Hi Julio, thanks for your post and for reading my two papers. A few responses below.
On Tue, Jan 8, 2013 at 11:50 AM, Julio Huato <[email protected]> wrote: > Fred: > > > According to marginal productivity theory, profit = MPK (or MRKP). Labor > > or surplus labor does not appear in this equation. > > Therefore, profit is determined in this theory independently of labor or > > surplus labor. > > > > How do you think that this theory can be reconciled with Marx's surplus > > labor theory of profit? I don't see it. > > There are two questions: (1) the substance or qualitative > determination of profit and (2) the quantitative determination of > profit. What you call the "marginal productivity theory" (MPT) says > nothing about (1). MPT is only about (2). > > I don’t get your distinction between a quantitative theory and a qualitative theory. How can marginal productivity theory (or any theory) be a quantitative theory without also being a qualitative theory. Marginal productivity theory concludes that profit = MPK. The MPK is a quantity of * output*, so the quality (or substance) of profit in this theory is *output*, as opposed to labor or surplus labor in Marx’s theory. > ... MPT is just the general proposition that, under > certain abstract conditions, the return that capitalists expect from > an additional unit of means of production must equal its marginal > contribution to their top-and-bottom line, and that this equality is > enforced by "competition" -- which, understood in the terms proposed, > includes the class struggle as well. Indeed... This argument assumes that means of production can be added and output increased *without adding more labor*. I think there are many production processes for which this is not possible; e.g. another shovel without another worker to dig another ditch. This argument also assumes that means of production can be added and output increased *without adding more raw materials *(or intermediate goods in general). This is impossible in all goods-producing industries which require more raw materials in order to produce more output; e.g. in order to produce another car, one needs more wheels, brakes, glass, etc. If capitalists were to follow this (marginal productivity) rule for profit maximization, they would lose money, because they would not have taken into account the additional cost of the additional raw materials. This was my main critique of Krugman, and you have not yet responded to it (nor has he). > > Have you had a chance to read my papers on marginal productivity in the > > Real World Economics Review? > > > > If so, what do you think of my criticisms? > > Yes, I read them both. And, with all due respect, Fred, I think they > misfire. > > Basically, the way I read them, your objections boil down to saying > that (1) aggregation into general categories (i.e. abstraction) is > impossible, because all real items in the universe are different, Let’s ignore the aggregation problem for now. I (along with lots of other people) think this critique is valid, but I did not mention it in my critique of Krugman, and it was not the main critique in my articles. > (2) > arbitrarily (abstract) "small changes" in a physical stock of means of > production are impossible, because some items are lumpy, I didn’t make this argument in my critique of Krugman nor in my articles (although I think it is sometimes true). > (3) caeteris paribus is impossible, because when one thing changes in the > universe, > everything else winds up changed as a result, and This was my main critique of Krugman, and with respect to raw materials specifically. If the quantity of machines (or labor) increases in good-producing industries, *raw materials must also increase *in order to produce additional output (e.g. cars and wheels). So the marginal product of capital (or labor) is *meaningless *in these production processes, because the concept of the MPK requires that *all other inputs be held constant*. You have not yet answered this key criticism, either in this post or in the post that you linked to on the Cambridge capital critique. > (4) the simultaneous > determination of an endogenous variable is an idem per idem fallacy. > > Re. (4), if you state that (a) y = 1 + 2 x, that (b) z = 4 - x and > that (c) y = z, you are not necessarily contradicting yourself. In > general, obviously, y cannot be equal to z: (a) and (b) are very > different equations. But, you can certainly find particular values of > x, y, and z such that all these equations hold just fine, i.e. x*=1 > and y*=z*=3. Again, this is not in general, but in particular -- at a > "point," so to speak. So, no, you are *not* allowed to argue that > equations (a) and (b) "assume" x while the point of the theory is to > determine the particular values of x (i.e. x*) that reconcile the > system. If you do, then the logical contradiction is yours. > I am not sure I understand your point here, but it seems to refer to my criticism that *marginal productivity theory takes as given the rate of interest *– the main variable that it is supposed to explain (the return to capital). Therefore, marginal productivity theory does not really present a theory of the return to capital; it just pretends to do so. The fact that the rate of interest is taken as given is hidden deep within the theory, so one must dig deep to discover it. Behind the veil of calculus, there is nothing. Are you arguing that it is OK for marginal productivity theory to take the rate of interest as given? I don’t think so. That would be like Marx’s theory taking as given the quantity of surplus-value (or ∆M), without explaining that this quantity of sv is determined by the quantity of surplus labor. More below. > > Ultimately, societies are devices by which we humans produce and > reproduce our *selves*, our *humanity*. The relevant input and > output of these devices is our humanity, that thing whatever which > distinguishes us from the rest of nature (labor = conscious or > purposeful activity, quipped Marx). The physical stuff that bears our > humanity (and our humanity can only exist in the physical world, in > and through physical objects, our bodies, our products, etc.) is just > the material form of our humanity. We produce our humanity by means of > our humanity through our social structures. The physical world, the > rest of nature, our material products, etc. can only mean something to > us by reference to our humanity. Thus, human societies are > aggregators, by definition. We take stuff that is incredibly diverse > in its material form and "reduce" it to its human meaning, e.g. > commodity value, political power, etc. And, if we view things this > way, all these things (value, political power, etc.) appear now as > specific social forms of the productive power of our labor. > Productive of what? Of humanity! We continuously or recurrently > transform inputs into outputs, and substitute inputs for inputs and > outputs for outputs, because -- deep down -- all those diverse inputs > and inputs are (again) our very humanity under an array of cloaks. > Yes, adding apples and oranges into units of something we call fruit > and, ultimately, into units of something we call freedom or productive > power or welfare or whatever entails of necessity a "loss of > information" -- discontinuities exist. But we have done it, we do it > all the time, and we will keep doing it in spite of that. If we do > not understand this, then we do not understand the essence of "money," > the essence of "political leadership," etc. (which, by the way, are > truly one and the same thing), and we have learned nothing important > from Marx. > I think this is an overly harsh and unjustified judgment. I think I have learned a lot more than “nothing important” from Marx’s theory, even if I am wrong about aggregation and marginal productivity theory (which I don’t think so). You still have not explained how marginal productivity theory is compatible with Marx’s surplus labor theory of surplus-value. You say that marginal productivity theory assumes competition, which includes class struggle, but this doesn’t explain how marginal productivity theory is compatible with Marx’s theory of sv (determined by surplus labor). Marginal productivity theory says that profit (actually the price of capital) is determined by the marginal product of capital, independently of labor and surplus labor. For example, marginal productivity theory implies that the length of the working day has *no effect* on the magnitude of profit, which depends instead entirely on the MPK. Marginal productivity theory is usually interpreted as having the opposite implication for class struggle – that class struggle for higher wages is *useless *or *harmful*; wages are determined by the marginal product of labor. Marginal productivity theory was developed in the late 19th century as an *answer to Marx’s subversive* *theory of surplus-value *(determined by exploitation and surplus labor). Marx’s theory was too subversive to be acceptable in academic circles, so an alternative theory had to be found. This ideological necessity was finally satisfied in the 1890s by the marginal productivity theory of Clark and Wicksteed. Clark was quite explicit about the need for an answer to Marx’s theory and the need to prove that capitalism is not based on exploitation, and that this was the goal of his marginal productivity theory. Clark certainly did not think that his alternative theory was compatible with Marx’s theory; he regarded his marginal productivity theory to be a *refutation* of Marx’s theory. Profit is produced by capital, not by labor. But Clark was wrong. Marginal productivity theory has been a miserable failure as a theory, especially the theory of capital. Marx’s theory is clearly superior to marginal productivity theory on the usual scientific grounds of logical consistency and explanatory power. Marginal productivity theory is filled with logical problems and it has little or no explanatory power – especially about the main question in a theory of capitalism: where does profit come from and what determines its magnitude? Comradely, Fred
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