Varn Vlog
Abandon all hope ye who subscribe here. Varn Vlog is the pod of C. Derick Varn. We combine the conversation on philosophy, political economy, art, history, culture, anthropology, and geopolitics from a left-wing and culturally informed perspective. We approach the world from a historical lens with an eye for hard truths and structural analysis.
Varn Vlog
The Problems of Surplus Value: A Discussion with Colin Drumm
Dive into the depths of the murky waters of Marxist value theory with Colin Drumm, the founder of Mimbres School, for an enlightening exploration. We examine the labyrinth of different interpretations, their birth in a politically charged context, and the reflections of Marx's idealistic concept of a liberal economy, sans state, in his work. We unwrap Petty's theories of surplus value, shedding light on the enigma that Marx's understanding of value theory often is, and challenging your preconceived notions.
Our journey extends through economic theory development and the repercussions of capitalized value and taxation. William Petty’s contribution to the transformation of surveying and his impact on the valuation of seized land is a highlight we delve into with gusto. We further explore the debates on tax proportioning post the civil war and its influence on our current comprehension of value. The discussion on Smith's theories - their influence on our perception of economic security and military strength, the Ricardo-Malthus debate on managing large permanent debt, and the birth of Keynesian theory, promises to be a riveting exploration.
Lastly, we dissect and critique Marxist and MMT Economic Theories. Colin’s analysis of Marx's labor theory of value, the intricacies, and its implications on government authority and money, presents a compelling narrative. We debate the problems with our intellectual history beyond Marxism and its influence on our present understanding of economics. We conclude our conversation by questioning economic growth, its implications, power dynamics, and distribution, urging you to reassess traditional economic theories and explore alternate perspectives. Join this intellectual voyage for a fresh perspective on economics and its theories.
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Hello and welcome to FarmVlog, and today I'm here with Colin Drum of member school fame, founder primary intellect.
Speaker 2:Although first money equals, as they say.
Speaker 1:Yeah, first, money equals, although, as about say you've expanded your contributing organizers and associates and basically general scholars, actually pretty significantly in the last year.
Speaker 2:Yeah, we've been growing quickly. You know, I mean it and I mean my, my. If all I wanted to do was fund myself, I could stop where I was. But I, that is, that's not the, that's not the project. So I'm trying to get money in people's pockets. So that mean there's three core organizers and we've we've brought in a couple fellows and you're kind of many organizers and they're gonna be more of those as our budget permits, basically.
Speaker 2:So there's more there's more people who will be announced soon, who are going to be joining the roster.
Speaker 1:So, yeah, that's, that's good news. I've been participating a little bit more and enjoying some of the courses that I've been auditing there, as well as some of the reading groups. One thing that I wanted to talk to you about actually, you even approached me about this one is to clarify your views on the Marxist understanding of value, itself highly contested and because I already know in the comments we're probably gonna hear like well, you aren't critiquing my form of value theory, blah, blah, blah, blah, blah.
Speaker 2:And you say something so I want. So part of the reason I asked to come on was I was watching some recent post about M&T and you were saying well, it's this value theory and not the other value theory. So there's, there's several different value theories, and that's part of what I want to talk about.
Speaker 1:I think you may have convinced me. There might be several different value theories and Marx that Marx himself is not particularly aware aren't the same, or if he is, he's not articulating it very clearly. So let's talk about your studies here. You started diving into Marx again and really digging into his sourcing on Smith Ricardo and then people like William Pettis and the stuff that comes up in like theories of surplus value.
Speaker 2:Pettis says the trade war is good. This is.
Speaker 1:Pettis, pettis, william Pettis, and you've been pointing out that, like, basically, marx makes Pettis too complicated and in doing so, actually Misses understands a lot of like basic stuff and what early economics was doing. They've also talked about this in terms of Malthus, which was not you vindicating like Malthus view on population you weren't doing that but that Malthus views on economics, which are under discussed, are not as unevolved or even as tied into as views on population as they are generally presented. So what got you interested in this and what you know? What did you start to read? Because I do know that this is part of your critique, not just of Marxism but of economics as a whole.
Speaker 2:So yeah, so this is. This is what I've been working on for the last five or six months now, since I got you know. Sometimes you just get in. I think we talked about this briefly last time I was on the show, but I've been. I've been plugging away at it since then sometimes you just get in an argument and you got to spend six months researching stuff to win the argument, and that's kind of what I've been doing, you know.
Speaker 2:Gotten to an argument about Marx, which is which is a you know Marx's economics is not something that I've spent a lot of time with in the last five or six years. You know I read that stuff I came to a conclusion about it. The conclusion maybe want to read some other things and so I've been away from it, but my you know my interest. I've been returning to this whole set of problems for a few reasons. One is at the member school, jared Baxter, who I think you had on recently or are going to have on.
Speaker 1:I'm going to have on in the fall, yeah.
Speaker 2:Right is given a series of courses for us on Marx. We began with the early Marx last year and so that kind of got me just reading that material, which I was reticent to read it. That's why Jared's doing Marx for the member school and I'm not doing it because I had such a love-hate relationship with it, but so I was reticent to get back into it. But as it has happens with Marx, once you start getting into it you get sucked into it again. And it also, you know, because I am going to be turning my dissertation into a book, and so I've been thinking, you know what?
Speaker 2:The book's going to be a little different. I'm going to remove a lot of stuff and add something, and one thing that I want to add is basically a bridge between in chapter one of the dissertation, which is about Marx, and chapter two, where I then move back to James Stewart and the late 16th, early 17th century and kind of the emergence of the English deficit state and that's kind of a big jump and in the dissertation I hand with it by saying and now we'll talk about William Shakespeare, et cetera, and so forth, but I want to find more of a bridge and interestingly, that bridge leads to Hobbes, who of course is a figure I think we talked a little bit about last time.
Speaker 2:I'm teaching Python right now, a figure that I have some fondness for. But it's interesting because Hobbes really is, in some ways, the originator of the value theory, but what he introduces is a different concept of what it ends up becoming.
Speaker 2:So there's a whole history, beginning with some just kind of brief remarks by Hobbes about what would eventually become value, that are taken up by his secretary, william Petty, who's a very interesting figure who I think is not talked about enough among people who are interested in the intellectual history of economics. So I've been, so I've been tracing that concept, the value concept, kind of beginning with Hobbes, into William Petty and then later economics thinkers, in the hopes of basically being able to you know, once I've done, showing what I try to show in that chapter, which is that liquidity, the price of liquidity, is this repressed concept in Marx.
Speaker 2:He really is anxious about it, wants it to go away, assumes that it isn't there this is a problem for the way that he presents the structure of a monetized economy.
Speaker 2:And the question that I don't answer in the dissertation, that I hope to answer in the book, is where did, why, where did Marx get this concept? Where did this concept come from? Why is it important? Why are we attached to it? Why are we arguing over it? Because I feel that a lot of people don't know this. I mean they, you, you undertake to defend it because you're a partisan of Marxism against some other kind of economic theory and you want to defend the value theory because we there's this idea. You know that the stakes of Marxism as a kind of science of economics depends in some way on this value theory. You have, you have other people who want to save Marx. You know and and and don't want to defend the value theory, and so they produce these readings of capital that basically make the economics arguments in the book irrelevant. I mean, this is the William Clair Roberts move was really the whole argument of Marxist capital is in three footnotes to Dante and the.
Speaker 2:The bulk of the text about the linen and the Bible is not. That stuff is irrelevant. I mean, he didn't really.
Speaker 2:I mean that's basically what they say. So so you know. So people are arguing over this thing, but I don't think they really have a great idea of where it came from. So I've been trying to trace that history and it begins in the 17th century. William Petty and Richard Comteon who who was responding to Petty, and and they are two thinkers so I'm going to talk about I want to, I want to try to explain this to you as we go forward who develop what's kind of the foundations of what ends up becoming the value theory.
Speaker 2:But they have two different versions of it and later value theories are trying to synthesize the two different theories and also add some additional complications. And in particular, it's complicated by the introduction of the concept of economic growth into economic thought, which is later they start talking about growth in the kind of mid, the late 18th centuries. Interestingly, it might be David Hume, who's kind of the guy who introduces this concept into the literature and later on you get the stuff about growth. This leads to a huge it's really becomes really confusing, but it's built on the foundations of this earlier theory, or or I call it a problem space. In this essay that I'm working on, it's not a theory, it's a problem space where Petty and Comteon neither of them is thinking about the growth of the economy whatever that means, and so I think it's easier to see the problems that they're working with in that literature.
Speaker 2:So I've been, I've been trying to work through that in, and partly I wanted to talk to you today for selfish reasons, because I'm a little stuck at the end of it and I'm hoping that trying to explain it to you will get it unstuck in my mind. Because because I'm now, I'm now to Ricardo, who's the last step before Marx, and it's and he has this whole debate with Malthus, right.
Speaker 2:So so which is an interesting debate and, I think, not well understood, because a big part of what they're actually debating about is the national debt. So essentially they're writing in that, in the wake of the defeat of Napoleon, and the English are trying to figure out what to do with the national debt because they've suspended convertibility to gold.
Speaker 2:So they have this big floating debt, that gold is trading above the net price, basically. So the official value of the currency in terms of gold is too high, the market is valuing it much lower, and and they're trying to decide whether they're going to wind down the debt or not, and part of what Ricardo and Malthus are arguing about is whether, if they paid off the debt, would that lead to a reduction of the economy. So it's a so it's a question about whether it's a question that's very much related to these modern M&T debates about what is public debt. Is it money itself? Does it? You know, what does it do? Well, they, you know Malthus and Ricardo we're we're having an argument about about that, among other things, and so what I am trying to foreground in this work and what I want to try to walk you through today is I think it's important to understand that value concepts are developed out of debates among the largely English, partly French ruling class in the 17th, 18th centuries about tax policy.
Speaker 2:So the value theories are conservation laws proposed in economics as a way to underpin an argument about taxation, about the limits of taxation, about the effects of taxation, other things like this. What's weird is that this drops out in Marx, because Marx is not very interested in taxation. He is sort of imagining a pure liberal economy with no state in it, among among other things, and so I it. So it's, it seems to me that when people, when people try to take value theories as the basis for a science of economics, they're abstracting it away from the political context that produced these concepts. And I think it would help us to try to remember, to try to know, try to trace that history and to reintegrate right the fact that value theories are always implicitly making arguments about the state and its taxation and its policies and stuff like that, and so I think it's helpful to try to reconnect that. So there's a whole course about petty and Conti on.
Speaker 2:That I'll launch into, but I'll let you get it.
Speaker 1:No, I mean there's a lot there. One of the things that that you did help me see when we talked about there's a surplus value is when Marx is running about petty, yeah, he does miss the tax content entirely. So, like this whole discre, this whole discussion, which, as a as a sub note, is such a specific part of value theory that often Marxist just don't discuss it at all. They're not talking about the stuff in theories of surplus value and I guess, part of volume one of capital. But even though even the value people, be they value form theorist, a kind of a connoisseur's value theory is, you know, and I think it does tell you the problem of how many supposed answers there are to what Marx believes is value theory. In a way, that's it's not true in other economic cases because it's not like there's. You know I'm not a believer in like marginalist economics, but we do kind of all know what it is like. There's not a debate about what the original thing or marginalism think it was right. So, and and also that you know the dominant tradition and Marx until recently, you know this was super important until the 1950s and the 1960s to like basically 2012, no one talked about that. If you talk to Marxist they're like oh well, we don't believe in that.
Speaker 1:Marx was wrong in that transformation. We've been trying to pick up the project otherwise David Harvey does this but when they try to read Capital, I'm not be frank. I actually don't understand what they're doing, because a lot of the times I'm like you're not making sense of the like. The categories that you're using Don't make sense with the text. You're pulling it from right, and so I got into looking at this. But even I started being like I don't know that. I know anyone who can explain to me what exactly Marx means by this right. So I started digging in the theories of surplus value to get back to this and there's a whole discussion of what is productive and Unproductive to the general surplus. But the general surplus is like this Negra, this nebulous aggregate of all economic transaction in a given economy. I mean yes.
Speaker 2:So. So this is what's more clear if we set Marx aside for a moment and go to the stuff that he's referencing, because I mean Okay, so I mean just a you mentioned earlier. Is he confused? Is he what? What's the deal with these different theories? There's a, there's a, there's a, there's a very generous reading and there's a less generous reading.
Speaker 2:I mean, and I'll try to return to this at the end there's definitely confusion and and in some ways, some deliberate hand waving in the materials that Marx is picking up, especially starting from.
Speaker 2:So Smith and then Ricardo and Malthus, as being these two people who are having a debate over the Smithian paradigm and the kind of next generation Smith and I think we can come back to this I mean, smith sometimes surreptitiously switches measures when he needs to order to make his arguments work out.
Speaker 2:So he, so he sometimes switches to a corn measure when the labor measure doesn't work for him, and these kinds of things. So there is some conf and unless you read really carefully but won't notice, there's big, big, big debates in the scholar, the literature, about this. People are very mad at each other about exactly what it is Smith is doing. So it is confusing and it's, and especially when you get to Ricardo. I mean that stuff is really difficult to wrap your to figure out what's going on, and Not only because Ricardo changes his views sometimes because he's like trying to respond to Malthus and other kind of stuff, but so it. So I mean the the generous reading of Marx and I think this is going on at a certain level is that he's trying To do dialectics with this value concept.
Speaker 1:So he knows there's contradictory concepts.
Speaker 2:And because he's, you know, kind of this earnest German schoolboy, he says, aha, have the tools to make contradictions into a powerful thing that moves forward. Right, so I'm gonna do, hey, go to it. And and I think you, basically, because they're so, two of the labor cons or the labor value concepts are what they call in the literature, the labor embodied theory and the labor commanded theory, and they're different, right, so, so you know. So one is the idea, this that's one is the substance idea. You know the idea that when, so in, marx talks about crystallized vow, crystallized social substance and stuff like that, that's kind of this embodied value, substance theory.
Speaker 2:The other theory, which is the first theory, this is Hobbes and petty's theory is the labor commanded theory, which just says the value of money is how much laborers you can hire, they. Basically, they're just arguing that the, that the nominal wage, is the deflator For, for monetary quantities. So if you want to know the real value of the quantity of money, just ask how many units of labor it will buy, and that's the real measure, right, that's the value commanded. So these things are in tension with one another, right, and? And the tension is the tension between price and cost, price and marks, because basically, you know the fact, there's relative surplus value, that one firm, because of its capital, can produce a good at a lower cost than the generally average cost necessary to produce the good. That is the tension between the two concepts. And so I think there's a generous reading and I think I actually think this is true to an extent.
Speaker 2:I think I think Marx is sometimes confused, but I actually think he's Trying to do something clever with this, which is basically to say look, these two value concepts are the first two terms of a Hegelian triad, because you've got the labor and body concept, which is value in itself, and you've got the labor Commanded value, which is value for another right. How much? How much labor is there in the thing versus how much labor is Recognized as being the value of the thing, right? So you've got the externalization Demand for recognition.
Speaker 2:And Marx is saying well, look, I can turn this into a Hegelian dialectic and I'm gonna produce a. You know, I'm gonna produce a synthesis. That's gonna, that's gonna be the next term. So so I think he is trying to do this and I think he has some awareness of this. Now. The problem is that if you go look at what Marx says about William Petty in theories of surplus value, which is one of the first things that I did when I was doing this, I think. I think that Marx himself is is the person who's responsible for a major misreading of William Petty's text, which I'll tell you about it a second after you've had a chance to say something.
Speaker 1:I Am thinking about this and I'm like well, the labor Commanded versus Like. This debate makes a lot of sense to me. Also the way that sniff, as and later Ricardo, move what they're counting Stores in. I was just thinking about this all of a sudden. The physiocrat versus pure Marxist, monetary, about people who would think you can measure it, monetary value versus a transformation problem versus a TSI. This all actually goes back to this, and it's not even like that's not in Marx, but the petty is like that's that. That's where you found the first misreading that you think is there, is, it is Marx's number, is like is. Of the, of all the things, this one's the one that actually is too generous to Marx.
Speaker 2:Yeah.
Speaker 1:I think this is.
Speaker 2:Marx's mistake and I think that his, but I think that his mistake has colored the reception of petty by non-Marxist's History of economics. So I think I mean Marx, I think this is little appreciated, but theories of surplus value is like a major, one of the first major like histories of economic thought. So Marx actually More, more than in addition to just being a political economist, he's pretty influential just on the the history of what it is so like when people talk about classical political economy, that's a term marks inventing, there nobody thought there was that before Marx said that there was and anyway.
Speaker 2:But but Marx goes looking in William Petty for the seeds of his own position, which is of this labor theory of value concept, and so what you'll find? So there's a book by Tony Aspermorgos called something about, In you can mess about Twitter and I'll see what the title of this, tony Aspermorgos. It's a really helpful book on some of this stuff, this history of political thought, that. But but he's confused about this too. I mean, what you'll get in Aspermorgos or other commentators is pet. Well, petty was trying to create the labor theory of value because he was confused and like his example doesn't make sense and and you know, etc and so forth. But Because and the issue here is that they can't make Petty's numbers work he gives a numerical example and if you try to read this example as being labor theory of value, it's nonsense. What I?
Speaker 1:but there's another way we can read it in which it makes sense.
Speaker 2:So basically, what Petty says is he says Okay, so imagine that you know there's a farm, right? So Petty wants to know about the value of an asset Relative to the value of the products of that asset. So you've got a farm and every year the farm throws off a stream of corn.
Speaker 1:What's the?
Speaker 2:relationship between those things. Right, this is capital, capital asset pricing. And Petty begins by saying well, basically, he arbitrarily Introduces a time horizon of 21 years, which he, he seems to think is like an empirical fact, that the, basically, the value of the farm is Worth about 21 years worth of the rent of the farm. This seems to be a sort of empirical observation. He has a story about this which basically says so Petty is interested in Actuarial tables, so he's one of these early people who's interested in calculating mortality, statistics about mortality, and he kind of has this argument that, well, 21 years is the maximum length of time that a son, father and grandfather are all alive at the same time and Somehow this is an explanation for why it doesn't really, doesn't really make sense and that, like, that part doesn't think of it. So it seems like Petty is observing this. He's saying the value of a farm is about 21 years worth of rent, and then he comes up with a story to explain it based on this actuarial data. That seems to be kind of what's going on.
Speaker 2:So you'll find people criticizing him later for not having a theory of this like why should it be like this? But he doesn't really have one. But. But his purpose in saying this is he wants to ask a question which is basically how do we understand the capitalized value of a non-farm income stream? So he, so he says look, you got a farm, there's, there's, you know, you've got an asset. It throws off a revenue source, but it's denominated in corn. So you've got, so you, you know, so you've got a certain amount of corn profits coming off of the farm.
Speaker 2:Now, how does that relate to Money, right? How do we, how do we measure that value in terms of money? Because one of the things that all of these thinkers are really concerned with is the fact that the, that, the, that there's an unstable relationship between the value of money and the value of corn. Because there's, you know, there's been a price revolution over the last hundred years and they've all noticed this. Prices change, so so they're like okay, so we need a real measure, right? Contrast this to the 19th century, and we've made this point for it together that in the 19th century the gold index was a fairly stable Relative to real prices, right? So these earlier writers not the case. They're very aware that the relationship between gold and are between money and and and corn changes.
Speaker 2:So so petty says okay, so how do we? How do we commensurate, basically, corn profits denominated in corn from Something else, from money profits denominated the money. And so petty kind of imagines Suppose you have the opportunity to invest. Well, he doesn't say this. What he says is suppose a man could get by his labor, sort of. So that's why people think it's a labor concept, because he kind of invokes the idea of labor. But he imagines, say, you just go to Peru and you dig silver out of the ground. He's been forwards the argument that says, well, the amount of profit you could get from Farming would have to be equal to the amount of silver that you should, you could dig out of the ground. And he assumes away the wages.
Speaker 2:So he assumes away what we would call labor, which is the wages you pay to the, to the worker he says well, just imagine that this guy who's going to Peru, just kind of like, digs potatoes, wild potatoes, out of the ground or whatever he feeds himself and and so it's assumed that away he says, well, the amount would have to be equal. So the amount of silver that comes from one year of going to Peru would have to be equal in value to the amount of corn Produced by one year of the farm. Now this doesn't make any sense if you think that it's a labor theory of value. Why? Well, because the asset has a price. If you could get an equal amount of silver by going to Peru and digging it out of the ground and coming back to England for free, for no purchasing of an asset, then There'd be no reason to buy the farm in the first place. So the fact that the farm has an asset value, um, depends upon the fact that you know that, that you don't have this other opportunity to go to go get the same Same profit without buying an asset, right?
Speaker 2:This is a puzzle that arises in petty's example when you try to read it through, this labor theory of value, and that's why everybody dismisses it. And this is in his. It's called a treatise on taxes. It's a little hard to find. But again, if you message me I can send you the text now, okay, well, so we're going to go back to the question what? But what's going on here?
Speaker 2:Well, petty's example makes sense If you realize that what he calls labor is what we would call profit, I mean, sorry, what we would call capital. That is he's. So when he's talking about labor he means an investor. He says his argument makes sense if you, if you, if you realize that he's saying he's making this equalizing rate of return on capital argument, so that. So he's saying the, the rate of profit available to be invested, to to be harvested by investing in overseas trade, has to be equal to the rate of profit available to be to be received by investing in a farm at home. So he's making an equalizing rate of profits argument. That's half of what becomes this, this transformation problem, right, basically?
Speaker 2:the transformation problem is the difficulty of reconciling a labor embodied theory with the equalizing rate of capital Theory. Marks doesn't realize that William petty already has the equalizing rate of capital theory. That's his original argument. Because he's making that argument for for reasons related to English tax debates after the restoration of the stewards and the end of the civil war. So so basically, um, you know the, the question for them was Well, um, how should we proportion taxes? Uh, between these two sectors, between urban property and rural property, because those are the two major classes of taxpayers, and and the way that their system was working out. The taxes were following, following disproportionately heavily on On land, on the, on the farms. Pretty much everybody's agreed about this. And during the civil war, basically the, the, the city of London managed to push basically all the taxes on they. They got rid of taxes for themselves, for the, for the commercial entities.
Speaker 2:William petty, in forwarding this argument about the, the, the necessary Equalization of the real rate of return on capital, which is his real theory, not the labor theory of value, he's saying this because he is a landholder in Ireland, so he's got a bunch of land on the periphery of the London logistics network, he's got peripheral farms. And his argument Is is to go to the London commercial classes right and say look, you Londoners have money, you've got silver, and what do you do with it? You send it overseas and invest it in the slave trade, for instance. This is one of the the thing the English are getting into the slave trade in a serious way and exactly the time that these writings are being formulated, you have this money, you invest it overseas and what do you get? You get more money. Petty says, okay, but look, what do you want to do with that money? You, london merchant, you've got money you invested overseas to get more money. Getting more money can't be the point. I mean, what do you want? And his answer is you want service, you want servants in London. So the real, what's the real value of these monoclonal Real, what's the real value of these monetary returns that you're getting by investing in overseas trade? Well, the the real value of it is how many butlers you can have and what determines how many butlers you can have the price of corn in London. And so basically, what he's saying is that, competing with one another, you merchant class, to get money from overseas, you're just going to be bidding up the price of labor You're, you're playing a zero-sum game with one another. So you don't have a coherent class interest, says petty, to just get monetary profits, because the value of those monetary profits has to be Denominated in the servants that you can hire.
Speaker 2:And so, when you shift taxes on to the agricultural classes, what are you doing?
Speaker 2:Well, you are making it Unprofitable to invest in a marginal farm, because Because the rate of return on your money that you could get elsewhere is higher, right, so? So, if, if you're an investor, what do you want to do? You want to buy a farm in Ireland or do you want to invest overseas? Well, if land is being taxed, then you're not going to want to invest in the, in the marginal farm, because it costs more to bring the corn from Ireland to London. So there's this diminishing returns as you get further from the core and and so, yeah.
Speaker 2:So, basically, so, so, so, because the rate of capitalization tends to equalize, um, you're, you are actually discouraging the kind of investments investment in marginal farms that will allow you, as a class, to get what you want and Instead, by you pursuing what looks like your class interest to push taxes on to the other faction of society. You're actually undermining what you should really want, right? I hope that kind of makes sense. So he is introducing this equalization of the rates of capital argument, which he describes as labor, although he's really talking about capital, because what he means by labor is just urban taxpayers as opposed to rural tax players. So he doesn't have this. He has this kind of Lockean rhetoric about how labor is the fundamental basis of property. But remember, when Locke says this, he includes his servant.
Speaker 2:Right, it says the, what is it? The peat my servant has digged, or whatever. It is right. So Locke is imagining that labor. When he says labor is the foundation of property, he also means labor that you hire. So when Petty talks about labor, he just means urban taxpayers. And he's introduced, he wants to introduce this capital is a rate of capitalization, equalization of profits argument, in order to try to argue against shifting all the taxes onto the agricultural base, to an audience of urban commercial investors, to try to convince them that this is in their best interest.
Speaker 2:And so what is interesting to me about this is is that the problem here is a question of how to distinguish between positional goods and absolute goods, how to distinguish between a good, that whose value is relative to its distribution. Right, money is only good if I have more of it than other people. So. So at one time Petty has a thought experiment, he he commits a kind of fallacy of composition where he says how do we measure the real value of all the money in England? Well, we take all the.
Speaker 2:Suppose you took all the money and divided it equally among everybody. How much, how many servants would each person be able to hire? Well, if everybody has the same amount of money, then nobody would be able to hire any servants, because nobody would need the work to be a servant. So so there's this interesting problem right when money is only really valuable because I have more of it than somebody else. And what Petty tries to do and this is the foundation for the whole discourse that becomes economics is to explain what is the absolute good. That is sort of obscured by the positional good on the surface of money and prices.
Speaker 2:And part of what I want to argue by, you know, through tracing this whole series of history, which gets a little complex. But it seems to me that economics was never able to resolve this controversy. So I mean this question how do we distinguish between relative goods, positional goods and absolute goods? Is the question that's never resolved, is the sort of last gasp of this controversy was the Cambridge Capital controversy, at which point they swept it under the rug and kind of forgot about it. But it's much easier when we go back to figures like Petty and Comte-Ingo I'm going to talk about in a minute, to see what they were arguing about, because it's much more clear. I think it helps bring these later problems into focus.
Speaker 1:So I want to talk about Comte-Ingo and mouth us a little bit before we get to how this is relevant to economics debates today, because people who know you online, have been, are probably, you know, are probably kind of interested in why you think this still matters in debates and why you think Marxist or Monta Monetary theorist or hybridist are the Marxist, who are fundamentally uninterested in what Marx spent the majority of his time writing about, which is actually a great deal of Marxist. William Clair Roberts is one form of it. A lot of socialists Republican Republicanism I mean small Republicanism, like the Neocouse Gates.
Speaker 2:They also seem to not care.
Speaker 1:Yeah, they also seem to not care about what Marx actually has to say about economics, which is strange to me. They're always downplaying it, Often because I think, as a side note and I know some of these people, I think because the debates around this and Marxism are immediately divisive, so they just would rather just make it go away. But how did the French play into this? Let's go back to that part of this history.
Speaker 2:Yeah, yeah. So the next move is Richard Confioune, and it's in a bit of historical irony that it's almost like two ominous right.
Speaker 2:So as you so you all may know. So, as I said before, so Petty is an investor in Irish land. More than an investor, he's the guy who surveyed Ireland after it was conquered during the Civil War. So I mean, basically what happened is that the new model army wasn't getting paid and they were going to become a political threat. And so Cromwell is like well, why don't you all go conquer Ireland and we'll give you Ireland instead of getting paid? So he kind of packs them off to Ireland just to deal with them. They end up conquering it and then they have the problem of what to do with the land and the basically was going to take 10 years to just to survey what they had taken.
Speaker 2:William Petty kind of wins this bid. He says I'll do it in a year and he basically he basically transforms surveying into a low skill thing so you don't have to train the surveyors. He broke it down into a system so you could hire untrained labor in order to do it, and he did it in a year. And then he made a great fortune speculating on the value of the shares, right, so he's the guy in charge of. So they're issuing all this paper that's backed by the Irish land and the paper is is there's dealers you can, it's bought and sold in secondary markets, and so nobody really knows what it's worth because they don't know how much it's backed by. So petty's the guy who's in charge of finding out what it's worth and he's also speculating on it, which led to a bunch of lawsuits that he spent like most of the rest of his life engaged in dealing with.
Speaker 2:But the irony that is that Richard Conteion is one of the people whose families land was dispossessed by the, by the new model army. So some of the land that petty himself ended up owning was once owned by Richard Conteion. So there's a bit of a personal animosity there. And so what's interesting is that Conteion closes petty's system. So petty, in his model, kind of assumes that there's new land at the margin available to be invested in. He assumes that there's this unoccupied land.
Speaker 2:Conteion, whose family right this supposedly unoccupied land was taken from, doesn't, doesn't have this principle. He says none of it's a closed system, there's no more land to get. And so, beginning there, conteion seeks to develop a theory that will explain essentially what the French state should be aiming for in terms of its trade policy. So I want to note that, basically, economics, in order to be economics, begins by saying that money can't be what you want, right? Money itself can't be what you want. It's got to be the case that you want something else beside money. What is it? And the reason that they're saying this, in contrast to the earlier thinkers, that they call mercantilists.
Speaker 1:I think mercantilism is a retro projection.
Speaker 2:I think it's an epithet, not just a real description of a real coherence of beliefs, but in general, like when people are writing economic policy for the state prior to the invention of economics, they generally assume that the state needs more money in it, that there's not enough money in the state, that it would be good if the country got more money. The economists say no, no, no, money is not what you want, in fact, just getting more money might even be bad.
Speaker 2:Right, it might be bad to have a surplus of money for various reasons, and Conteion is very interested in this kind of thing, but the reason that they're thinking this is that they've just watched the Dutch beat the Spanish. I mean that, like that is the basis for the development of this discourse, because Spain's the one with all the money. Look, you know, the Spanish king has all this money and the Dutch don't have money.
Speaker 1:They got debt instead.
Speaker 2:right, they got this public debt and they won. So how can it be that this little state with no land in it, how could they beat the Spanish empire? That's something the thinkers in this period are very interested in, and so they begin with the recognition of what you might hear referred to as the Spanish disease.
Speaker 2:The idea basically that if you just shove a bunch of money into a country, then it's going to create decadence. The rich people will get it. They'll just hire servants, they'll bid up the price of labor, their industry will become uncompetitive, they'll spend it all on imports and etc. So Conteón has this kind of cyclical theory according to which countries have a period of a golden age and then they get a bunch of money and then the money makes them decadent and they become weak, and there's kind of this cycle. And so the question is if money itself isn't what you should want, then what should you want? That's a more difficult question to answer than you might think. Right, I mean, what should you want? And Conteón's theory basically is and you can imagine that he's framing this rhetorically to appeal to a kind of territorially minded French ruling class that still imagines itself as a kind of feudal aristocracy or whatever. Conteón's argument is basically to say look, even assume that two countries have, in monetary terms, an even trade relationship. So they trade with each other, but the value of the goods balances out such that no money actually. They do it all with bills of exchange and no money actually moves between the countries. So even if there's monetary value parity between two countries, conteón says one country might still be winning. How Well, you'd be winning if the stuff that you export to pay for the stuff that you import takes less land to produce.
Speaker 2:So he is theorizing what we might now call the world system or the value added hierarchy. Right, he's saying look, there's a core and there's a periphery. And core countries export manufacturers and they import corn. They import agricultural goods. Peripheral countries export agricultural goods, they import manufactured goods. The manufactured goods take, if you calculate their value in terms of land, if you use an acre as your measure of value and say how much land everything take, then basically you can conquer other countries through trade by you essentially incorporate their territory into your virtual territory by giving them less of your territory in trade than you get of their territory. Right, that's basically his argument. And so you can. It's sort of the other side of the English corn law debates where eventually the English sort of decide hey, and this is relevant to this Malthus and Ricardo. They decide hey, why don't we give up on being energy independent? Why don't we give up on being have growing all of our own food? Because we'll import the food and we'll export manufactured goods and we'll develop in that way.
Speaker 2:So Contillon, I think, is trying to get the French government to see that this is about to happen to them and that they need to try to become the core rather than the periphery, because because France is exporting a lot of wine and corn and agricultural products and stuff like this. So so that's Contillon's theory and that is really the basis. Contillon is the one who introduces the substance theory. So Contillon introduces this value substance theory. His substance is not labor, he thinks. He thinks corn or land is the fundamental denominator of value. But that's where the embodied values thing comes from.
Speaker 2:So I think that much of the rest of the history of economics, and in a trajectory that kind of culminates with Marx, can be read as a tension between these two ideas. There's this English value sorry, labor commanded theory and there's this French corn embodied theory, and they're in contradiction with one another, and but both of them agree that money can't be what you really want, that money can't be what really matters. And so they explain money away, they show you what's going on underneath money and in certain ways that end up being very problematic, and I think I think really the foundations of what Marxists, marxists call the transformation problem is there already in this sort of dialogue between petty and Contillon, and so I think it's useful to return to them, because they, they, they present these problems in a way that is is much more direct and is less obscured in the sort of accumulation of jargon that you get after like 150 more years of people arguing about, about value.
Speaker 1:Right. So you know, we don't have to deal with fixed capital versus variable capital, which is, you know, a socially necessary labor time versus labor commanded, which makes variable capital. On all this, you know, your argument is like well, you know, these things explain some things, but they don't actually fix the fundamental problem that we're still seeing here. Correct, that's your basic assertion.
Speaker 2:I mean so I mean now we got to talk about Adam Smith because so so neither Compton nor petty are interested very much in the accumulation of fixed capital assets. So so I've been arguing that petty is a theorist of capital in the sense of capitalized value, he's interested in the question of what's the present value of discounted future income streams, that kind of question, and he's interested in that because it matters for English tax policy. But they aren't as interested in capital in the sense of machines, that that fixed capital assets that allow you to produce things more efficiently in terms of labor inputs etc and so forth. Right, this is a concern that comes later and it's something you know. So so one more of the value concepts. There's kind of this third, this is the whole, this is the Holy Ghost of the value Trinity, which is the relative prices of different commodities which is, which is something that people like Stuart and Mill, are kind of trying to develop this theory of later.
Speaker 2:In a way, I think that's a red herring. That's part of what I kind of want to suggest is that that is really not, that is just an. There's an original question of a manufacturing or a commercial sector and agricultural sector, and then and then you can kind of say, ok, within the commercial sector, we're going to make every good into its own sector and we're going to like repeat the analysis. But it's just repeating this original question, good by good, and so I feel like it complicates things unnecessarily. But that is a thing, that they're that, that, that the, the, the pre Smith, I guess thinkers are trying to think through, but the so again. So, ok, so with the later thinkers after Hume, there's this idea of growth and of course, there's Adam Smith.
Speaker 2:I think it is useful again to read Adam Smith in terms of not what his theory unfolds as a kind of theoretical structure based on these axioms, like labor is the source of all value, or whatever. But how is he attempting to intervene into a political, a policy debate in virtue of these concepts like these? These concepts are allowing him to do something, and this is where, well, the productive versus unproductive labor distinction comes in for Smith. So it's it's his argument, although we see it already in Kantian. It plays a role in Kantian's, as I said before, his, his cyclical theory of the rise and fall of communism, the rise and fall of commercial nations, involves this productive, unproductive labor distinction. The distinction, basically, is that landlords hire unproductive labor and capitalists hire productive labor.
Speaker 1:So if it's hired by a capitalist then it's productive.
Speaker 2:And if it's hired by a landlord, then basically you're imagining that it's just your butler or something you know. You're just paying somebody to kind of hang out and fan you with the bamboo leaves or whatever, and that's unproductive labor. So this, this plays a role in that theory. But for Smith, importantly, it includes not just the landlords but every government employee. So the unproductive versus productive labor distinction in Smith is just the public private sector distinction. That's it. Now that's a bit of a problem. There's all kinds of problems with this.
Speaker 2:We think that the point is to explain something productive. I think we do, the does the Starbucks barista produce value or not, or something like this. Right, I mean, that is taking this whole schema to a totally absurd place. But in Smith the point is just that's the government. And why does this matter? It's because Smith kind of in book five, which I recommend is the place to begin reading wealth of nations, smith begins with the observation that richer nations have military dominance over poor nations, which is a reversal of sort of this idea. You might have that, like rich nations become decadent and then fall to the, you know, austere deserts, islam and the Mads or whatever, like you might have. In the cartoon, you know, smith has the idea well, rich nations dominate militarily poor nations, and so, and so you need to become rich. Why should the government care about, about the wealth of nations? Well, because it's a, it's a security risk. You need to be richer or else you'll be dominated by other rich countries.
Speaker 2:And so there's a trade off, which is that you can hire a bigger army to march around and like, practice, their drills, or you could hire fewer workers, in which case they'd be available for the private sector for for labor. And so basically, smith's argument is that there's sort of this process that happens naturally in the private sector that produces wealth and this wealth makes you militarily stronger. And this is something that the private sector can do in the state can't do. So Smith sort of assumes. He basically says well, the state could try to do with the public's with, with the, with the, with the private sector does and, like you know, invest in factories and stuff, but it's less efficient and basically just has a kind of principal agent problem. That's his whole. His whole argument is that in the, in the private sector, the principal is the agent, and when you introduce the public sector, then he is no longer and so they're less efficient. And so basically, you know, whenever the state is taxing in order to fund, fund the army, it's sort of sucking energy out of this process that would otherwise be occurring, and so they're going to make it more militarily powerful later, right? So there's kind of this short term security, long term security trade off that Smith imposes by means of this capital theory.
Speaker 2:You know, basically as an argument for you know why the state should taxes a little. You know it's got a tax enough to do the necessary functions and no more than that. Because, because, even if the state thinks that it's sacrificing, you know, prosperity for security, really prosperity is security. It's just future security, right? So he's saying whenever you're going to be, you know he has this, you know you're this. When the state taxes, it takes away capital that would otherwise be invested in the private sector. So he's got this conservation law. That's, that's the point. There's a conservation law. The conservation law is introduced in order to make this argument about tax policy and, in particular, against the debt. Smith is very much against the debt and he said you know. So he says you know even though taxing is bad.
Speaker 2:It's the, it's the least bad way to fund the state, and so everything that the state does should be taxes, never debt funded. That's, that's this whole theory that he develops. Now the issue is that, as we kind of said earlier, smith is writing before the Napoleonic Wars. After the Napoleonic Wars, there is the debt, there's this huge permanent debt, and there's the question of what to do with it. So this Ricardo Malthus debate is a debate kind of internal to the Adam Smith paradigm. They both take themselves to be followers of Adam Smith, but they're trying to figure out what to do Now. That Smith's original, you know project, like don't let the debt get too big, like that roads are passed. So the question is you know what? What do we do now? And if we try to, if we try to wind down the debt, is it going to crash the economy? And and Ricardo wants to argue no, and part of how he argues, that is, appeals to versions of, say, is law, the law of markets, whereas Malthus is trying.
Speaker 2:Malthus who's kind of representing the interests of the people who are getting paid out of the national debt, the people who hold all this money, and he's trying to argue well, no, I mean, if you, if you, if you wound down the national debt, then all of the country Parsons wouldn't be buying stuff anymore and you'd have a crisis of effective demand and then the and then the economy would, would, would collapse. So what's interesting is that Malthus really anticipates much of what we now think of as Keynesianism, and he also seems to have the better end of the argument. I mean, this seems right, you know. I mean, there's there. Malthus is on the right side of divide between economic thinkers who see that money and debt, you know, there's this endogenous money problem. There's the question of you know whether the economy would be stable if only the government didn't intervene, and all this kind of stuff. And now this just says no, basically. Now that's what's curious to me and this is what I'm stuck on.
Speaker 2:We've now arrived at the part that I'm stuck on. So help me, help me think through it is that marks marks needs Ricardo to win in the Ricardo versus Malthus debate. He needs Malthus to be wrong because he needs Ricardo's value theory so that he can then try to perform this Hegel trick on it to show how, even if the government didn't intervene in the economy, it would still be unstable because its natural tendencies are, you know, contradictory. But he needs to say that, without taking the mouth is path, which is to say, yeah, the economy has naturally contradictory tendencies, which is why we need the stimulation of effective demand by policy of various kinds. So so he needs basically he needs there to be this real fundamental value logic in the economy that is impervious to monetary effects, that that, basically, the economy would be the economy that it is, no matter what monetary policy you choose, no matter whether you do that, that or not, no matter whether you do it into your not like. All of those things are causally irrelevant, because there's this one logic of the economy and it's the real logic of the economy. So he needs that In order to do what he wants to do.
Speaker 2:The problem is the problem is that the, that it seems like the. You know, the proto Keynesian mouth is sort of already won the debate, which I think is part of why Marx hates mouth, is so much. Right because he doesn't. It seems like Marx doesn't really know how to respond to that in a convincing way, other than to kind of double down on this, on this value theory that Ricardo has, where Ricardo is trying to yeah, I mean basically draw on sort of perfect equilibrium, self equilibrating markets kind of ideas in order to explain why the government should pay down the pay off the federal debt and it could do so without hurting anybody, in addition to the cornmau stuff that probably more familiar from from the Ricardo mouth is debate. So that's, that's in and it's out of that problem space, this set of problems, which is really should the government have debt?
Speaker 2:What are the effects of government debt? What are the distributive consequences of government taxation? What's the relationship between tax policy and growth? So the other thing they're arguing about is basically, you know, there's the Napoleonic Wars and England takes sterling off of gold and they print a bunch of bank notes and the economy takes off, I mean so so Ricardo has to say, yeah, yeah, I know that the like the economy is like growing a lot. We're having like a boom years over since we suspended convertibility to gold, but it's not because of that right there's.
Speaker 2:It can't be because of the money, right, the money can't be the reason money has to be an effect of what happens in the economy and never a cause of what happens in the economy.
Speaker 2:And he has to make this argument in order to try to advance the political argument that he has and and Marx's conceptual framework that he presents as though it's just, you know, a priori, almost scientific, objective claims. These are claims that he gets from Ricardo, who's advancing them in order to, in order to forward this specific political agenda. He's kind of a sound money guy, you know, and so I just I think that I think that people who are drawn to Marx because of the politics of it should be more aware of this intellectual history and and be weird, be wary of defending concepts out of allegiance to Marx when Marx himself is drawing on, drawing these concepts from people whose politics we wouldn't feel the same attachment to. Right.
Speaker 2:I mean right you like, like, can you imagine people, people saying like Well, we have to be loyal to the value theory because of Ricardo's politics? Right, I mean that nobody would say that, but there isn't. There isn't that much of a difference. Right marches, value theory, basically, is Ricardo's value theory. That's where he's drawing it from, and so I, and so I. So I think that's interesting for that reason.
Speaker 2:But the deep, the deeper thing that I'm interested in is is the positional versus absolute good problem, and and the fact that, vow, you need a value theory in order to say, look, I'm going to quantify the economy for you in objective terms that involve no positionality, and I'm going to do this because it allows me to advance an argument about what tax policy should be that is objective rather than just being the interests of one faction or another society, and that's what value theories are advanced for. Now Marx takes that on board as an assumption and this kind of reductive out of certain argument that he's constructing. But I think it's worth serious thought whether people who are politically invested in something called Marxism might be served by just contesting the assumptions in the first place. Rather, you know, by saying, by saying, look, I mean there is no objective measurements of the economy. That abstracts away from class, from positional antagonism in the economy. Basically, to say, look, the the problem that things are worth more the more they're unevenly distributed is a fundamental problem of economics and I think I think we might be better served by trying to draw that problem out into the open and denying denying the conceptual well foundedness of speaking objectively about value in order to show how value is politically constructed.
Speaker 2:There is no objective thing, it's it's well. Value is power. I mean value is a discourse of power. I mean here I sound like a phakodian, but but this is. I think this is right. So. So this is what interests me in all of this, because I think that when you trace the history of the concept all the way back to Hobbes and petty and their power theory of value, you end up in what I think are more, are more potentially productive places that don't, that don't involve all of this technical debt to, to, to Ricardo and Smith, that that you would get If you wanted to find Marxism as science.
Speaker 1:And also don't quite get into the optimistic managerialism implied by mid to later Canes. You know, like I do think, like that's one of the things that's always turned me off about cans is there's all these predictions that he makes based off his, his assumptions of government influence and money. Many of those things look to model out pretty well, at least within a singular nation, gets a lot more complicated when you're dealing with multiple nations and foreign and foreign currencies, etc. But but then there are these, these knock on effects that he predicts, like the dropping of the work day, what that don't happen, right. So for me, the reason why I have been, I have been so reluctant to drop the labor theory value, was around those issues.
Speaker 1:However, if you see money as something that can never be neutral, which is something that Marx assumes, well, interestingly, marx both assumes that and tries to explain it away. Actually in capital, I think that's that's a frustrating thing, because money is a in. Marx is is a fetish for a relation of production, which is a power relationship ultimately. But that you know. But he also kind of assumes that it's neutral once it's, once it's out in the world, like once.
Speaker 2:It is yeah, so so I think the I mean you know Marx's theory right, is that? What is it that he says? It's it's that you know the relation between people assumes the appearance of a relation between things. It's right, so so it seems like there's just this relation between things. One thing is worth X of another. And look, I mean really what that is is a is a relation between people it's it's, it's that sort of thing.
Speaker 2:I think the response of the view that I'm kind of trying to articulate and develop here would be to say look, I mean, marxist are always telling me how things seem, so that they can then pull the rabbit out of the hat and reveal to me that really it's some other way, but it Things don't even seem the way that Marxist say they seem. Right, that's that, I think is is the point, which is that if you look at prices, it doesn't appear like an objective quantitative relationship between things. It appears as a power struggle between buyers and sellers in the market and all this kind of stuff. Right, it just seems like that. So I think that's a problem for March, because they, because they want it, they need the power to be more hidden than it really is, so that they can then reveal it to you, because revealing the power that's hidden is the way that you're subjected as a Marxist. Right?
Speaker 2:You say I read Marx, I now see the power that's hidden, and I'm a Marxist. The wool has been pulled from my eyes, I no longer see the world like I was a liberal. It's this conversion thing. But I think the power is actually much more obvious than right there on the surface and it doesn't even seem that way in the first place. And so the problem is where do you go from there? Because, well, you've taken this promise of secret access to nominal economic reality off the table and you've said look, I mean, it's just a battlefield. Yeah, there are just power, there's just prices. We already know that. But then the value of having that revealed to you by critical theory is diminished, which I think is why they want to hang on to it so much.
Speaker 1:I mean it always took it as also they don't want to grant that political contestation of power within a currently existing state would be a viable means of doing this, although Marxists have also often backed away from that view pretty consistently, particularly as states are more powerful and surrectioning, harder and harder and further off for anyone to actually do so yeah, there's that. There's also this need to explain transitions in history which supposedly labor theory of value enables you to do. Except that's actually a problem in Marx, to be quite frank, because if you read his description in Capital, volume 1, which admittedly is a hypothetical there's nothing about that description that's actually limited to capital as it exists in quote, capitalism. It's actually kind of supposed to undoubtedly come off of barter, which, anthropologically, I have to give the grave rights and stuff they're due. We know that that's not the origins of money and while I'm not sure from other things that Marx writes that, he necessarily thinks it is.
Speaker 1:That's the dominant theory that you have in his work. So what do you do with that? Because on one hand we're arguing that the value form and abstract labor and blah, blah, blah, blah, blah is specific to capitalism and on the other hand we're like, yeah, but anytime more there's markets, this happens. But markets are not the primary thing that makes capitalism, because there's pre-capitalist market societies, and then all of a sudden you're in a real mess.
Speaker 2:And the reason that you're in this mess and this. I think this gets at some really deep problems with our intellectual history that go beyond Marxism. We've touched on this before. I mean this is the German idealism brain, the inner bug, which is that the reason that you need the value theory? I mean there's all kinds of reasons. Even if you don't know what it is, even if you can't agree with each other about what it is, you need it Because it says that history has a necessary form of appearance, that there is a necessity that is operating in and through history that is going to bring us to some determinate place.
Speaker 2:I mean that is so. I mean both Kant and Hegel are concerned with the question of the necessary appearance of freedom, and that's puzzling, because freedom seems to be the antithesis of necessity. I mean there seems to be this dichotomy according to which if things are necessary, then they're unfree because they're determined, and so freedom would have to be the opposite of necessity. Both Kant and Hegel want to try to show that freedom is necessary, and that's not a contradiction In Kant, that's the categorical imperative In Hegel. That's well, it's all of Hegel. It's supposed to demonstrate that there is a necessary overcoming of necessity that is operating in history. I think Marx is working completely within that paradigm, as much as he wants to claim to have escape inverted Hegel or whatever I mean he's really applying the same.
Speaker 2:He's indebted to the myth. He just wants to tell the myth in a slightly different way. And so there needs to be something necessary about history, which means about economic development. And in order to talk about things being necessary, you need to have units in which they are necessarily denominated, because if you can't even count things, then how are you going to come up with a theory about how they're necessary?
Speaker 2:But I think it turns out that really there are no necessary units in which to denominate any economic phenomena. I mean all possible units in which we might count. Economics measure magnitudes of good are themselves directly expressions of power. They are not objective, necessary categories that mask power. They are directly contingent expressions of power. They can be one way, they can be another way. It really just depends on who's in the accounting office and what the accounting framework is and who has the power to make their accounting framework the one that matters. And so there is a kind of deep contingency about the form of appearance of economic phenomena that is like anathema to the Marxist project, the level of its basic philosophical structure, kind of coming out of Hegel. This is the view that I'm working towards developing.
Speaker 1:So I guess your objection there makes sense. What I would ask you is why does this also entail a critique of MMT, although my suspicion is that the deep history of MMT has less to do with Minsky, less to do with Warren Mosler and a lot more to do with the neo-Cantian thinking in German historical school, and that Kalfried Knapp is actually, I guess, some other assumptions that are kind of dropped by the English institutionalists and Keynesians that pick him up Because he's not really picked up by the later German historical school. Interestingly, he's kind of picked up by Schacht in practice, but even that's kind of in practice more than for people who don't know who's German finance minister. But what I find interesting there is like, if you're like, oh, marxism, well we can't exclude the German historical school from all this German idealism being relevant, either because while they're not Hegelians, they are by and large Cantians or they are even quasi-Marxist. So do you think that's related? And because there's a lot of ways in which I also hear MMTers will talk about money and they will make assertions about, well, this much money in the economy won't mean this much employment.
Speaker 1:I'm like that still seems to be based off this idea that this balance sheet automatically equals this and you're skipping all the interim things in the middle. So, like Warren Moser right now says well, because the payouts on high bond rates, that's why unemployment's not gone down, because it's injected in the back end $0.6 trillion off the title national debt. I'm not sure that's a very back of the napkin calculation that he does. But then my immediate pushback on that is like well, that's just inverting the whole idea that the private debt sucks the money out entirely and isn't paying out Like somehow. You would expect that if it's one to one, then it actually shouldn't matter at all because the private debt should actually eat up the additional stuff dumped into the economy and it should have no effect whatsoever. That's not the case.
Speaker 1:Why that's not the case seems to be way more complicated than what you're saying, and it has to do with the fact that most of this seems to be looking at this in terms of just balance sheets Like. All we're looking at is balance sheets Like, and maybe the current situation seems to match what we think the balance sheet should say right now, although I'll also point out, almost all of these explanations are post hoc. So do with that what you will. I can make a lot of post hoc explanations work Simultaneously. As I said in my episode about this, I can also look at the quote declining rate of profits in GDP or whatever, and make that work too, like with empirical evidence, even though both things can't be true, and I can make the numbers work both ways, which tells me which made me more sympathetic to your proposition that maybe all of this is just like the numbers are hiding power relations anyway. But what is your critique of MMT in light of this?
Speaker 2:Well, I mean one thing I will say about the profits thing. I mean, even if you could measure real profits, which I'm skeptical of it suppose you could measure them and they were falling. I don't think there's any necessary reason to think that that matters. I mean, why should you care about profits rather than asset prices If profits are falling and asset prices are rising? What's the problem, right? So I mean, there's a bit of an assumption that what the ruling class cares about is profits, and maybe they don't.
Speaker 2:I mean, this is one of the things that I've been thinking about for a while. That initially made me skeptical, or looking for places outside of Marxism. What about asset prices thing? I mean what if there is no simple connection between, well, real substance, production stuff and asset prices?
Speaker 1:I mean if it's there doesn't seem to be like empiric.
Speaker 2:There doesn't seem to be. Certainly there's no consensus about it among anybody. Pick mainstreamers, pick Marxists, pick whoever you want. There's no consensus about it. So there doesn't seem to be. I mean, there's the other thing. If everything is getting worse, if, basically, what's happening in the economy is not that we're overcoming necessity and becoming the necessity of nature and liberating our creative potential, if what's basically happening in the economy is that we're shitting in all of the water and fucking up the planet, then if I were a powerful person, I just want to get the clean water and get the land and just sit there and wait, and I wouldn't care if I made any profits or not. The only thing I would care about is if I could fund my book. I just need to break even on making sure that my revenues pay my interest. I don't know if this comes-. There's the show I started watching, yellowstone, about the guy at the big ranch.
Speaker 2:And this comes up, this is presented as his attitude. Right, because I'm not in it to make a profit, I'm in it to preserve my dynastic wealth, anyway. So I think there's a bit of an unnecessary, an unwarranted assumption that profits are what the ruling class should care about. I mean, what if they don't? What if profits are just for paying interest and you just want to break even on your survival constraint and what you really want to do is get the assets and hoard them? I mean there is no why not? But the reason that we can't think that is because, well, the paradigm of economics sort of assumes historically and this goes this is again the Hegel myth that it assumes that these urban capitalists have permanently defeated the landlords as the sort of agents of history, and the question is how the proletariat is going to succeed in turn.
Speaker 2:But what if the landlords just go back to being the agent, the agent of history, like they've always been. And then the logic of the changes. But anyway, this is not the question you're asking.
Speaker 1:This is the core of the neo-futile debate. One of the things I've gotten to as I've dug into the neo-futile debate is I realized that in English common law and I don't know why this didn't occur to me, because I kind of know this, but it never occurred to me as important before In English common law like a commodity in a rent can literally be kind of measured the same way, because I can trade a source of rent as a commodity, which totally means that the distinction isn't that meaningful. So this whole debate over what counts as a rent and what counts as a commodity, which drives a ton of these debates about profitability, well, if I can trade a rent source as a commodity on the market, then what matters actually is when I'm valorizing it and when I'm doing with it. So that's actually kind of totally it's not something I can objectively say outside of the point of sale. This is doing this and acting like this.
Speaker 1:And when I realized that I was like oh, ok, so there's a problem with this conception of a clear distinction between the rentier economy and the capitalist economy to begin with. And Marx kind of flirts with that in capital volume too, but doesn't really, it's something he kind of plays with, and then the role of the state in all this he just doesn't deal with at all. So one of the things that I really started thinking about from you is OK, we have to deal with the cost of setting up markets, setting up currency exchanges and maintaining that that's not free, and it doesn't just happen.
Speaker 2:Well, it doesn't just happen and there's not one ideal way to do it. There's a number of different ways that you can do it, and how you set it up has different effects, but for Marx the logic of it emerged. He has this a priori analysis about what emerges. You know, things are traded and these are the necessary.
Speaker 2:It's a kind of Kantian categories that he's developing in the early parts of capital. And so if the institutional arrangements of the system matter, then you can't construct that argument. You'd have to go look at those. But I mean so OK here's. So there are these deep problems. How do you distinguish between productive and unproductive labor? These are distinctions that need to be introduced in order to make arguments work, but the more you tug on them, the more they fall apart. They're very unsatisfactory.
Speaker 1:How do we?
Speaker 2:tell the difference between and the relation between assets and commodities. What's the difference between them? Again, the more you can come up with these, you can do Talmud with it all day and have a lot of fun. But the issue I think in this relates to the M&T stuff is that the M&Ters think that they can get rid of these value theories, these conservation laws, and preserve but nonetheless preserve, the elite class consensus that the value theories make possible.
Speaker 2:So value theories make it possible for the elites to agree about what their common interests are in a way that rises above kind of factional disputes between landlords versus London merchants, et cetera and so forth. And in our day those conflicts are kind of like red state extractive industries versus coastal finance techs kind of stuff. I mean that's sort of the big division in the factional division in the US. In order for those two elites to agree about anything, they have to agree that they can measure GDP as a kind of value thing and they also have to agree that there's some sort of constraint that limits what the state can do. You know, in order for the state to do something, first the value has to be generated in the private sector and then the state kind of extracts it.
Speaker 2:And so you have to set up these value concepts as these conservation laws about something other than balance sheets. It's a theory about what is underneath the balance sheets. You have to have this theory in order to produce an elite class consensus. The Marxist theory says OK, I'm going to take on board the assumptions of the elite class consensus and show you how your system can't be stable. That's the goal of the argument the NMTers want to say. Well, in order to. The NMTers are the opposite. I mean, what they're saying is our allegiance to these value concepts is producing elite instability. The elites are mad at each other because the state is constrained because of these value theories. And if we wanna repair elite class consensus, then we need to just do functional finance and then we can make everybody happy. But I think the issue is that they don't understand the important role that these concepts they wanna dispense with play in creating the possibility of elite class consensus. And then they're surprised when MMT is divisive among the elites. Right?
Speaker 1:Right parts of it will be actually advised for policy, but only stuff that might lead to asset inflation or something like that, Like it's never fully taken on. And there are some of the tiers who are like, oh okay, class exists, we have to deal with that. And I'm like, well, power conflicts exist, you know, yes, classes is probably what I would say. You know, I'm a Marxist in this sense. It's the primary terrain, but it's not the only terrain. Furthermore, a lot of these classes, particularly the bourgeoisie, is highly divided, and always has been, and the idea that they understand their interest in a unified way is kind of, in and of itself, nutty.
Speaker 1:But it also misses one of the fundamental things that you pointed out. That goes all the way back to the beginning. Money is valuable if it's unequally distributed. That's part of the point. So any attempt to equally distribute it, no matter how you do it and maintain the elites is it is almost impossible. Because you're asking the people who have the controls of power to basically equalize power, Like in the form of this mediation through money and that like why the hell would anyone do that, Like unless they were forced to buy a gun, like it just doesn't really make sense.
Speaker 2:So it's you know so again. So I remember in your, when I watched your MMT thing, you know you were saying something about the value theories and you referred to the. You know the aggregate theories. It's not determining the individual prices, it's true with the aggregate, et cetera and so forth. I agree that that's what Marx's theory says, one of the reasons I wanted to come on and talk to you today. I wanna push you off that because you can't aggregate it. There's no the. Any possible aggregation involves a policy of composition.
Speaker 2:And so there's no way to talk about aggregation of these quantities because of all the things we've been talking about, and so that's a problem. I mean the idea that we can aggregate, that the law of you know, the value theory of labor is true at the level of aggregate, is the sort of conservation law that Adam Smith and Ricardo and thinkers like that posit in order to try to constrain government finance. But you know, but the problem is that there is no saying what would the value of money be if everyone had it equally. Is assuming a contradiction? I mean, that is a contradictory, you see. But money is money because not everybody has it. If everybody had it, it wouldn't be money, period. And so the value of money is an effect of its distribution, which means that there is this unresolvable power component in any possible measurement, quantitative measurement of any economic phenomena. I mean, unless you are literally just doing, you know, you're counting bushels of wheat and stuff like that, and you can do that, I mean, but that's not what economists mean when they talk about real quantities. I mean they mean something else and we can't produce it. And so this is now.
Speaker 2:This brings us into some of the stuff we've been talking about with Bichler and Dixon and that kind of, and it's why my view is similar to theirs. We've come at it from very different places. I some of the stuff that they say. I'm not qualified to even evaluate their arguments, so I don't know. But there's something important about what they're saying and whether it's exactly their theory or a theory that sounds like it.
Speaker 2:I think we need to understand that there are no objective quantities in economics that are fully abstracted from power, which means fully abstracted from distribution positionality. That means that quantification of the economy is something that accountants do. It's not something that happens naturally in the economy. It's something that accountants do and they could do differently. And if we're gonna understand the economy from a critical perspective, we need to understand that. Now we do need to think about real things in the world and not just balance sheets. I agree with you. There's something unsatisfactory about that, right, I mean to just say, you know to just say look, sexual balances, identity. Public sector red ink is private sector black ink. Okay, but now we're back to William Petty. Okay, you've got more money, but what do you want with it? You know, what do you wanna do with it?
Speaker 1:Right.
Speaker 2:What does it mean to you? How are you using money in order to exercise power? And we need to trace all of that, and that's something that, in the tears, are interested in, because they have a political agenda that is fulfilled by simply getting rid of these austerity value constraints and spending more money. But yeah, I mean, there's something you know, so, but I think that, basically, where I think this all leads is that we need to think about the economy in more concrete terms, in terms of, you know, like these theorists that we've been talking about, I mean, they have a difference between the agricultural sector and the manufacturing sector in their theory. That alone, like puts them ahead of a lot of modern economic theories that just have one sector in them, right? So, even just realizing that there's different sectors in the economy, I mean that's the beginning place for what I would think of as a more materialist analysis.
Speaker 2:And I know Marx has a theory of rent in volume three or whatever. But I mean, you know, it's not, it doesn't play a central role in his argument, like whereas Ricardo and Malthus are very much talking about agriculture, marx doesn't spend very much time arguing about the. In fact, he's kind of disdainful of arguments about diminishing returns and agricultural productivity and that kind of stuff.
Speaker 1:Yeah, I was actually. I was just reading Cojito on this and he's trying to say that Marx because of his Doyle's studies of German scientists and that was actually kind of actually you know, wanted to dismiss Ricardo's theory of returns, but really kind of accepts it I mean Ricardo Malthus debate but really kind of accepts it. And I've read it and I'm like I get where you see that he was reading that and I get why you say that he was concerned about soil depletion and diminishing returns there. But I don't get where you say that he ever accepted that, because it does seem like he still thinks that like infinite gross is possible by, you know, without considering the soil. And it's this new soil, fossil nitrogen.
Speaker 2:Fossil nitrogen, I mean.
Speaker 1:Right, it's just, it's totally there's this Leibig is the no-sec. Cojito is really writing this off of, and I'm just like you know it's a big leap to say that. Marx understands that, and thus we have a Marxian argument for, or like a more, you know, more balanced development of careful of certain kinds of growth, et cetera, Whereas I'm increasingly like, why are we talking about growth, about this at all? Are D growth for anything? We have to talk about a completely different way of dealing with this problem.
Speaker 2:But, yes, that's why I'm so passionate about all of this, because I think it matters for us, right? I mean, even the what gets called D growth, I think is sometimes on either side of this, but there's ways in which you might talk about D growth that accepts that there's such a thing as growth. I think we really need to challenge the idea that there's such a thing as growth. It's never been a very clear concept. When you look at the history of how this concept developed, it's full of real head scratcher kind of stuff. I mean undecidable distinctions, arbitrary pronouncements, other kinds of things like that. So, and you know, but the problem is that this, this puts hard questions on the table and, in particular, it's hard because we can no longer necessarily say that the trajectory of history that we're on is one that's leading to human freedom. I mean, that's what we have to, in a way, give up in order to dispense with that concept. Because, basically, growth, the idea of growth, is the explanation for how everybody can be free in the sense of getting whatever they want all the time. Right? Well, we'll all be free because we'll all just. We'll just have so much stuff that everybody can get what they want all the time. I mean that's sort of what growth promises, just to say, well, growth is not really a well-founded concept. There is this inherent positionality in well, in desire. I mean you want stuff because other people don't have it. I mean, look into your soul and tell me that there's nothing that you don't ever enjoy having something because you have it and somebody else doesn't. I think everybody experiences this. So there's this inherent antagonism that's constitutive of desire and what we want, what we desire, what we're trying to produce. And the problem is that if we start talking about material stuff how much water do we have? How much food do we have? How much airplane trips can we afford for each person to have? How much stuff? I mean, we're going to say you can't have what you want.
Speaker 2:And now we have said that there exist fundamental zero-sum relations in political order, and that's a problem, because that is the kind of structure that is potentially productive of enormous amounts of violence. And so that's the issue Is that this whole myth of growth, economics, all this stuff, is basically designed to tell a story that explains how political policy can be geared towards getting everybody what they want, with no zero-sum relations, no contradictions, et cetera and so forth. So as much as people like to criticize economics and as much as economics claims itself to be this pessimistic discourse that's interested in zero-sum trade-offs and stuff, it's really not the case. I mean, economics is incredibly optimistic in the sense that it sees history as this process of the overcoming of necessity, as the necessary overcoming of necessity.
Speaker 2:And I think if we give that up, the question is whether all we're left with is necessity and we just have to kill each other over it. And that's a possibility that nobody likes to think about very hard. So that's why they continue to believe in value and economics and growth and all this stuff. That's kind of where I'm at with this set of questions, but I think, if we take that challenge seriously, to say, look, I mean, can we make an accounting of what we have?
Speaker 2:and what our limits are and ensure that we remain within the limits. We're no longer talking about freedom, but we are talking about survival, and I don't know, I'd like to survive. I don't know how other people feel about it, but I'd like to survive and I think it's a serious question whether we're going to. So that's kind of where all this leads.
Speaker 1:The set of incidents when you talk about this in this era, or some terms of development, is interesting, and I always talk about anthropological studies of more egalitarian societies, almost all of which are ancient, by the way. I mean, that's the thing. It does dominate human history, but it all dominates human history. But so someone figured out how to compel other people to do agriculture and let's be honest about that, that was compelling other people to do it. If you look at agricultural societies decline in health. They didn't get people to do it because they volunteered. Despite what people may tell you towards this progress narrative, that's absolutely not the case. Anyone who's looked up bones would know it.
Speaker 2:And, by the way, we're going to be looking at all of this origins of agriculture in upcoming course number school taught by Jules DeLille on human origins. That's coming up in the fall. So awesome?
Speaker 1:Yeah, because that's been something I've been on for a while. I'm not one of these people who thinks that we can undo that. I'm not a primitivist, but it is something where I think OK, when we think about what egalitarian societies do, the one thing I will tell you is they are probably more competitive than you like, actually, and in many ways they have to sublimate and deal with a whole lot of violence. They do have to have pretty strong social norms and incentives to deal with violence, and that is not bringing in competition with outside groups, which is the thing that's almost always left out of. This equation is like yes, there are ways Humans have ways to neutralize competition between outside groups through expansions of sagalic kinship and these sorts of things, all about this.
Speaker 1:But, for example, when I always talk about my Hobbesian assumptions, it's just like oh, I don't have a Hobbesian assumption about individuals. I don't think individuals are necessarily out in a nasty, rudest and short way, but I do think groups of people are. I basically think Hobbes is right about the way collective groupings of people states, but also substate actors frankly actually act towards each other, whereas individuals with high social trust don't, but groups of individuals where social trust declines precipitously with outside groups do, and you have to figure out a way to deal with that and mitigate it, and I think you're absolutely right about the fear of that. There's also a real sense in which, if you don't mitigate that and I don't think value is going to mitigate it I remember reading the climate leviathan book and thinking it was far too optimistic giving current concerns that we were going to have a leviathan superstate and I was like, yeah, you're lucky if you get that. You're actual.
Speaker 2:The book's argument is that we're going to have climate X.
Speaker 1:Well, yeah, well, the book's hope. It's like if you actually talk to Joel Rainwright, we're not going to. Really, he doesn't think we're going to get that. He thinks we're going to get the climate leviathan. And my response to him is like that's too optimistic. Yeah, I wish That'd be nice. Well, the idea that you think these national bourgeoisies or whatever are going to do that before it is really too late for most people is kind of really optimistic. Climate X they can't even really. On one hand, there's all this. That's the section Like well, we should look at how indigenous people did this and blah, blah, blah, blah. And I'm super sympathetic to that. But I'm also like, yeah, but you haven't really explained how we get back there, unless you just kind of have this David Graber, david Wingrow like, oh, we just need to believe in it more. And I don't know, I'm just not. Even when I study equality, I'm not that optimistic that most of it's about just belief.
Speaker 2:One thing that this has come up in our courses before one thing that you observe sometimes in egalitarian cultures is that they destroy wealth Because if you don't want to become unequal.
Speaker 2:Just destroy the wealth, and then nobody has any wealth to accumulate in their lineage. And then again now you're equal, but we imagine that we can be equal, but preserve the myth that we're overcoming the necessity of nature. So we're both going to accumulate wealth and be equal. That's the idea. I think there are serious questions about whether that is the way that we should be approaching this problem.
Speaker 1:Yeah, yeah, minimum. That's why, when everyone talks about gay luxury, space, communism, are infinite markets forever? I just sort of laugh Like it's just like I just know Neither one of those visions. For one, I know I'm going to be being accused of taking a metaphor to literally whenever I talk about entropy. That's what everyone does Like oh, you're literalizing a physics metaphor. But I'm like, ok, but the laws of motion actually really do apply to everything. Why? So?
Speaker 1:Yes, I get that there's the sun and the Earth is not a closed system and because of the sun, labor can be. I get it. But really, though, there are limits here, most of which, by the way, is the accumulated dead energy. I'm not even dead labor, I mean literally fossil energy that's accumulated from billions of years of other dead things which we are going through and which we've found no equally dense source to replace Like. While I am hopeful that we can mitigate some of the of like, trying to go back to the 15th century or whatever, with renewables, I'm also pretty realistic that none of them are going to be as energy dense as fossil fuels. So, without pretty significant risks, such as nuclear power, where, yes, it is energy dense, but you've got a whole lot of other problems you have to deal with.
Speaker 2:So we're going to add out of the frying pan into the fire. It's the best case scenario for us, but yeah, I mean I think we need to. I guess the question for me is how do you develop a theory of political desires that replaces what we all feel is important about Marxism in a way that gets rid of this baggage, of these value theories, of the Hegel myth, of all these other things, and in a way that says, look, I mean, maybe we can accept our limits and we're going to have some food and some clean air and some fresh water and we're going to be happy with it. I mean, that's not what people get into, at least most people. It's not what they get into far-left politics for. But how do we reorient our vision around survival rather than freedom? I don't know. I think that's an important question. But again, I mean, if you say I care more about my survival than my freedom, you're now on the wrong side of the master's life dialectic.
