Peter Fleissner, catedrático de cibernética social, Viena, Austria contacto : fleissner@arrakis.es

1. 4th International Vanguard Science CongressThe role of Science, Technology and Geo-Politics in the Self-Determination of Mankind Ciudad de México, May 28-30, 2013Universidad Autónoma Metropolitana Unidad Xochimilco Peter Fleissner, catedrático de cibernética social, Viena, Austria contacto: fleissner@arrakis.es El papel de los servicios en las economías contemporáneas: Una formulación consistente dentro de los marcos de la teoría del valor del trabajo de Marx. The role of services in contemporary economies: A consistent formulation within the framework of Marx´s labour theory of value.

2. Outline Some basics of the labor theory of value Input-output tables and Marxian schemes of reproduction Commodities and services How to determine the value of services? Marx’ prices of production (transformation problem) Empirical results (Austria 2008)

3. How to analyse the economy? • Main method: • Creating Layers of Various Degrees of Abstraction. • The kind of abstraction is inspired by insights into history and the logic of the field. • For logical reasons we take goods (use values) produced under the existing division of labor as the most abstract layer. • Layers of high degrees of abstraction do not necessarily correspond to observed data, but they grasp essential aspects of reality. • Analogy to physics: The Law of Gravitation (all bodies fall with the same rate of acceleration) is contrary to evidence (compare the fall of a feather and a coin).

4. Economic Reality – A Complex Construction Contemporary Capitalism market prices (observed) 7 6 5 4 3 2 1 commodification of information goods/services Information Society: Finance market capitalism information as commodity, communication as commercial service Public sector: State monopoly capitalism taxes, subventions transfers, social insurance Globalized economy: Finance capitalism International financial capital markets for money, credit, stocks, derivatives Capitalism with perfect competition and fixed capital prices of production labor market Commodity production of self employed exchange values prices ~ labor values commodity/service markets Physical basis use values, environmental issues measured by mass, exergy or ecological footprint

5. The Economy – seen as a self organization process (historical and logical view) market prices (observed) Contemporary Capitalism 7 6 5 4 3 2 1 commodification of information goods/services Information Society: information as commodity, communication as commercial service Public sector Globalized economy International financial capital Capitalism with perfect competition and fixed capital older newer Logic: Dominance Commodity production of self employed Inspired by: Hofkirchner , W. (2002): Projekt Eine Welt: Kognition – Kommunikation – Kooperation. LIT-Verlag Münster-Hamburg- London. p. 166 Physical basis History: Emergence

6. Economic Reality – A Complex Construction market prices (observed) 7 6 5 4 3 2 1 Contemporary Capitalism commodification of information goods/services Information Society: information as commodity, communication as commercial service Public sector taxes, subventions transfers, social insurance Globalized economy International financial capital markets for money, credit, stocks, derivatives Capitalism with perfect competition and fixed capital prices of production labor market Commodity production of self employed exchange values prices ~ labor values commodity/service markets Physical basis use values, environmental issues measured by mass, exergy or ecological footprint

7. Layer 1: Use values, produced and consumed under a certain division of labor • Mathematical description in terms of Leontief’s input-output scheme to represent the economy in terms of use values. • Each row and each column represent one branch of production or firm • It reflects the degree of division of labor. • The matrix of technical coefficients A represents the technology of the economy. The element aij gives the amount of goods of industry i needed to produce one unit of output of industry j. • x (output vector) contains all use values produced. It can be split by kind of use of goods into Ax (demand for intermediate goods) and y (final demand). The following famous formula is called the primal problem  • Ax + y = x • y (final demand) can be split it into c (consumption) and s (surplus product = capital investment) • y = c + s. • or in matrix notation • Ax + Cx + Sx = x , • where C, and S represent matrices of consumption coefficients and surplus coefficients respectively.

8. Economic Reality – A Complex Construction market prices (observed) 7 6 5 4 3 2 1 Contemporary Capitalism commodification of information goods/services Information Society: information as commodity, communication as commercial service Public sector taxes, subventions transfers, social insurance Globalized economy International financial capital markets for money, credit, stocks, derivatives Capitalism with perfect competition and fixed capital prices of production labor market Commodity production of self employed exchange values prices ~ labor values commodity/service markets Physical basis use values, environmental issues measured by mass, exergy or ecological footprint

9. Layer 2: Labour values, small commodity production • The dual Leontief model deals with the unit prices • pA + q = p • p …row vector of unit prices • q … unit value added. • After substitution of q by life unit labor input l we get the basic formula how to compute Marx’ labor values v • vA + l = v. • v = l (E – A)-1 • We can split l into wages, w, and profits pand get • l = w + p. • Marx used other symbols •  W = C + V + M, •  where W is the labor value, • C constant capital, • V variable capital and • M surplus value. • In our notation: • v = vA + w + p. Production Consumption Labor Self-employed laborers Commodities & Services Money

10. Basic terms in Marxian Political Economics • commodity • value in use • value in exchange • (labor)value • constant capital • variable capital • surplus value • rate of surplus value/rate of exploitaiton • organic composition of capital • rate of profit

12. two aspects of a commodity Aristotle (“De Rep.” l. i. c. 9, ~ 350 BC): “The one is peculiar to the object as such, the other is not, as a sandal which may be worn, and is also exchangeable. Both are uses of the sandal, for even he who exchanges the sandal for the money or food he is in want of, makes use of the sandal as a sandal. But not in its natural way. For it has not been made for the sake of being exchanged” Adam Smith (The Wealth of Nations, 1776): “The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use’; the other, ‘value in exchange.’” Karl Marx (Das Kapital, Volume One, 1867) The wealth of those societies in which the capitalist mode of production prevails, presents itself as ‘an immense accumulation of commodities,’ its unit being a single commodity. Our investigation must therefore begin with the analysis of a commodity.”

13. On commodities and markets • A commodity is a product of human labour Since Aristotle we know that it has two essential properties (also Adam Smith and Karl Marx) • It has value in use Things or activities/services are useful for somebody for some reason • and value in exchange Things or activities have a value for others. They pay a price for it in the market. • In the market individual values are compared to each other -> market value is based on social necessary labor • If there is competition the market creates a tendency towards more efficiency

14. the composition of labor value w new labor (live labor) n w = c + n pre-done labor c

15. labor value w and its composition m surplus value (profit) new labor (live labor) n w = c + n = c + v + m variable capital (wages) v c c constant capital (fix and circulating capital) pre-done labor

16. Three essential indices: rate of exploitation, organic composition of capital and rate of profit Rate of exploitation = m / v Organic composition of capital = v / (c + v) Rate of profit = m / (c + v) Rate of profit = rate of exploitation * Organic composition of capital = m / v * v / (c + v) m surplus value (profit) new labor (live labor) n variable capital (wages) v c c constant capital (fix and circulating capital) pre-done labor

17. New aspects of the labour theory of value • Empirical estimates of labour values • Simple and complex labour • Treating services as value consuming • Transformation of values into prices • Marxian • Von Bortkiewicz • Geometric interpretation • Less abstract transformation

19. Stucture of gross output (observed) c - constant capital, v - variable capital, m - surplus valueAustria 2008: 75 industries (percent) d m v c

20. Stucture of gross output (observed) c - constant capital, v - variable capital, m - surplus valueAustria 2008: 75 industries (percent) d m v c

21. Simple and extended reproduction (Marx) simple reproduction MEW Bd 24, 396 Extended reproducción MEW Bd 24, 505

22. Use of output Input-Output-Table intermediate inputs Final demand (consumption, Investment, exports minus imports) „+“ „=“ Output Distribucion: costs and income „+“ Value addded (wages, profits, depreciation, taxes) „=“ Output

23. Input-Output scheme by Leontief(1905-1999, Nobel Laureat 1973) • Primal Problem: Quantities Ax + y = x • Dual Problem: Unit-Prices pA + q = p A(quadratic) Matrix of techn. coefficients (Leontief Matrix) xoutput (in quantities), columnvector yfinal demand (in quantities), columnvector punit-price, rowvector qunit-valueadded, rowvector

24. Input-Output Table (official statistics) „rectangular “: commodities times activities

25. Berechnung einer „quadratischen“ Input-Output Tabelle nach Sektoren Statistische Originaltafeln sind „rechteckig“ • U...Use-Matrix ... Inputs (Güter x Sektoren) • V...Make-Matrix ... Outputs (Güter x Sektoren) • F...Endnachfrage, W.. Wertschöpfung Umrechnung in eine quadratische Struktur (Sektoren x Sektoren) - Standardverfahren • Vorleistungen Ao = V diag(q)-1U diag(g)-1 • Wertschöpfung Wo = W • Endnachfrage Fo = V diag(q)-1F • Arbeitszeit no = n

26. Use of output: Input-Output-Table intermediate inputs Final demand (consumption, investment, exports minus imports.) „+“ „=“ Output Distribution: costs and incomes „+“ Value added (wages, profits, depreciation, taxes) „=“ Output

27. Marxian terminology Use of output Input-Output Tablein Marxian terms konstantes zirkulierendes Kapital c Vorleistungen Inputs (Lieferungen zwischen Unternehmen) Endnachfrage (Konsum, Investitionen, Exporte minus Importe) „+“ „=“ Output Extended reproduction Distribution: costs and incomes „+“ Lebendige Arbeit n variables Kapital v Mehrwert m Wertschöpfung (Löhne, Gewinn Abschreibung Steuern etc.) „=“ Output Wert w

28. Marx: composition of value Matrix Ao Vorleistungen Constant circulating Capital c Vorleistungen Inputs (Lieferungen zwischen Unternehmen) Endnachfrage (Konsum, Investitionen, Exporte minus Importe) „+“ „=“ Output Matrix Co Konsum der Lohnabhängigen consumption „+“ Lebendige Arbeit n Variable capital v Surplus value m Wertschöpfung (Löhne, Gewinn Abschreibung Steuern etc.) Surplus product Matrix So Surplus „=“ Output Value w

29. Das Marxsche Wertschema Matrix Ao Vorleistungen Constant circulating Capital c Vorleistungen Inputs (Lieferungen zwischen Unternehmen) Endnachfrage (Konsum, Investitionen, Exporte minus Importe) „+“ „=“ Output c + v + m = w Matrix Co Konsum der Lohnabhängigen Con-sumption „+“ Lebendige Arbeit n variable capital v surplus value m Wertschöpfung (Löhne, Gewinn Abschreibung Steuern etc.) Surplus product Matrix So Surplus „=“ Output Value w

30. Observed data: Current prices, Austria 2008,75 sectors

31. Verzeichnis der 75 Sektoren der österreichischen Wirtschaft

32. Structure of „classical“ labour values all industries are value producers c - constant capital, v - variable capital, m - surplus valueAustria 2006: 57 industries (percent), r = 0.819 m v c

33. Matrix Ao Vorleistungen Matrix Co Konsum der Lohnabhängigen Matrix So Surplus Output P‘ = Generalized Leontief Schema primal: (Ao + Co + So)1 = P‘ Marx: c + n = c + v + m = w where c = 1‘Ao, v = 1‘Co, m = 1‘So, w = P Matrix Co Konsum der Lohnabhängigen Quadratic Input-Output Table Leontief Scheme dual: 1‘(Ao + Co + So) = P Matrix So Surplus = Output P

34. “classical“ calculation of labor values w Ap + n = w solution: w = n (E – Ap)-1 value w = Live labor n times Leontief-Inverse (E – Ap)-1 Matrix Ap Intermediary goods in labor time Matrix Ao Intermediary goods observed Output at current prices Po = 1‘(Ao + Co + So) Output Po at current prices = Sum of intermediate products, consumption and investment Marx Input-Output + Matrix Co consumption + Live labor n + Value added Matrix So surplus = = Output Po Value w

35. Labor valuesandobserveddata EmpiricalresultsAustria 2005-2008 • Classicaldefinition • Material definition Geometricrepresentationofpricesandvalues Transformation problem a la Marx and von Bortkiewicz

36. Correlation Coefficient = 0,883 observed prices and classic labor values Austria 2008 75 sectors

37. Structure of labor values, classic, Austria 2008 d m v c

38. How are the differences produced? Prices, observed 2008 d d m m v v c c Labor values, classic, 2008

39. “classical“ calculation of labor values w Ap + n = w solution: w = n (E – Ap)-1 value w = Live labor n times Leontief-Inverse (E – Ap)-1 Matrix Ap Intermediary goods in labor time Matrix Ao Intermediary goods observed Output at current prices Po = 1‘(Ao + Co + So) Output Po at current prices = Sum of intermediate products, consumption and investment Marx Input-Output + Matrix Co consumption + Live labor n + Value added Matrix So surplus = = Output Po Value w

40. The shape of the surplus matrix S determines the structure of relative prices S11 <>0 S12 <> 0 S21 empty S22 empty Commodity production Services production • Assumptions: • A) the basic socio-technical structure is identical for all systems of feasible prices. • B) The sum of the surplus prouct is constant • C) Sum of Prices = sum of values • Origin of price changes is a different allocation of the surplus product among branches of production • Values of commodities and services are essentially different • Z.B: Austria 2008: 45 out of 75 Sektoren do not sell any investment goods

41. Surplus matrix partitioned S11 S12 Surplus product Commodities The systems of prices differ by different allocation of the surplus product S21 empty S22 empty Services Commodity production Services Production

42. General assumptions to determine labour values Each hour of labour has the same value The labour value of the output of a sector is proportionate to directly and indirectly spent average labor time = sum of past and actual labor The computation of the labor values are based on the concept of equivalent exchange: the enterprises receive for their commodities / services the full amount of the labor they have used. The sum of values = sum of prices, therefore a comparison of relative prices is possible

43. Consequences for services Enterprises who produce and sell services actually appropriate parts of the surplus product without contributing to it with their own production. In an economy in equilibrium commodity producing sectors are therefore unable to realise the full value of their product in the market – this means a violation of the principle of equal exchange The only possibility for them to realise the full value is to evaluate services under the condition of simple reproduction – without appropriation of surplus product Therefore we have to evaluate the value of services at reproduction cost

44. Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, Book II, Chapter III, Of the Accumulation of Capital, or of Productive and Unproductive Labour, http://www.econlib.org/LIBRARY/Smith/smWN.html. The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject; or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured...…In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, &c. …Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production.

45. S21 empty S22 empty S21 empty S22 empty

46. Matrix Ao Intermediate products Matrix Co Consumption of workers Matrix So Surplus Output P‘ = Generalized Leontief Scheme primal: (Ao + Co + So)1 = P‘ Marx: c + n = c + v + m = w where c = 1‘Ao, v = 1‘Co, m = 1‘So, w = P Matrix Co Consumption of workers Quadratic Input-Output Table Leontief Scheme dual: 1‘(Ao + Co + So) = P S21 empty S22 empty Matrix So Surplus = Output P

47. How to determine labor values where the principle of equivalent exchange is not violated? The economy is partitioned into commodity producing sectors (index 1) and services producing ones (index 2). A... Partitioned matrix of technical coefficients C... Partitioned matrix of consumption D... Partitioned matrix of depreciation A 11, A12 C11, C12 D 11, D12 A = {}, C = {}, D = {} A21, A22 C21, C22 D21, D22 n... Partitioned row vector of live labor = { n1, n2} w... Partitioned row vector of labor values = { w1, w2} E.... Unit matrix

48. Production of value in commodity producing sectors only Value of output of commodity producers w1 (A11 + D11) + w2 (A21 + D21) + n1 = w1 Value of output of services (at reproduction cost) w1 (A12 + D12 + C12) + w2 (A22 + D22 + C22) = w2 => Value of output of services w2: w2 = w1(A12 + D12 + C12). (E22 – A22 - D22 - C22)-1 Value of output of commodity producers w1: w1 = n1 { E11 – (A11+ D11) – (A12+ D12+ C12). (E22 – A22 - D22 - C22)-1 (A21 + D21) } -1

49. Coefficients of correlation classic:0.883 material:0.839 Observed prices, classic labor values and labor values with services at reproduction cost Austria 2008 75 sectors

50. Structure of labor values, services at reproduction costs, Austria ,2008 No surplus value d m v c