Wednesday, October 7, 2009

Roman Holiday

Traveling is so rejuvenating. New thoughts and sites, and time to linger with them.

Here are some photos from today’s excursion in Rome, our best day yet on this journey! Our capable tour guide was a cheat sheet pressed into Bobbi’s hand at the last minute before leaving home by our friends Giana and Adam Cavan. Thank you Adam and Giana.

We found a Wednesday wedding party, the quiet alleys, the rapids of the Tevere, the playa del sol for the cats of Rome, the serene Jewish quarter, the oldest ruins, the best church, and the views from Janinculum hill (the Bunker hill of Italy). Along the way we dined at a very fine little Trattoria in Trastevere.


Wednesday weddings, anyone! A few steps from our hotel we were nearly run over by a young man in tuxedo bearing a bouquet of white flowers. He rounded a corner for the entrance of the church with that telltale beating heart and happy aura. The best man was in hot pursuit recording each step with the camcorder. We followed them into the church. All the pews were covered with gold embroidered red covers, and the place was aromatic with flowers. Outside, the photographer was arriving, and separate groom and bride parties were excitedly gathering.


Seven hours later, on our way back to the hotel, the party was just breaking up. Several men in suits were negotiating with two traffic cops about many cars illegally parked in front of the church. The police officers were too affected by the proud uncles to do more than make an unconvincing show of tapping their ticket book. There was obviously more likelihood of their imminently joining the party than their writing tickets. The German tour group was going about its business.


In the heart of a theater district, not far from the Forum, lies the Largo Argentina, an excavation of four Roman Republic era temples, ca. 350 B.C. These were discovered in 1929 and carefully exposed. For now the Largo Argentina is a playground for privileged cats of Rome (house cats) who sun themselves or sleep in the shade as temperature requires, and feed on lasagna and other delicacies brought by local women who look after their welfare.


Typically relaxed and flirtatious young workers were busy sprucing up a beautiful fountain, dating from ca. 1588, in the Piazza Mattei.

After battling hordes at the Vatican Museum yesterday we were particularly attuned to the peaceful serenity in the Jewish quarter. Kosher butcher shops, artists, studios, kosher trattorias, a 19th Century synagogue, no cars, and seemingly only happy people. For 300 years Jews were confined to a 3 acre walled ghetto, today it is one of the jewels of Rome.


Turning the corner from the Ghetto towards the Pallatine hill, a path leads between the ruins of a 23 B.C. temple built by Augustus for his sister, and the Teatro Marcello, an ancient playhouse (13 B.C.). In recent years the top floor of the Teatro Marcello has been converted to apartments.


Our new favorite church in all of Italy is Santa Maria Trastevere. It may be the oldest church in Rome, built in the 12th century with simple Roman lines. Its 21 Roman columns were taken from ancient structures, meaning each column is made of different rock. The marble floor is delicately inlaid. The fa├žade has a beautiful mosaic of the Mary and 10 women. The decoration is wonderful throughout without being too much (e.g. I found the Sistine Chapel to prove the proverb that less is more). The inside has 12th century mosaics, a wonderful baroque wooden ceiling from the 17th Century. The effect is warm and inviting, a place you’d want to worship.


We returned home via the Juniculum hill. This was the scene of a key battle in June 1849 of the Italian wars of independence. The site is marked with a mausoleum dedicated to the dead, a lovely fountain, not unlike the Tevi fountain but less adorned, a statue of Garibaldi and the busts of main opposition leaders nearby.

Long live the revolution, long live traveling!

Sunday, May 24, 2009

Part I, Chapter 3: Money, or the Circulation of Commodities

Section 1. The Measure of Values

Money can’t buy you love, and what’s that diamond ring worth, anyway? So what comes of the distinction between the value of a commodity and its price. Marx says that the value created in a coat by socially useful labor expended by the weaver and tailor is invisible. Such value is an abstraction, an ideal or mental form. By contrast, the coat’s price is concrete and specific.
“As a measure of Value, and as standard of price, money has two entirely distinct functions to perform. It is the measure of value inasmuch as it is the socially recognized incarnation of human labor; it is the standard of price inasmuch as it is a fixed weight of metal. As the measure of value it serves to convert the values of all the manifold commodities into prices, into imaginary quantities of gold: as the standard of price it measures those quantities of gold. The measure of values measures commodities considered as values; the standard of price measures, on the contrary, quantities of gold by a unit quantity of gold, not the value of one quantity of gold by the weight of another.”
I think this means something like this. A coat, as an item of style and usefulness, has value commensurate with the labor used to create it. This value can be expressed as a certain weight of gold, the money commodity discussed by Marx. How much gold? The answer is so much gold as is its equivalent in value. The value of a coat is equal to an amount of gold that embodies the same amount of human labor as is contained in the coat. This is an unknown amount of gold, an abstraction, because either we cannot measure it, or we have not measured these labor value equivalencies.

But there is a problem with this abstract formulation of value, Marx readily acknowledges. In order to actually sell the coat, the owner of the coat, says Marx, must “lend [it] his tongue, or hang a ticket on [it], before [its] price[] can be communicated to the outside world.” Human nature being what it is, however, this price tag will not necessarily speak truthfully about the value of the coat. As soon as we name a price, we establish “a more or less accidental exchange ratio between a single commodity and another, the money commodity.” In other words the coat may be overpriced or underpriced relative to its underlying “real” value. This, says Marx, is not a defect but “admirably adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another.” I think this means, in essence, don’t worry if the price does not correlate to value because, in the long run, it all evens out. If that’s what he’s saying, I’m not certain that this is satisfactory.

A bigger issue is casually raised:
"The price-form, however, is not only compatible with the possibility of a quantitative incongruity between magnitude of value and price, . . . but. . . . Objects that in themselves are not commodities, such as conscience, honor, etc. , are capable of being offered for sale by their holders, and of thus acquiring through their price, the form of commodities. Hence an object may have a price without having value. [Those Barry Manilow tickets?] The price in that case is imaginary, like certain quantities in mathematics. On the other hand, the imaginary price-form may sometimes conceal either a direct or indirect real value-relation; for instance, the price of uncultivated land, which is without value, because no human labor has been incorporated in it.”
Since Marx restricts the concept of “value” to human labor that is incorporated in commodities, there are necessarily many things that have no value but that nevertheless have a price. Marx allows that such transactions can assume the form of commodities. Therefore, it appears that the value of commodities is reflected in their prices, however inaccurately, and the prices of things that are not commodities (like services?) can make them operate like commodities with value.

Observations

When Marx indicates that conscience and honor can be sold for a price, prostitution, selling of legislative votes, and murder for hire come to mind. These items all have a price but I think Marx would say they have no value [because they are not human labor expended upon the creation of a commodity]. Selling legislative votes and prostitution have in common that they are not physical objects—they are not commodities. They seem to be more in the nature of services. Services in general would seem to fall in this category of useful labor that is expended on something other than in the service of creating a commodity. Marx says the price in those cases is imaginary. But what is imaginary about it? It seems the price is real enough. Services from prostitution, to selling votes, to providing legal services have use value for many people, and they command a price that must be paid. What is the value of these services? Is it simply the price they command? Marx is unclear on this so far.

Raw land also, says Marx, has a price but no value because it does not incorporate human labor. However, the price, as Marx puts it, “conceals a direct or indirect value relation.” If this doesn’t mean that the value of raw land is defined by its price, then I don’t understand what Marx is saying.

Between natural resources, like raw land, on the one hand, and services that are not labor expended upon a commodity on the other hand, there appears to be a whole lot of economic activity that falls outside Marx’s Platonic ideal of “Value” expressed as useful human labor expended on commodities. Is the ultimate value of these forms of activity simply expressed by their price?

This whole idea of human labor expended as an objective measure of value appears problematic. Consider the value of art. An abstract art piece has use-value to many people. It is pleasant to look at, it can evoke feelings, emotions, and thoughts; it can be pleasing, soothing, or stimulating, as well as jarring, or confrontational. It has physical manifestation and would appear to be a commodity as envisioned by Marx. But does it have “value” in the Marxian sense? Is the value equal to the socially useful labor spent in creating it? Does it matter if one person likes it, millions like it, or no one likes it? Does it matter what someone is willing to pay for it? The idea of valuing artwork based on hours spent in creating it independent of how many people like it, or would be willing to buy it, or what someone would be willing to pay for it seems problematic.

In the legal services world, the billable hour is king. That seems to be one area where the value of human labor expended is equated directly to value. However, billable hours are measured very differently by attorney’s of relatively equal experience and skill. Many arguments are devised against the billable hour. Lawyers complain that it forces everyone to become a slave to the billable hour and to work excessive hours, and that it limits the upside on compensation when good results are achieved. Clients complain that it encourages inefficient work habits, and overcompensates when an undesirable result is achieved. Objectively, it is not always clear whether a particular avenue of research is productive and will add value to a case, or not. On large business deals, attorney fees are often valued based on a flat fee, or a percentage of the deal that translates to remuneration that is considerably higher than the customary hourly rate times the hours devoted to the project. Personal injury work is often priced as a percentage of any recovery. All of these methods of pricing legal services value the human labor expended on a case very differently. It is not intuitively obvious that one of these systems is objectively more correct than any other. It is not clear that a satisfactory explanation along the lines contemplated by Marx could be devised.

Saturday, May 9, 2009

Marx, Capital, Part 1, Chapter 2: Exchange

Thus far, Marx has discussed commodities, things. In chapter one, Marx discussed how commodities are the embodiment of human labor and he says that it is human labor that provides the essence of value. Value is expressed in terms of a relationship amongst commodities: one coat equals so much linen, so much wheat, or so much silver, ad infinitum for each and every thing. This exchange value betrays a social relationship among commodities. In Chapter two, Marx discusses how this social relationship takes the form of an exchange of private property by owners of private property (commodities).

Commodities cannot go to market and make exchanges on their own account. They must be exchanged by free actors. The exchange of commodities thus reflects an economic relationship between individuals as owners of commodities. What type of relationship is this? Marx says: “In order that these objects may enter into relation with each other as commodities, their guardians must place themselves in relation to one another, as persons whose will reside in those objects, and must behave in such a way that each does not appropriate the commodity of the other, and part with his own, except by means of an act done by mutual consent. They must therefore, mutually recognize in each other the rights of private proprietors.” An exchange is a contract: the free and mutual consent to exchange things between owners of private property. “We shall find,” says Marx, “that the characters who appear on the economic stage are but the personification of the economic relations that exist between them.”

It is difficult to know just what Marx means here because his language in this chapter is poetic and filled with metaphor. All commodities are owned by someone. The exchange relationship that exists between commodities defines an economic relationship between the owners of commodities. However, questions are raised more than they are answered.

The free exchange of commodities between owners of private property happens, of course, but what does it tell us? I believe Marx would say that Bill Gates is the owner of wealth that reflects the collective value produced by all who labored to create the Microsoft Empire. Gates may exchange some of his wealth for a $52 million mansion on the shores of Lake Washington. On the other hand the idea of a free exchange of commodities doesn’t tell us much about what happens with the money Gates donates to the Bill and Melinda Gates foundation. It also tells us nothing about how commodities are accumulated or wealth is amassed. Marx notes that private property can be acquired by force. He does not mention, but one should not forget, trickery, chicanery, and the unscrupulous use of monopoly power. In “Wealth and Democracy” (2002) Kevin Phillips describes how in the United States great concentrations of wealth have successively come about from (1) piracy, (2) slavery, (3) war profiteering, (4) railroad monopolies, (5) steel monopolies, (5) oil monopolies, (6) banking charters, and (7) high technology monopolies. The fact of an exchange, as such, tells us not much about how property was accumulated, or why things are valued as they are in a given exchange.

Observations

Marx again notes the qualification made earlier that labor imparts value to commodities only to the extent that the resulting product has use value for persons. But use value lies in the eye of the beholder, collectively the market. If I set up a refrigerator factory in Caracas lots of people will find my refrigerators to be of use, or desirable, which is the same thing; but if I set up this factory in Inuvik, less so. If only a few people find a commodity of use, does this mean that the labor that went into making the thing imparts less value? I think Marx would agree. But if so, isn't the value of commodities ultimately derived from demand and what the highest bidder is willing to pay, and not from the labor that went into creating the thing?

Thus far Marx has addressed commodites, their use value, their exchange value as depositories of labor, and how an exchange of commodities implies an economic relationship between the owners of commodities. But whereas all commodities are owned, not everyone owns commodities. What about the laborer who does not own commodities? There has been no talk yet of how labor should be compensated. What is the value of the labor rendered by the refrigerator factory worker in Inuvik; does the labor have no value because the commodity has no value?

Stay tuned.

Monday, April 6, 2009

The Relevance of Karl Marx

Wendy Shearn just pointed out to me a short literary review by Christopher Hitchens of a new Marx biography: "Marx 'Das Kapital': a Biography" by Francis Wheen. Hitchens' review appears in the April '09 issue of the Atlantic. It is full of name droppings of Heidegger, Duhring, Lasalle, Michelthwaite, Woolridge, Bahro, Hilferding, Schumpeter, and others whose mention means nothing to me. However, I understand them to be serious persons of importance and they did and are all talking about Marx as having had, and continuing to have vibrancy and relevance to our modern world. We learn, for example, that John Cassidy, in an essay in The New Yorker in 1997 suggested that Marx may yet turn out to be the next important thinker for the 21st Century.

. . . with that, I'll keep on reading!

Saturday, April 4, 2009

Marx, Capital, Part 1, Chpt.1, Section 4: "The Fetishism of Commodities, and the Secret Thereof."

Christopher Hitchens in “God is not Great” has observed: “Marx and Freud were not doctors or exact scientists. It is better to think of them as great and fallible imaginative essayists.” Whereas in sections one through three, Marx has tried to provide an explanation of what we mean when we say a coat has value, section four abandons this more grounded approach. It is very much an imaginative essay. It introduces the utopian ideal of a planned society that directs and rewards labor in accordance with the labor provided by each citizen.

We are blinded by the fetishism of things, says Marx. A coat is a straightforward object insofar as we envision it as a thing of use to us, something to keep us warm. However, insofar as it is a commodity, the coat is a mysterious thing with the metaphysical qualities that Marx described in the first three sections: use value, exchange value, and an embodiment of human labor. In addition, from the moment that men in any way work for one another, their labor assumes a social form. The coat is warm and useful to the wearer; however, the social relation inherent in the coat stemming from the labor, and the exchange value the coat has with every other thing is not visible. For these reasons we worship the exchange value of Commodities without fully appreciating how they embody labor value and complex social relations.

The fact that value comes from the labor that went into making a thing is an open secret, Marx says, hidden behind the apparent fluctuations of the relative values of commodities. The ultimate money form of valuing commodities conceals, instead of disclosing, the social character of private labor, and the social relations between the individual producers. Marx holds up to the light as examples a society of one (Robinson Crusoe), a dark ages feudal society, and a patriarchal peasant family, and he concludes in each case that the measure of value imparted to all commodities is self-evidently the measure of individual labor power that goes into the sum total of commodities produced by each of these societies.

Then . . . .all of a sudden, we’re not in Kansas anymore. The following passage, no longer descriptive, introduces strongly utopian shades:
“Let us now picture to ourselves, by way of change, a community of free individuals, carrying on their work with the means of production in common, in which the labor power of all the different individuals is consciously applied as the combined labor power of the community. . . . The total product of our community is a social product. One portion serves as fresh means of production and remains social. But another portion is consumed by the members as a means of subsistence. A distribution of this portion amongst them is consequently necessary. . . We will assume . . . that the share of each individual producer in the means of subsistence is determined by his labor time. Labor time would, in that case, play a double part. Its apportionment in accordance with a definite social plan maintains the proper proportion between the different kinds of work to be done and the various wants of the community. On the other hand, it also serves as the measure of the portion of the common labor borne by each individual, and of his share in the part of the total product destined for individual consumption.”
Marx , after several digressions comes back to this theme, concluding that the process of material production “does not strip off its mystical veil until it is treated as production by freely associated men, and is consciously regulated by them in accordance with a settled plan. This, however, demands for society a certain material ground-work or set of conditions of existence which in their turn are the spontaneous product of a long and painful process of development.”

Observations

The language in this section is more sweeping and less careful than in the previous three sections. The “let us imagine a society of free men” paragraph comes out of left field. It is not carefully set up or supported by what has come before. The shift from an explanation of what we mean by “value” to imagining a society of free men where everyone labors according to a definite plan set up to serve the needs of societ appears to introduce a very large and complex, and at this point in the book , not self-evident proposition.

Is there a contradiction inherent in "freely associated men (working) in accordance with a settled plan." Who sets the plan? Once the body politic establishes a plan, is it implicit that the power of the state will enforce that plan . . . at which point do we still have men freely associating to create the wealth of society, or do we have the state enforcing its plan on its citizens?

Hobbes, Locke, Rousseau, and Rawls--the giants of Western political theory--would all agree that the individual gives up much of his or her freedom in order to live in society. The alternative is Iraq ca. 2004 where, in Hobbes' memorable phrase "life is nasty, brutish, and short." But the social bargain in the U.S., where lady liberty says "give us your tired, your poor, your huddled masses . . ." has generally been that individuals are free to produce what commodities they wish. We prohibit some activities deemed harmful (e.g. prohibition, drug laws) but at least since we abolished slavery in 1865 we have not been in the business of telling people what to do. Social and economic mobility unfettered by laws has been our ideal.

From 21st century America, the thought of commodities being produced in accordance with a social plan, and directing people what to produce, is jarring and would require more than the quiet introduction this idea is given here. Of course in "old Europe" as Rumsfeld has dismissively quipped (and I now mean 1867, the date of publication of Part I of Das Kapital) there was not the expectation that mine workers or industrial workers would have social mobility. In America, too, the economy of half the country was still based on the institution of slavery. Aristotle and the Greeks did not envision social mobility. The Guild's of the middle ages locked people into their work and precluded social mobility. We do live in different and better times.

Sunday, March 29, 2009

"Capital," Part 1, Chpt. 1, Sec. 3: "The Form of Value or Exchange-Value"

In Section 3 Marx addresses the question "What is value?", or, you might say, "What is money?" He traces a pseudo historical development of money from a barter society to a fully formed money market economy. In doing so, he expressly rejects the notion that the value of things is merely an expression of their market price.
Our analysis has shown, that the form or expression of the value of a commodity orignates in the nature of value, and not that value and its magnitude originate in the mode of their expression as exchange-value. This, however, is the delusion . . . of the mercantilists and their recent revivers, Ferrier, Ganilh, and others, . . .the modern bagmen of Free-trade. . . The modern hawkers of Free-trade, who must get rid of their article at any price . . . For them there . . . exists neither value, nor magnitude of value, anywhere except in its expression by means of the exchange relation of commodities, that is, in the daily list of prices current.

To Marx, the value of things derives ultimatley from the labor that went into their creation, thus the proposition that value is nothing but the "daily list of prices" seems vulgar and incorrect.

Why incorrect? The most elementary form of value is to express one commodity as a relative value of another commodity: e.g. 20 yards of linen = one coat. Marx introduces a technical definition here: the linen in the example is the "relative value" (relative form of value), whereas the coat is the "equivalent form of value." These are the two forms of value. Every expression of the value of a thing entails the interplay between two things: the relative (linen in the example), and its equivalent (the coat). However, the value of a thing can be expressed like this in relation to an infinite number of other commodities. So, Marx asks, if a coat is worth 20 feet of linen, 100 pounds of coffee, the hind quarter of a cow, so much wheat, etc.--all at the same time--then what is the coat really worth? There must be some underlying, unifying common denominator of value that ties it all together. Marx thinks that the labor that went into the creation of each thing is this common denominator that gives meaning to the the myriad expresions of relative value.

A social relation, i.e. the trade in goods, is necessary for the notion of value because a thing's value cannot be expressed in terms of itself: "20 yds of linen = 20 yds of linen" is a tautology and meaningless. An exchange of commodities is thus essential to the concept of value. No matter how warm or beutiful the coat, the tailor's labor in creating the coat infuses the coat with value only in the moment when the coat is exchanged for something else.
"It is the expression of equivalence between different sorts of commodities that alone brings into relief the specific character of value creating labor, and this it does by actually reducing the differnt varieties of labor embodied in the different kinds of commodities to their common quality of human labor in the abstract. . . . Human labor creates value, but is not itself value. It becomes value only in its congealed state, when embodied in the form of some object. In order to express the value of the linen as a congelation of human labor, that value must be expressed as having objective existence, as being a something materially different from the linen itself, and yet a something common to the linen and all other commodities."

This same relationship holds true in our modern money world. We developed money as a matter of necessity because direct barter is a highly inefficient manner of trading. If you have cows but need a plough, you must find someone who not only has a plough but also wants meat. What if you find someone who wants meat but has no plough and can only offer you linen? To get your plough, you must then also find someone who has a plough and wants linen. What if you are looking for a commodity whose equivalent is less than a whole cow? How could you divide your cow to accomlish the exchange? From such necessity social conventions evolved towards common universally useful mediums of exchange: beaver pelts and dried corn in the American colonies, linen in pre-industrial Europe. These kinds of commodities were chosen for a number of reasons, but above all because they were widely desired, durable, portable and easily stored.

In later stages of economic development, gold became the commodity universally accepted as the medium (the "equivalent") of exchange. Later still, paper money backed by gold reserves served the same purpose, and later still just paper money backed by the full faith and credit of the state treasury. In each case, the socially accepted (and trusted) commodity is universally exchangeable with any other commodity. However, throughout, the value being expressed in the exchange is ultimately the labor that is incorporated in things.
When one commodity serves as the equivalent of another, such as linen (or gold currency), and coats consequently acquire the characteristic property of being directly exchangeable with linen (or the currency), we are far from knowing in what proportion the two are exchangeable. The value of the linen (the currency) being given in magnitude, that porportion depends on the value of the coat. . . . The magnitude of the coat's value is determined, independently of its value-form, by the labor-time necessary for its production."

Observations

It does not appear that this is a prescription for doing away with free markets. The process here seems more descriptive than prescriptive. Marx is trying to come to grips with the fundamental source of value and he thinks the "bagmen of Free trade" have it muddled. He believes labor must be the common denominator of all the exchange equations that could be stated between one commodity and an infinite number of other commodities. In other words, the meaning underlying "1 coat = 20 yds of linen" is an expression of its value in terms of the labor used to produce it. In saying that "that's what the exchange equivalance means," Marx does not need to abandon the market. The market, of course, may get this valuation wrong on any given day in its "list of prices."

On the other hand, if we accept that the underlying source of value in any thing is some multiple of undifferentiated unskilled labor units, one might be inclined to set up an agency to scientifically study and investigate how much labor is in each thing directly, and to set what the labor will be worth; in other words to take the market out of it. Whether the free market (the invisible hand) can do a better job at accurately setting those values than some governmental agency may have been an open question in 1917. Today, I think we would say the experiment's been run, and that a governmental agency will not do a better job at this than the market. Nevertheless, this does not necessarily discredit Marx's observation about labor being an underlying source of value.

Wednesday, March 25, 2009

Marx, Capital, Part I, Chpt. 1, Section 2: The Two-Fold Character of Labor

In Section One Marx discussed how things have two qualities: the quality of being useful, and the quality of having value. A coat is useful because it keeps you warm. A coat has value because a weaver created the cloth, a designer conceived it, and a tailor or seamstress made it; in other words, it was worked on. Marx concluded that the true value of the thing (not necessarily its market price) corresponds with how much labor was used to create the coat.

In Section Two he discusses the flip side of this duality. First, every thing requires labor to be useful. The apple must be picked, the corn must be planted and reaped, the cotton must be picked and weaved, the coat must be sewn. Labor is what makes the thing useful. Second, labor has value, and it is labor that gives value to things.

The amount of unskilled labor used to create a thing is the basic measure of value. Skilled labor can be measured in unskilled labor units. Thus an hour of skilled labor is worth more than an hour of unskilled labor in accordance with social conventions.

A thing's useful value (as opposed to money value) has two components: (1) the raw materials that go into the thing; and (2) the labor that goes into shaping the raw materials into a useful thing or commodity. However, a thing has monetary value only to the extent that it was labored upon.
"Tailoring and weaving, though qualitativley different productive acitivies, are each a productive expenditure of human brains, nerves and muscles, and in this sense are human labor . They are but two different modes of expending human labor-power. . . . But the evalue of a commodity represents human labor in the abstract, the expenditure of human laobr in general. And just as in society, a general or a banker plays a great part, but mere man, on the other hand, a very shabby part, so here with mere humnan labor... Skilled labor counts only as a simple labor intensified, or rather, as multiplied simple labor, a given quanitty of skille being consdered equal to a greater quantity of simple labor.

Observations

Nature, it seems, is left out of the equation. Although raw materials are "useful", only labor adds value. Marx would say that when we buy lumber to build a house the price of the lumber is a function of the labor that went into cutting down the tree and shaping it into a 2x4. We are just now, I think, beginning to appreciate the value of natural resources (like clean air, stable envirionment, etc.).

The idea of a fungible unit of unskilled or basic labor, with an assumed baseline rate of productivety, seems like some type of Platonic form. Marx uses an example of a coat incorporating twice as much labor as the cloth of which it's made. The measure of this exact relationship would seem to be highly impractical,nay impossible to measure in practice. The same goes for determining the multiple to be applied to different forms of skilled labor. Marx mentions "social conventions." That sounds very much like the whole thing is still fundamentally market driven.

Sunday, March 22, 2009

Karl Marx: Capital: A Critique of the Political Economy Chpt. 1, Section 1

Capital: A Critique of the Political Economy
by Karl Marx.

Karl Marx published the first volume of Das Kapital in 1867. Marx died in 1883 before he had completed editing Volumes II and III, and these volumes were published by his friend and collaborator Friedrich Engels in 1885 and 1894 respectively. I’ve not read this book before. So without further advance research, without preconception (other than that it became an influential book for communist thought), I will dive in. In order to assure careful reading, and purely for my own discipline and pleasure, I will keep a log of this book at this blogspot. I hope you will find it entertaining and that my review will also prompt some thoughts along the line that the reader may care to share.

So without further ado . . . let’s get started.

PART I

Chpt. 1, Section 1: “The Two Factors of a Commodity: Use-Value and Value (i.e. the Substance of Value and the Magnitude of Value).

1. The wealth of society in capitalist system presents itself as the sum total of all commodities.

2. A commodity is a thing that satisfies some human want. I.e. a thing for which there is a market. Marx discusses, and seems to acknowledge that the exchange value for a thing (market price) is set by supply and demand, and that this exchange value is independent of both the objective usefulness of a thing and the labor that went into producing it.

3. Marx then posits a grand bartering scheme where a bushel of wheat can be exchanged for so much gold, so much iron or, so much milk, etc. ad infinitum. Each commodity a similar multitude of exchange values. Marx presents this as a problem: he suggests that there must be some common denominator to all these myriad different exchange values. For us, money comes to mind: the dollar or whatever currency you want to use. However, that’s not what Marx has in mind. Here is what he says:

“Let us take two commodities, e.g. corn and iron. The proportions in which they are exchangeable, whatever those proportions may be, can always be represented by an equation in which a given quantity of corn is equated to some quantity of iron. . . What does this equation tell us? It tells us that in two different things (x amount of corn and y amount of iron), there exists in equal quantities something common to both. The two things must therefore be equal to a third, which in itself is neither the one nor the other. Each of them, so far as it is an exchange value, must therefore be reducible to this third.”

Yes, the common currency, money, right? No . . . labor. All commodities take labor to produce. The labor used to create a commodity is a value independent of its exchange value. Whatever the exchange value (supply and demand) such value would not exist but for the labor that went into creating the thing. Therefore, the value of a commodity is equal to the labor hours required to produce it.

Marx here is clearly not speaking of market price value. Marx acknowledges that Market price value is a function of supply and demand and is completely independent of the labor that goes into it. Rather, Marx is postulating a grand normative, prescriptive, and entirely theoretical notion of value: the value of a thing in society should be measured by the number of hours of productive labor that is required to make the thing.
“[A ] useful article has value only because human labor in the abstract has been embodied or materialized in it. How then is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labor, contained in the article.”

A corollary of this position recognized by Marx is that as the means of production become more efficient, he mentions the power loom, the value of a thing decreases together with the reduction in labor required to produce it. Something useful, like air, water, oil in the ground, that requires no human labor has no value.

Marx concludes by emphasizing the normative nature of his conception: “If the thing is useless,” he says, and we might well ask “useless” in whose eyes, then “so is the labor contained in it; the labor does not count as labor, and therefore creates no value.”

Observations

This first section is couched in terms of a logical argument: that somehow the conclusion of labor being an irreducible value inherent in all things is compelled by logic. Marx provides no justification in this chapter why there should b e a connection between the amount of labor that goes into the production of a thing and its inherent social value. Although there is surely a connection between the cost of production and labor, the farther one gets from clearly useful and necessary commodities like iron, ore, copper, and agricultural products, the less self evident the thesis becomes. Although Marx imports a normative basis for this system of values, he does not yet begin to address how to determine the use-value of a thing and who gets to say so (if not the market).

The Renewal of Renewable Energy

Peak electricity demand in California is approximately 60,000 megawatts. In excess of 20% of this is imported, mostly from the Southeastern U.S. and the Pacific Northwest. Roughly half of this demand is fulfilled by natural gas, a little less than a fifth by nuclear plants, and a similar amount by hydroelectric power plants. Peak usage (which happens seldom) and peak capacity are about equal, which is why we flirt with black-out conditions on hot summer days.

For 20 plus years environmental lobbying on the one hand, and rate capping on the other hand, inhibited the construction of new power plants. We stood idly by as demand rose ‘til Enron and the partly real, partly manufactured energy crisis of 2001jolted us sufficiently to acknowledge that new capacity must be added. As Victor Rauch has pointed out, we have been able to delay the day of reckoning because our energy use has gotten much more efficient over that past 25 years. Although car mpg consumption has not improved much, our buildings, factories, and appliances are all much more efficient than they were in 1980. At this point, however, the jig's up: growing population and demand has outstripped capacity. We must increase our production of electricity or curtail our habits and potential for economimc growth.

Luckily, we don't have to add this new capacity by building more nuclear or gas fired plants. High crude oil prices, stimulus dollars, and global warming are making renewable energy sources more viable and attractive than ever. Advances in technology since we last subsidized renewable energy (wind power at Altamont Pass, Tehachepi, and San Gorgonio, early generation solar heat in the Mojave, and solar panels for swimming pools) promise that this time round, renewable energy will be economically sustainable on a large scale. California utilities are mandated to achieve 20 percent renewable energy by 2017, and this appears eminently achievable.

BrightSource Energy of Oaklan is one company at the forefront of this renewal of renewable energy. They have contracts to develop 2,000 megawatts of solar power (heat generation technology) for California’s two major utilites: Pacific Gas & Electric and Southern California Edison. These contracts all by themselves represent a 4 percent increase in the state’s electrical power capacity.

My brother-in-law, David, an early adopter of everything cool, has a 3.5kw solar panel installation on his roof. If 3 million California households (26% of total households) had similar installations, that would add up to an additional 10,000 megawatts of renewable power. Assuming an installation cost of $11,000 each, that would represent a cost of $3,100/kw, which I believe would be very competitive with building new nuclear power plants ($3,500 - $4,000 per kw).

We've seen the future and it's renewable energy. As Arnold would say, Go Kalifornia!

Supercatialism: superbig, superefficient, superbad?

What is Walmart good for? Walmart is good for investors (100 fold return on 1987 investment) and Walmart is good for consumers ($300 20" flatscreen TV's). What is Walmart not good for: Mainstreet shops, American manufacturers of products, and employees of both. The same can be said for Amazon, Barnes & Noble, Starbucks, McDonalds, and most of American business today: good for investors and consumers, bad for wage earners . . . and bad for politics.

Robert Reich, who served as Secretary of Labor under Clinton, in his 2007 book "Supercapitalism" gives a very readable and persuasive explanation of the transformation of American business from the post World War II decades to the 1999 WTO protests in Seattle (not an event addressed in the book). In 1960 the giants of American business were few and relatively unchallenged by competition. This allowed for a truce between managmenet and labor. Unions were strong, wages were high and rising, and business could pass along the cost to consumers. The middle class was strong. The distribution of wealth was more and more balanced between rich and poor. The lack of competition allowed for luxuries of inefficiency, and relativelyh high production costs. In this equilibrium between top companies and the middle class, what was good for IBM was perceived, and was, good for the country. However, consumers lost out in the quality, selection, and price of products, as well as in their choice of entertainment. Censorship on three available television channels enforced conformity and limited choice. Investors also lost out, because profits, although stable, were not maximized.

Reich describes how the advent of the computer, the bar code, global supply chains, and easy access to capital has changed everything. The world was rearranged and the playing field has tipped, radically, in favor of consumers and investors. Global supply chains and lots of competition has raised the quality of goods, while lowering prices. The losers have been wage earners and citizens. With his long experience in Washington D.C. politics Reich describes vividly how increased competition between businesses has resulted in the lawyers, lobbyists, consultants and money that have come to bear on politics in an effort to gain competitivbe advantage for one business over another. The legitimate concerns of citizens are drowned out in the resulting clamour and noise. Intense competition among businesses calls for superstar business leaders who are paid like sports stars. Price competition requires lower wages. Equality of income has suffered. As in all such efforts, Reich's description is better than the presecription.

Reich can seem a bit churlish in his advocacy of government regulation/legislation and dismissal of all other options, and he fails to explore the merits of citizens exercising their power as consumers for political ends. Notably, in his discussion of wage stagnation and growing income inequalities, he fails to note or discuss the fact that the purchasing power of those wages has increased dramatically over the past 40 years. That $300 Walmart television would have cost $3,000 without the changes. He naively, I think, and without sufficient discussion, takes up the cause that corporations should not be recognized as persons, and that corporations should not pay taxes (a Scott Thurow idea). I highly recommend the book for the insights it provides in viewing a broad spectrum of changes that have occurred in our economy, body politic, and society through the lens of the consumer and the investor.

Wednesday, February 11, 2009

China Television Causes Blaze


http://64.174.227.146/exchweb/bin/redir.asp?URL=http://www.nytimes.com/slideshow/2009/02/10/world/asia/0210-BEIJING2_index.html




It’s interesting that the folks at CCTV felt comfortable defying police orders in setting off their explosive fire-works. The role of newspapers in the West may be to “sell newspapers’, but there is no doubt that this kind of event sells, and the “who, what, where, when and why” would be relentlessly pursued and the story would ultimately get out in the open. As ineffective and venal as lawmaking is in the U.S., we have been generally pretty good about generating outrage and then enacting codes to protect public health and property in response to disasters. When we get in trouble, it’s invariably because a shroud of secrecy has been permitted (e.g. military abuses leading to environmental contamination, or unethical and unfair medical experiments on soldiers, industrial plants operating with inadequate supervision). The fact that CCTV is able to suppress the facts around this event, and suppress the event itself, will make it unlikely that sufficient light gets shed on the building code issues and law enforcement issues . . . to say nothing of establishing a free and independent press. It seems corruption and the arrogance of power are likely to go unchecked, and a learning opportunity will be wasted. It's not Tiannamen, or Tibet, but it does not suggest that China is developing in a positive direction.