Marxist Professor Fred Moseley’s recent work Money and Totality was 20 years in the making. A couple of weeks ago, in the midst of reading it, I remarked on this blog that it was thoroughly engaging, at least for those interested in Marxist economic theory and its application to the analysis of capitalism. I also promised further comment, once I had finished it, so here goes.
Moseley’s interpretation of Marx’s theory is ‘macro’ ie macroeconomic, in that it begins logically with the operation of the economy as a whole, and then proceeds to the ‘micro’ or the operation of the individual parts of the economy in question.
The interpretation is ‘monetary’ in that it argues that Marx’s theory uses values or prices quantified in terms of money. Capitalism is a money-using system, and in fact Marx defines capital itself as money which is used to make more money, or ‘self-expanding value’.
The title of the book is thus explained: ‘money and totality’, the latter as describing the importance of the macroeconomic system as a whole.
According to the author, Marx drew on the philosopher Hegel in the logical priority he gives to the whole economy, the macroeconomy, over the microeconomy. Hegel’s ‘universal’ is a holistic category which refers to the most essential property of all elements in a system. The universal comes before the ‘particular’, or the distinctive properties of the individual parts of a system. The particular presupposes the universal, which continues to exist as the analysis proceeds from the latter to the former.
Marx’s logic in his work Capital therefore employs two levels of abstraction. In Volume I he analyses ‘capital in general’ or the whole capitalist economy as a single system. In this economy, the production of total surplus value is determined. This is equal to total profit in the system.
In Volume III of Capital, Marx proceeds to analyse the determination of the distribution of the total surplus value between individual ‘capitals’ or industries via the process of competition between them. As a result, the total profit is distributed between capitals and this in turn determines the equilibrium ‘prices of production’ at which the produced output of commodities is sold on the market, subject in addition to fluctuations in supply and demand.
For Moseley, Marx’s analytical framework in Capital is the circuit of money, which is written as follows:
M—C…P…C’—M’ (where M’=M+dM)
Putting this into words, money (M) is used to purchase the commodities (C) labour power and means of production, for use in production (P), which produces an output of more commodities (C’), which are then sold for more money (M’). The term in brackets means that M’, the money received upon sale of the produced commodities is equal to the original M plus an extra amount of money (dM or the increase in M).
According to Moseley, the determination of dM or surplus value is the main point of Marx’s voluminous Capital. In Volume I, Marx analyses the production of surplus value for the economy as a whole, and in Volume III, he analyses its distribution, and subsequent division into the profit of individual capitals, interest, rent etc.
One of Moseley’s key aims in his book is to do away with the ‘transformation problem’, a controversy which has occupied a huge amount of the time and effort of academics, both Marxist and otherwise. The problem refers to the transformation of the value of inputs into production into prices of production. Consumers of the production do not pay for commodities in values, but in prices, and since some of the produced commodities are inputs (intermediate goods) into subsequent production, these inputs will be paid for in prices, not values. The values of the inputs thus need ‘transforming’ into prices before they are used in production. The claim is that Marx forgot to do this transforming of values, or did not live to do it, as he died before completing Volume’s II and III of Capital, which were put together by Engels from his copious notes.
Moseley, with close reference to Marx’s works, not just Capital itself, claims that the transformation problem is a chimera, and that he has thus put an end to the controversy. He apparently does so by arguing that the inputs to production are priced in terms of money, not values, so that the initial money capital used to purchase labour power and means of production for the production process is taken as given. Marx therefore analyses capitalism as one system of prices, not two (values and prices). Accordingly, the problem is not there!
It would be nice if Moseley had put an end to the endless controversy among Marxists and their critics, so that the former could turn their attention to analysing modern capitalism. We will see what happens, but heterodox economists are fonder of critique than their mainstream foes so, whether or not Moseley is right may not put an end to the debate.
Where I wish to critique(!) Moseley, despite his powerful arguments in the book, is over his uncritical acceptance of Marx’s Labour Theory of Value. This holds that all value and surplus value is the product of labour, so that the latter is exploited in the production process by the capitalist class, which appropriates the surplus value and uses it for expanding production and making ever-more money in the form of profit. Thus the working class needs to overthrow the system and replace it with socialism and eventually communism in order to eliminate the social injustice of exploitation and inequality.
Now I think Marx was a great (political) economist, and there is much in his work which is valid and useful: in the words of institutional economist Geoffrey Hodgson, he developed the theory of economic systems, a theory of production, a theory of money and crisis (anticipating Keynes). However that is no reason to be uncritical of even the foundation of some of his ideas. Hodgson has argued that the Labour Theory of Value is circular: Marx assumes that labour is the source of all value, and then argues that since it does not receive the entire value of its produced output, that it has been dealt a grave injustice.
Post-Keynesian and arch-critic of mainstream economics Steve Keen has also argued, from within Marx’s philosophical framework of dialectical materialism and value, that all the inputs to production, not just labour power, can be sources of surplus value. In this way both means of production and labour power have this particular, in Marx’s words, ‘use-value’. Put simply, their value in use, an objective quality, is that they are potential sources of a value greater than their purchase price, and can thus be used to produce and realise profit.
In sum then, Moseley’s book is clearly written and is surely a great achievement, but he is too uncritical of Marx in some ways. Undermining the Labour Theory of Value does not do away with many of Marx’s own intellectual achievements. But the development of economic thought, and in particular its heterodox schools, does not end with Marx, and he should not be immune from critique, even at a fundamental level.