within the analytical framework of the circuit of money capital $(M - C \dots M + Δ M) .$ And in particular that in the Volume 1 macro theory of the total surplus value, the first component of the value of commodities as products of capital is the actual constant capital advanced and consumed in capitalist production, which is taken as given and then later explained in two stages as equal to the prices of production of the means of production (see Moseley 2016: 19–21 and chapter 4 for a discussion of this two-stage explanation of the given actual quantities of constant capital [and variable capital]). The labor theory of value for a theory of capitalism is more complicated than the simple labor theory of value of the standard interpretation of Marx’s theory.

One significant advantage of my interpretation is that it makes Marx’s theory a logically consistent whole and there is no “transformation problem” in Marx’s theory—as opposed to the standard interpretation which makes Marx’s theory logically contradictory and there is an insoluble transformation problem and Marx’s labor theory of value should be rejected for that reason. A widely accepted principle in hermeneutics (the study and interpretation of texts) is that when there are competing interpretations of a text, the preferred interpretation is that one that makes the text more of a consistent whole. Based on this principle, it would seem that my “macro-monetary” interpretation should be the preferred one. Why continue to insist on the standard interpretation—handed down from Bortkiewicz to Sweezy to Steedman—when there is an alternative interpretation, which is logically sound and with substantial textual evidence, that eliminates the transformation problem and makes Marx’s theory a logically consistent whole?

Footnotes

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author received no financial support for the research, authorship, and/or publication of this article.

1

Skillman argues that the two levels of abstraction in my interpretation (the production and distribution of surplus value) and the prior determination of the total surplus value is not possible because commodities are sold at a single price at a single point in time and thus the production and distribution of surplus value must be determined simultaneously at the same time by this single price. However, this criticism interprets the prior determination of the total surplus value in a temporal sense—the production of surplus value at one point in time and then the distribution of surplus value at a later point in time. But I argue that the prior determination of the total surplus value (by the total surplus labor) means logically prior (the whole is determined before the parts), not temporally prior. According to Marx’s labor theory of value and surplus value, the total surplus value must be determined logically prior to its division into individual parts because all the individual parts come from the same source, the surplus labor of production workers.

2

Skillman criticizes me because I do not show that m is well-defined and unique. This criticism seems to be based on an interpretation at Marx’s theory in terms of a system of simultaneous equations and the way to “show” uniqueness is that the number of equations and the number of unknowns must be equal. But my interpretation of Marx’s theory is not based on a system of simultaneous equations. Consistent with Marx’s general labor theory of value, the SNLT required to produce a unit of gold is the actual quantity of labor-hours, adjusted for skills and unequal intensities of labor. Marx assumed that such a unique quantity exists.

3

An English translation of the entire Manuscript of 1861–1863 was published for the first time in the Marx-Engels Collected Works, Volumes 30–34, from 1988 to 1992.

4

It should be noted that when Marx stated in this passage that the labor contained in the means of production was expressed in its “general form, as social labor,” he meant that this labor was expressed in the form of money, or as the price of the means of production (see 1988: 11 and 34 for similar expressions of money as the general form of social labor).

5

The “Results” manuscript was written just after the Manuscript of 1861-1863 and was intended as a summary of Volume 1 and a transition to Volume 2.

Author Biography

Fred Moseley is Professor Emeritus of Economics, Mount Holyoke College, and editor of Marx’s original Volume 3 manuscript Marx’s Economic Manuscript of 1864–65 (Brill 2016).

References

Marx

Karl

. (1861–1863) 1971. Theories of Surplus Value, Volume 3. New York: International Publishers.

Marx

Karl

. (1863) 1977. “Results of the Immediate Process of Production.” In Capital, Volume 1, ed. Marx

Karl

, 943–1084. New York: Random House.

Marx

Karl

Engels

Friedrich

. (1861–1863) 1988. Marx-Engels Collected Works, Volume 30. New York: International Publishers.

Moseley

Fred

. 2016. Money and Totality: Marx’s Logical Method in Capital and the End of the “Transformation Problem.” Leiden: Brill Publishers. Paperback edition, Chicago: Haymarket Books.

Skillman

Gilbert.

2018. Book review of Money and Totality: A Macro-Monetary Interpretation of Marx’s Logic in Capital and the End of the “Transformation Problem.” Review of Radical Political Economics 50 (3): 620–625.