## Warning – statistical reasoning required

This post presents arguments about the rate of profit using forms of statistical reasoning that will be unfamiliar to many readers. But I am asking you to try and perservere with the argument. Some properties of economic relations can only be understood by an in-depth examination of statistical distributions.

In the analysis of capitalism presented in Vol 1 of Capital Marx has the money value of commodities shadowing their labour value.

This matches how Ricardo initially presents value at the start of the first chapter of his Principles.

Both Ricardo and Marx later go on to modify their presentation to take into account an assumed tendency for profit rates to equalise. Ricardo presents this modification almost immediately towards the end of his first chapter. Marx’s modifications were published posthumously by Engels in what appeared as Vol 3 of Capital.

The underlying assumption in both the Principles and Capital 3 is that movement of capital out of low profitable branches and into highly profitable ones will tend to equalise profit rates.

It is interesting that  Marx and the classicals were willing to allow for some things to be tendential: movement of profit rates over time, tendencies of prices to oscillate around labour values or natural prices. When it comes to profit rates across industries, instead of a tendential treatment the examples given in the Principles and Capital 3 assume a single uniform profit rate.

This assumption carried over first to the critics of Marx like Boehm Bawerk and then to Sraffian school. The whole debate from Ricardo to Steadman was conditioned on the assumption of profit rate equalisation.

One may ask why, if the classicals were willing to allow a stochastic relationship between market price and natural price, did they resort to the assumption of strict equalisation when it came to the rate of profit?

Why was it that it took until the publication of the Laws of Chaos for this assumption to be questioned?

It is certainly much easier to think of economic data in terms of averages than in terms of complete statistical distributions. Easier to think of just the average profit rate and assume this applies generally than to recognise that there is always a spread around the average. If you are making up simple examples, as those from Ricardo to Steadman did, then you really have little choice. To give examples involving a spread of profit rates you would need to include dozens of different industries with randomly distributed profit rates. That would be messy. It would not tell a clear story. It would be hard to draw conclusions.

But if we accept that profit rates will actually be dispersed, and that at most there is a tendency for profit rates to equalise, how would we expect this to be manifest?

Let us focus on the key distinction between price of production theory and value theory. In the classical presentation by Marx the first step is to assume uniform ratios of s/v and then show that in the presence of different c/v ratios this leads to a dispersal of profit rates s/(c+v). This dispersal is then taken to contradict an assumption of profit rate equalisation so a second scheme is constructed in which profit rates equalise, but in consequence the ratio s/v becomes dispersed.

So equalisation of one ratio implies the dispersal of the other.

## Two class standpoints

There is an implicit acceptance that one dispersal is ok ( dispersal of s/v ) whereas the other dispersal (s/(c+v) ) is not. But behind this acceptance there is an implicit assumption – that capital has more agency than labour. It is taken as given that owners of capital will act to maximise their profit, shifting from low profitable branches to high ones. But there is no analogous assumption made about labour.

Why should workers accept being in an industry in which the profit to wage ratio is much higher than in others?

They have two options after all. They could simply change jobs to move to the industries in which the wage share was higher. Alternatively they could strike for higher wages, knowing that if their employers were making abnormally high profits from each worker then they would have a good chance of winning.

The profit rate equalisation theory only looks at struggle between the owners of capital to maximise their return. It ignores the struggle between capital and labour. And I mean that literally. The books and articles about the transformation problem prior to the publication of Laws of Chaos, just never discuss the class struggle when looking at profit rate equalisation.

Paradoxically, insofar as discussion of class struggle in this context occurs at all, it is thanks to Ricardo not Marx. Ricardo was interested in differential capital compositions because he wanted to know how wage rises would have a different effects on prices of various commodities. His conclusion was that wage rises would lead to a relative fall in the price of capital intensive commodities. But neither he, nor the Neo-Ricardians concerned themselves with the ability of different capitalists to resist wage demands.

In Capital the assumed relationship is:

What happens if we assume that there does indeed exist a tendency towards equalisation of profit rates but that it is only enough to control the dispersion of the rate of profit. What does this weaker hypothesis imply for the relationship between the dispersion of s’= s/v and r= s/(c+v). Intuitively it is fairly clear that if we assume a constraint on the dispersion of r then the dispersal of s’ will necessarily be greater, since, in price of production theory the s/v ratio has to accomodate the random variation in c/v on top of any independent variation in profit between industries.

One can test this with a simple spreadsheet linked here .  I suggest you dowload it an examine it in Excel or Liber Office. This has about 40 industries all have a constant capital of 100, but have variable capitals normally distributed with a mean of 50 and a standard deviation of 18. We can the set the rate of profit to also be normally distributed with a controlled standard deviation. If you download the spreadsheet we can see that the default rate of profit is 20% with a standard deviation of the profit rate of 12% – actually quite a widely dispersed profit.

## How do we measure dispersion

The way to measure dispersion in absolute terms is the standard deviation. Basically this is a technique for averaging the  spread about the mean. Since some instances in the spreadsheet have profit rates above 20% and some below, ranging from around 6% to around 40%, one wants to add these discrepancies from 20% up in a way that ignores the sign. What statisticians normally do is square the disparities, take the mean of the squared disparities and then take the square root of that. The squaring is to map both positive and negative disparities to positive squared values, you then take the mean of these to get the average. But that is still too big because of the squaring step, so you take the square root to cancel it out.

This gives you an absolute positive number, but it does not tell you how wide the dispersion of profit rates is in relative terms. If the average profit rate was 20% then a standard deviation of 2% is not much – only a 1/10th of the total level of profit. If the rate of profit fell to 4% and the standard deviation was still 2%, then in relative terms it would be a big spread – a spread by half.

So to measure the spread of the rate of profit you have to divide the standard deviation in profit by the average rate of profit. This measure standard deviation/ average is called the coefficient of variation of the rate of profit.

One can apply the same technique to the rate of surplus value and get the coefficient of variation of s/v by dividing the standard deviation of s/v by the average rate of surplus value.

In the example spreadsheet the coefficient of variation of the rate of profit is set by the random number generator to be 0.6. The spreadsheet also calculates the coefficient of variation of the rate of surplus value. Since the spreadsheet uses random number generation recalculates whenever you load it, or whenever a cell is altered the coefficient of variation you get will vary. But if you repeatedly recalculate, you find that the coefficient of variation of the rate of surplus value tends to be greater than that of the rate of profit.

By altering the cell labeled rstd ( cell h6) you can tune the dispersion of the rate of profit and see that there is a strong tendency for the dispersion of the rate of surplus value to be greater. Columns L and M shows the result a large number of runs giving dispersions of r and s/v. Column N shows the ratio of the two dispersions for each.

### X axis coefficient of variation of rate of profit, y axis coefficient of variation of the rate of surplus value.

• On average  the dispersion of s/v is 2.9 times that of r
• The graph shows the relationship between them
• Note that as the dispersion of r increases so does that of s/v, but to a greater extent.

Why does this happen? It is because the rate of profit is given a mean and standard deviation that are independent of the organic composition. The profit to wage ratio is then subject to the sum of two random disturbances

1. Due to random variations in profitability independent of organic composition
2. Due to the effect of organic composition – since the assumption of independence of the rate of profit on organic composition means that the profit to wage ratio is the only ‘route out’ for this random noise.

So what can we conclude?

If we assume a weakened price of production theory in which the dispersion of the rate of profit is not zero, but is constrained to be within a specific coefficient of variation, then we should expect that the spread of the rate of surplus value will be greater than that of the rate of profit.

Way back in the mid 1990s Allin Cottrell and I did an empirical study of the rates of profit and rates of surplus value in the sectors of the UK economy described in the national input output table. We got the following measures for the empirical dispersions of the rate of profit and rate of surplus value:

 Emprirical data UK Cottrell and Cockshott 1995 Indicator Coefficient of variation Rate of profit 0.608 Rate of surplus value 0.423

The actual value of the surplus value dispersion was lower than that for the rate of profit.

We concluded in our original paper that this was pretty conclusive evidence that the tendency of the rate of profit to equalise either did not operate or, at the very least, was significantly weaker than a tendency towards equalisation of the profit/wage ratio.

At the time we had not run the sort of simulation performed by the just released spreadsheet. The spreadsheet simulation reinforces our conclusion from 1995.

The dispersion of the rate of profit was the maximum that I tried on my spreadsheet ( which is why I set that as the profit dispersion in the uploaded spreadsheet ). On the basis of running multiple simulations of the spreadsheet the expected dispersion of the rate of surplus value would have been at least 1.

Consider the implications of a coefficient of variation of the rate of surplus value greater than 1. It implies that the standard deviation in the rate of surplus value would be greater than the rate of surplus value itself. In consequence a substantial number of industries would be showing negative rates of surplus value – they would be running at a loss.  You can verify this by repeatedly rerunning the simulation ( press F9 button for libre office ).

Let me go over this again.

• If you assume that there is even an imperfect tendency of the rate of profit to equalise,
• If you then assume that it results in the empirically observed dispersion of profit rates
• The consequence would be that the dispersion of s/v would be so high that a significant fraction of whole industries would have negative surplus value.

To those of my readers familiar with the work of Farjoun and Machover will remember that in the Laws of Chaos, they predicted that to avoid a prohibitive number of firms running at a loss the dispersion of the rate of surplus value require around 3 standard deviations between the rate of surplus value and the loss making point – that is to say they predicted a coeffiecient of variation of s’ of around 0.33. Well the actual dispersion of the UK rate shown by the 1984 IO table was slightly higher. But only slightly. There are about 2.5 standard deviations separating the mean rate of surplus value from the loss making point.

I said above that the prediction is that the spread of s/v must be greater than the spread of r if r is independent of c/v. Since in fact r has the greater spread, it must be the case that r is not independent of c/v, and this is indeed what we found.

The narrow constraint on the rate of surplus value forces the profit rate of industries with high organic composition to be low.

In our 1995 paper we concluded that the empirical evidence supported the predictions of Farjoun and Machover.

The spreadsheet demonstrates the principles of the Farjoun and Machover argument in a way that allows you to play around with the dispersion of the rate of profit and see what the implications are for the spread of rates of surplus value.

It reinforces the theoretical incoherence of price of production theory.

## What is the alternative

But what do you have to assume in order to get a model with the observed situation where the dispersion of the rate of surplus value is lower than that for the rate of profit?

Well if you assume that the basic law is one of a tendency for the rate of surplus value to equalise, then you can set up an analogous spreadsheet like the one here. In this case the rate of surplus value is controled by a Gaussian random number generator with a specified mean and standard deviation. You then compute what the consequent dispersion of the rate of profit is as shown below for a similar series of runs.

In these runs the dispersion of the rate of profit tends to be greater than that of the rate of surplus value, though the effect is less marked at high surplus value dispersion levels.

This is consistent with the observed data for the UK.

So we conclude that a theory of the tendency of the rate of surplus value to equalise is supported by the empirical data for the UK.

## Mirror of : response to RV, or why the law of value must hold.

https://paulcockshott.wordpress.com/2020/06/26/a-belated-response-to-rv-or-why-the-law-of-value-must-hold/

This is a continuation of a previous debate with RV, here and here.

RV claims that I say that “the average prices of commodities are directly proportionate to the labour time socially necessary to reproduce them.”. I don’t because that is a mathematically ill defined statement. There is no such thing as an average price of different commodities since the commodities are incomensurable. You can not average the price of size 9 socks, Volkswagen Up cars, and 20cm lampshades. To form an average you need numbers of a uniform sort, which can not be done with distinct commodities. What can be measured is the correlation between the labour content of the output of industries and the money value of the output of these industries.

What I do claim is :

One can allow an element of noise, a percentage error induced by temporary fluctuations of supply or demand whilst still accepting that the attractor for relative money values (prices) is relative labour values. In modern language, not available to Marx, we would say that labour content is strongly correlated with sale value in terms of money.

It is this assumption that is absolutely crucial to the arguments that Marx uses for the analysis of relative surplus value in volume I of Capital. The analysis of capitalist exploitation is the most politically controversial part of Capital.

RV has no difficulty in finding places in Vol 1 of Capital or in Theories of Surplus Value where Marx says, without elaborating much, that average prices do not correspond to values. This, as I say above, is a mathematically ill formulated claim, but let us read it charitably as indicating that Marx believed, as a follower of Ricardo, that profit rates equalised and that in consequence capital intensive commodities would sell at a premium relative to their labour content. He promises to explain all in a volume to be published later. But none the less his entire set of theoretical demonstrations rest on what he may perhaps have believed was a mere provisional assumption that relative prices are proportional to relative values.

RV claims that this assumption is made because Marx is deliberately setting himself a hard task. He implies that the assumption of price/value proportionality makes Marx’s task exceptionally hard:

He has to demonstrate that there is surplus-value even under the very restrictive assumption that average prices are proportionate to values. Marx singles out the most restricted, most difficult case, because he thinks it is only in this case that he can decisively make his point without there being any possible other explanation.

It is true that Marx is setting up this assumption to exclude certain superficially easy but false explanations of surplus value. The simplest explains profit by monopoly power. The capitalist as a monopolist, in this version, makes a profit by selling commodities above their true value.

Well there is little reason to doubt that individual monopolists do gain profit this way, but it fails as a general explanation for profits. If some capitalists are selling above relative values, others must be selling below them, so the gains of one would be cancelled by the losses of another. Although the monopoly theory is superficially attractive, it would therefore fail as an explanation for capitalist profit in general. In modern language, such deviations are a zero sum game.

The next theory that Marx wanted to exclude was that workers were being cheated by the price of labour being below the value of labour. One of his rival socialist theorists like Rodbertus advocated this sort of account. So the insistance that commodities sell at their value was also intended to stress that labour power too, sold at its value. This was to obviate reformist projects according to which exploitation would end if all commodities, including labour power, could be made to sell at value. He argues instead, that even if labour power does sell at its value, surplus value will still exist. He does not doubt that at times the price of labour power falls below its value – falls to a level at which workers familes can not reproduce themselves. But he is guarding his argument against the simple trades unionist demand for a a fair day’s wage for a fair day’s pay. Instead he constructs his analysis of capitalist exploitation to show that even if workers are paid the value of their labour power they are still exploited. The solution must be the ‘abolition of the wages system’. This point is made explicitly in the last lines of Wages Prices and Profit. The equivalent terminating phrase in Capital is ‘expropriation of the expropriators’.

The claims that profit arises from monopoly or under pricing of labour, whilst superficially plausible, are incapable of being integrated into a consisten overall system of social accounting – of the sort presented in Vol 2.

In fact, I will argue, that the system of accounting in Vol 2 necessarily implies that the law of value – in the sense of a close correlation between prices and labour values must hold if capitalism is to reproduce itself. Dave Zachariah and I give a formal mathematical demonstration of this in a recent paper. I will give a demonstration by numerical example later.

But for now, lets just ignore the reproduction models in Vol 2 and concentrate on the way that the coherence of Vol 1 depends absolutely on the law of value ( understood as necessary close correlation between prices and labour values ).

I will now simple quote what I said on this in my original article and we can see if RV has been able to make an adequate response.

Recall that Marx calls absolute surplus value, that surplus value produced by lengthening the working day. In his analysis of this he assumes that a proportional increase in the working day – say by 1/4  from 8 hours to 10 hours will result in a proportional proportional increase in the value added by labour during the day. He repeatedly switches between presentation in terms of money and equivalent proportional representations in terms of time.

The same proportionality is involved in his discussion of the limitation of the working day.

If it were not the case that value added was proportional to labour time, this whole argument would be groundless. Were value added not proportional to labour time, were it proportional to the fixed capital employed, for example, then there would be no relationship between the length of the working day and the surplus value going to the employer. If you drop the assumption of proportionality of value added to labour time worked, then the whole analysis he gives falls appart.

Now look at relative surplus value. It is termed relative because it is produced when the relative proportions of value added going in wages and surplus change, the working day remaining constant. He says that the wage is equal to the money value of the necessities required to reproduce labour power under given cultural conditions of life. If the use of machinery reduces the labour required to make these necessities then there is a proportionate fall in their money value and, as a result, the share of surplus value rises since the labour force can now be reproduced with fewer hours of necessary labour. If necessary labour falls, surplus labour and surplus value rise.

Where the absolute surplus value analysis rests on a proportionality between labour time and the value added to the product. Relative surplus value rests on a proportionality between labour time and the money wage, via the mediation of the price of wage goods.

The detailed analysis of how machine weaving replaced hand loom weaving is based on the same assumption. The reduction in the time taken to produce a yard of cloth with machinery reduced its money value and in consequence forced the handloom weavers into penury. The same assumption comes up again and again – proportionality between socially necessary labour time and money value of commodities.

If RV thinks that this proportionality is not a foundational assumption of the analysis of absolute and relative surplus value, let us see him reconstruct the analysis without at any point being able to make that assumption.

How does RV respond to this challenge?

Is he able to derive an analysis of relative or absolute surplus value without assuming a strong positive correlation between labour content and price ?

No he completely flunks the challenge because it can not be done. Instead he avoids the issue :

It is indeed absolutely necessary for the analysis (“the process of breaking a concept down into more simple parts, so that its logical structure is displayed”) of how surplus-value arises in production to assume (= suppose) that commodities are exchanged at their values. Even if they actually don’t. In other words, when you abstract from value-price deviations, that doesn’t mean that you think they aren’t there. It just means that you think they’re not relevant to what you’re trying to demonstrate (of course maybe they are relevant, and in that case your demonstration will not stand the test of practice). It means that it renders the analysis unnecessarily complex and doesn’t allow you to conclusively demonstrate anything. At least, that’s how Marx sees it.

He makes two points

• that it is necessary for analysis to assume that prices are proportional to values even if in reality they ae not
• that you can abstract in the analysis from price value deviations

But this is not good enough. It is not a matter of abstracting from price value deviations. A strong positive correlation between prices involves the assumption that there are deviations. But that the deviations, the noise, is small compared to to the signal, this is literally what correlation measures. For him to rebut the point that Marx’s analysis depends on this positive correlation it is not enough to say Marx was ignoring deviations. He would have to show that Marx’s argument would still hold if prices and values were uncorrelated. If prices were not correlated to labour content, then the use of labour saving weaving machinery would not have depressed the price of woven cotten and impoverished the hand loom weavers in the way Marx describes in his anlysis of machinery. The whole argument would fall down.

On his first point. If the theory of surplus value mathematically rests on the assumption of labour value to price proportionality, and if in reality it turns out that prices are uncorrelated with values (as Kliman claims ) then Marx’s theory would be dead wrong and we should reject it outright – as the bourgeois economists have long claimed. But if Marx believed his theory of surplus value to be true, then he must have believed that the premises on which it rested were true premises.

Again, I repeat the challenge, RV and Kliman for that matter, have to show that Marx’s theory of surplus value can be reconstructed on the assumption that price and value are uncorrelated. Of course if RV can not reconstruct the theory of surplus value without assuming that the law of value holds, then the theory of the declining rate of profit – which depends on the theory of surplus value would also be unsound.

## Impossible things

“Alice laughed. ‘There’s no use trying,’ she said. ‘One can’t believe impossible things.’

I daresay you haven’t had much practice,’ said the Queen. ‘When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast. There goes the shawl again!”

― Lewis Carroll

It is easy for RV to find passages where Marx supports the Ricardian theory that profit rates equalise, and that this will induce systematic deviations between price an value. Marx was, on this point a completely uncritical Ricardian. This is why, for a long period from the 1960s the neo-Ricardian school were able to make hay with their criticisms( for example Steedman, Ian. Marx after sraffa. London: NLB, 1977).

Marx may well have thought that “differences in the average rate of profit in the various branches of industry … could not exist without abolishing the entire system of capitalist production.” But as Dodgson points out, in the youth of a theory one can believe many impossible or contradictory things. Marx both believed that Ricardo was right about the equalisation of profit rates, and that Marx’s own theory of reproduction was right. But this, was a belief in the impossible.

They can not both be right.

This is why there is a ‘transformation problem’.

Marx seems not to have been aware of the problem, but it was pointed out after his death by Samuelson, the neo-Ricardians, etc. It is unfortunate that Kliman and some other older Marxist economists have gone to inordinate lengths to try to hold onto pre-prandial fantasy, doubly unfortunate if younger comrades like RV never get to eat.

Marxist economists have a choice, they can hold fast to the law of value, the theory of surplus value and the analysis of reproduction in Vol 2, or they can decide to go along with the Ricardian assumptions of the early part of Vol 3. If you hew to the Ricardian assuption as RV, Kliman, Harvey and Steedman do, then in one way or another you end up repudiating the law of value.

Vol 2 deals with reproduction and turnover time, but it does all this on the basis of exchange at labour values. What was not apparent to Marx when writing Vol 3 was that it is actually the assumption of profit equalisation that leads to the economic collapse. One can grasp this if one starts out from the reproduction shcemes of Vol 2. Dave Zachariah show this in our lectures on the Kliman price theory here, starting from slide 99. We also have a video. In what follows I will give a simple example of why this is.

What I will show is that if you allow for varying turnover times then and equal rate of profit disrupts the reproduction of the economy.

Let us start by assuming we have a country with 100 million workers. If they are all full time workers then the annual net product in terms of labour value must be 100 million person years.

We can divide the economy into three big sectors:

1. The production of means of production
2. The production of wage goods and services consumed by the working class
3. The production of services and goods consumed by the capitalists. This includes not just luxuries, but a whole bunch of services like investment management, corporate law, advertising etc.

We will assume that the economy is in simple reproduction, neither growing nor shrinking, with no net capital accumulation. In that case the entire net product comes from sectors 2 and 3.

The whole of sector 2s output is consumed by workers, so the labour required to make its output is the necessary labour time of the economy. The ratio between the sizes of sectors 3 and 2 expressed in person year terms gives the rate of surplus value. We will assume the rate of surplus value is 100% – well within the bounds of plausibility.

That implies that the value of output of each of sectors 2 and 3 must be 50 million person years.

That does not mean that 50 million work directly in each of sectors 2 and 3. Each must use up means of production supplied by sector 1. Let us suppose that wage goods use 20 million person years of means of production, and capitalist consumption 10 million. So at the next level of detail our situation is ( all figures millions of person years).

You can view this as saying that 30 million workers are employed in sector 2 and 40 million in sector 3. That leaves 30 million workers out of the population who are employed in the means of production sector, 2/3 of whose net output goes to sector 2 and the rest to sector 3.

This description covers the deployment of labour between industries, the social division of labour. At the same time it represents flows of value, both between industries and to final consumption. It is one of the advantages of labour value andalysis that there is this one to one correspondence between value flows and deployment of people.

Production requires buildings, machines and vehicles, fixed capital that lasts several years. The flow from sector 1 to sector 2 is made up both of new machines and also of raw materials. We can go from a flow of value toa stock of capital if we know the turnover time. So if the turnover time of constant capital in sector 3 is 10 years, and the flow of new constant capital is 10 million person years, then the capital stock in sector 3 would be 100 million person years. This simply means that it will take 100 million person years at current technology to completely replace the capital stock as it wears out. This is the real meaning for the value of a capital stock – how long it would take people to rebuild it.

It is often easier to work with the inverse of turnover time, the depreciation rate. In what follows I am assuming the following depreciation rates for sectors.

This is based on the assumption that production of means of production will use longer lived capital equipment than the capitalist consumption sector. Steel rolling mills are longer lived than the computers and office supplies used by accountants etc. set an intermediate depreciation rate for the workers consumer goods industry.

We can then set up a snapshot of the distribution of labour and constant capital in this economy. That it is capable of reproduction can be seen by checking that the total surplus labour 50 matches the output of sector 3 and that the total flow of means of production 50 in red matches the output of sector 1.

These figures are all in million person years. But if we assume that there are 2160 working hours a year, each of which creates a value of £30 we can get the equivalent monetary table. Because the table is wide, you should use the scroll bar to see it all.

Again we can verify that the system can reproduce. Colour codes show matching counsumption demands on the bottom row matching sector outputs in the gross output column.

So if we assume prices are proportional to labour values, at £30 per hour then we would have a self reproducing capitalist economy. But if you look in the profit rate column you see that the rate of profit varies widely between industries. In fact this is just what we see if we look at a real capitalist economy – a wide dispersion of profit rates between sectors.

But Ricardo, Marx, Samuelson, Steedman, Kliman etc thought ( or still think ) that such a dispersion of profit rates is somehow wrong. Surely capitalism should be fairer to capitalists than this?

The law of value is unfair to capitalists! What a scandal!

Surely they should all be able to earn the same rate of profit?

Hence the ‘transformation problem’. How can we alter the law of value so that it is fair to all capitalists?

Let us apply the iterative procedure for solving the transformation problem advocated by Kliman. At each time step we adjust the price of the output of each sector to get an equal rate of profit, holding total wages constant. That is to say we award to each sector a uniform profit rate. We calculate the profit rate such that it is the original total surplus value divided by the latest money valuation of the capital employed. This is to be consistent with Marx’s belief that the total surplus value will be unchanged under the transformation.

Well lets see what happens after 5 iterative steps using the Google Slides iterative solver.

I have added a column to show the price adjustor arising from prices of production. It means that means of production that have a labour value expressed in money of £1 must sell at £1.20 to equalise profit rates, necessities with a labour value of £1 must sell for £1.07 etc.

As you can readily see, all sectors now have the same profit rate 5.17%. This is what the transformation procedure is intended to achieve – equal shares in surplus value for equal quantities of capital. Fairness and justice to all capitalists.

Unfortunately the result is an economy that is now incapable of reproducing since for each sector, supply and demand are now out of alignment.

Look at sector 1. Its output is priced at £4,140,739M, but the demand is only £3,883,593M. Clearly they do not match. The same applies to all the coloured figure pairs. Kliman has claimed that this kind of difference between purchased means of production and selling price does not matter; since means of production were purchased in the previous time period. There is, he claims, nothing to stop the capitalists in sector 1 selling their products at a higher price in the current period.

But this does not apply to wages. The total wages paid were £3,240,000M but the capitalists in sector 2 have to sell their output at £3,693,225M to earn the uniform profit rate. There is a shortfall of £453 billion pounds between what workers are able to spend and the price that the capitalists want to charge. Clearly they can not sell them for this elevated price.

If they sell them for £3,240,000M, which is all the workers have to spend, then their profit will be £714,562M not the £1,167,787 required by profit equalisation.

Now look at the capitalist consumption sector. It is attempting to sell its output at £710 billion less than the money that the capitalists have as profits to spend. This gives the firms in this sector the opportunity to hike their prices – which will mean that their sectoral profit will rise by £710 billion.

At that point the profit rate in sector 3 will run above the requisite average rate.

## Conclusion

If the law of value holds, and commodities sell at prices proportional to their labour content, then any social division of labour required by current technology and the current rate of exploitation can be reproduced. You get a set of prices at which inter sector supply and demand match. Each sector can sell its full output, pay wages and make a profit.

The rate of profit will not be equal between sectors, but this inequality does not threaten the reproduction of the capitalist economy.

If, on the other hand, some external planning body were to calculate what equal profit rates should be, and instruct all capitalists to sell at prices which would equalise profit rates, then you would get severe inequalities in inter sector supply and demand. Of course, in a capitalist economy there is no such planning body able to impose the hypothetical prices of production. But in socialist economies this has been a live issue. There was a planning body. It could impose prices. Should it impose prices of production?

Samuelson famously proposed “A New Labor Theory of Value for Rational Planning Through Use of the Bourgeois Profit Rate“. Similar proposals came from some Soviet economists in the Khrushchev period.

Stalin had argued strongly against the idea that a socialist economy must adopt the criterion of equal profit rates:

If this were true, it would be incomprehensible why our
light industries, which are the most profitable, are not being
developed to the utmost, and why preference is given to our
heavy industries, which are often less profitable, and sometimes altogether unprofitable.

If this were true, it would be incomprehensible why a
number of our heavy industry plants which are still unprofitable and where the labour of the worker does not yield
the “proper returns,” are not closed down, and why new
light industry plants, which would certainly be profitable and
where the labour of the workers might yield “big returns,”
are not opened.
If this were true, it would be incomprehensible why workers are not transferred from plants that are less profitable,
but very necessary to our national economy, to plants which
are more profitable — in accordance with the law of value,
which supposedly regulates the “proportions” of labour
distributed among the branches of production.

(ECONOMIC PROBLEMS OF SOCIALISM )

He here shows a practical awareness that smooth reproduction requires accepting that the rate of return in sector I will be lower than in other sectors. He explicitly relies on Marx’s analysis of reproduction in Vol 2 to justify this:

As to Marx, he, as we know, did not like to digress from his investigation of the laws of capitalist production, and did not, in his Capital, discuss the applicability of his schemes of reproduction to socialism. However, in Chapter XX, Vol. II of Capital, in the section, “The Constant Capital of Department I,” where he examines the exchange of Department I products within this department, Marx, as though in passing, observes that under socialism the exchange of products within this department would proceed with the same regularity as under the capitalist mode of production. He says:

If production were socialized, instead of capitalistic, it is evident that these products of Department I would just as regularly be redistributed as means of production to the various lines of production of this department, for purposes of reproduction, one portion remaining directly in that sphere of production which created it, another passing over to other lines of production of the same department, thereby entertaining a constant mutual exchange between the various lines of production of this department.”(Stalin is quoting Marx :Karl Marx, Capital, Eng. ed., Vol. 2, Chapter 20, Section 6.)

Consequently, Marx by no means considered that his theory of reproduction was valid only for the capitalist mode of production, although it was the laws of the capitalist mode of production he was investigating. We see, on the contrary, that he held that his theory of reproduction might be valid also for the socialist mode of production.

Volume 2 and the analysis of reproduction is not only a sound basis for an intial theory of socialist planning. It is the fundamental explanation of why the law of value must operate in a capitalist economy it that is to reproduce itself.

Volume 3 on the other hand, whilst it contains a lot of good stuff, has an incorrect Ricardian theory of price. Marx at times believed that he had made a breakthrough here. He was mistaken. The theory is empirically wrong, leads to inconsistent and non-reproducible social accounting. Marx wrongly believed that “differences in the average rate of profit in the various branches of industry … could not exist without abolishing the entire system of capitalist production.” whereas in reality, any attempt to impose an equal profit rate would render the capitalist economy unable to reproduce itself.

## Mirror of : Class and the LGBT lobby

( mirror copy of this post )

It is today taken as almost axiomatic that the left supports the LGTB cause. It came therefore, as a surprise to me to find a communist journalist Gearoid O Colmain arguing  that homosexuals, far from constituting a persecuted minority, are in fact key protagonists of the ruling class and bourgeois ideology.

He claims that

In the Soviet Union homosexuality was seen as one of the many perversions promoted by the bourgeoisie and their petty-bourgeois opponents– a ruling class phenomenon of social rather than biological origin. The communist understanding of sexuality has, since the counter-revolutions in Europe in 1989 and the dissolution of the USSR, been conveniently buried and forgotten.

My impression of his arguments is that they are very mixed with some stuff that is plausible and some stuff that is cranky, denying that HIV causes AIDS for example. But I think that a plausible economic argument can be made for one of his key arguments – that the political gay movement expresses middle class and upper class interests. I will in this post try to pull together an argument to this effect. I will focus on the mean class position of homosexual men, and show that this puts them in the top 10% of the population, and that this economic position is not incidental, but is closely connected with the gay male mode of life. Note the specificity, it does not apply to Lesbians.

## 1  Class

How do you define class position in Marxist terms? At its most basic the distinction between exploiting and exploited classes rests on whether a person  receives goods and services involving more labour than they contribute to society. This is a general definition that applies across all class societies, slave, feudal or capitalist. If you get back more than you put in in terms of labour then you, at least partially, benefit from exploitation.

It is important to realise that whether someone benefits from exploitation is not down to the legal form of their income. A person may formally be an employee and still benefit from exploitation. Obviously this applies to a manager on £250,000 a year. It is not always so evident where the cut-off comes. To work it out precisely you have to know what the monetary equivalent of an hour of labour is. I have not worked this out recently for the UK but before the recession I reckoned that it was about £20 an hour. As a first estimate anyone earning more than this in say 2008 would have been, at least partially, benefiting from the exploitation of others.

Just taking wage income into account is obviously too simple. People may have property income as well, and on the negative side they may be exploited by banks to whom they pay interest, or landlords to whom they pay rent. But simple income figures give you a first cut.

An alternative approach is to look at the share of wages in national income, then look at the mean wage. Someone on the mean wage will be exploited by the average amount. In 2009 for example the UK wage share was 53%1 and the average salary was £26,4502 which implies that the average employee generated a surplus value of £23,450 giving a total value created per employee of just under £50,000, so anyone earning above this was not exploited.

Because the distribution of income is uneven, the mean wage in 2009 was well above the median adult income which was only £16,400, and 67% of adults had an income of less than the average wage. About the top 10% of Britons, that year, had an income above the exploitation threshold of £50,000.

What does it mean to say someone is middle class?

Was a person on the median income of £16,000 – in the middle of the income range middle class?

In strict statistical terms it might seem so, but socially that makes no sense. A middle class status used to be associated with the self employed professions or small business people, who were not exploited, nor were they employers of labour. In terms of the current income distribution that would be people earning around the exploitation threshold say in the range £45,000 to £73,000, above which a person was receiving the value they create, plus the surplus value created by an average worker. Above that level they can reasonably be said to be upper class.

This comprised roughly the distribution from the 88th to the 96th percentile of the UK income distribution, or 8% of the population. If you are in the top 10% of the population then you are either comfortably middle class or upper class.

## 2  Economics and the gay lobby

You might initially think that economic class position had nothing to do with homosexuality, but it does not take long looking at the empirical sociological literature to come to the conclusion that this is mistaken. There is a connection, but it is that the interests of gays tend to be aligned with that of the propertied classes, rather than being independent of conflicting class interests. First, the literature on class attitudes to homosexuality shows that working class people are more likely to be hostile to it, and people from higher social classes more likely to be favourable or tolerant towards itAndersen and Fetner, [2008],Embrick et al., [2007]. Second, published data shows that gay couples are, on average, significantly better off than straight ones. On both attitudinal grounds and economic grounds therefore, the gay straight polarisation axis, rather than being independent of the class polarisation axis turns out to be tilted with respect to it.

There is a large body of data establishing that the gay population is disproportionately drawn from the middle and upper middle class, with, as a result, disproportionately small proportion being working class. In the UK a study showed that whereas only 16% of men had university degrees, 36% of gays had them Arabsheibani et al., [2005]. Where only 5.5% of all men had professional or managerial jobs, the proportion among gay men in the UK was 9%. For the USA, where educational opportunities have traditional been better than the UK, a study of couples showed that 43% of gays and lesbians had college degrees, whereas only 28% of straight men and 26% of straight women had such degrees Black et al., [2007]. Similar results come from Berg and Lien [2002],Billy et al. [1993]. Given this difference in jobs and education, one would expect that there would be a significant economic disparity between the position of gay and straight families. This is indeed what we find.

A large Swedish survey of 1,029,420 heterosexual and 940 gay and 968 lesbian couples found that gay couples had the highest incomes Ahmed et al., [2011] . They show that gay couples earn more than heterosexual couples who in turn earn more than lesbian ones. This is unsurprising since male earnings are pretty consistently higher than female ones, so an all male household would be expected to earn the most and an all female one the least. No attempt is made in this survey to compute the per-capita incomes of different household types, i.e., to take into account non-earning dependents, principally children, but also potentially older relatives. To do this one would have to know the average family size for different households.

Black et al., [2000] give data on the proportion of heterosexual and homosexual couples with 1,2,or 3 or more children in their households, thought this is for the USA not Sweden. Nonetheless, it is possible to use their data to compute the mean household sizes for different types of couples (Table 1).

Table 1: US Family size by category, calculated from Black et al. [2000],table 11 .
 married unmarried children gay hetero hetero lesbian men women couple couple couple couple single single 0 0.948 0.408 0.638 0.783 0.952 0.77 1 0.03 0.224 0.181 0.126 0.029 0.101 2 0.012 0.23 0.11 0.05 0.014 0.076 3 0.011 0.138 0.071 0.04 0.005 0.045 total 0.087 1.098 0.614 0.346 0.072 0.388 family size 2.087 3.098 2.614 2.346 1.072 1.388

ArabsheibaniArabsheibani et al., [2005] produces data for hourly rates of pay for men and women in the UK who are in either gay couples or married heterosexual couples. This broadly reproduces the results of Ahmed, Andersson and Hammarstedt for Sweden, in that he showed that the median wage of gay men in couples was higher than that of heterosexual married men, which in turn was slightly above that of lesbian women, who in turn earned more than married heterosexual women (Table 2). He does not estimate incomes of couples. This can not be done just by adding the hourly wage rates of married men and women, firstly because of the lower employment rate of married women 71% against 85% for women in Lesbian couples and 87.5% for men in gay couples, and secondly because married women have lower working hours. However if we did simply add the mean hourly pay of the married men and women scaled by activity rates and divide by an estimated family size we can get the an estimate of mean hourly pay per family member. Table 3 gives such an estimate for the UK and Table 4 corresponding estimates for Sweden. Both these tables depend on the use of family size estimates derived from Black et al. We can expect the relative family sizes of gay, lesbian and hetrosexual married couples to be similar accross countries at comparable stages of development. Although the exact divisors that should be used will vary from country to country, the ordering that we obtain of per capita income as being gay couples > lesbian couples > heterosexual couples will be robust.

Table 2: Comparision of median hourly wages of gay and heterosexual individuals in the UK, year 2000. From Arabsheibani et al. [2005]. Note that the figures in both cases are for cohabiting couples.
 Same sex Heterosexual married Men £10.10 £8.90 Women £8.70 £6.20

#1Estimate of percapita incomes in gay and straight couples in the UK. Mean pay rates and activity rates from Arabsheibani et al. [2005], family size estimates derived from Black et al. [2000].

 Gays Lesbians Married men Married women Mean pay rate £11.70 £10.10 £10.70 £7.60 Activity rate 0.87 0.85 0.84 0.71 Product £10.18 £8.58 £8.99 £5.40 Per couple £20.36 £17.17 £14.38 £14.38 Scaled by family size Per capita hourly income £9.75 £7.32 £4.64 £4.64
Table 3: Incomes of Gay, Lesbian and Heterosexual couples in Sweden.
 Type of couple Gay Lesbian Heterosexual Mean income of couple SEKAhmed et al., [2011] 584,000 464,000 532,000 Per capita adjusted for family size Black et al., [2000] 280,000 197,000 190,000

For example we can derive figures for per-capita income for gay, lesbian and straight couples in the US from the data in Black et al. [2007] giving the same ordering. Again the per capita income of gay male couples is highest, followed by lesbian couples, followed by heterosexual couples (Table 5 ).

The figures for the UK in Table 3 show a two to one advantage in per capita incomes for gay as opposed to straight couples. If we combine this with Arabshebani’s figures for the distribution of wages by deciles, we see that this means that the median gay income is as high as the top decile of of heterosexual family incomes. Only the top 10% of straight families are as well of as a mid income range gay couple. This amounts to an appreciable socio economic class difference.

### 2.1  Unpaid social labour by couples

But the analysis so far has only dealt with the market economy and earnings obtained there. The family is also a place where work is done, the domestic economy. Indeed this is the original meaning of economy, managment of the household. This work does not assume monetary form, either because it is entirely private : a person cooking their own meal, or because, although it is social : looking after children, it occurs under non-capitalist relations of production. Even the ‘private’ work of a person feeding themself, is in a sense socially necessary labour, since, absent such cooking, the population would starve. But shopping, cooking, cleaning up, washing are all activities that take place whether the household has children or not and are thus not relevant in the comparison of different household types. On the other hand child care time will vary according to whether the household has children and depend also on the number of children they have. Since much of our data has come from North America let us look there. Statistics Canada give figures which show that in the average family with children the mother spends 2.55 hrs a day in childcare and the father 1.55 hours a day, to give a total per couple of 4.1 hours. On the assumption that Canadian and US household time budgets are similar we have computed the expected number of hours of childcare time in different categories of family, weighting 4.1 hrs a day by the probability that the household has children (Table 5).

Table 4: Estimates of gay, lesbian and straight couples incomes and contributions of unpaid labour for the US 2007. Incomes derived from Table 5 in Black et al. [2007], and family size is derived from Table 2 in the same paper. Bourgeois valuation of unpaid labour follows the valuation of Colman and Atlantic [1998] and is in 1998 \$Can. Hours per year unpaid Socially Necessary Labour Time (SNLT) derived from figures for daily childcare by men and women couples in Canada [2011] weighted by the probability that a given family type has children (Table 1).
 Gay Lesbian Straight Mean couple income \$82,000 \$66,500 \$65700 Mean family size 2.144 2.356 3.173 Per capita income \$38259 \$28234 \$20700 Unpaid SNLT hrs/yr 74 329 882 Bourgeois value \$567 \$2495 \$6692 Marxian valuation \$2324 \$10229 \$27433

Derivation of Marxian valuation

 US percapita GNP 2007 \$46000 Participation rate 63% GNP per participant \$73000 Paid working week, hours 47 Hours per year 2350 Value created per hour of labour \$31

From this we see that straight couples perform much more unpaid socially necessary labour time. But how much is this labour worth. One approach taken in Colman and Atlantic, [1998] was to value childcare labour at the rate of pay of childminders in private childcare businesses. From the standpoint of Marxist economics this is wrong, since that confuses the value of labour power with the value created by labour and from the standpointsome of orthodox economics it also underestimates the impact of withdrawing this much labour from the market economy. Workers are only paid a fraction of the value they create, so valuing unpaid labour at the prevailing wage rate is a serious underestimate of the value that that labour would have created were it deployed in the market sector. It amounts to the assumption that there would be no additional property income were the effective labour force to increase. Adding the equivalent of millions of additional full time workers to the market economy would generate additional value flows that would filter through to profit, interest, tax revenues etc.

A better procedure is to estimate the monetary equivalent of social labour time, as is done in the subsidiary table. This gives a figure of about \$31 value created per hour by US labour in 2007. Scaling the unpaid childcare labour in families by this gives the bottom line of Table 5. We see that whereas the average gay couple did unpaid social labour with a value of about \$2300 a year, the average straight couple did unpaid social labour to a value of over \$27000 a year, more than 10 times as much. Of that labour about \$17000 worth is done by the mother and \$10000 worth by the father.

It could be argued that this is an unfair comparison; that having children is a private decision and it is nobody else’s business if a gay couple do not want to have children. Why should they work to create labour power for the capitalist system?

The reality is that having children is, in part, a private decision although social expectations play a huge role in the decision. However, things can be simultaneously private and social. Commodity production rests on this kind of duality: commodities are produced by private individuals and firms, but they are produced to meet social needs. Children are produced as a result of private actions but once they are grown up, they constitute the future society, and via their work, support that society. A person who, due to choice or circumstances, has no offspring, depends for their day to day existence on the offspring of others. It may appear that by saving for their old age they have provided for themselves. But this is a monetary illusion. You do not save for your old age by putting cans of beans and sacks of flour in a cellar to sustain you; instead you rely on freshly produced food, clothes etc, produced by the labour of the generation that follows you. If you rely on a state pension then the next generation will be taxed to support you. If you have a private pension it will be invested in government bonds to produce interest. That interest will again come from tomorrow’s tax payers. If it is invested in shares, then the pension will come from the employment of tomorrow’s workers.

The unpaid labour of raising children, labour predominantly done by mothers, is socially essential and all the current generation, whether they have children themselves or not, benefit indirectly from it. Gay activists are wont to identify their campaigns with campaigns against women’s oppression, but the economic analysis so far shows that this concept is fallacious. Not only are gay couples financially better off, they also, in the main, often opt out of the socially necessary unpaid labour that is at the root of the disadvantaged position of women/wives. The establishment and normalisation of gay marriage will tend to increase the inequality of men and women in this respect. Insofar as a portion of the male population were once covert homosexuals, who would have hidden their preferences, married women and helped to bring up children, they can now move directly into a respectable gay marriage where they are statistically very unlikely to do any unpaid child raising work. The net effect is obviously to accentuate the disparity between men and women, and shift even more of the burden of raising the next generation onto women.

The economic basis of marriage is not love. As both experience and the tradition of romantic literature tell us, you do not need to be married to love, and many marriages continue despite an absence of love. The legal institution of marriage regulates, on the one hand, rights and duties with respect to children, and on the other, the sharing of various juridical assets. These include both direct ownership of dwellings, instances where there are heritable tenancies, and personal rights to other public and private benefits: pensions, insurance, citizenship. In the early stages after the legalisation of homosexuality, gays were relatively uninterested in marriage, and, if anything, disdained it as a mark of respectability.

Two processes operating over the last decades may have made the juridical asset aspect of marriage more attractive. The first of these is just the cumulative result of the economic advantage that gay couples enjoy. It enables them to accumulate property faster than other couples, so they have more to share on the death of a partner. Gays are twice as likely to own dwellings in the highest property band as heterosexuals. Black et al., showed that over 34% of middle-aged gays owned houses in the highest property band as against under 16% of married men and women of the same age. We have been unable to find statistics on ownership of financial assets, but one would expect, from the big income disparity, to find a similar bias there. At the same time, the advance of privatisation, neo-liberalism and the undermining of universal health and social benefits increases the importance of heritable or shareable private insurance rights.

Couples seeking to protect their relationship and family through wills and other mechanisms in the absence of a marriage contract need significant resources, including knowledge and money. This is equally the case in the dissolution of a relationship not recognised by the state, where only those with these same resources can pursue an equitable distribution of joint assets.” Bhroin, [2009]

The conclusion from the evidence so far is that the gay marriage movement is fundamentally conservative, aimed at the securing of relatively privileged property ownership and it makes the relative position of women in society slightly worse3. The economic effects are small since the affected population segment is tiny, but the debate on gay marriage takes on a prominence way beyond any direct socioeconomic effect that it may have.

 Reproductive Semi-reproductive Non-reproductive Atomised nuclear family lesbian couple gay couple Semi-communal extended family Communal phalanstery/kibbutz nunnery/monastery
Table 5: Family forms on two axes.

## References

[Ahmed et al. 2011]
Ali M Ahmed, Lina Andersson, and Mats Hammarstedt. Inter-and intra-household earnings differentials among homosexual and heterosexual couples. British Journal of Industrial Relations, 49 (s2): s258-s278, 2011.

[Andersen and Fetner 2008]
Robert Andersen and Tina Fetner. Economic inequality and intolerance: attitudes toward homosexuality in 35 democracies. American Journal of Political Science, 52 (4): 942-958, 2008.

[Arabsheibani et al. 2005]
G Reza Arabsheibani, Alan Marin, and Jonathan Wadsworth. Gay pay in the uk. Economica, 72 (286): 333-347, 2005.

[Berg and Lien 2002]
Nathan Berg and Donald Lien. Measuring the effect of sexual orientation on income: Evidence of discrimination? Contemporary economic policy, 20 (4): 394-414, 2002.

[Bhroin 2009]
Feargha Ní Bhroin. Feminism and the same-sex marriage debate. Electronic, Marriage Equality, April 2009. URL ww.marriagequality.ie/download/pdf/feminism_paper_final_01.05.pdf.

[Billy et al. 1993]
John OG Billy, Koray Tanfer, William R Grady, and Daniel H Klepinger. The sexual behavior of men in the united states. Family planning perspectives, pages 52-60, 1993.

[Black et al. 2000]
Dan Black, Gary Gates, Seth Sanders, and Lowell Taylor. Demographics of the gay and lesbian population in the united states: Evidence from available systematic data sources. Demography, 37 (2): 139-154, 2000.

[Black et al. 2007]
Dan A Black, Seth G Sanders, and Lowell J Taylor. The economics of lesbian and gay families. The Journal of Economic Perspectives, 21 (2): 53-70, 2007.

Statistics Canada. General social survey – 2010 overview of the time use of canadians. July 2011.

[Colman and Atlantic 1998]
Ronald Colman and GPI Atlantic. The Economic Value of Unpaid Housework and Child Care in Nova Scotia. GPI Atlantic Halifax, 1998.

[Embrick et al. 2007]
David G Embrick, Carol S Walther, and Corrine M Wickens. Working class masculinity: Keeping gay men and lesbians out of the workplace. Sex roles, 56 (11-12): 757-766, 2007.

[Nair 2015]
Yasmin Nair. The secret history of gay marriage. 2015. URL http://yasminnair.net/content/secret-history-gay-marriage.

### Footnotes:

1From Extended Penn World Tables

3 “In short, the secret history of gay marriage is that its real history, as a rapacious, greedy, and entirely selfish campaign carried out by rapacious, greedy and entirely selfish gay men and women has been systematically erased by gay men like Frank Bruni and their unctuous straight allies like Frank Rich and Linda Hirshman. The secret history of gay marriage is not that it might prevent our sex lives from being more interesting, but that its victory enables the cementing of a neo-liberal society where only private relationships can ensure access to economic security and healthcare. The preferred narrative is that gay marriage will be a dream come true. The reality is that gay marriage is nothing but a nightmare and neo-liberalism’s handiest little tool.” [Nair, 2015]

File translated from TEX by TTH, version 4.08.

An  objection to the last post was  raised by Adam Zebegner who claimed that it was well known that Marx specifically stated that exchange is a necessary condition for the existence of abstract labor. To justify this ‘well known’ position he cited Rubin to the effect that:

In the second edition of ‘Capital’, we find the famous phrase:

“The equalisation of the most different kinds of labour can be the result only of an abstraction from their inequalities, or of reducing them to their common denominator viz. expenditure of human labour power or human labour in the abstract” (cf. Kapital p.87).

In the French edition Marx replaces the full stop at the end of this sentence with a comma and adds “… and only exchange produces this reduction, by bringing the products of the most diverse kinds of labour into relation with each other on an equal footing” (Le Capital I p.70).

This insertion is highly indicative and shows clearly how far removed Marx was from the physiological conception of abstract labour. How can we reconcile these observations by Marx, of which there are dozens, with the basic thesis that value is created in production?” ( Rubin )

This passage by Adam is quoting Rubin in a text that has a lot to answer for in terms of the confusion it has given rise to.

I reread the relevant German and English passages before writing the previous article and assosciated video. I have never studied Capital in French.  So I went and looked at French translations. The first thing that became evident is that there is considerable controversy over the accuracy of the first French translation by Roy. In what follows I give the passage from Capital that I quoted, first in the English Aveling translation, then in the German original and then in two french translations.

## Aveling passage 1.

If then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour. But even the product of labour itself has undergone a change in our hands. If we make abstraction from its use value, we make abstraction at the same time from the material elements and shapes that make the product a use value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material thing is put out of sight. Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract. (Capital 1 Chap 1, page 28 )

## German edition

Sieht man nun vom Gebrauchswert der Warenkörper ab, so bleibt ihnen nur noch eine Eigenschaft, die von Arbeitsprodukten. jedoch ist uns auch das Arbeitsprodukt bereits in der Hand verwandelt. Abstrahieren wir von seinem Gebrauchswert, so abstrahieren wir auch von den körperlichen Bestandteilen und Formen, die es zum Gebrauchswert machen. Es ist nicht länger Tisch oder Haus oder Garn oder sonst ein nützlich Ding. Alle seine sinnlichen Beschaffenheiten sind ausgelöscht. Es ist auch nicht länger das Produkt der Tischlerarbeit oder der Bauarbeit oder der Spinnarbeit oder sonst einer bestimmten produktiven Arbeit. Mit dem nützlichen Charakter der Arbeitsprodukte verschwindet der nützliche Charakter der in ihnen dargestellten Arbeiten, es verschwinden also auch die verschiedenen konkreten Formen dieser Arbeiten, sie unterscheiden sich nicht länger, sondern sind allzusamt reduziert auf gleiche menschliche Arbeit, abstrakt menschliche Arbeit.

## Equivalent passage Roy

La valeur d’usage des marchandises une fois mise de côté, il ne leur reste plus qu’une qualité, celle d’être des produits du travail. Mais déjà le produit du travail lui-même est métamorphosé à notre insu. Si nous faisons abstraction de sa valeur d’usage, tous les éléments matériels et formels qui lui donnaient cette valeur disparaissent à la fois. Ce n’est plus, par exemple, une table, ou une maison, ou du fil, ou un objet utile quelconque ; ce n’est pas non plus le produit du travail du tourneur, du maçon, de n’importe quel travail productif déterminé. Avec les caractères utiles particuliers des produits du travail disparaissent en même temps, et le caractère utile des travaux qui y sont contenus, et les formes concrètes diverses qui distinguent une espèce de travail d’une autre espèce. Il ne reste donc plus que le caractère commun de ces travaux ; ils sont tous ramenés au même travail humain, à une dépense de force humaine de travail sans égard à la forme particulière sous laquelle cette force a été dépensée.

## PUF edition

Si l’on fait maintenant abstraction de la valeur d’usage du corps des marchandises , il ne leur reste plus qu’une seule propriété : celle d’être des produits du travail. Mais, même dans ce cas, ce produit du travail s’est déjà transformé dans nos mains. En faisant abstraction de sa valeur d’usage, nous faisons du même coup abstraction des composantes corporelles et des formes qui en font une valeur d’usage. Il cesse d’être table, maison ou fil, ou quelque autre chose utile que ce soit. Tous ses caractères sensibles sont effacés. Il cesse également d’être le produit du travail du menuisier, du maçon, du fileur, bref, d’un quelconque travail productif déterminé. En même temps que les caractères utiles des produits du travail, disparaissent ceux des travaux présents dans ces produits, et par là même les différentes formes concrètes de ces travaux, qui cessent d’être distincts les uns des autres, mais se confondent tous ensemble, se réduisent à du travail humain identique, à du travail humain abstrait.

As you can see none of these texts, where Marx first introduces abstract labour, contain a passage equivalent to that cited in the Rubin text.

It turns out that Rubin was not citing from section 1 of Chapter 1 of Capital where Marx defines abstract labour. Instead he was citing from the Roy edition of section 4 which is on the fetishism of commodities, that is to say on a section that deals with the ideological misrepresentation of real economic relations brought about by commodity exchange. In this process, the real cause of value -abstract labour – vanishes for the participants of capitalist society. Instead, value appears to be an intrinsic property of commodities rather than an indirect representation of the social cost of their production.. The whole of the passage is:

“L’égalité de travaux qui diffèrent toto cœlo les uns des autres ne peut consister que dans une abstraction de leur inégalité réelle, que dans la réduction à leur caractère commun de dépense de force humaine, de travail humain en général, et c’est l’échange seul qui opère cette réduction en mettant en présence les uns des autres sur un pied d’égalité les produits des travaux les plus divers.

Le double caractère social des travaux privés ne se réfléchit dans le cerveau des producteurs que sous la forme que leur imprime le commerce pratique, l’échange des produits.”

Rubin only quotes the italicised section. He leaves out the bold section which makes it clear that Marx is not talking about the condition of existence of abstract labour, but the condition by which the existence of this labour forces itself into the brains of people in a capitalist economy. Marx is talking about how men become concious of abstract labour – which is not the same as the conditions of existence of abstract labour – it is the fetishised perception of it. In the Aveling version the context is even clearer :

” The equalisation of the most different kinds of labour can be the result only of an abstraction from their inequalities, or of reducing them to their common denominator, viz. expenditure of human labour power or human labour in the abstract. The twofold social character of the labour of the individual appears to him, when reflected in his brain, only under those forms which are impressed upon that labour in every-day practice by the exchange of products. “

It is verging on the mendacious for Rubin to have said  that the addendum to the French sentence “shows clearly how far removed Marx was from the physiological conception of abstract labour”. It is quite clear, once you read the whole passage, that Marx is not discussing the existence of abstract labour, but the form of representation this labour assumes in commodity producer’s brains.

Rubin goes beyond this and says :

This is not a question of an isolated comment by Marx. We will show that in the later editions of ‘Capital’, Marx increasingly stressed the idea that in commodity production only exchange reduces concrete labour to abstract labour.”

Whilst Rubin bends what Marx said slightly, at least Rubin is not claiming here that abstract labour only exists in commodity producing society – he is saying that if the society is commodity producing, then only exchange reduces concrete labour to abstract labour. Modern readers of Rubin go beyond this and claim that abstract labour can not exist in societies other than commodity producing ones. It is reasonable to say that in a commodity producing society men only become aware of abstract socially necessary labour time indirectly via exchange value, but that is neither the condition of its existence nor the only possible way in which it would be possible to be aware of it. In the communist society proposed by Marx products were to be directly labelled in the community warehouses with the hours required to produce them.

The communist society would simply count the labours of the different trades as equivalent. The only distinction that, according to Marx, would apply is a distinction in speed and intensity of labour. But such distinctions are nothing to do with equating different concrete labours, instead they are distinctions between fast and slow workers within a given trade, between average mine workers and Stakanhov  to take a Soviet example.

The problem of people giving priority to interpreters when studying Capital, is that  these interpreters may have a particular axe to grind and be selective or misleading in their presentation of quotes from Marx. It is made worse when modern readers only have ready access to one side of the historical debate in which the arguments were developed. In the case of Rubin, his work is widely available in English, whereas most of those he was arguing with are only available, as Allin and I found, in fading microfiches of Russian journals of the inter-war years.

For those interested I published on my blog the one translation that I have been able to find from Rubin’s opponents at this time. It is worth reading Isaak Dashkovskij to get some idea of the theoretical context in which Rubin was debating.

## Abstract and Concrete Labour

Paul Cockshott 15/11/19

The issue of abstract and concrete labour is relatively minor. The two concepts dealt with in a few very clear paragraphs at the beginning of Capital. But unfortunately it has, over the last couple of decades, been mystified by some Marxist. Misleading claims have been put about to the effect that :

• Abstract labour only exists under capitalism
• In socialist economies there is only concrete labour
• That there is no division of labour in non capitalist economies

Marx uses the concept on the second page of Capital where he writes:

If then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour. But even the product of labour itself has undergone a change in our hands. If we make abstraction from its use value, we make abstraction at the same time from the material elements and shapes that make the product a use value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material thing is put out of sight. Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract. (Capital 1 Chap 1, page 28 )

So he is saying that each type of commodity has its own special physical qualities, and that these qualities are given to it by the special actions of the different types of labour : spinning, joinery, masonry. But if we consider commodities in general, bearing in mind that they exchange with one another, it can not be the specific character of labour the labour that made them that is important. It is the fact that they are all made by human labour. He says human labour in the abstract to emphasise that it is people doing it, whatever these people were doing.

It is a unique ability of our species, shared by no other species currently alive on this planet, to be able to apply ourselves readily to a vast variety of tasks. The combination of hands with large brains gives us this adaptability. It was only human labour that Marx considered as important in commodities.

At the time Marx was writing, we were not the only species working. There was a lot of horse labour going on in the English economy. In terms of physical effort probably more was done by horses than by people. I have seen figures for the horse population of late Victorian England as being 3.3 million, the human population was 21 million. A human male is hard put to sustain 75 watts of output, women and children considerably less. A horse power is 735 watts, so we can estimate that horses were delivering around twice as much work as people in Marx’s England.

But this work by our equine sisters was all traction. Horses were not spinning, engaging in cabinet making or bricklaying. There was no horse labour in the abstract; all they did was pull or carry riders.

The important thing to understand about commodities is that they were all produced by people working, irrespective of what kind of work people were doing. And because we are not concerned with exactly what they were doing, we can measure labour in units of time:

A use value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article. The quantity of labour, however, is measured by its duration, and labour time in its turn finds its standard in weeks, days, and hours. (Capital 1 Chap 1, page 29 )

Clearly if we are measuring labour in units of time, we are ignoring what the person was doing, and only taking into account that they were working at something.

The argument in Capital is in the context of commodities whose value, he says, comes from the division of labour. If we think about the division of labour, it is obviously human labour in general that is being divided between specific trades or professions. But the claim of some Marxists that abstract labour and the division of labour are something specific to capitalism does not follow. Just because Marx is writing about the division of labour under capitalism here, does not imply that capitalism is necessary for a division of labour. Indeed he explicitly makes this point:

To all the different varieties of values in use there correspond as many different kinds of useful labour, classified according to the order, genus, species, and variety to which they belong in the social division of labour. This division of labour is a necessary condition for the production of commodities, but it does not follow, conversely, that the production of commodities is a necessary condition for the division of labour. In the primitive Indian community there is social division of labour, without production of commodities. Or, to take an example nearer home, in every factory the labour is divided according to a system, but this division is not brought about by the operatives mutually exchanging their individual products. Only such products can become commodities with regard to each other, as result from different kinds of labour, each kind being carried on independently and for the account of private individuals. (Capital 1 Chap 1, page 30 )

So the argument goes that the division of human labour between different activities gives rise to the exchange value of commodities, but this only occurs if the division of labour occurs in a society of private individuals producing independently. In other social organisations, there can be a division of labour without commodities.

So there is every reason to suppose that a division of labour and therefore human work in the abstract will also exist in communist societies – even if there was no commodity production in them. We may hope that communist societies will tend to free people from a narrow subordination to this division of labour, so that people may vary their tasks either during the week or from year to year. This is what Marx was getting at when, many years earlier, he wrote

For as soon as the distribution of labour comes into being, each man has a particular, exclusive sphere of activity, which is forced upon him and from which he cannot escape. He is a hunter, a fisherman, a herdsman, or a critical critic, and must remain so if he does not want to lose his means of livelihood; while in communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.(German Ideology, Ch 1)

The fact that one person may do different concrete tasks at different times abolishes neither the division of labour nor abstract labour as Marx points out in Capital :

There are, however, states of society in which one and the same man does tailoring and weaving alternately, in which case these two forms of labour are mere modifications of the labour of the same individual, and not special and fixed functions of different persons, just as the coat which our tailor makes one day, and the trousers which he makes another day, imply only a variation in the labour of one and the same individual. Moreover, we see at a glance that, in our capitalist society, a given portion of human labour is, in accordance with the varying demand, at one time supplied in the form of tailoring, at another in the form of weaving. This change may possibly not take place without friction, but take place it must.(Capital 1, page 31)

I am not quite sure where this prejudice about the abstract labour only existing under capitalism, and ceasing to exist in a future economy comes from. It clearly does not come from a straighforward reading of Capital. I suspect there exists a substantial number of Marxists who put off reading Capital for a while. In that period they ‘prepared themselves’ by reading commentators on Capital. Perhaps they read Heinrich, Rubin etc. But this means that by the time they read Marx, they already have certain ideas about what they should expect to find there. They read Marx through lenses they have borrowed. And these introduce a certain confirmation bias.

I always encourage people to read great thinkers in their own words first. Whether it is Einstein, Darwin or Marx you want to study, read them in the original first. Only read commentators afterwards. If you have read the original you are in a position to critically assess the commentators. If not, you may give excessive weight to the commentary.

## Response to Horowitz

Every now and then I get requests to respond to specific criticisms of our1 work. I usually just make a brief response in an email when asked a question about what a critic has said. But like buses, you wait 20 years then three come at once. In the last week three people from three countries have asked me to respond to a 1996 article by Horowitz Money, money prices, and the socialist calculation debate2.

Here is a brief response. It is brief both because his own criticisms of us are short, and because we have replied at length in the past to the same or very similar points.

Horowitz accuses us of only focusing on von Mises critique of socialist calculation. He acknowledges that we have demonstrated that computationally the problem of socialist calculation is tractable, but that we have ignored the arguments of Hayek. Hayek, Horowitz wrote, made a distinct critique of socialism, not that millions of equations were too complex to solve, but that on epistemological grounds socialist calculation was impossible.

Horowitz is correct that the Hayek critique of socialism is not identical to that of Mises, but by the time Horowitz article was published in 1996 we had already produced a report3 dealing with Hayek’s arguments. As a technical report this had perhaps limited circulation but a journal article4 covering the same ground has also been published. Our response to Hayek was extended ten years later in more detail5.

Horowitz’s article touches only on one of all the points we raise against Hayek, that of so called ’tacit knowledge’. Hayek argued that a function of market incentives was to draw out from economic actors what he called tacit knowledge. By this he means knowledge that they did not know that they even had until the right monetary incentives drew it out from them.

We are very skeptical of this notion. Observe that the existence of tacit knowledge is so defined as to be unmeasurable and undetectable. Once any knowledge is writen down or communicated, then it no longer meets the criterion of being tacit. So how do we know that this tacit knowledge exists in the first place?

The hypothesis that explicit knowledge has tacit knowledge as its precondition is untestable by definition. Tacit knowledge like the existence of the soul, is an unfalsifiable proposition. The sorts of examples that Hayek gave – the particular and specialised knowledge that a shipping clerk has – are singularly unconvincing. As we wrote in 1994:

Further, even the sort of ‘particular’ knowledge which Hayek thought too localized to be susceptible to centralization is now routinely centralized. Take his example of the information possessed by shippers. In the 1970s American Airlines achieved the position of the world’s largest airline, to a great extent on the strength of their development of the SABRE system of computerized booking of flights (Gibbs, 1994). Since then we have come to take it for granted that our local travel agent will be able to tap into a computer network to determine where and when there are flights available from just about any A to any B across the world. Hayek’s appeal to localized knowledge in this sort of context may have been appropriate at the time of writing, but it is now clearly outdated.

Horowitz argues that production functions are not knowable because they are continuously in the process of being created by entrepreneurial activity. This he says, precludes planning in the absense of monetary economy.

The first point I should make here is that Marxist economists do not think that there is such a thing as a production function. It is a concept of bourgeois economics. We did say that the Austrian school is distinguished from other bourgeois economics schools by thinking that the production function is constantly mutable and subject to change. But Marxists reject the whole notion of a production function6. Instead socialist planning theory analyses production in terms of sets of techniques7.

These are two very different concepts.

The production function in neoclassical theory typically takes the form

LαKβ

where P is production, L is labour used, K is capital used. Clearly this is a non linear function, and a highly abstract one in that K and L are just sums of money. K is not broken down in to any concrete list of goods used. This abstraction was the focus of the Cambridge capital theory debates of the 1960s where Sraffian economists showed that even if one assumes perfect competition and uniform profit rates, you can not define the value of capital independently of both the concrete lists of components used in each technique or the distribution of national income between the working and capitalist classes.

The model used by Sraffa to critique the neoclassical model was a matrix specifying how much of each input is used by each production process. Sraffa uses only one production technique per process. This is itself a simplified version of what the mathematical planning theory of Kantorovich used, since Kantorovich allows multiple possible production techniques to make each product.

Now how does this collection of technique fit in with what Horowitz says?

How about his claim that the knowledge of how to produce things is only created or elicited by entrepreneurial activity?

Well he is certainly right in that the knowledge of the techniques needed to make things is itself the result of activity. But it is not the activity of the mythical entrepreneur. It is, in advanced industrial society, the collective effort of design teams and bureaus. And the process of knowledge production is very objective. It can not function without extensive documentation. As we wrote in 2007:

One component of a cybernetic control system has to be distributed. Clearly it is the Airbus factories that have the information about what parts are used to make an A340, the car plants have the information about what parts are used to make a Mondeo. This information approximates to what Hayek and the Austrian school of economics call contextual or tacit knowledge – but it is of course no longer human knowledge. Literally nobody knows what parts go into an A340. The information, too vast for a human to handle, is stored in a relational database. At an earlier stage of industrial development it would have been dealt with by a complex system of paper records. Again the knowledge would have been objective – residing in objects rather than in human brains. The very possibility of large scale, co-ordinated industrial activity rests upon the existence of such objectivised information. The information to construct the parts explosion is generated by a computerised design process within the collaborating factories of Airbus Industrie. In a cybernetically controlled socialist economy, the parts explosion data for the A340, along with the parts explosion data for other products would have to be computationally combined to arrive at a balanced production plan.

I suspect that the Austrian school writers have never actually worked in a modern design bureau. They certainly have a rather abstract idea about how the knowledge our industrial society depends on is actually produced.

When Horowitz says that without money prices experts would have no way of determining what was technically feasible but economically irrational, he is falling back from Hayek to Mises. This argument that only money provides a way of aggregating different inputs in order to chose the cheapest technique was the core of Mises argument. But at least Mises recognised that if one had access to labour values, these would serve just as well. Horowitz forgets this concession by Mises. He also seems unaware of Kantorovich’s Objective Valuation, arising out of linear programs, so this particular argument by Horowitz was already long obsolete in 1996.

1Cottrell, Cockshott and Michaleson’s

2Money, money prices, and the socialist calculation debate Steven Horwitz Advances in Austrian Economics,ISBN: 978-0-76230-055-6, eISBN: 978-1-84950-019-7, ISSN: 1529-2134, Publication date: 31 May 1996

3Cottrell, A., & Cockshott, W. P. (1994). Information and Economics: A Critique of Hayek. Department of Computer Science, University of Strathclyde.

4Cockshott, W. Paul, and Allin F. Cottrell. “Information and economics: a critique of Hayek.” Research in Political Economy 16 (1997): 177-202.

5Cottrell, Allin, and W. Paul Cockshott. “Against hayek.” (2007).

6The classic Marxist deconstruction of it is Shaikh, Anwar. “Humbug production function.” Capital Theory. Palgrave Macmillan, London, 1990. 191-194.

7Kantorovich, Leonid V. “Mathematical methods of organizing and planning production.” Management science 6.4 (1960): 366-422.

## Socialist calculation: the computer engineering problem

In the same year that Allin Cottrell and I published Towards a New Socialism(TNS), I also brought out a couple of computer science books. The two CS books might seem to have little to do with the book on socialism but they are linked by an intellectual history of research over the decade that led up to TNS.

Since around 1981 I had been thinking about the problem of socialist calculation from an engineering viewpoint and trying to come up with computer engineering solutions. The other books record part of that history. I bring it up now because I think that some of the engineering solutions that I worked on in the 1980s were sufficiently in advance of the then existing technology that they may still have some technical relevance to a future planned economy.

In particular, I will focus on the issues of the persistent store and the world wide address space machines that I was designing and prototyping.

## The Data Curator

From late 1980 to the summer of 82 I was working on my PhD. The research topic was how to incorporate the concept of data persistence into high level compiled languages in such a way as to allow it to work in a distributed networked environment.

Because of this background and also because I was a Marxist economist, a fellow PhD student from China, a CPC member and still in those days a Maoist, asked if I would be willing to come to work in the planning ministry in Beijing and introduce some of the techniques we had developed in Edinburgh to that ministry. As it happened, despite me agreeing, my Chinese comrade discovered that although foreign CS experts were being invited to China, the planning ministry was out of bounds for foreigners.

But let me first explain the context of our research in Edinburgh in the early 80s and why it was seen to be relevant.

The dominant paradigm in computing in 1980 divided computer memory into two logically distinct types: Random Access Store (RAM) and Filestore. Data in RAM vanished when you turned the machine off, whereas the Filestore was persistent. The conceptual distinction reflected two different technologies, semiconductor DRAM and rotating magnetic disks. These two technologies are still with us, but persistent semiconductor store (SSD) is rapidly replacing the old rotating disks in new computers.

Today, both RAM and SSD are made of silicon, and both allow rapid random access. But the conceptual legacy of the old disk filing systems persists. Files have to be opened and accessed by read and write system calls, and any data stored in the variables of programme vanishes when the programme ends.

But this distinction between persistent and volatile memory can in principle be hidden by smart virtual memory technology. The EMAS operating system that we used in Edinburgh in the late 70s and early 80s and the MIT Multics system had a different concept. A user’s files were mapped into the address space of their programme and accessed as array data with a programme. Some early interpretive languages like APL and Smalltalk also had the notion of a ‘workspace’ in which the variables of a programme could persist between login sessions.

Although memory mapped filestore has since been adopted in Windows NT, Windows 10 etc,  much current programming still takes place using the older read/write file paradigm.

Memory mapping of files only really works for array data types. Heap data: instances of classes, graphs, trees etc, is still non-persistent in most programming languages. A limited form of heap persistence is provided by Java serialisation, but this facility is not as consistent and orthogonal as that which was long ago available in Smalltalk.

Our research in the early 80s was designed to allow existing compiled languages like Algols or Pascal to have persistent heap store. Moreover, we wanted this persistent store to be larger than that provided on the relatively small 16 bit Alto processors on which Xerox Parc had prototyped Smalltalk.

In 1980 commercial personal computers were puny Apple IIs or similar 8-bit machines. There was no World Wide Web, and the ethernet was still just a research system in Xerox Parc. So Edinburgh CS dept developed its own workstation : the APM, and its own locally designed ethernet.

The Data Curator project succeeded in demonstrating that you could implement a distributed persistent object structured virtual memory for compiled languages. Its first demonstration was for a dialect of Algol from St Andrews: S-algol.

The Edinburgh extension was termed PS-algol with the P standing for Persistent.  Subsequently, persistence was built into the languages  Napier88,  Fibonacci and the Java variant pJama.

When I was asked to go to China I started thinking about how the technology of persistence could be applied to planning an economy for a country as huge as China. The first point that struck me is that we were going to need a much large scale of distributed computing than anything we had experimented with. If one looked forward to a future automated Chinese economy the planning system would need to coordinate data originating in hundreds of millions of computers. It would have to integrate this into a single vast shared database that could coordinate the whole of social production.

## Persistent store machines

This implied that we would need a computer architecture with a very much larger shared virtual address space than those available on 1980s computers, which maxed out at 32-bit virtual address space.  Furthermore,   remember this was before the collapse of the USSR, and socialism still seemed to be winning on a world scale, it struck me as obvious that a design for socialist planning should in principle be extendible to worldwide planning, for a day in the future when the number of computers rivalled the numbers of people.

The population of the world, around 4 billion, in those days would already exhaust 32 bits if there was one computer per person.

The first machine architecture I designed,  PSM had a 128 bit address space made up of a 48 bit host number, a 48 bit local object number and an offset of up to 32 bits within the object. That is to say, individual objects could be up to 4 Gigabytes in size.

Objects would migrate via a worldwide network from the source machine to any machine that had a copy of the Host/LON combination. This is very similar to the somewhat later concept of a URL used in the WWW, but with the difference that the identifiers were seen as being binary rather than textual.

The machine architecture seems, by modern standards, to have a rather sparse register set (shown below).

The sparse set of registers was heavily influenced by the ICL 3900 series. We were in close collaboration with ICL with the view to the PSM being a successor architecture to the 3900. The single 128 bit accumulator,  already was there on the 3900. The segment registers we proposed were longer than those on the 3900. The intention was to prototype the PSM by microcode changes to an existing series 3900.

ICL supplied us with an early 3900 machine at Glasgow University to which the team had moved. But obstacles were placed in the way of accessing the microcode so the research platform at Glasgow was switched to a new machine that I will describe in a later post.

## Concluding thoughts

For socialist calculation to be feasible certain engineering problems had to be solved. It had to become possible to access what is now termed ‘Big Data’. It had to be possible to unify information across millions of computers. It had to be possible to have databases very much larger than could be addressed by the 32-bit computers available at the start of the 1980s.

Today the technologies to do most of these things are well-established thanks to the Web and cloud data servers.

It is arguable, however, that the computing paradigm on which all of this is built, that of volatile ram combined with a distributed filespace is less amenable to high-performance computation over distributed graph structures than the sort of address architecture our team was working on in Glasgow in the mid-1980s.   With modern VLSI technology, it would be feasible to design a class of 128 bit addressed RISC processors. The ICL register architecture we proposed is clearly obsolete and would have to be replaced by something more modern.

## What then is the escape from capitalism?

What would be the essential features of a socialist economy, one the would be really achievable?

If you go back to the 19th-century socialists like Marx they saw the elimination of a monetary economy as being absolutely essential. One can read the whole of Marx’s Capital as a prolonged argument to the effect that a monetary industrial economy leads inevitably to the whole set of capitalist institutions. From money and industry comes the buying of labour power, from this comes exploitation and the class system. From exploitation stem all the other evils of the system.

Any attempt to introduce a reformed monetary economy leaves the basic logic untouched. The underlying tendencies implicit in the monetary economy re-assert themselves. The experience of hitherto existing socialism which altered property ownership without eliminating money and monetary calculation are a testimony to this inner logic. There was a constant pressure to re-introduce more and more capitalist elements to the economy since these capitalist institutions are an inner necessity of monetary logic.

But what does getting rid of money imply? Is it even feasible? What is the alternative?

Marx was pretty clear that he saw the immediate alternative as being a system based on the use of personal labour accounts:

the individual producer receives back from society – after the deductions have been made – exactly what he gives to it. What he has given to it is his individual quantum of labor. For example, the social working day consists of the sum of the individual hours of work; the individual labor time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such-and-such an amount of labor (after deducting his labor for the common funds); and with this certificate, he draws from the social stock of means of consumption as much as the same amount of labor cost. The same amount of labor which he has given to society in one form, he receives back in another. (Critique of the Gotha Programme)

With this institution there is no exploitation – the worker gets back what they have contributed. There is no surplus going to a property owner.

There still has to be something equivalent to an income tax, what Marx calls deduction of labour for common funds.

But there is still a unit of account. Marx was not proposing an economic free for all. He was not saying that you simply go to the common store and remove as much as you want. Clearly, were this to be allowed you would be encouraging parasites no better than those in the old society. But how does this system of labour accounts actually differ from money?

Does it not, in the terminology of thinkers like Heinrich, not just ‘reproduce the value form’. Marx answers this in a footnote in Capital I.

The question — Why does not money directly represent labour-time, so that a piece of paper may represent, for instance, x hours’ labour, is at bottom the same as the question why, given the production of commodities, must products take the form of commodities? This is evident, since their taking the form of commodities implies their differentiation into commodities and money. Or, why cannot private labour — labour for the account of private individuals — be treated as its opposite, immediate social labour? I have elsewhere examined thoroughly the Utopian idea of “labour-money” in a society founded on the production of commodities (l. c., p. 61, seq.). On this point I will only say further, that Owen’s “labour-money,” for instance, is no more “money” than a ticket for the theatre. Owen pre-supposes directly associated labour, a form of production that is entirely inconsistent with the production of commodities. The certificate of labour is merely evidence of the part taken by the individual in the common labour, and of his right to a certain portion of the common produce destined for consumption. (Capital I Chap 3)

So here he is saying that the precondition for the sort of labour certificate he talks about is directly associated production, that is to say, production that is organised according to a common plan and not carried out by private businesses.  But would this not just re-create money?

Would these labour certificates not start to circulate like bank notes?

Well Marx was explicit that this would not happen.

In the case of socialised production the money-capital is eliminated. Society distributes labour-power and means of production to the different branches of production. The producers may, for all it matters, receive paper vouchers entitling them to withdraw from the social supplies of consumer goods a quantity corresponding to their labour-time. These vouchers are not money. They do not circulate.(Capital 2, Chap 18)

How, though, did he propose to prevent these certificates or paper vouchers from circulating. He does not spell it out but when you think of it, the implication is pretty clear. The vouchers would bear the name of the worker who had performed the x hours work. In the small mill towns of the 19th century, when store counter workers would know the other workers by name, this would have been enough. In a big city, a purchaser might have to produce an identity document. This would have prevented them from circulating and acting like money.

But all that is based on the technology of the early 19th century. By the late 19th century socialist authors like Bellamy were proposing to harness the then very modern punched card technology. Bellamy envisaged a socialist economy in which citizens would have social credit cards, punched cards, that they would use to buy things from common stores. When they bought something the credit would simply be canceled out by punching it away on the card. The goods would then be delivered in Amazon-style using pneumatic tubes that would run to every house.

What this shows is that an earlier generation of socialists had no hesitation about using the best technologies of their day when thinking of getting rid of money. Today, of course, we have the infrastructure of smart cards and their readers. Changing this over to a labour accounting system would be simply a matter of :

1. Changing the unit of account from the Euro to the labour hour.
2. Amending the software so that transfers between private accounts were impossible.
3. Withdraw all Euro’s from circulation.

But in order to mark goods in terms of their labour content, you need both the direct association of production, its carrying out in accordance with a common plan, and the ability to do the necessary calculations.

Back in the 1920s the right wing economist Mises claimed that socialist calculation without money would be impossible. He did concede that Marx’s labour time would be an alternative way of reckoning but said that working out labour content was impossibly difficult. The economy was far to complex, far too many different types of labour were involved indirectly in the making of any one product, for this to be feasible.

Mises was writing before computers and before the internet. In his day calculations were done by clerks with paper and pen in ledgers. What was once daunting, becomes, with modern digital technology a relatively easy task. Even back in the 1980’s Allin Cottrell and I showed that with then available network technology and 8-bit microcomputers, you could maintain a system of social labour values that was updated daily. With modern equipment, the updating could be even more rapid.

The technical and theoretical problems associated with abolishing the capitalist monetary economy are readily solvable. The solutions have been public for years. The problem is political. It is promulgating and persuading the great bulk of the population that they stand to gain directly and in the short term from such a transition.

## New website

I have created a new, paid for, website to bring together material that I previously had spread over several other sites. I am in the process of trying to collect as many of my publications and draft publications together here as I  can.

Use the top menu to navigate between topics.