[This is an excerpt from a much larger work on Max Weber's leitender Geist that I am preparing as one of the chapters of Krisis that follow the Nietzschebuch.]
is gained. Means of production are also complementary goods. But
[171] their values are not directly determined: we value them only because
they somehow or other lead to consumers' goods, and their value
can thus, from the point of view of the subjective theory of value,
be derived only from the value of these consumers' goods. But many
factors of production are always involved in the production of a
single consumers' good, and their productive contributions are seem-
ingly indistinguishably intermixed. In fact, before Menger, one
economist after another thought it impossible to speak of distin-
guishable shares of the means of production in the value of the final
product, with the result that further progress seemed impossible
along this route, and the idea of subjective value appeared to be
unusable. The theory of the value of complementary commodities
solves this seemingly hopeless problem. It enables us to speak of a
determinate 'productive contribution' (Wieser) of such means of
production and to find for each of them a uniquely determined
marginal utility, derived from its possibilities of productive applica-
tion – that marginal utility which has become… the basic concept of the modern theory of distribution and the fundamental principle of our explanation of the nature
and magnitude of the incomes of economic groups. (JA Schumpeter, "Bohm-Bawerk" in Ten Great Economists)
the significance of the length of the period of production in its two-fold aspect -
the aspect of productivity and that of the lapse of time.
He gave both aspects their exact content and their places in the
foundation of the system of marginal utility analysis. He further
made the length of the period of production into a determinant of
economic equilibrium, thus giving a sharply distinct meaning to the
concepts of 'productivity,' 'economic period, ''flow of goods'; and he
brought into the realm of analysis a rich multitude of relationships
in economic life which are as yet far from exhausted. (JAS in “Ten Great Economists”)
(183) balance with one another, the values of present and future goods can-
not stand at par even in a socialist community, that the value phenom-
enon which is the basis of the rate of interest cannot be absent even
there, and hence demands the attention of a central planning board.
From this it follows that even in a socialist society workers cannot
simply receive their product, since workers producing present goods
produce less than those who are employed on the production of
future goods. Thus, whatever the community decides to do with
the quantity of goods corresponding to that value agio, it would
never accrue to the workers as a wage (but only as a profit) even
though it were divided equally among them. This could very well
have practical consequences whenever, for example, the community
had occasion to become conscious of the economic value of its mem-
bers to itself; in such a case it could assess the value of a worker
only at the discounted value of his productivity, and since all work-
ers equally able to work must obviously be evaluated equally, a
'surplus value' must even here emerge which would appear as an
income sui generis. (183)
cause of profit only in the sense in which such exploitation would
occur also in a socialist state; second, there is exploitation not only
of labor, but also of land. For moral and political judgment this is
of course irrelevant, since the socialist state would use its 'exploita-
tive gains' in a different way; but it is all the more important for
our insight into the nature of the matter.(183)
of this topic – that the rate of interest is a purely economic and not
a historical or legal concept.(183)
the law of costs as a special case of the law of marginal utility. As a
consequence of the theory of imputation, the phenomenon of cost
becomes a reflex of subjective value, and the law of the equality of
the cost and the value of a product is derived from the theory of
value – never in our science has there been a more beautifully closed
chain of logic.
But all this so far still refers only to the world of values. That
All of its forms express themselves also in the mechanism of the ex-
change economy can be shown only by a corresponding theory of
price. Bohm-Bawerk therefore turns to price theory, developing the
implications of the law of value for the behavior of buyers and
sellers, and his investigation culminates in that celebrated proposi-
[172] tion (for the case of bilateral competition) which has since become
'historic':' The level of price is determined and limited by the level
of the subjective valuations of the two marginal pairs' - i.e .on the
one hand by the valuations of the 'last' buyer admitted to purchase
and of the seller who is the 'most capable of exchanging' among the
ones already excluded from the exchange, and on the other hand by
the valuations of the seller 'least capable of exchanging' among those
still admitted to the exchange and of the 'first' excluded buyer.
All this is developed first for the situation with given quantities of
exchangeable commodities with the conclusion that, since the
forces operating on the supply side of the market are the same as
those operating on the demand side, the old 'law of demand and
supply' turns out to be simply a corollary of the law of marginal
utility. This is then extended to the case of the formation of the
prices of commodities whose available quantities can be varied by
production.
one hand by the valuations of the 'last' buyer admitted to purchase [!]
and of the seller who is the 'most capable of exchanging' among the
ones already excluded from the exchange, and on the other hand by
the valuations of the seller 'least capable of exchanging' [!] among those
still admitted to the exchange and of the 'first' excluded buyer.
and want intensities, and under careful consideration of the factor
of substitutability, Bohm-Bawerk arrives(in Menger's sense, and in
a way similar to Wieser's) at the law of decreasing marginal utility
with increasing 'coverage' of wants within each category - i.e. with
increasing quantities of the commodity in the possession [!] of an indi-
vidual. (169)
The
“system of needs” can be satisfied best, most efficiently, rationally and
optimally, through the combination of industrial machinery, or means of
production, and of “free labor”. The Law
of Value as reformulated in the new marginal utility theory of the
Neoclassical Revolution represents the “scientific” specification by political
economy of the market price mechanism as the optimal system for allocating
existing scarce resources according to individual choices. The “machinery of
production”, the technologies adopted in the process of production, is
determined by the system of needs that “demands” its “rational and systematic”
utilization through bureaucratic rule so that its technically-determined
“output” or “supply” can be maximized to satisfy the “individual choices” as
fixed by the market price mechanism.
The “nature of the matter” is that from
the standpoint of the individual’s self-interest the new Economics
determines accurately the individual
contribution to the production of goods for final consumption (in Schumpeter’s
words quoted below, “the community has occasion to become conscious of the
economic value of its members to itself”), which is what “interests” the
“individual” ultimately, and what determines
the “value” and “distribution” or “allocation” of privately-owned social
resources between individuals in society:
Another application of this theory [marginal utility]
is the next step to a height
from which a wide view into the innermost working of
an economy is gained. Means of production are also complementary goods. But
[171] their values are not directly determined: we value them only because
they somehow or other lead to consumers' goods, and their value
can thus, from the point of view of the subjective theory of value,
be derived only from the value of these consumers' goods. But many
factors of production are always involved in the production of a
single consumers' good, and their productive contributions are seem-
ingly indistinguishably intermixed. In fact, before Menger, one
economist after another thought it impossible to speak of distin-
guishable shares of the means of production in the value of the final
product, with the result that further progress seemed impossible
along this route, and the idea of subjective value appeared to be
unusable. The theory of the value of complementary commodities
solves this seemingly hopeless problem. It enables us to speak of a
determinate 'productive contribution' (Wieser) of such means of
production and to find for each of them a uniquely determined
marginal utility, derived from its possibilities of productive applica-
tion – that marginal utility which has become… the basic concept of the modern theory of distribution and the fundamental principle of our explanation of the nature
and magnitude of the incomes of economic groups. (JA Schumpeter, "Bohm-Bawerk" in Ten Great Economists)
The
incessant message of all bourgeois intellectual forces at this critical time in 1917 of
global conflict and in the face of the Bolshevik challenge and the spread of
revolutionary worker movements in Europe is
the futility or the impossibility of Socialism. “Rational
socialism” can amount to or end up in the identical system of production as
capitalism, with only a lot more bureaucracy and a lot less free choice. At the
very best, “rational socialism” could “minimize” the “frictions” of the market
mechanism, its “transaction costs” and the negative effects of “disturbances”
or “exogenous shocks”. At the worst, it would distort the “free individual
choices” made by “free labor” by removing the ability of “labor” to determine
“freely” the individual choices of workers, in such a way that “bureaucracy
would rule alone” and would no longer
be “kept in check” by private capitalism with its free market and free labour,
through the conflictual and “ir-reconcilable” self-interests! Alternatively,
were there to be no state bureaucracy, then free market capitalism would not be
able to maintain the “laws of free market competition” that determine
“scientifically” its optimal level of production for the satisfaction of
individual needs and wants understood as “self-interest”.
(185) We now approach the last step of the stairway
that takes us to
the top of Bohm-Bawerk's edifice . He was the first to
realize fully the significance of the length of the period of production in its two-fold aspect -
the aspect of productivity and that of the lapse of time.
He gave both aspects their exact content and their places in the
foundation of the system of marginal utility analysis. He further
made the length of the period of production into a determinant of
economic equilibrium, thus giving a sharply distinct meaning to the
concepts of 'productivity,' 'economic period, ''flow of goods'; and he
brought into the realm of analysis a rich multitude of relationships
in economic life which are as yet far from exhausted. (JAS in “Ten Great Economists”)
Our proof shows further that, because only an agio on present
goods puts the relative demands of
present and future into proper(183) balance with one another, the values of present and future goods can-
not stand at par even in a socialist community, that the value phenom-
enon which is the basis of the rate of interest cannot be absent even
there, and hence demands the attention of a central planning board.
From this it follows that even in a socialist society workers cannot
simply receive their product, since workers producing present goods
produce less than those who are employed on the production of
future goods. Thus, whatever the community decides to do with
the quantity of goods corresponding to that value agio, it would
never accrue to the workers as a wage (but only as a profit) even
though it were divided equally among them. This could very well
have practical consequences whenever, for example, the community
had occasion to become conscious of the economic value of its mem-
bers to itself; in such a case it could assess the value of a worker
only at the discounted value of his productivity, and since all work-
ers equally able to work must obviously be evaluated equally, a
'surplus value' must even here emerge which would appear as an
income sui generis. (183)
Two corrections of the
idea of exploita-
tion are now also in
order: first, one can speak of 'exploitation' as a cause of profit only in the sense in which such exploitation would
occur also in a socialist state; second, there is exploitation not only
of labor, but also of land. For moral and political judgment this is
of course irrelevant, since the socialist state would use its 'exploita-
tive gains' in a different way; but it is all the more important for
our insight into the nature of the matter.(183)
It
follows that Socialism may well be able to remove some of the “anarchical”
features of capitalism which preserve in large part the “free individual
choices” of “free labor”. But it would do so at the cost of removing in large
part that very “free consumer choice” and “free labor” that capitalism makes
possible! In no way whatsoever could Socialism prevent or abolish the
“separation”, the Trennung, of the
worker from the means of production – the source of the Marxian “alienation”,
of the ante litteram Lukacsian and Heideggerian “loss of totality”, “reification”
and “facticity” – because these are “technically necessary” aspects of the
efficient utilization of resources for the satisfaction of the system of
individual “conflicting and irreconcilable” individual wants and needs!
There
is not and there cannot be a “capitalist” economy and a “socialist” economy:
these are only formal differences in “ownership” of the means of production
that must give rise in any case to
the “separation” of all workers, individually and collectively, from control
over their work in favour of a technocratic “bureaucracy” for the sake of the
paramount technical and rational “efficiency” of production and the paramount
satisfaction of “the system of needs”, of “the iron cage”! There can only be one Economics, one “economic science”: the time for “Political Economy” is past because politics cannot determine the
rationally calculable technical efficiency of industrial production and its
utilization of resources.
Theoretically
more important, however, is the
result
- to use a terminology that has become accepted in treatments of this topic – that the rate of interest is a purely economic and not
a historical or legal concept.(183)
This is the task and the supreme
achievement of capitalism as a mode of production based on “free labor” that it
“organizes” for the maximization of individual utilities. Its ultimate aim is
the efficient production of consumption goods, not just for the present but
also for the future, in accordance with the conflicting subjective valuations
(needs and wants) of self-interested individuals!
In applying this 'theory of imputation' (Wieser), which
owes
to Bohm-Bawerk one of its most perfect formulations, we
arrive at the law of costs as a special case of the law of marginal utility. As a
consequence of the theory of imputation, the phenomenon of cost
becomes a reflex of subjective value, and the law of the equality of
the cost and the value of a product is derived from the theory of
value – never in our science has there been a more beautifully closed
chain of logic.
But all this so far still refers only to the world of values. That
All of its forms express themselves also in the mechanism of the ex-
change economy can be shown only by a corresponding theory of
price. Bohm-Bawerk therefore turns to price theory, developing the
implications of the law of value for the behavior of buyers and
sellers, and his investigation culminates in that celebrated proposi-
[172] tion (for the case of bilateral competition) which has since become
'historic':' The level of price is determined and limited by the level
of the subjective valuations of the two marginal pairs' - i.e .on the
one hand by the valuations of the 'last' buyer admitted to purchase
and of the seller who is the 'most capable of exchanging' among the
ones already excluded from the exchange, and on the other hand by
the valuations of the seller 'least capable of exchanging' among those
still admitted to the exchange and of the 'first' excluded buyer.
All this is developed first for the situation with given quantities of
exchangeable commodities with the conclusion that, since the
forces operating on the supply side of the market are the same as
those operating on the demand side, the old 'law of demand and
supply' turns out to be simply a corollary of the law of marginal
utility. This is then extended to the case of the formation of the
prices of commodities whose available quantities can be varied by
production.
In
reviewing the theoretical masterpiece of his Viennese mentor, Schumpeter
remarks first on “the beautifully closed chain of logic” of Bohm-Bawerk’s
elaboration and extension of marginalist theory – forgetting in the process
that it was precisely the attempt by Karl Marx of closing his “system” by “trans-forming values into prices” that had
led him to accuse the German theoretician of indulging in “metaphysics” in the
appropriately named article “The ‘Close’ [Abschluss] of Karl Marx’s System”!
Schumpeter is unable to see that the “metaphysics” of the socialist and Marxian
“labor theory of value” have now become the “metaphysics of neoclassical
marginal utility”! It is precisely the attempt to identify and define a “Law of
Value” that leads to the “impossibility”, outside of “meta-physics”, of
“quantifying mathematically” what are inextricably social relations of production!
Already
in 1911, Schumpeter had celebrated at the very beginning of chapter two of the Theorie the advent of the Weberian Rationalisierung as the “overcoming”
(Uberwindung) of “metaphysics” and the triumph of “empirical science” – totally
mis-comprehending yet again the Nietzschean
denotations of the word as applied by
Weber. What Schumpeter overlooks in his Machian exultance is the
evident and dramatic “conflict” that Bohm-Bawerk’s theory contains and exudes! For behind Bohm-Bawerk’s “scientistic”
and lucid exposition lies all the explosive conflict of capitalist society even at the level of market pricing
according to consumer choice – according to “marginal utility”! However
much the “different subjective valuations” of goods on the market may be based
on “fair and equal exchange” on the market, the terrifying fact remains that
the self-interests of the “individual market agents” is determined through the
sheer violence of “imposition” of their subjective, egoistic choices and
preferences!
The level of price is determined and limited by the level
of the subjective valuations
of the two marginal pairs' - i.e .on the one hand by the valuations of the 'last' buyer admitted to purchase [!]
and of the seller who is the 'most capable of exchanging' among the
ones already excluded from the exchange, and on the other hand by
the valuations of the seller 'least capable of exchanging' [!] among those
still admitted to the exchange and of the 'first' excluded buyer.
The full conflict and sheer violence of
the market mechanism is made evident here in all its stark nakedness! It is
“futile” to seek recourse to “the beautifully closed logic” of the Neoclassical
theory reformulated by Bohm-Bawerk: the
inescapable fact remains that even behind the most “beautiful and elegant
equations” there is all the ineluctable conflict
of what Weber will soon call with astonishing (Marxian!) insight “the
capitalist rational organisation of free labor”!
[F]or value to emerge, relative scarcity has to be added to
utility. With the
aid of a distinction between want categories (or want
directions) and want intensities, and under careful consideration of the factor
of substitutability, Bohm-Bawerk arrives(in Menger's sense, and in
a way similar to Wieser's) at the law of decreasing marginal utility
with increasing 'coverage' of wants within each category - i.e. with
increasing quantities of the commodity in the possession [!] of an indi-
vidual. (169)
As Schumpeter quite uncritically reveals
and concedes with this summation, this “scientific-rational economic mechanism”
is still self-consciously dependent on the conflicting self-interests of
individuals and on their “historical or legal” acquisition of “possessions”
which determine both “the relative scarcity” of commodities as well as their
“increasing or decreasing quantities”! It follows inexorably, by definition,
that this “conflict” can never be in “equilibrium” and that contrary to what
Schumpeter claims above it can never be “a purely economic and not a historical or legal concept”! Quite
to the contrary, this “economic concept and process” instead must be “guided”
and “governed”! Enter Weber’s leitender
Geist.
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