Moseley’s macro-monetary Marx – a review and partial critique

FMoseley Money and TotalityMarxist 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.


10 thoughts on “Moseley’s macro-monetary Marx – a review and partial critique

  1. Here is a way to look at LTV. I am not claiming it is Marx’s view since I don’t know the literature that well.

    “Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed.”
    — Abraham Lincoln, First Annual Message, 1861

    The basis of the labor theory of value is that in a monetary economy, labor is priced (wage/salary as monetary value), that is, time and ability are exchanged for money. The only possible source of value other than labor is nature’s endowments used as materials and energy. But natural objects only become materials and usable energy through the application of labor. These are the intermediate goods.

    Nothing has a price as a commodity until labor acts on it, even if only picking up a stick in the forest that becomes firewood for sale rather than use. The means of production are the result of workers whose effort has a price in term time and ability. Since picking up a stick to use as firewood only requires unskilled labor. The price is the fraction of the wage/hr. as labor time.

    The unit of labor power is one hour of unskilled labor, eg., one hr. of unskilled labor has a value of one and the price (wage) is determined in the labor market. Workers with more ability have greater labor power based on output capacity. So the inventor of a capital good as a means of production is contributing more labor power and therefore is rewarded more in monetary terms than an unskilled worker for the same time.

    Whether this reward is fair value in the market place brings in the question of rents. In Marx’s model rent is competed away in a perfectly competitive system in which power relationships are symmetrically proportionate. So compensation of workers with different skill levels and returns on different capitals that yield different levels of output are smoothed by competition in the labor money markets.

    This means that if there is a residual from sales after the production process at the macro level in which all work is compensated, this is the total labor value. If the amount of sales exceeds the amount of labor inputs, as it must in capitalism, then the residual is the surplus value.

    Profit is income minus expenses. If all expenses accrue ultimately from application of labor power, then if total income exceeds the cost of total labor, surplus value results as a consequence of rationing scarce goods by price in markets. Capitalists compete for a share of this surplus labor power which they receive without work.

    Worker expropriation and exploitation based it arises from private ownership of the means of production in a monetary production economy, and this expropriation can be traced to primitive accumulation through forceable enclosure rather for than personal use as in Locke’s just-so story.

  2. “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.”

    This may have been true of the Ricardian Socialists, but it was never Marx’s view. To quote Heinrich:

    “Exploitation — contrary to a widespread notion and despite corresponding statements by many “Marxists” — is … not meant to be a moral category. The point is not that something is taken away from workers that “actually” belongs to them, and that this act of taking is something morally reprehensible. The reference to “paid” and “unpaid” labor is also not intended to argue for the compensation of “all” of the labor expended. On the contrary, Marx emphasizes that — according to the laws of commodity exchange — the seller of the commodity labor-power receives exactly the value of his or her commodity.”

    • Thanks for your comment and the quote. While the seller of the commodity labour-power receives his or her value (the wage), the value of output produced by the actual labour expended is greater than this. The difference between the two is the surplus value, as you no doubt already know. According to Marx, the surplus is expropriated, and surely this is the source of exploitation. If I have misunderstood, perhaps you could expand on Heinrich’s quote and your point on the source(s) of value and exploitation.

      • My point isn’t that there is no difference between the value of the wage and the value of the output, but that this difference shouldn’t be moralized or looked at as something that needs to be totally closed with laborers being paid in full for their output. That’s not Marx’s political solution but it’s what you appear to suggest he wanted.

  3. Marx distinguished between expropriation and exploitation.

    Expropriation is economic. It is the difference between the cost of aggregate labor power by workers as sellers of labor power for wages and value received in markets by sellers of commodities.

    There is no normative value attached here necessarily. For example, in a worker cooperative, workers would share the surplus value created in accordance some voluntary rule for profit-sharing. In such a case expropriation exists according to the definition but it is benign owing to distributional arrangements.

    Exploitation enters normatively as workers are forced to accept a wage determined by owners as land is enclosed and they are compelled to work for wages for subsistence. This was intensified when workers were forcibly transferred from land to factories. Then workers only got the wage they were offered and the surplus value that was expropriated as profit went to owners by virtue of ownership of the means of production. Since surplus value as capitalist profit is unearned, it is economic rent similar to land rent under feudalism.

    Robert Paul Wolff addressed the question of expropriation and exploitation:



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  5. “Marx assumes that labour is the source of all value”. This is simply inaccurate. To Marx, and in accordance with Classical Political Economy, it is both Labour AND Land that are the sources of all value. Quoting from the first sentence of the fist chapter of the Critique of the Gotha Program (1875): “Labor is not the source of all wealth. Nature is just as much the source of use values (and it is surely of such that material wealth consists!) as labor, which itself is only the manifestation of a force of nature, human labor power.”

    Also, if you’re considering factors of production such as machinery as a source of value, I would just state the obvious, that ultimately they are labour as well (or its product) – “dead labor”.

    • Labor certainly is the substance of value in Marx. You seem to be misunderstanding what he meant by “wealth” in the Critique of the Gotha Programme, which is material wealth, i.e. use-values. This is made explicit even in the part that you quoted where it says “nature is just as much the source of use-values (and it is surely as such that material wealth exists!) as labor”. Value on the other hand is independent of use-value and is not a product of nature. In fact, Marx uses examples like untouched forests and virgin soil as valueless useful articles in the first chapter of Volume I.

      • Thanks for the above comments. Maybe it is too sweeping to say that Marx ‘assumes’ that labour is the source of all value, but I am sure that he argues that it is. Although I have a lot of time for Marx, I am more persuaded by the Sraffian argument that it is the whole economy that is productive (or not) and capital and labour can both be sources of a surplus, rather than just labour. If this is accepted it is impossible to measure separately the contributions of the forces set to work by labour and capital. This is not to deny the conflict between the two, although their material interests may also be unified at times, allowing some scope for cooperation in the workplace.

      • Simplifying, there are three factors — nature, work, and ownership.

        The story begins with nature. It is the primary source of use-value.

        Work adds value to the primary source of nature. Nature is potentially useful until it is make useful by work, even it that is just picking up a stick of firewood. Obviously, this is transformed by the introduction of technology but the discovery and deployment of technology involves work. In addition, early technology became common property.

        Ownership contributes nothing more of actual value than land and work.

        Ownership becomes parasitic by extracting surplus value from owning the means of production and not contributing productive work.

        Nature is “land.”

        Work is “labor.”

        Ownership of the means of production is “capital.”

        But this is primitive capital, so to speak. Marx defined “capital” as “self-expanding value” in the Grundrisse. In a monetary economics this is money capital.

        One can imagine early land owners extracting a share from ownership (power) and using tht share to exchange for other goods they desired, so all capital cannot be reduced to money capital.

        But Marx was chiefly interested in modern monetary economies. Here, money capital or financial capital is fundamental. Money is used as investment to produce goods for sale (commodities) for money. What’s left after deducting expenses, including the wage bill, is profit.

        Marx sough to show that profit was based on surplus value extracted without contributing productive work and simply as a matter of the power of ownership. This is not a relation of exchange among human being that are equal as persons, but rather the exertion of power by one cohort (ownership class) over another (workers).

        The workers are the “makers” in this model and the owners, the “takers.”

        Marx was responding to the analysis of economic rent in classical economics, especially in the view of Ricardo.

        Economic rent is compensation in excess of contribution in the sense it is not necessary to produce use-value.

        Marx is envisioning an initial state in which primary producer exchange goods having use-value. Think hunter-gathers and early agriculturalists. They were free and not alienated from their work.

        The succeeding state is initiated by the introduction of primitive accumulation, where the stronger assert ownership and extract a share based on ownership without contributing work. This resulted in not only extraction of surplus value as economic rent but also class structure and power asymmetries. The result was commodification and the subsequent alienation of workers that were no longer free and ceased to be integrated human beings.

        The value of commodities in markets is a combination of use-value and surplus value, and surplus value is the basis for owner’s share or profit.

        The rest is history. But the fundamentals remain the same even though the land lords were supplemented by owners of capital goods after the transition from the agricultural to the industrial age.

        Even serfs had a modicum of freedom in the agricultural age, since they could live at least a a subsistence level from their work on the land, But factory workers became completely dependent on their wage in a modern monetary economy.

        I think it is a decent paradigm for thinking about this. Where people go wrong in criticizing it, is imputing work to ownership as ownership. If owners also contribute even ideas no less organization, it’s “work” in the sense of making a productive contribution. So, it rewarding it appropriately (reasonably) is not rent. But if ownership is used to exert asymmetry of power to extract more than it reasonable, it is rent.

        Even in neoclassical models that assume perfect competition, profit is competed away, although ownership is rewarded based on reasonable return on investment based on risk as a legitimate expense. According to marginalism all receive their just desserts in terms of productive contribution. No power asymmetry, no rent. Perfect competition assumes asymmetry away.

        And even Keynes said to “euthanize the rentiers,” not literally, of course, but to adopt policy based on a system that preempts rent extraction.

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