Law of Value - Steve Keen and The Machine

Steve Keen and The Machine

In his book Debunking Economics: The naked Emperor of the Social Sciences, the Australian economist Steve Keen has attempted to counter Marx's theory (in his view Marx's pre-1857 view, specifically) from a post-Keynesian perspective, by arguing that machines can add more product-value over their operational lifetime than the total value of depreciation charged during those asset lives. For example, the total value of sausages produced by a sausage machine over its useful life might be greater than the value of the machine. Depreciation, he implies, was the weak point in Marx's social accounting system all along. Similar to John Roemer, Keen argues that all factors of production can add new value to outputs.

This raises the question of how we know which part of the new value is due directly to the worker, which part is due to the pork, and which part is due directly to the machine (or indirectly to any worker involved in the production of that machine) - none of which of course can produce products without the others, unless we suppose full automation.

Marx remained insistent that economic value is a human creation; only human labour could create net new value. Machines as capital did not create any new value by themselves; instead human beings conserved the value of machines, and transferred the value of machines to the new products. Therefore, logically, machines could contribute no more value than was implied by the labour it took to make them, or perhaps more precisely, by their current value in society. This value should of course be distinguished from that part of the output price charged as depreciation costs, i.e. a distinction should be drawn between depreciation in labour-value terms and depreciation in money-price terms. The replacement costs of fixed equipment are influenced by developments in productivity within industries producing the equipment, developments which may be reflected in price-levels only with a certain time-lag.

That aside, Marxist economists such as Ernest Mandel have argued that owners of new, more productive fixed equipment (which the owners may monopolize with the aid of patents) can obtain extra income from its use, representing effectively an economic rent (so-called "technological rents"). Whatever view one takes, it is clear depreciation raises complex issues, because depreciation write-offs often do not reflect the "real" loss of value of a fixed asset, but rather the maximum value permitted by governments and auditors to be written off for tax purposes (for more discussion, see the OPE-L ("Outline of Political Economy") list and Steve Keen's comment on Marx and Surplus Value .