Implications of a Purely Mechanized Economy

Improvements in productivity make it possible to produce more with a given employment of labor. However, under capitalism, whether this greater potential is fulfilled is contingent on there being sufficient effective demand to sustain the higher potential output. Any deficiency in demand will result in unemployment and forgone production. Although it is always possible for a currency-issuing government to ensure full employment, long term, with increasingly robotized or mechanized production methods, some form of basic income system would sooner or later make more sense. We could imagine a mechanized economy, with output, inside resource limits, responsive to demand financed out of basic income. One way to reflect on such a possibility is in terms of Marx’s analysis of capitalism. Here, the temporal single-system interpretation is applied.

Mechanization and Value

It is well known that in Marx’s theory of commodity production, labor is the source of all new value. The means of production merely pass on their already existing value to new commodities. This is Marx’s way of recognizing that capital goods and raw materials either were the output of another production process in the current period or were produced in a previous accounting period. Including them in the value of new commodities would be double counting, since they do not entail new production.

It is critical to recognize that Marx’s argument applies to value, not physical output or wealth. He is not suggesting that labor is the only source of physical output or wealth. Nature, other animals and machines all clearly create new physical output and wealth, as does labor. The argument, rather, is that only labor translates into new value. The plant, machinery and raw materials used up in the production period only pass on their preexisting value (actually, their prices). Nature, in contrast, does not transfer any value to output. Instead, private property rights give owners of natural resources a legal entitlement to a payment of rent, which comes out of the surplus value created in the production period.

Of the new value that is created in the production period, some goes to workers as wages and some goes to capitalists and other social groups as surplus value. Specifically, surplus labor – the labor carried out in excess of what is required to produce the equivalent of the value paid to workers in wages and salaries – is the basis of surplus value in Marx’s theory. In aggregate, surplus value equals profit, prior to its distribution among various recipients. Some of it will go to rentiers as rent or creditors as interest income.

Considering that surplus labor is the sole origin of surplus value in Marx’s theory, it is interesting to reflect on an extreme scenario in which the entire production of the economy becomes purely mechanized. Marx’s theory suggests that, in this scenario, capitalism must have ceased to exist! The reason is that there would be no production of surplus value (profit) in such a system, making it unviable for capitalists.

But what does it mean to say that a purely mechanized economy could not be a capitalist economy? After all, even in such a society, surely we humans would still be doing some things that were not mechanized. So what would be going on?

It would simply mean that this human activity (labor) was no longer being treated as value production and that our human capacity to work or create (labor power) was no longer being treated as a commodity.

In such a system, there might still be a requirement to work in order to gain access to material needs, and there might still be authoritarian measures used to direct production. However, it would not be capitalism. The surplus would not take the form of value, but simply its physical form – the material output produced in excess of the needs of social reproduction.

Equally possible is that we might choose to organize our activities in such a way that income was no longer tied to work. Material needs could be met through the free distribution of the output of mechanized production processes. Required resources and facilities for human endeavors could be made freely available. Human activity could then be genuinely free and associations between individuals voluntary.

Highly Mechanized Production Under Capitalism

For capitalism to remain despite a high degree of mechanization, it would instead be necessary that at least some human activity continued to be value production. That would require that some human endeavors were only enabled within the context of value production, just as is the case in our present society.

In the absence of a basic income guarantee, there would be an onus on the government to ensure demand remained sufficient to sustain high levels of employment. Otherwise, in the midst of such plenty, periodic episodes of mass unemployment, especially if continuing for sustained periods, would likely result in extreme social conflict.

If human activity remained commodified – i.e. capitalist social relations remained in place – capitalists would retain significant ownership and control of the means of production, including the purely robotized or mechanized production processes. Surplus value would continue to be created out of the employment of labor under capitalist conditions. Just as now, all capitalists would compete for a share out of aggregate profit, irrespective of how much surplus value was created in their own sectors.

The reason for this, in Marx’s theory, is that competition tends to equalize the rate of profit realized by different sectors, even though it is the least capital-intensive sectors (least efficient sectors) that produce the most surplus value (because proportionately they outlay more on the employment of workers than means of production).

Briefly, for Marx, the value of a commodity, λ, equals c + v + s. Here: c is ‘constant capital’, the value (or dollar amount) outlaid for the means of production used up in producing the commodity; v is ‘variable capital’, the sum of value outlaid for the employment of labor; and s is ‘surplus value’, the amount of value produced by workers in excess of the amount (v) outlaid on their employment.

Marx argued that in exchange there would be a tendency for commodities to sell at their ‘prices of production’, p, rather than their values. These are the prices that would ensure all sectors received the same rate of profit. They are equal to c + v + π, where π is profit. Prices of production differ from values whenever s differs from π. In sectors with an above average ‘organic composition of capital’ (c/v), π > s and p > λ. The reverse is true of sectors with an organic composition of capital below the average. In this way, competition causes surplus value to be transferred from sectors with below average compositions of capital to those with above average compositions.

In aggregate, however, Marx maintained that total value equals total price (the sum of all values equals the sum of all prices), surplus value equals profit, and the value rate of profit (VROP) equals the rate of profit (ROP). In effect, the creation of aggregate surplus value in production determines the amount of aggregate profit that can be realized in exchange, with competition between capitalists merely causing a transfer of surplus value between sectors according to their compositions of capital.

For example, if the economy were divided into two sectors, one completely mechanized and the other employing a combination of labor and means of production, the situation might look something like this (for simplicity, I have assumed all means of production are used up each period so that there is no fixed capital):

  SECTOR    c    v   s   λ     ROSV     p       π         ROP
                              s/(c+v)         p-(c+v)   π/(c+v)

  Robot    100   0   0  100     0%     125      25        25%
  Mixed     20  40  40  100    67%      75      15        25%

  Total    120  40  40  200    25%     200      40        25%

In this example, production in the robot sector occurs entirely without labor. Over the period, $100 worth of robots and other means of production, including raw materials, is used up, passing on $100 to the final value. No new value is produced in this sector, and therefore no surplus value. It is simply the already existing value of the means of production that is passed on to the final value. The robots, if able to learn, could be getting smarter and smarter throughout the period, thereby enabling larger and larger material output. But in value terms, there is no new value produced, because the amount paid by capitalists for the means of production will reflect costs of production and the rate of profit, not the material output produced by the means of production.

In the mixed sector, $20 of value is passed on to the final commodity through the using up of means of production and $80 of new value is created through the employment of labor. Capitalists appropriate $40 as surplus value.

As already noted, competition between the sectors and between capitalists tends to equalize the profit rate in each sector (in the example, it is 25% in each sector and in the economy as a whole). This is argued to occur as a result of capitalists seeking out the highest return for their investment. If one sector offered a higher rate of profit than the other, investment dollars would flow into the more lucrative sector until no further advantage could be obtained, assuming competitive conditions, which, for Marx, following classical political economy, entails free mobility of money capital.

The example illustrates that capitalists in the mixed sector do not get to keep the entire surplus value, even though that is the sector in which the surplus value is actually produced. Instead, total price in the robot sector rises above total value produced in that sector ($125 > $100) and total price in the mixed sector falls below total value produced ($75 < $100). In Marx's theory, this tendential equalization of profit rates ensures that technical innovation and mechanization are not discouraged by operation of the 'law of value' (value based on labor time). It means that innovators are not penalized in terms of profit for minimizing their use of labor (minimizing their amount of new value production). It provides a competitive impetus to economize on the use of society's labor time.  

The Social Possibilities are Open

Since it is technically possible for capitalism to continue even in a highly mechanized economy provided human activity remains commodified, the social ramifications of increasing mechanization are an open question. Increasing mechanization makes it possible at some point to sever the connection between work and income entirely. That would seem to offer the greatest potential for human freedom and creativity.

Yet, there is no inevitability that this option will be taken unless general populations actively press for this social progression. Those with the greatest stake in the existing system may persist in their efforts largely to confine employment opportunities (and access to infrastructure and productive facilities) to the sphere of capitalist social relations. General populations might be persuaded to go along with this state of affairs provided there was sufficient class compromise to ensure that real wages and general living standards rose more or less in line with productivity improvements.

Nevertheless, with material needs so easily met, the absurdity of such a social relation, in which much of human potentiality can only be expressed on terms acceptable to the capitalist class, may well become increasingly apparent over time. For this reason, there are probably grounds for optimism that, ultimately, some kind of basic income scheme or non-monetary type of guaranteed access to material needs and facilities will emerge provided we put our collective foot down and demand it. If there had been the political will, it probably could already have happened.

Technical Note

How best to interpret Marx’s theory of value remains controversial. As noted from the outset, the view taken in this post is informed by the temporal single-system interpretation (TSSI) of Marx’s theory. Andrew Kliman’s Reclaiming Capital provides a good discussion of the debate from the TSSI perspective. Under this interpretation, all of Marx’s three aggregate identities hold true.

The interpretation differs from the one put forward by ‘physicalist’ interpreters in two respects. First, whereas physicalists interpret Marx’s theory as simultaneist – that is, referring to the simultaneous determination of input and output values – the TSSI considers the theory to be dynamic: the values (actually, prices) of this period’s inputs enter as data in the determination of next period’s output values.

Second, whereas physicalists interpret Marx’s theory as dual system – one system determining values, another system determining prices – the TSSI considers the theory to be a single system: value and price magnitudes are mutually determinative. In particular, the economy-wide rate of surplus value determines the average rate of profit which enters into the determination of prices of production, while input prices enter (as the amount of value needed to acquire the means of production) into the determination of values.


25 thoughts on “Implications of a Purely Mechanized Economy

  1. In a capitalist economy, the drive to automate production comes from the drive to sustain or enlarge profits. Pushing the idea of automated production to its conceptual limits one comes to a purely robotized or mechanized economy.

    As a first comment I would say that from an abstract viewpoint any economic sector can be seen as being composed of a purely “robotized” sub-sector and a purely “humanized” sub-sector. Under this viewpoint the analysis developed in the post applies always.

    A second comment may be made on fundamental “information-pumping” needs of purely robotized systems (not to speak of material and energetic restrictions). Present day and in development automation systems, machines, robots, electronics computer and communication, need repair, assembling and design. So, a “residual” of human labor is always needed and the system is never pure in a rigorous way. Unless one envisions synthetic life forms that would self-repair, self-assemble and self-design. The contours of such possibilities remain uncertain.

    A third comment may be made on a massive substitution of labor by robotic systems in the context of capitalism. Either it will result in massive unemployment and unemployment benefits (a curious situation where people is massively paid to not work) or in a massive increase in the already large pool of digging holes and filling holes private jobs or in a massive job guarantee program. Any of these possibilities limit and tend to diminish ROP and pave the way to a transition to the fourth option.

    The fourth option is a massive dismissing of capitalism. If one defines capitalism by the prevalence of employer-employee firms, then a post-capitalist society will be one where the employer-employee relationship in firms will be absent, being substituted by the peer-to-peers or partnership relation among members of the firm.

    This will entail fundamental changes in terms of incentives for people to act and decide at the economic realm. For example, the notion of wage or salary will cease to exist, as well as of “unemployed”. The drives for firms to automate production will exist but not only to enlarge profit. A main drive will be diminishing working hours per person or augmenting personal income for hour.

  2. Welcome, PG. Thank you for contributing such a thoughtful and thought-provoking comment. I think all your points are very good ones. Your observation that, in abstract, we can always think of the economy as having purely robotized and humanized sectors in varying proportions is excellent. It reminds me in a way of how Sraffa made use of the concept of the ‘standard commodity’.

    In a purely technical sense, I do think – at least according to Marx’s theory of value – that it is possible for the rate of profit to be maintained with ever more automated production IF human activity remained to a large extent value production. My hope is that this would not happen, and my opinion is that it is unlikely in the long term. But as long as labor remained value production, the humanized sector would produce the surplus value while the robots used in the robotized sector would become very inexpensive, keeping the proportion of investment dollars channelled into constant capital sufficiently low relative to outlays on variable capital.

    Nevertheless, the process by which this occurred would be extremely socially disruptive. As you mention, sharp reductions in employment would occur periodically with each new wave of automation. Also, the lower prices of the components of constant capital would not compensate capitalists for higher costs incurred prior to the latest revolution in production methods. In terms of Marx’s theory, c/v would fall with the cheapening of robots, raising the value rate of profit, but only on new investment, not past investment. The result would be bankruptcies for many capitalists, further centralization of capital among the capitalists who remained, and sharp (even if temporary) rises in technological unemployment.

    This social disruptiveness, and the increasing absurdity of material plenty (or the potential for it) alongside this social disruptiveness, makes me think it will ultimately be very difficult for the capitalist class to compel general populations to submit to capitalist social relations. For these reasons, I tend to agree with your conclusion in the final paragraph of your comment.

    For that matter, would indvidual capitalists even wish to maintain the system of value production? They are captives of the present system just like the rest of us. The current social system compels a certain kind of behavior that really is not conducive to realizing maximum human potential. The gap between what is possible under the present system and what is possible under an alternative one will only grow as technology continues to advance.

  3. A thoughtful post as usual. I tend to differ though on the idea that MMT like guaranteed job ideas are the way to go. We all agree that technology today is vast and everyone could be living well if not for capitalist production relations. Further, technology is only getting greater and per your post, we’re heading into a very robotic world. A great thing actually if only for how our world structured.

    The MMT JG proposals out there though are structured in a way that would seem to just institutionalize a minimum wage work force which of course will only grow as robotics expand. It seems to solidify the commodity nature of labor even further and so it kind of surprises me that someone with a Marxist approach would feel good about it. It also seems far too narrow for using it as a major proposal of the left, even though short term it’s an improvement over what we have today. And finally, it seems to miss the potential of the very world you discuss – an almost work-free world of robotics. It seems a very 20th century or even 19th century approach to the realities and potentials of the 21st.

    On separate note, I find that the point raised by Rosa Luxemburg and amplified by Kalecki and others to be very important but largely missing from much of our analysis. That is that profits themselves can only arise from capitalist spending – (outside of government spending that is). Since workers cannot be the source of profit, and if in a robotic economy investment spending would decline, then clearly profits could not be sustainable. So it seems to me that to take the pure Marxist viewpoint that profit arises from surplus value extracted from the worker is right as far as it goes, but doesn’t give us the full picture. It misses the point that profits only arise to the degree the excess of price over wage is reinvested back into the economy.

  4. Great comments, Jim. I think I agree with your argument on the JG. My mention of the JG in the opening passage was just to indicate that if full employment remained the goal, a JG would be the most effective means of maintaining it. (It would probably be the only means of maintaining it in the face of the massive reductions in employment likely to occur with the widespread implementation of robotics.) But as you say, we should be able to do better than this and free ourselves from capitalist social relations altogether. The technological advances will place this more and more within our grasp, if they haven’t already. Also, I am hopeful this moment in history may be a big opportunity. It would be a mistake to demand too little rather than meaningful change.

    Your point about profits only being realizable to the extent that the excess of price over wage is autonomously spent back into the economy is really important. I probably should have been clearer when suggesting profitability could technically be maintained, in that it would be highly reliant on government providing that autonomous spending.

    However, it would be absurd to try to prolong capitalism in this fashion, and much better to liberate ourselves from value production.

    (I’m pretty sure I’ve read at least one paper by Wray discussing the Luxemburg/Kaleckian point on realization. I’ll see if I can dig it up and provide a link.)

    BTW, your blog is excellent. I’m really enjoying following it.

  5. Greatly appreciate the positive feedback. I think your site is a very valuable resource for intelligent economic / political critique and I follow it closely.

  6. Thanks, Jim. I also appreciate your feedback.

    Regarding the realization of profit, I think this is the paper of Wray’s I had in mind. It is actually on Post Keynesian approaches to inflation, and only discusses the profit realization aspect of pricing and demand in passing. He may have discussed the point in more depth elsewhere, but I think it was this passage from p.12 that for some reason stuck in my mind:

    Post Keynesians adopt an aggregate markup theory of pricing in which price is determined at the macro level as a markup over labor costs. The price of consumption goods must be high enough above wages in that sector so that some consumption goods will be left for workers in other sectors. This allows some workers to be put in the investment sector (and government and trade sectors) to produce the surplus (goods and services) that workers cannot buy. At the micro level, each capitalist must be able to obtain a markup over labor costs, ability to do which depends in part on market power. However, at the macro level, there won’t be any profits to distribute unless there is spending in excess of the wage bill in the consumption sector. The aggregate, macro, price level determines the aggregate potential surplus to be divided among all the firms in society; the capitals then compete at the micro level for profit flows. What generates this aggregate surplus to be realized by firms at the micro level? As the Kalecki equation shows, the aggregate amount of profits is identically equal to the sum of investment plus consumption out of profits plus the government’s deficit and the trade surplus, less saving out of wages. In the simplest model (no government deficit, balanced trade, and no saving out of wages), profits equal investment plus capitalist consumption. If the price is set high enough that workers cannot buy all the output, capitalists can get the rest so long as they spend.

  7. The ultimate ponzi scheme requiring ever rising compounded investment which can’t possibly be profitable unless the compounding continues forever into the future. I think the most amazing thing is that the ponzi scheme has lasted so long. Although we often forget how crisis prone capitalism has been since, to pick an approximate start of the corporate era, 1900. WW1, depression, WW2, cold war, 70’s, 3rd world debt, S&L’s, Mexico, Russia, Thailand, etc, etc, and of course now.

    When will it finally be placed to rest?

  8. Another great post.

    I’d just like to comment on Mr O’Reillys comment earlier;

    “The MMT JG proposals out there though are structured in a way that would seem to just institutionalize a minimum wage work force which of course will only grow as robotics expand. It seems to solidify the commodity nature of labor even further and so it kind of surprises me that someone with a Marxist approach would feel good about it”

    I think this is true but its also true that A JG is simply a way to justify a “citizens income” so to speak. We simply tie it to showing up somewhere for eight hours and doing something. Eventually as we become less dependent on jobs it evolves into a citizens income once people find out that this notion doesnt lead to runaway inflation but instead puts a floor under aggregate demand and is actually stabilizing.

    There certainly are lots of bad ways to set up a JG program and no doubt, if we get one while the current republicans have a say, we will get the worst imaginable at first. But even the worst imaginable is better than now I think.

  9. Greg,

    Agree the program as intended by MMT economists would be better than we have today, but have grave doubts the worst imaginable would be better. The worst imaginable would be an institutionalization of a near permanent underclass while leaving in place all the brutality of capitalism.

    One of a number of things that I think are problematic with MMT JG proposals is their extreme narrowness. MMT opens tremendous doors for a more just society, yet the proposals are among the narrowest possible. This is probably a function of how right wing the economics profession is today and maybe a fear on the part of MMT economists of appearing too radical. I’d feel much better about the MMT ideas if they incorporated a broader critique of capitalism.

  10. Jim

    Thanks for the response. I think if you read Wray, Black, Mosler, Mitchell youll see proper criticisms of capitalism. I say proper because they place their criticisms on banking, where I think they belong. I dont see capitalism per se as THE problem, only this particular form of capitalism we have evolved to over the last 25 years. We can properly incentivize economic activities and properly regulate out of control banking/speculative activity. It just takes an informed citizenry and a responsive govt………….. just!

  11. I see the problem in terms of the failure of the prevailing world view to adapt to changing reality, resulting in a disconnect between perception of reality and actual reality. The debate is still being framed in terms of obsolete concepts.

    The purpose of economic activity is to provision a people. Economics studies the key relationships involved, such as production > distribution > consumption.

    Unfortunately, economic data are generally considered in terms of a monetary unit of account rather than real factors, such as units of energy, units of labor, units of output, etc., so that monetary factors get overemphasized in the debate. The prevailing worldview is essentially about M > C > M’, as the unfolding of the crisis shows. The concern is about the health of the financial system rather than key factors like unemployment, which are supposedly dependent on capital. Thus, the ownership class takes priority.

    What this thinking leads to is the ownership class (savers) accumulating claims on resources and leisure, which is considered to be the whole point of capitalism, while workers become increasingly debt-dependent. But the narrative funs that everyone has an equal opportunity to become an accumulator of claims on resources and an enjoyer of leisure as an owner. This is fixed as a norm, both economically and morally. If you are not rich, it is your own fault.

    The reality is that innovation resulting from greater development of highly complex social systems has increased productivity so drastically that the units of output and leisure have greatly increased per units of work, resources and energy. The question is whether the ownership class has a natural or human right to accumulate the fruit of increased productivity as claims on present and future output and increased opportunity for leisure, or whether output and leisure should be more widely distributed.

    The principles arguments in favor of the accumulation by the ownership class are the right to private property and economic incentive/efficiency. Is the right to private property a natural or human right? Is the the right to private property absolute? Does individual incentive trump social responsibility? Is economic efficiency of higher priority than social effectiveness? What is the appropriate relationship of the elements to the each other and to the system as a whole in social system?

    These are all philosophical questions that stand in need of revisiting in the light of increased productivity, which makes a greater level of distributed prosperity is possible. This is also a political battle that is being fought globally as the world enters a period of globalism in which sustainability is a high priority.

  12. I think another way to state what you have written here Tom, which is a question I have asked numerous times in comment sections throughout the internet, is how much should we “value” savers. Of course the value of saving is linked to the interest rates we demand as savers.

    I think we need to reevaluate the level of deference we give to saved/accumulated money. Savings have taken this position which is placed above current needs. Saving is deferred current consumption and a return of 5% says I will be able to double my consumption in about 14 years. Think about what everyone else needs to give up in order for the saving class to double their consumption every 14 years. Its an insane idea as I see it.

    We essentially force productivity onto the workers by slowly lowering their wages and keeping their amount of work constant or increasing. This is how the interest is paid to the savers, by making current consumers consume less.

    I think our attitude towards saving needs to change drastically. Savers should be told how unreasonable it is to expect their future consumption to be able to double every 12-15 yrs ad infinitum.

  13. Thanks for the link, Greg. I just had a quick read and think your reasoning is good. It is a very interesting take on the subject. I will read it again more closely.

    I do think the issue is implicit in debates over interest. For instance, there are Keynes’ arguments for cheap money and euthanasia of the rentier. There is also, in my opinion, an apologetic aspect to the neoclassical notion of a real determination of interest. The theory implies that the return to saving reflects a productive contribution in its supposed prior financing of investment, with the real rate of interest moving to the level necessary to bring about “equilibrium saving and investment” at full-employment output. Of course, the capital debates exposed that idea as nonsense, but I think you are right to discern a strong ideological aspect to the debate and a kind of brainwashing that we have all been subjected to, in varying degrees, when it comes to thinking about saving.

  14. Well I was trying to attack a couple of notions, which are quite prevalant in many circles. The first being that you can somehow analyze what is happening in our economy while removing money and the second being of course a natural rate of interest. Interest, in my view, is not natural. It is a component of capitalist paradigms. And, of course, removing money from any economic analysis is just ….. insane I think. I really wish more would be done on these two subjects.

    I think it should be obvious that expecting interest to accumulate in a non monetized economy has real constraints so any link between monetary and real is immediately fractured when we talk about interest in a monetary economy.

  15. Two issues with the savings fetish. The first is purely moralizing. “Debt is bad, saving is good.” It’s biblical, really. A kind of “religious” bias, and sometimes it actually is religious. It is also the result of scarcity thinking, strongly impressed in human consciousness based on historical precedent, like storing more body fat at present than is needed in terms of contemporary life.

    The second is the false idea that savings precedes investment, which is wrong economically. This is “saving the seed corn for next years planting” kind of thinking. A monetary economy doesn’t work this way.

    Another biggie is cultural bias, especially in the US. A dogma among many, especially Libertarians, is that saving leads to financial independence, which is a sine qua non of “liberty.” This is a very big deal in the US.

    We know from the sectoral balance approach that saving is deferred consumption, so that all the goods and services an economy is capable of producing are not purchased in the current period, leading to unwanted inventory, which results in economic underperformance and contraction, unless government or the ROW make up the difference.

    If the country is running a CAD, then government must offset the domestic private saving if the economy is to perform at its potential, i.e., full employment with price stability. No problem with that within reason, but if there is excessive saving at the top, then the offset can be viewed as subsidizing it. At that point, I would say that the saving is excessive, and policy needs to be put in place that gets some of those funds moving again as investment. This can be accomplished through tax policy that penalizes saving about a certain amount, for instance.

  16. Thanks, Peter, for another very insightful post. Thanks also to the commentators for very interesting comments.

    Ernest Mandel, in Introduction to Marxist Economic Theory (chapter I) considers the extreme hypothetical situation where no labour whatsoever is used in production (thus, is not exactly the same situation you or PG are talking about, where there is a mixed sector, however small it might be). And Mander says that this scenario allows to logically prove the labour theory of value.

    Although in that chapter Mandel’s proof is only sketched intuitively, the idea is to show, by reductio ad absurdum, that “labour is the source of all new value” (henceforth, A).

    Thus, Mandel starts by assuming that the negation of A [i.e. not(A)] is true: i.e. it is not the case that “labour is the source of all new value”. The idea then is to find out if not(A) leads to a contradiction, in which case the assumption is negated. As the negation of not(A) [i.e. not(not(A))] is A, we have our proof (i.e. A or “labour is the source of all new value” is true).

    So, in a capitalist economy where economic activity is profit-motivated and where commodities are bought at their value, if labour is not the source of all new value, then it should be true that

    (1) lambda >= c + v + s = c (as v = 0, s = 0)

    Thus, c = lambda – alpha (alpha is a hypothetical, non-negative, “surplus-value” obtained from other inputs to production, besides human labour).

    But c is supposed to have been bought at its value; c = lambda – alpha means that c was bought at a discount. The only way this can hold is that alpha = 0, or equivalently

    (2) lambda = c + v + s.

    (2) means that labour is the only source of value. QED.

    I would appreciate any comments/criticism on this deduction, its logic (or lack thereof), from you or the other posters, alike.


    From (2), as you did, one could deduce that this hypothetical economic system is no longer capitalism:

    Consider a simple closed economy with a household and a business sector, but no government.

    NDP = C + I – depreciation = COE + GOP – depreciation.

    Observe that v in (2) is known in the System of National Accounts as compensation of employees (COE = v); if v = 0, then employees have no income. And s is corporate profits (GOP = s); if s = 0, then businesses achieve no profits.

    Therefore, there is no effective demand for whatever is produced. But nothing is produced, because v + s = NDP = 0 = C + I. No value is added to the input of raw materials, machines and structures. That, as pointed out, does not sound like capitalism.


    Some time ago a couple of posts ([1] and [2]) treating the same subject in a Star Trek setting, became a bit of a cause of discussion over the web.

    So, if appropriate, I would like to use a sci-fi setting from this point on.

    In Isaac Asimov’s “Foundation and Earth” there is the description of Solaria: a planet where robots tended to huge properties, inhabited by a single genetically-engineered owner. Owners are hermaphrodites and their children are almost their their parent’s clones.

    There is no energy-scarcity; the robots are able to perform all the physical work and pretty much all intellectual work required (they not only produce, but design and repair themselves and all other machines used); in principle, every property is autonomous, separated, independent and isolated from all other properties (no commercial exchange takes place between properties, either).

    It is clear that such planet has reached a kind of stasis: basically no change is possible, except for an accident. To me it is clear that this is not really capitalism, although there is some kind of non-transferable, non-divisible private property; and not even the word society applies anymore, as there is no interaction among the owners. The Masters, in my opinion, are no longer members of the Homo sapiens species, either (as they are hermaphrodites)

    The novel does not go into details about how such “society” evolved, but the impression I got from reading it (many years ago, so the memories are vague) is that human workers in-world or off-world became unnecessary: redundant, so to speak.

    That sounds quite ominous, to me. Can you guys see any reason why this Solaria scenario is unlikely? After reading Marshall Brains’ article, to me, it does not sound technically impossible, at least in the long run.

    [1] Anti-Star Trek Revisited
    [2] Anti-Star Trek: A Theory of Posterity

  17. Very interesting comment, Magpie. For now, I will just make a few brief observations in response. They won’t do justice to the considerations you’ve raised. I may return to the topic in the future.

    To clarify, although a situation might be reached in which there is stasis in terms of (capitalist) value, this does not mean there couldn’t be dynamism in material terms or, in the broadest sense possible, in the way life is lived and experienced. In narrow material terms, a purely mechanized economy could generate considerable growth in material output over time. Machines might be creating more and better machines that create more and better machines, etc. No new ‘value’ (appropriated labor) would be created, but material output would be increasing.

    The living of our lives in the broadest sense – our thinking, learning, communicating, interacting, creating, working, playing, etc. – could be developing in a very dynamic fashion with the aid of technology. The potential, in this sense, seems unlimited. As one example, interactive virtual reality technology provides access to a wide range of experiences, albeit vicarious, that would not otherwise be accessible. As an aid to imagination or to physical, emotional and intellectual development, the possibilities seem endless.

    I think the real question is whether human activity – life in the broadest sense – has been freed completely from the production of value. Even once we have been freed, we will still be living and experiencing life, including pursuing vocations we find interesting. It’s just that our activities won’t be dictated by value relations.

    Regarding the risk of human redundancy, I am not familiar with the theoretical limits to artificial intelligence – for example, whether some kind of robot consciousness is possible and, if so, in what sense – but even if robots were able to reach a point where they could live life better than us, this would not remove our own desire to live life. I don’t think our own experiences would become redundant just because robots might be capable of greater experiences.

    Technology often seems ominous under capitalism because it is a threat to our employment prospects as wage labor or undermines the profitability of past investments that relied on older technologies. But that is a defect of capitalism, not of technology. Technology provides the potential for better lives for humans and other species. It is an open question whether we will be able to organize ourselves socially in a way that enables us really to benefit from these opportunities.

    I would also question the notion of redundancy in a post-capitalist society. From the perspective of capitalist value production, a worker’s existence is only justified to the extent it enables the production of new value, either immediately through the expenditure of living labor or potentially as a member of the reserve army of labor. But the day we end value production will hopefully also be the day we reject this justification for a person’s life. Hopefully it will be the day we recognize that life needs no justification.

    I have always liked the saying, “we work to live, not live to work”. Unfortunately, it is not really true for many people under capitalism. However, post capitalism, I hope we can do better, and say, “we live for its own sake, and work if we want”.

    It is not that I am necessarily optimistic about the future. I am just suggesting that the social possibilities are open.

  18. It’s a link that Peter provided somewhere in this post, although I can’t find it now. WHICH IS THE POINT and why I had to extract the link to begin with for future reference. He always uses some fancy consolidation of URLs and words — you know “SEE HERE” — which I’m convinced is some secret code between communists only accessible after midnight in your time zone.

  19. Thanks for highlighting Marshall Brain’s post. Previously, beowulf linked to it in a comment on a post at Neil Wilson’s blog, 3spoken. The secret code was meant to be indecipherable to people in other time zones. I’m not sure how it was cracked.

  20. See? He just did it again:


    It’s not possible to include enough “air quotes” or employ enough Captain Crunch Decoder Rings. Consolidation obfuscation!

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