Debunking Economics Vs. The falling rate of profit

[La Comédie Noire]

I've been reading Capital volume II lately and decided to reread the chapter in Steve Keen's book on Marxian economics. While he praises Marx, he also throws some criticism his way.

According to Keen, Marx's theory of the tendency of the rate of profit to fall over time is wrong and is actually the weakest of three crisis theories he had, the other two being the "anarchy of production" and "over production" ones.

According to him, Marx actually failed to follow his logic all the way through when it came to the two fold nature of the commodity and ended up treating labor power as a special case as the sole source of surplus value. When in reality all commodities can add surplus value to a commodity. It makes no sense, he argues, to treat a machine as something that only gives back the dead labor embodied in it because that is its exchange value, the work the machine actually does is it's use value. Otherwise there would be nothing stopping you from arguing that labor simply gives the dead labor that was necessary for it's reproduction back to the production process and nothing more. The past labor stored up in a commodity furnishes new use values which are the actual source of surplus value and that is true regardless of the commodity as long as it is consumed productively.

Basically Marx had a superior positive proof, which he used to locate the source of surplus value, along side his so called negative proof which singled out labor as the only viable source of surplus value. This positive proof however, that it is a commodity's use value in production rather than it's exchange value in circulation that accounts for surplus value and thus profit, could be applied to all commodities and ended up removing labor from its preeminent place in Marxian Economy.

Any thoughts on this? I have a few objections myself, but I can't quite articulate them yet.

[ZeroNowhere]

Well, yes, one would object to Marx's views if one disagreed with his theory of value. God knows why you would claim that Marx had other, 'more valid' theories if you did disagree with the theory which underpins them, though.


According to Keen, Marx's theory of the tendency of the rate of profit to fall over time is wrong and is actually the weakest of three crisis theories he had, the other two being the "anarchy of production" and "over production" ones.Firstly, it's fairly clear that Marx didn't consider 'overproduction' to be a 'crisis theory' as such, in the sense of an explanation of crisis. He rather connects overproduction crises with the falling rate of profit quite explicitly; for example, in this (http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch17.htm) chapter from 'Theories of Surplus Value', or the chapter on the development of the contradictions inherent in the falling rate of profit. Secondly, the 'anarchy of production' sounds like just a reference to disproportionality theory, unsurprisingly the theory of choice for revisionists and utopian 'moral socialists' over the 20th Century, but misses the significance of the anarchy of production, its private nature, for the falling rate of profit and overproduction. Indeed, Engels mentions this anarchy in reference to overproduction:


We have seen that the capitalistic mode of production thrust its way into a society of commodity-producers, of individual producers, whose social bond was the exchange of their products. But every society based upon the production of commodities has this peculiarity: that the producers have lost control over their own social inter-relations. Each man produces for himself with such means of production as he may happen to have, and for such exchange as he may require to satisfy his remaining wants. No one knows how much of his particular article is coming on the market, nor how much of it will be wanted. No one knows whether his individual product will meet an actual demand, whether he will be able to make good his costs of production or even to sell his commodity at all. Anarchy reigns in socialized production.

But the production of commodities, like every other form of production, has it peculiar, inherent laws inseparable from it; and these laws work, despite anarchy, in and through anarchy. They reveal themselves in the only persistent form of social inter-relations — i.e., in exchange — and here they affect the individual producers as compulsory laws of competition. They are, at first, unknown to these producers themselves, and have to be discovered by them gradually and as the result of experience. They work themselves out, therefore, independently of the producers, and in antagonism to them, as inexorable natural laws of their particular form of production. The product governs the producers.

[...]

The contradiction between socialized production and capitalistic appropriation now presents itself as an antagonism between the organization of production in the individual workshop [ie. collective labour] and the anarchy of production in society generally. And likewise the falling rate of profit:


It is the compelling force of anarchy in social production that turns the limitless perfectibility of machinery under modern industry into a compulsory law by which every individual industrial capitalist must perfect his machinery more and more, under penalty of ruin.

[...]

We have seen that the ever-increasing perfectibility of modern machinery is, by the anarchy of social production, turned into a compulsory law that forces the individual industrial capitalist always to improve his machinery, always to increase its productive force.

[...]

The fact that the socialized organization of production within the factory has developed so far that it has become incompatible with the anarchy of production in society, which exists side by side with and dominates it, is brought home to the capitalist themselves by the violent concentration of capital that occurs during crises, through the ruin of many large, and a still greater number of small, capitalists. The whole mechanism of the capitalist mode of production breaks down under the pressure of the productive forces, its own creations. It is no longer able to turn all this mass of means of production into capital. They lie fallow, and for that very reason the industrial reserve army must also lie fallow. Means of production, means of subsistence, available laborers, all the elements of production and of general wealth, are present in abundance. But "abundance becomes the source of distress and want" (Fourier), because it is the very thing that prevents the transformation of the means of production and subsistence into capital. For in capitalistic society, the means of production can only function when they have undergone a preliminary transformation into capital, into the means of exploiting human labor-power. The necessity of this transformation into capital of the means of production and subsistence stands like a ghost between these and the workers. It alone prevents the coming together of the material and personal levers of production; it alone forbids the means of production to function, the workers to work and live. On the one hand, therefore, the capitalistic mode of production stands convicted of its own incapacity to further direct these productive forces. On the other, these productive forces themselves, with increasing energy, press forward to the removal of the existing contradiction, to the abolition of their quality as capital, to the practical recognition of their character as social production forces. The last paragraph would seem to be a fairly clear reference to what Marx called a crisis of 'overaccumulation', and discussed quite explicitly in the context of the falling rate of profit. This overaccumulation is, as Marx says, ultimately also a crisis of overproduction, that is, overproduction of capital. So, then, rather than three separate 'crisis theories' here, which may be judged independently, it would seem that the three are rather more interconnected than Keen implies.


It makes no sense, he argues, to treat a machine as something that only gives back the dead labor embodied in it because that is its exchange value, the work the machine actually does is it's use value. The labour process produces value. Value is the crystallized labour process. This process embraces both the labourer and the machine, and in a certain ratio at that. Still, though, it would seem rather bizarre to argue that Marx's argument that labour-power is the only source of surplus-value, of the process M-C-M', doesn't follow from his theories on the dual nature of the commodity. Keen's argument here doesn't really seem too far a departure from the view which Marx criticizes of capital being productive as such, simply because it is undifferentiated expenditure.

[La Comédie Noire]

Firstly, it's fairly clear that Marx didn't consider 'overproduction' to be a 'crisis theory' as such, in the sense of an explanation of crisis. He rather connects overproduction crises with the falling rate of profit quite explicitly; for example, in this (http://www.anonym.to/?http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch17.htm) chapter from 'Theories of Surplus Value', or the chapter on the development of the contradictions inherent in the falling rate of profit. Secondly, the 'anarchy of production' sounds like just a reference to disproportionality theory, unsurprisingly the theory of choice for revisionists and utopian 'moral socialists' over the 20th Century, but misses the significance of the anarchy of production, its private nature, for the falling rate of profit and overproduction. Indeed, Engels mentions this anarchy in reference to overproduction:

Yes, I thought that as well and I think he is biased towards "over production" because he is a Keynesian.

Also, I think he ignores the qualitative characteristics of labor power which make it different from other commodities because he likes Sraffa's "commodities by means of commodities". To him, it's all just commodities no matter how far back you go, though he admits the existence of social class. He even brings up the possibility that labor power is bought piece meal, while machines are bought outright, thus allowing the capitalist to dispense with labor power much more readily, but he dismisses this as somehow insufficient though he admits that industries with a higher organic composition of capital would make realization more difficult.