MMT makes clear that a currency-issuing government can always spend sufficiently to ensure full employment alongside low, stable inflation. It can always purchase what is available for sale in its own currency. The point – which, on a little reflection, should be obvious – is that the availability of real resources, not revenue, is the constraint on a currency-issuing government’s fiscal policy. Or, put another way, inflation is the constraint.
In the comments section of the previous post, which considered the idea of labor as the sole creator of value, a participant provided a link to an interesting lecture by Steve Keen. Although I had not seen the lecture prior to posting, broadly speaking I have been aware of Keen’s developing perspective on Marx’s theory of value since reading the first edition of Debunking Economics. It may not have been evident to most readers, but partly I had Keen’s critique in mind when writing the post. It seems to me that his analysis highlights a need for those of us who defend Marx’s theory to explain why it is correct to consider labor the sole creator of value. In entertaining one possible rationale, the previous post was not intended as a proof of anything. Otherwise, I would have titled it a proof rather than a musing. But now it might be worth backtracking a little to provide some background on the rationale for that post.
I am pondering the legitimacy or otherwise of Marx’s claim that labor is the sole source of value in capitalist commodity production. It is not clear that such a claim can be proved. Sometimes it is simply presented as an assumption. Other times various motivations or intuitions are offered. Here are some thoughts of that nature.
In the previous post, we encountered the views of a small subset of Internet Marxists who appear to adhere to a rather hard-line, Chicago-like neoclassical understanding of the capacities of the state. There is another small subset, the Austrian Metalist Internet Marxists (or Austrian Marxists, for short), who appear to believe that a state currency not “backed” by gold must surely have zero value or, at the very least, command a level of acceptance likely to crumble at any moment. In reality, the choice between a gold standard and fiat money changes little of significance when it comes to the value of the currency or its acceptance, although it does of course affect the policy space a state leaves open to itself for as long as the currency arrangement remains in place.
There appears to be a small subset of Internet Marxists – emphasis on the words small subset – who embrace Neoclassical or Austrian ideas. Take, for instance, the Freshwater Say’s Law Internet Marxists, who maintain that the state is powerless to do anything to alter the level of capitalist production and employment. In the end, the state will supposedly drag down capitalists under the weight of its own “unproductive” activity or bring on a Fiscal Crisis of the State. This will be the day on which the issuer of the currency somehow runs out of its own currency.
In recent parts of the series, we have been considering the temporal single-system interpretation (TSSI) of Marx’s theory of value. We have considered how, in the TSSI, the values of constant capital and variable capital depend upon the prices that prevail when inputs and labor power enter production. In contrast, the values and prices of output are only determined once production is complete and the commodities are ready for sale on the market. This conception of value and price determination requires a more general formula for the MELT (or ‘monetary expression of labor time’). The basic meaning of the MELT remains the same. It is still the amount of monetary value attributable to an hour of socially necessary labor or, conversely, the amount of labor, represented in commodities, that a unit of the currency can command. But there is now a need to account not only for the rate at which living labor creates monetary value but also the rate at which monetary value is transferred from the means of production to final output. In the TSSI, the method for calculating the MELT needs to be modified under most circumstances.
The previous post introduced the temporal single-system interpretation (TSSI) of Marx. It was seen that, under this interpretation, Marx’s three aggregate equalities all hold. It was noted that the same can be said for other single-system interpretations. As long as constant capital and variable capital are defined as the amounts paid for the means of production and labor power, the equalities are logically valid. In this post, a possible rationale is offered for defining constant and variable capital in this way. Attention then turns to Marx’s own writings on the matter to consider whether the single-system understanding accords at all with his view.
Differences in interpreting Marx, as we have seen, tend to come down to three key questions. The first concerns how the value of labor power is understood. This will affect the treatment of variable capital. Is its value determined by the labor embodied in wage goods or the prices of those goods? The second question concerns the value of the means of production. This pertains to constant capital. Is the value of constant capital determined by the labor embodied in inputs or the amounts paid for them? The third question concerns whether value and price determination should be considered simultaneous or temporal. It was pointed out in the previous post that Marx’s aggregate equalities stand or fall with our answers to the first two questions. His equalities hold provided constant and variable capital are assumed to depend upon the prices of inputs and wage goods rather than the labor embodied in them. This approach is taken by all single-system interpretations, whether temporal or simultaneist. For the purposes of this post, adopting any of these interpretations would have been fine. However, the choice between temporality and simultaneity will sometimes be relevant later in the series. By way of background, the present post specifically introduces the temporal single-system interpretation (TSSI).
So far, the intention has been to give a sense of the relevance and accessibility of Marx’s macroeconomic ideas. Rather than jump straight into his theory, with what might appear to be strangely named variables and foreign concepts, it seemed desirable to spell out simple connections between Marx’s categories and those of non-Marxist economics. Doing so meant glossing over some of the finer points of Marx’s definitions and categories. The first task of this post is to address a few of these. Attention then turns to distinguishing value from price and introducing Marx’s three aggregate equalities. The implications of Marx’s equalities are powerful, but their validity depends on how his theory is interpreted. The final section of the post will highlight the major points of contention. This will provide context for two upcoming posts, which consider the temporal-single system interpretation (TSSI) and a possible rationale for its adoption in this series.
The first post in this series distinguished between three types of macro measures: ‘monetary’, ‘real use-value’ and ‘real labor-time’ magnitudes. Under simplifying assumptions, the post spelled out basic connections between these different kinds of variables. The same assumptions are retained in this post to highlight a connection between the aggregate markup (Kalecki), the rate of surplus value (Marx), value of the currency (MMT) and the monetary expression of labor time (MELT).