Marx’s irrational irrational commodity

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At the apex of the pyramid is a baleful eye, Capital — a real God, the demiurge of the world — that controls every aspect of our lives. Marx scaled the pyramid and gazed into the depths of the horror. Human cognition against alien cognition. Rationality against irrationality. Did Marx retain his sanity, or did he lose it?

Capital takes many forms. The most abstract form, at the apex, is money-capital, money for sale with a price, where “the relations of capital assume their most externalised and most fetish-like form” (Marx, [1894] 1971, Pt. V, Ch. 24). Marx’s theory of money-capital is neglected because it arrives rather late in Part 5 of Volume 3 of his magnum opus. And the truth is that most people have bailed out before then. But this somewhat obscure corner of Marx’s theory actually illuminates a more general, and important, property of this theory, which has broad implications for our understanding of the true nature of the demiurge, and therefore the true nature of the society we live in.

The irrationality of capitalism

Engels tells us that Hegel’s philosophy implies that “all that is real in the sphere of human history, becomes irrational in the process of time, is therefore irrational by its very destination, is tainted beforehand with irrationality”; and in consequence, “all that exists deserves to perish” ” (Engels, 1976, Pt. 1).

Engels didn’t have the BBC or the British Labour Party in mind when writing these words. He had everything in mind. So this seems to be a very gloomy prognosis. But the other side of the coin is that genuinely new things must pop up in human history while, of necessity, other things must wither away too.

Now Marx, as a follower of Hegel, is committed to an ontology that admits irrational kinds that exist in reality and are essentially contradictory.

We all know what a logical contradiction is. It denotes an impossibility (e.g., a square circle, or stating both that Socrates is mortal and socrates is not mortal).

But a dialectical contradiction is something different. 

A dialectical contradiction refers to the existence of a system, with component parts, where each part of the system attempts to control a particular property of the system in incompatible ways.

This isn’t as complicated as it sounds. Imagine, two teams in a game of tug-of-war that attempt to pull the rope in opposite directions. That’s a dialectical contradiction.

There isn’t a logical contradiction here. But there is a single combined system with internal parts that are in conflict.

I actually dislike the phrase “dialectical contradiction”, because it doesn’t evoke the right image. Plus, people disagree about what a dialectical contradiction really is. So I’ll use the term “real contradiction” instead. A real contradiction can happen in reality, but can’t be represented in most systems of formal logic.

Real contradictions are the cause of change and motion. So the rope pulls left and right in virtue of the real contradiction between the two competing teams.

A real contradiction denotes a logically possible situation, but the situation may ultimately be unstable and therefore transient on some time-scale. Eventually it will perish. The game can’t go on forever.

Marx, applies this Hegelian point-of-view, to demonstrate that capitalism must perish from its real contradictions — real contradictions such as perpetual class conflict between workers and capitalists over the production and distribution of the surplus, and emerging new, social forms that work against the rule of private capital — such as worker co-operatives, trade unionism, the tendency for capital to concentrate and therefore socialize property on larger and large scales — these kinds of real contradictions together imply that capitalism, on a historical time scale, is in the “process of becoming” something else, specifically a new mode of production that transcends the contradictions.

Capitalism is an “irrational” system from the perspective of real possibilities immanent within, and emerging from, capitalism itself. This social game is going to end.

Logical contradictions point to real contradictions

Now, of course, real contradictions and logical contradictions are not in contradiction. They live quite happily together. 

How they live together would take us too far afield. But one aspect, which Hegel mentions in the Science of Logic, is worth noting. He says that — if we can express a scientific theory sufficiently rigorously and precisely and thereby discover some logical contradictions within it — then we’ve made progress, because the existence of a logical contradiction is a big clue that the theory has failed to capture, or express, an underlying real contradiction in the phenomenon, which is a cause of change over time.

So the slogan could be: logical contradiction in a theory implies a real contradiction in reality. 

And this heuristic is applied by master dialecticians. Whenever something doesn’t make sense in thought, before assuming your thinking is wrong, just make sure to double-check whether it’s reality itself that’s wrong, not you. The real may be irrational.

Marx makes this kind of move quite often in his analysis of Capitalism. He does so in his analysis of money-capital. In fact, Marx claims that money-capital is an irrational commodity.

What is money-capital?

So what is money-capital? The quick answer is that it’s capital in its money form.

When Marx talks about capital he’s really talking about a social practice in which money participates and that has the purpose of getting more money, of making a profit.

Money functions as capital when people use it, not merely as a means of exchange to buy things, but when it’s used as a principal sum that is loaned to production for a period of time in exchange for an interest payment. When money is used in this way it becomes money-capital. The aim isn’t to spend the money, but to lend it to someone else, and get more money back.

Typically, when you or I spend money, we don’t expect to get it back. We’ve spent it. But when “money-capitalists”, or finance capitalists, lend their money to finance some productive activity, they do expect to get their money back. And get back even more.

Who borrows this money? Simplifying a bit, it’s “industrial-capitalists” who, as owners and managers of firms, borrow money-capital to finance their production plans with the expectation of earning a profit in the market, or profit-of-enterprise.

So we find, in capitalist societies, a circuit of money-capital, a social practice that repeats over time, which involves social roles, such as the money-capitalist, who lends, and the industrial-capitalist, who borrows. And this circuit features specific activities, such as the work of selling, arranging and servicing loans. And it features new economic forms, over-and-above money, such as loan contracts, and promissory notes, which state that the borrower promises to repay the principal sum plus interest after so many days. And, to a large extent, the entire financial architecture of the modern world is an enormous ensemble of circuits of money-capital, coming-to-be and ceasing-to-be, on different time scales, and making contact with industrial production in millions of different ways. But each and every one has the express purpose of funding material production to then extract interest income from it.

A promissory note from 1864

We might think that profit is just profit. But not all profit is the same. Marx, just as many other economists do, distinguishes between interest and profit-of-enterprise, because these different kinds of profit derive from different kinds of property claims. 

A finance-capitalist owns stocks of outstanding loans and therefore maintains a property claim on all principal sums plus the interest (and plus any loan collateral). These property claims terminate upon repayment of the loan. 

The industrial capitalist, in contrast, is basically the owner of the firm, and therefore has a claim on the firm’s net income, and is liable for both profit and loss after all costs are deducted from

revenue, including the cost of borrowing money from the finance-capitalists. This property claim terminates when ownership is transferred or the firm dissolves.

So profit as interest, and profit as profit-of-enterprise are importantly different.

Now, money-capital, as a sum of money, is rather strange. It’s strange because it’s bought and sold like a commodity, and has a price, which we call the interest rate.

Marx, following the classical authors, held a rather simple view of what determines the interest rate. According to Marx the price of money-capital, is set in the market for loanable funds, where finance-capitalists endowed with excess money-capital meet industrial-capitalists who have profit-making schemes but lack the funds to put their plans into action.

The industrial-capitalists borrow the money-capital. And the use of this money-capital, for a period, itself costs money, which is the interest rate.

So, simplifying a bit, total profit in the economy splits into two different kinds of profit income: interest and profit-of-enterprise. The industrialist deducts the interest due on the borrowed money-capital from their total profit and distributes it to the money-capitalist. Interest, then, is a deduction from industrial profit.

So we have a strange kind of commodity, called money-capital, which has a strange kind of price or cost, which is the interest-rate.

Now the strangeness of money-capital manifests in Marx’s theory in a specific way. And to understand how, we first need to briefly review some fundamental aspects of Marx’s theory of value.

Prices are regulated by labour costs

Marx, in Volume 1 of Capital, describes three properties of commodities that are important for the theory of value. 

First, a commodity is a use-value, i.e. a thing with utility, because it “satisfies human wants of some sort or another’ (Marx, [1867] 1954, Ch. 1).

Second, a commodity has an exchange-value, which is its price, or rate of exchange with other commodities in the market.

And third, a commodity has a labour-value that is the total quantity of labour supplied to produce 1 unit of it, and replace the means of production used-up  (what Marx ([1867] 1954, Ch. 3) calls “socially necessary labour time”3 ).

A labour-value is a function of the current methods of production, i.e., the prevailing know-how, technology and so forth, and denotes a quantity of “abstract labour” or “homogeneous human labour” which basically denotes the working capabilities of the average person.

The causal regularities of commodity production, which operate “behind the backs” of the participants, instantiate a “law of value’”, which is the tendency, given constant methods of production, for exchange-values to “gravitate” toward or around their labour-values. The law of value distributes the available social labour to different branches of production according to market demand. Exchange-values, at any time, will not reflect the underlying labour-values, due to imbalances between supply and demand, but are continually pushed in the direction of labour-values due to the law of value.

Marx therefore states that exchange-value “represents” or “expresses” abstract labour much as the height of a mercury column, in virtue of the law of thermal expansion, refers to and measures ambient temperature.

Although Marx mainly uses physical examples of commodities (e.g., he talks about wheat, silk, gold etc.) he also uses non-physical examples, such as intangible services, like acting or clowning. So providing the service of clowning at a children’s party equally has a use-value, exchange-value and a labour-value. 

Without any sense of irony the labour of clowning transfers the labour-value of used-up balloons to the entertaining output. It must do, simply because, in normal circumstances, clowns need to pay for all their costs, and make a decent living.

So, in the very briefest and simplest possible terms, in Marx’s theory of value, the exchange-value of a commodity refers to and is regulated by the cost of producing it in terms of labour resources, which is its labour-value. 

This is the first key to understanding Marx’s theory of money-capital, which is that prices are ultimately regulated by labour-time.

Now let’s turn to the second key.

Surplus-value has no labour cost

We need to briefly examine another aspect of Marx’s theory, which is his theory of surplus-value.

To explain surplus-value I will use a very simple example. Imagine an economy where, at the start of the working day, there are two things: first, a large collection of means of production, and, second, labour-power ready to go into action. 

And let’s say that, during the working day, workers use-up all the means of production. And so, at the end of the day, we have a large collection of newly produced commodities, which we’ll call the gross product. 

The gross product consists of two parts: first, a newly produced collection of means of production that entirely replaces what was used-up; and second, a net product, which is a collection of newly produced goods and services, ready for consumption.

So, in this super simple example, society, every single day, uses-up and replaces its means of production, and produces a net product, which is then consumed by the population. And let’s assume no growth. So society just repeats like this, day in day out.

OK, keep this simple economic picture in mind.

Now, according to Marx, the labour process transfers the labour-value of the used-up means of production to the output, and adds newly supplied labour-time.  So let’s say that, during the working day, workers supply a total of 10 million hours of labour. This means that the labour-value of the gross product has two components: the labour-value of the used-up means of production, which reappears in the gross product, plus the addition of 10 million hours of living labour.

The labour-value of means of production just keeps reappearing in the gross product. And so we can subtract it out. That leaves the labour-value of the net product, which must therefore be the 10 million hours of labour that were newly added during the working day. 

The workers, of course, need to consume. So some of this net product gets distributed, via the spending of money wages, to workers. Let’s assume that the labour-value of the total real wage is 4 million hours. 

The 10 million hour working day therefore splits into two parts: a necessary part, which is the 4 million hours supplied to produce the real wage, and a surplus part, which is the remaining 6 million hours distributed, by definition, to non-wage earners, that is to capitalists, which they purchase with their money profits.

This surplus-labour, this 6 million hours dedicated to producing goods consumed by capitalists, is what Marx calls surplus-value.

So human labour bears fruit — it yields a surplus-value in excess of the cost to maintain it. The 10 million hours of labour supplied to workers is more than what’s necessary to sustain them. Only 4 million hours is needed for that. The remaining 6 million hours of work, supplied to the economy, is a strict injection of new value, a true surplus.

This will become important for what we’ll discuss later: Marx says that surplus-value is “a value not existing previously and not paid for by any equivalent”. What does he mean by this?

He means that capitalist profit, which they use to purchase part of the net product, is indeed a profit, is simply a monetary increment over-and-above what capitalists invested in production. This is the meaning of profit after all: profit is additional money, not balanced by a pre-existing cost. 

But Marx also means that the substance of profit, the surplus-value, is additional labour-time supplied by workers, over-and-above what’s needed to sustain them, and therefore is a strict net injection of labour-time into the economy. And so the “prolongation of the working day” (Marx, [1867] 1954, Ch. 15, Sec. 3(A)), beyond what is necessary is, as Marx says, a gift to the capitalist — a surplus-value provided “gratis” (Marx, [1867] 1954, Ch. 18)..

And so surplus-value is the material basis of Marx’s theory of exploitation and expose of the wage system. The supply of labour in return for the money wage seems to be an equal exchange “for common advantage’” between two parties “constrained only by their free will” (Marx, [1867] 1954, Ch. 6). But Marx points out that, in terms of labour-time, the exchange is unequal. Workers supply a day of labour but receive only a part of that day in payment. 

Surplus-value is appropriated by the capitalist class by spending their profit that they obtain solely in virtue of legal ownership of the firm, and not by supplying any labour and receiving a wage. The capitalists, both in terms of money and in terms of labour-time, don’t pay for it. They get it for free.

Surplus-value is, to quote Marx, “not paid for by any equivalent”, and intrinsically costless, because no equivalent is supplied or exchanged in order to create it (Marx, [1867], Ch. 24, Sec. 1).

Marx’s proposition that surplus-value is costless is the second key to understanding Marx’s theory of money-capital. 

OK, now we’ve got these value-theory basics stated, let’s turn to what Marx says about money-capital.

The irrational commodity

As we mentioned, the strangest thing about money-capital is that it’s money that has turned into a commodity, that can be bought and sold, and has a price.

Money-capital is “a commodity, whose capacity for self-expansion has a definite price quoted every time in every prevailing rate of interest” ” (Marx, [1894] 1971, Pt. V, Ch. 24). And so money-capital has an exchange-value.

Marx calls money the “universal use-value” (Marx, 1993a, Ch. 1) because it functions as a universal means of exchange, and therefore is useful to everyone. 

But money-capital has an additional use-value over-and-above its utility as a means of exchange. Marx says:

“It is this use-value of money as capital — this faculty of producing an average profit — which the money-capitalist relinquishes to the industrial capitalist for the period, during which he places the loaned capital at the latter’s disposal”  (Marx, [1894] 1971, Ch. 21).

So money-capital is useful to the industrial capitalist because they need it to fund new production and make a profit.

But although money-capital is both a use-value and an exchange-value, and therefore has commodity-like properties, Marx is clear that it’s not a genuine commodity but an odd or unusual commodity. 

“We have seen that interest-bearing capital, although a category which differs absolutely from a commodity, becomes a commodity sui generis, so that interest becomes its price, fixed at all times by supply and demand like the market-price of an ordinary commodity.” (Marx, [1894] 1971, Ch. 22)

Marx offers three different, but related, reasons for excluding money-capital from the class of commodities proper.

The interest-rate is a growth rate of money

The price of money-capital is a growth rate. For example, an interest rate of 10% per annum represents the potential of a sum of money, say 100 pounds, to expand to 110 pounds in one year.

Marx notes that a growth rate of money is a self-referential concept. He says:

“Capital manifests itself as capital through self-expansion … The surplus-value or profit produced by it – its rate or magnitude – is measurable only by comparison with the value of the advanced capital … If, therefore, price expresses the value of the commodity, then interest expresses the self expansion of money-capital and thus appears as the price paid for it to the lender” (Marx, [1894] 1971, Ch. 21).

The price of an ordinary commodity is defined in terms of non-price quantities, specifically money-cost per physical unit; e.g., 2 pounds per bushel of corn. In contrast, the price of money-capital is entirely defined in terms of money value; e.g., 10 pence per 1 pound of money-capital. 

In consequence, the price of money-capital is a dimensionless ratio of two money magnitudes, i.e. an interest rate, and therefore, according to Marx, the price is a “purely abstract and meaningless form” (Marx, [1894] 1971, Ch. 21) and only “appears” to be a price. 

The price of an ordinary commodity denotes how much money needs to be spent to obtain some non-monetary things. But the price of money-capital is self-referential, and denotes how much money needs to be spent to obtain some money.

So Marx says:

“Interest, signifying the price of capital, is from the outset quite an irrational expression. The commodity in question has a double value, first a value, and then a price different from this value, while price represents the expression of [labour-]value in money. Money-capital is nothing but a sum of money, or the value of a certain quantity of commodities fixed in a sum of money … How, then, can a sum of value have a price besides its own price, besides the price expressed in its own money-form?” (Marx, [1894] 1971, Ch. 21) (my emphasis).

Normally price represents an underlying labour-value, an underlying real cost of producing some commodity. But money-capital is an odd commodity because its price is a dimensionless growth-rate that does not refer beyond monetary phenomena.

The interest-rate is a purely monetary cost

Let’s turn to the second weirdness of money-capital.

Real capital, such as raw material inputs, is produced, used-up and replaced by human labour.

In contrast, money-capital, as a sum of money loaned out as capital, is already existing money that returns to the lender with interest. Money-capital is not produced but circulates. Loanable capital therefore does not have a labour cost of producing it, and therefore doesn’t have a labour-value.

It therefore follows that the price of money-capital — the interest-rate — is purely monetary, or purely nominal, since there is no underlying real cost of production that its price could refer to. Marx says:

“If we want to call interest the price of money-capital, then it is an irrational form of price quite at variance with the conception of the price of commodities. The price is here reduced to its purely abstract and meaningless form, signifying that it is a certain sum of money paid for something serving in one way or another as a use-value; whereas the conception of price really signifies the [labour-]value of some use-value expressed in money” (Marx, [1894] 1971, Ch. 21)..

The price of a normal commodity denotes a labour-value whereas the price of money-capital does not have a corresponding labour cost to refer to. 

Marx says: “Price, after all, is the [labour-]value of a commodity … A price which differs from [labour-]value in quality is an absurd contradiction.” (Marx, [1894] 1971, Ch. 21) 

So money-capital is odd because it has a use-value and an exchange-value, but not a labour-value.

The interest-rate is a lawless variable

Since money-capital lacks a labour-value its price does not bear a lawful relationship to the methods of production. In consequence, there is no “natural” or normal interest-rate for the market rate to gravitate toward.

“The average rate of interest prevailing in a certain country – as distinct from the continually fluctuating market rates – cannot be determined by any law. In this sphere there is no such thing as a natural rate of interest in the sense in which economists speak of a natural rate of profit and a natural rate of wages” (Marx, [1894] 1971, Ch. 22).

So what does determine the interest-rate? Well Marx, in his rough notes that were eventually published as Volume 3 of Capital, suggests that the competitive haggling between finance and industrial capitalists in the market for loanable funds regulates the interest-rate. 

And so the interest rate is, to use Marx’s phrase, “arbitrary and lawless” (Marx, [1894] 1971, Ch. 21)  because it depends on an irreducibly subjective conflict between financiers and industrialists.

In contrast, the market price of a genuine or normal commodity is lawfully regulated by its labour-value. But the market price of money-capital, in contrast, is regulated by a lawless distributional conflict that lacks any connection to real cost.

This is the third and final reason Marx gives to explain why money-capital isn’t a proper commodity. Its price is not “regulated by the immanent laws of capitalist production” (Marx, [1894] 1971, Ch. 21)., and is an exception to the law of value that regulates all other commodities.

The rational commodity

So money-capital is an irrational commodity, not a real commodity, because its price is a purely nominal, self-referential growth-rate that fluctuates according to a distributional intra-class conflict that is arbitrary and lawless. Money-capital has the form of a commodity but lacks its substance. Its price isn’t regulated by an underlying labour-value.

Now Marx’s description of the irrationality of money-capital seems quite rational. But let’s dig a bit deeper, and examine each one of Marx’s claims.

On Marx’s claim that the interest-rate is a growth rate of money

OK, first claim:

Marx argues that the price of money-capital is usually self-referential because it refers to the growth rate of money. But, looked at another way, the interest rate denotes the unit cost of a commodity, just like any other price.

For example, consider 1 kilo of butter that costs 5 pounds to buy. Its price is expressed in units of monetary cost (i.e., 5 pounds) per unit commodity (i.e., 1 kilo of butter), and therefore has dimensions “money cost per unit commodity”. 

Now consider a loan of one month maturity offered in the capital market at 5% interest. This interest-rate is equivalent to a price of 5 pence per 1 pound of money-capital. 

The price of money-capital is therefore also expressed in units of nominal cost (i.e., 5 pence) per unit commodity (i.e., 1 pound of money-capital) and conforms to the same dimensional form of an ordinary price. It just so happens that, in the case of money-capital, the numerator and denominator are of the same type and so its price may also be conveniently expressed as a dimensionless interest-rate.

And we should point out that money-capital isn’t money. It’s a different thing from money. It is loanable money. And loans have a duration.

Actual capital markets offer a range of money-capital commodities at different prices that reflect the term structure of interest rates (e.g., 5 pence per 1 pound loaned for 1 month, 7 pence per 1 pound loaned for 6 months etc.) In all cases the interest-rate denotes the cost of purchasing quantities of money-capital, of different loan periods, in the capital market.

So the fact that the price of money-capital is normally expressed as an interest-rate does not imply it is essentially self-referential or unusual. The interest-rate simply denotes the price of a commodity that we happen to measure quantities of it in terms of the same unit of account that we also use for prices.

On Marx’s claim that the interest-rate is a purely monetary cost

OK, let’s turn to Marx’s second argument: that money-capital lacks a labor-value.

According to Marx, any kind of material object or activity can have a labour-value. He says: “[labour-]Value is independent of the particular use-value by which it is borne, but it must be embodied in a use-value of some kind” (Marx, [1867] 1954, pg. 183) and “it is a matter of complete indifference what particular object serves this purpose” (Marx, [1867] 1954, pg. 196). 

Marx explicitly notes that both money and money-capital are distinct kinds of use-values. In consequence, both money and money-capital, as use-values, would qualify for inclusion in the class of things that can have a labour-value.

But Marx is careful to exclude money. Although labour-value may inhere in any use-value Marx says, “we leave out of consideration its purely symbolical representation by tokens” (Marx, [1867] 1954, Ch. 8).

The reason is simple: an amount of money, say 1 pound, refers to labour-value but  is not itself a labour-value, just as 1 degrees centigrade refers to temperature but is not itself temperature. 

Now, the historical existence of commodity-money, and Marx’s discussion of it, can obscure this essential point.

Consider a gold coin. The coin has a labour-value, which is the labour required to mine the metal and coin it. But the coin’s nominal value, stamped on its surface, is a symbolic quantity that lacks any necessary connection to the money-value or labour-value of the gold that bears it.

Some interpreters of Marx think he only viewed money as a commodity, such as gold. But this isn’t the case at all. For example, Marx writes that the separation of “name and substance, nominal weight and real weight” begins as soon as coins are debased during circulation such that “the function of gold as  coin becomes completely independent of the metallic value of that gold” (Marx, [1867] 1954, Ch. 3).

So we must distinguish “money”, in the sense of a nominal representation of economic value, a unit of account, such as 1 pound, from “money” in the sense of the physical bearer of that representation, such as ounces of gold, paper bills, bytes of memory etc. The representation and its vehicle are materially conjoined but functionally distinct. 

Marx’s point is that money, in the sense of a nominal unit of account, is not a labour-value but is a “purely symbolic representation” of labour-value.

Now this can get confusing. So to avoid it, I’m now going to use the term “money” to refer to the unit of account, the symbolic representation, that lacks any intrinsic value.

Money, then, cannot have a labour-value. And that’s pretty clear now. But does the exclusion of money on these grounds also apply to money-capital? 

The exclusion certainly applies to a quantity of money-capital, which is a sum of money (e.g., 1,000 pounds of loan capital) because that quantity is a “purely symbolic representation’” of economic value. 

But the exclusion does not apply to the commodity money-capital, which is produced by a complex of activities (e.g., loan arranging, loan-servicing and accounting for and tracking repayments, including loan enforcement) and additional social representations (e.g., promissory notes, loan contracts etc.) that are entirely distinct and not reducible to a quantity of money.

Since money-capital is a use-value and any kind of thing or service can have a labour-value — including, presumably, the activity of supplying money-capital — then money-capital cannot be excluded from the class of commodities with a labour-value for the same reasons that we can exclude money itself.

So what labour-value could money-capital have? What labour must be supplied to produce it ready for sale in the market?

In the hyper-financialised capitalist economies of today, a significant share of the total working day is devoted to the administrative work of lending out money-capital. The production of the bewildering array of different kinds of loan agreements, which all serve to instantiate new circuits of capital accumulation, all incur a real cost of production, specifically the activities of workers, employed in financial enterprises, who do the work of arranging and servicing loans.

Marx, depending on the reading, classifies this labour as unproductive, which are costs incurred due to the specific character of capitalist production (e.g., bookkeeping labour that maintains a record of stockholders and their claims), or incidental costs incurred due to “circulation” rather than production (e.g., the work marketing and sales etc.) According to Marx, unproductive labour is a deduction from surplus-value and therefore does not have the “same absolute character of necessity” as properly productive labour.

The truth is that Marx’s distinction between productive and unproductive labour is either unclear or not fully elaborated, as many people have pointed out. So, for the purposes, and to keep things simple, I will entirely avoid this interpretative issue in Marxology and simply assume that the supply of money-capital incurs zero direct labour costs (i.e., that no labour is supplied to administer the circuit of money-capital). We’re going to assume that the commodity money-capital has no production costs whatsoever.

But there is a real cost, of a kind, that is incurred to supply money-capital. Finance capitalists don’t lend out their money-capital unless part of the working day is devoted to producing goods for their consumption. 

The necessaries, and luxuries, of life are a necessary condition of the supply of money-capital. For example, Marx writes that: “If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists”  (Marx, [1894] 1971, Ch. 23).

Finance capitalists, and capitalists in general, cannot live on air. The reproduction of the class of people, who own and supply money-capital, incurs labour costs. 

Marx is very clear that human labour is a commodity, and has a real cost of production which is equal to the labour-value of the real wage.

So, on the face of it, the commodity money-capital has a real cost which is equal to the labour-value of the consumption goods that allow money-capitalists to “live on their interest”.

Now Marx doesn’t think this, because he says that the price of money-capital, the interest-rate, is purely nominal because it lacks the commodity money-capital lacks and underlying labour-value. But, on the other hand, the commodity money-capital isn’t supplied for free, and therefore a possible candidate for the labour-value of money-capital is the labour supplied to reproduce the class of finance capitalists. 

On Marx’s claim that the interest-rate is a lawless variable

OK, let’s turn to Marx’s third claim that the interest-rate is “lawless” and belongs to the “realm of accident” because it is regulated by a distributional conflict, rather than the objective conditions of production. 

Marx is obviously right to say that the interest-rate is not fixed by the technical methods of production. But a distributional conflict doesn’t have to be lawless.

For instance, Marx himself predicates his theory of surplus-value on just such a distributional conflict, which is the split of the working day into necessary and surplus parts, where that split depends on the labour-value of labour-power, which is the labour-time supplied to produce the real wage. 

But, of course, as Marx recognises the real wage isn’t fixed by the techniques of production. Marx ([1867] 1954) writes, “in contradistinction therefore to the case of other commodities, there enters into the determination of the value of labour-power a historical and moral element”.

The distributional conflict, between workers and capitalists, forms part of the “historical and moral element” that determines the size of the wage.

Despite this, Marx does not classify the wage-rate as “lawless” nor does he consider the foundation of his theory of surplus-value to be arbitrary or capricious. Instead, Marx emphasises that labour-power is a full-blown, normal commodity, with a labour-value and an exchange-value.

So, if Marx applied the same standard of classification to the causes of the interest-rate — specifically the historically formed consumption claims of money-capitalists — then we should not classify the interest-rate as “lawless”.

Class struggle determines both the size and composition of the real wage, and the size and composition of the capitalist consumption. The split of the working day, into necessary and surplus parts, is definitely not determined by objective conditions of production. And the commodities labour-power and money-capital are not brought to market unless their sellers are remunerated.

But although Marx is willing to grant that labour-power is a commodity with a labour-value, and therefore that the money wage isn’t lawless or arbitrary, Marx is unwilling to grant that money-capital is a proper commodity, or that its price could also lawfully represent an underlying labour-value.

Marx’s problem of money-capital

OK, let’s sum-up so far.

Marx claims that money-capital isn’t really a proper commodity, but “sui generis“, an oddity.

But, in terms of Marx’s own theory of value, there is a case to be made to come to the opposite conclusion. There are ground to state that money-capital has a unit price that is causally related to the real cost of reproducing money-capitalists at their conventional level of consumption (in much the same manner that Marx would claim that the wage rate is causally related to the labour-value of labour-power.)

On this basis, money-capital has a use-value, exchange-value and a labour-value, and therefore has all the properties of a fully-fledged, proper commodity. 

So why does Marx insist on the “irrationality” of money-capital?

And now we can begin to get to the root of the issue. Marx’s theory of surplus-value splits the working day into necessary and surplus parts. Interest, which is a component of capitalist profit, is a claim on the surplus-labour supplied by workers. In consequence, although capitalist consumption goods do have a labour-value, since they require labour to produce them, this labour itself does not constitute a cost of production, because the labour was provided “for free” and without cost, as a surplus or net injection of labour-time into the economy.

This is also why Marx views the consumption of surplus-labour, on the part of capitalists, as unproductive consumption. He says: “the commodities the capitalist buys for his private consumption are not consumed productively, they do not become factors of capital” (Marx, 1994a) . Since these commodities are not a factor of capital, that is do not form part of the means of production that are technically required to produce things, they therefore do not form part of the objective costs of production.

So, on the one hand, in Marx’s theory, surplus-value is not a real cost of production. And that’s because it treats the cost of reproducing different classes in society asymmetrically or differently: workers’ consumption is a necessary cost of production, but capitalists consumption is not.

In contrast, Marx’s theory of value implies that money-capital is a commodity with a cost of production, both a monetary cost, which is its price in the market for loanable funds, and a real cost, which is the labour-value of the goods and services that reproduce the capitalist class.

But Marx does not pursue this logic since his theory of surplus-value implies that money-capital cannot have a cost of production. Marx resolves the contradiction by classifying money-capital as sui generis, a unique kind of quasi-commodity, with a price that is a pure form without content.

Money-capital, therefore, according to Marx, belongs to the class of commodities that “have a price without having a [labour-]value”, for example land or “conscience, honour, etc.” (Marx, [1867] 1954, Ch. 3), which have prices that are “imaginary, like certain quantities in mathematics” such as the square root of minus 3 (Marx, 2000, Addenda, Sec. 5). So Marx makes the explicit link between the irrationality of the interest-rate and the irrationality of complex numbers.

An “imaginary’” or “irrational’” price is the exception to the rule that “money is nothing but the value-form of commodities” (Marx, [1867] 1954, Ch. 3, Sec. 1) in the sense of representing or expressing labour-value.

So perhaps we’ve stumbled upon a problem in Marx’s theory, or at least some kind of unresolved tension. Money-capital, for Marx, both is, and is not, a commodity, where the affirmation finds support in Marx’s theory of value, and its negation in this theory of surplus-value.

Marx expects to identify irrational kinds. Capitalism, after all, is a social system riven with real contradictions that throws up contradictory, irrational and fetishistic social forms. Marx attempts to capture this reality in thought. The irrationality of money-capital, according to Marx, is therefore a manifestation of the ultimately contradictory nature of capitalism. 

And here we come to the question I would like to pose. That I would like us to think about. Is Marx right about this? Or, is there something wrong in his cognition of capitalism? 

In other words, does the contradictory nature of money-capital express a real contradiction in reality, or a logical contradiction in Marx’s thought? 

Before we answer this question, I think we need to take a little step back, up to a higher vantage point. We need to understand how Marx’s economic propositions fit into his broader scientific view of the “materialist conception of history” (Marx and Engels, 1987, Pt. 1). So I need to talk about historical materialism for a bit.

The empirical-normative content of historical materialism

“Historical materialism” is Engel’s shorthand for the “materialist conception of history”, which aspires to explain the succession of kinds of societies in human history in terms of a recurring real contradiction between what people can technically achieve, what their causal powers enable them to do, when they work, and the economic and political organisation of work. This is typically summarised as the contradiction between the “forces of production” and the “social relations of production”. 

Humans spontaneously learn from their material practice. In consequence, throughout history, the forces of production have a tendency to alter and improve. At certain junctures in history the forces of production develop to such an extent that the “material productive forces of society come into conflict with the existing relations of production”.

For example, the emergence of early workshops and factories, roughly speaking from the middle of the 16th to near the end of the 18th century, introduced a finer-grained, and therefore more productive, division of labour within single workshops. This is a change in the forces of production, which ultimately dissolved the traditional trades and undermined the institutional power of the medieval guilds. This is a change in the relations of production.

The contradictions may drive social actors to instigate a period of social and political upheaval that, if successful, ultimately overthrows the existing social relations and establishes new relations consistent with the forces of production. So relatively high-frequency technical change drives relatively low-frequency institutional change. Marx’s pithy aphorism, “The hand-mill gives you society with the feudal lord; the steam-mill, society with the industrial capitalist” summarises the main idea. 

Anyone who reads Marx’s works will find lots of highly critical, or normative, statements about the evils of capitalism. But Marx, very explicitly, avoids comparing capitalism to a subjective standard or utopian ideal. His moral outrage is ultimately based on applying the perspective of historical materialism to identify the real contradictions of capitalist production.

For example, Marx documents a class conflict between workers and capitalists over the distribution of the economic surplus. The combination of workers who are causally responsible for the production of the surplus do not decide on its distribution. Instead, the “owners of the means of production” distribute the surplus in virtue of a property claim rather than causal responsibility.

Capitalism, therefore, is founded on a contradiction between the forces of production, i.e. socialised labour, and its relations of production, i.e. private appropriation of the fruits of others’ labour. 

These social relations are irrational because they fail to reflect the actual material conditions of production and therefore constitute a “fetter”  (Marx, 1993a, preface) on the further development of the causal powers of labour. 

For example, Marx argues that capitalist exploitation causes unnecessary and regular economic crises, such as interruptions of production due to falls in profitability, financial crashes due to the inability to realise the value of “fictitious” capital, and also the unfreedom and relative poverty of the workers, which prevents the full realisation of their human capacities and powers.

At the same time, the real possibilities immanent within capitalism indicate that the contradictions can be abolished.

So Marx and Engels believe that capitalism is pregnant with a post-capitalist, or socialist, system of production in which profit income, that is income received in virtue of the ownership of the firm, rather in virtue of labour supplied, has been abolished. For example, Marx points to joint-stock companies, which indicate how ownership can be socialised, and worker co-operatives, which indicate how a firm can be owned by its working members, and points out these are transitional institutions that prefigure fully social and democratic forms of property.

Marx’s normative statements, therefore, ultimately derive from comparing capitalism to a post-capitalist system partially present within or implied by capitalism itself. 

This is sometimes forgotten, even though it’s absolutely fundamental to Marx’s critique of capitalism. For example, Marx and Engels (1987, Pt. 1, Sec. A) state that, “communism is for us not a state of affairs which is to be established, an ideal to which reality [will] have to adjust itself. We call communism the real movement which abolishes the present state of things. The conditions of this movement result from the premises now in existence.”

And it’s for these kinds of reasons that Marx and Engels claim that their  critique of capitalism is especially scientific, rather than moral or utopian, since it reveals, in thought, an actual historical trajectory. 

The subtitle of Capital is a “critique of political economy”. And this critique is empirically grounded, because it identifies real contradictions, but also normative, since it argues that transcending the contradictions will result in a better society, where “better” ultimately denotes increased causal powers and freedoms. 

So the critique is empirical, and it’s normative. And it’s not merely empirical, and it’s not merely normative. For want of a better phrase, and please write in if you can think of a better one, I’ll refer to this dialectical perspective as “empirico-normative”. Historical materialism is an empirico-normative theory of social change.

And this means that many of Marx’s key concepts are neither purely empirical nor purely normative. And standard readings often miss this essential point. And we can see this playing out in Marx’s concept of “surplus-labour” and his account of the labour process, which we’ll now return to.

Marx’s empirical-normative analysis of the labour process

Let’s turn our thoughts back to Marx’s splitting of the working day into two parts.

Marx’s split does not merely quantitatively identify that workers get this many labour hours and capitalists get that (in the form of goods and services). Marx’s theory of surplus-value in addition classifies a part of the day as a necessary cost and the surplus part as unnecessary and fundamentally costless.

On what grounds does Marx justify this classification? Why, for example, is it necessary that workers produce the real wage but it’s not necessary that they produce the real income of capitalists?

Marx is very clear about why when he first introduces the split. He argues that the real wage is necessary because in any viable economic system the labour force must reproduce itself. But the labour force must reproduce capitalists only in the specific, historical circumstances of capitalism. 

Allow me to quote the key passage because it’s incredibly important:

“That portion of the working-day, then, during which this reproduction [of labour-power] takes place, I call ‘necessary’ labour time, and the labour expended during that time I call ‘necessary’ labour. Necessary, as regards the labourer, because independent of the particular social form of his labour; necessary, as regards capital, and the world of capitalists, because on the continued existence of the labourer depends their existence also. During the second period of the labour-process, that in which his labour is no longer necessary labour, the workman, it is true, labours, expends labour-power; but his labour, being no longer necessary labour, he creates no value for himself. He creates surplus-value which, for the capitalist, has all the charms of a creation out of nothing. This portion of the working-day, I name surplus labour-time, and to the labour expended during that time, I give the name of surplus-labour.”  (Marx, [1867] 1954, Ch. 9) 

The asymmetry is clear: capitalists need workers but workers don’t need capitalists. This proposition is not strictly empirical but counterfactual: Marx implicitly assumes the real possibility of organising production where workers do not supply additional labour to an exploiting class, over-and-above that necessary to reproduce themselves.

And therefore, the justification for Marx’s asymmetrical treatment of the reproduction costs of workers and capitalists, which we noted earlier, ultimately derives from the empirical-normative perspective of historical materialism.

The existence of embryonic new social forms — such as democratic worker-owned firms that hire-in capital, rather than labour-power, and democratically distribute  firm profit to working members, rather than absentee owners — indicate the real possibility of more democratic and equitable property forms that transcend the hiring of human beings, i.e. the capitalist wage system.

A post-capitalist economy is a real possibility. It would lack the social role of a capitalist, much like the feudal lord and slave-owner disappeared in earlier social transitions. In this historical sense, the property relations and functional income categories that constitute the capitalist class, and the labouring activities that produce that income, are unnecessary.

Marx’s theory of surplus-value, and its split of the working day, predicts that if the social role of capitalist was abolished — but capital accumulation and the size of the workforce remained constant — then workers could knock-off early yet still consume the same real wage. The surplus-labour, which supported the hyper-consumption of a small class of capitalists, would no longer be necessary.  Alternatively, workers could choose to continue to work a “full” day, and supply additional labour, but would distribute it to themselves at their collective discretion.

So, from Marx’s empirical-normative perspective, necessity to work to produce consumption goods for capitalists is historically contingent. This surplus-labour is, counterfactually speaking, unnecessary post-capitalism. So Marx’s theory of surplus-value is an irreducibly counterfactual theory because it relies on a comparison between what is and what could be.

And it makes total sense. And it is right.

An empirical analysis of the labour process

Marx’s theory of surplus-value completely rejects the cost logic implied by capitalist social relations of production. But let’s switch perspectives again. 

Let’s now contrast Marx’s empirical-normative account of the labour process with a strictly empirical, or factual, account, which takes the cost logic of capitalist social relations as simply an empirical given.

Consider again the single working day in our simple example economy during which workers supply 10 million hours of labour. We split the 10 million hours into 4 million hours of necessary labour, supplied to produce the real-wage, and 6 million hours of surplus-labour, which for simplicity we’ll assume is devoted entirely to the production of capitalist consumption goods.

A necessary condition for the reproduction of capitalist social relations is that capitalists receive surplus-labour in the form of their real income. In consequence, in the actual circumstances of capitalist production, rather than the counterfactual circumstances that could prevail post-capitalism, the real wage is not produced after 4 million hours of labour. If it were then workers could knock-off early and yet still consume the real wage. But they cannot do this. In the actual circumstances of capitalist production workers supply, as a necessary condition of the production of the real-wage, additional surplus or tributary labour for the capitalist class.

And so, the surplus labour, from a strictly empirical perspective, is a necessary cost. 

As an empirical fact, then, workers supply the whole working day of 10 million hours in order to receive the real wage and reproduce themselves. 

And therefore a strictly empirical account of capitalist production implies that the labour-value of the real wage, the total amount of time that workers must supply to produce it, isn’t 4 million hours, but 10 million hours, the full working day.

And this makes total sense. And it is right.

In contrast, Marx’s empirical-normative account implies that the labour-value of the real wage is only 4 million hours, which is the total labour that would need to be supplied to reproduce the real wage in circumstances without capitalist exploitation, and where capitalists didn’t exist.

So, clearly, different theoretical choices about what we classify as necessary costs of production generate quantitatively different measures of the labour-value of commodities, including commodity bundles such as the real wage.

A contradiction

So what should we do? Should we consider the surplus-labour supplied to capitalists as a real cost of production or not? 

On the one hand, and following Marx, we can take a empirical-normative view of the capitalist labour process and observe that the supply of surplus-labour is historically contingent and therefore counterfactually unnecessary; on the other hand, we may take an empirical view of the labour process, which Marx does not do, and observe that surplus-labour, although historically contingent, is factually necessary in the empirical circumstances of a capitalist economy.

Which view is right? Which viewpoint should we adopt? 

It depends on what we want to do. If we want to critique capitalism then we should follow Marx. And this means that we don’t include surplus-labour as a cost of production, and we use a counterfactual definition of labour-values, that reveals to what extent capitalists exploit workers, and to what extent workers give their time for free in order to supply tribute to the owners of capital.

But if we want to explain the cost structure generated by capitalist property relations, and understand what prices, in a capitalist system, represent or measure, then we need to include surplus-labour as a cost of production. Then we use an empirical definition of labour-values that tells us how much time workers actually have to supply, in the conditions of their exploitation, in order to produce commodities.

The prices in a capitalist economy include a profit mark-up that gives capitalists the power to command and receive tributary labour. Marx, for example, points out that the interest-rate as a monetary cost of production, that industrial capitalists must pay, and which reappears in the cost of their output.

Marx, however, attempts to explain the cost structure that factually obtains in a capitalist economy, which includes surplus-labour as a cost of production, in terms of a counterfactual cost structure that excludes surplus-labour as a cost of production.

But a factual cost structure cannot be explained in terms of a counterfactual cost structure. And this is the fundamental logical contradiction present in the core of Marx’s analysis of capitalism.

Grasping this point is essential for a deep understanding of the structure of Marx’s theory of value, going beyond it, and thereby improving our understanding of capitalist reality.

Marx aims to construct a unified theory of value and exploitation. On the one hand, he employs his theory of surplus-value to reject the cost logic of capitalism; on the other hand, Marx employs his theory of value to explain that logic. But a counterfactual measure of socially necessary labour-time can satisfy only one of these aims. 

This fundamental contradiction manifests as different surface problems in Marx’s theory, whenever Marx tries to quantitatively link the value-form, that is monetary values, to its content, that is labour-values. Some of these problems have been talked about a lot, and I won’t mention them here, because it would take us off course.

Instead, let’s return to Marx’s classification of money-capital as an irrational commodity. Because, now that we understand what’s happening in the deep structure of Marx’s theory, we can formulate a more complete understanding of the precise nature of the irrationality of Marx’s irrational commodity.

The complete nature of money-capital

We can now return to the original question I posed: Marx classifies money-capital as irrational. Does this reflect a contradiction in reality, or a contradiction in Marx’s thought?

Marx explains that money-capital, as a social practice in which money-capitalists claim a share of surplus-labour, is exploitative, and ultimately prevents a fuller development of the forces of production. We can therefore judge it to be “irrational” from the perspective of a materially possible, future society that has abolished this form of exploitation. The normative judgement that money-capital is irrational is similar to our modern understanding that earlier forms of property, such as slavery or feudal bondage, were irrational.

However, Marx additionally claims that money-capital is in fact “irrational” in the different sense that it possesses irrational properties, such as a price “reduced to its purely abstract and meaningless form”, which is an “absurd contradiction”. It is this latter, specifically empirical, claim that I’d like to focus on. Here money-capital is “irrational” because it appears to be a commodity but also appears not to be a commodity.

Marx acknowledges that labour is supplied in order to bring money-capital to market, for instance the labour supplied to produce the real income of money-capitalists. However, his counterfactual analysis of the labour process classifies this labour as surplus that, by definition, cannot constitute a cost of production.

Money-capital therefore appears “irrational” — with a price but not a labour-value — because Marx compares its actual, monetary cost — which is the interest-rate — with its labour cost in circumstances where capitalists don’t extract a tribute. And in these counterfactual circumstances it has no labour-value, because its cost is surplus, superfluous and unnecessary.

In contrast, a strictly empirical analysis of the labour process will count the labour supplied to produce capitalist consumption goods as a cost of production. An empirical analysis captures the fact that money-capital does have a labour cost, which is non-zero.

In consequence, once we compare like with like, i.e. actual-monetary with actual-labour costs, then money-capital no longer appears to be an irrational commodity but rather belongs to the class of commodities proper, a fully-fledged commodity, with a use-value, exchange-value and a labour-value.

So we can now answer our question. 

Marx claims, as a matter of fact, that money-capital is irrational because it factually has a monetary cost but counterfactually lacks a labour cost. But counterfactual properties cannot be factual properties. And so Marx’s claim is a logical fallacy.

And this is why Marx simultaneously points out the commodity-like properties of money-capital but at the same time points out that those commodity-like properties must be illusions, irrational forms thrown-up by capitalist production.

But this tension in Marx’s theory dissolves, in a relatively straightforward manner, once we adopt a more general viewpoint that includes, yet distinguishes between, both factual and counterfactual accounts of the labour process.

The theory of surplus-value, which explains the phenomenon of capitalist exploitation, requires Marx’s empirico-normative perspective that views the reproduction of a capitalist class as historically contingent and therefore unnecessary. 

The theory of value, which Marx employs to explain the phenomenon of exchange-value in the circumstances of capitalist social relations, requires an empirical perspective that views the reproduction of a capitalist class as necessary.

From this more general viewpoint, money-capital is a normal commodity with a price and a labour-value; while, simultaneously, in the context of criticising capitalist property relations, we see that money-capital is the product of exploitative social relations.

We can therefore relocate the irrationality of money-capital from its nature as a commodity to its nature as a social practice. 

I think therefore Marx was wrong to state that money-capital both is, and is not, a commodity. I think, instead, we should simply and more accurately state that money-capital is a commodity, but that it expresses a social relationship that deserves to perish.

Marx’s rational irrational commodity

OK, let’s come to a close.

Marx’s theory of money-capital, which states it is and is not a commodity, suffers from the characteristic bias of automatic application of the Hegelian dialectic. If your ontology accepts the existence of irrational kinds, then you might reinterpret a logical contradiction in your thought as a real contradiction in reality. 

Marx’s designation of money-capital as irrational ultimately derives from the fundamental logical contradiction in his theory of capitalism, which is his attempt to explain a factual cost structure predicated on capitalist social relations in terms of a counterfactual cost structure predicated on the abolition of those relations. This contradiction, not fully resolved by Marx, means that his theory of value and theory of exploitation sometimes collide, as they do when he discusses the nature of money-capital. 

But by adopting a more general point of view, that includes both factual and counterfactual accounts of the labour process in capitalism, we avoid these collisions. 

Money-capital, in this general setting, is a rational commodity, with a price and a labour cost, and therefore does not constitute an exception to the law of value, but it nonetheless expresses social relations that are irrational from the perspective of historical materialism.

And we’ve arrived at this conclusion by applying some of the wisdom of Hegelian philosophy to Marx’s writings. Allow me to end with a somewhat obscure, but very interesting, quotation from Hegel in his Science of Logic:

“Intelligent reflection, to mention this here, consists, on the contrary, in grasping and asserting contradiction. Even though it does not express the Notion of things and their relationships and has for its material and content only the determinations of ordinary thinking, it does bring these into a relation that contains their contradiction and allows their Notion to show or shine through the contradiction. Thinking reason, however, sharpens, so to say, the blunt difference of diverse terms, the mere manifoldness of pictorial thinking, into essential difference, into opposition. Only when the manifold terms have been driven to the point of contradiction do they become active and lively towards one another, receiving in contradiction the negativity which is the indwelling pulsation of self movement and spontaneous activity” (Hegel, 1969, p. 442).

The language may be opaque but Hegel’s methodological remarks here are quite sophisticated. Partisans of dialectical materialism should pay even closer attention to logical contradictions at the level of “ordinary thinking” for the reasons Hegel gives. Often, to make theoretical progress, we need to compress the “manifold terms” of a complex theory into an essential logical contradiction. The reduction to a logical contradiction may reveal a glimpse of an underlying process of change that the theory fails to adequately reflect.

The “self-movement and spontaneous activity”, or process of change, not adequately reflected in Marx’s theory of Capital, is the historically contested and changing definition of what should, and should not, constitute a necessary cost of production in human society. Marx employs a single definition of necessary cost. A theory with sufficient representational capacity to adequately reflect this historical process includes contested, and therefore multiple, definitions.

Marx doesn’t quite achieve this, and therefore the deep structure of his theoretical system does generate surface problems, once we drive his concepts to the point of contradiction. The elements of irrationality in Marx’s designation of money-capital as an irrational commodity is just one of those difficulties, and the least known. Marx heroically ascended the pyramid and stared down the abyssal eye, but the irrational horror stared back at him and overthrew an element of his own rationality.

We can therefore conclude, in a rational but nonetheless paradoxical and dialectical manner, that Marx’s irrational commodity is both rational and irrational, both coming-to-be and ceasing-to-be, much like all things in human history.

(c) Ian Wright 2021.


Hegel, G. W. F., 1969. Science of Logic. George Allen & Unwin, London, translated by A. V. Miller.

Marx, K., [1894] 1971. Capital. Vol. 3. Progress Publishers, Moscow.

Marx, K., [1894] 1971. Capital. Vol. 3. Progress Publishers, Moscow

Marx, K., 1993a. A contribution to the critique of political economy. Progress Publishers, Moscow.

Marx, K., 1994a. Chapter six: results of the direct production process. In: Karl Marx and Frederick Engels: Collected Works. Vol. 34. International Publishers, New York, NY, pp. 355–466.

Marx, K., 2000. Theories of Surplus Value. Prometheus Books, New York

Marx, K., Engels, F., 1987. The German Ideology: Introduction to a Critique of Political Economy. Lawrence & Wishart Ltd, London.

Engels, F., 1976. Ludwig Feuerbach and the End of Classical German Philosophy. Foreign Language Press, Peking.

Wright, I. P. 2015. The Law of Value: a Contribution to the Classical Approach to Economic Analysis. PhD Thesis, Open University, UK.



  1. Hi Ian,

    I was wondering whether you had read or had any thoughts on the linked essay from the folks over at CasP, on the need to re-orient an analysis of capitalism from a focus on commodities to one on assets:

    It’s a quick read but I’ll (attempt to) summarize essential quotes and claims below:

    – the Marxian category of value is “theoretically indefinable, empirically non-measurable, and can exist only in a competitive market — a theoretical fiction that has little to do with actual capitalist competition.”

    – prices therefore are based not on equivalences of value but on differences in power between antagonistic social groups (e.g. the wage is the sign of power relations between employer and employee, price of a good the sign of power relations between vendor and customer, etc.)

    “if we think from the framework of power relations, the monetary magnitudes do not refer to a relation between nature and the productive capacity in general, but to a relation between social groups in particular. According to this thesis, prices are driven not by the productive power of society over nature, but by the social power of specific groups. Suppose there is a technological innovation that augments the capacity of producing a certain commodity. What will be the overall result of such innovation? Will it democratize access to that commodity, driving its price down? Will it increase the relative power of the companies that produce it? Will it lead to the formation of a monopoly, driving the price up? Will it increase the leisure time of the members of the community? Will it intensify the exploitation of workers and boost unemployment? From a CASP perspective, the ‘material determinations’ can tell us nothing about the final redistributive outcome. Only the interaction between social groups will answer these questions.”

    “Mobilizing a greater amount of labour implies facing a ‘greater resistance’: resistance from more workers, or resistance from workers who are forced to work harder. The relevant variable, therefore, is not the abstract labour time, but the concrete resistance of the actors involved — a capitalist may increase the price of his goods if his competitors and consumers are unable to exercise a greater resistance; a capitalist may reduce his production costs (and augment his profit margin) if he succeeds in reducing the resistance of his employees, etc. Prices, thus, do not indicate an equivalence of time, but a difference of power: they are the measure of a distance between social forces… a realistic theory of capital accumulation must indeed recognize the possibility that changes in productivity levels will lead to a change in price. This possibility, however, can be admitted as a ‘special case’, not as a necessary relation. And, more importantly, this special case should not obscure the fact that the relation between productivity and prices is always mediated by power. It is power — the specific action of social groups — that determines the social outcome of changes in productivity.”

    “The fact that the exchange of assets does not participate directly in the process of the production of commodities, does not mean that they do not produce anything. As the inquiry showed, assets do something at least as relevant as the production of things: they allocate the power of deciding what will be produced. Financial activities are ‘productive’ in the sense that they reproduce and reshape power relations. Now, if assets are the units of capitalized power, and if power is (among other things) power over production, then production is ultimately governed by the ownership of assets. Assets do not produce commodities: they give orders to those who do.”

    “if the Marxist concept of value is nothing but a theoretical fiction, there is no reason to preserve the distinction between concrete labour and abstract labour. Instead, it seems more reasonable to distinguish between a concrete labour that produces goods and services and equally concrete activities that reproduce and modify power relations. The former involves physical interactions between a group of individuals and a set of external objects. The latter involves power relations between different social groups — and, in fact, social theory already has a concept to designate it: class struggle.”



  2. Hi Anon,

    Thanks for your question, and apologies for the delayed response.

    The Marxist concept of value is not a “theoretical fiction”, and post Marx has been formally defined by many economists, both within and outside the Marxist tradition, leading to operational definitions and robust empirical work, such as explanations of the structure of input-output prices in terms of vertically-integrated labour coefficients.

    From your summary it seems that the linked essay wants to reduce economic phenomena to distributional conflict (between “groups”). Obviously, distributional conflict does play a role in setting market prices (and natural prices too). Marxists would be the last to deny this. But distributional conflict occurs in the context of market competition itself constrained by the total labour of society and its productivity. No possible outcome of distributional conflict can cause pens to regularly cost more than planes. Pens are regularly cheaper than planes in virtue of objective costs of production, not distributional conflict (i.e. relative prices are in general not due to “differences in power” between economic groups). As far as I can tell, the “capital is power” paradigm is a new variant of subjective theories of value, where group subjectivity stands in for the neoclassical subject. This approach seems inadequate at best.

    Hope these brief comments are helpful.

    Best wishes,


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