MELTing the concept of socially necessary labor time
I have been reading a series of essays by the Australian economist Peter Cooper on the alleged compatibility between Marx’s labor theory of value and modern monetary theory, which he has given the title, Marx and MMT. In particular I have been studying this particular essay, Part 1: Three Kinds of Macro Variables, which purports to show consistencies between Marx’s approach and modern money theory.
Needless to say, I am not impressed.
Peter borrows heavily from the TSSI school, who employ the so-called MELT approach to money as a substitute for Marx’s own theory of money. Here is the problem with the so-called monetary expression of labor time employed by the TSSI school as a substitute for Marx’s theory of money:
In the United States, according to the Bureau of Labor Statistics, during the month of May, 2019, approximately 162.6 million workers were employed. The BLS also estimates that, on average, these employed workers worked about 34.4 hours each week. This amounts to a total of 5.6 billion hours of labor time per week.
Does this mean that the value produced by these workers amounts to the equivalent of 5.6 billion hours of labor?
Perhaps, but how would we know?
According to Marx and Peter Cooper, in order to calculate how much of this labor time actually produced value, we would have to know how much of the 5.6 billion hours of labor worked during a typical work week in May actually fell into the category of socially necessary labor time.
How then do we determine how much of the 5.6 billion hours workers provided weekly during the month of May, 2019 was actually socially necessary?
Peter provides only one criteria:
“Labor only counts as socially necessary if it is performed with the average degree of intensity and proficiency currently attained in that line of production.”
This is as much as Peter tells us and it is helpful. But it is only one way labor time can be qualified as socially necessary. In addition to being performed according to definite socially determined standards of labor intensity and proficiency, Marx offers several more conditions:
- The labor must produce an object that satisfies a want.
- The labor must produce an object for exchange.
- The product of the labor must be transferred to another by an exchange.
If these three additional conditions are not met, according to Marx, “the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value”, which is to say, that labor is not socially necessary labor.
The peculiarity of Marx’s conditions for what constitutes socially necessary labor time are such that even if all labor in all lines of production in a community of commodity producers were performed with the average degree of intensity and proficiency currently attained, the possibility exists that their combined effort still might produce more of one or another commodity than is necessary.
How might this be so?
Marx discusses this in a fascinating thought experiment in chapter three of Capital.
Let’s suppose I have a friend who is a weaver. My friend, the weaver — let’s call her Sally Cleaver — has produced 20 yards of linen. As Sally knows, making a living by weaving is no easy career. Thus, she is diligent in her chosen vocation. Sally knows what linen goes for in her local community, so she prices her linen competitively. And she is careful to spend no more time than is on average socially necessary to produce her product. The price of her 20 yards of linen, then, is simply the monetary expression of the labor time realized in her commodity.
On one fateful morning, Sally shows up at the market with her 20 yards of linen confident she has met all of the requirements of her local market. Despite her diligence, however, she finds that her local market is saturated by the linen of other weavers like herself. Each has priced their linen precisely at the going market price and each has taken no more time than is required on average to produce their product. Yet, together, they have produced twice as much linen as the market can absorb.
Sally Cleaver and many of her fellow weavers discover that the greater part of their product is “superfluous, redundant, and consequently useless“, despite the fact that they each have spent no more labor time than is required by “the average degree of intensity and proficiency currently attained in that line of production”, and priced their product appropriately to reflect this labor.
This is a disaster.
Of course, Sally could give her linen away, but she has to eat. Although Sally is a generous person, and there are many people in her community who could use the linen, she does not weave for charity. She engages in weaving in order to make money to feed her family. Her primary business concern is how much money will she make by weaving. Yet, despite her individual entrepreneurial attentiveness, the law of value treats Sally’s labor together with the labor of her fellow weavers as if it is the labor of a single social weaver. It applies to this social weaver the same verdict it would apply to an individual weaver who had spent more labor time on production of linen than is socially necessary.
The result is catastrophic for Sally. Her labor has been declared superfluous by the impersonal forces of the law of value. The market treats her labor as if she had not labored at all; as if she had spent her entire day drinking in the local bar — with all of the hangover, but nowhere near as much fun.
For a commodity producer, to have one’s labor declared superfluous by the law of value is a terrible thing. Moreover, there is no appeal from this verdict, since it simply means one is unable to convert the product of her labor into exchange value, into money.
Contrary to Peter, Marx argues that labor can only be determined to be socially necessary if it creates a social use-value, a thing of utility for another. If Sally’s linen does not prove to be useful to another person — and this can only be proven by an exchange — “the labour does not count as labour, and therefore creates no value.” (Marx, Capital, v1, c1)
Peter makes a classic error here when he discusses Marx’s theory. He assumes that since there is a relationship between the socially determined average duration of labor required for production of a commodity and the money-price of the commodity, that the value of a commodity can be stated either in the form of this socially determined average labor time or in the form of its money-price.
In fact, according to Marx, what constitutes socially necessary labor time is not an “either/or” relationship, it is an “and” relationship; both conditions have to be fulfilled for the labor time expended on production of a commodity to constitute socially necessary labor time.
To return to the catastrophe encountered by my entrepreneur friend, Sally Cleaver, it is meaningless that she has expended no more labor on production of her 20 yards of linen than was, on average, required for its production among producers of linen. Beyond this, her linen had to prove that it was a social use-value, a use-value for another. This could only be proven by an exchange of her commodity for the commodity of another producer or group of producers.
Absent this confirmation that she had produced a social use-value, Sally produced only a waste product.
What confuses Sally even more, she explains to me later that night as she drowns her sorrows in her beer, is how Jeff Bozo, who runs a huge linen conglomerate in the kiosk next to her, seems to thrive at the time she is going bankrupt.
“I thought you said Bozo is trying to make a profit,” she says.
“Yup,” I answer.
“But you said he does this by having his workers expend superfluous labor,” she says.
“Yup,” I answer.
“How can Bozo make a profit engaging in superfluous labor, while I go bankrupt engaging labor that is, on average, socially necessary,” she asks, pointing out the absolute bizarre character of the capitalist mode of production, as opposed to simple commodity production.
“I guess you’ll have to read my next post,” I answer and drain my mug, before calling it a night.