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ValueofKnowledgeReference
TheoriesofValue
Whatdowemeanbyvalue?Everyone,itissaidhastheirownvalues.Ivaluetruthfor
example,Ivaluemymother.Isitlegitimatetoask"Howmuch?"?Orisitlegitimateto
insist that there is a meaning to value for which the question of "How much?" is
meaningless,aqualitativesenseofvalue.IfIhadtolieinordertosavemymother'slife,
orifshewaskidnappedandIhadtopayaransom,wouldn'tIthenbeforcedtorecognise
that my values were quantifiable? Indeed, value is meaningless outside of the act or
possibilityofexchange.
Butmorethanthis:historyhasforalong,longtimebeenbringingeverythinghuman
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
thesubjectofexchange.Weliveinatimewhenfewcornersofliferemainuntouchedby
thepossibilityoractualityofexchange.
In Section 3 of Chapter One of Capital Marx traces the development of the value
relationfromthe"ElementaryorAccidentalFormofValue"through12differentforms
up to the "Money Form" as exchange becomes more extensive in social life. Marx's
Capitalremainsthedefinitiveworkonvalueasitdevelopedupuntilthe1860s.Theaim
ofthisworkistotracethedevelopmentofthevalueformandtheconceptofvaluesince
then.
Inthearticleon"EthicalValues",IpayattentiontothedevelopmentofEthicsandthe
placeofvalueinEthics.Ifthereeverwasanydoubtaboutthelegitimacyofequatingthe
meaningofvalueinthesetwocontexts,thenJohnStuartMills'Utilitarianismdespatches
thatdoubt.TheEthicsofUtilitarianismisthemirrorimageofhispoliticaleconomy,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
fundamentalchallengestoUtilitarianism.
Preamble
My object is to study the historical course of the concept of "value" in bourgeois
economictheory,and
https://www.marxists.org/reference/subject/philosophy/help/value.htm
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1. Correlatethephasesinthishistorytothetrendsofbourgeoisphilosophy,
principallyepistemology,whichcoincidewiththem,andwherepossible
establishthehistoricalconnectionsinthedomainoftheorybetweenthe
theoryofknowledgeandthetheoryofeconomicvalue,and
2. Correlatethephasesinthehistoryofthevalueconceptwiththeactual
historyofeconomicvalueitself.
In this way I wish to explore the concept of value as a mediating point in a thread
connectingthedevelopmentofthecapitalisteconomyandthedevelopmentofbourgeois
thought.
One of the problems in achieving this is that from a certain point, the word "value"
actuallydisappearsfrombourgeoiseconomictheoryaltogether,asifthewordhadbeen
"givenabadname",soitiswithalittlelicencethatitispossibletotracetheconceptof
value during a long period in which it goes by another name. "Value" reappears in
twentiethcenturyeconomicsasintheexpression"valueadding".
Also,ifIamtobeabletotalkaboutthefateofvalueitselfinthegrowthoftheglobal
economy,howcanIdothiswithoutrelyingonsomespecificconceptofvaluemyself?In
generalIintendtoletthehistoryitselfguidemesofaraspossible.
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
developmentoftheconceptsofbourgeoispoliticaleconomyasitwasoftheworkingof
thecapitalistsystemofeconomicsitself.IwanttocontinueMarx'sstudyof"Theoriesof
Value".
However,IdonotintendtorecapitulateMarx'sstudyofclassicalpoliticaleconomyor
giveanexpositionofMarx'sownideas,bothofwhichhavebeenbetterdonebyothers
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).
ClassicalPoliticalEconomy
WilliamPetty
(16231687),founderofEnglishPoliticalEconomy,successivelyseaman,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
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natural forces of individual selfinterest. Unlike liberals after Adam Smith, however,
Pettyconsideredthemaintenanceofahighlevelofemploymentbymonetaryandfiscal
policiesandbypublicworkstobeadutyofthestate.Marxarguedthatthebourgeoisieof
thistimeneededtheforceofthestate,viataxationorothermeans,tocreateconditionsfor
capitalist accumulation. In the Treatise, he argued that the labour necessary for
productionwasthemaindeterminantofvalue.
ThePhysiocrats
QuesnayandotherFrenchwritersofthe1750sand1760swerethefirsteconomiststo
begin to analyse production rather than simply circulation in the endeavour to find the
sourceofsurplus value. They believed however that only agricultural labour was truly
productive. Value extracted from Nature by agricultural labour is distributed by
circulationandmanufacturingissimplytheutilisationoflaboursupportedbythesurplus
productofthelandforotheractivitiesmoreorlessakintocirculation,inmuchtheway
Marxregardeddomesticserviceasexpenditureofsurplusratherthanproductivelabour.
"As the actually first systematic spokesmen of capital, [the physiocrats] attempt to analyse
thenatureofsurplusvalueingeneral.Forthem,thisanalysiscoincideswiththeanalysisof
rent, the only form of surplusvalue whch they recognise. Therefore, they consider rent
yielding, or agricultural, capital to be the only capital producing surplusvalue, and the
agriculturallaboursetinmotionbyit,theonlylabourproducingsurplusvalue,whichfroma
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
analysismadebyPetty....Thephysiocrats,furthermore,arecorrectinstatingthatinfactall
productionofsurplusvalue,andthusalldevelopmentofcapital,hasforitsnaturalbasisthe
productivenessofagriculturallabour".[CapitalVolIII,ChXLVII]
InthePhysiocratsweseethenavematerialistconceptionthatonlyNature,nothuman
labour, can be the source of value it is this navet which is criticised in Hume's
scepticism. Also, we see the Physiocrats promoting what Marx refers to as their "own
practicalinterests".Thepromotionoftheirspecificpropertyasthesourceofvaluebythe
theoreticalrepresentativesofaclassisalsoseenintheearlyMerchantileandMonetarist
systems,andtothisday,forinstance,amongfinancecapitalistswhobelievethat"money
makesmoney"orindustrialistswhoseealltheservicesectorsasparasiticinrelationto
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
capitaistwaseverywheretakenastheproducer,inthewaythatwesay"Hadrianbuilta
wall".
AdamSmith
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Adam Smith (17231790), the first to complete a comprehensive theory of political

economy,sawlabourasthesolesourceandmeasureofvalue:
Labouristherealmeasureoftheexchangeablevalueofallcommodities.Therealpriceof
everything,whateverythingcoststothemanwhowantstoacquireit,isthetoilandtrouble
of acquiring it. What everything is really worth to the man who has acquired it, and who
wanttodisposeofitorexchangeitforsomethingelse,isthetoilandtroublewhichitcan
savetohimself,andwhichitcanimposeuponotherpeople....Labouralone,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
moneyistheirnominalpriceonly.(The Wealth of Nations,1776)
and according to Smith, price was determined by relation of value to the amount of
moneyincirculation.
AlifelongfriendofDavidHumeandpartofthe"ScottishEnlightenment",Smithwas
alsoacquaintedwithVoltaireandothersoftheFrenchEnlightenment.Smithcametothe
theoryofpoliticaleconomyexpressedinThe Wealth of Nationsfromastudyof"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 preIndustrial Revolution
capitalism.ConsistentwiththetheoryofknowledgeofDavidHume,Smithregardsvalue
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
independentlyofthewillandunderstandingofhumanbeings,butasthenaturaloutcome
oftheclashoftheirindividualism.Smithwroteintheveryearliestdaysoftheindustrial
revolution, but it was not the large, steampowered industrial enterprises which were to
emergewhichformedthecontextofhisthinking,butratherthesmallscalemanufacture
oftheearlyeighteenthcentury.
DavidRicardo
David Ricardo (1772 1823) attempted to construct a political economy consistently
centreduponthislabourtheoryofvalue,butaccordingtoMarx'scritique,Ricardofailed
torecognisethattheworkerssoldnotlabour itselfbutlabour power(Marx'sterm),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,anyattempttolocatethesourceofsurplusvaluewasboundtoruninto
contradictions,andindeed,Ricardo'stheorywasrivenwithcontradictions.Marxregarded
thisasitsstrengthratherthanitsweakness!
ItwaslargelyuponthebasisofRicardo'seffortsthatMarxbeganhisworkonpolitical
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economy. Marx not only distinguishes between labour power (with its own costs of
reproduction)butbetweenexchangevalue(valueinthesenseofRicardoandSmith)and
usevalue,whichisconcrete,qualitative,notquantitative.MarxisacontemporarywithJ
S Mill, Jevons, Say, Walras and subjects the theories of Mill and Say as well as the
classicalpoliticaleconomiststocritique,thoughthereisnoevidencethatMarxknewof
Jevons and Walras. My concern here is chiefly with the development of the theory of
valuebeginningwithMarx'scontemporariesandinbourgeoispoliticaleconomyuptothe
presentday.
I do not wish to enter into a consideration of Marx's theory or that of Smith and
Ricardo.SufficeitsaythatRicardoisthelastbourgeoispoliticaleconomisttoattemptto
consistentlyapplyalabourtheoryofvalue.Theconceptionoflabourasanactivityarising
bythecombinationoflabourpowerandtheproductsofpastlabourinthelabourprocess,
and that labour power itself is a product with its own costs of production is unique to
Marx.InthehistoryofbourgeoisphilosophyitwasHegelwhounderstoodtheimportance
ofconceivingofhumanlabourasalsoaproductoflabour,andthathumanneedsarenot
only satisfied but produced by labour. While Hegel was familiar with the political
economyofAdamSmithandincorporatedwhathelearntfromClassicalBritishPolitical
Economyinhisownsystem,therewasnodirectinfluenceintheotherdirection.
JohnStuartMill
In his Principles of Political Economy John Stuart Mill (1806 1873) presents the
conceptofValueroughlyasfollows:
(1)therearetwokindsofvalue,useandexchangevalue,butthesearecommensurable.
Usevalueiswhatyouwouldbepreparedtopayforsomething,andexchangevalueisthe
averagemarketvalueusevaluecanbelessbutnevermorethanexchangevalue
(2)usevalueisnotofconcerntopoliticaleconomy
(3)(exchange)valueisarelative,notanabsoluteconcept.
(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
ratherthanjustone(i.e.money)
(5)valuefluctuatesaccordingtosupplyanddemandarounda"naturalvalue".
Hegoesontoreducetheconceptofvaluetoanothing,withoutactuallydismissingit.
Itisakindof"properprice",sinceifpricediffersfromvalueitisbecausesomeonehas
been"rooked"orthereisatemporarydistortioninthemarket.Millsaysin1848:"There
isnothinginthelawsofvaluewhichremainsforthepresentorfuturewritertoclearup".
Millisverymuchapartofthetraditionalofclassicalpoliticaleconomy,andconsistent
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with that tradition. Mill adheres to an objective or "costofproduction" conception of

exchangevalue.Millspeakshowever,asanapologistforcapitalandhasabandonedthe
projectofscientificallyaccountingforthewealthofnations.Herejectsthelabourtheory
ofvalue,allowingallfactorsbroughttotheproductionprocessaproportionalshareinthe
formationofanewvalue.Wagesarewhatacapitalistispreparedtopayforlabour,and
whatthelabourerdeserves.
Context
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"datingfromMills'SystemofLogic,Comte'sCourseinPositivePhilosophy,
and also Feuerbach's Essence of Christianity, Schelling's Philosophy of Revelation,
Kierkegaard'sConceptofDread and Schopenhauer's WorldasWillandRepresentation.
[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
investigationorontheotherside,towardsinnerconcernwithFaith,Love,Will,Sinand
soforth.
FortheFirstPositivism,sociologywasseenasthecentralscience,andsocietyandits
intellectual superstructure is seen as evolving towards rationality and science with
religiondyingawaysocialscienceaspiredtoemulatethemethodsandachievementsof
naturalscience,conceivingsocietyasanobjectwhichcanbestudiedandunderstoodby
thesamemethodsasdevelopedsosuccessfullybynaturalscience.Primacyisgiventothe
dataofperceptionandrationalmeansofcomprehendingthatdata.
Economy:Themiddleofthenineteenthcentury,theperiodofMills'swriting,isthat
of the growth of finance capital which continues up until the beginning of this century,
whichisgenerallyrecognisedasthebeginningoftheepochofimperialism,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
around1900.
Mill represented a degeneration from the political economy of Smith and Ricardo
inasmuchasheridpoliticaleconomyofthecontradictionsofRicardo'stheory.Milltook
an approach to these contradictions which was opposite of Marx's (and Hegel's). He
simplyeliminatedonesideofthevaluecontradiction(usevalue)frompoliticaleconomy.
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
bourgeoiseconomistswealthisagiven,itisthe"endowment"oftheeconomicagents,or
whatever.Thatdoesnothavetobeexplained.
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Ontheotherhand,Millhaslaidthebasisforthefuturedevelopmentoftheconceptof
value in bourgeois political economy in his reduction of usevalue to a quantity
commensurate with exchangevalue and his advice to abandon the study of value in
favourofthestudyofprice.Britainis,inMills'day,stillthedominantindustrialpowerin
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
factorsofproductionascontributingequallytothecreationofvalue.Thisisafterallthe
banker'sview."Investmoneywisely,andyou'llmakeaprofit".Theconcreteactivityof
humanbeings,labouringintheproductionandreproductionofthemeansoflifearetothe
bankermerelyobjects,equallyasmuchasthenaturalmaterialsconsumedinproduction.
Valuehaslostitsqualitativesideandisnowpurelyquantitative.
In the System of Logic, in accord with the spirit of his time, Mill minimises the
importanceof"metaphysical"questions,butremarks::
"...thegreatandmuchdebatedquestionsoftheexistenceofmattertheexistenceofspirit,
andofadistinctionbetweenitandmattertherealityoftimeandspace,asthingswithoutthe
mind,anddistinguishablefromtheobjectswhicharesaidtoexistinthem....inthepresent
stateofthediscussiononthesetopics,itisalmostuniversallyallowedthattheexistenceof
matterorofspirit,ofspaceoroftime,isinitsnatureinsusceptibleofbeingprovedandthat
ifanythingisknownofthem,itmustbebyimmediateintuition."
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,byintroducingtheconceptofameasureoftheutilityofacommodity,eventhough
hisowntheoryplacesthisutilitymeasure"outside"ofpoliticaleconomy.
Mill'sPrinciples of Political Economy was published in 1848, the same year as the
Communist Manifesto. His Utilitarianism (1861) is the translation of his political
economyintoethics.[See"EthicalValues"]
The"MarginalRevolution"
The English logician and economist William Stanley Jevons (1835 1882),
expounded in his book The Theory of Political Economy (1871) the marginal utility
theoryofvalue.WiththeFrenchborneconomistLonWalras(18341910),oneofthe
first to propound a comprehensive mathematical analyses of general economic
equilibrium, and Karl Menger in Vienna (1871), Jevons opened a new period in the
historyofeconomicthought.
The "marginal revolution" in natural science began with Isaac Newton 150 years
earlier.Allthelawsofnatureelaboratedduringthatperiodareexpressedindifferential
form.Jevonsintroducedthedifferentialtopoliticaleconomyunderthenameof"margin"
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andthistrulymadearevolution.
WithElements of Pure Economics (1874), Walras is generally credited with having
foundedthe"Lausanneschool"ofeconomistslaterledbyVilfredoPareto(18481923).
Walrasappliedtotheeconomicuniversetechniquesfortreatingsystemsofsimultaneous
equationsthatwerewellknowninclassicalmechanics.Assuminga"regimeofperfectly
freecompetition,"Walrasconstructedamathematicalmodelinwhichproductivefactors,
products,andpricesautomaticallyadjustinequilibrium.
Buttheintroductionofthedifferentialwasnottheonlyrevolutionwhichtakesplace
with"Neoclassicalpoliticaleconomy".
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"picksuponMills'conceptofusevaluewhatyouwouldbepreparedtopayfor
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
marketaspurchasers.
Fromhereonthen,theproblemofvalueisthatofthemind,ofthevalueplacedupon
thisorthatobjectbyaperson,andpriceistheoutcomeoftheinteractionof"marginal"
valuesbetweensuppliersandconsumersofthevariouscommodities,includingfactorsof
productionsuchascapitalandlabour,whichappearsidebysideintheequationofprice.
It should be pointed out that this is not a shift of value from "supply side" to "demand
side".Eachsideinanexchangeperceiveinthecommodityofferedinexchangeavalue,
beitmoneyorproduct,butwhatmattersis"intheeyeofthebeholder",notintheactual
orpotentialcostofbringingthecommoditytomarket.Thisconceptisquitedistinctfrom
Smith's idea of the labour one is saved by purchase, since though this is still expressed
fromthepointofviewofthepurchaser,itremainsanobjectiveconcept.
AlfredMarshall
NextinthegenealogyofBritishPoliticalEconomyafterJ.S.Mill,isAlfredMarshall
(18421924).ForMarshall,marginalutilityonthedemandsideandmarginalefforton
the supply side jointly determine price. By considering the time periods over which
variousfactorsoperate,Marshallsoughttoapplythisapproachtodetermineconditionsof
partialequilibriumofafinitemarketanddevelopedanapproachtosolvingproblemsof
priceformation.Marshalldifferssomewhatfromthemainstreamofneoclassicalpolitical
economy in that he sees price as an outcome of the joint action of marginal costs of
productionandmarginalutility(orusevaluemeasure)andthusstillretainssomewhatof
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thetraditionofclassicalpoliticaleconomy.
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
wouldhardlyfindasatisfactory"assumption"uponwhichtobuildasystemofpolitical
economy!). He is thus able to rely upon money as the exclusive measure of "wealth",
underwhicheverythingcontributingtowellbeingisincluded,beittangibleorintangible,
artificialornatural.Marshallsubstitutesforvaluethenotionofpriceatequilibriumofa
specificmarket,butinfactwehavemadenoadvancefromtheperceptuallygivenprice
andmeasuresabstractedfromthatwehaveno"value"assuch.Marshallistrying,inthis
way,inthespiritofhistimes,toeliminateanykindof"metaphysics"fromhisscience.
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
contributiontoeconomictheoryasfollows:
1. "theedificeisbuiltessentiallyonacompetitivebasis.Heconsiders
monopoly,butseparately....
2. Itassumesthatwantsaregivenindependentlyoftheutilityaspectsofthe
processesleadingtotheirsatisfaction,i.e.,thattheyareconstantsinthe
problemofeconomicequilibrium.Thewholeconcepthasreferencetothe
satisfactionofgivenwantsandnottotheexplanationoftheirexistence.
3. Itassumesthatallmovableeconomicresourcesareeffectivelymobileand
divisible.
4. Actionmustberationallydirectedtowardwantsatisfaction.Itistobe
notedthatitisthewantsofpeopleasconsumersandnotasproducers
whichareconsideredasbeingsatisfied"(TheStructureofSocialAction,
1937)
Thus,Marshallachievestheidealofscienceforhistime,onlybyplacingoutsidethe
scienceeverythingthatmattershumanneedsandtheirorigin,humanlabour,thevalue
of money and "imperfections" (i.e the reality) of the market. But of course, such a
wonderfullysanitiseduniverseiseminentlysuitablefortheapplicationofmathematics!
John Neville Keynes (1852 1949) mentions the word "value" only in passing as an
exampleofawordinthecommonlanguagewhichisambiguousafterJSMill,theword
hasdisappearedfromthelandscapeofpoliticaleconomy.
Bytheturnofthecentury,Britainisalreadyindecline.Itisonthecontinentthatneo
classicalpoliticaleconomyismorefullyandconsistentlydeveloped.
VilfredoPareto
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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
outputequations.HisMind&Society,publishedin1916,reflectshisownproblemwith
the inhumanity of these conclusions. Pareto has laid the foundation for a structural or
functionalapproachtoeconomicsbyconsistentlydevelopingtheimplicationsofpursuit
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
economicsbringsustothebrinkofstructuralism.
Theaverageofmeasurementsofadatumisjustanotherperception.Butassoonaswe
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
sensationbutgiventousinsensation.
Context
This period of the closure of the nineteenth century is the period of the Second
Positivism,inwhichisassociatedwithErnstMach(AnalysisofSensations)andothers,
who renounced even formal recognition of objectively real objects. The problems of
cognition were interpreted from the viewpoint of extreme psychologism, which was
mergingwithsubjectivism.ThePositivistsofthistimesoughttoexpelall"metaphysical"
concepts from science and "value", in the sense of an objective substratum of value
adheringinacommodity,waspreciselyonesuchconcept.Onlyvalue"intheeyeofthe
beholder"wasacceptableasgenuinelyscientificinthisview.
Theturnofthetwentiethcenturymarkstheexhaustionofsourceofrawmaterialsand
the capacity for expansion of capital and the opening of the period of imperialism, the
struggleformasterybetweenrivalimperialpowers.Thebasisofvaluehasshiftedfrom
the object and its production, to the subject (the market), and its consumption. In
approachingnature,oneconfrontsnotjustanalreadyhumanisednature,butone'srivals.
These conceptions of laissez faire capitalism lasted only so long as the developed
capitalisteconomieswhichweretheirbasishadaccesstounlimitedroomforexpansion
andrawmaterials.Astheseconditionsbecameexhausted,economycamemoreandmore
undertheswayoffinancecapital.
The measure of utility laid the basis for the use of mathematical methods imported
frommechanicstoanalysethedynamicsofsupplyanddemandinestablishinganetwork
of relative values in terms of the marginal utility of product and money. But "value" is
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hereexclusivelyusedinthesenseofthesubjectiveutilityoftheproducttothebuyerorof
moneytotheseller.
Insofaras"value"ismentionedinsubsequenteconomicliteratureatall,valuerefersto
thesubjectivevalueofacommodityinthemindofshewhowishestoacquireitandthere
is nothing of Adam Smith's conception of the purchaser being "saved the labour of
producingitherself",somethinginconceivableinanalreadyhighlydevelopedindustrial
economy.
Andthemindthatformulatesthisvalueistheindividual,isolated,autonomousbeing
who draws her values from her inner personality. This political economy is consistent
withthesociologyofMaxWeberwhichseekstoconsidertheinteractionoftherational
actionofmanyindependentwillsandpassionswithoutregardtoanyobjectivecriteriaof
valuesofeachactor.
TheEconomicModelofNeoclassical
Economics
Theneoclassicaleconomistsofthe"marginalrevolution"wereabletobuildacoherent
mathematical framework for economic science using the concept of utility within a
certainmodeloftheeconomy:
independent,individualagentsintheeconomy(individualconsumersor
firms)werepresumedtobeblessedwithabsoluterationalityin
maximisingtheirutilitythroughbuyingandsellingonthemarket,and
ifthereisanequilibriumstateforthemarket(inwhichanyagentsuffers
areductioninherutilityifsheactsdifferently),theninashorterorlonger
time,by one or another route,itdoesnotmatterwhich,theeconomy
willfinditswaytothisequilibrium.
These two assumptions are absolutely crucial to the whole science. The "agents"
effectively"search"forbuyingandsellingprices,investmentpolicies,etc.,untiltheyfind
asituationwheretheiraggregate"utility"isoptimised.Thegeneralprinciplethatthereis
adecliningutilityinbuyingmoreandmoreofausefulproductandanescalatingeffortin
supplyingmoreandmoreofaproduct(ordecliningnetearningsfromtotalsales)means
that it is possible to conceive of a partial equilibrium state where there is a balance
betweensupplyanddemand.Anyvariationinthepolicyofanysingleagentreducestheir
ownnetutility.Accordinglythestateofthemarketwill"gravitate"towardsthismarket
equilibrium.Theassumptionthatthemarketequilibriumwhichisalsoanequilibriumfor
each agent, makes it possible to construct a selfcontained "science" of economy. The
pathbywhichthisequilibriumisarrivedatneednotbeconsideredlikea"magichand"
themarketushersthetradersintothemarketequilibrium,whiletheauctioneercallsthe
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marketpriceoutuntildemandmatchessupply.
Itisknownempiricallythatmarketsmaybeinrealityveryunstableandmobile,butit
is wellknown in the natural sciences that complex dynamical systems can be very
intractable for analysis. So, economic science has for long contented itself with dealing
withtheeconomyasaseriesof"partialequilibrium"marketsthatis,prices,etc.moveas
a result of changed inputs from production, weather conditions, etc and interaction
betweendifferentmarketsattheirinterfaces(changing"boundaryconditions"),butwithin
the constraints of these "disturbances", are in equilibrium: "partial equilibrium". The
distinctionbetweenpartial(changingandnotaffectingthewholeeconomy)equilibrium
anddynamicsituations,isthattherateofchangeisnotitselfafactorindeterminingthe
outcome,suchasisthecasewhenthereisa"runonthemarket"orlossofconfidencein
thecurrency,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
domainofscience".[Whyanyofthese"rational"agentsdon'tmakeamillionbyselling
theiradvanceknowledgeofmarketvaluesisamystery!]Equally"outside"ofeconomics
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
historyofthesameeconomy,tothepositivistitisagiven,in"input",notanoutput.Each
trader,beshelabourerorbanker,isfreetosaveortradewhatshebringstothemarket
place...as"equals".
Uptotheturnofthecentury,thisviewoftheeconomyasthesumtotalofmillionsof
economic agents independently optimising their selfinterest, giving rise to a gradually
evolvingpartialequilibrium,seemedprettyplausible.
TheRiseofStructuralism
EmileDurkheim
EmileDurkheim(18581917)whilehimselfapositivist,laidthebasisforstructuralist
sociology and his direct follower was Claude LeviStrauss (b. 1908) who is also
influencedbyRomanJakobson(18961982),astudentofFerdinanddeSaussure.While
DurkheimavoidedthedogmaticgeneralisationsofAugusteComte,heclaimedthatitis
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.Durkheimpointedoutthatrealityisreflectedbymeansofconceptswhichare
social constructions.InhiscriticismofJames'andDewey'sPragmatism,Durkheimdealt
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with how sociallyheld beliefs (myths), which have no practical or scientific validity in
themselves, may nevertheless constitute an approach to reality, and he rejected the
pragmatists'dismissaloftruthasindividualutility.WithDurkheim,weseethebeginning
oftheideathatmateriallydifferentideas,beliefsorpracticeshavevaliditywithin a given
total social structure,ratherthanbeingassessableastrueorfalse"inthemselves".Thus,
ifamythformsthesubstratumrationalisingasetofsocialtaboosandpractices,thenthe
realmeaningofthemythliesinthesocialpracticesitisregulatingtoassesssuchamyth
bynormativelycomparingitto,forexample,amodernscientificworldview,wouldmiss
the actual validity of the myth in its social context. Thus an individual proposition has
meaningonlywithinthewholestructureofbelief.
Durkheim's sociology created the basis for transcending the economics in which the
endsofactionmustbesimplytakenasgivenor"constant",sincehedrewattentiontothe
factthatendsaswellasmeansaresociallyconstructed,andfurtherthatsuchends(utility)
are constructed socially and have meaning only within a given social structure, not in
termsofindividualvoluntaryaction.
FerdinanddeSaussure
Meanwhile,FerdinanddeSaussure(18571913)foundthepositiviststandpointquite
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
methodologyofstructuralism.
Positivismhadattemptedtounlockthemysteryoflanguagebyinvestigatingthesound
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
soundbeingattachedtoameaningisthesimilarityanddifferenceithastootherequally
arbitrarysounds.Notexactlyarbitrary,sincethesoundsdohaveahistory.Butthesound
onlymattersinitsrelationofsimilarityofdifferenceorcombinationtoothersounds,not
assuchitonlyhasmeaningaspartofastructure.Thus"structuralism".
AndSaussure,withoutgivinganyparticularsignificancetoit,notestheanalogyofthe
"value"ofasoundtothevalueofacoinineconomics.A10Franccoinhasontheone
handitsrelationto10onefranccoins,andontheotherarelationtothecommodityitcan
buy. But its value derives from its relation to the other coins in the currency. Only by
being exchangeable with moneythings can an object have value in relation to
commodities.
Functionalism (Talcott Parsons) may be regarded as an American pragmatist
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version of European structuralism, and I do not intend to give special attention to

functionalismatthispoint,takingitupelsewhereaspartofthedevelopmentofAmerican
Pragmatism.Functionalismsimplyaskswhatfunctionasocialformationorconceptplays
withinawholesystemfunctionalismemphasisesthetendencyofsocialforcestofunction
tomaintainthestabilityofsocialstructures.Itisthe"otherside"ofstructuralism.
Context
Already under severe strain with the crisis that has affected the whole scientific and
ideologicalworldattheturnofthecentury,bourgeoissocialtheoryreachedanimpasse
withtheRussianRevolutionandtheGreatWar.TheinterwarcrisisFascism,theGreat
Depression, not to mention the various crises of psychology, mathematics and physics
producedamyriadofconflictingtheoriesinalmosteverydomain.Generallyspeaking,it
is only the outcome of these crises after the War that has lasting significance. Saussure
anticipatedthisdevelopmentinhislinguistics,butitisfromthe1930sthatstructuralism
beginstoformitselfanddevelop.
AllthetheoriesofthepreWorldWarIperiodareassociatedinonedegreeoranother
withacceptanceoflaissez faireconceptsofthemarket,i.e.thatanyforcewhichdisturbs
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
markettoallowtheparticipantstodojustthatgetthebestpossibledealforeveryone.
ThecrisisofEuropeancivilisationofthefirstpartofthiscenturyisalsoacrisisofthe
market.
TheDepressiondemonstratedirrefutablythatthemarketfailedtodeliverthebestofall
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 selfinterest, but certainly not by rational selfinterest, that rationality was in
anycasenotaphenomenonofindividualconsciousnessbutofcollectiveconception,that
theeconomywasitselfa wholeandnotjustanaverageandthathumanneedscouldnot
betakenforgrantedsincethemarketwasascapableofdestroyinghumanneedsasitwas
ofsatisfyingthem.
TheGreatDepressionwasforeconomicswhattheMichelsonMorleyexperimentwas
for physics and geometry, and Gdel's theorem was for mathematics. The capacity
demonstratedintheRussianRevolutionforsocietytooperatebyentirelydifferentlaws,
and the capacity demonstrated by Fascism for capitalism to eradicate liberal values
createdaseriousimpulseforradicalchange.
JMKeynes
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JohnMaynardKeynes(18831946),isthefounderofpostDepressioneconomics.In
his prior work on probability, Keynes makes the point that even a vanishingly small
probabilityattachedtoafundamentalhypothesiscanthroughextensiveramificationlead
tocertainty(andviceversa).KeynesusesthisobservationtocounterHumeanscepticism.
In relation to the capacity of the market, Keynes observes that there is no level below
whichthevalueofacommoditymaynotfallincircumstancesofdepression,andnolevel
belowwhichwagesmaynotfallincircumstancesofmassunemployment.
With Keynes, there is a serious beginning to the study of economic policy aimed at
stateactiontoregulateorcontrolthemarket.AlsobeginningfromtheOctober1929crash
is the period of the fixed rate of exchange between the US dollar and gold. Beginning
withtheeffortstolifttheworldeconomyoutofdepressionandprepareforwaralsoisthe
widespread recognition of the efficacy of conscious manipulation of "utility" by
advertisingandhenceforth"demand"isasmuchavariableineconomicsas"supply"and
thestatehasapreeminentroleingeneratingdemandaconceptofcourseunthinkable
sinceWilliamPettyinthedaysof"primitiveaccumulation"intheseventeenthcentury.
JohnHicks'(1939)conceptofthemarginalrateofsubstitutionallowsthemodellingof
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.Implicitinthisconceptistheequationofsubjectivevaluebetweendiffering
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
economicpower.
Whereasneoclassicaleconomicsrequiredonlythatapersonshouldbuymoreorless
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,thatiswithperfectlyrationalknowledgeofthevicissitudesofthemarket.No
onecanpretendthatthisisactuallythecase,buttherewasnoalternativefoundationupon
which a theory could be based. They relied upon the tried and tested method of
professionalthinkerstoignorewhatyoucannotrationalise.
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
supplyanddemandarenowcalculatedonlargerandlargercomputersusingsimultaneous
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
professionaltrainingwasasaCivilEngineer.Ineverfailtobeamusedbythefactthatfor
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this type of economics, the world is just a "structure" in exactly the sense that a steel
frameisastructure,andtheapproachandmethodofanalysisisthesame.Onlynocivil
engineer in the world would be so stupid as to imagine that these methods would be
adequatetoastructurewith4,000,000,000"degreesoffreedom"thetermbywhichwe
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
limitedshorttermprediction(forwhichdifferentialequationswouldnotbeneededinany
case),theresultofeconomicanalysisismoreafunctionofprogrammingerrorsthanof
anydegreeofreflectionofreality.
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
procedurebywhichtheentityisdetermined.Thus,anaverageofsomeeconomicindex
canbedeemednotonlytobeadatumofperception,butalsoan"input",anindependent
variablebothdeterminedbyanddeterminingothersuchdata.Inthelanguageofstructural
analysis,astructureis"deficient"isthenumberofindependentvariablesor"degreesof
freedom" exceeds the number of determinant relations between them it is "over
determined"ifthenumberofindependentconstraintsexceedsthenumberofindependent
variables.Thegoodprogrammerknowshowtobuildasetofgoodequations.Thisispure
nonsenseifappliedinrespectoftheworldeconomy.Butit'saviewwhichfitswellwith
the world view of the managers of institutions which are managing a world economy,
manipulatingthesupplyandpriceofwholemarketsandwholecountries.
Thereisanewcriterionoftruththathasarrivedhere:solongasthesystemcanbekept
working,thenanyparticularpartofthewholesystemisjustifiedtruthisinthesystem.
Solongastherewereenoughdollarstokeeppumpingintothesystem,thesystemheld
up. This story came to an end in 1968, when the postWar hegemony of the US was
terminated with the ending of the fixed rate of exchange between the dollar and gold.
Fromthenbegantheperiodofrunawayinflationand"stagflation".Thestructurebegan
tocollapse.
MiltonFriedman
MiltonFriedman(b.1912),architectofthepost1968reactionagainstKeynesianism.
Friedmanisatpainstopointoutthatitisirrelevantwhetheran"assumption"ofatheory
istrueornot,onlywhetheritissufficientlyandeffectivelytruetoallowvaliddeductions
to be made from the theory. I.e., whether or not economic modelling is "realistic" is a
stupidquestion.Thisisthelastgaspofstructuralism.Itmaybe"unrealistic"butitisthe
awfulrealityformillions!
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Fromthisperiod,withthebreechinthefixedrateofexchangebetweenthedollarand
gold,the"purchasingpowerofmoney"isavariablewhichfloatsonthemarketlikeany
other. The "marginal rate of substitution" of any two commodities is but one link in a
networkofrelationsonwhichthereisnolongeranyfixedpoint.
Friedmanwastheguruof"Monetarism",theeconomicdoctrinewhichwasadoptedby
Reagan'sAmericaandThatcher'sBritain,andwasuntilfairlyrecenttimes,thedominant
economictheory.ItshareswithKeynesianismafocuson"macroeconomics"butreserves
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 rightwing capitalist
governments towards addressing the delayed confrontation with organised labour and
meantallowingunemploymenttogrowagaintoweakenthepoweroforganisedlabour,
cutting all public spending and allowing the market to do its work of strengthening the
handofthemorepowerful"economicagents"
Keynes'fallfromgracemeantnotonlytheendofgovernmentswithaggressivepublic
works and social agendas, but the end of belief in the capacity of society to control or
evenpredictthecourseofeconomiceventsgovernmentsarenolongerreallyblamedfor
economicmalaise,themoresosincetheyhavebecomeminorplayersinthemarketplace
themoresosincetheendofKeynesianpublicenterprise,unlessitisforinterveningtoo
much or for not doing enough to ameliorate the suffering of the losers. While the
mainframecomputersofthelargesteconomicplayersarenotabletopredictthecourseof
the economy, computers are beginning to proliferate and become workaday tools of
economicagents.
MicroeconomicsandEconomicRationalism
The continued failure of monetarism to rectify the problems inherited from
Keynesianismledthebourgoisietotheconclusionthattheproblemscouldnotbesolved
by"macroeconomics",butneedaturnto"microeconomicreform".ThisturntoMicro
economicsmarkstheendofstructuralisminbourgeoiseconomictheory.Theconception
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
workerswhorefusetoworkharder,thebusinesspersonwhorefusestomodernise,habits
ofwork,"humannature"isdominatingtheeconomy.Thisturnisconsonantwiththeloss
of confidence in "grand narratives". The hard work has to be done "get into the
workplacesandchangehowpeoplework!".Theroleofgovernmentnowshiftstogiving
thecapitaliststhelegalandculturalaswellasgeneraleconomicmeanstobreakorganised
labour, change workpractices and increase productivity. No longer is it thought that
profitability will flow naturally from a good average rate of profit rather, the rate of
profitcanonlyberestoredbyboostingtheprofitineachindividualworkplace.
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"Valueadding" becomes a popular term in this period. "Valueadding" is economic

activity which adds to the price something can attract on the market, be it advertising,
R&D or manufacture. Agriculture, mining and lowtech. manufacture or manual labour
are "low valueadding" while software, advertising, consultancy are considered high
"valueadding"butitreallydoesn'tmatterwhat,solongasyoucangetpeopletopayfor
it.Valueisasocialconstructionbuiltonnothingbuttheactivityofthedominantsocial
playersandtheimagemakers.
AsiftheWallStreetCrash,theGreatDepressionandallthemayhemofacoupleof
centuries of laissez faire capitalism had never happened, the luminaries of economic
rationalismspouttheirpostmoderntruisms,whichsoundsuspiciouslylikethetruthsof
nineteenthcenturyliberalism.Thesoleexceptiontothiscomparisonisthatthequantityof
fictitiousvaluecirculatinginthelatetwentiethcenturysovastlyoutweighsthequantity
of gold held by reserve banks, that governments must walk a knife edge to balance the
moneysupplyandpreventdescentintorunawayinflationordepression.
PostStructuralism
Context
Economics:Thebreakupofthepostwarboominthelate1960s,coincidedwiththe
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
technologymovedintothe"informationage"andlaterthe"KnowledgeAge",withnew
products moving from the physics lab to the living room in a few short years and
telephoneanddatacommunicationsnetworksproliferatingacrosstheglobe.
Bythe1980s,thefailureofallmacroeconomicschemesofeconomicmanagementto
create stability or eliminate structural unemployment led to a concentration on "micro
economicreform"andincessantchangeinworkpracticesandthedemolitionofallforms
of legal regulation or constraints on exploitation. Economic theory moved away from
reliance on macroeconomics, concentrating on the application of games theory and
sociologicaltoolstosystematisetheunderstandingoforganisationalbehaviourandrather
thanplacinghopesinthemanipulationofglobalfactors,thereisareturntoconcentration
onincreasingtherateofproductivityworkplacebyworkplace.
Politics:The1960smarkthehistoricbreechbetweentheworkingclassandtheleft
intelligentsia(witnessthePolishworkersandstudentsaction,theFrenchGeneralstrike,
Czechoslovakia and subsequent events) and the beginning of the breakup of Stalinism
(Maoism, Eurocommunism, etc), the disillusionment of a generation of radical
intelligentsia,thehighpointofthenationalliberationmovement(theTetoffensive)and
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thebeginningoftheriseofthewomen'smovement.
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
whileitsopposite,behaviourism,embracesthetheoriesofGdelandTuringandartificial
intelligence merges computer science of cognitive psychology and in turn with the
structurallinguisticsofNoamChomsky.WhilelinguisticsgivesbirthtoSemiology(the
study of signs) Roland Barthes asserts that semiology is but a part of linguistics. The
triumphofthedigitalovertheanaloguecomputercoincideswiththereturntodominance
of finite mathematics and mathematical concepts which defy imagination: category
theory, string theory, fractal geometry, Catastrophe theory and Complexity theory. The
greatsocialandpoliticalstructuresdisappear,justlikethesolidsandgeometricfiguresof
ordinary experience disappear into discontinuity of atoms and digits. Rationality is
reduced to algorithms and effective procedures, knowledge to information processing.
Foucault's"poststructural"historicismdoestostructuralisminhisfieldwhatthecategory
theory,etc.hasdonetoanalysis.
TheEconomicsofComplexity
Beginningintheearly1980s,aneweconomictheorybegantotakeshape,inresponse
to the patent in adequacy of theories of general equilibrium, and is associated with the
AmericansPeterAlbin,DuncanFoley,JanosKornai,BrianArthurandothers.Thenew
schoolhasnotyetproducedresultswhichwouldallowittosupplantthedominanttrends
ingovernmentFinanceMinistries,butitaimstodescribethedynamicsofthemarketby
substitutingforthepresumedabsoluterationalityofagentsanintelligenceequivalenttoa
computeroffinitememoryaTuringmachine,whichcanattempttomaximiseitsutility
byexecutingaprocedureonthebasisofdataderivedfromsignalsfromotheragentsin
theeconomy.
Takingseriouslythespeculatorormanufacturer'sproblemofpredictingthefutureofan
economyandtherealcostofcollectingandprocessingtheinformation,andthefactthat
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
ArtificialIntelligenceEconomistssubjecttheproblemtoananalysisofthekindtowhich
Kurt Gdel subjected mathematical theories and Alan Turing applied to computational
procedures.Theyshowthat,ingeneral,theproblemofoptimisinganagent'sactioninthe
contextofmanyotheragentsoptimisingtheiractionswiththepowerofaTuringmachine
isformallynot computable,isundecidableinthesenseofGdel'stheoremthecourse
ofeventscanonlybesimulated.
Further, they utilise Noam Chomsky's categorisation of the complexity of language
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structuretoprovideahierarchyofcomplexityfortheeconomicproblemsandeconomic
activity which results from the actual interaction of intelligent economic agents (or at
leastmaybeahundredofthem).
Aformallanguageisdefinedbyagrammar,analphabet,afinitesetofvariablesanda
finitesetofproductionswhichdefinehowtomakenew"sentences"inthelanguageanda
"fullstop".[The"fullstop"isthemostimportantbitofall!]Thepotentialcomplexityofa
formallanguagegeneratedbyagrammardependsonwhatrestrictions,ifany,areplaced
ontheproductionrules.Unrestrictedlanguagesarethemostcomplex.
1. Aregularlanguageiscomposedofaseriesofsimpleunlinked
constructions.
2. Acontextfreelanguageissuchasacomputerprogramminglanguage
whichcanbeinterpretedandimplementedoneinstructionatatimeasa
regularlanguage.
3. Acontextsensitivelanguageislikeacomputerlanguageinwhichan
instructioncanbeinterpretedandimplementedonlyinthelightof
precedinginstructions.
4. ThehighestinChomsky'shierarchyisthegeneralorunrestricted
languageofwhichordinaryhumanlanguagesareexamples.
The behaviour and computability of economic models may in turn be classified
according to corresponding levels of complexity which are associated with the same
hierarchiesoflinguisticcomplexity:
1. Systemswhichhavea"pointattractor",thatis,thereexistsasingle
equilibriumstateofthesystemtowhichthesystemwill"gravitate"in
time.Ingeneral,thisequilibriumstateiscomputablebyneoclassical
meansofeconomictheory.
2. Systemswhichexhibitcyclicalbehavioursuchasisseeninbusiness
cycles,theparametersifwhichcanbecomputedbythemethodsof
structuraleconomictheory.
3. Chaos(alsoknownas"strangeattractor"),thequasiequilibriumofthe
systemischaoticbehaviourinwhichthereisnostableequilibriumstate
andnodetectableperiodicbehaviour.
4. Complexbehaviourinwhichthesystemmovessharplyandunpredictably
towardsdifferentequilibriumstates,periodicbehaviourorchaosbutthe
outcomeisindefinitelysensitivetoinitialconditionsandformally
unpredictable,likethenotoriousbutterflywhich"causes"atornado.
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)
necessarilygiverisetoeconomicbehaviourwhichisin generalcomplex(type1,2or3
outcomesareincludedaspossible outcomes) and cannot be computed the only way of
knowingwhatevena100agentmodelwithonly2stateseachwilldoistosimulateiton
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acomputerandwatchwhathappens.Or,theonlywaytoknowwhatarealeconomywill
doistowatchithappen.Comforting,isn'tit.
And it must be emphasised that these conclusions are not in the form of an "open
verdict",butareprovenbythesamemethodsthatGdelusedtoprove the existence of
undecidablestatementsinamathematicaltheory!Further,thecomplexitydoesnotarise
fromtheunpredictablenatureof"outsideforces"orinthemassofdata:eventhesimple
computer modelisformally 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 nearinfinite
interconnectednessoftheglobaldivisionoflabour.Otherthingsbeingequal,acomplex
organisation or economy is inherently stronger than one less powerful. But it is also
inherentlyandirreduciblyunpredictable,uncontrollableandgiventosudden,unexpected
rapidandcatastrophicglobalchange.Theverypowerofthedevelopedmarketeconomy
istherootofitsinherentandirreducibleunpredictability.
Now,theArtificialIntelligenceEconomistshavemovedsubstantiallyinthedirection
ofrealismwhentheymodeleconomicagentswithTuringmachines.AlanTuring,asthe
founder of Artificial Intelligence research, was fond of challenging anyone to tell him
howyoucouldtellhimthedifferencebetweenawellprogrammedcomputerandahuman
beingusingthesameinputoutputdevices,andthisisofcoursethesamepositionasthat
held by behaviourist psychologists. So, they have broad support for a claim to realism.
However,itshouldbeemphasisedthatwiththeireconomics,aswithAlfredMarshall's:
Theformationofvalue(utility)is"outsideofeconomics"
Theproductionprocessitselfis"outsideofeconomics"
The"agents"arestillpresumedtobeoperatingindependently,according
totheirownintelligence,thoughthetheoryallowsforthegovernmentto
actasanagentwithasignificantbutnotdominantspecificweight,or
providecentralisedinformationtoallagents
thefictionthatlabourandcapitalcometothemarketas"equals"is
maintained,"wastefulworkers"donot"allocateenoughoftheirincometo
futureconsumption",andthereforefailtogetrich.
the"endowments"ofthevarious"agents"arejust"initialconditions",the
inputtoeconomics,notitsoutput.
Itisatheoryof"boundedrationality".Alltheagentsactaccordingtotheirownfinite
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
Turingmachinestakesasteptowards"realism"issomerespects,(notablyinthelightof
thefactthatfinancehousesprogramcomputerstodotheirspeculatingontheshortterm
markets),butthemodellingofinteractionsbetweenpeopleintermsofvariouspatternsof
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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
predictiveutility.
Nevertheless,themostimpressiveresultofthiseconomicsisitspredictionofessential
instability,andthestudyofthefactorscontributingtoinstabilityisworthlookingat.
ComplexityandDevelopment
Capitalist development has brought about a gigantic simplification of the world:
1,000sofdistinctpeopleshavebeendissolvedintoasingleworldwidedivisionoflabour
(eventheBushmenwhereNikeshoesandwatchNBC)qualitativehumanlabourhasbeen
reduced to simple quantity of abstract labour called value (spouses, holidays, good
fortune, education, health and fantasy are all commodities purchased on the market)
insideoutside,Monday/Sunday,London/AliceSprings,day/nightitdoesn'tmatter,you
cannolongertellthedifference.
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
workersinterpersonalrelationshipsbuildnetworksthataresaidtolinkanytwopeoplein
theworldbyonlysixlinksandthespeedofinformationflowayoungpersonenters
the workplace just as her parents take early retirement and takes a job that didn't exist
whenshestartedschoolworkorganisationischangedannuallyinagivenworkplaceand
productsgofromfundamentalresearchtothemassmarketinafewyears.
An interesting outcome of empirical complexity research concerns a factor normally
representedbytheGreekletterlambda,butwhichIwillcall.istheprobabilitythata
"cell" which is "on" at a given time will be "on" in the next cycle. close zero or 1
correspond to processes which rapidly reach stable equilibrium afterany disturbance
nearto0.5correspondstochaoticprocesses=0.273isknownasthe"edgeofchaos",a
rateofinformationtransferatwhichacomplexprocessnolongerhasanequilibriumand
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
completelydifferentconfigurationorintounendingchaoticvariation.
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
thatcantoleratenovacuum.
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Theincreasingcomplexityisinseparablefromtheincreasinghomogeneity.
TheGreenTheoryofValue
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,
includingLimits to Growthin1972.Effortstopredictthecourseoftheglobaleconomy
bycomputersimulationreachedahighwatermarkwiththisgroup,buttheClubofRome
ismostfamousforitsdoomsdaywarningstoworldcapitalismonexhaustionofnatural
resourcesandthegrowinggapbetween"North"and"South"andacritiqueoftheconcept
of"value"implicitinthecalculationoftheGDP.
Theypointout(correctly)thatthetearingdownofaforestiscountedasaddingtothe
GDP,asisfillingtheatmospherewithpollution,whiletheproductionofgarbagedisposal
units necessary to restore the damage is counted as adding even further value. The
solution seriously proposed is to recalculate the GDP by counting as negatives the
various factors of environmental degradation and counting the cost of restoring that
damageasadeductionfromtheprofitsmadeincausingthedamage.
Whereasawellmeaninggovernmentthatappliedtaxpenaltiesforthecuttingdownof
trees (thereby increasing the addedvalue of treefelling though effectively reducing the
number of trees felled) or providing taxdiscounts for production of pollutionreducing
technology (increasing the profitability of protecting the environment), they propose
instead that financial services such as insurance are undervalued (since insurance
provides the service of increasing the feeling of security which "isn't counted"). They
assertthatthecalculationofvalue,asthesumofallincomesorexpendituresintheactual
economy, reflects ideological prejudices inherited from the rise of manufacture in the
eighteenthcentury,andthat"nowadays"weshouldbeassigningmorevaluetoservices
andtheenvironmentandlesstomanufacture,whichdoessucheviltolifestyleandthe
environment.
"Enlarging on the implicit and exclusive paradigm of economic theory, still predominantly
connected,asitwere,totheindustrialisationprocess,maycontributetowardsamorepositive
viewofwhatthefuturewealthandwelfarecouldbe".[The Notion of Economic Value in
the Postindustrial Society]
TheseargumentscanbereadinfullinCycles, Value and Employment, Responses to

the Economic Crisis,1984.Incidentally,thesame"prophetic"workpromotesthe"long
wave" theory of economic cycles, which it credits to Kondratieff and Ernest Mandel.
Writingin1984,theypredictanendtothecrisisin1991,accordingtothe"longwave"
theory.Iprefercrystalballs.
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The same argument that if only the economists would do different sums, then the
efforts of governments would be concentrated on increasing the newlycalculated GDP,
andwecouldsavetheenvironmentandsolvethecrisisisstillpopularinsectionsofthe
Greenmovement,anditcanoftenbeheardthattheproblemwiththeworldtodayisthat
wehaveawrongideaaboutvalue,andthatifwecoulddecideuponabetterdefinitionof
value,thenthingscouldbebetter.
Itisjustliketryingtoconvincepeopletogiveuptheirdangerousbeliefintheforceof
gravity,inordertoavoiddrowning[PrefacetoTheGermanIdeology].Thistheoryisso
misconceivedthatitreflectsonlythedepthofdespairandconfusionthatinfecteventhe
commandingheightsoftheworldeconomy.
FeministTheoriesofValue
Thearticle,"LiberationEpistemology" deals ni more depth with the various ways in
which women have dealt with the problem of the undervaluing of their labour. Here I
wanttolookatacoupleoftheorieswhichbeardirectlyonthetheoryofvalueinthesense
consideredabove.
(1) Female professional economists have asserted that the absurd mathematisation of
economictheoryrepresentsamalebias"aboysgameinasandbox".Afaircomment.
However, if in the 1980s and 90s we counterpose to this "people grappling with real
economic problems that are out there" [Myra Strober] we could be in danger of simply
joiningthemovetomicroeconomicsfromtheotherside.It'sOKtobeontheotherside
ofcourse,butthatdoesnotconstituteanewtheory,justbeingontheothersideandusing
the same economic tools as became fashionable everywhere after the failure of
structuralism.
(2)Inthemid1960s,theUniversityofChicago'sGaryBeckerapplied"rationalchoice
theory"totheanalysisofwomen'sdomesticlabourhewentontocreatethetheoretical
toolsfordealingwiththepenetrationofthecommodityrelationintocriminalbehviour,
drugaddiction,romance,andsoonwithoutlimit.HegotaNobelPrizeforthistheoretical
workwhichfairlyaccuratelyreflectedthedevelopmentofcapitalismduringthepostwar
period,andinparticularthepenetrationofthecomodityrelationintodomesticlifeasa
result of the socialisation of women's labour. At the level of economic theory this does
notgobeyondHicks'marginalrateofsubstitution,butlendsitselfwelltoGametheory
andtherangeofmathematicalmethodsassociatedwiththebreakupofstructuralism.
(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
recognitionfortheirotherwiseunpaidlabour.PersonallyI'dratherbepaid!Accordingto
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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.Howdoweestimatethehourlyrateforhavingsexorcleaningtoilets?Sexhasan
hourlyrateofatleast$100perhour,whiletoiletcleaningisworthabout$10perhour.
Unsurprisinglyagain,theseideasdonotgainuniversalsupport.
(4) Barbara Bergmann, an editor of the magazine Feminist Economics, argues that
"Highcommodificationisthepathtoliberation".Theprofoundtruthinthisisofcourse
that this is exactly what women have been doing of the past thirty years, and in the
advancedcapitalistcountriesnowadays,themajorityofwomenareintheworkforceand
moreandmoreformerlydomesticlabourispurchasedonthemarket.Interestingly,when
I tried to further investigate Prof. Bergmann's ideas on the Internet, I found that every
timeIgottoanactualtextwrittenbyher(ratherthanapassingreferencetohername),I
came across a passwordaccess key, requiring me to pay up via credit and before
proceedinganyfurther.Prof.Bergmannhasensuredthatherlabourfeministeconomic
theorywillbeavailableonlyataprice,soshehasthevirtueofconsistency!Iremainof
theviewhowever,thatcommodificationisanecessarypreparationforliberation,butonly
ahighlypaid,privilegedacademiccouldbelievethatitconstitutesliberation.
TheFutureofValue
The complexity people have discovered a new gravedigger for capitalism: the very
complexity which makes the world economy of today qualitatively more "intelligent"
thananydictatororbureaucracyoranycomputerprogram,inotherwords,morepowerful
thanany"plannedeconomy"(inthesensethatLenindescribedinState & Revolution),is
notonlyessentiallyunpredictableanduncontrollablebutinherentlypronetocatastrophe.
The forces of production, the accumulated products of our own labour, have grown
beyondthepowerofevenourunderstandingletonlyourcontrolandthreatentodestroy
humanityaltogether.
The measure of the usefulness of human labour, value, a social construction which
beganlifeasameasureofhowhumanbeingsspendtheirtime,becameameasureofthe
usefulnessofthings,haslostallcontactwithhumanlabourorneeds,butdominatesour
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
increasinglylittlerelationbetweenvalueandusefulnessorhumanhappinessoranything
else, is a fact a fact which can be deplored but cannot be redefined. The real fiction
whichisvaluecanonlybetransformedbyeradicatingtheconditionsuponwhichitrests
productionforexchange.
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Recognisingthatvalueisasocialconstruct,wehavetosociallyconstructanewsystem
of productionconsumption relations in which human time is consciously allocated in
accordancewithaperson'sneedtolivehumanly,withouttheaidofcommodityexchange,
withoutconcernforefficiencyorprofitmarginsatthesametime,wemusteschewthe
notionofcentralisedplanningwhichisastepbackwards,butunleashthefullpotentialof
complexity of 4,000,000,000 human wills acting under their own creative direction
towards collective ends. This means terminating exchangevalue altogether: to each
according to her needs, from each according to her ability.
Itisadauntingtask,butitistheonlytaskworthdoing.Idon'tknowjustnowhowthat
canbedone,butIbelievethisdefinestheproblemtobesolved,forthemoment.
Marx'sTheoryofValue
Anyone genuinely familiar with Marx's critique of political economy will know how
powerfulishisanalysisofcommodityproductionandthelabourtheoryofvaluewhichis
at the heart of that analysis and the many great insights that this analysis has given us
abouttheessentialnatureandhistoricaltrajectoryofcapitalism.However,whateverthe
claims,IdonotknowofasingleMarxistwhocanclaim,handonheart,thattheyhave
donebetterthanacapitalistthinktankinpredictingtheupsanddownsofcapitalismin
the short or long term. And complexity economics shows how desperately inadequate
bourgeoiseconomicsremains.
The "labour theory of value" disappears with value itself, as soon as people stop
exchangingcommodities.Wedonotneedanewtheoryofvalue.Wewilldemonstrate
ourvalueswhenwecandecidehowtospendourtimeandthesoonerwecandecidewhat
todowithourowntime,thebetter.Solongaswestillwantsomethinginexchange,so
longareweenslaved.Solongaswehavetospendouttimedoingonethinginorderto
getsomethingelseinexchange,solongareweenslaved.
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,heldthatforMarx,acommoditycouldonlyhavevalueunlessitwasatangible
"material"object.Thisiscompletelyfalse.Ifitweretrue,thewholeofthisworkwouldof
courseflyinthefaceofMarxism.
In Chapter One of Capital, Marx points out that (exchange)value has no connection
withthephysicalpropertiesofacommodity,andvalueis"theveryoppositeofthecoarse
materialityoftheirsubstance".Themostimportantcommodityofall,labourpower,isa
"service" not a good. In the Grundrisse, Marx deals with a woodcutter, a porter and a
wandering tailor, all of whom are stated not to create value, because, as selfemployed
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contractors,theysellnotlabourpowerbuttheproduct.
Indiscussingthelotofaschoolteacher,Marxsays:
"Sofarasthelabourprocessispurelyindividual,oneandthesamelabourerunitesinhimself
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
controlledbyothers.AsinglepersoncannotoperateuponNaturewithoutcallingtheirown
musclesintoplayunderthecontroloftheirownbrain.Asinthenaturalbody,headandhand
wait upon each other, so the labourprocess unites the labour of the hand with that of the
head.Laterontheypartcompanyandevenbecomedeadlyfoes.Theproductceasestobethe
direct product of the individual, and becomes a social product, produced in common by a
collectivelabourer,i.e.,byacombinationofworkers,eachofwhomtakesonlyapart,greater
orless,inthemanipulationofthesubjectoftheirlabour.Asthecooperativecharacterofthe
labourprocess becomes more and more marked, so, as a necessary consequence, does our
notionofproductivelabour,andofitsagenttheproductivelabourer,becomeextended.
"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
deducedfromtheverynatureoftheproductionofmaterialobjects,stillremainscorrectfor
thecollectivelabourer,consideredasawhole.Butitnolongerholdsgoodforeachmember
takenindividually.
"Ontheotherhand,however,ournotionofproductivelabourbecomesnarrowed.Capitalist
production is not merely the production of commodities, it is essentially the production of
surplusvalue.Thelabourerproduces,notforthemself,butforcapital.Itnolongersuffices,
therefore,thattheyshouldsimplyproduce.Theymustproducesurplusvalue.
"That labourer alone is productive, who produces surplusvalue for the capitalist, and thus
worksfortheselfexpansionofcapital.Ifwemaytakeanexamplefromoutsidethesphereof
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.Thatthelatterhaslaidouttheircapitalinateachingfactory,instead
ofinasausagefactory,doesnotaltertherelation.Hencethenotionofaproductivelabourer
impliesnotmerelyarelationbetweenworkandusefuleffect,betweenlabourerandproduct
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 surplusvalue. To be a
productivelaboureris,therefore,notapieceofluck,butamisfortune."[CapitalVolumeI,
PartV,emphasisadded]
Thus makes it abundantly clear that it is not the material (or immaterial) form of the
product,buttheprodcutionrelationswithinwhichitisproducedthatinvestacommodity
withvalue.
Postscript:EconomicModelling
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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
predictthefuture.
Development of the model takes place in great measure through development of
modellingoftherelationsandsupposedactionoftheeconomicagents.Itisaparticularly
pureexpressionoftheEthicsofthesocietymodelled.
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
quantitieswhicharebothinputsandtheoutcomeofinteractionwithotherfactorsinthe
equationsformingtheeconomicmodel.
These "input variables" become the new metaphysical entities, but metaphysics
lacking any theoretical foundation. For example, instead of social classes, we have
incomegroupsoroccupationalgroups.Inthesemodels,thematerialworldisreducedto
"outside"factorswhicharebeyondanalysisandinthedomainoftrialanderror.
The inhuman character of social relations in the view of the various bourgeois
economistsisputinparticularlystarkreliefbytheireconomicmodels.Basicallytheyare
saying: "the world is like a cloud ofatoms", "theworldislikeamechanical structure",
"theworldislikeachemicalreaction"or"theworldislikeacomputer".Modelscometo
handwhenthemathematicaltechniquesfordescribingthebehaviourofagivenmodelis
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
developmentofindustryandtechnique.Sofortheeconomistsofthemechanicalage,the
worldisagiantmachine,fortheeconomistsoftheinformationtechnologyage,theworld
isagiantcomputer.
Thus in a certain bizarre sense, the economic models accurately reflect the "human
nature"ofpeopleatsuccessivestagesofthedevelopmentofcapitalism.
Postscript:Barthes,DerridaandValue
Roland Barthes (1915 1980, French social and literary critic whose writings on
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semiotics helped establish structuralism and the New Criticism as leading intellectual
movements.)beganasadiscipleofSaussureinthe1950s,butinhis1964Elements of
Semiology, "turns Saussure on his head". Barthes is a decisive influence on Lacan,
FoucaultandDerridainshortbearssomeconsiderableresponsibilityforthedominant
philosophicaltrendoftoday.
WhereasSaussuresawlanguageasapartofsemiology,Barthessaysthatsemiologyis
apartoflinguistics.Giventhattotheseguys"signs"coveranythingthatwedoinrelation
tootherpeople,thisistantamounttosayingthatlanguageformstheworldnottheother
wayaround.
Further, Barthes picks up Saussure's offhand remark about an analogy between the
valueofawordandthevalueofacoinandrestatesitafter50yearsduringwhich"value"
has disappeared from political economy. We are dealing here with much more than an
"analogy".Ataboutthesametime,Lyotardpointsoutthatknowledgeitselfhasbecomea
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
producingittendstobemonopolisedbythedominantworldpowers.
EpistemologicallyspeakingwehaveinSaussure'sstructuralistlinguisticsafairlynaive
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(100centsmakesadollar,100yenmakesapoundsterling)andotherobjectscan
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
onlybyitsowninternal"logic"mayitbeindicatedbyothercommodities.
DerridaturnsBarthes'linguisticvaluearoundagainandalsomakesacritiqueofMarx's
theoryofvalue.(see"Derrida")
ForDerridavalueexistsasa"potential"fromtheverybeginningofhumanproduction,
beforetheemergenceoftheexchangeofcommodities.Likewise,language,grammar,is
something which exists in nature (in the same sense that "information" is a category of
physics,thermodynamics,etc.),andhumanlanguageisadevelopmentofwhatexistsas
"potential"withininorganicnature.Derridaacceptsthattheobjectswhichweperceivein
capitalistsociety(jobs,state,supplyanddemand,etc.),butalsoequallyalltheobjectsof
the material world, are "ghosts" summoned up by the very process of labour it is all
mentalconstruction.
This is mostly a very negative critique which leaves one wondering on what basis if
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anypriceexists.Derridaargues(byimplication)thatthissystemofvaluesisimplicitin
the historical development of the production process itself, rather than being something
whicharisesthroughtheprocessofexchange.
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
originalgeneticepistemologyisquiteconsistentwithamaterialistview,thoughlackinga
socialhistoricalconceptionoftheformationofknowledge,butessentiallyastepforward
from Kantianism. However, those who have come after the pioneers of Constructivism
seetheworldasnothing butanindividual'smentalconstruct.
Sidebyside with this is Behaviourism which rejects consciousness altogether and
acceptsbehaviouronlyasvalid.Boththeseapproacheslendthemselvestoanalysisofthe
developmentofcomplexsystemsandarebeginningtobeinfluentialineconomics.
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Adam Smith (17231790), the first to complete a comprehensive theory of political

with that tradition. Mill adheres to an objective or "costofproduction" conception of

version of European structuralism, and I do not intend to give special attention to

"Valueadding" becomes a popular term in this period. "Valueadding" is economic

TheseargumentscanbereadinfullinCycles, Value and Employment, Responses to

an article in The Australian Higher Education Supplement, 20 January 1999, the

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