Administration costs

[Comrade #138672]

According to Marx, administration costs are part of the extra costs in the circulation sphere, which means that administration services do not add any value to the commodities produced in the production sphere.

I have a few questions about this, though. Let's say that a given individual capitalist owns a factory and buys the labor-power of around 1,000 workers or so. These 1,000 workers all add value to the commodities they produce. This is part of the production sphere. But, of course, the capitalist needs to keep track of everything and will need some administration / bookkeeping to make sure that everything happens smoothly. This is part of the circulation sphere. So, let's say the capitalist hires a few workers to take care of the administration for him. According to Marx, they do not add value, even though they are paid wages like other workers. The administration workers also need some tools to help them perform administration work, like computers (means of administration). But, obviously, these computers do have value.

1. So what happens to this value? Is the value slowly "destroyed" in the process, since the value is consumed within the circulation sphere rather than the production sphere?
2. If this is true, then why do we need to distinguish between administration services that do not add value and other services that do add value? Can we not just say that the administration work does have value (apart from the consumed means of administration), but that this value is "destroyed" when it is consumed in the circulation sphere?

[ckaihatsu]

According to Marx, administration costs are part of the extra costs in the circulation sphere, which means that administration services do not add any value to the commodities produced in the production sphere.

I have a few questions about this, though. Let's say that a given individual capitalist owns a factory and buys the labor-power of around 1,000 workers or so. These 1,000 workers all add value to the commodities they produce. This is part of the production sphere. But, of course, the capitalist needs to keep track of everything and will need some administration / bookkeeping to make sure that everything happens smoothly. This is part of the circulation sphere. So, let's say the capitalist hires a few workers to take care of the administration for him. According to Marx, they do not add value, even though they are paid wages like other workers. The administration workers also need some tools to help them perform administration work, like computers (means of administration). But, obviously, these computers do have value.

1. So what happens to this value? Is the value slowly "destroyed" in the process, since the value is consumed within the circulation sphere rather than the production sphere?
2. If this is true, then why do we need to distinguish between administration services that do not add value and other services that do add value? Can we not just say that the administration work does have value (apart from the consumed means of administration), but that this value is "destroyed" when it is consumed in the circulation sphere?


1. The functions of F.I.R.E. (finance, insurance, real estate -- bookkeeping, advertising, etc.) are all costs to business, so this means they're 'constant capital'.


[23] A Business Perspective on the Declining Rate of Profit

http://s6.postimage.org/c0b0m6i25/23_A_Business_Perspective_on_the_Declining_Rat.jpg (http://postimage.org/image/c0b0m6i25/)


The value of constant capital should be considered as (generic) 'capital', in however it happens to benefit the company to realize gains (or not).


[11] Labor & Capital, Wages & Dividends

http://s6.postimage.org/f4h3589gt/11_Labor_Capital_Wages_Dividends.jpg (http://postimage.org/image/f4h3589gt/)


2. Whether the value (of administrative functions or whatever other costs of doing business) is "destroyed" or not would depend on whether that particular company is profitable, or not, I'd imagine.

[Slavic]

Following Ckaihatsu, I would categorize administration costs as constant capital. I do not understand why Marx denies that these costs do not add to the value of the product. It is from my understanding that the value of a product is the some of its physical parts, the value applied from the workers, and the value added from the usage of constant capital ie. Machinery.

Administration costs would seem to me to act like another type of machinery that help facilitate the production of the commodity. The daily cost of this machinery "administration costs" would be added to the final commodity.

[tuwix]

2. If this is true, then why do we need to distinguish between administration services that do not add value and other services that do add value? Can we not just say that the administration work does have value (apart from the consumed means of administration), but that this value is "destroyed" when it is consumed in the circulation sphere?

I think that this lack of value is en effect of assumption that administration is only doing things that in theory owner could do by himself but he's so lazy of he has enough assets that employ to do it some other.
It was reality of XIX century. There was no corporate or income taxes these times and everyone could govern the enterprise by himself. But one who has excess om assets tend to employ someone other for things which could do by himself.
Now times has changed. States enforced regulations that stimulate a development of administration due to growing problem of unemployment. Today in so-called Western world majority of works is only to maintain employment and control the population by job. Only in very small enterprises owner can do work done by administration by himself.

[Comrade #138672]

1. The functions of F.I.R.E. (finance, insurance, real estate -- bookkeeping, advertising, etc.) are all costs to business, so this means they're 'constant capital'.


[23] A Business Perspective on the Declining Rate of Profit

http://s6.postimage.org/c0b0m6i25/23_A_Business_Perspective_on_the_Declining_Rat.jpg (http://postimage.org/image/c0b0m6i25/)


The value of constant capital should be considered as (generic) 'capital', in however it happens to benefit the company to realize gains (or not).


[11] Labor & Capital, Wages & Dividends

http://s6.postimage.org/f4h3589gt/11_Labor_Capital_Wages_Dividends.jpg (http://postimage.org/image/f4h3589gt/)


2. Whether the value (of administrative functions or whatever other costs of doing business) is "destroyed" or not would depend on whether that particular company is profitable, or not, I'd imagine.But profitable is not the same as value creation, or is it?


Following Ckaihatsu, I would categorize administration costs as constant capital. I do not understand why Marx denies that these costs do not add to the value of the product. It is from my understanding that the value of a product is the some of its physical parts, the value applied from the workers, and the value added from the usage of constant capital ie. Machinery.

Administration costs would seem to me to act like another type of machinery that help facilitate the production of the commodity. The daily cost of this machinery "administration costs" would be added to the final commodity.Marx denies that these costs add value to the commodities, because they are costs made in order to facilitate circulation. These costs do not enter the production sphere. Value creation only happens in the production sphere, not in the circulation sphere.

So, if we assume that is true, then this means that value is lost when it is consumed in the circulation sphere, i.e. "value destruction".


I think that this lack of value is en effect of assumption that administration is only doing things that in theory owner could do by himself but he's so lazy of he has enough assets that employ to do it some other.
It was reality of XIX century. There was no corporate or income taxes these times and everyone could govern the enterprise by himself. But one who has excess om assets tend to employ someone other for things which could do by himself.
Now times has changed. States enforced regulations that stimulate a development of administration due to growing problem of unemployment. Today in so-called Western world majority of works is only to maintain employment and control the population by job. Only in very small enterprises owner can do work done by administration by himself.But if a "non-lazy" capitalist would participate in the production process, then he could also add value to the commodities. What is the difference then?

[ckaihatsu]

But profitable is not the same as value creation, or is it?


Sure -- I can't see why not, since it's based on (new) revenue coming in.





Marx denies that these costs add value to the commodities, because they are costs made in order to facilitate circulation.


Could you dig-up this specific point by Marx for us?

I very much doubt that the cost / value *isn't* passed-on, since it wouldn't just *vanish* into thin air....

I agree with Slavic here.





These costs do not enter the production sphere. Value creation only happens in the production sphere, not in the circulation sphere.


I don't know that you can just summarily and arbitrarily keep these spheres *separate* -- I tend to think that the 'spheres' are just a term of convenience.





So, if we assume that is true, then this means that value is lost when it is consumed in the circulation sphere, i.e. "value destruction".


But a company with more / better investments of constant capital (value) would conceivably be providing products with better *value* (quality) than a company that is overall smaller in scale. I still don't see how value is 'lost' unless it's simply woefully mismanaged.





But if a "non-lazy" capitalist would participate in the production process, then he could also add value to the commodities. What is the difference then?


No difference whether the administrative / management tasks are 'in-house' or 'outsourced' -- value, in overhead, is being added, and is also a cost.