Quick Note #1

On Greenspan’s interpretation of Boehm-Bawerk’s critique of Marx

Interest, the practice of charging money for time, is founded, according to Boehm-Bawerk, on the qualitative difference between present and future. It rests on the fact that present goods are more highly valued than those which become available in the future. (TGE, 174) That is, one is in general willing to pay more for something which is available now then for the same product which will only be available at some future date. There is then, in short, a difference in value between present and future commodities. “Interest is simply the price expression of this difference” (TGE, 175)

I can already hear the objection coming, “Isn’t this a conflation of price and value? One paying more for something later doesn’t mean it has more value.” Here is an attempt at an answer to this. Obviously, between two different commodities the fact that their prices are different doesn’t mean that one is more valuable than another. But when the two products are the exact same product, the fact that their prices differ becomes somewhat problematic. If 10 pieces of wheat is no longer equal to the same ten pieces of wheat, do we not have an issue?

Marx, in Value, Price, and Profit, says, “Price, taken by itself, is nothing but the monetary expression of value.” Marx continues, “The market price expresses only the average amount of social labour necessary.” But, Marx clarifies that it is only the natural price of a commodity that expresses this value in that “the oscillations of market prices, rising now over, sinking now under the value of natural price, depend upon the fluctuations of supply and demand.” Smith describes the natural price as that which market price is pulled toward… sound familiar? This is a common idea within Marxian price theory, but I digress. Nevertheless, the fact that the price of the very same good, independent of the market, is purchased for more now rather than later then becomes problematic in the fact of this natural and market price division. Value then, becomes temporally changed. As Greenspan says, “For in determining value through duration of labour time [the labour theory of value] fails to take into account the effects of when this labour takes place.” Even in the first volume of Capital, Marx speaks of value and how, only after it “undergo[es] a series of metamorphoses,” “can ripen into the price form.”

That the exact same commodity is quantitatively different at the level of the price form (the monetary expression of value), independent of market forces, is highly problematic for Marx’s labor theory of value.

Ultimately, if Marx’s labor theory of value (hereinafter referred to as LTV) has no affect on prices then it has no affect on the economy. Extricated from any of its sociological implications, as capitalism is fundamentally a destruction of the social as we conceive it, the LTV seems to have no implications if it doesn’t affect the prices of goods sold. Ultimately, there is no reason why one couldn’t set the price of a good to whatever they want, therefore displacing any tendency of the rate of profit to fall. The rate of profit is, for Marx as he explains in the third volume of Capital, (the rate of surplus value/total capital), or “the ratio of the surplus-value s to the total capital C, or s/C is called the rate of profit, p’.” This is all to say “p’ = s/C.” The Marxian argument is that constant capital cannot lead to surplus value because it is essentially dead labor. But, obviously, this is not true. Boehm-Bawerk demonstrates the contrary with his theory of roundabout production. Surplus value very simply is equal to price (total revenue) minus cost (total capital) spent. In this sense, surplus value and profit become indifferentiable. In this sense, the profit accrued by the first commodity is higher than the second, therefore equating out to it having more surplus value? What Greenspan, following Boehm-Bawerk, points out here is a very important seeming contradiction in Marx.

Then again, this may be a misunderstanding on my part. If so, comment or contact me if you have already before.