[Marxism] Reply to S. Jeong on labor-time calculation

Patrick Bond pbond at mail.ngo.za
Thu Oct 18 00:14:56 MDT 2018

Fascinating, Joseph.

Let me cc to Seongjin, one of the most engaged and generous Marxist 
thinkers I know. He'll be interested in your comradely criticisms.



On 2018/10/18 07:37 AM, jgreen--- via Marxism wrote:
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> A reply to Seongjin Jeong on labor-time calculation
> and 21st century socialism
> ===============================================
> (from Detroit/Seattle Workers' Voice list, Oct. 14, 2018)
> By Joseph Green
>      * Jeong takes the labor-hour as the bottom-line of communist economic
> planning
>      * But the PLTC can't handle environmental issues
>      * Is reducing things to a single unit of measure necessary for economic
> calculation?
>      * Marx vs. the single unit of measure
>      * Calculation with many units of measure
>      * The use of material balances does not prove an economic system is socialist
>      * Input-output tables may or may not be material planning
>      * The supposed abolition of labor and economic planning
>      * Notes
> The issue of what economic planning under socialism would look like was
> discussed at one of the panels at the 50th anniversary conference of the Union of
> Radical Political Economists (URPE), which was held at the end of September at
> the University of Massachusetts-Amherst. Seongjin Jeong put forward the view
> that money would be replaced by labor certificates, and that planning would be
> done according to the single measure of the labor hour.
> I wasn't at the URPE conference; what I know about it is from a report written up
> by the left-wing economist Michael Roberts and placed on his blog, and from
> Jeong's draft paper "Soviet planning and the labor-time calculation model:
> implications for 21st-century socialism" which Roberts linked to. (1) In his paper,
> Jeong considers objections to his view, and as part of this, conscientiously refers
> to my three-part article "Labor-money and socialist planning", which puts forward
> a very different view. (http://www.communistvoice.org/00LaborHour.html) (2)
> My article on socialist planning centered on showing that there was no single
> measure that could serve as the natural unit of socialist planning, not even the
> labor-hour, and that the use of the labor-hour as such a measure would result in
> duplicating many faults of capitalism. It traced the history of the idea of labor
> money in the socialist movement, and the repeated failures of the attempts to use
> labor money. It pointed out that the labor certificate under communism, as
> envisioned as a possibility by Marx, was only to be used for the distribution of
> consumer goods and not for overall economic planning nor for how workplaces
> would obtain the goods they needed for their operation. My article pointed to the
> development of methods to plan in material terms.
> This might seem a rather obscure subject, but it bears on many practical matters.
> For example, the rationale for using market measures for environmental goals,
> rather than relying mainly on regulation and planning, lies in the belief that a
> single unit of measure is the way to achieve economic results. The rationale for
> reducing every decision to a calculation of profit and loss lies in the belief in a
> single unit of measure. And yet in reality it won't matter that much if money
> denominated in dollars or other national currency was replaced by calculation in
> labor-hours.
> Moreover, Jeong also claims that the Soviet planning agencies didn't really
> calculate properly or use input-output tables, and that this was a major cause of
> the shortages and disproportions in the Soviet economy.  According to Roberts,
> this line of reasoning led to the view that "with the development of AI [artificial
> intelligence], algorithms, big data and quantum power, such planning by labour
> time calculation is clearly feasible. Communism will work." In my view, such views
> slur over the fact that the problem with the Stalinist economy wasn't simply bad
> choices by Stalin and his successors, nor was it bad calculation due to the lack of
> computing power, but that the Soviet Union under Stalinism became a
> state-capitalist country with a new ruling class.
> Given the importance of these issues, I would like to take this occasion to reply to
> Jeong's article, especially as Jeong focuses on several important points of
> economic analysis.
> Jeong takes the labor-hour as the bottom-line of
> communist economic planning
> ----------------------------------------------------------------------------------------
> Jeong holds that "The Marxian model of a communist economy, in its first phase,
> is characterized by 'planning based on labor-time calculation' (hereafter
> abbreviated as PLTC)."  And he writes that "PLTC is one of the essential
> components of Marx's communism." (3 - but from here on references to Jeong's
> paper will simply give the page number)
> Now, in order to use the labor-hour in this way, it can't be measured by the labor
> of any one person --  it has to be labor of an average intensity. This is called the
> abstract labor hour, not in order to denigrate it, but to distinguish it from the
> concrete or definite labor hour exerted by a definite person at a definite time and
> location.  Jeong writes "...PLTC...is unthinkable if the unit of calculation is actual
> or individual labor-time. In the first phase of communism, where the economy of
> time to cope with the state of scarcity is still needed, PLTC is unavoidable, and its
> unit should be social." (p.82)
> In this system, in order to ensure that every workplace has the necessary inputs,
> every product is measured in terms of the amount of the congealed labor-time
> embodied in it. So the PLTC means that one replaces the financial measure of
> the US dollar or the South Korean won with the abstract labor-hour. And just as
> financial calculation implies that two things with the same price are equal, the
> PLTC would imply that two things embodying the same amount of congealed
> labor-time are equal and interchangeable. (The congealed labor-time is what
> Jeong calls "the total labor-time embodied in products", p. 83)
> But the PLTC can't handle environmental issues
> ---------------------------------------------------------------------------------------------
> Yet Jeong also admits that the PLTC has trouble with environmental issues. He
> says that "it is difficult for Marxian PLTC to take into consideration all the diversity
> of human life in an emancipated communist society or ecological issues." (p. 84)
> Nor is Jeong the only advocate of the PLTC who admits that it can't deal with
> environmental issues. Allin Cottrell and W. Paul Cockshott are passionate
> advocates of using labor-time as the socialist economic measure. And yet they
> say that "We are not claiming that labor-time calculation would necessarily do
> better [than capitalism] in cases where the market fails to conserve resources. ...
> We have no problem with the idea that environmental considerations and
> labour-time accounting are not necessarily reducible to a scalar common
> denominator, and that the balancing of these considerations may require political
> judgment on which opinions can differ." (4)
> I discussed this in my article on socialist planning. (5) Indeed, in my view PLTC
> would have trouble with other issues as well, including health care, education,
> and child care. There would have to be one correction to PLTC after another to
> allow sufficient attention to be paid to them. Oops. So much for planning with a
> single measure.
> For Jeong, these problems are simply shortcomings of the PLTC, which show that
> it won't be used at a later stage of communism. He says that such "qualifications
> should not be considered a rejection of PLTC. Far from being incongruent with
> the developed phase of communism, PLTC is indispensable to the advance of
> communism to its developed phase." (p. 84)
> But how can PLTC be a useful economic phase in the 21st century if it doesn't
> deal with the pressing environmental issues? How can production be organized
> properly without protecting the environment, and without considering such other
> issues as the proper support for social programs, issues that PTLC doesn't deal
> with? It's a farce to talk about "21st century socialism", which is faced with global
> warming, rampant pollution, and other problems, and put forward a planning
> system which can't deal with them. And it's a farce to say one has a single unit of
> measure, if one has to made one correction after another in the calculations with
> that unit.
> Jeong even says "Just replacing a market price-based coordination by a
> labor-time calculation is not sufficient to free the system from the law of value." (p.
> 83) And he goes on to say that "the Marxian communist model of PLTC is
> inherently contradictory, in that it tends to virtually simulate and reproduce the
> capitalist labor-value system." (p. 84) I strongly agree that replacing financial
> calculation with labor-hour calculation tends to reproduce capitalist exchange.
> But I disagree that it's Marx's model. On the contrary, Marx put forward the labor
> theory of value to show how capitalism operates and how workers are exploited,
> not to show how to plan socialist production. I will come back to Marx's view about
> what's wrong with labor time calculation in a moment. But first let's see why Jeong
> insists on it as the bottom line of economic calculation.
> Is reducing things to a single unit of measure
> necessary for economic calculation?
> ----------------------------------------------------------------------------------------
> Jeong adheres to the PLTC because he believes that rational economic planning
> requires "using a single unit of measure". He writes that "it is impossible to
> achieve macroeconomic coordination and balance without adopting a single unit
> of measure that enables the calculation of social averages. ... Planning without
> this single accounting unit is simply a contradiction in terms, tantamount to the
> rejection of planning altogether." (p. 81)
> Using a single unit of measure means that this unit is the bottom line of
> calculation - everything is measured or valued in accordance with this unit. This is
> what is done in capitalist society with money, where the dollar reigns supreme in
> the US. And then the best alternative is supposedly that which gives the most
> profit, or which come out highest in a cost-benefit comparison. It is because we
> are so used to it from everyday market experience that this seems utterly natural
> to us. Jeong's picture of the early phase of communism preserves this use of a
> single measure by replacing money with labor certificates based on labor hours,
> but he recognizes, as we have seen, that having such a single unit "tends to
> virtually simulate and reproduce the capitalist labor-value system".
> But what is the alternative? Is there a way to carry out economic planning without
> relying on a single unit as the bottom line? Well, first let's see that Marx showed
> that no single unit would suffice, and then see whether alternative methods of
> calculation and planning have ever been used in modern industrial economies.
> Marx vs. the single unit of measure
> ------------------------------------------------------------------------------------
> Jeong cites a passage from Marx's "Grundrisse" to back up his claim that a single
> unit of economic measurement is needed, and that this unit is the labor hour. But
> when we look a little closer at the passage, it turns out that Marx was actually in
> the midst of reiterating one of his main theoretical arguments against the use of a
> single unit of measurement.
> Marx wrote: "On the basis of communal production, the determination of time
> remains, of course, essential. ... Economy of time, to this all economy ultimately
> reduces itself. ... Thus, economy of time, along with the planned distribution of
> labor time among the various branches of production, remains the first economic
> law on the basis of the communal production. However, this is essentially
> different from a measurement of exchange values (labor or products) by labor
> time." (6)
> By itself, this looks like Marx was emphasizing the use of a single unit, the labor
> time. The problem, however, is that Jeong left out the rest of the paragraph,
> which deals with one of the ways in which the treatment of labor time in
> communal society will differ from that of capitalist society. Marx wrote:
> "The labour of individuals in the same branch of work, and the various kinds of
> work, are different from one another not only quantitatively but also qualitatively.
> What does a solely quantitative difference between things presuppose? The
> identity of their qualities. Hence, the quantitative measure of labours presupposes
> the equivalence, the identity of their quality." (emphasis as in the original)
> This is a contrast of abstract and concrete labor. The abstract labor hour only
> measures labor quantitatively, while concrete labor has definite properties, which
> are important. Equating things quantitatively, or comparing them only
> quantitatively, means ignoring the qualitative differences between them.
> This is a major theme which he returned to repeatedly in the "Grundrisse" and, for
> that matter, in "Capital". Clearly Marx's idea was that future society will need to
> take account of the qualitative differences, something which no single measure,
> neither money nor measurement by the abstract labor hour, can accomplish. One
> can't deal seriously with Marx's standpoint about economic planning without
> taking this into account. At the same time, what's true or not doesn't depend
> simply on textual analysis. Marx's standpoint and writings deserve close study,
> but what he said about qualitative differences is correct, not because he said it,
> but because it corresponds to economic reality.
> For example, if labor time were the single unit of measure, then one hour of a
> carpenter's labor would equal one hour of a welders' labor.  Marx is saying no,
> they are qualitatively different. For example, if we need so many carpenters, we
> cannot replace them by so many welders. The carpenter and the welder might be
> paid the same, but if we are to ensure that construction can take place, we need
> to keep track of carpenters and welders separately.
> The same thing holds when one compares two different products or material
> goods. One labor hour's worth of one material good is not qualitatively equal to
> one labor hour's worth of a different good. For example, economic planning
> needs to keep track separately of such things as how much food there is, and
> how much steel. Food that took one hour of labor time to produce (counting both
> direct and indirect labor) isn't the same thing as, say, steel that took one hour to
> produce. With respect to the abstract labor hour, one hour = one hour = one hour.
> With respect to money, one dollar = one dollar = one dollar. But with respect to
> rational economic planning, they're different. We can't eat steel. We can't use
> food to build bridges and buildings. So the amount of food and steel available has
> to be calculated separately. Thus, effective planning for a project cannot leave it
> at there are supplies available worth, say, a million labor hours, but has to break
> down what is needed into different categories. So, while Jeong claims that
> economic calculation absolutely requires using a "single unit of measure", the
> opposite is true.
> In the quote from "Grundrisse", Marx was saying that economic calculation is
> always necessary, even under communism (we shall see later on that Jeong
> doesn't believe this is so in later-phase communism), but it cannot be done with
> the single measure.
> As we have seen, Jeong himself recognizes that PLTC has difficulty accounting
> for qualitative diversity and environmental issues. But he doesn't realize why this
> is so. Effective calculation must take account of the abstract labor hour, but it
> must also deal with other factors of economic importance. It must not reduce
> matters to a single factor.
> Calculation with many units of measure
> -------------------------------------------------------------------------------
> Still, thanks to living in a capitalist society and having to buy and sell things all the
> time, it might seem to be only common sense that calculation requires a single
> unit of measure.  This might seem particularly so if, as is probably only too
> common, one wasn't taught the spirit of mathematics in school, but only one
> mechanical rule of calculation after another. But during the last century methods
> were developed to plan in physical terms. They were used by governments of
> vastly different types, not just the Soviet Union but to some extent by Western
> capitalist countries and also some newly-independent countries. This type of
> planning didn't just take into consideration the overall size of the economy, or the
> Gross Domestic Product. Nor did it simply list the different types of material goods
> that existed. It paid attention to the "intersectoral flows" that connected one
> branch of the economy with the other. Steel, for example, wouldn't be measured
> simply by how much it cost, nor by the total labor-hours needed to produce it.
> Instead steel would be measured by the resources that were needed from each
> other sector of the economy for the production of steel, while the other sectors of
> the economy were measured, in part, by how much steel they needed for their
> production.
> This new type of calculation was first put forward in the Soviet Union in the 1920s,
> and was called "material balances". The method used to adjust these material
> balances was mathematically crude, but was an important new departure in
> planning. It seems to have helped inspire the development of input-output tables
> in Western capitalist countries, which were also taken up to some extent in the
> Soviet Union. In parts one and two of my article on the "labor hour and socialist
> planning" I explain the basic idea behind these methods in more detail, and I also
> show that Marx foreshadowed these methods in volume II of "Capital" where he
> wrote equations connecting how different sectors of a capitalist economy interact
> with each other.
> These methods of physical planning were not communist planning, and as
> mentioned, were used by governments of all types. But they did show that it is
> possible to calculate using multiple units of measure, and that it was absolutely
> necessary to do so to achieve realistic results. That's why even diehard capitalist
> governments make a certain use of them, albeit only as an occasional
> supplement to overall financial planning. So these methods did not achieve, or in
> most cases even aim at, a fully planned economy, but they showed that some
> physical planning was needed even for very limited goals.
> Jeong holds that I champion the way the Soviet Union prepared material
> balances as against input-output tables. But in my article, I wrote that the
> "Western input-output methods...are essentially a variant of the method of
> material balances. Input-output methods start ... from the point of working with
> balances of goods regarded as qualitatively different. ... Western economic
> authors like to make various fine distinctions between material balances,
> input-output methods, and linear programming. ... [But these distinctions] don't
> affect the issue raised in this article. What is important, is that all these methods
> use a multitude of separate balances of qualitatively distinct goods." (7) So I
> sometimes grouped all these methods, including the "Soviet version of material
> balances", under the general term "material balances". I stressed that  the various
> forms of material balances were not socialist planning, and all that they had "in
> common with the future economic calculation of a classless society, is that they
> both have to keep track of society's production in material terms." (8)
> The use of material balances does not prove
> an economic system is socialist
> -------------------------------------------------------------------------------------
> Jeong seeks to discredit the idea of material balances because it means
> abandoning the single unit. He promotes input-output tables, because he believes
> this means using a single measure.
> To do so, he  writes "It is ... not correct to regard material balances as a
> specifically communist method of resource allocation. Even in capitalism, variants
> of material balances have been frequently used to allocate some strategically
> crucial goods when the monetary economy does not work, like during wartime."
> (p. 81) I agree strongly with him on this, and I repeatedly made the same point,
> right up to the use of the same example of wartime planning, in my article on
> socialist planning.
> But the same points also apply to input-output tables and linear programming.
> They are only technical planning tools, while socialism is based on whether the
> working class owns and directs the economy. It's the social structure of a country,
> the class regulations, that define socialism, not the planning tools. And socialist
> planning involves planning from below as well as above. Without a socialist
> structure, no matter how much planning is attempted, only a limited amount can
> be achieved.
> For that matter, in my article on socialist planning I pointed out that material
> balances and input-output tables aren't even the last word in physical planning.
> For example, these methods depend on certain assumptions about the economy,
> which are only approximately true (such as that twice as much production always
> requires exactly twice as much resources). Environmental issues could be
> included in the calculations but generally aren't. And so forth. These methods are
> but a step in the direction of realistic physical planning. They have in common
> with future communist planning that they make use of not one, but many separate
> natural units.
> Input-output tables may or may not be material planning
> ---------------------------------------------------------------------------------------
> Jeong writes in praise of input-output tables that "input-output tables can be
> compiled in terms of physical natural units as well as monetary or labor-time
> ones". (p. 81) And this is true. But what Jeong misses is that when input-output
> tables are written in terms of many physical natural units, then they are being
> used as material balances, whereas otherwise they might not be. There is a
> subtlety here. The difference isn't simply whether the table has entries written in
> financial terms. It's whether the table attempts to combine categories which are
> qualitatively different into a single combined or aggregate category (for example,
> combining the quantity of food and that of steel into a combined category which
> embraces both). This is explained in more detail in my article on socialist
> planning, which also refers to how this distinction was drawn by the late Wassily
> Leontief, the bourgeois economist who was the father of Western input-output
> analysis. (9)
> The point here is that when input-output tables represent material planning, they
> are an example of calculations that go beyond using a single unit of measure.
> When, instead, they use a single unit of measure, whether the dollar or the
> labor-hour, to combine entries with qualitatively different properties, they have
> what Leontief very politely called "a faint but unmistakable air of unreality". (10)
> The supposed abolition of labor and economic planning
> ------------------------------------------------------------------------------------------
> Jeong insists that the PLTC is indispensable in the early stage of communism,
> but says it will vanish in developed communism. That is how he reconciles his
> recognition that using the abstract labor-hour as the single unit will be similar to
> "the capitalist labor-value system" with his picture of communism. (p. 84) He
> holds that PLTC will lead to economic advances that will lay the basis for the
> advanced phase of communism that will do without the PLTC.
> But wait a minute! If economic calculation is supposed to require a single unit of
> calculation, namely the abstract labor hour of the PLTC, how can economic
> calculation be carried out in advanced communism without the PLTC? Apparently
> Jeong believes that there will be no economic calculation in advanced
> communism. This is utterly astonishing, but that is where his argument leads.
> Moreover, he writes that "labor will ... be transformed into activities", and that "the
> essence of Marxian communism is not the domination of labor but its abolition."
> (p. 84) True, Marx envisioned in his "Critique of the Gotha Program" that labor will
> change from something workers have to do into "life's prime want". But Jeong
> goes further, and describes this as the abolition of labor. And, of course, if labor is
> abolished, then it follows that labor-time vanishes too. But according to Jeong's
> system, with the lack of that single unit of measurement, the abstract labor-hour,
> "macroeconomic coordination and balance" is impossible to achieve, and there
> would be "the rejection of planning altogether."
> Now, Marx too thought that labor certificates would vanish as communism
> developed. Jeong writes about "needs-based distribution" and pays attention to
> how from the start of communism some of the social product will be distributed
> freely. (pp. 83-84) This is in accordance with Marx. But Jeong then identifies how
> much economic planning takes place with how many labor certificates are
> circulating. This means to forget about the planning that is necessary in order to
> produce the goods. Marx, on the contrary, distinguished between how goods are
> distributed, and whether there had to be economic planning.
> After all, where do the necessities and luxuries of life come from? From where do
> all the good things come that are distributed among people, and how does one
> ensure that production is carried out in a way that protects the environment? This
> requires planning. Marx stressed repeatedly that economic planning wouldn't
> vanish in communism, but simply take on another form. Recall that Jeong himself,
> when arguing for the single economic measure, cites a passage in which Marx
> says that "the planned distribution of labour time among the various branches of
> production remains the first economic law" of communist production. Indeed,
> Marx wrote that such planning "becomes law, to an even higher degree" than
> existed under capitalism. Nowhere does Marx suggest or even hint that this
> planning will diminish as communism develops.
> It is not Marx, but Jeong, who first assumes that the economic planning must be
> carried out in a way similar to that of "the capitalist labor-value system", and then
> concludes that therefore, to avoid the capitalist labor-value system, there must be
> an end to labor and calculation itself.
> While I disagree with many things that Jeong puts forward, I think he has done a
> service by putting them forward and looking into the contradictions in them. If I
> have time, I will take up the issue of what went wrong with the Soviet economy in
> a continuation of this reply.
> Notes
> ------------------------------------------------------------------------------
> (1) Roberts wasn't at the conference either, and says that his report is "solely
> based on some of the papers presented that I have obtained and also from some
> of the comments on the sessions by participants." His report on the 50th URPE
> conference can be found at
> https://thenextrecession.wordpress.com/2018/10/02/50-years-of-radical-political-e
> conomy/ under the title "50 years of radical political economy".
> Jeong's draft article, "Soviet planning and the labor-time calculation model:
> implications for 21st century socialism", can be found at
> https://thenextrecession.files.wordpress.com/2018/10/sovietplanningltc_seongjin_
> urpe20180928.pdf. It is contained in "Varieties of Alternative Economic Systems",
> pp. 71-87.
> (2) The table of contents of the entire three-part article with the overall title
> "Labor-money and socialist planning" and links to all three parts can be found at
> http://www.communistvoice.org/00LaborHour.html. The article opposes the idea
> of labor money and advocates that the Marxist labor theory of value does *not*
> mean that the labor-hour is the natural unit of socialist calculation. Jeong's
> criticism of my article occurs on p. 81 of his article.
> (3) From Jeong's draft paper, p. 71, the parenthetical comment is Jeong's.
> (4) The quote from Cottrell and Cockshott is from  "Calculation, Complexity and
> Planning: The Socialist Calculation Debate Once again", in Review of Political
> Economy, vol. 5, no. 1, 1993, Section II.3.1. It is also available at
> https://www.semanticscholar.org/paper/Calculation-%2C-Complexity-And-Plannin
> g-%3A-The-Debate-Cottrell-Cockshott/6f6e2d52da790c839d3e52a02d2e8f321a8
> b4640.
> (5) See "The environment and things of zero labor content" in part 2 of "Labor
> money and socialist planning",
> http://www.communistvoice.org/26cLaborHour2.html.
> (6) "Grundrisse: Foundations of the Critique of Political Economy", Translated
> with a Foreword by Martin Nicolaus, Pelican Marx Library (Penguin Classics), The
> Chapter on Money, p. 173. The passage is cited by Jeong on p. 71. I discuss this
> passage in some detail in the section "Concrete and abstract labor" of part 3 of
> my article on socialist planning.
> (7) See the section "Soviet material balances and Western input-output methods"
> in "Labor-money and socialist planning, pt.
> 2".http://www.communistvoice.org/26cLaborHour2.html.
> Strictly speaking, the use of input-output tables is similar to the method of
> material balances only when those input-output tables keep track exclusively of
> material goods and the intersectoral connections between them. Input-output
> tables can also be used for ordinary financial planning, and are widely so used by
> bourgeois economists and even international capitalist agencies. This is
> developed further in the section "Input-output tables may or may not be material
> planning".
> (8) See the section "One, two, three, many natural units (the method of material
> balances)" in "Labor-money and socialist planning, pt. 1"
> http://www.communistvoice.org/25cLaborHour.html.
> (9) See the section "Soviet material balances and Western input-output methods"
> in "Labor-money and socialist planning, pt. 2". It should be noted that the use of
> "shadow prices" in linear programming shows the departure from physical
> planning. This doesn't mean linear programming is useless, but that it can't serve
> as the bottom line of realistic calculation.
> (10) See Leontief, "Essays in Economics", ch 2 and 4. <>
> (From the Oct. 14 issue of D/SWV list, with minor corrections)
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