Scarcity and Abundance
Paul is right that at the heart of marginalism is the concept of scarcity. But, it's not just become wrong in its assumption about that as a result of information technology or info-capitalism. The basic concepts of marginal productivity theory were developed by James Anderson, and then by Ricardo and Marx, in their theories of differential rent. Marx, mostly adopts Ricardo's argument that the market value of agricultural products/minerals is determined by the least efficient land, rather than the average, because, unless this land produces the average profit, it would not be cultivated. In Theories of Surplus Value, he modifies this to illustrate the role of demand and the effect of Absolute Rent. Where Marx, following Anderson disagrees with Ricardo is in the notion that production must always move to less fertile lands, in order to meet rising demand. Marx shows that, as a result of rising demand, capital can open up new, more fertile lands, so that instead of rising marginal costs, they fall. More importantly, Marx shows where this can happen in agriculture, it always does happen in industry. Industrial capitals, he says, never introduce new machines or processes that are less efficient, less productive, or less profitable than what they replace.
Its not info-capitalism that undermines the notion of scarcity, but the whole history of human production, and particularly the history of that production under capitalism. Certainly, in the short-term, there may be limitations on how much of something can be produced, though, as Marx says, beyond a certain point, capital becomes very elastic in being able to expand production, without even the need to employ additional fixed capital. But, the whole history of capitalist production has shown the possibility of expanding output to ever larger volumes, and that contrary to the Malthusian prophecies of catastrophe, each increase in output brings with it greater efficiency and lower marginal costs. Even in the 1950's, as Colin Clarke showed, the world could feed itself several times over.
The fact that the unit value of commodities can fall to very low levels does not mean that value becomes zero, or that the surplus value becomes zero. Moreover, for capital, what is important is not the gross revenue but the net revenue, i.e. the surplus value. The surplus value per unit/profit margin may fall to very low levels – that is the basis of Marx's law of the tendency for the rate of profit to fall – whilst the mass of surplus value rises to ever higher levels, precisely because of the volume of production. The only issue here may be how to realise the value and surplus value. However, again, this is not a new problem. Fairly early on, capital learned to utilise insurance, including social or national insurance, as a means of pooling large volumes of small payments into larger collective payments. As well as tolls for roads and bridges, this problem of zero marginal costs, for public goods, was addressed by collective payments via taxes, and so on. And, I will examine the potential that the cloud now provides for exerting control over access to many information tech products, and thereby eliminating copying.
Paul says,
“Information goods exist in potentially unlimited quantities and, when that is the case, their true marginal production cost is zero. On top of this, the marginal cost of some physical info-tech (memory storage, and bandwidth) is also collapsing towards zero. Meanwhile, the information content of other physical goods is rising, exposing more commodities to the possibility that their production costs begin to plummet too. All this is eroding the very price mechanism that marginalism describes so perfectly.” (p 163)
Firstly, marginalism does not describe that price mechanism perfectly, because its underlying assumption is scarcity and diminishing returns, when that has never been the case. Its reflected in the fact that orthodox textbooks show the supply curve rising from left to right, reflecting higher marginal costs at higher levels of production. When it gets into the weeds, it becomes more sophisticated, showing rising short-run marginal cost curves, in the context of a longer-run falling marginal cost curve, but the underlying assumption remains that ultimately marginal costs rise due to diminishing returns.
Secondly, all that Paul is recognising here is what has always been true in relation to fixed costs, which is they too, along with labour fall as a proportion of output value, as productivity and output rises. The concept that Marx’s law was about a rising proportion of fixed capital, which more or less ignored the actual basis of his law – a rising share of raw material value – is a misrepresentation of Marx that has persisted for a long time, and can still be seen. But, that focus on fixed capital, rather than raw material follows more from Ricardo than from Marx.
Paul is right to note that the value of many commodities, including material commodities, is falling rapidly, but, if anything, the changed nature of production should lead to opposite conclusions to those Paul arrives at. It's always the case that fixed capital value shrinks as a proportion of output value. To the extent that materials and intermediate production experience falls in unit values, as a result of rising productivity, that falls absolutely, thereby reducing commodity values. Given that services account for 80% of value added, we should expect that is not affected by the increase in the volume of material processed.
The fact that a lot of value in these commodities comes from intellectual labour, and that this labour, in the realm of research and development, acts like fixed capital, is simply being reflected in the fact that the value created by the intellectual labour is spread over a huge level of output. Paul's faulty concept of The Labour Theory of Value also plays a part here, because he makes the error of assuming that because the value of labour-power is reduced, this is the same as a fall in the value of labour as a proportion of output value. It isn't. That depends on the quantity of labour-time, not the value of labour-power. A fall in the value of labour-power simply increases the proportion of surplus labour-time, and so surplus value.
So, we have a revolution in technology that reduces the value of fixed capital, we have a rise in the significance of intellectual labour in output. Both of these, however, fall as a proportion of the value of output, as the mass of output rises exponentially. To the extent material prices are reduced, this reduces the value of commodities, further releases capital, and raises the rate of profit. Paul seems to miss that point that the more those input costs are reduced in value, the more capital is released as revenue, and the more it raises the rate of profit, and facilitates capital accumulation.
And, whilst, traditionally, a rise in productivity has been marked by a proportional rise in the mass of material processed, for all the reasons Paul has described, and that I have set out elsewhere, that is no longer the determining feature. Take the example of media production. A cameraman could previously have used several cameras, and a lot of time to stitch images together to produce a rough 3-D picture. But, now, a 3-D camera, and recent technology allows that to be done in no more time than it previously required to produce a 2-D video. The fixed capital (camera) here may cost little more than did a previous camera, and before long probably less. The labour here becomes more productive, i.e. it now produces a 3-D video in the time previously required to produce a 2-D video, and less time than was previously required to produce a 3-D video. But, no raw material is processed as part of this process, let alone a larger quantity of raw material.
The firm selling the 3-D video may be able to sell it at a higher price than a 2-D video, even though it only requires the same amount of labour to produce, because consumers may see a 3-D video as providing more use value than a 2-D video. In other words, they may view the labour used in the production of the 3-D video as complex labour, relative to that which produced the 2-D video, even though, in practice, its the same labour. And, the employer will have paid the cameraman the same wages as before, because the value of their labour-power has not changed. So, the firm will now get a higher rate of surplus value, and higher rate of profit.
Sitting here, writing on a sunny day, looking across my garden, and the fields beyond, I was thinking about the same thing in relation to the use of drones for aerial photography, where the same kind of argument can be made. And, this applies to increasing areas of production, where raw material processing plays no part or only a minor part, but where complex labour plays an increasing role. The consequence of technology in these cases is increasingly not to reduce the amount of labour employed, but to increase the quality, range, and quantity of these outputs, by the existing labour. But, again, Paul fails to account for the fact that, if anything, a growing proportion of labour is complex labour – thereby creating more value and surplus value – but that the very processes he describes, of falling commodity prices, not only reduces the value of constant capital, thereby releasing capital as revenue, and raising the rate of profit, but also reduces the value of labour-power, thereby releasing variable-capital as revenue, and raising both the rate of surplus value and rate of profit.
Because Paul accepts the marginalist claims about scarcity, he believes that non-scarcity undermines orthodox theory. But, the reality of non-scarcity over the last 100 years has not undermined it. The fallacy of the Ricardian Law of diminishing returns and his theory of crisis built on it, as with the Malthusian theory, did not stop the marginalists adopting that principle in the first place. Contrary to Ricardo and Malthus, even in the 19th century, in place of diminishing returns, falling profits, crisis and catastrophe, the opposite was seen. Capital expanded massively, productivity rose, unit costs fell, and the mass of profit grew like topsy. Falling nominal commodity prices, resulting from that process did present a problem, because workers are reluctant to accept lower nominal wages, even when they represent a rise in their real wages. That is why, alongside Fordism, central banks were introduced to create low levels of annual inflation, so that nominal wages could rise, but by less than the rise in productivity, so that the rate of surplus value could rise.
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