Value Product - Criticism & Controversy

Criticism & Controversy

Marx's idea of value creation and value product makes little sense from the point of view of the theory of factors of production and production functions.

Marx himself already anticipated this, in chapter 48 of Capital Vol. 3, titled "The Trinity Formula" where he discusses the view that land, labour and capital (which he sarcastically calls the "holy trinity" of political economy) all create a new value equal to factor income (Marx regarded human labour and land as the mainsprings of material wealth, but he considered value as a purely social attribution referring to labor-content). In modern macroeconomics, the controversy surfaces again, and is discussed in amusing essays by Prof. Anwar Shaikh (see references).

In Marxian social accounting, one theoretical controversy concerns the treatment of the wages of so-called productive and unproductive labour. Unproductive labour by definition does not make net additions to the new value product, but only transfers value from other sectors on the basis that it reduces the costs of capitalist production. Depending on how the gross and net product are defined, the value of these wages could be accounted for either as a component of surplus value, or as a circulating constant capital outlay, or be excluded from the value product altogether.

Different interpretations are offered by Shane Mage, Murray Smith, Anwar Shaikh and Fred Moseley. One aspect often overlooked in this controversy is that wages costs and labour costs are not the same thing. Employers and employees must also pay social insurance levies of various types, and there may be other imposts on wages; also, the buying power of wages is reduced by indirect tax imposts and profit imposts. This affects the magnitude of a society's variable capital and the value of labour power.

Another Marxian accounting controversy, less discussed, concerns which net tax receipts of government constitute part of the new value product. Obviously taxes included in official gross product measures do not equal the net total tax take, because some taxes are unrelated to production and therefore excluded. The Marxian critique of public finance appears to be rather undeveloped as yet, however. In principle, net tax levied on current production and paid out of current gross revenues would be included in the value product.

Least discussed is the problem of finding a non-arbitrary, rigorous distinction between value created and value transferred in respect of services. The conceptual problem here is essentially that it may be difficult to specify unambiguously what the nature and function of the "product" sold is, when services are rendered.

Some Marxists have argued however that Marx's value relations and value aggregates cannot be measured at all, and at best only experienced. That was manifestly not Marx's view; already in his Grundrisse manuscript he had referred to a balance sheet cited by Malthus; in Das Kapital he attempted to calculate the rate of surplus value according to data provided by Frederick Engels; and towards the end of his life, as Leontief noted, he wrote that he wanted to study the "ups and downs" of economic activity mathematically (but Samuel Moore convinced him that the data to do it did not exist yet). Engels later remarked that the problem really was that much data relevant to testing Marx's concepts simply was not available.

Subsequent Marxian scholars have argued the critique of political economy should continue, with regard to the new economic concepts and theories, rather than stop at the point where the ink dried on the last sheet of paper that Marx wrote on. One reason is that the new concepts and theories might distort the representation of economic reality, just as much as the old ones that Marx criticized.

In the USSR and other Soviet-type societies, Marx's social accounting approach strongly influenced the Material Product System (MPS), a social accounting method alternative to GDP accounts, which distinguished sharply between "productive" and "non-productive" sectors of the economy. These accounts focused on balances of the value of material goods produced. In some respects, this is ironic, since Marx's social accounting referred to the capitalist economy, not to a socialist economy. The MPS accounts were abandoned in favour of GDP accounts after the downfall of official communism in the USSR and Eastern Europe, although they are still compiled as parallel accounts in North Korea and Cuba.