WEBVTT

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Prof: Okay, good morning.

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We're going to make the
transition today to talking

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about Marxism,
the second of the three

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Enlightenment traditions that
we're going to consider in the

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first part of this course.

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And I should warn you at the
outset that I have something of

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a heterodox view of Marx.

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I have something of a heterodox
view of Marx in that if you went

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and read, for instance,
there's a book by a man called

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Graeme Duncan
called Marx and

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Mill.

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He basically,
his story line is that Marx and

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Mill operate with fundamentally
opposed paradigms,

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paradigms meaning foundational
assumptions,

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so that Marx and Mill make
completely incommensurable and

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incompatible assumptions about
how the world works,

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and the political theory that
can flow from those assumptions.

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And so to some extent they are,
he thinks on all the big

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questions, speaking past one
another.

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That they're basically you
can't adjudicate,

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if you like,
the disagreements between them

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in part because he thinks
they're speaking from

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fundamentally opposed paradigms.

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I think that view couldn't be
more wrongheaded.

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Marx and Mill are creatures of
the Enlightenment,

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both, and therefore we will
find in examining Marx,

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that just like all of the
utilitarians we've already

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considered so far,
they're both committed to

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basing politics on a scientific
theory of human association,

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and to committing themselves to
individual freedom as the basic

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and most important principle of
politics.

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Now, so let's,
before we get into the details

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of Marx's own argument,
let's say a few general things

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about Marx as an Enlightenment
thinker.

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And if we think about the
Enlightenment thinkers first of

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all as committed to science
there's no question that Marx

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was committed to a scientific
theory of politics.

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If you read his attack on
Proudhon and the utopian

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socialists, for example,
it was all about attacking them

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for being unscientific in their
thinking.

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It was all about rejecting
sentimentalism or wishful

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thinking in trying to understand
what was feasible and what was

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not feasible in politics.

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So Marx has a scientific
conception.

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Of course it doesn't come
within a country mile of the

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scientific conceptions we saw
both among early Enlightenment

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theorists like Bentham,
or mature Enlightenment

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theorists like Mill.

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Rather, Marx is committed to
something called the materialist

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conception of history.

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And the materialist conception
of history is the idea that,

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to use another one of his
rather impenetrable phrases,

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he's committed to the idea of
dialectical materialism.

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You might say,
"Well, what is dialectical

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materialism?"

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This comes from the idea first
articulated by a German

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philosopher called Hegel that
history moves in a kind of

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zigzag of fits and starts.

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The dialectical idea is that
some change gets made,

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some innovation gets made.

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This, though,
breeds a kind of undertow,

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a resistance against the
change, the first change,

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and then you get as a result of
the initial change,

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the undertow,
the kind of pushback,

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but which isn't the same as a
pushback to where you started

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from,
you get a new starting point.

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So Hegel's famous terms were
thesis,

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antithesis,
and synthesis.

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The thesis is a change.

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So you get, say,
the transition from serfdom to

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a market-based society.

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Then you get resistance to that
market-based society.

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You get a new working class
comes into being,

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let's say, and then that
working class becomes the agent

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of a new change that will
produce its own antithesis and

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new synthesis.

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So history goes like this,
if you like.

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It doesn't go in a straight
line, but it goes in a

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direction.

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It goes forward in some sense.

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And Hegel's idea had been that
history eventually reaches an

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ending point,
and he thought the ending point

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was the Prussian state of his
day.

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He thought all of history was
evolving toward this supreme

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highest point of the Prussian
state of his day,

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and it was guided by the
working out of ideas in history.

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Marx turns this on his head;
on its head I should say,

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not on his head.

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Marx turns it on its head
saying, "Well,

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yes history goes in this kind
of zigzag direction of thesis,

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antithesis, synthesis,
and then the synthesis becomes

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the new thesis and so on,
and yes, it has an endpoint

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(which he thinks is a communist
utopia),

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but it's not driven by ideas.

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It's not driven by ideas at all.

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Instead it's driven by material
interest."

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So that's why Marx's view is
sometimes called,

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as I said, dialectical
materialism.

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It's driven by material
interest, or as Bill Clinton did

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put it in the 1992 campaign,
"It's the economy,

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stupid."

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"It's the economy,
stupid."

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That's the basic idea behind
materialism that ideas,

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culture, beliefs,
all of that stuff is what Marx

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referred to as superstructure.

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It's not really important.

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What is important is the
economic base,

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so that economic interests
drive everything over time.

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And if you want to understand
how a political system works you

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better understand the economic
system.

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So in this sense it's a very
different view than Bentham,

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or Mill, or any of these folks
because they're really working

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in the realm of ideas,
right?

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They're not Hegelians to be
sure, but they think that this

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idea of shaping society in terms
of their utilitarian calculus

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can be used in order to
reorganize things.

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For Marx that would be a
completely absurd agenda.

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You have to start with the
economy.

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It's the economy, stupid.

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You have to understand what the
power of forces are in the

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economy and what the tensions
and possibilities are within the

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economy before you can
understand anything else about

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politics.

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And in that respect I think one
thing you should really get

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straight right away is just what
Marx thought about capitalism.

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How many people here thought
Marx was against capitalism?

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Marx was against capitalism?

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Almost nobody?

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Max wasn't against capitalism?

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How many think he wasn't
against capitalism?

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One?

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Why do you think he wasn't
against capitalism?

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Just get to a mic.

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Student:  He wasn't
against capitalism because Marx

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thought capitalism was a
necessary step in getting to

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socialism.

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Prof: You're exactly
right.

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So what Marx thought about
capitalism was,

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and we're going to understand
the reasons for this in detail

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in the next couple of lectures,
that for a certain phase of

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history it was essential.

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He thought capitalism was the
most innovative,

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dynamic, productive mode of
production that had ever been

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dreamed up,
and there was no way you could

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even think abut a socialist or a
communist society developing

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unless you had capitalism first.

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And Marx would have had
absolutely no sympathy for the

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Russian Revolution which was
done in a peasant society,

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or the Chinese communist system
either.

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He would have said they were
completely premature because in

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the end it's going to be
capitalism which is necessary to

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generate the wherewithal to make
socialism possible.

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So he wouldn't have had any
sympathy with the Leninist or

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Stalinist projects,
which we'll talk about later.

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So he's not against capitalism.

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What he thinks about capitalism
is that it's sawing off the

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branch it's sitting on over
time.

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That is to say there are basic
contradictions within the way

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capitalism works,
and indeed the very things that

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make capitalism the most
productive mode of production

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ever to have existed in human
history at one point,

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those very same dynamics
ultimately will undermine it.

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So in that sense don't think of
him as simply against

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capitalism.

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He, rather, wants to understand
the dynamics process that brings

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capitalism into being,
leads it to maturity,

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and eventually leads it to
self-destruct.

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And that is the story that he's
going to tell us.

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So he has a scientific theory.

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It's a materialist theory,
and it's based on this metaphor

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of the base and superstructure.

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People have come up with other
metaphors, skeleton and flesh

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and so on, but you can play with
them.

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But the core idea is that it's
the material relations that

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shape everything else.

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More controversially,
though, people might say,

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is to say, "Well,
Marx is really a believer in

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individual rights and
freedoms."

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Most people say, "What?

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Marx, a believer in individual
rights and Marx thinking that

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freedom is important?"

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Most people say,
"No, Marx is an

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egalitarian.

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Marx is all about
equality."

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And one of the things I'm going
to suggest to you in my

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exposition of Marx is that that
is basically wrongheaded.

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You'll see that when we come to
talk about his idea of a

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communist utopia one of his
bumper stickers for that is the

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claim that,
"The free development of

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each is a condition for the free
development of all."

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"The free development of
each is the condition for the

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free development of all."

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So he's an egalitarian in the
sense that,

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yes, he wants everybody to have
freedom,

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and he thinks that that is
denied to many people in most

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forms of social organization.

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But freedom is the most
important value,

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nonetheless,
and he wants to assure it for

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everybody.

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And related to that,
you'll see when we come to talk

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about on Wednesday or next
Monday the labor theory of

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value,
that the basic thing that

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drives Marx is a theory of
alienation from our true selves.

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We can't be free unless we're
at one with our true selves.

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And every system of social
organization before communism,

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in his view,
makes it impossible for us to

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be at one with our true selves.

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We are alienated from our true
natures as productive creatures

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by the way in which society is
organized, and that's the basic

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problem.

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So we're denied our capacity
for free action,

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according to Marx,
and he thinks we can never

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realize it until we reach this
communist utopia.

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So the takeaway point is going
to be that Marx is an

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Enlightenment theorist par
excellence.

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Passe people like Duncan it's
simply not correct to see him as

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doing something fundamentally
different than the real

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Enlightenment thinkers such as
Mill and Bentham.

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Marx is an Enlightenment
thinker, and when you want to

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see radical critiques of the
Enlightenment you have to go to

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people like Burke and other
anti-Enlightenment thinkers who

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we're going to be getting to
after spring break.

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A second point related to Marx
and individual rights and

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freedoms is you're going to see
that we're going to go back to

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our discussion of Locke,
and you're going to discover

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that Marx is a true Lockean
believer in the workmanship

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ideal,
not in his theory of science,

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but in his theory of rights and
entitlements.

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Marx is going to embrace a kind
of doctrine of self-ownership

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and the idea that we own what we
make as the basis for his theory

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of exploitation,
because his theory of

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exploitation is going to turn on
the claim that people are,

14:43.639 --> 14:47.949
in fact, denied the fruits of
their own labor because of the

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way that the system is set up.

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Well, you could say,
"So what?

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Why should we care that people
are denied the fruits of their

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own labor unless they're
entitled to the fruits of their

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own labor,"
and indeed that is Marx's view.

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So you will see that--I was
once accused of belittling Marx

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by calling him a minor
post-Lockean,

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but with respect to the labor
theory of value you will see

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that the main conceptual ideas
that go into it are straight out

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of Locke's Second
Treatise and it's straight

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out of the workmanship ideal.

15:30.519 --> 15:34.259
What Marx is going to try and
do, when we get to the labor

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theory of value,
is give a secular version of

15:37.152 --> 15:38.862
the workmanship ideal.

15:38.860 --> 15:42.990
And indeed, developing a viable
secular version of the

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workmanship ideal is a project
with at least as long a history

15:47.740 --> 15:50.700
as the history of
utilitarianism,

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and at least as fraught with
difficulties as the history of

15:55.029 --> 15:56.299
utilitarianism.

15:56.298 --> 15:58.778
And we will see when we get to
Rawls,

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an even more radical attempt
than Marx to develop secular

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version of the labor theory of
value and the workmanship model,

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and the difficulties it runs
into.

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So Marx, we will see,
is the first in a long line of

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people who tried to secularize
the workmanship ideal by

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creating this labor theory of
value that's going to have a

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rather checkered future as we
explore it into the twentieth

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century.

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So that's where we're heading.

16:31.019 --> 16:35.519
We're going to explore Marx as
an Enlightenment thinker by

16:35.518 --> 16:40.768
means of three lectures,
and the first one is going to

16:40.769 --> 16:47.759
deal with Marx and the challenge
of classical political economy.

16:47.759 --> 16:49.279
Now, why do I say that?

16:49.279 --> 16:53.049
Because really there are two
Marxes.

16:53.048 --> 16:57.548
If you were taking a course in
the history of ideas that had

16:57.546 --> 17:00.286
more than three lectures on
Marx,

17:00.288 --> 17:06.278
what you would discover is a
lot of attention to his German

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roots.

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I've already mentioned that he
was a disciple and critic of

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Hegel,
the German idealist

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philosopher, but much of his
writing until the mid-nineteenth

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century was inspired by his
critique of Hegel's other

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followers and disciples,
and we're pretty much not going

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to deal with that.

17:27.038 --> 17:29.738
We're not going to deal with
the German Marx.

17:29.740 --> 17:32.710
We're not, by in large,
going to deal with the young

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Marx.

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Rather, what happened to him
was Marx thought--you may or may

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not know this,
but in the 1830s there were

17:41.038 --> 17:43.388
revolutions across Europe.

17:43.390 --> 17:48.440
Kings and queens were kicked
out of office and democracy came

17:48.442 --> 17:49.372
to power.

17:49.368 --> 17:52.728
And Marx and many of those
around him thought this is the

17:52.730 --> 17:54.950
beginning of the end of
capitalism.

17:54.950 --> 17:58.590
By 1832 or 1833,
all of those democratic

17:58.590 --> 18:03.260
revolutions had failed,
and the monarchies had been

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restored across Europe.

18:05.778 --> 18:11.328
But then in 1848 there was
another whole series of

18:11.333 --> 18:16.513
revolutions across Europe,
and once again Marx thought

18:16.509 --> 18:19.379
maybe this is the beginning of
the end,

18:19.380 --> 18:22.630
and had great faith and
optimism that that was going to

18:22.626 --> 18:23.466
be the case.

18:23.470 --> 18:27.640
But by 1851 those revolutions
had all, again,

18:27.642 --> 18:31.912
failed and the monarchs were
back in power.

18:31.910 --> 18:36.540
And Marx, after that,
became steadily more dejected

18:36.539 --> 18:42.189
and steadily more skeptical over
his remaining years that,

18:42.190 --> 18:45.750
in fact, he was going to see a
communist revolution in his

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lifetime.

18:46.440 --> 18:51.880
And rather, he invested in the
project of trying to understand

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capitalism in a much more
systematic way than he had done

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in his youth.

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He was kicked out of Germany.

19:00.900 --> 19:04.690
He couldn't go to France and he
wound up in London,

19:04.690 --> 19:08.560
and he lived the last decades
of his life in London,

19:08.556 --> 19:11.736
and in fact died and was buried
there.

19:11.740 --> 19:16.840
If you're ever in London you
can go up to Highgate Cemetery

19:16.837 --> 19:18.857
on the Northern Line.

19:18.858 --> 19:20.378
It's a very interesting
cemetery.

19:20.380 --> 19:21.820
There are all kinds of
interesting people there.

19:21.819 --> 19:23.539
George Eliot is there.

19:23.538 --> 19:27.748
Anyway, there is Karl Marx in
Highgate Cemetery.

19:27.750 --> 19:30.610
It's all overgrown and very
interesting.

19:30.608 --> 19:34.378
Anyway, he spent his last
decades working in the basement

19:34.384 --> 19:38.114
of the British Museum,
and that's where he composed

19:38.108 --> 19:41.508
his magnum opus,
his three-volume work Das

19:41.509 --> 19:42.479
Kapital.

19:42.480 --> 19:46.470
It was actually envisaged as a
twelve-volume work,

19:46.471 --> 19:51.111
and the only volume that was
published in his lifetime was

19:51.114 --> 19:53.074
actually volume one.

19:53.068 --> 19:57.408
The second and third volumes
were put together by his friend

19:57.411 --> 20:00.061
and collaborator Friedrich
Engels.

20:00.058 --> 20:05.718
And unfortunately for us the
volumes about politics were

20:05.721 --> 20:07.371
never written.

20:07.368 --> 20:10.128
So you have to,
to some extent,

20:10.125 --> 20:15.445
put together his mature views
about politics from scraps he

20:15.451 --> 20:20.741
wrote here and there,
and some of the short pieces

20:20.743 --> 20:26.143
about politics that do appear in
the early volumes.

20:26.140 --> 20:32.580
So we're going to mostly focus
on the mature Marx.

20:32.578 --> 20:37.278
We're mostly going to focus on
Marx as he set himself the task

20:37.279 --> 20:42.059
of understanding the dynamics of
capitalism after he had pretty

20:42.057 --> 20:46.137
much given up on his youthful
enthusiasm for the quick

20:46.142 --> 20:50.772
transformation of the world into
socialist and then communist

20:50.765 --> 20:55.225
societies,
which he had basically started

20:55.227 --> 21:01.017
to shed after 1848 with a brief
revival of interest in 1870

21:01.021 --> 21:05.971
given events in France,
but basically it was a

21:05.971 --> 21:11.911
trajectory from youthful
optimism into mature pessimism,

21:11.910 --> 21:16.830
at least from his point of view.

21:16.828 --> 21:21.088
Okay, so what he did was,
he said to himself,

21:21.088 --> 21:24.668
"Well, what is it that
people are involved in--

21:24.670 --> 21:28.590
who are engaged in the serious
systematic analysis of

21:28.587 --> 21:30.017
capitalism?"

21:30.019 --> 21:35.769
And here we tend to present
Marx as an unorthodox or radical

21:35.772 --> 21:41.432
thinker, but in fact he was a
very conventional thinker for

21:41.429 --> 21:42.599
his day.

21:42.598 --> 21:48.098
That is to say Marx was a
follower of Adam Smith and David

21:48.097 --> 21:52.807
Ricardo,
and he saw himself largely as

21:52.809 --> 21:59.859
tackling and refining the
theories that they developed.

21:59.858 --> 22:04.258
And what I want to do with the
rest of our time this morning is

22:04.255 --> 22:08.575
say something about the project
of classical political economy

22:08.579 --> 22:11.699
that Marx inherited and
contributed to,

22:11.700 --> 22:15.910
and why he thought getting the
basic problems that the

22:15.913 --> 22:20.453
classical political economists
were trying to solve solved

22:20.446 --> 22:25.056
would enable us to understand
what the real conditions were

22:25.058 --> 22:30.068
that would eventually lead to
the collapse of capitalism.

22:30.068 --> 22:36.108
The most important feature of
capitalism,

22:36.108 --> 22:40.428
as far as Adam Smith was
concerned in The Wealth of

22:40.432 --> 22:43.942
Nations and his followers
after him,

22:43.940 --> 22:49.440
was the division of labor.

22:49.440 --> 22:56.470
The division of labor is really
important because it has two

22:56.469 --> 22:57.779
features.

22:57.779 --> 23:02.629
One, as far as Marx will be
concerned, it begins the process

23:02.633 --> 23:05.433
of alienating us from ourselves.

23:05.430 --> 23:07.210
Why does it do that?

23:07.210 --> 23:12.190
It does that because,
instead of producing things

23:12.190 --> 23:18.000
that we then consume,
we start producing things in a

23:18.000 --> 23:23.650
situation where we divide up
tasks and that makes it

23:23.647 --> 23:28.407
impossible for us to live
rounded lives.

23:28.410 --> 23:30.270
That's ultimately where it's
going to go.

23:30.269 --> 23:34.139
But second, and much more
important from the point of view

23:34.144 --> 23:37.004
of economics,
is that the division of labor

23:36.999 --> 23:39.309
is the engine of productivity.

23:39.308 --> 23:43.638
The more you engage in the
division of labor the more

23:43.643 --> 23:46.063
productive you make people.

23:46.058 --> 23:50.318
And Smith has this wonderful
example right near the beginning

23:50.319 --> 23:54.369
of The Wealth of Nations
where he talks about a pin

23:54.366 --> 23:55.216
factory.

23:55.220 --> 23:58.990
Smith has been going around
England trying to understand

23:58.991 --> 24:02.011
where the dynamism in the
English economy is,

24:02.010 --> 24:05.510
and he gives this description
of a pin factory.

24:05.509 --> 24:07.989
He says,
One man draws out the wire,

24:07.990 --> 24:10.390
another straights it,
a third cuts it,

24:10.387 --> 24:13.427
a fourth points it,
a fifth grinds it at the top

24:13.434 --> 24:15.254
for receiving the head.

24:15.250 --> 24:18.890
To make the head requires two
or three distinct operations.

24:18.890 --> 24:23.820
To put it on is a peculiar
business.

24:23.819 --> 24:25.869
To whiten the pins is another.

24:25.868 --> 24:29.568
It is even a trade by itself to
put them into the paper.

24:29.568 --> 24:32.628
And the important business of
making a pin is,

24:32.630 --> 24:35.490
in this manner,
divided into about eighteen

24:35.487 --> 24:37.117
distinct operations.

24:37.118 --> 24:39.988
As a result of that division of
labor,

24:39.990 --> 24:45.780
though, Smith calculated that
ten workers could make 48,000

24:45.780 --> 24:48.910
pins a day,
but if they had all worked

24:48.912 --> 24:53.042
separately and independently all
they could have produced was a

24:53.042 --> 24:53.912
few dozen.

24:53.910 --> 24:57.890
So that basic insight of
Smith's, that it's the division

24:57.885 --> 25:02.075
of labor that is the engine of
capitalist productivity,

25:02.078 --> 25:06.528
sets the terms for Adam Smith's
analysis of markets in The

25:06.528 --> 25:10.308
Wealth of Nations,
for Ricardo's

25:10.313 --> 25:15.373
refinement, and for Marx's
refinement of both of their

25:15.369 --> 25:18.709
arguments in Das Kapital.

25:18.710 --> 25:27.060
So what was the project of
classical political economy?

25:27.058 --> 25:31.588
What was it that Marx was
stepping into and trying to

25:31.594 --> 25:32.994
contribute to?

25:32.990 --> 25:39.050
Well, one way of describing it,
as I have it here,

25:39.048 --> 25:44.238
is, it was the search for
theories of natural and market--

25:44.240 --> 25:46.750
I've got theories there twice,
sorry--

25:46.750 --> 25:50.220
search for theories of natural
and market wages,

25:50.220 --> 25:52.790
prices, rents, and profits.

25:52.788 --> 25:56.088
They wanted to understand what
determines wages,

25:56.088 --> 25:57.938
prices, rents,
and profits,

25:57.944 --> 26:02.374
but they thought you had to
have a theory of natural wages,

26:02.368 --> 26:04.318
prices, rents,
and profits,

26:04.318 --> 26:10.458
and market wages,
prices, rents, and profits.

26:10.460 --> 26:15.590
Now, let's focus on prices,
because the way the other three

26:15.589 --> 26:20.279
are treated is basically by
analogy to the analysis of

26:20.278 --> 26:21.338
pricing.

26:21.338 --> 26:26.368
A modern neoclassical economist
would say, "There is no

26:26.369 --> 26:29.269
natural price of anything."

26:29.269 --> 26:36.249
A modern neoclassical economist
would say, "What determines

26:36.251 --> 26:41.131
prices is supply and demand in
the market.

26:41.130 --> 26:45.900
There is nothing else to say
about prices."

26:45.900 --> 26:50.980
And they gave up the notion
that there's any natural theory

26:50.980 --> 26:55.450
of wages, prices,
rents, and profits to be found.

26:55.450 --> 26:58.690
So a big difference between the
classical theorists,

26:58.694 --> 27:02.004
and the modern theorists,
is this idea that there's a

27:02.003 --> 27:03.853
theory of natural prices.

27:03.848 --> 27:08.138
Now, why would they think
there's a theory of natural

27:08.136 --> 27:08.876
prices?

27:08.880 --> 27:13.130
The reason they thought there
was a theory of natural prices

27:13.134 --> 27:17.254
was they were arguing with
people like the physiocrats and

27:17.247 --> 27:21.067
the trade theorists about where
value comes from.

27:21.069 --> 27:23.299
What is the source of value?

27:23.298 --> 27:28.958
The physiocrats in France said
the source of value is the land,

27:28.955 --> 27:33.605
that somehow it gets
transferred to the products.

27:33.608 --> 27:37.458
Whereas the trade theorists,
who had been impressed that

27:37.460 --> 27:41.940
countries like Holland which had
so little land but had become so

27:41.940 --> 27:43.660
rich said,
"No.

27:43.659 --> 27:45.889
Value comes from trade."

27:45.890 --> 27:50.160
So they were all sort of
saying, "Where is the it?

27:50.160 --> 27:53.420
What is the source of
value?"

27:53.420 --> 27:57.320
And the English theorists
following Locke,

27:57.323 --> 28:01.513
Petty--Sir William Petty,
John Locke, Hobbes,

28:01.510 --> 28:07.700
all believed that the way you
find value is to go into labor;

28:07.700 --> 28:12.600
that work, workmanship is the
source of value.

28:12.598 --> 28:15.398
So all classical political
economists,

28:15.400 --> 28:20.640
Smith, Ricardo and Marx
believed in the labor theory of

28:20.636 --> 28:23.236
value,
and they counter posed it to

28:23.236 --> 28:26.936
theories based on trade,
or the physiocrats' theories

28:26.940 --> 28:32.500
that were popular in France,
as I've said.

28:32.500 --> 28:36.370
So that's one reason,
but another is that it's not

28:36.373 --> 28:40.883
the case that they were ignorant
of the laws of supply and

28:40.880 --> 28:41.750
demand.

28:41.750 --> 28:47.960
So and we'll see how Marx
handles them on Wednesday.

28:47.960 --> 28:52.260
It's not the case that they're
ignorant of the laws of supply

28:52.256 --> 28:56.616
and demand, but they thought it
couldn't possibly tell you the

28:56.624 --> 28:57.774
whole story.

28:57.769 --> 28:59.749
So you can think about it this
way.

28:59.750 --> 29:07.920
Suppose there is a dearth in
the supply of coffee mugs?

29:07.920 --> 29:10.770
The price will go up.

29:10.769 --> 29:14.579
They didn't disagree with that,
right?

29:14.578 --> 29:17.908
And if there are too many
coffee mugs, more coffee mugs

29:17.906 --> 29:20.676
than anybody wants,
the price will go down.

29:20.680 --> 29:25.040
Maybe somebody will realize you
an drill holes in the bottom and

29:25.038 --> 29:29.418
then use them to grow plants in,
and then maybe the price would

29:29.417 --> 29:32.027
go up a bit because there will
be more.

29:32.028 --> 29:35.938
But they thought that supply
and demand fluctuate with what

29:35.938 --> 29:38.228
it is that people actually want.

29:38.230 --> 29:41.070
They didn't have any problem
with that notion,

29:41.068 --> 29:45.258
but still in all they thought
there must be something that

29:45.260 --> 29:49.670
will tell you what the price is
when supply and demand are in

29:49.673 --> 29:50.853
equilibrium.

29:50.848 --> 29:54.958
Another way you can think about
it is supply and demand go up

29:54.958 --> 29:57.878
and down,
but they go up and down around

29:57.880 --> 30:03.020
some point,
and what tells you what that

30:03.019 --> 30:04.529
point is?

30:04.528 --> 30:08.078
Okay, that's what the labor
theory of value was supposed to

30:08.083 --> 30:08.393
do.

30:08.390 --> 30:10.550
That's the natural price.

30:10.548 --> 30:15.298
I think a modern economist
might call it the long-run

30:15.301 --> 30:17.131
equilibrium price.

30:17.130 --> 30:21.470
That's one way in which if you
wanted to find an analogy in

30:21.470 --> 30:25.890
modern economic thinking to this
classical idea of a natural

30:25.885 --> 30:28.635
price,
it's the long-run equilibrium

30:28.643 --> 30:29.113
price.

30:29.108 --> 30:33.978
It's the price of a commodity
when supply and demand are in

30:33.982 --> 30:35.162
equilibrium.

30:35.160 --> 30:43.400
So the labor theory of value
was a theory of that.

30:43.400 --> 30:46.980
It was going to tell you what
the long-run equilibrium price

30:46.984 --> 30:48.934
of a commodity would be,
okay?

30:48.930 --> 30:52.810
And all of the classical
political economists were trying

30:52.808 --> 30:54.678
to have a theory of that.

30:54.680 --> 30:57.460
So when you read "natural
prices,"

30:57.457 --> 30:59.457
that's what you should think.

30:59.460 --> 31:02.690
They're trying to understand
what--

31:02.690 --> 31:06.980
not marginal changes in the
sense of a Pareto diagram,

31:06.980 --> 31:12.400
but the long-run changes given
the marginal fluctuations around

31:12.402 --> 31:13.542
some point.

31:13.538 --> 31:15.638
The question is,
what is that point?

31:15.640 --> 31:19.990
And that's what the labor
theory of value was designed to

31:19.986 --> 31:20.836
give you.

31:20.838 --> 31:22.868
It was a theory,
in that sense,

31:22.865 --> 31:26.305
of natural prices,
not a theory of market prices.

31:26.308 --> 31:28.098
They thought you had to have
both.

31:28.098 --> 31:30.348
Supply and demand gave you the
market price.

31:30.348 --> 31:35.408
The labor theory of value gave
you the natural price.

31:35.410 --> 31:40.760
A second big problem that
framed the project of classical

31:40.756 --> 31:45.336
political economy was that they
all believed,

31:45.338 --> 31:50.048
as they looked around them,
that there was a declining

31:50.048 --> 31:52.978
tendency in the rate of profit.

31:52.980 --> 32:02.230
This was taken as a given;
as a given, widely-accepted

32:02.228 --> 32:04.388
empirical fact.

32:04.390 --> 32:10.600
And so if it was the case that
the rate of profit tends to

32:10.601 --> 32:14.381
decline over time,
it can be offset by various

32:14.380 --> 32:16.810
things and so on which we will
talk about,

32:16.808 --> 32:20.658
but if it's the case that the
rate of profit in capitalist

32:20.659 --> 32:25.209
economies declines over time,
your theory isn't going to be

32:25.205 --> 32:28.575
worth a damn unless you can
explain why.

32:28.578 --> 32:31.148
So one of the tests,
if you like,

32:31.152 --> 32:35.092
of a good theory,
as far as Smith was concerned,

32:35.085 --> 32:37.715
as far as Ricardo was
concerned,

32:37.720 --> 32:41.960
and as far as Marx was
concerned, was it had to explain

32:41.964 --> 32:45.664
the declining tendency in the
rate of profit.

32:45.660 --> 32:49.340
And Smith had an account,
Ricardo had an account,

32:49.344 --> 32:51.344
and Marx had an account.

32:51.339 --> 32:52.379
They all differed somewhat.

32:52.380 --> 32:55.120
They all overlapped in some
ways.

32:55.118 --> 32:59.288
We'll see part of the reason
all three of them thought you

32:59.291 --> 33:03.611
would have to have imperialism
was you needed new markets to

33:03.609 --> 33:07.709
offset this problem of the
declining tendency in the rate

33:07.710 --> 33:12.050
of profit at home,
but that was only going to be a

33:12.045 --> 33:14.545
temporary stopgap or solution.

33:14.548 --> 33:18.158
But in any event,
your theory wasn't going to be

33:18.162 --> 33:22.932
worth anything unless it could
explain why prices are what they

33:22.928 --> 33:24.998
are,
the theory of long-run

33:25.000 --> 33:30.910
equilibrium prices,
and second, unless it gave a

33:30.907 --> 33:41.067
credible account of why profits
fall in capitalist systems over

33:41.067 --> 33:42.377
time.

33:42.380 --> 33:47.570
Now, a third conceptual point
to make that you need in order

33:47.567 --> 33:52.667
to understand the project of
classical political economy as

33:52.669 --> 33:58.209
Marx understood it is actually
related to the first point,

33:58.210 --> 34:02.000
but I'm just singling it out
because people sometimes get

34:01.997 --> 34:03.347
confused about it.

34:03.348 --> 34:07.938
It's a distinction that Marx
makes between use-value and

34:07.940 --> 34:09.360
exchange value.

34:09.360 --> 34:15.800
Sometimes you'll see Marx uses
the word value with a big V.

34:15.800 --> 34:19.300
You should just read that as
exchange value.

34:19.300 --> 34:27.810
So value with a big V is
exchange value.

34:27.809 --> 34:31.339
So what is the difference
between use-value and exchange

34:31.344 --> 34:31.864
value?

34:31.860 --> 34:36.620
Well, for Marx use-value is
utility.

34:36.619 --> 34:40.779
That's all it is.

34:40.780 --> 34:45.340
Use-value is simply usefulness.

34:45.340 --> 34:49.790
And he has a kind of binary
theory of use-value.

34:49.789 --> 34:52.809
Either things have use value or
they don't.

34:52.809 --> 34:55.729
So coffee cups have a
use-value, you can drink out of

34:55.726 --> 34:56.116
them.

34:56.119 --> 34:59.169
If somebody drilled holes in
the bottom of them they would

34:59.166 --> 35:02.156
have no use-value until somebody
came along and said,

35:02.159 --> 35:04.479
"Well, we can use them to
grow plants,"

35:04.476 --> 35:06.066
then they would have use-value.

35:06.070 --> 35:09.110
So things either have use-value
or they don't,

35:09.114 --> 35:11.894
and I'll come back to that in a
minute.

35:11.889 --> 35:15.869
And that's going to affect the
supply and demand,

35:15.867 --> 35:19.347
but it's not going to explain
the price.

35:19.349 --> 35:24.109
It's not going to explain the
long-run equilibrium price.

35:24.110 --> 35:28.770
That is the exchange value and
that is what we learn about from

35:28.766 --> 35:33.046
the labor theory of value as far
as Marx was concerned.

35:33.050 --> 35:38.070
So it's the labor theory of
value explains the price,

35:38.068 --> 35:43.858
and is not to be confused with
the use-value or utility of an

35:43.858 --> 35:44.918
object.

35:44.920 --> 35:48.500
Again, one important
difference, and maybe the most

35:48.501 --> 35:52.731
important difference between
classical political economy and

35:52.726 --> 35:55.516
neoclassical political economy
is,

35:55.518 --> 35:58.848
we will see later,
the neoclassical people shed

35:58.851 --> 36:03.051
the labor theory of value and so
there is no exchange value

36:03.052 --> 36:06.562
independent of utility,
but we'll get to that.

36:06.559 --> 36:08.379
That's getting ahead of
ourselves.

36:08.380 --> 36:13.110
When you're concerned with the
classical formulations,

36:13.110 --> 36:17.320
and in the nineteenth century,
exchange value or price,

36:17.320 --> 36:22.510
or value with a big V,
is determined by the labor

36:22.512 --> 36:27.492
theory of value and use-value is
usefulness.

36:27.489 --> 36:35.069
And that brings me to Marx's
definition of a commodity.

36:35.070 --> 36:39.860


36:39.860 --> 36:45.300
A commodity has a very special
meaning for Marx.

36:45.300 --> 36:51.520
It's something that is produced
for exchange.

36:51.518 --> 36:58.388
So if you plant an apple tree
and you grow apples in order to

36:58.387 --> 37:05.137
eat them, you're producing for
consumption, those apples are

37:05.139 --> 37:07.429
not commodities.

37:07.429 --> 37:12.169
But if you plant an apple tree
and grow apples and sell them,

37:12.170 --> 37:15.570
then those apples are
commodities, right?

37:15.570 --> 37:21.320
And something is a commodity if
it's produced for exchange.

37:21.320 --> 37:24.690
And that's very important
because once you have a division

37:24.693 --> 37:27.953
of labor you have more and more
commodity production.

37:27.949 --> 37:33.239
And you might recall in my very
first lecture I said that one of

37:33.242 --> 37:38.362
the things Marx shares in common
with Bentham is he's somebody

37:38.364 --> 37:43.244
who pushes the idea he has to
the absolute extreme and then

37:43.237 --> 37:45.167
even beyond that.

37:45.170 --> 37:49.940
So what we're going to see
happen with Marx and

37:49.936 --> 37:55.116
commodification is exactly
analogous to Bentham and

37:55.115 --> 37:56.355
utility.

37:56.360 --> 37:59.990
That Bentham says,
"How would the world look

37:59.985 --> 38:03.985
if utility maximization was the
only game in town,

38:03.989 --> 38:07.589
if there was nothing else at
all?"

38:07.590 --> 38:09.410
and so his theory runs.

38:09.409 --> 38:12.709
With Marx it's,
"How would the world look

38:12.710 --> 38:16.600
if commodification was the only
game in town?"

38:16.599 --> 38:22.589
Everything in a capitalist
system becomes a commodity,

38:22.590 --> 38:25.530
even the worker himself.

38:25.530 --> 38:27.230
Even the worker himself.

38:27.230 --> 38:31.660
And when we start to understand
the dynamics of capitalist

38:31.661 --> 38:35.941
production we'll see that the
analysis of the value of a

38:35.936 --> 38:40.826
worker is no different than the
analysis of the value of the pin

38:40.833 --> 38:45.113
that the worker produces in Adam
Smith's factory.

38:45.110 --> 38:50.950
So he takes this idea of
commodification and pushes it to

38:50.952 --> 38:52.102
the hilt.

38:52.099 --> 38:57.649
So I think if you think about
those four features of the

38:57.648 --> 39:03.798
project of classical political
economy it gives you a sense of

39:03.802 --> 39:09.652
what was in Marx's head as he
set off to try and understand

39:09.652 --> 39:13.792
the dynamics of capitalist
systems.

39:13.789 --> 39:18.849
And what he did was,
he said, "Well,

39:18.849 --> 39:23.219
we have to understand,
first of all,

39:23.219 --> 39:30.089
how capitalist systems look to
the participants,

39:30.090 --> 39:34.990
because the way in which they
look to the participants is not

39:34.994 --> 39:39.414
the same as the way in which
they really work."

39:39.409 --> 39:41.979
So there's a basic distinction,
if you like,

39:41.978 --> 39:43.948
between appearance and reality.

39:43.949 --> 39:49.159
The way in which people think
market systems work isn't the

39:49.163 --> 39:52.223
way in which they actually work.

39:52.219 --> 39:54.119
So it's a little like Bentham
saying,

39:54.119 --> 39:58.819
"You might think you're
not motivated by utility and all

39:58.820 --> 40:01.330
the rest of it,
but in fact you are,

40:01.327 --> 40:03.467
and the rare case is we get it
right,

40:03.469 --> 40:05.859
not the rare case is that we
get it wrong."

40:05.860 --> 40:07.960
In this sense Marx,
like Bentham,

40:07.958 --> 40:09.268
is an objectivist.

40:09.268 --> 40:13.148
He thinks he's describing
scientifically the laws of

40:13.146 --> 40:17.176
motion of capitalist systems
regardless of whether the

40:17.175 --> 40:22.265
participants in those systems
understand these laws of motion,

40:22.268 --> 40:26.038
and for the most part they
don't.

40:26.039 --> 40:29.799
Indeed he's going to claim
ultimately that a socialist

40:29.795 --> 40:33.685
revolution differs from all
others because for the first

40:33.692 --> 40:37.272
time in history,
people understand the social

40:37.268 --> 40:42.768
relations that they're part of,
and so can self-consciously

40:42.768 --> 40:48.958
transform them and create an
unalienated social order.

40:48.960 --> 40:53.470
So at the beginning of volume
one of Kapital he's

40:53.465 --> 40:57.235
basically saying,
"How does it look to the

40:57.235 --> 40:59.115
participants?"

40:59.119 --> 41:03.449
Well, if you have a division of
labor, you look around,

41:03.452 --> 41:05.622
what do you actually see?

41:05.619 --> 41:10.419
You see people producing
commodities.

41:10.420 --> 41:15.380
They exchange those commodities
for money, and then they use

41:15.382 --> 41:20.262
that money to buy other
commodities, which they consume.

41:20.260 --> 41:23.340
So you have these cycles of
exchange;

41:23.340 --> 41:27.680
commodity, money,
commodity, right?

41:27.679 --> 41:32.769
So the person working growing
apples, sells the apples for

41:32.768 --> 41:38.208
money, and then uses the money
to buy milk and eggs and so on,

41:38.213 --> 41:41.073
in the simplest case,
right?

41:41.070 --> 41:45.790
So if someone landed from Mars
in the middle of a capitalist

41:45.789 --> 41:48.829
economy, that's what they would
see;

41:48.829 --> 41:52.529
all of these people producing
things, exchanging those things

41:52.532 --> 41:56.112
for money, and buying other
things which they then consume,

41:56.112 --> 41:56.732
right?

41:56.730 --> 41:59.740
That was the idea.

41:59.739 --> 42:03.839
But then if you look a little
bit more carefully,

42:03.840 --> 42:08.280
you see that actually some
people are doing something

42:08.284 --> 42:10.254
entirely different.

42:10.250 --> 42:13.400
Most people are producing
commodities, exchanging the

42:13.402 --> 42:16.922
commodities for money and then
using the money to buy other

42:16.918 --> 42:18.978
commodities that they consume.

42:18.980 --> 42:22.560
But Marx says,
"Some people are doing

42:22.559 --> 42:24.479
something different.

42:24.480 --> 42:30.010
They're taking some money,
buying a commodity (in this

42:30.007 --> 42:36.677
case the labor of the worker for
a certain time) and then selling

42:36.681 --> 42:41.271
what gets produced for more
money."

42:41.268 --> 42:45.708
So they're not interested in
consumption it doesn't seem,

42:45.708 --> 42:47.768
at least at first sight.

42:47.768 --> 42:54.608
And indeed, if you look even
more closely you'll see that

42:54.605 --> 43:00.335
when they do that,
the money they end up with is

43:00.342 --> 43:05.472
more than the money they started
with.

43:05.469 --> 43:10.209
M prime is bigger than M.

43:10.210 --> 43:13.400
And the question,
the organizing question of

43:13.398 --> 43:17.208
Das Kapital--
and it was the question that

43:17.211 --> 43:21.501
preoccupied Adam Smith and David
Ricardo before Marx,

43:21.500 --> 43:24.110
and as I said,
in this sense he was completely

43:24.110 --> 43:29.580
orthodox classical theorist,
his radicalism comes in later.

43:29.579 --> 43:32.659
The question is where does
prime come from?

43:32.659 --> 43:36.859
What makes profit possible?

43:36.860 --> 43:39.910
You're not going to explain why
profits decline,

43:39.914 --> 43:43.304
after all, if you can't
understand where profit comes

43:43.295 --> 43:43.875
from.

43:43.880 --> 43:53.040
What is the origin of profit?

43:53.039 --> 43:57.069
That's the basic problem.

43:57.070 --> 44:00.950
The transformation of money
into capital has to be developed

44:00.952 --> 44:04.312
on the basis of the immanent
laws of the exchange of

44:04.309 --> 44:07.799
commodities,
in such a way that the starting

44:07.797 --> 44:10.697
point is the exchange of
equivalents.

44:10.699 --> 44:14.909
The money-owner who is as yet
only the capitalist in larval

44:14.909 --> 44:17.459
form,
must buy his commodities at

44:17.458 --> 44:20.408
their value,
sell them at their value,

44:20.409 --> 44:24.809
and yet at the end of the
process withdraw more value from

44:24.809 --> 44:28.979
circulation than he threw into
it at the beginning.

44:28.980 --> 44:33.660
His emergence as a butterfly
must, and yet must not,

44:33.663 --> 44:37.523
take place in the sphere of
circulation.

44:37.518 --> 44:40.888
These are the conditions of the
problem.

44:40.889 --> 44:45.829
A very famous passage at the
beginning of Kapital

44:45.829 --> 44:51.129
telling us that if you want to
understand why the capitalist

44:51.130 --> 44:57.150
winds up with more you have to
understand the source of value,

44:57.150 --> 45:02.850
because there's no cheating;
equivalents exchange for

45:02.853 --> 45:06.083
equivalents in every one of
those cycles.

45:06.079 --> 45:09.519
It's not that somehow the
worker is tricked into selling

45:09.521 --> 45:12.151
his labor power for less than
its worth.

45:12.150 --> 45:15.480
On the contrary,
he's paid exactly what its

45:15.476 --> 45:16.106
worth.

45:16.110 --> 45:21.630
So once you can understand that
puzzle of how,

45:21.630 --> 45:24.540
when equivalents exchange for
equivalents,

45:24.539 --> 45:28.559
new value is still nonetheless
created,

45:28.559 --> 45:32.069
then you understand the secret
to where profit comes from,

45:32.070 --> 45:36.550
you know the source of value,
and you can begin the process

45:36.550 --> 45:41.190
of understanding the dynamic
productiveness of capitalism and

45:41.188 --> 45:44.818
why it will eventually start to
fall apart.

45:44.820 --> 45:48.800
And we will dig into those
subjects on Wednesday.

45:48.800 --> 45:54.000