Carrol wrote:
> What is it and how is it supposed by believers
> to explain pricing.
Value (and, hence, price) is only a particular social form that the
"marginal utility" of goods takes. In general, "marginal utilities,"
"marginal productivities," "marginal rates of substitution," "marginal
rates of transformation," etc. are the "specific proportions" of
social labor time that Marx (and Engels) referred to in several
writings.
The following is a brief excerpt from the paper (still in draft form)
I presented on Saturday at the annual conference of the Eastern
Economics Association in New York City on economics and socialist
planning.
* * *
Scale is at the heart of the argument for socialism, or at least at
the heart of the Marxist argument for socialism, arguably the most
compelling argument for socialism formulated to date.8
It is known that Marx's story goes (more or less) like this:
1. Every society has to allocate the productive force of its labor
(stock), a.k.a. its labor power, or its social labor time (flow) in
accordance with "quantitatively determined specific proportions" among
its alternative uses, so that it produces the goods that it needs to
subsist.9 In a society where private ownership prevails, this
allocation takes place through trade in markets. In societies in
which private ownership prevails, production is fragmented, carried
out in independent private units. Not only the labor that regulates
and directions the production of goods is divided, but also it is
spent without a fuller sense of the overall input requirements and
consumption needs of society as a whole. However, if social life is
to flow, if society is to reproduce itself, then this divided labor
has to be reunited or reunified, it has to fit together in accordance
with the said "specific proportions." If these proportions are not
kept, if labor is overspent here and underspent there, in other words,
if labor is wasted willy nilly, the reproduction of society will be
disrupted.
2. Consequently, the transfer of claims of private ownership over
goods (i.e. trade) in markets is the vehicle through which societies
with private ownership bridge the social division of labor.10 Within
each unit, the individual capital in charge sees to it that the unit's
resources are allocated internally in accordance to proportions
aligned with the overall goal of the unit, as dictated by the owner.11
In economics and financial accounting, these proportions are usually
called "internal prices" by analogy with actual prices. However, they
are not true prices, because prices entail that actual trade (transfer
of private ownership claims) be involved. When division or department
A supplies division or department B of the same firm with an
intermediate good, that is not trade. That is the internal shuffling
and re-shuffling of the firm's own resources.12
3. Values (or their superficial manifestation, market prices) are the
social form in which the "specific proportions," the specific quanta
of social labor time, must necessarily take in a society with dominant
private ownership, e.g. capitalism. But the "material content" of
those forms, what Marx also called in Capital, the "material
determinations of value" or the "essential determinations of value,"13
is the set of "specific proportions." Moreover, for the readers who
keep a close track of what Marx and Engels wrote and "really meant":
There is only a hint of this notion in Grundrisse and Capital, without
much elaboration. Engels, in Anti-Duhring, made a more explicit note
about their nature (while referring to the economic organization of a
socialist society): These "quantitatively determined specific
proportions" in which the total social labor is allocated are
determined by a comparison of the "useful effects" of the goods
involved.14
In other words, Marx and Engels anticipated (albeit at a
sub-analytical level, but clearly in a conceptually superior manner)
Allen and Hicks' (1934), Hicks' (1939), Samuelson's (1947/1983),
Debreu's (1951), Debreu's (1959), Arrow's (1963) notions that -- given
society's distribution of wealth ownership, technology, consumer
preferences, and hardwired institutional constraints -- market prices
(relative prices in general, not only money prices) tend to reflect
the equalization of the marginal rates of transformation of productive
inputs into goods and, also, of the marginal rates of substitution
across all goods and to the said marginal rates of substitution.15
Again, those of us who regard the labor theory of value as a
self-evident truism will note that the terms "productive inputs,"
"productive resources," or "productive wealth" resolve, ultimately,
into the productive force of labor (stock) or social labor time
(flow).
The economists have been fascinated by these proportions, and Marx's
"quantitatively determined, specific proportions" (based on Engels'
comparison of the "useful effects" between goods) have been
rediscovered over and over in a variety of analytical contexts. In
the Soviet Union, the school of optimal planning, a group of superb
mathematical economists that made notable contributions to economic
analysis, re-baptized Marx's "specific proportions" as "resolving
multipliers" (L. Kantorovich) and "feedback costs" (V.V.
Novozhilov).16 In the Western world, the developers of activity
analysis and mathematical programming called them "shadow prices."
Also in the Western world, these "specific proportions" have come to
be known as "Arrow prices," "Arrow-Debreu prices," "Lagrange
multipliers," "Hamiltonians," "dynamic multipliers," etc. Varian
(1992), Intriligator (1971), and Dixit (1990) offer sharp expositions
of the common mathematical foundation underpinning all of these
various analytical forms.
Why did Marx and Engels not elaborate further on their insight? Aside
from the technical difficulty of studying these proportions with the
mathematical instruments concretely available to them, Marx
(1857/1973) suggests an answer. Marx (1857/1973) appears to have
regarded the analysis of these "specific proportions" as a
straightforward task for engineers or technologists.17 Marx noted
that the precondition for value (i.e. the "material content" of value)
was use value. In other words, that the precondition for the social
existence of society's total labor time in its alienated form of value
was the character of labor as producers of use value, labor as a
concrete useful human purposeful productive activity. Insofar as the
goal of his "economics" was to uncover the nature of the social
relations of capitalist production, that note was sufficient to
indicate the direction in which further study of these "specific
proportions" would need to take.
It is ironic that bourgeois economists, economists adamantly opposed
to socialism and the labor theory of value, from Menger on, came to
pursue the technical or material aspect of the value relation.
Marxists, from Hilferding (1904) and Bukharin (1927), rejected their
work tabula rasa, instead of clarifying its true nature, disentangling
the web of ideological mystification from its "rational kernel," with
the result that, even today, Marxists lag behind in critically
digesting all this work.
This is, of course, no denial of the ideological trickery exhibited by
the defenders of the status quo. The ideological con effected by
bourgeois economics consists of conflating or blurring the distinction
between the material content of the reproduction of a society and its
specific social form. So, naturally, they pretend that the social
form of values (and prices) is the only conceivable way in which these
"specific proportions" may appear, "specific proportions" which (under
abstract, idealized conditions) ensure efficiency in the sense of
enabling the maximization of social welfare given a certain level of
the productive force of labor (or, equivalently, the minimization of
the productive force of labor required to attain a certain level of
welfare), however society may measure its welfare.
The economists (with perhaps a few exceptions) cannot contemplate the
complete dissolution of private ownership. So even the proportions in
which social labor is allocated inside a capitalist firm are called
"prices" ("internal prices" to be precise), even though they are not
and cannot be prices. Unlike Preobrazhensky (1925/1965) or Lange
(1936-1937/1948), to name two prominent advocates of socialism, Mises
(1922), Hayek (1988), and virtually the whole of the bourgeois
literature on socialist planning (the work of a few socialists
inclusive, a number of Soviet economists inter alia) fail to
distinguish between "prices" in the "generalized sense" or (to use
Wicksteed borrowed by Lange) as "terms on which alternatives are
offered" and prices "in the narrower sense" or as rates at which
private ownership claims are exchanged in markets. The economists
fail to see that these "prices" are only accounting proportions --
i.e. common-sensical rates of resource allocation that firms (or, for
that matter, the public sector of a society in transition to
socialism) must keep in their internal operations if they want to
avoid the waste of their resources, and that (in the case of the
transition to socialism) their effective social content is shifting
with the degree with which the associated producers as a civic force
appropriate and absorb the social functions of the state stripping off
their political (antagonistic, hierarchical) form.
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