The Thought of Karl Marx

7/26/2019 The Thought of Karl Marx

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The Thought of Karl Marx

Part One

Today I launch what will undoubtedly be a many part tutorial on the thought of Karl

Marx. Since there may only be a handful of folks out there who actually want to read such a

tutorial, I will intersperse these segments on my blog with my usual commentary on the passing

scene. If anyone wishes to take this tutorial really seriously and supplement it with readings, let

me begin with a few suggestions. The most important thing, of course, is to read Marx himself.

The essential texts are The Economic!hilosophic Manuscripts of "#$$, The %ommunist

Manifesto, and &olume 'ne of %(!IT(). (mong the early works, !art 'ne of T*E +EM(-

IE')'+/ is also useful. Serious students will want to read all of %(!IT() the three

0olumes, plus the socalled 1fourth 0olume1 the three 0olumes of T*E'IES '2 S3!)3S

&()3E but as that comes to fi0e thousand pages of discussion of economics, I will understand

if you gi0e it a pass.This will be a tutorial on the thought of Karl Marx, not on Marxism, as it has come to be

called. There will be no discussion of )enin, Stalin, Mao, Max Schachtman, osa )uxembourg,

the 2irst, Second, Third, or 2ourth Internationals, or e0en of the Sunnyside !rogressi0e School,

which I attended until age six. If there is anyone for whom this multipart tutorial is not enough

4olff, there are always my two books on Marx5 3-EST(-I-+ M(6 and

M'-E/7(+S M3ST 7E S' )3%K/. Some years ago, 8errold Siegel, a !rofessor at

!rinceton, published a magnificent biography of Marx called M(69S 2(TE. I recommend it

most warmly.So, enough throat clearing. )et us begin.Marx was born in "#"#, in a small town near what is now the border of )uxembourg.

(lthough he came from a long line of rabbis, his father had made a pro forma con0ersion to

%hristianity so that he could pursue his career as a lawyer. Marx was a brilliant student, and his


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parents had great hopes for him, perhaps as a professor. (t se0enteen he went off to uni0ersity,

studying first at 7onn :if my memory ser0es me I am doing this from memory, rather than

spending time checking things in books; and then at 7erlin. *e earned a doctorate in philosophy

with a dissertation on the ancient +reek atomists. I ha0e actually read Marx9s doctoral

dissertation, and you can trust me that it is not the 0ery first thing by Marx you would want to

read. Its significance for his later de0elopment is that it dealt with philosophers who espoused

materialism, not as was then the philosophical rage in +erman speaking Europe idealism.To understand Marx9s life and thought, it is essential to call to mind, at least in its broad

outlines, what was happening in Europe when Marx was growing up. There were two great

uphea0als underway, both of which had a profound effect on Marx, and, indeed, on e0ery other

important thinker of that time. The first was the political uphea0al triggered in the late

eighteenth century by the o0erthrow of the ancien regime in 2rance, and then by the series of

military and political re0olutions that were carried across %entral and Southern Europe by

-apoleon9s armies.It is difficult for us, at this remo0e, to appreciate


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installed, the lesson of those three glorious days was that direct action in the streets by the

common people could ha0e dramatic re0olutionary effects.(ll of this must be kept in mind when one reads T*E %'MM3-IST M(-I2EST',

written by Marx in "#$# shortly before another round of political uphea0als. The optimism

Marx exhibits in that early work is a direct conse=uence of the lessons of the pre0ious sixty

years. If the 'ld egime in 2rance could be toppled, if the *apsburg Empire could be shattered,

if street riots could bring down kings, how unreasonable was it to suppose that dedicated

communists could bring into existence the next stage of historyAThe second great uphea0al was less dramatic, but Marx e0entually concluded that it was

much more important, and indeed was the cause of the political transformations I refer, of

course, to the explosi0e rise and expansion of capitalism. 3nlike the political re0olutions, this

transformation matured first in England. E0en 2rance, whose highly de0eloped and rationali>ed

economy was still largely agricultural, did not experience the capitalist transformation as early as

did England, and in the part of Europe in which Marx was growing up, the economy was still for

the most part in a late feudal stage of de0elopment.Marx de0oted his life to analy>ing capitalism, and we shall ha0e a great deal to say, later

on, about his insights and conclusions. In these opening remarks, I want to deal, as it were, with

surfaces, appearances, rather than with the underlying structure of the economy. There were four

or fi0e ways in which capitalism thrust itself into the consciousness of social obser0ers both in

England and, somewhat later, on the continent. 2irst of all, there was an explosion of output.

+oods were spewed from the new factories in astonishing =uantities. In his great work, T*E

%'-ITI'- '2 T*E 4'KI-+%)(SS I- E-+)(- I- "#$$, 2riedrich Engels, Marx9s

lifelong collaborator and friend, describes the shop windows filled with goods, like a great

cornucopia o0erflowing with the bounties of industry. Marx chooses to begin the 0ery first

paragraph of %(!IT() by saying, 1The wealth of those societies in which the capitalist mode of


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production pre0ails, presents itself as 9an immense accumulation of commodities.91 :*e is

=uoting himself here from an earlier work.; This sudden expansion of the scope of output

worked profound changes in English, and later in continental, society.

The second striking conse=uence of the ad0ent of capitalism was the phenomenon of the

1new men,1 factory owners who had begun life in modest circumstances as apprentices or

ed great estates and catapulted themsel0es into the ranks of the

nobles, but the newly wealthy capitalists were not buccaneers, aggrandi>ing themsel0es at the

point of a sword. Indeed, it really was not clear how they were able to become so rich so fast.The third great change in English society was the transformation of cities. *uge slums

sprouted up, inhabited by landless, propertyless people whose sole source of food and shelter

was day labor in the new factories. Many of these were former peasants, dri0en off the land by

country s=uires who enclosed their land and turned it into sheep pastures to feed the new cloth

factories9 demand for wool.The fourth great change was the erosion of the traditional authority and position of the

landed aristocracy and the clergy. This is a complex story going back to the late Middle (ges,

and it would take too long e0en to sketch here. Suffice it to say that capitalism truly was, as

Marx was among the first to obser0e, the most re0olutionary force e0er let loose upon society.2inally, it is worth mentioning that among the byproducts of the explosi0e growth of

capitalism was the emergence, in the late eighteenth and early nineteenth centuries, of a large,

literate class of businessmen, merchants, and their families, who became not only a market for


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the no0el, as literary historians ha0e noted, but also a powerful class demanding a real 0oice in

the affairs of go0ernment, and prepared to call into =uestion the traditional authority of king,

noble, and cleric.

(ll of this was taking place as the young Karl Marx went off to uni0ersity in "#?B.

Tomorrow, we shall ha0e to talk about what he found when he got there.

Part Two(s one might expect, the young Marx was powerfully shaped by the intellectual climate

of the +erman uni0ersity world in which he found himself. The leading influence was the

+erman idealist philosopher +eorg *egel. E0en though *egel had died in 9?", four years before

Marx first went off to uni0ersity, his thought remained the framework within which e0eryone,

acolyte and critic, functioned. *egel had been a deeply conser0ati0e political thinker, 0iewing

the !russian state as the high point and fulfillment of the onward march of eason in *istory, but

there was a rebel group of young men who featured themsel0es )eft *egelians, and Marx 0ery

=uickly became an important part of that informal circle. The intellectual world was in as much

of a ferment as the political and economic spheres. In "#?B, a0id Strauss published his )I2E

'2 8ES3S, which created a storm of protest and contro0ersy. 4hat Strauss did was to bring to

bear on the +ospels the new techni=ues of textual interpretation and historiography then being

de0eloped by +erman scholars, concluding that the accounts of the miracles were mythological

and could not be treated as reports of genuine e0ents. Six years later, as Marx was completing

his doctoral dissertation, )udwig 2euerbach stunned the philosophical and theological world

with his ESSE-%E '2 %*ISTI(-IT/, in which he argued that the standard %hristian account

of Man as ha0ing been created in the image of +od was exactly backwards. Man, he said, had

created +od in his own image, taking the best characteristics of human beings their power of

reason, their capacity for bene0olence, etc. and, by raising these human characteristics to the


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highest concei0able le0el, had forged a conception of an omniscient, omnipotent, bene0olent

deity.This was heady stuff, and Marx was not alone in thinking that the world of ideas was

undergoing a re0olution =uite as dramatic as that taking place in the palaces of go0ernment and

the cathedrals of religion.2aithful readers of this blog will know that I do not like *egel9s philosophy, but there is

no denying its profound influence on e0ery branch of intellectual acti0ity in the nineteenth

century. Marx took o0er from *egel the structure or framework within which he conceptuali>ed

the stages of economic de0elopment indeed e0en the 0ery notion of stages of de0elopment

came from *egel. In order to lay the groundwork for my later exposition of what Marx and

Engels e0entually named *istorical Materialism, therefore, I must spend some time

summari>ing, or sketching the outlines, of *egel9s rather powerful idea. :/esterday e0ening I

watched achel Maddow inter0iewing a epublican operati0e, and the generosity and good

spirit with which she treated this man, with whom, as she obser0ed, she had 0irtually no

agreement on any matter of politics, set an example for me. So I shall acknowledge *egel9s

importance, and the originality and usefulness of his ideas, for all that I do not like him. (s they

say in the selfhelp world, I am trying to be a better person. 5C ;4hat *egel did, if I can put it this way, was to immanenti>e and seculari>e the %hristian

story. The %hristian story, in its outlines, recounts the succession of metaphysical or theological

stages through which human beings mo0e on their way from the beginning to the end of history.

*istory begins with the %reation, which includes the creation of Man in the +arden of Eden.

The second stage begins with The 2all, which results in mortality and the expulsion from Eden.

The third stage commences with +od9s compact with (braham, repeated and deepened by the

renewal of the compact :or Testament; with -oah and Moses. +od gi0es to Man *is )aw, in the

form of the Ten %ommandments and their elaboration, and promises that if Man will keep this


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)aw, +od will make him to multiply and flourish. The entire period of the 'ld Testament is the

period of The )aw. 7ut man repeatedly shows that he cannot keep +od9s )aw, which, since it is

eternal and di0ine law, must be obeyed to the last


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in which these stages could possibly occur. -or is it possible to skip a stage :begin to sound

familiarA;*egel took this story and translated it into a story about the unfolding in history of +eist

or Spirit. Each of the stages of human history, in his account, was defined by the degree to

which reason had unfolded itself and embodied itself in thought and society. (nd each stage of

human history could be understood as the unfolding throughout a society of this stage of

eason9s coming to know itself. :I ha0e no idea what that means, so let us mo0e on.; Thus, an

entire society could be seen as the expression, or embodiment, of a unified Idea the %lassical

era, the Medie0al era, the 7aro=ue era, the omantic era. *egel taught us to see the painting,

architecture, sculpture, politics, e0en the styles of personality, as expressions of the same style or

form or Idea. Thus, when 8acob 7urckhardt wrote, in his classic work, T*E %I&I)I(TI'- '2

T*E E-(ISS(-%E I- IT()/, of 1the enaissance man1 whose indi0iduality extended e0en

to his designing his own distincti0e mode of dress, he was drawing on an idea that had originated

in %hristian eschatology and had been seculari>ed and generali>ed by *egel.&ery early in his intellectual de0elopment, the young Marx had the brilliant, though

rather simpleminded, idea of in0erting *egel9s story :in0ersion is another of *egel9s fa0orite

categories;. Instead of construing the material elements of human life the wresting of a li0ing

from nature as reflections of, or embodiments of, one stage in the unfolding of the Idea, Marx

undertook to construe the art, law, politics, and religion of each stage of social e0olution as

reflections of the way in which human beings get their food, clothing, and shelter. This is the

sense in which Marx considered himself a Materialist rather than an Idealist. Marx retained

*egel9s secular %hristian notion of stages of history, and he kept too the notion that the

succession of stages was necessitated, not random.(t first, when Marx really knew 0ery little about the actual de0elopment and functioning

of a capitalist economy, he sei>ed on (dam Smith9s seminal idea of the i0ision of )abor and


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with a great rhetorical and logical flourish made that the key to the succession of stages of

history. The nice thing about di0ision of labor is that if one does not think too deeply about it, it

seems to be a unidimensional measure with natural endpoints. 'ne starts with a society in which

there is no di0ision of labor. E0eryone simply gets a li0ing from nature as best as he or she can.

This stage Marx calls !rimiti0e %ommunism. 4ith each ma


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*egelians, led by the 7auer brothers, 7runo and Edger. Marx thought they were pompous

airheads, and he and Engels excoriated them in their 0ery early work, T*E *')/ 2(MI)/,

written in "#$$ when Marx was twentysix.

7ut be that as it may, Marx built *egel9s notion of stages of social de0elopment into the

theory of economic de0elopment that he called *istorical Materialism. 4e shall ha0e a good

deal to say about it a bit later on.-ext part5 The Economic!hilosophic Manuscripts of "#$$.

Part ThreeMarx became in0ol0ed in the founding and editing of a new


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paragraphs that Marx inscribed in this column ha0e come to be referred to as 1(lienated )abor,1

and they constitute the fullest and most carefully thought out discussion of this topic that Marx

e0er wrote.

I ha0e a good deal to say about Marx9s theory of alienated labor, but before I begin, I

want to take


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uring the Second 4orld 4ar, the /ugosla0 partisans, led by Marshal Tito, succeeded in

dri0ing the +ermans out of their lands without the help of the ed (rmy, with the result that in

the postwar period, the newly formed /ugosla0ia was able to maintain a =uasiindependence. (

number of /ugosla0 philosophers and political theorists were eager to find some way of

embracing Marx9s theories without toeing the Stalinist line. %asting about for writings by Marx

on which they could erect an independent, humanist Marxism, they came upon the !aris

Manuscripts, which had first been published in ussia in the F@s, but had then been all but

ignored by the Stalinist theoreticians. In the writings of the /oung Marx, they heard a 0oice that

called to them and inspired them. To


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exercising great skill with chisel and mallet, with can0as and brush, or with pen, the artist makes

the idea real, externali>es it, embodies it in some medium, thereby producing the work of art.This selfexternali>ation :or selbstentausserung it always sounds better in +erman;

may be achie0ed with great effort, lea0ing the artist exhausted, spent, drenched in sweat. 'r it

may be accomplished with blinding speed and seemingly little or no effort at all. 7ut in either

case, the completion of the act is, for the artist, a moment of triumph and fulfillment. The Idea

has truly been made 2lesh. The labor is a fulfilling labor, the fatigue a good fatigue. There it

stands, on the page, or on the can0as, or on the podium what had begun as an idea in the

artist9s mind is reali>ed, made real, before him or her. (nd the work of art is now a0ailable to all

of us to see, to hear, to read, to experience and en


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make an other, an enemy, something that stands o0er against oneself :gegenstand;. 7ut to

alienate also means to sell, to transfer title from one owner to another. In this sense, the word is

routinely used in the law. 7y alienating the work of art, by selling it, the artist becomes alienated

from it. The work of art becomes not simply other than him or herself, but perhaps e0en

inimical, hurtful, an enemy.:May I be permitted a brief moment of narcissistic selfabsorptionA 4hen I am writing

indeed, as I ha0e been writing these paragraphs this morning I feel fully ali0e. My stubby

fingers fly o0er the keys, hitting wrong letters now and again but charged ne0ertheless with an

energy that I feel at no other time in my life. The words come as fast as I can get them onto the

screen, and I know, with utter certainty, that what I am saying is right. I ne0er re0ise, and I ne0er

show what I ha0e written to another person before externali>ing it, publishing it, either in print or

in cyberspace. 'nce I ha0e published a book, I am finished with it. I mo0e on, perhaps I write

another book. 7ut what I ha0e published now exists independently of me, and I cannot control

how it is construed, or the uses to which it is put, by persons I ha0e ne0er e0en met. -ow, I

know all too well that these sub


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animals, li0e by purposefully transforming nature in accordance with ideas in their minds, so as

to make it into goods that can satisfy their needs. :Marx did not know about tool use in animals,

but that really does not matter here.; They too first form an idea in mind of a stone shaped to

be a tool, of a field of grain, of a stick bent to form a bow and then externali>e it, embodying

the idea in an obation, of production, is labor.

Marx here sets himself against a long tradition in 4estern thought, going all the way back

to the 7ook of +enesis, that sees labor as an e0il, a painful necessity, a curse laid upon us by +od

for our disobedience. ecall the words of +E-ESIS, %hapter ?, 0erses "G"H513nto the woman he said, I will greatly multiply thy sorrow and thy conceptionD in sorrow thou

shalt bring forth childrenD and thy desire :shall be; to thy husband, and he shall rule o0er thee.(nd unto (dam he said, 7ecause thou hast hearkened unto the 0oice of thy wife, and hast eaten of

the tree, of which I commanded thee, saying, Thou shalt not eat of it5 cursed :is; the ground for

thy sakeD in sorrow shalt thou eat :of; it all the days of thy lifeDThorns also and thistles shall it bring forth to theeD and thou shalt eat the herb of the fieldDIn the sweat of thy face shalt thou eat bread, till thou return unto the groundD for out of it wast

thou taken5 for dust thou :art;, and unto dust shalt thou return.1

So it is that man must labor painfully for his bread, as a curse for his disobedience. (nd so it is

that woman9s bearing of children is called labor, for it too is painful, and a curse laid upon her

for her disobedience.

4ell, enough for today. I shall continue with this after I ha0e prepared my lecture for

4ednesday.
http://www.kingjamesbibleonline.org/Genesis-3-16/http://www.kingjamesbibleonline.org/Genesis-3-16/http://www.kingjamesbibleonline.org/Genesis-3-17/http://www.kingjamesbibleonline.org/Genesis-3-17/http://www.kingjamesbibleonline.org/Genesis-3-17/http://www.kingjamesbibleonline.org/Genesis-3-18/http://www.kingjamesbibleonline.org/Genesis-3-19/http://www.kingjamesbibleonline.org/Genesis-3-19/http://www.kingjamesbibleonline.org/Genesis-3-17/http://www.kingjamesbibleonline.org/Genesis-3-17/http://www.kingjamesbibleonline.org/Genesis-3-17/http://www.kingjamesbibleonline.org/Genesis-3-18/http://www.kingjamesbibleonline.org/Genesis-3-19/http://www.kingjamesbibleonline.org/Genesis-3-19/http://www.kingjamesbibleonline.org/Genesis-3-16/http://www.kingjamesbibleonline.org/Genesis-3-16/


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Part FourIn the essay on estranged, or alienated, labor can be found some of the most powerful

lines Marx e0er penned. I will not try to summari>e the entire essay. My summary would too

long, and ine0itably would be like a prose summary of a poem ne0er a good idea. !lease read

it for yourself if you ha0e not already done so. The central idea is captured in this phrase from

the 0ery beginning of the essay5 1the ob>ling aspects of the new capitalism, namely the fact that as capital becomes e0er more

producti0e, spewing out goods in enormous =uantities, the workers who produce those goods

remain impo0erished and e0er more powerless. %apital the factories, machines, farms, mines,

and also the techni=ues embodied in the machines is, after all, brought into existence by the

effort, the labor, of the workers. *ow can it be that they become more and more ensla0ed by

what they themsel0es ha0e producedA It had not always been this way. In pre0ious stages of

human history, an especially good har0est, a boom year, resulted in better times for all, if only

momentarily. 4hile the rich remained rich, the poor en


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workers who are, or ought to be, colleagues and comrades in a collecti0e undertaking. Since


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still on the continent, he and Engels published the most famous political tract e0er written5 T*E

%'MM3-IST M(-I2EST'. I am going to assume that e0eryone reading this tutorial has read,

or will now immediately read, the M(-I2EST'. )ike !lato9s E!37)I% and 4( (-

!E(%E, it is one of those documents familiarity with which is the mark of literacy. In the

M(-I2EST', we see Marx beginning to de0elop the theories of economic de0elopment that we

know as *istorical Materialism. The economic theory is still rudimentary, but the theory of

stages of de0elopment, and the crucial thesis that the law, politics, culture, and philosophy of an

age are a reflection of the way in which the economic acti0ities of the society are organi>ed, is

beginning to be worked out.The M(-I2EST', in its ebullient, aggressi0e optimism, is 0ery much the statement of

young men. 1( spectre is haunting Europe the spectre of %ommunism,1 it begins ominously.

Immediately, the authors announce the central thesis of their doctrine5 1the history of all hitherto

existing society is the history of class struggles.1 (nd off they go. In my opening remarks to

this tutorial, I tried to sketch the political situation in Europe when Marx and Engels were young,

as a way of explaining why they were so optimistic about the nearterm prospects for a

communist re0olution. They were not, after all, deluding themsel0es. In "#$#, the year the

M(-I2EST' appeared, Europe exploded into workers9 uprisings, most prominently in !aris

itself. 4e know, with the benefit of a century and a half of hindsight, that the hopes of Marx and

other re0olutionaries were doomed to be dashed, but it cannot ha0e looked like that to them at

the time.The failure of the "#$# uprisings had an interesting theoretical effect on Marx, I belie0e.

I obser0ed earlier that there was indeed a break between the young Marx and the mature Marx.

It concerns the theoretically 0ery significant issue of mystification. 'riginally, Marx took the

typical enlightenment position that in the Middle (ges, the real roots of clerical and monarchical


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power were mystified by religious superstition and the fiction of the di0ine right of kings, but

that under capitalism, the clouds of mystery had been blown away by the cool bree>es of reason,

so that it was immediately apparent to nineteenth century Europeans that the power of church,

state, and capital rested upon force alone. 7ut the failure of the re0olutions seems to ha0e

persuaded Marx that %apital9s power was itself mystified, by the doctrines of laisserfaire and

free trade, so that it was not at all easy to understand how the e0ergreater producti0ity of

industrial capital ser0ed to strengthen its ability to defeat all challenges. 7y contrast, feudalism

was relati0ely transparent. It was ob0ious e0en to the peasants themsel0es that the wealth of

their feudal masters came from the days of labor ser0ice that they were forced to pro0ide on the

lord9s lands.There is a great deal more to be said about Marx9s writings in the period leading up to the

production of %(!IT(). My English translation of the %omplete 4orks of Marx and Engels

runs to twenty thick 0olumes 7E2'E the publication of &olume 'ne of %(!IT(), for

hea0en9s sake 7ut the economic theory is the heart of his entire life9s work, and there are limits

to how many blog posts I can get all of you to read, so I am going to stop here, and tomorrow

begin my discussion of Marx9s mature economic theory.

Part Five4e come now to the heart of this tutorial, Marx9s economic theories. It is worth noting

that the subtitle of %(!IT() is 1( %riti=ue of !olitical Economy.1 Marx9s work is as much a

criti=ue of pre0ious economic theories as it is an analysis of the economic reality of capitalism.

Karl Marx was, at one and the same time, the greatest of the classical political economists,

bringing to completion more than a century of brilliant theori>ing, and also the greatest critic of

classical !olitical Economy, de0astatingly exposing the inner contradictions and inade=uacies of

the classical tradition. In order to understand what he is talking about in %(!IT(), therefore,

we must spend a little time tracing the e0olution of classical !olitical Economy from its origins


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in 2rance in the middle of the eighteenth century to the work of its greatest exponents, (dam

Smith and a0id icardo, against whom and in continuation of whom, Marx wrote.!olitical Economy begins with the effort of Turgot and Juesney to understand the 2rench

economy in the eighteenth century. These two theorists, who, with their fellows, ha0e come to

be referred to as the !hysiocrats, concei0ed agriculture as central to the wealth of 'ld egime

2rance, so much so that they disparaged the producti0e efforts of artisans and craftsmen. Their

great contribution to the field, and to subse=uent theorists, was their recognition that the on

going producti0e economic acti0ities of a nation must be conceptuali>ed as an endless cyclical

process of E!'3%TI'-. The output of the nation at one point in time becomes the input

of the producti0e process at a later point in time, so that there is a cycle of inputs and outputs, a

cycle of reproduction. This season9s har0est pro0ides the seed corn for next season9s planting.

The iron ore dug from the mines this year becomes the sho0els used to dig iron ore next year,

and so on. :This is the origin of the title of !iero Sraffa9s seminal little book, !'3%TI'- '2

%'MM'ITIES 7/ ME(-S '2 %'MM'ITIES.; There are, of course, some goods that are

by their nature not reproducible old master paintings, for example, whose 0alue lies not only in

their beauty but also in their scarcity. Somewhat more importantly, one essential input into

production land is not in general reproducible :although it is of course possible, on the

margins, to carry out landfill operations that increase the a0ailable land, such as the pro


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most of our attention, namely labor, for this generation9s output of the production process :the

children; becomes the next generation9s inputs :the parents;, thus


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iron because that is the way Marx thought about it :as did icardo, by the way;. Sraffa9s

approach is different, although either way is con0ertible to the other easily enough. %all this

System (5

)abor Input %orn Input Iron Input 'utput)abor Sector ?# units "H units "H@ units%orn Sector "@@ units F units "G units ?@@ unitsIron Sector H@ units H units "F units H@ unitsTotal Input "H@ units $H units $ units

( few preliminary obser0ations about System (D". The si>e of the units is not indicated, but since this is supposed to be an annual cycle of

reproduction, presumably they are pretty big :millions of tons of corn, or something like that.;F. There is not the slightest indication of what technology of production is being used.

Important though that ob0iously is, it is irrele0ant for the purposes to which we are going to put

this model. 2ollowing the %lassical !olitical Economists, we assume that there is one and only

one dominant techni=ue used for the production of each good. If some entrepreneur introduces a

new and more efficient techni=ue, the pressure of competition pretty soon forces all the other

entrepreneurs in that line to adopt it, and it becomes the new standard.?. -otice :this is crucially important; that both corn and iron are re=uired as inputs in each line

of production.$. I could make the model somewhat more elaborate, in an effort to do a better


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of production. 2or reasons that will become clear, we shall call the first group of goods 7asic

+oods, and the second group )uxury +oods. In System (, iron and corn are both 7asic +oods.B. This model is deliberately so simple that it e0en ignores fixed capital, which lasts through

more than one cycle of production, and


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designed to persuade those from whom the surplus is taken of the rightness of the appropriation.

The surplus getters suggest that they are bigger, stronger, more handsome, more charismatic,

smarter, more producti0e, blessed by the +ods, sanctified by immemorial tradition, chosen by a

0ote of the people, riding the wa0e of history. (nd for the most part, those from whom the

surplus has been taken the expropriated accept these rationales, sometimes grudgingly, =uite

often willingly or e0en enthusiastically.The surplus comes in many forms. It is extra grain har0ested from the fields, o0er and

abo0e what is needed to keep ali0e those who grow and har0est the grain. It is cloaks and

mantles o0er and abo0e what is needed to shelter from the weather those who shear the sheep,

card and spin the wool, and wea0e the cloth for the cloaks and mantles. Sometimes it takes the

form of swords made from iron that would otherwise pro0ide additional plowshares or in the

form of spears that could better ser0e as pruning hooks. :( little biblical reference there, for

those of a religious turn of mind.;In some societies, the conditions of life of those who get the surplus are only slightly

more comfortable than those from whom the surplus is taken, but in many societies, the

differences are so great that after a while the two groups of people seem not e0en to be of the

same species or from the same world. The producers of the surplus are short, thin, careworn,

illiterate, and short li0ed. The surplus getters are tall, handsome, healthy, cheerful, well

educated, and longli0ed. The surplus producers struggle to keep their children from star0ing to

death. The surplus getters send their children to I0y )eague schools and on to the +rand Tour of

Europe. )ife is good for the surplus gettersD not so good for those who produce the surplus.*ow do the surplus getters get the surplusAIn many ways. Sometimes, like the &ikings of early medie0al Europe, they simply sail

up the ri0ers of 4estern Europe from the coast each 2all and steal the har0est as the peasants

reap it. 'r they ride into town as the bandits of the Southwest did and take the har0est at the


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point of a gun. (t first, this is, and is understood to be, simple theft. 7ut as the bandits return,

year after year, the peasants become accustomed to the raids, and in an effort to a0oid bloodshed,

prepare the har0est for the stealing. This is then called taxes. E0entually, one lone bandit rides

into town, not e0en wearing a gun, to collect the money the peasants ha0e managed to ac=uire by

selling their crops. The state has arri0ed.Sometimes the surplus getters hold the producers in bondage, forcing them to labor on

the lands owned by the surplus getters. Instead of sei>ing the surplus after it has been produced,

they forcibly command the labor of the producers, allowing to the producers only so much of the

annual product as is needed to keep them ali0e and allow them to raise up their replacements

when they wear out their children. This is known as sla0ery. The condition of the sla0es is

often 0ery little different from that of the nominally free producers whose surplus is taken from

them, or appropriated.*ow do the surplus getters get the surplus in a capitalist society. in which all men are free

:we pass o0er in silence for the moment the condition of women;, and all exchanges in the

marketplace 0oluntary and based on mutual selfinterestA That there are surplus getters e0en in

this 10ery Eden of the innate rights of man1 :%(!IT(), last page of %hapter &I; is manifest, for

cheek by


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on. The landed aristocrats, by contrast, used their share of the surplus :which came to them in

the form of rents; to employ crowds of li0eried ser0ants, gi0e la0ish balls, maintain gilded

carriages, consuming the surplus unproducti0ely. Smith in particular was worried that as the

demand for grain pressed on the a0ailable land and rents rose, so much of the annual surplus

would be transferred to these unproducti0e expenditures that growth would come to a halt and

the dreaded 1stationary state1 would result. It is worth noting that the notion of class conflict

was central to classical political economy, and was not in any way original with Marx.( share of the social surplus in most societies is consumed buttressing, protecting, and

rationali>ing the pri0ileged position of the surplus getters. Some of that share is used to support

a substantial military and police force which is a0ailable to put down any dangerous protests

from those who are being denied the fruits of their producti0e labors. Some supports priests and

churches, in which the 0irtues of submission and the promise of plenty in the next life ser0e to

dull the resentment of the expropriated producers. Some must be de0oted to maintaining lawyers

and


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concentrate here on one =uestion among all those that ha0e been raised or intimated, namely,

*ow in a capitalist economy does it come about that entrepreneurs exit from the market e0er

richerA Exactly how is it that in a capitalist economy the annual surplus is appropriated by one

class, the entrepreneurs, or capitalistsATo answer this =uestion, Marx must wrestle with and finally sol0e a technical pu>>le

concerning the determinants of the prices of commodities in the marketplace that had baffled

Smith and in the end stumped icardo.In the next post, we shall begin our discussion of this famous pu>>le, leading finally to

Marx9s 0ersion of that centerpiece of %lassical !olitical Economy, the )abor Theory of &alue.

Part Seven

The theoretically most interesting and problematic of the doctrines of the %lassical

!olitical Economists is their explanation of how prices are determined in a laisserfaire capitalist

economy. 4hy, you may wonder, is that so important a =uestionA 4ell you may ask. I myself

asked that same =uestion of 8ohn Eatwell :currently 7aron Eatwell and !resident of Jueen9s

%ollege, %ambridge;, when as a young man in his thirties he taught a brilliant graduate course on

&alue Theory in the 3Mass Economics epartment in the semester when I was first ac=uainting

myself with economic theory. *e was rather startled by the =uestion, not anticipating that a total

naif would be sitting in on his 0ery ad0anced seminar, but the answer is =uite simple. The two

great =uestions of %lassical !olitical Economy are, 2irst, how is the annual social product :the

1wealth of nations,1 in Smith9s words; di0ided up among the three classes of society the landed

aristocracy, the entrepreneurs, and the laboring classA and Second, what are the conditions of

sustained economic growthA +rowth and distribution are the alpha and omega of the classical

school. It is what makes their theories, otherwise so out of date, interesting today. -ow, in a

laisserfaire money economy, the social product is apportioned to each class by the

intermediation of money. Each class recei0es a share of the social product in the form of the


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money that it manages to lay its hands on. The landed aristocracy is paid a price for the use of its

land we call it rent. The entrepreneurial class is paid a price for the use of its capital we call

it profit. (nd the laboring class is paid a price for its laboring :or, as Marx will say, for the use of

its )abor !ower but that gets ahead of our story.; we call it wages. These prices rents,

profits, and wages determine the distribution of the annual social product. The same processes

of competition that determine the prices of corn and iron, cloth and coal, eggs and cattle fodder

also determine rents, profits, and wages.%onfronted with this =uestion, (dam Smith makes a series of brilliant conceptual mo0es

that 0irtually define the discipline of economics e0er after. :(side5 I ha0e


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nature, go0erned, as is physical nature, by uni0ersal laws. Instead of gra0itation as the key to

these laws, Smith offers the uni0ersal tendency of men to 1truck and bargain1 in the marketplace.

:See a0id *ume9s TE(TISE '2 *3M(- -(T3E for a similar conceptual mo0e in

*ume9s case, the principle of the association of ideas. *ume and Smith, of course, were good

friends.;4e obser0e, Smith says, that in any gi0en neighborhood or marketplace, there is a

customary or usual price at which goods sell, and also a customary or usual wage paid to

laborers, rent paid to land owners, and profit earned by entrepreneurs. These customary or usual

prices may, of course, 0ary on a particular day as a conse=uence of momentary factors, such as a

glut of corn one day or a scarcity of cloth the next. Smith, like icardo and Marx after him, was

=uite aware of what ha0e come to be called the 1laws of supply and demand,1 but he, as did they,

considered these to be ephemera, not underlying determinants of the system of society. To those

customary prices Smith gi0es the name 1natural prices,1 calling the momentary fluctuations

1market prices.1 The natural prices act, he says, like centers of gra0ity, drawing the fluctuating

market prices to them :you see the influence of -ewton.; 2rom that day forward, one of the

central tasks of Economics became the disco0ery of the determinants of natural price. Those of

you who ha0e studied economics will be familiar with the notion of natural price under its

modern label, e=uilibrium price.4hat then determines the natural price of a good in the marketA Smith is actually rather

confused about this =uestion, and offers three answers without seeming to understand that they

are different from, and in fact incompatible with, one another. 'ne source of his confusion is his

belief, which icardo shared, that in order to understand what happens when the relati0e prices

:exchange ratios; of two goods change, one needs to find in the circle of exchanging goods one

whose natural price ne0er changes, so that any change can be traced to some alteration in the


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conditions under which the other good is produced. (ll of this is fascinating, but much too

complex to go into here. :'nce again, see my book.;4hat matters is that Smith ad0ances a seminal idea, on which all subse=uent %lassical

!olitical Economy rests. The natural price of a good, Smith proposes, is determined by the

amount of labor that is re=uired to produce it.-ow, a small but important terminological matter. In the eighteenth and early nineteenth

centuries, the term 10alue1 was used interchangeably with 1natural price.1 The 0alue in

exchange, or exchange 0alue, of a good in the market was called either its natural price or its

0alue. Thus, when Smith ad0anced the hypothesis that the natural price of a good is determined

by the =uantity of labor needed to produce it, he was offering a )abor Theory of -atural !rice,

or, what was to him the same thing, a )abor Theory of &alue. That,


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land;, but in the real world, all economic acti0ity relies upon both 1the accumulation of stock1

and the 1appropriation of land.18ust so we are clear, let me spell out the problem, e0en at the risk of being a trifle tedious.

Suppose the deer hunters use bows and arrows to hunt the deer, while the bea0er hunters use

bea0er traps to catch the bea0er. :7ows and arrows and bea0er traps are 1stock.1; -ow, it takes

labor to make a bow and arrows and also to make a bea0er trap. %learly, in deciding in what

ratios they will exchange the deer for the bea0ers, both groups of hunters need to take into

account that labor as well as the actual labor of hunting or checking the traps. It might be, for

example, that bea0er traps take only a few moments to make, but really can be used only once

:the bea0ers wreck them trying to escape;, whereas bows and arrows take many days to make,

but can be reused for years. In some way or other, this indirectly re=uired labor will ha0e to be

taken account of if the two groups of hunters are to succeed in making rational decisions when

they enter into bargaining with one another.Smith pretty much ga0e up on this problem, and there things stood for fortyone years.

Enter a0id icardo, arguably one of the three or four greatest economists of all time. The

solution to the problem, icardo proposed, is to think of the stock the tools, raw materials, etc.

used in the process of production as though they had embodied in them the labor that had been

expended at an earlier time in making them or gathering them. 4hen workers use those tools

and machines as they work up the raw materials into the finished products ready to be sold in the

marketplace, we can think of them as transferring that embodied labor, along with their own

labor, to the finished product. Thus, the natural price, or 0alue, of the end product is really

determined by the sum of the labor directly re=uired in the production process and by the labor

indirectly re=uired in earlier periods of production. The sum of embodied labor and direct

labor is the true determinant of natural price or 0alue. This in a nutshell is icardo9s 0ersion of


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the )abor Theory of &alue, and it is, as we shall see, a dramatic ad0ance on Smith9s hypothesis,

e0en though it is still not =uite right.(t this point, I am going to stop, because in the next !art, I must incorporate some little

systems of e=uations into the text, and despite the helpful suggestions of a number of you, I ha0e

not =uite figured out how to do that. (lso, I must lecture this afternoon to my graduate seminar,

and I think I ought at least to make a show of preparing for my lecture. See you all tomorrow, if

I succeed in sorting out the technical details of incorporating e=uations into the text.

Part Eight [part one]4e are now ready to engage with icardo9s 0ersion of the )abor Theory of -atural !rice

:or &alue;, to see what it means, and to ascertain whether it is correct. 2or a 0ariety of reasons, it

is useful to change my original cornLiron model a bit by assuming that the surplus getters

:capitalists, in this case; use a portion of the physical surplus to underwrite a sector de0oted to

the production of luxury goods. Technically, these are goods that re=uire inputs of 0arious sorts,

but whose output is not re=uired as input into either the corn or the iron sector. They are, in

modern terminology, final goods. 4e could, of course, posit a sector de0oted to the production

of luxurious clothing or sporty cars or gourmet breakfast foods, but since we are explicating

icardo, and therefore presumably analy>ing the doings of stern, upright, seriously religious

!rotestant businessmen, I shall assume that the luxury good to which they choose to de0ote a

portion of their surplus is theology books. 7y the way, some of you may be wondering why

%orn 2lakes and fro>en Macaroni and %heese dinners do not count as luxury goods, e0en though

they, like theology books, are not used as inputs into any line of production, and thus are also

final goods. The answer and it turns out to be super important, theoretically is that %orn

2lakes and fro>en Macaroni and %heese dinners are wage goods i.e., things consumed by the

labor producing sector, which is to say by the workers. Thus they do enter indirectly into the

production of all the other sectors, because labor does. 4ay down the road, this is going to allow


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me to in0oke a nifty theorem pro0ed by 8ohn 0on -eumann to demonstrate exactly when Marx9s

sophisticated 0ersion of the )abor Theory of &alue is true. I say this now


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each unit of corn re=uires onethird of a unit of labor directly. 7ut each unit of corn also re=uires

"L"B@ of a unit of corn, as seed presumably :I get this number by di0iding the left hand side of

the %orn Sector line through by ?@@, to find out what are called the 1unit input re=uirements1 of

the %orn Sector.; -ow, we ha0e


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with gi0es us a great deal of information about the production of corn, iron, and theology books,

but there are three =uantities that it does not directly tell us about. namely, the )abor &alues of

corn, iron, and theology books. These are, as they say in elementary algebra classes, the

unknowns :or, as onald umsfeld would say, the known unknowns.; So, I am going to choose

three symbols to stand for these unknowns. )et us let )c stand for the labor 0alue of corn, which

is to say the total amount of labor directly and indirectly re=uired for the production of one unit

of corn. )i will stand for the labor 0alue of iron, and )b for the labor 0alue of books. Three

unknowns, three e=uations pretty easily arri0ed at. 4e can sol0e that baby Tomorrow, I will

show you the e=uations :back to the scanner ugh;, tell you what the solution is :you are going

to ha0e to work out that bit of elementary math yoursel0es;, and mo0e on to the next step in the

process of checking to see whether icardo9s )abor Theory of &alue is true.

Part Nine3sing the 0ariables defined at the end of the last !art, we can now set up a system of

three simultaneous linear e=uations. *ere they are5"@@ N F)c N "G)i N @)b O ?@@)c H@ N H)c N "F)i N @)b O H@)i

F@ N ")c N F)i N F)b O $@)bThe first e=uation says that "@@ units of labor directly applied to F units of corn, in which

is embodied a =uantity of labor two times the labor 0alue of corn, and to "G units of iron, in

which is embodied sixteen times the labor 0alue of iron, yields ?@@ units of corn, in which is

embodied ?@@ times the labor 0alue of corn. (nd so forth. -otice that the 0ariable )b does not

appear in either of the first two e=uations. That means that an increase in the difficulty of

producing theology books :problems with the proofs for the existence of +od, perhaps; will ha0e

no effect whatsoe0er on the labor 0alue of either corn or iron. It also means that we can treat the

first two e=uations as a system of two linear e=uations in two unknowns, and after sol0ing it we

can simply plug the 0alues of )c and )b into the third e=uation to find the 0alue of )b. :(ll of


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this is a mathematical representation of a 0ery important set of facts about the economy, of

course.;So what is the solution to the first two e=uationsA 4ell, if you will carry out the

manipulations yoursel0es, you will find that )c O @.$ and )i O ".F. )b turns out to be e=ual to

@.G.@.$ whatA you may ask. @.$ units of labor is the answer. That is how much direct and indirect

labor ends up being embodied in one unit of corn. If the dimension of labor happens to be

workeryears, and the dimension of corn happens to be metric tons, then the e=uations tell us that

in this system it takes @.$ workeryears of labor, directly and indirectly, to produce one metric

ton of corn. :eal world factual plausibility is not an issue. 4e are doing economics here;4e ha0e now ascertained the labor 0alues of the produced commodities in this system. icardo

says that these labor 0alues determine the natural or e=uilibrium prices at which these

commodities sell in a laisserfaire marketplace. More precisely, he says that commodities

exchange in proportion to their labor 0alues. To find out whether he is right, we must still figure

out what the e=uilibrium prices are, so that we can see whether they are proportional to the labor

0alues.In calculating labor 0alues, we remained in the sphere of production, attending only to the

=uantities of inputs re=uired for specified =uantities of outputs, but now, as Marx would say, we

mo0e into the sphere of circulation. 4e must set up a new system of e=uations that is a bit more

complicated to sol0e :second semester high school algebra;, but before we can set up the

e=uations, we must make a number of simplifying assumptions and beha0ioral assumptions

about the capitalist economy in which all of this is taking place. *ere are some of the things we

must assume. :Marx, as we shall see e0entually, has enormously insightful and important things

to say about the historical, sociological, economic, and psychological conditions under which


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these assumptions are plausible, but I can only talk about one thing at a time, so they will ha0e to

wait for a while.;2irst of all, we must assume that the goods being produced ha0e become standardi>ed, so

that one unit of corn or iron or books is much like another. If the society is still in the stage of

craft production, with hand crafted furniture and artisanal loa0es of bread or wheels of cheese, it

will be impossible to represent the production process by our simple e=uations. The workers too

must be standardi>ed, and stripped of their inherited skills, so that one unit of labor directly

applied is much like another. In the sphere of circulation, we must assume that competition

establishes a single price for each kind of good, a single wage rate for labor, and a single rate of

profit on in0ested capital :rent is not yet an issue.; (ll of these assumptions are hidden behind

the simple price e=uations we shall shortly be setting down. Marx was the first economist

:indeed, the first thinker of any sort; to recogni>e the enormous significance of these

assumptions. Much of the first se0eral chapters of %(!IT() is de0oted to spelling them out and

analy>ing them. )ater on, I shall ha0e a good deal to say about them.To formulate our e=uations, we need some new symbols for the unknowns. :I am limited,

unfortunately, by the fonts a0ailable to me, so this will be clumsier than I would like.; 2irst of

all, we need a 0ariable for each of the prices of the goods produced5 !c for the price of corn, !i

for the price of iron, and !b for the price of books. 4e shall use 4 for the money wage, and

for the rate of profit. :'rdinarily one would use the +reek letter pi, but such is life in

cyberspace.; *ere are the e=uations read off from the same data that yielded the labor 0alue

e=uations5"@@4 N F!c N "G!i N @!bC " N C O ?@@!c H@4 N H!c N "F!i N @!bC " N C O H@!i F@4 N "!c N F!i N F!bC " N C O $@!b


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4hy " N C, you may ask. 7ecause the money that the capitalists get from selling their output

:?@@!c in the case of the corn sector; must be enough to co0er the cost of production :the "; plus

enough to yield the going rate of profit on that cost :the ;. *ence " N C.

This is a system of three e=uations in fi0e unknowns. Mathematicians call such a system

1underdetermined1 :no, that is not what (lthusser means by 1underdetermined,9 but that is

another matter entirely.; 4hat to doA 4ell, the first step is to eliminate one of the price

0ariables. emember that what we are interested in is relati0e prices, which is to say exchange

ratios between different commodities. The classical practice, employed by Smith, icardo, Marx

and all other classical !olitical Economists, is to select one commodity as the money in the

system, gi0e one unit of it the price ", and then express all other prices as multiples of that unit

commodity, or as it is usually called, numeraire. This can be an ounce of gold, a pound of sil0er

:the 7ritish !ound Sterling; or, if one is a Masaai warrior, one cow. In this case, we shall choose

corn as our numeraire, and set the price of one unit of corn e=ual to ". 4hen we plug that

assumption into our e=uations, we get5"@@4 N F N "G!i N @!bC " N C O ?@@ H@4 N H N "F!i N @!bC " N C O H@!i F@4 N " N F!i N F!bC " N C O $@!b

This system is still undetermined, by one degree :as we say;, because there are now three

e=uations and four unknowns. -otice that once again, the first two e=uations can be treated

separately, because the price of books, !b, does not appear in them. They constitute a system of

two e=uations in three unknowns5 !i, 4, and .There are two things we can do. The first is to reduce the e=uations to one by eliminating

the price of iron, so that we get a single e=uation in 4 and . If we do this, we find with some

algebraic manipulations :which I must simply assume you folks can do on your own; that there is

the following in0erse relationship between 4 and 5" N C O GLF4 N "C


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Inspection re0eals that as the wage rises, the profit rate falls, and 0ice 0ersa, which nicely

demonstrates the fundamental %lassical thesis that the interests of the working class and the

capitalist class are diametrically opposed.

7ut we can also try ement, that the 4age and the !rofit ate drop out, and

the two e=uations yield the result !i O ?. This is an extraordinary result. It seems that in this

system, the price of iron :and also the price of books, which turns out to be ".B; is totally

independent of the wage rate and the profit rate. -o matter how those fluctuate in in0erse

relation to one another, the prices remain the same.4ell, icardo said that the prices at which goods exchange their natural prices or

0alues are proportional to the =uantities of labor re=uired directly and indirectly for their

production their labor 0alues. Is he rightA )et us see.The price of corn is " and the labor 0alue is @.$, so the ratio is "L.$ O F.BThe price of iron is ? and the labor 0alue is ".F, so the ratio is ?L".F O F.BThe price of books is ".B and the labor 0alue is @.G so the ratio is ".BL.G O F.B*E/ !EST' I%(' IS I+*T. T( (

(h well, if life were only that easy. Stay tuned. Tomorrow we shall disco0er the secret

of this remarkable result.

Part Ten:The absence of comments on the last two posts suggests that I ha0e finally succeeded in

boring you to death. 7ut I am ha0ing such fun expounding this material, that I am going to press

on, e0en posting twice in one day. !erhaps it is e

o0er.;

I guess you already figured out that I cooked the books to confirm icardo9s hypothesis.

If you want to check up on me,


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e=uations cannot be sol0ed so nicely. It is still true that the wage and the profit rate 0ary

in0ersely that is, as 8ane (usten says, a 1truth uni0ersally acknowledged.1 7ut until you

specify a real wage :so much corn and so much iron per unit of labor; and plug it into the

e=uations, the system will be underdetermined. (nd when you do, the nice neat proportionality

between prices and labor 0alues will not hold true.4hat is happeningA 4hat is it about the little system I created that yields the nice neat

icardoconfirming resultsA 4ell, in the


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the ratio of the labor 0alue to the price of bread. This, for those of you who ha0e e0er wondered,

is what is called 1the transformation problem.1 :7y the way, some of you may in your study of

economics ha0e come across the phrase 1the roundaboutness of production.1 That phrase refers

to the same thing we ha0e been discussing.;-ow the really interesting thing is that icardo knew all about this problem, and spent a

good deal of his life trying unsuccessfully to sol0e it. *e was well aware that in the general case,

prices are not proportional to labor 0alues. 7ut the problem stumped him. It was left to Marx to

think the matter through more deeply and come up with a brilliant solution that is ()M'ST, but

not =uite, satisfactory. It is going to be some days before I get to that part of the story, so hold

the thought.Strictly speaking, we ha0e come to the end of our discussion of icardo, and are ready to

mo0e on to Marx, but there is one more little matter that I should like to discuss, namely rent.

This is not part of Marx9s story, because Marx knew that icardo had sol0ed the problem of rent,

and therefore he did not bother with it. Still, it was a brilliant coup on icardo9s part, and we

ought to be able to spare a few paragraphs to pay tribute to him.The problem, in a nutshell, is this5 Entrepreneurs :which in icardo9s day fre=uently

meant in0estors renting land on which to grow grain or raise sheep; pay rent for the land they use

:to the landed aristocrats, those la>y bums;. That rent is one of their costs of production, as

surely as the wages they pay or the money they shell out for seed and farm machinery. 7ut land

is not a produced commodity, and does not contain embodied labor that is passed along to or

embodied in the commodities produced on it. That being so, it would seem that the )abor

Theory of &alue cannot hold true e0en in the special case of e=ual organic composition of

capital. The theory can only be true if rent is -'T a cost of production. 7ut how can that beA

%ertainly, if you ask an entrepreneur in the wool or corn trade, he will assure you that the rent he

pays is 0ery much a cost of production. 4hy would he pay it otherwiseA


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*ere is icardo9s answer5 In any country, there are many different =ualities of arable

land, many 0ariations in the producti0ity of the land. 'n some land, one need merely throw the

grain at the ground and crops will spring up. 'n other land, some culti0ation is re=uired, on still

other land fertili>er is needed to get a crop, and there is some land so arid and unproducti0e that

one can scarcely grow anything on it at all. -ow, at a gi0en le0el of demand for corn :i.e., grain

recall that 1corn1 is the English name for whate0er is the dominant grain in a region, not for

what we call corn, which the English call mai>e;, entrepreneurs will compete for the best land,

and they will offer rent to its owner, for they know that e0en after paying rent, they can make a

profit on such fertile land. 4hen all the best land has been rented, the remaining entrepreneurs

will bid on the somewhat less fertile land. They will only be willing to pay lower rents, because

they will not be able to compete against the in0estors who ha0e snatched the best land, if they are

forced to pay e=ually high rents. If demand presses on supply, and dri0es up prices in the

market, more entrepreneurs will fan out and offer rents to the owners of e0en less fertile lands.

The landowners are engaged in a parallel competition among themsel0es. The land is utterly

useless to them unless it is rented out, so although they will press for the highest rents they can

get, if push comes to sho0e, they will take whate0er they can get.(t the margin, the least fertile plot of land will rent for 0irtually nothing per acre, for

there is so little demand for it that the last entrepreneur who comes along and offers pennies an

acre will succeed in striking a bargain. emember, if you want to know why a landowner would

rent his land out for so little, the answer is that anything is better than nothing.-ow, come har0est time, all these entrepreneurs who ha0e been raising indistinguishable and

interchangeable corn on lands of 0arying fertilities, on which they are paying 0arying rents, will

bring their crops to the market, and there competition will ensure that e0ery bushel of corn sells

for the same price, E+()ESS '2 *'4 M3%* ' )ITT)E E-T *(S 7EE- !(I


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2' T*E )(- '- 4*I%* IT 4(S +'4-. That means that the corn grown on the least

fertile land will fetch the same price in the market, and among the costs of production of the

capitalist who grew his corn on that land, rent does not appear. Therefore, rent is -'T a cost of

production.73T I2 E-T IS -'T ( %'ST '2 !'3%TI'-, 4*(T IS ITAThe answer, icardo says, is that rent is a di0ersion into the pockets of the landowners of

a portion of the profit earned by the capitalist class. It is, functionally speaking, identical with

the money that is di0erted today into the pockets of financiers, who drain the profits from

capitalists


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discourse. The classical political economists were children of the Enlightenment, and belie0ed

that when the fog of superstition was blown away, what would remain was a simple, clear

transparent world whose structure could successfully be captured by a plain, nonmetaphorical

prose. To them, the marketplace was a transparent world of rational calculation and exchange.7ut Marx belie0ed that capitalist economy and society is deeply mystified, presenting itself as

transparent when it is in fact opa=ue, as rational when it is in fact irrational, as the end of history

when it is in fact e and explicate it, and yet acknowledge our bondage to it, with full and appropriate

intensity of emotional articulation of each le0el. *is solution, uni=ue among social scientists of

any discipline or persuasion, is a complexly ironic discourse, rich with cultural allusions and

resonant with o0ertones and implications. -o one had e0er written social science like this

before, and no one has since, or perhaps e0er will again.This is not the customary 0iew of Marx9s language, of course. The reaction of the 7ritish,

as exemplified by 8oan obinson, has been to subscribe to what I elsewhere call the childhood

polio 0iew of Marx9s writing style. This is the notion that when he was young, he contracted a

nearly fatal case of *egelism, which nearly destroyed his ability to mo0e gracefully from the

beginning to the end of a sentence. )ong years in England facilitated a partial reco0ery, but the

effects lingered, with the result that he ne0er succeeded in achie0ing the limpid clarity of a a0id

icardo. -e0er mind that this 0iew is offered with respect to the man who wrote T*E

%'MM3-IST M(-I2EST', arguably the most powerful piece of political prose e0er penned.


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4e know for a certainty that the theory is wrong because while Marx was preparing &olume 'ne

of %(!IT() for publication, he wrote, in E-+)IS*, an exposition of his 0iews, published as

the pamphlet &()3E, !I%E, (- !'2IT, which is as transparent a piece of icardian prose

as one could ask for. %learly, Marx chose to write as he did because he belie0ed that only thus

could he communicate his richly complex ironic 0ision of capitalist society and economy. (nd, I

am =uite con0inced, he was correct.:(fter writing these last lines, I reread portions of M'-E/7(+S M3ST 7E S'

)3%K/, to keep some of its phrases and arguments fresh in my mind. That little book, I belie0e,

is, sentence for sentence and page for page, the best thing I ha0e e0er written, although it has

languished for years now, ha0ing, in a0id *ume9s poignant phrase, fallen 1stillborn from the

presses.1 I cannot reproduce it here, though I should like to, but perhaps some of you will be

mo0ed to take a look at it.;In the opening pages of %(!IT(), Marx begins his analysis of the mystifications of

capitalism, but I am going to postpone my discussion of this aspect of Marx9s theory because it

would interrupt the story I ha0e been telling about the )abor Theory of &alue. I shall ha0e to

return to this theme of mystification, howe0er, because it is impossible to understand the full

complexity of Marx9s economic theory without it.ecall the point at which we had arri0ed when we concluded our look at icardo.

icardo sol0ed Smith9s problem of the 1accumulation of stock1 by re0ising the )abor Theory of

&alue to take account of labor indirectly re=uired for production or as icardo puts it,

1embodied labor.1 This embodied labor is thought of as residing in the capital inputs and being

transferred, but by bit, to the output in the process of production. :Marx will ha0e a wonderful

time both ridiculing and embracing this bi>arre notion of bits of labor being passed from the

spindle to the wool as the wool is spun into thread. *e calls the notion absurd, crackbrained,

10erruckt,1 and yet, despite that fact, correct. 4e shall ha0e to see later on what that is all about.;


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7ut brilliant though icardo9s re0ision was, it turned out to hold true only in the 0ery special case

of economies like the little cornLironbooks model we were looking it. (s I told you :without

proof, though that is easily supplied if you know a little linear algebra;, prices are in fact

proportional to labor 0alues only in the case in which each line of production exhibits the same

ratio of labor directly re=uired to labor indirectly re=uired a situation which Marx e=ui0alently

describes as 1e=ual organic composition of capital.1 :Marx also rather 0i0idly describes this as a

situation in which each line of production uses the same proportions of 1li0ing labor and dead

labor.1;Since Marx belie0es that he can sal0age the )abor Theory of &alue despite this

problematic limitation, and in doing so re0eal some 0ery deep truths about capitalism, we might

expect him to begin &olume 'ne of %(!IT() by posing the problem for the general case, in

which we do not ha0e the con0enient and rather unusual situation of e=ual organic composition

of capital. 7ut to our surprise, Marx does not follow this strategy of exposition. Instead, all of

&olume 'ne is written about the special case of e=ual organic composition, and it is not until

&olume Three that Marx completes his defense of the :now considerably re0ised and elaborated;

)abor Theory of &alue. 4hyAThe reason is that Marx sees in the writings of his classical predecessors an e0en deeper

problem than that of the determinants of natural price, a problem of which Smith, icardo, and

Mill were not e0en aware. The problem goes so deep into the real nature of capitalism that it

takes Marx 0irtually an entire 0olume to sol0e it and explore the historical, ideological, social,

and economic implications of the solution. E0entually, he will use his solution to this little

understood problem as the clue to the final defense of the )abor Theory of &alue. I shall argue

that it is his solution of the problem posed in &olume 'ne, rather than his resolution of the

difficulties with the )abor Theory of &alue, that is the real heart of Marx9s entire criti=ue of


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capitalism. It is also the central truth of Marx9s lifework, unrefuted to this day, a truth that stays

with us after history and mathematics and politics and time ha0e tarnished Marx9s reputation. It

is because of this truth that I call myself a Marxist.

If I may be facetious for a moment and make a little philosophical ing what is going on in the economy.; 7ut why are there any profits at allA

4hy do capitalists get rich under capitalismA4e know why sla0e masters get rich. They force their sla0es to perform producti0e labor

whose product the masters appropriate. 4e know why feudal lords get rich. They compel their

serfs to labor se0eral days a week on the lord9s land, and the lords then appropriate what is grown

on that land. 7ut in a capitalist economy, there are no sla0es, there are no serfs. There are only

legally free men and women who 0oluntarily accept


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The apologists for capitalism on the eighteenth and nineteenth centuries had a number of

answers to this =uestion, all of them, needless to say, 0ery flattering to the capitalists, and these

answers ha0e stayed with us. 'ne can still find them in modern mainstream economics

textbooks.The first answer, and my fa0orite, is the abstinence, or, as I like to think of it, the cheese

paring, theory of profits. (ccording to this explanation, most people impro0idently and

wantonly spend e0ery bit of money they can lay their hands on, buying fine clothes and hard

li=uors and expensi0e delicacies for their dinner table, and so they ne0er grow any wealthier.

7ut a few sternly religious upstanding !rotestant men li0e simply, pare their cheese, scrimp on

their clothing, eschew hard li=uor, and set aside e0ery bit of money they can s=uee>e out of their

daily budgets until they ha0e amassed enough to start a small business. 1Many a mickle makes a

muckle,1 as +eorge 4ashington said, mis=uoting the old Scots pro0erb. !rofit is then the reward

in this life for the 0irtue that will be e0en more la0ishly rewarded in the next. Modern

economics


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he chooses to forego the sixty thousand dollars in interest that he could earn simply by putting

his money in the bank. (t the end of the year, when it comes times for him to do his books and

figure out whether he has made a profit, he will ha0e to subtract, from his gross re0enues, not

only the cost of his labor, raw materials, machinery, and so forth, but also that lost sixty thousand

dollars. That is, as they say these days, the opportunity cost to him of using his million dollars to

start the business. *is calculations yield a happy result. (gainst his fi0e million in gross

re0enues, he writes the Q$,#$@,@@@ he has spent for all those inputs, adds to this the QG@,@@@ in

foregone bank interest, and finds that he still has Q"@@,@@@ left o0er, for a healthy "@P profit on

his in0ested one million. In short, he has made a profit. The second entrepreneur, who has until

now led a rather profligate life, has no sa0ings at all, but he is a fast talker, and manages to

persuade a banker to lend him one million dollars, in order to launch his business. *is end of

the year calculations yield exactly the same result. *e has fi0e million in re0enues, four million

eight hundred and forty thousand in production costs, and sixty thousand in bank interest, all of

which, when deducted from his gross re0enues, lea0es him with the same "@P profit. So it

seems that profit is not the reward for abstinence, upstanding li0ing, and frugality.:This is growing rather long. I shall continue tomorrow.;

Part Twelve'ther explanations :and


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=uite surprised if he were informed that the salary of the manager had entirely gobbled up the

company9s profits, lea0ing nothing for him to disport himself on the i0iera.E=ually implausible is a more recent rationale, which traces profits to the compensation

for entrepreneurship and inno0ation. -o doubt, in any economic system, some compensation

must be made for those indispensable talents, but why then do routine businesses, not engaged in

daring and exciting flights of inno0ation and entrepreneurship, also earn a solid profitAMarx poses the problem in its full difficulty by positing, as I ha0e said, that commodities are

exchanging at prices proportional to their labor 0alues which, as we ha0e seen, means that

there is e=ual organic composition of capital in all lines of production. -ow, under those

circumstances, the capitalist pays for his inputs a money price proportional to the labor embodied

in those inputs. *e then hires workers to transform those inputs into salable output. 4hat wage

does he pay his employeesA 4ell :this is the crucial point in the entire exercise;, the workers are,

from the point of 0iew of the theory of laisserfaire capitalism, petty commodity producers,

producing their laboring, which they sell for a wage, so they, like e0eryone else, are paid a

money wage proportional to the cost to them of producing their labor. This means that they are

paid enough money to buy the food, clothing, and shelter they re=uire to be able to continue to

work. In addition, since their physical plant :their bodies; wears out, they must be paid enough

for a depreciation fund so that when their physical plant is completely spent :and they die;, it can

be replaced. In short, they must be paid enough to raise children who, at the age of twel0e or

thirteen, are ready to take their place in the factories. :/es, Marx fully intends this as bitterly

ironical, which is to say 7'T* literally true (- ()S' a de0astating condemnation of

capitalism. This is why he needs a complex language capable of capturing all of this. More of

this anon.;-ow, when the capitalist combines his 0arious inputs, the result is a product embodying a

=uantity of labor directly and indirectly applied. The product is then sold in the market, and by


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Marx9s assumption, it, like the inputs, sells at a money price proportional to its labor 0alue. (nd

here is the nub of the problem. The capitalist has paid the labor 0alue price for his inputs. *e

has combined them :including, perhaps, his own managerial laboring;, thereby transferring to the

output all of that embodied and direct labor. (nd he now sells the output for its labor 0alue,

which is to say for a money price proportional to the labor embodied in it. *ow on earth can he

make a profitA If he decides arbitrarily to slap a "@P surcharge on the cost of his inputs, that will

do him no good, because all the other capitalists will do the same, and the cost to him of his

inputs will rise so as to eat up what he gained by upping the price of his output. (s Marx writes

at the 0ery end of %hapter 2i0e :1%ontradictions in the 2ormula of %apital1;51'ur friend, Moneybags, who as yet is only an embryo capitalist, must buy hiscommodities at their 0alue, must sell them at their 0alue, and yet at the end of the process mustwithdraw more 0alue from circulation than he threw into it at starting. *is de0elopment into afullgrown capitalist must take place, both within the sphere of circulation and without it. Theseare the conditions of the problem. *ic hodus, hic salta1 :1*ere is hodes. 8ump here1 thetag line of an ancient oman story about a braggart who claimed to ha0e made a great broad>le that had stumped all of his predecessors, namely5 In a capitalist system, how do the

surplusgetters get the surplusA :(s I ha0e been phrasing it.; *ere is his answer.1In order to be able to extract 0alue from a commodity, our friend, Moneybags, must be so luckyas to find, within the sphere of circulation, a commodity, whose use0alue possesses the peculiarproperty of being a source of 0alue, whose actual consumption, therefore, is itself anembodiment of labour, and conse=uently, a creation of 0alue. The possessor of money does findon the market such a special commodity in capacity for labour or labourpower.1

( few words about the language of this passage. 2irst of all, the term translated by

(0eling, Moore, and Engels as 1Moneybags1 is geldbesit>er, whose standard translation is

1possessor of money.1 7ut the etymology of 1geldbesit>er1 suggests someone sitting on money,

and that calls to mind the wonderful nineteenth century caricatures of Thomas -ast and others,

who routinely represented capitalists as fat men in tails and top hats with big dollar signs or


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pound signs on their breasts, sitting on bags of money. The translation 1Moneybags1 perfectly

captures Marx9s mocking tone. This character is presented to us by Marx as a nai0e, decent

fellow searching in the market for a commodity that will ha0e the magical =uality of adding

more 0alue, when it is consumed in production, than is contained within it. 4e are in0ited to

imagine him trying first this commodity and then that, until, hey presto, he hits upon labor, and

suddenly finds that he is making a profit.This is crackbrained, mad, absurd, 10erruckt,1 as Marx says. :I cannot do an umlaut in

this damned blog, so you will ha0e to supply the umlaut each time I write 10erruckt.1; 7ut it is

also true, and the solution to the mystery of profit. The fact that a proposition about capitalism

can be both true and crackbrained is one of Marx9s way of showing us that capitalism, despite its

surface appearance of e0eryday simplicity and rationality, is in fact deeply mystified and shot

through with what he calls, following *egel, 1contradictions.1The precise solution to the problem, Marx says, is that there is a distinction, in the case of

labor but in the case of no other commodity, between the )abor!ower of the worker, which is a

human capacity, and the )abor, which is what the worker does when hired by the capitalist. The

worker is paid for his or her )abor!ower :strictly, although Marx does not say so, the )abor

!ower is rented, not sold;, and the natural price of that )abor!ower, as for any other commodity,

is its replacement cost, which is to say the amount of labor embodied in it. 4hen the worker eats

food, wears clothes, and rests at night in a shelter, he or she is consuming commodities

purchased in the market at their natural prices. The labor embodied in those wage goods is then

transferred to the worker, or more precisely is transferred to the worker9s )abor!ower,

reconstituting it.-ow comes the real secret. )et us suppose that it takes six hours of labor a day, directly

and indirectly, to produce the food, clothing, and shelter that the worker needs to reconstitute her

)abor!ower for one more day. In that case, the worker will be paid a money wage proportional


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to those six hours of embodied labor. 73T, when the worker goes to work the next day, she will

be re=uired to work a full twel0ehour day. In working a twel0e hour day, she will embody

twel0e hours of new labor, li0ing labor, labor directly re=uired, in the product that the capitalist

will e0entually sell. (nd the difference between the six hours of embodied labor she must

purchase in the form of wage goods, and the twel0e hours of labor she is re=uired to perform, is

the surplus labor, or Surplus &alue, extracted from her by the capitalist. 4hen the capitalist sells

the product in the market, at its 0alue, he appropriates that six hours of surplus labor, in the form

of an e=ui0alent amount of money, which thereupon becomes his profit.*ow do I know that the embodied labor in the wage goods will be less than the labor time

gi0en up in the sphere of productionA 7ecause it is a mathematical truth, easily pro0ed, that I2

T*EE IS ( !*/SI%() S3!)3S I- T*E S/STEM (S ( 4*')E, T*E- T*EE 4I))

7E S'ME (M'3-T '2 S3!)3S )(7' !E2'ME I- T*E S!*EE '2

!'3%TI'-. 4hat is more, T*E )(7' &()3E '2 T*E !*/SI%() S3!)3S 4I))

E6(%T)/ EJ3() T*E S3!)3S )(7' !E2'ME I- T*E S/STEM, (- T*E

M'-E/ &()3E '2 T*E !*/SI%() S3!)3S 4I)) E6(%T)/ EJ3() T*E M'-E/

!'2IT.'r, as we say these days, Ta daThere is a 0ery great deal more to be said, but I must go teach, so I will post this, and continue

tomorrow.

Part ThirteenMarx has now answered the =uestion, 4hy are there profits in a capitalist economyA

!rofit is the money representation of the surplus labor extracted from the workers in the process

of production, and then reali>ed in the sphere of circulation, when the output is sold. Since I am

trying to bring this tutorial to a close before the F@"F presidential election : 5C ;, I am simply

assuming that all of you are capable of going back to the e=uations of our little system and

checking that the labor 0alue of the physical surplus e=uals the surplus labor extracted in the


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system, and the price of the physical surplus e=uals the total profit appropriated in the system. If

anyone is ha0ing trouble doing that, speak up and I will spend a moment showing you how to do

it.

It would seem natural, at this point, to mo0e on to the second big =uestion, which was left

pending by icardo, namely, 4hat happens in the general case when une=ual organic

composition of capital results in the de0iation of prices from labor 0aluesA :This is, strictly

speaking, the Transformation !roblem.; 7ut there is an enormous amount to be said before we

get to that problem. Indeed, what remains to be said constitutes most of the content of &olume

'ne of %(!IT(). So for the next se0eral days, I will be rapidly summari>ing the high points of

Marx9s brilliant sociohistoricalanthropologicalpsychological analysis of capitalism.)et us start with the little matter of the wage. ecall that in order to introduce the concept of

surplus labor, and with it the central concept of surplus 0alue, Marx :and we; must specify a real

wage. ( real wage, for those of you unfamiliar with the


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had ad


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subsistence wage more restrictedly, and so are willing to lea0e a larger share of the annual

surplus to the capitalists. E0erything I ha0e ation of produced goods that fits them for the role of

1commodity9 in a capitalist economy. ( parallel process of deskilling and regimentation is

necessary before it makes any sense to speak, as we do in our little e=uations, of so and so many

units of labor re=uired for the production of one unit of corn or iron. 'nly when traditional craft

labor has been destroyed, and replaced by industrial labor, are the units of labor plausibly

interchangeable. /et another process of routini>ation must take place in the processes of

production, through the introduction of machines. (ll of these historical processes, interacting

on one another, e0entually bring about a state of affairs in which it is possible, meaningfully, to

speak of =uanta of 1socially necessary labor1 as embodied in standardi>ed commodities.'ne small point, among the scores that Marx makes so brilliantly, will perhaps help to explicate

these remarks. Imagine, if you will, two workers employed in automobile assembly plants. 8ohn

works in a Toyota plantD Mary works in a +eneral Motors plant. They are both a0eragely

efficient, work at the same speed, work on roughly comparable machines, and embody the sa

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The Thought of Karl Marx