Wednesday, November 26, 2014

McCloskey on Piketty: Caesar on a Pau-de-Arara.

The pictures below show a popular form of transportation in contemporary north-eastern Brazil, known in Portuguese as pau-de-arara (I'll leave details for another opportunity). Generally, impoverished refugees from the drought, those people leave their homes and flee to the cities in search of survival.


Gaius Julius Caesar, in the cusp of his power, never owned one such vehicle; neither did the richest Roman, the quasi-legendary Marcus Licinius Crassus, Caesar's contemporary. For that matter, neither did the Egyptian pharaohs, the Chinese, Inca or Aztec emperors.

Centuries of technological advancement certainly revolutionized land travel. And that most of this progress took place under capitalism is undeniable: even a pau-de-arara available to rural migrants from the poorest regions of Brazil puts to shame the technological advancements the Caesars enjoyed.

But you wouldn't think those migrants rich, let alone richer than Caesar, would you? Could you compare the enjoyment (i.e. utility) experienced by the migrants on a pau-de-arara and Caesar in his very own sella, or sedan chair?

The point is that one cannot identify technological progress with wealth, as Deirdre McCloskey implicitly does:
"(…) In Piketty's tale the rest of us fall only relatively behind the ravenous capitalists. The focus on relative wealth or income or consumption is one serious problem in the book". 
Adam Smith, David Ricardo, and Karl Marx knew that, even if McCloskey chose to ignore it: You are poor(er) or rich(er) in relation to your peers and your contemporaries, not in relation to historical comparisons, which easily lead to absurd.

Augustus hailing a pau-de-arara, on his way to Río. [A]

That is, unless you can conceive a Roman Imperator merrily hanging from one of those infernal contraptions, his hopes centred on finding work as domestic help in São Paulo or Río de Janeiro. "Imagine -- thinks Caesar -- they even have those amazing $50 electrically-powered vacuum cleaners!"

Image Credits:
[A] Augustus of Prima Porta, 1st century. Photographer: Till Niermann. My use of the file does not suggest the author endorses me or my usage of his work in any way. This file is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.

Sunday, November 23, 2014

Marx's Reply: Alabama!

Or, "40-Hour Week (for a Livin')"

Commenting on Mark Thoma's latest, Branko Milanovic writes that he didn't like Thoma's treatment of Marx and promptly corrects him, based on the authority of Joan Robinson (the well-known "doyenne of English Marxists"):
"Thus, in Marx we have two steps: (a) labor theory of value, and (b) value of labor power which together show (Marx was very proud of this) that exploitation is not mere stealing but takes place on the back of the action of the law of value. Capitalism allows everything to be bought and sold according to its value, including labor. Surplus value and exploitation are thus 'imbedded' in the 'value-driven' or 'value-based' nature of the capitalist process. They are not a robbery; they are just an intrinsic feature of the system.
Joan Robinson thought that Marx’s distinction between value  of labor and value of labor power was just 'metaphysics.' It is quite likely so. But nevertheless, it was an important methodological innovation which distinguishes Marx from Smith and Ricardo."

It's appropriate, then, that Marx himself, directly from Highgate Cemetery, should reply:
"That the method employed in 'Das Kapital' has been little understood, is shown by the various conceptions, contradictory one to another, that have been formed of it.
"Thus the Paris Revue Positiviste reproaches me in that, on the one hand, I treat economics metaphysically, and on the other hand — imagine! — confine myself to the mere critical analysis of actual facts, instead of writing receipts (Comtist ones?) for the cook-shops of the future."

But, there must be something incredibly convoluted in that, no? What, exactly, is involved in the labour power vs labour thing?

"This is the 'jingle' in a television beer commercial in which sweaty workers are shown enjoying a drink or two after their daily efforts. The advertiser's aim is to present ordinary citizens contributing to the advancement of the nation over and above what they are rewarded in wages (and, hopefully, spending some of those wages on the advertiser's 'liquid gold' as well). Ironically, and no doubt unintentionally, the jingle also summarises the Marxist theory of surplus value-that workers produce over and above what is returned to them as wages." (F. Stilwell [*])
Frank Stilwell (professor emeritus, Department of Political Economy, University of Sydney) is referring to the 1985 song "40-Hour Week (For a Livin')" (lyrics, Wikipedia entry), by American country, southern rock and bluegrass band Alabama. In Australia that song was used in a TV ad by a local beer manufacturer.

The idea seems clear to me; so clear in fact that a Joe Blow like yours truly can understand it: surplus value is what workers produce "over and above what is returned to them as wages" and which always ends up in their employers' pockets: the employer pays the exact labour power expended (the wages), all right; but whatever the worker's labour produces goes to his employer. When the output exceeds the input, there is a surplus value: expressed in money, a profit.

Being that so clear, it's astonishing that learned, middle-class, liberal, sophisticated, worldly, hard-working, economics professors appear to have difficulty understanding surplus value and Marxism.

Left in my confusion, I cannot but remember Upton Sinclair:
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it."

[*] 2002. Political Economy, the Contest of Economic Ideas. Oxford University Press. Page 114.