A piece in the Financial Times from several days ago has finally pushed me to scribble down a few initial thoughts on value – a topic I been thinking about more and more. Titled “The attack of the rentier killers”, the article argues that the wealthy who hold and receive income from assets will fight low interest rates and rising inflation tooth and nail because it lowers the value of their assets. Paul Krugman has recently picked up on this topic as well, while the notion that only sustained low interest rates can “euthanize” a dangerous, politically-motivated rentier class originally comes from Keynes.
There is much to be said about this claim. One question is whether there currently exists a well-defined rentier class whose interests are opposed those of a class of capitalist producers. The growth of finance and its increasing integration into all other aspects of the economy challenge this idea. Furthermore, the current application of extraordinary monetary policy has produced a combination of low interest rates and low inflation. The former decreases the flow of gains from interest-bearing assets; at the same time, the latter means that all assets better maintain their value. Finally, current policy has led to a greater concentration of assets (I posted some thoughts on this here), which has disproportionately benefited the wealthy.
In writing this, however, I was motivated by a smaller point that comes right at the end of the Financial Times article:
Based on [the previous] analysis, the surest sign that our society is on the verge of […] a secular stagnation story is the increasing frequency and severity of bubbles today. But if they’re really symptomatic of the death throes of the rentier class, then perhaps they shouldn’t be feared by central bankers at all?
Instead, central bankers should start thinking about ways to create entirely new forms of positive value in society based on social, educational, sustainable or even humorous activity? Carbon credits, RINs, energy rationing units, brownie points and Dogecoins, and so forth.
I want to focus on the phrase “positive value.” I take this to be opposed to “negative value.” A likely example of the latter would be the financial returns that accrue to rentiers while asset price bubbles are being inflated; with the problem being that these same bubbles also end up harming others when they burst. The argument is that rather than continue to allow for the creation of financial bubbles that have negative economic impacts, we should instead create sinks into which rentiers can pile their money looking for higher returns, but which will also be socially-useful. Tongue firmly planted in cheek, the author even suggests feel-good brownie points as a worthwhile “positive value”-generating asset bubble vehicle.
Notwithstanding the humorous element, I think this is actually quite a good example of what happens when the mainstream talks about value. Especially telling is the separation of value into bad – asset bubbles in housing and fine wines (boo!) – and good – brownie points, or more seriously, carbon credits (yay!). Unfortunately, value here can be neither good nor bad.
Before the marginalist revolution of the late 19th century, the theory of value was the starting point of much economics. The classical economists took it to be foundational; Marx began Capital with a difficult chapter on it. Indeed, the theory of value goes back to Aristotle. The Greek philosopher distinguished between two sciences: oikonomia and chrematistike – literally translated, household management and money-making. The first studies how to use the finite physical means at our disposal to achieve the best of a potentially infinite number of possible ends, while the second asks how it is possible to achieve a single, potentially infinite, end (money) using any possible means.
In a perverse way, Aristotle’s oikonomia is today a high-school course where awkward teenagers try their hand at Betty Crocker brownies, while the prestigious science of economics is the descendant of chrematistike. The trouble is that good and bad belong to the realm of oikonomia, which chooses amongst ends – happiness, health, wealth, destruction – that can be good, bad or anything in between. Value, on the other hand, is a concept firmly rooted in chrematistike.
Aristotle, however, had only some vague thoughts on the matter; it was only the classical economists and, in particular, Marx who took this idea and ran with it. They were witness to the ascendancy of a social system that subordinated material relationships to that single end of ever-expanding piles of money, capital…stuff. “Stuff” is really almost the most appropriate term because it expresses the fact that, under capitalism, value is not based on the particular qualities of a thing but on the fact that it can add to a quantity. Money begets more money, value more value. Capitalism, unlike everything that came before it, has a growth dynamic that is literally without end because it is purely quantitative. Value is a number that goes up or down, rather than an end that can be better or worse. The growth of “positive” value can be as destructive as the growth of “negative” value.
The major innovation is that marbles, popsicles, heart transplants and machine guns, all qualitatively very different, can be expressed as a quantity of something abstract. The bad news is that this means that there is no “good” or “positive” value. The same tendencies to reduce things to mere quantities that can expand without limit are present in carbon credits as they are in old-fashioned money. The good news, I suppose, is that there is no “bad” value either. Dollars and gold are no worse than brownie points when the object of the game is accumulation.
This tendency towards ever greater accumulation reveals why production and not exchange is the key to understanding capitalism. Simply transferring equivalences – five dollars of popsicles for five dollars of dollar bills, two tonnes of pollution for two carbon credits – does nothing for the growth of value. What makes capitalism special, however, is that value needs to grow. So while exchanging brownie points or carbon credits sounds great, the problem is that both under capitalism still require the growth of something, somewhere. Behind the ever growing masses of value, however they are expressed, are not only masses of qualitatively-different objects, but also and more importantly, masses of human beings whose labour produces them. All value ultimately has its source in some object and some human labour, no matter what convoluted path led to the precise number that expresses a particular value. Rentiers and capitalists travel the same path, hand-in-hand.
It is easy to forget this, especially in today’s world, where production is further removed from the world of wealth, and value can seem immaterial. Three broad areas in particular of the modern world call out for a renewed value theory: finance, information and ecology. The first two in particular seem to offer the promise of immateriality. Yet even information is never immaterial – all those bits and bytes have to be stored somewhere: tapes, hard drives, CDs, Blu-rays… While each byte appears inconsequential, together they are changing the landscape as much as anything, filling factories with workers and landfills with digital garbage, mostly across the global South.
Also ecology, which places physical nature back at the centre of debate, is today too easily co-opted back into capitalist value. The carbon credits that are often held out as an optimistic, socially-beneficial investment vehicle are nothing but the monetization and give-away of material claims on the right to pollute and increase GHGs – claims whose increase in value still requires other growth. Green capitalism is an oxymoron precisely because it is based in the potentially infinite expansion of value – not “positive value” but value plain and simple.
There is much, much more to be thought and said about value: what it is, how it transforms, how it relates to physical systems, and so on. Unfortunately, value theory is not only important, it’s hard. Perhaps because of this, the question of value remains a fundamental, if ignored, question of economics today, not only in diagnosing the present but in searching for and formulating desirable alternatives for the future. This, then is just a prelude of sorts. I plan to come back to problems of value on this blog in the future in more detail.