Recently I've been getting a number of hits on this site from the Wikipedia entries for Surplus Value and the Law of Value, written by readers of the relevant chapter in Debunking Economics, "Nothing to lose but their minds".
I owe it to the authors of those wikis to provide an accessible link to my interpretation of Marx in some depth; hence this page.
My key argument is that, as well as developing and championing the labour theory of value (LTV) as it is commonly understood, Marx also developed a means by which he believed the LTV could be derived from "first principles" by dialectical reasoning. I argue that Marx was half correct: he did develop a brilliant dialectical basis for classical economic analysis in general, but this analysis, when properly applied, contradicts the central tenet of the LTV that labour alone is the source of surplus value.
The essence of Marx's logic was to identify the commodity as the central "unity" in capitalism, with exchange-value as its foreground aspect and use-value as its background aspect. Explaining why this can be used to reveal the true sources of surplus value in capitalism takes some time, and involves disavowing readers of the popularly believed "thesis-antithesis-synthesis" vision of dialectical reasoning (which is not at all how Marx reasoned). The papers linked below provide that detailed analysis; here I'll just highlight that this logic was central to Marx's reasoning in Capital--even though most Marxists, and scholars of Marx, ignored it completely until Rosdolsky's The Making of Marx's Capital was published in 1973. The pivotal paragraph in which Marx revealed the source of surplus value in capital stated that:
“The past labour that is embodied in the labour power, and the living labour that it can call into action; the daily cost of maintaining it, and its daily expenditure in work, are two totally different things. The former determines the exchange value of the labour power, the latter is its use-value.” [Capital I, 199]
In my interpretation of Marx, I apply this same logic to machinery--and reach the result that machinery too can add surplus value, as indeed can any input to production.
With the result that surplus arises from production in general, and not from any especially privileged input to production, Marx effectively freed classical economics from the many technical weaknesses that led to its defeat, in the 19th century, by the then new "neoclassical" school. There is no "transformation problem"; differences in the "organic composition of capital" have no necessary impact on the rate of surplus value (instead they raise real problems with the realisation of surplus--its conversion from physical stuff into money); and a rich model of capitalism's real dilemmas and strengths arises.
But this freedom involved abandoning a belief that made classical economics, in Marx's hands, not just a means to analyse capitalism, but a means to overthrow it. Without the LTV, there was no "tendency for the rate of profit to fall", no necessity for socialism, etc.
Without wanting to dive into any psycho-babble on this point, I believe that Marx's fervent desire for socialism led him to believe that his new dialectical way of thinking supported the LTV, rather than disproving it. He convinced himself of this in one sentence of philo-babble in the Grundrisse, and elaborated that into about 7 pages of obfuscation in Capital. The obfuscation worked, in that most readers of Capital believed that the LTV was Marx's central belief, and completely missed Marx's dialectical logic.
I see this dialectical foundation for classical economics as a major advance for Marxian analysis, not a failure. Unfortunately, while historians of economic thought were receptive to my views, academic Marxian economists in general reacted in much the way that neoclassicals do to my critiques of their theories. From my point of view, that was a great pity, because my attitudes to the two theories are fundamentally different: I regard neoclassical theory in general as a waste of time, and its foundations as entirely inappropriate for the analysis of an industrial and evolving capitalism. This revised, dialectical interpretation of Marx, on the other hand, is my candidate for the "grand theory of value" on which economics should be based.
Playing with Shakespeare's words somewhat, I came to praise Marx, not to bury him; but so many academic Marxists so strongly identified with the LTV that they treated me as yet another undertaker for Karl. Partly because of those reactions, I put my Marxian research and publication plans on the backburner, and moved on to the critique of neoclassical economics (and developing models of Minsky's Financial Instability Hypothesis).
The Wiki entries themselves, and hits from those pages to my site, have made me slightly less pessimistic about how my views on Marx might be received. So while I'm not about to write a book on the subject just yet, here are some links to unpublished works and some lectures that detail my views:
Thanks, in closing, to the authors of those pieces in the Wikipedia.