Zero Marginal Costs
Paul repeats, in several places, the idea that the information revolution reduces the marginal cost of production towards zero. As I will show, in the next chapter, this idea flows from a fundamental error in Paul's understanding of the Labour Theory of Value, and his confusion of labour, the value creating substance, with the commodity labour-power. In short, Paul confuses the fact that rising productivity, which reduces the value of labour-power, with a reduced labour content in production. The two things usually go together, but they are not the same thing. A worker, who works for 10 hours, creates 10 hours of new value, irrespective of what their wages, i.e. the value of their labour-power is. If wage goods fall in value, from the equivalent of 6 hours labour to only 4 hours labour, it doesn't change the fact that the worker has created 10 hours of new value. It only means that, now, they get back the equivalent of 4 hours of their labour rather than 6, and the capitalist now gets 6 hours, rather than 4 hours as surplus value.
Paul has, in fact, fallen into the same confusion as Adam Smith, of adopting a cost of production theory of value, whilst thinking they are using a labour theory of value, but I will deal with that, specifically, in the next chapter.
If we take the substantive point of Paul's argument, the truth is that whether the marginal cost of production rises or falls depends upon the type of production. On the basis of the argument I set out earlier that the intellectual or scientific labour used in the initial development of products acts like fixed capital, we would expect to see that as the volume of output expands, this fixed cost is increasingly diminished, as a proportion of unit costs, as Marx sets out in Capital III, Chapter 6. But, as Marx sets out there, as output rises, the amount of materials consumed increases with it. Fixed costs fall as a proportion of total output value, but materials rise as a proportion of total output value. If we take, say, a pair of jeans, it may involve £1 million of fixed capital (whether it is in the form of actual machinery, or intellectual labour in their design). In addition, it may comprise £10 for materials, and £10 for production labour (divided £5 wages, £5 profit). If 1 million pairs of jeans are sold, their price is £1 fixed capital, £10 material, £5 wages, £5 profit = £21. (If the fixed capital is actually in the form of intellectual labour this has to be modified, because this “fixed capital” is also variable-capital, producing surplus value. For example, if the intellectual labourers are paid wages of £0.5 million, this constitutes £0.5 million of surplus value.)
Now assume that output rises to 2 million pairs. It is then £0.50 fixed capital, £10 materials, £5 production labour, £5 profit = £20.50. The marginal cost of production hardly budges, though the portion attributable to fixed costs, halves from £1 per pair to £0.50. The determinant factor here is the nature of the commodity as a material product that requires raw material for its production. The other factor is the scale of production. Suppose only 1,000 pairs of these jeans are produced. Then, in each pair £1,000 fixed capital, £10 material, £5 production wages, £5 profit, gives a price per pair of £1,020. This is not outlandish when compared to the prices of some designer clothing. But, now, if output rises to 2,000 pairs: £500 fixed capital, £10 material, £5 production wages, £5 profit = £520, so that we now have a significant fall in the marginal cost of production.
In reality, in the case of the intellectual labour here, whilst the value component in the jeans may be £1 million, the wages paid to the designers might be only £0.5 million, so that the real profit is higher by this amount. It forms essentially a surplus profit, or rent, which illustrates precisely why they might wish to restrict supply. But, in terms of the overall mass of profit compare the two extreme points here. At one end, with output at 1,000 pairs profit is £0.5 million on intellectual labour, plus £5,000 on production labour = £505,000. At the other extreme, it is £0.5 million on intellectual labour, plus £10 million on production labour = £10.5 million!
What is different about the current period, and it is a feature not of information technology, but simply of rising social productivity, which enables material needs to be met with increasingly less labour, is that the majority of value added comes from service production, rather than the production of material goods. Where this becomes significant then is the production of services. Paul sets out a series of examples like the ones I have used myself, in the past, in this respect. Because technology becomes very cheap, the objection that Marx raised that no individual labourer can afford to acquire the means of production, to be an independent commodity producer, falls away. It's not just the individual musician, artist, film-maker, and so on who can produce a commodity, which they can sell, directly to consumers, rather than first having to sell their labour-power itself, as a commodity, to capital. The computer programmer, accountant, sex-worker, and so on, can do the same. In fact, fairly early on, sex workers found that they could utilise that capability with the use of webcams, and live streaming.
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