Value of Knowledge Reference

Theories of Value

What do we mean by value? Everyone, it is said has their own values. I value truth for example, I value my mother. Is it legitimate to ask "How much?" ? Or is it legitimate to insist that there is a meaning to value for which the question of "How much?" is meaningless, a qualitative sense of value. If I had to lie in order to save my mother's life, or if she was kidnapped and I had to pay a ransom, wouldn't I then be forced to recognise that my values were quantifiable? Indeed, value is meaningless outside of the act or possibility of exchange.

But more than this: history has for a long, long time been bringing everything human into a relation of exchange with everything else. In days long ago the question of exchanging something rarely arose, and the concept of value could not exist in such a society. "Thou shalt" certainly existed. A society without values is not an unethical or immoral society. But the question of value poses itself when the things produced by human labour (and I include here even the most intangible as human products) become the subject of exchange. We live in a time when few corners of life remain untouched by the possibility or actuality of exchange.

In Section 3 of Chapter One of Capital Marx traces the development of the value relation from the "Elementary or Accidental Form of Value" through 12 different forms up to the "Money Form" as exchange becomes more extensive in social life. Marx's Capital remains the definitive work on value as it developed up until the 1860s. The aim of this work is to trace the development of the value-form and the concept of value since then.

In the article on "Ethical Values", I pay attention to the development of Ethics and the place of value in Ethics. If there ever was any doubt about the legitimacy of equating the meaning of value in these two contexts, then John Stuart Mills' Utilitarianism despatches that doubt. The Ethics of Utilitarianism is the mirror image of his political economy, and bourgeois ethics has not developed one iota past Utilitarianism in the 150 years since, despite the development of the productive forces which continue to pose ever more fundamental challenges to Utilitarianism.


My object is to study the historical course of the concept of "value" in bourgeois economic theory, and

  1. Correlate the phases in this history to the trends of bourgeois philosophy, principally epistemology, which coincide with them, and where possible establish the historical connections in the domain of theory between the theory of knowledge and the theory of economic value, and
  2. Correlate the phases in the history of the value concept with the actual history of economic value itself.

In this way I wish to explore the concept of value as a mediating point in a thread connecting the development of the capitalist economy and the development of bourgeois thought.

One of the problems in achieving this is that from a certain point, the word "value" actually disappears from bourgeois economic theory altogether, as if the word had been "given a bad name", so it is with a little licence that it is possible to trace the concept of value during a long period in which it goes by another name. "Value" reappears in twentieth century economics as in the expression "value-adding".

Also, if I am to be able to talk about the fate of value itself in the growth of the global economy, how can I do this without relying on some specific concept of value myself? In general I intend to let the history itself guide me so far as possible.

I am motivated in this study partly by the observation that Marx's Capital was sub-titled Critique of Political Economy, and was in as large a measure a study of the development of the concepts of bourgeois political economy as it was of the working of the capitalist system of economics itself. I want to continue Marx's study of "Theories of Value".

However, I do not intend to recapitulate Marx's study of classical political economy or give an exposition of Marx's own ideas, both of which have been better done by others before me. I want to study the fate of the concept of value from John Stuart Mill (a contemporary of Marx) up till today (the Postmodern Philosophers and the Complexity theorists).

Classical Political Economy

William Petty

(1623 - 1687), founder of English Political Economy, successively seaman, physician, Professor of Anatomy, Professor of Music, inventor, surveyor, landowner, member of Parliament and statistician, whose main contribution to political economy, Treatise of Taxes and Contributions (1662), considered the role of the state in the economy and touched on the labour theory of value. A founder of the Royal Society, he was a protagonist of the empirical scientific doctrines. Petty favoured giving free rein to the natural forces of individual self-interest. Unlike liberals after Adam Smith, however, Petty considered the maintenance of a high level of employment by monetary and fiscal policies and by public works to be a duty of the state. Marx argued that the bourgeoisie of this time needed the force of the state, via taxation or other means, to create conditions for capitalist accumulation. In the Treatise, he argued that the labour necessary for production was the main determinant of value.

The Physiocrats

Quesnay and other French writers of the 1750s and 1760s were the first economists to begin to analyse production rather than simply circulation in the endeavour to find the source of surplus value. They believed however that only agricultural labour was truly productive. Value extracted from Nature by agricultural labour is distributed by circulation and manufacturing is simply the utilisation of labour supported by the surplus product of the land for other activities more or less akin to circulation, in much the way Marx regarded domestic service as expenditure of surplus rather than productive labour.

"As the actually first systematic spokesmen of capital, [the physiocrats] attempt to analyse the nature of surplus-value in general. For them, this analysis coincides with the analysis of rent, the only form of surplus-value whch they recognise. Therefore, they consider rent-yielding, or agricultural, capital to be the only capital producing surplus-value, and the agricultural labour set in motion by it, the only labour producing surplus-value, which from a capitalist point of view is quite properly considered the only productive labour. .. pushing into the background in favour of its own practical interests the beginnings of scientific analysis made by Petty. ... The physiocrats, furthermore, are correct in stating that in fact all production of surplus-value, and thus all development of capital, has for its natural basis the productiveness of agricultural labour". [Capital Vol III, Ch XLVII]

In the Physiocrats we see the naïve-materialist conception that only Nature, not human labour, can be the source of value; it is this naïveté which is criticised in Hume's scepticism. Also, we see the Physiocrats promoting what Marx refers to as their "own practical interests". The promotion of their specific property as the source of value by the theoretical representatives of a class is also seen in the early Merchantile and Monetarist systems, and to this day, for instance, among finance capitalists who believe that "money makes money" or industrialists who see all the service sectors as parasitic in relation to their own "real" productivity. For French political economy of the late eighteenth and early nineteenth century, no distinction was made between the capitalist farmer and the agricultural labourer or between the industrial worker and the industrial capitalist; the capitaist was everywhere taken as the producer, in the way that we say "Hadrian built a wall".

Adam Smith

Adam Smith (1723-1790), the first to complete a comprehensive theory of political economy, saw labour as the sole source and measure of value:

Labour is the real measure of the exchangeable value of all commodities. The real price of everything, what everything costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who want to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. ... Labour alone, therefore, never varying its own value, is alone the ultimate and real standard by which the value of all commodities can at all time and places be estimated and compared. It is their real price; money is their nominal price only. (The Wealth of Nations, 1776)

and according to Smith, price was determined by relation of value to the amount of money in circulation.

A life-long friend of David Hume and part of the "Scottish Enlightenment", Smith was also acquainted with Voltaire and others of the French Enlightenment. Smith came to the theory of political economy expressed in The Wealth of Nations from a study of "human nature" and consideration of how the innate passions of human beings became transformed into socially productive cooperation in laissez faire capitalism. He developed a "four stage" theory of history tracing how social institutions respond to development of the productive forces and culminate in pre-Industrial Revolution capitalism. Consistent with the theory of knowledge of David Hume, Smith regards value to be exclusively the product of human labour, which in turn has its source in human nature. The institutions of society and the division of labour arise historically independently of the will and understanding of human beings, but as the natural outcome of the clash of their individualism. Smith wrote in the very earliest days of the industrial revolution, but it was not the large, steam-powered industrial enterprises which were to emerge which formed the context of his thinking, but rather the small-scale manufacture of the early eighteenth century.

David Ricardo

David Ricardo (1772 - 1823) attempted to construct a political economy consistently centred upon this labour theory of value, but according to Marx's critique, Ricardo failed to recognise that the workers sold not labour itself but labour power (Marx's term), with costs of production which differ from the quantity of labour realised by use of labour power in the process of production and embodied in the production owned by the employer. Thus, any attempt to locate the source of surplus value was bound to run into contradictions, and indeed, Ricardo's theory was riven with contradictions. Marx regarded this as its strength rather than its weakness!

It was largely upon the basis of Ricardo's efforts that Marx began his work on political economy. Marx not only distinguishes between labour power (with its own costs of reproduction) but between exchange-value (value in the sense of Ricardo and Smith) and use-value, which is concrete, qualitative, not quantitative. Marx is a contemporary with J S Mill, Jevons, Say, Walras and subjects the theories of Mill and Say as well as the classical political economists to critique, though there is no evidence that Marx knew of Jevons and Walras. My concern here is chiefly with the development of the theory of value beginning with Marx's contemporaries and in bourgeois political economy up to the present day.

I do not wish to enter into a consideration of Marx's theory or that of Smith and Ricardo. Suffice it say that Ricardo is the last bourgeois political economist to attempt to consistently apply a labour theory of value. The conception of labour as an activity arising by the combination of labour power and the products of past labour in the labour process, and that labour power itself is a product with its own costs of production is unique to Marx. In the history of bourgeois philosophy it was Hegel who understood the importance of conceiving of human labour as also a product of labour, and that human needs are not only satisfied but produced by labour. While Hegel was familiar with the political economy of Adam Smith and incorporated what he learnt from Classical British Political Economy in his own system, there was no direct influence in the other direction.

John Stuart Mill

In his Principles of Political Economy John Stuart Mill (1806 - 1873) presents the concept of Value roughly as follows:

(1) there are two kinds of value, use and exchange value, but these are commensurable. Use value is what you would be prepared to pay for something, and exchange value is the average market value; use-value can be less but never more than exchange value;
(2) use-value is not of concern to political economy;
(3) (exchange) value is a relative, not an absolute concept.
(4) value is distinguished from price because of the variable "purchasing power of money" and may be measured against an overall general average of other commodities rather than just one (i.e. money);
(5) value fluctuates according to supply and demand around a "natural value".

He goes on to reduce the concept of value to a nothing, without actually dismissing it. It is a kind of "proper price", since if price differs from value it is because someone has been "rooked" or there is a temporary distortion in the market. Mill says in 1848: "There is nothing in the laws of value which remains for the present or future writer to clear up".

Mill is very much a part of the traditional of classical political economy, and consistent with that tradition. Mill adheres to an objective or "cost-of-production" conception of exchange value. Mill speaks however, as an apologist for capital and has abandoned the project of scientifically accounting for the wealth of nations. He rejects the labour theory of value, allowing all factors brought to the production process a proportional share in the formation of a new value. Wages are what a capitalist is prepared to pay for labour, and what the labourer deserves.


Philosophy: Along with his contemporaries Auguste Comte and later Herbert Spencer, Mill is a part of the First Positivism, and part of the "expurgation of Hegelianism" dating from Mills' System of Logic, Comte's Course in Positive Philosophy, and also Feuerbach's Essence of Christianity, Schelling's Philosophy of Revelation, Kierkegaard's Concept of Dread and Schopenhauer's World as Will and Representation. [See "1841"] This time marked a sharp break with the "speculative" or "metaphysical" philosophy of the preceding 250 years, giving priority either to positive scientific investigation or on the other side, towards inner concern with Faith, Love, Will, Sin and so forth.

For the First Positivism, sociology was seen as the central science, and society and its intellectual superstructure is seen as evolving towards rationality and science with religion dying away; social science aspired to emulate the methods and achievements of natural science, conceiving society as an object which can be studied and understood by the same methods as developed so successfully by natural science. Primacy is given to the data of perception and rational means of comprehending that data.

Economy: The middle of the nineteenth century, the period of Mills's writing, is that of the growth of finance capital which continues up until the beginning of this century, which is generally recognised as the beginning of the epoch of imperialism, characterised by the domination of finance capital over industrial capital. In Britain, the Industrial Revolution is more or less complete and the British Empire is expanding to its peak around 1900.

Mill represented a degeneration from the political economy of Smith and Ricardo inasmuch as he rid political economy of the contradictions of Ricardo's theory. Mill took an approach to these contradictions which was opposite of Marx's (and Hegel's). He simply eliminated one side of the value-contradiction (use-value) from political economy. In so doing, he effectively abandoned the quest which drove Smith and Ricardo to understand the source of wealth in bourgeois society. For Mill, and all subsequent bourgeois economists wealth is a given, it is the "endowment" of the economic agents, or whatever. That does not have to be explained.

On the other hand, Mill has laid the basis for the future development of the concept of value in bourgeois political economy in his reduction of use-value to a quantity commensurate with exchange-value and his advice to abandon the study of value in favour of the study of price. Britain is, in Mills' day, still the dominant industrial power in the world, but it is in his period that the finance sector is moving into a predominant position. It seems appropriate that the spokesperson of an emerging financial power should minimise the importance of value by comparison with price and would see all factors of production as contributing equally to the creation of value. This is after all the banker's view. "Invest money wisely, and you'll make a profit". The concrete activity of human beings, labouring in the production and reproduction of the means of life are to the banker merely objects, equally as much as the natural materials consumed in production. Value has lost its qualitative side and is now purely quantitative.

In the System of Logic, in accord with the spirit of his time, Mill minimises the importance of "metaphysical" questions, but remarks::

"... the great and much debated questions of the existence of matter; the existence of spirit, and of a distinction between it and matter; the reality of time and space, as things without the mind, and distinguishable from the objects which are said to exist in them. ... in the present state of the discussion on these topics, it is almost universally allowed that the existence of matter or of spirit, of space or of time, is in its nature insusceptible of being proved; and that if anything is known of them, it must be by immediate intuition."

In politifcal economy, Mill has prepared the way for a radical break from objective conceptions of value which characterised all theories of value up to and including his own, by introducing the concept of a measure of the utility of a commodity, even though his own theory places this utility measure "outside" of political economy.

Mill's Principles of Political Economy was published in 1848, the same year as the Communist Manifesto. His Utilitarianism (1861) is the translation of his political economy into ethics. [See "Ethical Values"]

The "Marginal Revolution"

The English logician and economist William Stanley Jevons (1835 - 1882), expounded in his book The Theory of Political Economy (1871) the marginal utility theory of value. With the French-born economist Léon Walras (1834 - 1910), one of the first to propound a comprehensive mathematical analyses of general economic equilibrium, and Karl Menger in Vienna (1871), Jevons opened a new period in the history of economic thought.

The "marginal revolution" in natural science began with Isaac Newton 150 years earlier. All the laws of nature elaborated during that period are expressed in differential form. Jevons introduced the differential to political economy under the name of "margin" and this truly made a revolution.

With Elements of Pure Economics (1874), Walras is generally credited with having founded the "Lausanne school" of economists later led by Vilfredo Pareto (1848 - 1923). Walras applied to the economic universe techniques for treating systems of simultaneous equations that were well-known in classical mechanics. Assuming a "regime of perfectly free competition," Walras constructed a mathematical model in which productive factors, products, and prices automatically adjust in equilibrium.

But the introduction of the differential was not the only revolution which takes place with "Neo-classical political economy".

For Jevons, the utility or value to a consumer of an additional unit of a product is inversely related to the number of units of that product he already owns. For Jevons "value" picks up on Mills' concept of use-value - what you would be prepared to pay for something - as the concept of value. Here then is a move from viewing "value" as something objective in relation to both to producer and consumer, to subjective. This subjective value now forms the substratum determining the actions of agents in the market as purchasers.

From here on then, the problem of value is that of the mind, of the value placed upon this or that object by a person, and price is the outcome of the interaction of "marginal" values between suppliers and consumers of the various commodities, including factors of production such as capital and labour, which appear side-by-side in the equation of price. It should be pointed out that this is not a shift of value from "supply side" to "demand side". Each side in an exchange perceive in the commodity offered in exchange a value, be it money or product, but what matters is "in the eye of the beholder", not in the actual or potential cost of bringing the commodity to market. This concept is quite distinct from Smith's idea of the labour one is saved by purchase, since though this is still expressed from the point of view of the purchaser, it remains an objective concept.

Alfred Marshall

Next in the genealogy of British Political Economy after J.S. Mill, is Alfred Marshall (1842 - 1924). For Marshall, marginal utility on the demand side and marginal effort on the supply side jointly determine price. By considering the time periods over which various factors operate, Marshall sought to apply this approach to determine conditions of partial equilibrium of a finite market and developed an approach to solving problems of price formation. Marshall differs somewhat from the mainstream of neo-classical political economy in that he sees price as an outcome of the joint action of marginal costs of production and marginal utility (or use-value measure) and thus still retains somewhat of the tradition of classical political economy.

Marshall however, never mentions the word "value", and assumes for the purpose of analysis that the purchasing power of money is a constant (something his successors would hardly find a satisfactory "assumption" upon which to build a system of political economy!). He is thus able to rely upon money as the exclusive measure of "wealth", under which everything contributing to well-being is included, be it tangible or intangible, artificial or natural. Marshall substitutes for value the notion of price at equilibrium of a specific market, but in fact we have made no advance from the perceptually given price and measures abstracted from that; we have no "value" as such. Marshall is trying, in this way, in the spirit of his times, to eliminate any kind of "metaphysics" from his science.

Marshall's magnum opus, Principles of Economics, was written in 1890, at a time when the Second Positivism ruled the philosophical roost. The functionalist Talcott Parsons characterises Marshall's philosophy as empiricism and summarises his contribution to economic theory as follows:

  1. "the edifice is built essentially on a competitive basis. He considers monopoly, but separately. ...
  2. It assumes that wants are given independently of the utility aspects of the processes leading to their satisfaction, i.e., that they are constants in the problem of economic equilibrium. The whole concept has reference to the satisfaction of given wants and not to the explanation of their existence.
  3. It assumes that all movable economic resources are effectively mobile and divisible.
  4. Action must be rationally directed toward want satisfaction. It is to be noted that it is the wants of people as consumers and not as producers which are considered as being satisfied" (The Structure of Social Action, 1937)

Thus, Marshall achieves the ideal of science for his time, only by placing outside the science everything that matters - human needs and their origin, human labour, the value of money and "imperfections" (i.e the reality) of the market. But of course, such a wonderfully sanitised universe is eminently suitable for the application of mathematics!

John Neville Keynes (1852 - 1949) mentions the word "value" only in passing as an example of a word in the common language which is ambiguous - after J S Mill, the word has disappeared from the landscape of political economy.

By the turn of the century, Britain is already in decline. It is on the continent that neo-classical political economy is more fully and consistently developed.

Vilfredo Pareto

Building on the work of Jevons and Walras, Pareto developed the application of mathematics to economic analysis. Economics has now become a science of input and output equations. His Mind & Society, published in 1916, reflects his own problem with the inhumanity of these conclusions. Pareto has laid the foundation for a structural or functional approach to economics by consistently developing the implications of pursuit of individual ends by rational means within the context of social action. While Pareto himself remained within the domain of the Second Positivism, his application of the methods of simultaneous equations taken from the analysis of mechanical structures, to economics brings us to the brink of structuralism.

The average of measurements of a datum is just another perception. But as soon as we conceive of such an "average" in relation to something else, such as the average of another datum, then we have transformed it into a "metaphysical entity", which affects not only our senses and measuring instruments, but something else, outside of our sensation but given to us in sensation.


This period of the closure of the nineteenth century is the period of the Second Positivism, in which is associated with Ernst Mach (Analysis of Sensations) and others, who renounced even formal recognition of objectively real objects. The problems of cognition were interpreted from the viewpoint of extreme psychologism, which was merging with subjectivism. The Positivists of this time sought to expel all "metaphysical" concepts from science and "value", in the sense of an objective substratum of value adhering in a commodity, was precisely one such concept. Only value "in the eye of the beholder" was acceptable as genuinely scientific in this view.

The turn of the twentieth century marks the exhaustion of source of raw materials and the capacity for expansion of capital and the opening of the period of imperialism, the struggle for mastery between rival imperial powers. The basis of value has shifted from the object and its production, to the subject (the market), and its consumption. In approaching nature, one confronts not just an already humanised nature, but one's rivals.

These conceptions of laissez faire capitalism lasted only so long as the developed capitalist economies which were their basis had access to unlimited room for expansion and raw materials. As these conditions became exhausted, economy came more and more under the sway of finance capital.

The measure of utility laid the basis for the use of mathematical methods imported from mechanics to analyse the dynamics of supply and demand in establishing a network of relative values in terms of the marginal utility of product and money. But "value" is here exclusively used in the sense of the subjective utility of the product to the buyer or of money to the seller.

Insofar as "value" is mentioned in subsequent economic literature at all, value refers to the subjective value of a commodity in the mind of she who wishes to acquire it and there is nothing of Adam Smith's conception of the purchaser being "saved the labour of producing it herself", something inconceivable in an already highly developed industrial economy.

And the mind that formulates this value is the individual, isolated, autonomous being who draws her values from her inner personality. This political economy is consistent with the sociology of Max Weber which seeks to consider the interaction of the rational action of many independent wills and passions without regard to any objective criteria of values of each actor.

The Economic Model of Neo-classical Economics

The neo-classical economists of the "marginal revolution" were able to build a coherent mathematical framework for economic science using the concept of utility within a certain model of the economy:

These two assumptions are absolutely crucial to the whole science. The "agents" effectively "search" for buying and selling prices, investment policies, etc., until they find a situation where their aggregate "utility" is optimised. The general principle that there is a declining utility in buying more and more of a useful product and an escalating effort in supplying more and more of a product (or declining net earnings from total sales) means that it is possible to conceive of a partial equilibrium state where there is a balance between supply and demand. Any variation in the policy of any single agent reduces their own net utility. Accordingly the state of the market will "gravitate" towards this market equilibrium. The assumption that the market equilibrium which is also an equilibrium for each agent, makes it possible to construct a self-contained "science" of economy. The path by which this equilibrium is arrived at need not be considered; like a "magic hand" the market ushers the traders into the market equilibrium, while the auctioneer calls the market price out until demand matches supply.

It is known empirically that markets may be in reality very unstable and mobile, but it is well-known in the natural sciences that complex dynamical systems can be very intractable for analysis. So, economic science has for long contented itself with dealing with the economy as a series of "partial equilibrium" markets; that is, prices, etc. move as a result of changed inputs from production, weather conditions, etc and interaction between different markets at their interfaces (changing "boundary conditions"), but within the constraints of these "disturbances", are in equilibrium: "partial equilibrium". The distinction between partial (changing and not affecting the whole economy) equilibrium and dynamic situations, is that the rate of change is not itself a factor in determining the outcome, such as is the case when there is a "run on the market" or loss of confidence in the currency, etc.

While it is irrelevant to the theory in what the "utility" is constituted, should it be allowed that the agents do not act consistently and rationally in pursuit of maximum utility, then the behaviour of the economy is entirely unpredictable and "outside the domain of science". [Why any of these "rational" agents don't make a million by selling their advance knowledge of market values is a mystery!] Equally "outside" of economics is how the hell each of the citizens involved in the economy acquired their respective "endowments"; while these "endowments" are obviously the outcome of the previous history of the same economy, to the positivist it is a given, in "input", not an output. Each trader, be she labourer or banker, is free to save or trade what she brings to the market place ... as "equals".

Up to the turn of the century, this view of the economy as the sum-total of millions of economic agents independently optimising their self-interest, giving rise to a gradually evolving partial equilibrium, seemed pretty plausible.

The Rise of Structuralism

Emile Durkheim

Emile Durkheim (1858 - 1917) while himself a positivist, laid the basis for structuralist sociology and his direct follower was Claude Levi-Strauss (b. 1908) who is also influenced by Roman Jakobson (1896 - 1982), a student of Ferdinand de Saussure. While Durkheim avoided the dogmatic generalisations of Auguste Comte, he claimed that it is from a construction erected on the inner nature of the real that knowledge of concrete reality is obtained, rather than by simple generalisation of the immediate data of perception. Durkheim pointed out that reality is reflected by means of concepts which are social constructions. In his criticism of James' and Dewey's Pragmatism, Durkheim dealt with how socially-held beliefs (myths), which have no practical or scientific validity in themselves, may nevertheless constitute an approach to reality, and he rejected the pragmatists' dismissal of truth as individual utility. With Durkheim, we see the beginning of the idea that materially different ideas, beliefs or practices have validity within a given total social structure, rather than being assessable as true or false "in themselves". Thus, if a myth forms the substratum rationalising a set of social taboos and practices, then the real meaning of the myth lies in the social practices it is regulating; to assess such a myth by normatively comparing it to, for example, a modern scientific world-view, would miss the actual validity of the myth in its social context. Thus an individual proposition has meaning only within the whole structure of belief.

Durkheim's sociology created the basis for transcending the economics in which the ends of action must be simply taken as given or "constant", since he drew attention to the fact that ends as well as means are socially constructed, and further that such ends (utility) are constructed socially and have meaning only within a given social structure, not in terms of individual voluntary action.

Ferdinand de Saussure

Meanwhile, Ferdinand de Saussure (1857 - 1913) found the positivist standpoint quite incompatible with any possibility for the foundation of a scientific Linguistics and it is Saussure who is generally credited with being the first to consistently elaborate the methodology of structuralism.

Positivism had attempted to unlock the mystery of language by investigating the sound-units that composed the spoken languages and trying to build up an understanding of a language from the study of these sensuous components. Saussure says that the sounds which compose a language are "arbitrary" in the sense that the only significance of a sound being attached to a meaning is the similarity and difference it has to other equally-arbitrary sounds. Not exactly arbitrary, since the sounds do have a history. But the sound only matters in its relation of similarity of difference or combination to other sounds, not as such; it only has meaning as part of a structure. Thus - "structuralism".

And Saussure, without giving any particular significance to it, notes the analogy of the "value" of a sound to the value of a coin in economics. A 10 Franc coin has on the one hand its relation to 10 one-franc coins, and on the other a relation to the commodity it can buy. But its value derives from its relation to the other coins in the currency. Only by being exchangeable with money-things can an object have value in relation to commodities.

Functionalism (Talcott Parsons) may be regarded as an American pragmatist version of European structuralism, and I do not intend to give special attention to functionalism at this point, taking it up elsewhere as part of the development of American Pragmatism. Functionalism simply asks what function a social formation or concept plays within a whole system; functionalism emphasises the tendency of social forces to function to maintain the stability of social structures. It is the "other side" of structuralism.


Already under severe strain with the crisis that has affected the whole scientific and ideological world at the turn of the century, bourgeois social theory reached an impasse with the Russian Revolution and the Great War. The inter-war crisis - Fascism, the Great Depression, not to mention the various crises of psychology, mathematics and physics produced a myriad of conflicting theories in almost every domain. Generally speaking, it is only the outcome of these crises after the War that has lasting significance. Saussure anticipated this development in his linguistics, but it is from the 1930s that structuralism begins to form itself and develop.

All the theories of the pre-World War I period are associated in one degree or another with acceptance of laissez faire concepts of the market, i.e. that any force which disturbs the independent action of agents on the market optimising their marginal utility with inherently perfect rationality is ipso facto interfering with the inherent capacity of the market to allow the participants to do just that - get the best possible deal for everyone. The crisis of European civilisation of the first part of this century is also a crisis of the market.

The Depression demonstrated irrefutably that the market failed to deliver the best of all possible worlds to the "economic agents"; that the dynamics of the market were as important as its equilibria, if not more so, and that dynamics were driven possibly by perceived self-interest, but certainly not by rational self-interest, that rationality was in any case not a phenomenon of individual consciousness but of collective conception, that the economy was itself a whole and not just an average and that human needs could not be taken for granted since the market was as capable of destroying human needs as it was of satisfying them.

The Great Depression was for economics what the Michelson-Morley experiment was for physics and geometry, and Gödel's theorem was for mathematics. The capacity demonstrated in the Russian Revolution for society to operate by entirely different laws, and the capacity demonstrated by Fascism for capitalism to eradicate liberal values created a serious impulse for radical change.

J M Keynes

John Maynard Keynes (1883 - 1946), is the founder of post-Depression economics. In his prior work on probability, Keynes makes the point that even a vanishingly small probability attached to a fundamental hypothesis can through extensive ramification lead to certainty (and vice versa). Keynes uses this observation to counter Humean scepticism. In relation to the capacity of the market, Keynes observes that there is no level below which the value of a commodity may not fall in circumstances of depression, and no level below which wages may not fall in circumstances of mass unemployment.

With Keynes, there is a serious beginning to the study of economic policy aimed at state action to regulate or control the market. Also beginning from the October 1929 crash is the period of the fixed rate of exchange between the US dollar and gold. Beginning with the efforts to lift the world economy out of depression and prepare for war also is the widespread recognition of the efficacy of conscious manipulation of "utility" by advertising and henceforth "demand" is as much a variable in economics as "supply" and the state has a pre-eminent role in generating demand - a concept of course unthinkable since William Petty in the days of "primitive accumulation" in the seventeenth century.

John Hicks' (1939) concept of the marginal rate of substitution allows the modelling of consumer actions across various markets and is an essential component for a fully structural conception of economics, putting finally to bed Marshall's "hybrid" conceptions. Implicit in this concept is the equation of subjective value between differing commodities, together with the supposed perfect rationality of the "economic agents". Despite all the lemmings of Wall Street, economics still rests on the supposed "rationality" of economic agents, and in fact this supposed rationality is now infinitely extended as it must now account for the actions of speculators wielding enormous economic power.

Whereas neo-classical economics required only that a person should buy more or less to rationally fulfil her needs in a given market, the coherence and determinacy of the theory requires that people buy insurance policies, invest in shares, buy futures, etc., rationally, that is with perfectly rational knowledge of the vicissitudes of the market. No-one can pretend that this is actually the case, but there was no alternative foundation upon which a theory could be based. They relied upon the tried and tested method of professional thinkers to ignore what you cannot rationalise.

From the end of the War, digital computers became available for governments, universities and large corporations. The movement of prices and the ups and down of supply and demand are now calculated on larger and larger computers using simultaneous equations built on the supposed ratios of interdependence between more and more and more economic indices. The number of coefficients which must be plugged into such calculations increases with the square of the number of factors correlated. [My own professional training was as a Civil Engineer. I never fail to be amused by the fact that for this type of economics, the world is just a "structure" in exactly the sense that a steel frame is a structure, and the approach and method of analysis is the same. Only no civil engineer in the world would be so stupid as to imagine that these methods would be adequate to a structure with 4,000,000,000 "degrees of freedom" - the term by which we rather cutely refer to the "independent variables" of a system]. As the system becomes more and more complex, it becomes more and more obvious that in all but the most limited short-term prediction (for which differential equations would not be needed in any case), the result of economic analysis is more a function of programming errors than of any degree of reflection of reality.

The now predominant operational notion of conception allowed that an entity can be deemed to be objective to just the extent that it is possible to define the effective procedure by which the entity is determined. Thus, an average of some economic index can be deemed not only to be a datum of perception, but also an "input", an independent variable both determined by and determining other such data. In the language of structural analysis, a structure is "deficient" is the number of independent variables or "degrees of freedom" exceeds the number of determinant relations between them; it is "over-determined" if the number of independent constraints exceeds the number of independent variables. The good programmer knows how to build a set of good equations. This is pure nonsense if applied in respect of the world economy. But it's a view which fits well with the world view of the managers of institutions which are managing a world economy, manipulating the supply and price of whole markets and whole countries.

There is a new criterion of truth that has arrived here: so long as the system can be kept working, then any particular part of the whole system is justified - truth is in the system.

So long as there were enough dollars to keep pumping into the system, the system held up. This story came to an end in 1968, when the post-War hegemony of the US was terminated with the ending of the fixed rate of exchange between the dollar and gold. From then began the period of runaway inflation and "stag-flation". The structure began to collapse.

Milton Friedman

Milton Friedman (b. 1912), architect of the post-1968 reaction against Keynesianism. Friedman is at pains to point out that it is irrelevant whether an "assumption" of a theory is true or not, only whether it is sufficiently and effectively true to allow valid deductions to be made from the theory. I.e., whether or not economic modelling is "realistic" is a stupid question. This is the last gasp of structuralism. It may be "unrealistic" - but it is the awful reality for millions!

From this period, with the breech in the fixed rate of exchange between the dollar and gold, the "purchasing power of money" is a variable which floats on the market like any other. The "marginal rate of substitution" of any two commodities is but one link in a network of relations on which there is no longer any fixed point.

Friedman was the guru of "Monetarism", the economic doctrine which was adopted by Reagan's America and Thatcher's Britain, and was until fairly recent times, the dominant economic theory. It shares with Keynesianism a focus on "macro-economics" but reserves for government the role of regulating the money supply and represented a significant move back to reliance on "market forces". It was the first step by right-wing capitalist governments towards addressing the delayed confrontation with organised labour and meant allowing unemployment to grow again to weaken the power of organised labour, cutting all public spending and allowing the market to do its work of strengthening the hand of the more powerful "economic agents"

Keynes' fall from grace meant not only the end of governments with aggressive public works and social agendas, but the end of belief in the capacity of society to control or even predict the course of economic events; governments are no longer really blamed for economic malaise, the more so since they have become minor players in the market-place the more so since the end of Keynesian public enterprise, unless it is for intervening too much or for not doing enough to ameliorate the suffering of the losers. While the mainframe computers of the largest economic players are not able to predict the course of the economy, computers are beginning to proliferate and become work-a-day tools of economic agents.

Micro-economics and Economic Rationalism

The continued failure of monetarism to rectify the problems inherited from Keynesianism led the bourgoisie to the conclusion that the problems could not be solved by "macro-economics", but need a turn to "micro-economic reform". This turn to Micro-economics marks the end of structuralism in bourgeois economic theory. The conception of value as something which can be manipulated by "structural" means - government economic activity - has been given up. The focus returns again to the workplace, the workers who refuse to work harder, the business-person who refuses to modernise, habits of work, "human nature" is dominating the economy. This turn is consonant with the loss of confidence in "grand narratives". The hard work has to be done - "get into the workplaces and change how people work!". The role of government now shifts to giving the capitalists the legal and cultural as well as general economic means to break organised labour, change work-practices and increase productivity. No longer is it thought that profitability will flow naturally from a good average rate of profit; rather, the rate of profit can only be restored by boosting the profit in each individual workplace.

"Value-adding" becomes a popular term in this period. "Value-adding" is economic activity which adds to the price something can attract on the market, be it advertising, R&D or manufacture. Agriculture, mining and low-tech. manufacture or manual labour are "low value-adding" while software, advertising, consultancy are considered high "value-adding" - but it really doesn't matter what, so long as you can get people to pay for it. Value is a social construction built on nothing but the activity of the dominant social players and the image-makers.

As if the Wall Street Crash, the Great Depression and all the mayhem of a couple of centuries of laissez faire capitalism had never happened, the luminaries of economic rationalism spout their post-modern truisms, which sound suspiciously like the truths of nineteenth century liberalism. The sole exception to this comparison is that the quantity of fictitious value circulating in the late-twentieth century so vastly outweighs the quantity of gold held by reserve banks, that governments must walk a knife edge to balance the money supply and prevent descent into run-away inflation or depression.



Economics: The break-up of the post-war boom in the late 1960s, coincided with the end of the convertibility of the dollar and the opening of the period of rising structural unemployment. The service industries are overshadowing the "rust industries" and technology moved into the "information age" and later the "Knowledge Age", with new products moving from the physics lab to the living room in a few short years and telephone and data communications networks proliferating across the globe.

By the 1980s, the failure of all macro-economic schemes of economic management to create stability or eliminate structural unemployment led to a concentration on "micro-economic reform" and incessant change in work practices and the demolition of all forms of legal regulation or constraints on exploitation. Economic theory moved away from reliance on macro-economics, concentrating on the application of games theory and sociological tools to systematise the understanding of organisational behaviour and rather than placing hopes in the manipulation of global factors, there is a return to concentration on increasing the rate of productivity workplace-by-workplace.

Politics: The 1960s mark the historic breech between the working class and the left-intelligentsia (witness the Polish workers and students action, the French General strike, Czechoslovakia and subsequent events) and the beginning of the break-up of Stalinism (Maoism, Euro-communism, etc), the disillusionment of a generation of radical intelligentsia, the high-point of the national liberation movement (the Tet offensive) and the beginning of the rise of the women's movement.

Philosophy: this time marks the end of Structuralism; in culture the end of Modernism. In psychology we see the move to prominence of cognitive theories and while its opposite, behaviourism, embraces the theories of Gödel and Turing and artificial intelligence merges computer science of cognitive psychology and in turn with the structural linguistics of Noam Chomsky. While linguistics gives birth to Semiology (the study of signs) Roland Barthes asserts that semiology is but a part of linguistics. The triumph of the digital over the analogue computer coincides with the return to dominance of finite mathematics and mathematical concepts which defy imagination: category theory, string theory, fractal geometry, Catastrophe theory and Complexity theory. The great social and political structures disappear, just like the solids and geometric figures of ordinary experience disappear into discontinuity of atoms and digits. Rationality is reduced to algorithms and effective procedures, knowledge to information processing. Foucault's "post-structural" historicism does to structuralism in his field what the category theory, etc. has done to analysis.

The Economics of Complexity

Beginning in the early 1980s, a new economic theory began to take shape, in response to the patent in adequacy of theories of general equilibrium, and is associated with the Americans Peter Albin, Duncan Foley, Janos Kornai, Brian Arthur and others. The new school has not yet produced results which would allow it to supplant the dominant trends in government Finance Ministries, but it aims to describe the dynamics of the market by substituting for the presumed absolute rationality of agents an intelligence equivalent to a computer of finite memory - a Turing machine, which can attempt to maximise its utility by executing a procedure on the basis of data derived from signals from other agents in the economy.

Taking seriously the speculator or manufacturer's problem of predicting the future of an economy and the real cost of collecting and processing the information, and the fact that the course of events depends on their own action and that of other agents also using computers to optimise their gain, before attempting a solution of the problem, the Artificial Intelligence Economists subject the problem to an analysis of the kind to which Kurt Gödel subjected mathematical theories and Alan Turing applied to computational procedures. They show that, in general, the problem of optimising an agent's action in the context of many other agents optimising their actions with the power of a Turing machine is formally not computable, is undecidable in the sense of Gödel's theorem - the course of events can only be simulated.

Further, they utilise Noam Chomsky's categorisation of the complexity of language structure to provide a hierarchy of complexity for the economic problems and economic activity which results from the actual interaction of intelligent economic agents (or at least maybe a hundred of them).

A formal language is defined by a grammar, an alphabet, a finite set of variables and a finite set of productions which define how to make new "sentences" in the language and a "full stop". [The "full stop" is the most important bit of all!] The potential complexity of a formal language generated by a grammar depends on what restrictions, if any, are placed on the production rules. Unrestricted languages are the most complex.

  1. A regular language is composed of a series of simple unlinked constructions.
  2. A context-free language is such as a computer-programming language which can be interpreted and implemented one instruction at a time as a regular language.
  3. A context-sensitive language is like a computer language in which an instruction can be interpreted and implemented only in the light of preceding instructions.
  4. The highest in Chomsky's hierarchy is the general or unrestricted language of which ordinary human languages are examples.

The behaviour and computability of economic models may in turn be classified according to corresponding levels of complexity which are associated with the same hierarchies of linguistic complexity:

  1. Systems which have a "point attractor", that is, there exists a single equilibrium state of the system to which the system will "gravitate" in time. In general, this equilibrium state is computable by neo-classical means of economic theory.
  2. Systems which exhibit cyclical behaviour such as is seen in business cycles, the parameters if which can be computed by the methods of structural economic theory.
  3. Chaos (also known as "strange attractor"), the quasi-equilibrium of the system is chaotic behaviour in which there is no stable equilibrium state and no detectable periodic behaviour.
  4. Complex behaviour in which the system moves sharply and unpredictably towards different equilibrium states, periodic behaviour or chaos but the outcome is indefinitely sensitive to initial conditions and formally unpredictable, like the notorious butterfly which "causes" a tornado.

The Artificial Intelligence Economists demonstrate that even highly formalised and restricted models of economic behaviour which allow independent economic agents to implement procedures commensurate with a Turing machine (i.e type 3 linguistically) necessarily give rise to economic behaviour which is in general complex (type 1, 2 or 3 outcomes are included as possible outcomes) and cannot be computed; the only way of knowing what even a 100-agent model with only 2-states each will do is to simulate it on a computer and watch what happens. Or, the only way to know what a real economy will do is to watch it happen. Comforting, isn't it.

And it must be emphasised that these conclusions are not in the form of an "open verdict", but are proven by the same methods that Gödel used to prove the existence of undecidable statements in a mathematical theory! Further, the complexity does not arise from the unpredictable nature of "outside forces" or in the mass of data: even the simple computer model is formally unpredictable!

The growing complexity of the world economy is a direct reflection of the growing sophistication of business organisation, telecommunications, the use of computers, modern methods of management and financial practice and the near-infinite interconnectedness of the global division of labour. Other things being equal, a complex organisation or economy is inherently stronger than one less powerful. But it is also inherently and irreducibly unpredictable, uncontrollable and given to sudden, unexpected rapid and catastrophic global change. The very power of the developed market economy is the root of its inherent and irreducible unpredictability.

Now, the Artificial Intelligence Economists have moved substantially in the direction of realism when they model economic agents with Turing machines. Alan Turing, as the founder of Artificial Intelligence research, was fond of challenging anyone to tell him how you could tell him the difference between a well-programmed computer and a human being using the same input-output devices, and this is of course the same position as that held by behaviourist psychologists. So, they have broad support for a claim to realism. However, it should be emphasised that with their economics, as with Alfred Marshall's:

It is a theory of "bounded rationality". All the agents act according to their own finite intelligence to optimise something, it matters not what. It does not take the notion of value any further than structural economics. Further, the modelling of people as little Turing machines takes a step towards "realism" is some respects, (notably in the light of the fact that finance houses program computers to do their speculating on the short-term markets), but the modelling of interactions between people in terms of various patterns of signalling between "cells" is desperately remote from realism, and it turns out that this aspect of the models makes all the difference in outcome. This kind of Artificial Intelligence economics is still lagging a long way behind even structural economics in predictive utility.

Nevertheless, the most impressive result of this economics is its prediction of essential instability, and the study of the factors contributing to instability is worth looking at.

Complexity and Development

Capitalist development has brought about a gigantic simplification of the world: 1,000s of distinct peoples have been dissolved into a single world-wide division of labour (even the Bushmen where Nike shoes and watch NBC); qualitative human labour has been reduced to simple quantity of abstract labour called value (spouses, holidays, good fortune, education, health and fantasy are all commodities purchased on the market); inside-outside, Monday/Sunday, London/Alice Springs, day/night - it doesn't matter, you can no longer tell the difference.

But this "simplification" is also an immense increase in complexity: the most insignificant product reaches the consumer after passing through the hands of 1,000 workers; interpersonal relationships build networks that are said to link any two people in the world by only six links - and the speed of information flow - a young person enters the workplace just as her parents take early retirement and takes a job that didn't exist when she started school; work organisation is changed annually in a given workplace and products go from fundamental research to the mass market in a few years.

An interesting outcome of empirical complexity research concerns a factor normally represented by the Greek letter lambda, but which I will call þ. þ is the probability that a "cell" which is "on" at a given time will be "on" in the next cycle. þ close zero or 1 correspond to processes which rapidly reach stable equilibrium after any disturbance; þ near to 0.5 corresponds to chaotic processes; þ = 0.273 is known as the "edge of chaos", a rate of information transfer at which a complex process no longer has an equilibrium and becomes subject to rapid and unpredictable transformation. That is, an economy in relative partial equilibrium which simply reproduces itself faster and faster, sooner or later descends into catastrophe, either rapidly moving into a new equilibrium in a completely different configuration or into unending chaotic variation.

It is just these horrific characteristics of capitalism that make it like a plague which destroys and consumes any society that comes in contact with it - an economic system that can tolerate no vacuum.

The increasing complexity is inseparable from the increasing homogeneity.

The Green Theory of Value

Responding to the global crisis, the Club of Rome was founded in 1968 by leading capitalist politicians and economists. Particularly during the period 1972 - 1980 it published influential reports on problems of the global economy and development, including Limits to Growth in 1972. Efforts to predict the course of the global economy by computer simulation reached a high-water mark with this group, but the Club of Rome is most famous for its doomsday warnings to world capitalism on exhaustion of natural resources and the growing gap between "North" and "South" and a critique of the concept of "value" implicit in the calculation of the GDP.

They point out (correctly) that the tearing down of a forest is counted as adding to the GDP, as is filling the atmosphere with pollution, while the production of garbage disposal units necessary to restore the damage is counted as adding even further value. The solution seriously proposed is to re-calculate the GDP by counting as negatives the various factors of environmental degradation and counting the cost of restoring that damage as a deduction from the profits made in causing the damage.

Whereas a well-meaning government that applied tax penalties for the cutting down of trees (thereby increasing the added-value of tree-felling though effectively reducing the number of trees felled) or providing tax-discounts for production of pollution-reducing technology (increasing the profitability of protecting the environment), they propose instead that financial services such as insurance are under-valued (since insurance provides the service of increasing the feeling of security which "isn't counted"). They assert that the calculation of value, as the sum of all incomes or expenditures in the actual economy, reflects ideological prejudices inherited from the rise of manufacture in the eighteenth century, and that "nowadays" we should be assigning more value to services and the environment and less to manufacture, which does such evil to life-style and the environment.

"Enlarging on the implicit and exclusive paradigm of economic theory, still predominantly connected, as it were, to the industrialisation process, may contribute towards a more positive view of what the future wealth and welfare could be". [The Notion of Economic Value in the Post-industrial Society]

These arguments can be read in full in Cycles, Value and Employment, Responses to the Economic Crisis, 1984. Incidentally, the same "prophetic" work promotes the "long-wave" theory of economic cycles, which it credits to Kondratieff and Ernest Mandel. Writing in 1984, they predict an end to the crisis in 1991, according to the "long-wave" theory. I prefer crystal balls.

The same argument - that if only the economists would do different sums, then the efforts of governments would be concentrated on increasing the newly-calculated GDP, and we could save the environment and solve the crisis - is still popular in sections of the Green movement, and it can often be heard that the problem with the world today is that we have a wrong idea about value, and that if we could decide upon a better definition of value, then things could be better.

It is just like trying to convince people to give up their dangerous belief in the force of gravity, in order to avoid drowning [Preface to The German Ideology]. This theory is so misconceived that it reflects only the depth of despair and confusion that infect even the commanding heights of the world economy.

Feminist Theories of Value

The article, "Liberation Epistemology" deals ni more depth with the various ways in which women have dealt with the problem of the under-valuing of their labour. Here I want to look at a couple of theories which bear directly on the theory of value in the sense considered above.

(1) Female professional economists have asserted that the absurd mathematisation of economic theory represents a male bias - "a boys game in a sand-box". A fair comment. However, if in the 1980s and 90s we counter-pose to this "people grappling with real economic problems that are out there" [Myra Strober] we could be in danger of simply joining the move to micro-economics from the other side. It's OK to be on the other side of course, but that does not constitute a new theory, just being on the other side and using the same economic tools as became fashionable everywhere after the failure of structuralism.

(2) In the mid-1960s, the University of Chicago's Gary Becker applied "rational choice theory" to the analysis of women's domestic labour; he went on to create the theoretical tools for dealing with the penetration of the commodity relation into criminal behviour, drug addiction, romance, and so on without limit. He got a Nobel Prize for this theoretical work which fairly accurately reflected the development of capitalism during the post-war period, and in particular the penetration of the comodity relation into domestic life as a result of the socialisation of women's labour. At the level of economic theory this does not go beyond Hicks' marginal rate of substitution, but lends itself well to Game theory and the range of mathematical methods associated with the break-up of structuralism.

(3) The same theory mentioned above in relation to the Club of Rome has, unsurprisingly, support amongst feminist economists: if only the government would calculate the GNP inclusive of women's unpaid labour, the this would give women recognition for their otherwise-unpaid labour. Personally I'd rather be paid! According to an article in The Australian Higher Education Supplement, 20 January 1999, the Canadian and Australian governments are conducting surveys "with an eye to towards incorporating household production into their official statistics". Interesting problems arise. How do we estimate the hourly rate for having sex or cleaning toilets? Sex has an hourly rate of at least $100 per hour, while toilet cleaning is worth about $10 per hour. Unsurprisingly again, these ideas do not gain universal support.

(4) Barbara Bergmann, an editor of the magazine Feminist Economics, argues that "High commodification is the path to liberation". The profound truth in this is of course that this is exactly what women have been doing of the past thirty years, and in the advanced capitalist countries nowadays, the majority of women are in the workforce and more and more formerly domestic labour is purchased on the market. Interestingly, when I tried to further investigate Prof. Bergmann's ideas on the Internet, I found that every time I got to an actual text written by her (rather than a passing reference to her name), I came across a password-access key, requiring me to pay up via credit and before proceeding any further. Prof. Bergmann has ensured that her labour - feminist economic theory - will be available only at a price, so she has the virtue of consistency! I remain of the view however, that commodification is a necessary preparation for liberation, but only a highly paid, privileged academic could believe that it constitutes liberation.

The Future of Value

The complexity people have discovered a new grave-digger for capitalism: the very complexity which makes the world economy of today qualitatively more "intelligent" than any dictator or bureaucracy or any computer program, in other words, more powerful than any "planned economy" (in the sense that Lenin described in State & Revolution), is not only essentially unpredictable and uncontrollable but inherently prone to catastrophe. The forces of production, the accumulated products of our own labour, have grown beyond the power of even our understanding let only our control and threaten to destroy humanity altogether.

The measure of the usefulness of human labour, value, a social construction which began life as a measure of how human beings spend their time, became a measure of the usefulness of things, has lost all contact with human labour or needs, but dominates our lives.

As always, value arises only through the medium of exchange. A thing which is not put up for exchange has no value in the sense of economics. The fact that there is increasingly little relation between value and usefulness or human happiness or anything else, is a fact; a fact which can be deplored but cannot be redefined. The real fiction which is value can only be transformed by eradicating the conditions upon which it rests - production for exchange.

Recognising that value is a social construct, we have to socially construct a new system of production-consumption relations in which human time is consciously allocated in accordance with a person's need to live humanly, without the aid of commodity exchange, without concern for efficiency or profit margins; at the same time, we must eschew the notion of centralised planning which is a step backwards, but unleash the full potential of complexity of 4,000,000,000 human wills acting under their own creative direction towards collective ends. This means terminating exchange-value altogether: to each according to her needs, from each according to her ability.

It is a daunting task, but it is the only task worth doing. I don't know just now how that can be done, but I believe this defines the problem to be solved, for the moment.

Marx's Theory of Value

Anyone genuinely familiar with Marx's critique of political economy will know how powerful is his analysis of commodity production and the labour theory of value which is at the heart of that analysis and the many great insights that this analysis has given us about the essential nature and historical trajectory of capitalism. However, whatever the claims, I do not know of a single Marxist who can claim, hand on heart, that they have done better than a capitalist think-tank in predicting the ups and downs of capitalism in the short or long term. And complexity economics shows how desperately inadequate bourgeois economics remains.

The "labour theory of value" disappears with value itself, as soon as people stop exchanging commodities. We do not need a new theory of value. We will demonstrate our values when we can decide how to spend our time and the sooner we can decide what to do with our own time, the better. So long as we still want something in exchange, so long are we enslaved. So long as we have to spend out time doing one thing in order to get something else in exchange, so long are we enslaved.

One point which may need to be made about Marx's theory of value arises because Ernest Mandel, who was regarded by many as the foremost expert on Marx's political economy, held that for Marx, a commodity could only have value unless it was a tangible "material" object. This is completely false. If it were true, the whole of this work would of course fly in the face of Marxism.

In Chapter One of Capital, Marx points out that (exchange-)value has no connection with the physical properties of a commodity, and value is "the very opposite of the coarse materiality of their substance". The most important commodity of all, labour-power, is a "service" not a good. In the Grundrisse, Marx deals with a wood-cutter, a porter and a wandering tailor, all of whom are stated not to create value, because, as self-employed contractors, they sell not labour power but the product.

In discussing the lot of a school teacher, Marx says:

"So far as the labour process is purely individual, one and the same labourer unites in himself all the functions, that later on become separated. When an individual appropriates natural objects for their livelihood, no one controls them but themself. Afterwards they are controlled by others. A single person cannot operate upon Nature without calling their own muscles into play under the control of their own brain. As in the natural body, head and hand wait upon each other, so the labour-process unites the labour of the hand with that of the head. Later on they part company and even become deadly foes. The product ceases to be the direct product of the individual, and becomes a social product, produced in common by a collective labourer, i.e., by a combination of workers, each of whom takes only a part, greater or less, in the manipulation of the subject of their labour. As the co-operative character of the labour-process becomes more and more marked, so, as a necessary consequence, does our notion of productive labour, and of its agent the productive labourer, become extended.

"In order to labour productively, it is no longer necessary for you to do manual work yourself; enough, if you are an organ of the collective labourer, and perform one of its subordinate functions. The first definition given above of productive labour, a definition deduced from the very nature of the production of material objects, still remains correct for the collective labourer, considered as a whole. But it no longer holds good for each member taken individually.

"On the other hand, however, our notion of productive labour becomes narrowed. Capitalist production is not merely the production of commodities, it is essentially the production of surplus value. The labourer produces, not for themself, but for capital. It no longer suffices, therefore, that they should simply produce. They must produce surplus-value.

"That labourer alone is productive, who produces surplus-value for the capitalist, and thus works for the self-expansion of capital. If we may take an example from outside the sphere of production of material objects, a schoolteacher is a productive labourer, when, in addition to belabouring the heads of their scholars, they work like a horse to enrich the school proprietor. That the latter has laid out their capital in a teaching factory, instead of in a sausage factory, does not alter the relation. Hence the notion of a productive labourer implies not merely a relation between work and useful effect, between labourer and product of labour, but also a specific, social relation of production, a relation that has sprung up historically and stamps the labourer as the direct means of creating surplus-value. To be a productive labourer is, therefore, not a piece of luck, but a misfortune." [Capital Volume I, Part V, emphasis added]

Thus makes it abundantly clear that it is not the material (or immaterial) form of the product, but the prodcution relations within which it is produced that invest a commodity with value.

Postscript: Economic Modelling

Economic modelling is all about making a metaphor with the idea of reducing the problem of economic theory thereafter to a mathematical one of solving the equations. The formation of the models depends on guesses about those factors which may be deemed to be decisive and guesses about the factors connecting the inputs and outputs. Despite the mathematical appearance, the procedure is in the first place conceptual (visualising the metaphor) and thereafter predominantly empiricist, since the results of each model cannot be predicted other than by simply trying a model and seeing if it produces "predictions" which confirm past observations, and then hoping that it will predict the future.

Development of the model takes place in great measure through development of modelling of the relations and supposed action of the economic agents. It is a particularly pure expression of the Ethics of the society modelled.

From the time of the introduction of these models, the concept of value becomes eclipsed in economic theory, as a "metaphysics", replaced by average prices and other quantities which are both inputs and the outcome of interaction with other factors in the equations forming the economic model.

These "input variables" become the new metaphysical entities, but metaphysics lacking any theoretical foundation. For example, instead of social classes, we have income groups or occupational groups. In these models, the material world is reduced to "outside" factors which are beyond analysis and in the domain of trial-and-error.

The inhuman character of social relations in the view of the various bourgeois economists is put in particularly stark relief by their economic models. Basically they are saying: "the world is like a cloud of atoms", "the world is like a mechanical structure", "the world is like a chemical reaction" or "the world is like a computer". Models come to hand when the mathematical techniques for describing the behaviour of a given model is made available. This happens as a result of developments in the appropriate branch of natural science and the relevant mathematics. This in turn is intimately linked to the development of industry and technique. So for the economists of the mechanical age, the world is a giant machine, for the economists of the information technology age, the world is a giant computer.

Thus in a certain bizarre sense, the economic models accurately reflect the "human nature" of people at successive stages of the development of capitalism.

Postscript: Barthes, Derrida and Value

Roland Barthes (1915 - 1980, French social and literary critic whose writings on semiotics helped establish structuralism and the New Criticism as leading intellectual movements.) began as a disciple of Saussure in the 1950s, but in his 1964 Elements of Semiology, "turns Saussure on his head". Barthes is a decisive influence on Lacan, Foucault and Derrida - in short bears some considerable responsibility for the dominant philosophical trend of today.

Whereas Saussure saw language as a part of semiology, Barthes says that semiology is a part of linguistics. Given that to these guys "signs" cover anything that we do in relation to other people, this is tantamount to saying that language forms the world not the other way around.

Further, Barthes picks up Saussure's off-hand remark about an analogy between the value of a word and the value of a coin and restates it after 50 years during which "value" has disappeared from political economy. We are dealing here with much more than an "analogy". At about the same time, Lyotard points out that knowledge itself has become a commodity like any other, or rather, not just like any other, but the most important commodity in relation to the development of the world economy, since the means of producing it tends to be monopolised by the dominant world powers.

Epistemologically speaking we have in Saussure's structuralist linguistics a fairly naive materialism which understands language as indicating something, albeit "structurally" rather than "atomistically"; with Barthes the linguistic structure is the absolute, and all other forms of human practice merely indicate language. A linguistic element therefore cannot have value; on the contrary, value exists only in the relation of one signifier to another (100 cents makes a dollar, 100 yen makes a pound sterling) and other objects can only have value insofar as they can be equivalent to a signifier and be part of the economy. In economic terms, the monetary system is the only substance of value, and only by its own internal "logic" may it be indicated by other commodities.

Derrida turns Barthes' linguistic value around again and also makes a critique of Marx's theory of value. (see "Derrida")

For Derrida value exists as a "potential" from the very beginning of human production, before the emergence of the exchange of commodities. Likewise, language, grammar, is something which exists in nature (in the same sense that "information" is a category of physics, thermodynamics, etc.), and human language is a development of what exists as "potential" within inorganic nature. Derrida accepts that the objects which we perceive in capitalist society (jobs, state, supply-and-demand, etc.), but also equally all the objects of the material world, are "ghosts" summoned up by the very process of labour - it is all mental construction.

This is mostly a very negative critique which leaves one wondering on what basis if any price exists. Derrida argues (by implication) that this system of values is implicit in the historical development of the production process itself, rather than being something which arises through the process of exchange.

Another tendency in this period, a rather a very broad group of tendencies, is that of Constructivism which builds upon cognitive theories and genetic epistemology. Piaget's original genetic epistemology is quite consistent with a materialist view, though lacking a social-historical conception of the formation of knowledge, but essentially a step forward from Kantianism. However, those who have come after the pioneers of Constructivism see the world as nothing but an individual's mental construct.

Side-by-side with this is Behaviourism which rejects consciousness altogether and accepts behaviour only as valid. Both these approaches lend themselves to analysis of the development of complex systems and are beginning to be influential in economics.