Weber's Protestant Ethic and Neoclassical Economics

8/13/2019 Weber's Protestant Ethic and Neoclassical Economics

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Exordium

A specifically bourgeois economic ethic Max Weber, the Protestant Ethi c and

Neoclassical Economic Theory

What the great religious epoch of the seventeenth century bequeathed to its utilitarian successor was,

however, above all an amazingly good, we may even say a pharisaically good, conscience in theacquisition of money, so long as it took place legally. Every trace of the deplacere vix potest hasdisappeared.A specifically bourgeois economic ethichad grown up. With the consciousness of standing in the

fullness

176of God's grace and being visibly blessed by Him, the bourgeois business man, as long as he remained

within the bounds of formal correctness, as long as his moral conduct was spotless and the use to whichhe put his wealth was not objectionable, could follow his pecuniary interests as he would and feel that hewas fulfilling his duty in doing so. The power of religious asceticism provided him in addition with sober,

conscientious, and unusually industrious workmen, who clung to their work as to a life purpose willed byGod.

In this telling passage from the last chapter of WebersProtestant Ethicdedicated to

Asceticism, the great German scholar draws a clear and unmistakable link between the world-

changing emphasis of the Protestant faith on workor labour(Arbeit) as the road to salvation

and its manifestation or reward in the outward signs of material wealth and success the lightcloak that nefariously turns into an iron cage. Yet in tracing this link between the Protestant

Ethic and the Spirit of Capitalism and then designating the former as a specifically

bourgeois economic ethic Weber unwittingly inverts, ormore accurately reverses, the realcontent of what truly constitutes the specificity of this bourgeois ethic. The aim of this piece

as intrepid, I believe, as it is originalis to show that the Protestant Work Ethic, though itcertainly played a historical role in the rise of the Spirit of Capitalism, most certainly could not

provide a logical coherent foundation for a specifically bourgeois economic ethic, and was infact in complete opposition to and even in contradiction with such ethic. By so doing, we hope to

provide a revealing original interpretation and critique of the worldview introduced by the

negatives Denkena worldview that, whilst in strident opposition to the universalistic claims ofWestern metaphysics and theology, has come to dominate implicitly, though not explicitly, the

science and ideology of global capitalism.

Our thesis here is that the Protestant Work Ethic retains the Christian and Scholastic genes of

mediaeval theology and jusnaturalism (Latin,jus naturale, Natural Law theory) that will

ultimately form the foundations of Classical Political Economy and of the Labour Theory ofValueboth of which are emphatically antitheticalto any version of a specifically bourgeois(and capitalist) economic ethic. The real, true and canonic bourgeois economic ethic indeed,

an entire imponent metaphysics is and could only be constituted by what has come to be

known as neoclassical economic theory, a theory that from its early beginnings in the middle

of the nineteenth century on the back of Hobbesian and Lockean possessive individualism andthen through its direct predecessor, the negatives Denkeninitiated by Schopenhauer, has come to

dominate and permeate the entire one-dimensional uni-verse of bourgeois orthodox economic


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science.We characterize this philosophical and socio-theoretical current, immensely influential

to this day - though this is far from obvious to even the most perceptive scholars in economics

especially - as negatives Denken or negative thought. The meaning of this description willbecome apparent in the course of our exposition as we trace the salient aspects of the negativesDenkenwith special reference to the field of economic theory as expounded and articulated by

Neoclassical Theory.

For although in the worldview of the negatives Denkenlabour can consumeexistingwealth or

nature to provide for individual wants when it comes into contact with this nature, it can by

no means create or producegreaterwealth to satisfy or provide for human wants unless thislabour can be made more productive by capital. Aphoristically put, one might say that for

the Protestant Ethic and for the Labour Theory of Value production leads to greater wealth and

possessions by means of labour understood as penitence (toil and abstinence or parsimony)

whereas for the negatives Denkenit is the renunciationof present consumption that leads tofuture accumulation through the diversion of labour to the production of capital. The essential

feature that the Protestant Ethic and the negatives Denkenhave in common is that for both

labour is sacrifice and penance or toil and effort: yet the all-important difference isthat for the first labour pro-duces greater wealth, regardless of whether this wealth is then

saved or consumed, whereas for the second this is impossible given the essence of labour as

want or provision for want, and only the renunciation of consumption, the conquering

or sublimation of want, and therefore the suppression and extinguishment of the Arbeit

can lead to the accumulation of wealth provided that this renunciation is devoted to the

production of labor-saving tools and ultimately of exchange values.

We wish to demonstrate here that whilst Neoclassical economic theory and a fortiorithe

negatives Denkengive absolute pre-eminence to sacrifice and renunciation as the real

foundation, source and origin of greater wealth or production, just as the P rotestant Ethic did,

they deny most vehemently that labour can be the real source and origin of greater wealth andassert rather that that source and origin is to be found in capital understood as thesaving of

labour or better still as the diversionof labour from immediate present consumption to

production goods or labour-savingtools or, in other words, means of production orcapital. Indeed, for the negatives Denkenand for Neoclassical Theory it is quite simply

metaphysically impossible for labour to be the source and origin of wealth of any description;

if anything, labour is seen as consumption of wealth, as want or as provision for want(Bedarf) to ensure survival.

Hence, for Neoclassical Theory labour has no utility and is rather dis-utility; labour is effort,

toil and pain: it cannot be thesubstance ofor be embodiedinany kind of wealth or goods.Not labour, but renunciation of consumption, which includes labour-as-consumption (!), in

favour of the production of labour-saving tools can lead to the accumulation of wealth. Not only,

then, is labour not the source of wealth-creation for the negatives Denken, but labour is even

considered as a form of consumption of wealth to secure its own subsistence! Furthermore, as wewill show presently, for the negatives Denkenthe accumulation of wealth must be devoted not to

consumption but to the production of Objective Value or goods for exchange.The necessary

corollary of this condition is that if the increased production is not to be consumed, that part of it


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that is constituted by consumption goods can then be used only toward the purchase of the

labours of other individuals who do not or cannot afford to save.

Theprotestantische Ethikas enucleated by Weber still expressly glorifies labour as the directand positivesource and motor of wealth-creation, that is to say, as thesubstanceof all except

natural wealth, bytracing the spirit of capitalismback to the Christian notions of humanexpiation of the original sin through the ascetic dedication to work and prayer as in theBenedictine mottoora et labora (pray and work). The devotion to work and prayer

represents a withdrawal from the world by subtracting time from the pursuit of worldly and

mundane pursuits that sinfully privilege this world and this life against the other world andthe afterlife, above all by exalting the toilandsacrificeto which man was condemned when

expelled from the Garden of Eden. Work and prayer represent therefore the rightful pious means

of expiating for the original sin of mankind and its expulsion from heaven. This is an ex-piation

(Lt.pius, pious) that is equally a red-emption (Lt. red-emptio, buying back) of mans salvation,of mans original state of heavenly bliss or grace: - expiation and redemption that represent a

renunciation of the evanescent terrestrial world (the Augustinian civitas terrena) and an a-

scent back to paradise (Lt. ascensio, climbing up [to paradise or civitas Dei]). The task andsubstance of thisA-skesisis thus the withdrawal fromand denigration ofthe world and mundane

pleasures by the ascetic through the sheer renunciationof these pleasures and of consumption.

This Christian deontology and ethic of ascetic renunciation was articulated early in the Middle

Ages by the monastic sects (Benedictine and Franciscan) and was then sharpened andexasperated in the determinist eschatology of the Puritan Protestant Work Ethic.

For the Protestant Work Ethic, there are two aspects to theAskesis: one is the toil representedby labour as penance and atonement for the original sin, and the other is the parsimony that

devotion to labour entails as a result of being a material diversion from consumption. Yet, as

we shall demonstrate here, this renunciation, in its German version asEntsagung, a term

coined by Goethe, will undergo a profound and radical reformulation through Schopenhauersmetaphysics and ethics as a direct and profoundly influential negation of Classical German

Idealism, most virulently in opposition to the universal rationalism of Hegels dialectics. So

radical was the reformulation of the Christian and ascetic worldview at the hands ofSchopenhauer and the theoreticians that followed in his wake - from Nietzsche to Weber and

Heidegger in philosophy, Mach in science, and the Austrian School in economicsthat we can

indeed speak of a reversal (Um-kehrung) of that worldview whereby first its metaphysics andthen its ethics were thoroughly turned inside out until they found practical expression in

Neoclassical Theory from the early marginalists to the Austrian School, to General Equilibrium.

Weber perceived the central difficulty, the apory in his thesis, as these passages demonstrate:

Rationalism is a historical concept which covers a whole world of different things. It will be our task to find

out whose intellectual child the particular concrete form of rational thought was, from which the idea of a

calling and the devotion to labour in thecallinghas grown, which is, as we have seen,so irrational from the

standpoint of purely eudaemonistic self-interest, but which has been and still is one of the most characteristic

elements of our capitalistic culture. We are here particularly interested in the origin of precisely the irrational

elementwhich lies in this, as in every conception of a calling.

(Vorbermerkung, pp.75-8).


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In fact, thesummum bonumof [this] ethic, the earning of more and more money, combined with the strict avoidance

of all spontaneous enjoyment of life, is above all completely devoid of any eudaemonistic, not to say hedonistic,

admixture. It is thought of so purely as an end in itself, that from the point of view of the happiness of, or utility to,

the single individual, it appears entirely transcendental and absolutely irrational. Man is dominated by the making of

money, by acquisition as the ultimate purpose of his life. Economic acquisition is no longer subordinated to man as

the means for the satisfaction of his material needs. This reversal of what we should call the natural relationship, soirrational from a naive point of view, is evidently as definitely a leading principle of capitalism as it is foreign to all

peoples not under capitalistic influence. At the same time it expresses a type of feeling which is closely connected

with certain religious ideas. (PE, beginning of Ch.2, The Spirit of Capitalism.)

For Weber, capitalist industry is supremely rational in that it relies on the arithmetical surplusof profit over costs in the process of production and market exchange of goods. Its rationality is

purely instrumental (or purposive,Zweck-rationalitat) and not substantive (Wert-rationalitat)

because it is made tangibleby the ability of the capitalist to calculate preciselythe profitability

of his enterprise through the medium of money. It is thisKalkulationthat makes capitalism asupremely rational human endeavor for Weber. On the other hand, apart from the fact that all

callings or vocations are irrational in the sense that they do not have a material origin, andapart from the fact that the Protestant calling leads to the indefinite accumulation of wealth, the

capitalist calling appears irrational to Weber alsobecause, on one side, the capitalist seeks toaccumulate wealth through the exertion of labour, and yet at the same time the devotion to

labour in the [capitalist] calling [is]irrational from the standpoint of eudaemonisticself-

interest. In other words, Weber correctly points out, the entire capitalist enterprise seems whollyirrational and counter-productive from the veryself-interestedstandpoint of the capitalist! If

indeed the aim of the capitalist is the eudaemonistic self-interested one of accumulating wealth,

it is then irrational to think that this can be done through the devotion to labour or money

when it is blatantly obvious that such devotion represents an indefinite renunciation of thevery wealth or self-interest that the devotion to labour or to money is meant to help

accumulate!

And the converse is even more true and irrational: for it is irrational in the extreme to suppose

that a devotion to labour that is meant as expiation for the original sin can be pursued so

asceticallywhen one knows that it will actually result in the accumulation of wealth! Weber issaying, quite validly, that a calling that at one and the same time pursues wealth through labour

when labour is ipso factothe diversion of time for consumption to time for production and

therefore to total abnegation of the self or renunciation of wealth that such a calling can

only be classed as irrational, in complete contradiction with the calculating rationality thatmoney makes mathematically possible for the capitalist! Worse still, the indefinite accumulation

of wealth that is a by-product of the devotion to labour is irrationally inconsistent with its

original goal of expiation of the original sin.

This interesting contradiction between devotion to labour and accumulation of wealth

should have prompted Weber to reassess the legitimacy of the link between the Protestant Work

Ethic and the Spirit of Capitalism not so much in historical terms, where it may well be accurateand even legitimatebut above all in terms of the internal consistency of such a link, and

therefore of its ability to be adopted effectively by the capitalist bourgeoisie as a lasting ideology

capable of being presented not just as a specifically bourgeois economic ethic but indeed


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eventually (in the late nineteenth century) as an economic science.((Interestingly, it was

another Neoclassical economist, the Italian Vilfredo Pareto, who first distinguished between

ideologies and their derivations that may be functional to the interests underlying them andthose that may be dys-functional or detract from those interests. Webers own notion ofZweck-rationalitatis aimed at assessing the purposive rationality of given means at achieving stated

aims.)

Another important inconsistency with the Protestant ethic and Classical Political Economy is that

the accumulation of wealth in capitalist industry is impossible as the result of purely individual

exertion or toil or sacrifice, but rather through the command over the labours of otherindividualssomething that is clearly inconsistent with the status of the devotion to labour as

expiation or sacrifice. For it is preposterous to suggest that one may expiate and atone for ones

sins vicariouslyby accumulating the labour of others! If indeed labour is the real substance of

value and the motor of the accumulation of wealth, then it becomes impossible for the capitalistto explain the legitimacy of his profits. As every capitalist knows, any accumulation of capital on

any suitable scale is possible only through the use of the laboursof many workers, not just the

work of the individual capitalist! (As Marx established, capital is the concentration of workers inone place, what he called the concentration of capital distinct from the concentration of

capitals which refers to the need for capitalists to equalize the rate of profit across different

markets.) Weber himself in the first quotation above specified how the capitalist, apart from

feeling justified in his profits through the Protestant Work Ethic, acquired also through this Ethica workforce of unusually industrious workmen. The contradiction here between private

capitalist accumulation and the utilization of a large workforce that makes such private

accumulation possible is entirely palpable!

Yet another apory in the Protestant Ethic is that of the conflict between greater labour

productivity and the depreciation of the price of labour or wages. What for Smith and the

Puritansand for Weber - was wealth-creating division of labour, Hegel perceived in Smithspin production as the paradoxof greater productivity of labour that does not enrich the worker!

The problem, of course, as Marx will correctly explain, is that the use value of the higher

productivity of living labor (its wealth) is obviously greater with specialization, but the value-in-exchange of the labor-power of the worker is lower as a result because the employer can

employ fewer workers for the same output and thus lower the wages he pays to the fewer

workers he can employ! With good reason, Mandeville could chastise Smith with the harshreality that the Publick that benefitted from Private Vices(conspicuous consumption) was

not the working class whilst taking delight both in the ferity of humans as well as in exposing the

hypocrisy of Smiths invisible hand (aDeus absconditusor hidden God) that justified

bourgeois enrichment and working-class immiseration as a hidden divine purpose. Mandevillecould still share the condemnation of laziness andof the charity halls, not for Deistic reasons

related to the Protestant work ethic(for discouraging labor as an avenue to wealth), but for

the quite cynical realization that they invited work-shirking on the part of proletarians to the

detriment of profits and production of goods to satisfy those private vices that he mercilesslylampooned! What may appear as contradictory was in fact only sheer cynicism that Mandeville

preferred to hypocrisyfor him, hypocrisy is the tribute that vice pays to virtue.


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This conceptual inability of the Protestant Ethic to reconcile labour as the source of new wealth

and the legitimacy of capitalist profits as a separate claim to wealth also based on labour is a

major source of theoretical paradoxes, one that afflicted equally Classical Political Economy, andone that Marx exposed vehemently and ruthlessly. In reality, with the protestant ethic Weber is

still unwittingly reprising the Labour Theory of Value in its pre-Marxian form, although in his

academic lectures he had adopted already the marginalism of the Austrian School. (In theVorbermekung,however, he embraces Cantillons notion of entrepreneurial profit wherebyprofits are the simple outcome of exchange. It is a well-known fact that Webers understanding

and grasp of economic theory was rather limited.) Specifically, Weber was embracing Smiths

theory of specialization as the source of new and greater wealth: - division of labour,specialization, as wealth-creation, as more efficient pro-duction or labour productivity, and

therefore labour as pro-duction. Wealth is created through growing labour productivity enabled

by exchange and therefore specialization, that is, through the pro-duction of more goods for

exchange and the use of fewer goods for consumption: growth of productivitythroughexchangeis the source of wealth. In this perspective, wealth is the squeezing out of greater

output from existing means of production or resources or from their re-combination by means of

higher labour intensity. By consuming less himselfor by working harder the worker canexchange moreand by exchanging more he can specialize more so as to produce even more!

The worker can be more productive by specializing, producing more and consuming less in the

exchange. Smith assumes fixed and exogenous technology. Smiths theory does not encompass

innovation or the role of wealth as delayed consumption. Thus, consuming lessoneselfbecomes producing wealth for exchange by consuming less. Both Smith and Weber single out

this parsimonyas a means of accumulating wealth and as an aspect of Asceticism in (PE,

p161). It can be seen how this protestantwork ethic rationalestill preserves entirelythe linkbetween labourand wealth-creationbecause the aim of parsimony is not the saving of labour

time through its diversion from consumption to production, but rather increasing the

productivity of labour through its intensification by means of specialisation.

In the Smithian worldview, faithfully adopted by Weber to describe his conception of the

Protestant Work Ethic, it is still labour (Arbeit), it is the higher productivity of labourthat is the

immediate source and cause (fons et origo) of the increase of wealth. Thi s rationale andaetiologyis in all and for all the rationale of Natural Law, of Classical Political Economy and of

the Labour Theory of Value (from the mediaeval Schoolmen such as Aquinas to Smith and to

Marx through Ricardo and JS Mill). It is the ancient biblicalprejudice that wealth comes onlyin the sweat of thy brow. (Smith refers in Astronomy to the distinction between tranquility

and composure and labour and discomfort.) Labour as toil is the price to be paid for the

acquisition of wealth a real cost hypothesis. As we are about to see, this worldview of

wealth as a direct product of labor requires three fundamental presuppositions: the first is thathuman needs are fairly homogeneous, with minor exceptions; the second is that human labour,

although it may be as heterogeneous as there are human activities, is quantitatively homogeneous

in terms of the labour-time or labour-power required to satisfy these homogeneous human needs;

and third, as a corollary of this, that labour therefore represents the most fundamental andpervasive source of human social co-operation and co-ordination to ensure the reproduction of

society, the basis of the social synthesis.


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In effect, these presuppositions, especially the last, are in direct contradiction with the aim of

both Classical Political Economy and of the Protestant Ethic to justify and rationalize capitalist

individual accumulation of social resources as private property which is why this rationale

and aetiology could no longer serve the bourgeoisie after the initial phase of accumulationin the

First Industrial Revolution. The central achievement of Neoclassical Theory, derived

fundamentally from the philosophical reversal of Western Hellenic and Judaeo-Christianmetaphysics performed by the negatives Denken,will be the outlining of a complex andcomprehensive economic positivist sciencethat will relegate labour and the working class to

their subordinate place in the market economy. Above all, by severing the social-teleological

osmotic link between labour and wealth, Neoclassical Theory was able to replace the Judaeo-Christian Beruf, so burdened withmetaphysical notions,religious tenets and moral

theology (this was Schopenhauers, and Nietzsches,critique of Kant and Hegel), with the

positivistic Hobbesian amoral, effectiveEntsagung that leads to theentrepreneurial spirit

(Unternehmergeist) of the captain of industry glorified by Schumpeter.

This is the specifically bourgeois economic ethicthat Weber was seeking at the end ofDie

protestantische Ethikbut understood and traced incorrectly. The new link that needs to betheorized is that between labour as consumption of nature,saving as renunciation of

consumption, and thence as deliverance from the world (Schopenhauer), on one side, and

then capital as diversion of labour from consumption of wealth to production of labour-saving

tools or tools that increase labour productivity, utilityas partial satisfaction of insatiablehuman appetite or as gap between want and provision for want, and therefore capital as store

of utility or value meant for future exchange, value for exchange as objective [market

validated] valueand finally capital as interest-yielding labour-saving tools due to the discountof future goods.Only by severing the nexus between labour and wealth and replacing it with the

link between wealth and utility, and only by reversing(um-kehren) the metaphysical content of

wealth and labour by re-defining fundamentally the understanding of these human realities

will it be possible for the bourgeoisie to establish that wealth is not an objective orintersubjectiveentitythat can grow or be accumulated but rather asubjective estimationby

atomistic individuals of the utilities in exchange or marginal utilities to be derived from the

exchange of production and consumption goods in a temporaldimension, that is, through thesubjective discounting of present wealth as against its use in the future. Neoclassical theory

draws its conclusions thus from the application of abstract general principles from physics and

psychology.

This is the side that Weber neglects but that is present in Schopenhauer and is insightfully and

coherently, though not always explicitly, applied in the sphere of economic theory by Bohm-

Bawerk and the Austrian School of Economics, first, and then more broadly by NeoclassicalTheory. Let us look more intently then at the contrast between Classical and Neoclassical notions

of wealth and value and the role of labour and capital in their creation and accumulation.


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Classical Political Economy and Neoclassical Economic Theory

A. Labour as Present Consumption and Capital as Production of Delayed (Future)Consumption or Objective Value

The propositions of the Protestant Ethic and of the Labour Theory of Value are fundamentally

antithetical to the metaphysical positions of the negatives Denkenand also of Neoclassical

Theory. For Webers Calvinists and Puritans, wealth is a sign of Beruf, of divine graceandactive divine calling. But theBeruf, even in its religious specification ofEntsagung, of

renunciation andAskesis, does not yet sever decisively the theoretical link between labour and

the accumulation of wealth by interposing the role of capital in the trans-formation of existing

natural resources or wealth into greater wealth for individuals. The wealth of the ProtestantWork Ethic is still a constructive universal human value that can be socially aggregated and

accumulated by means of labour as effort first and then as sacrifice and renunciation of

consumption, even though labour is not seen associalfulfilment but rather as expiation and

sacrifice by the individual soul in its univocal relation with the Divinity. Theseveranceof labourfrom wealth - now defined as subjective value, that becomes objective only as value in

exchange -, the strict denial of social labour and the postulation of individual labours, and

the interposition of capital between labour and its imprescindible object, that is, nature, asthe sole means by which individual labours can do more than satisfy individual wantsall these

elements are absolutely vital to the development of a specifically capitalist ethic freedfrom the

moral theology of Judaeo-Christian eschatology and of mediaeval Natural Law orjusnaturalism that atavistically clings to the pillars of universal human values, of inter esse, and

of commutative and distributive justice much to the detriment of bourgeois self-interest.

Two are the essential foundations of the Protestant Work Ethic and of the Labour Theory of

Value that bourgeois economic theory needs to demolish: the first is that all economicallysignificant wealth that is to say, all use values pro-duced by human beings and not occurring

naturallyderive their exchange or market value from labour itself. And the second is thatlabour is a homogeneous entity that can be measured in terms of the amount of it that is

embodied in exchange values and upon which market prices are agreed upon by market agents.

Clearly, therefore, Classical Political Economy intends Value as a concordant or centripetal

realitythat is, as an entity whose content and quantity can be agreed upon by all human beingsand be the subject of social and economic co-ordination either through planning (socialism) or

through the market (liberalism).

It is this universality, this concordance and possible harmony that the negatives Denken attacks

most virulently. For the negatives Denken, human wants are entirelysubjectiveand cannot in anyway shape or form be regarded as homogeneous or commensurable. Consequently, wealth can

be considered only from the point of view of Subjective Value pertaining to each individualworker in isolation from other workers. Hence, although it is the immediate factor in the

production of wealth, labour can exist only as individual labours precisely because neither

wealth nor labour can be homogeneous objective use values that apply to human beings as aspeciesthat is,phylogenetically.Labour must be regarded only ontogenetically, as mere

mechanical operari, only as the physical bodily exertion on the part of the individualworker


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separate fromthe exertions of other workers andseparate fromany tools that the worker may

utilize. Indeed, the utility of the tools is considered to be entirely distinct and separate from

the actual body of the worker. Consequently, labour always and ineluctably consumes its object,

whether it be the tools it utilizes or the materials it works upon, to provide for thepresentmaterial wants of the labourer. In no circumstances can labour be considered to be homogeneous

or to satisfy homogeneous human needs and therefore to constitute the most basic form of thehuman social synthesis, of human social co-ordination andfulfilment.A fortiori, there can be nonotion of social labour for Neoclassical Theory, nor can therebe any separation (Trennung)

in the Marxian sense between labor and the means of production- because there was never

anyunion between them!The human operari is entirely instrumental to its goal the provisionfor want. There is and there can be no Gattungswesen, no species-conscious being, no original

union of workers with tools or indeed with the product of the labor process because labour is

not seen as a social activity. Quite to the contrary, the insatiable nature of human wants and the

scarcity of their provision ensure that there is conflict between and among workers, andbetween workers and nature, let alone between workers and capitalists! Human beings are

irreducibly and ontologically things-in-themselves; they are Wills or, as Nietzsche describes

them, instincts of freedom that can co-operate or col-laborate to the extent that theirneeds, their iron necessities and their wants are provided for and satisfied.

This is the Hobbesianstatus naturae, the bellum omnium contra omnes, the state of nature in

which homo homini lupusobtains and that Schopenhauerpostulatesin Book Four ofDie Weltals Wille und Vorstellung, afterhis pitiless critique of Kantian ethics in the Grundprobleme der

Ethik, of the moral theology of the Categorical Imperative. In the negatives Denkeninitiated

by Schopenhauer in response to the Hegelian dialectic,the instrumental operari, theArbeit,labor itself does not have utility because it is the objectification of the Will to Life with its

unfathomable Wants, with its evanescent World. Only the Worldis wealth; only

consumption goods have utilityfor the Will. The Will alone ultimately measures or values

or prices the marginal utility of the means of production not in an objective or substantivesense, but merely from its unfathomable desire (conatus) and appetite (appetitus), from its

individual viewpoint (Gesichtspunkt), from the per-spective of the individual choice.

Utility is an entirely subjective and inscrutable entity that can be measured as Value, that can

be given social significance or a social Form that can be reified only through the

social osmosis of the market pricing mechanism where individual Wills clash or com-peteand come into conflict for the same wealth rendered scarceby the insatiable individual human

appetite. TheAskesis, Webers ascetic renunciation of the world orEntsagung, is emphatically

not attainedthrough the pursuit of labor as an end in itself, but rather through the deferral of

consumption and the application of theArbeit to the construction of tools (means ofproduction, or capital) that are more roundabout and therefore increase the productivity of

labor by saving it, effectively bysuppressingor extinguishingit. Like fire, labour does not

pro-ducewealth but rather consumesor trans-formsthe means and materials of production that it

utilizes. And the higher Value derived from producing with more roundabout methods ofproduction can be calculated not just in an instantaneous or timeless analytical dimension but

even in a temporal one, in terms of time preference, that isa projection toward, a mortgage

over the future. The notion of fructiferous capital, of interest-bearing capital, is all here.


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Labor can have no utility because it has no intrinsic value. Instead, labor is effort

(Kampf), it is the objectification of the Will, it is the operari, it is Pain (Leid) without

Pleasure (Lust): labor is dis-utility! And the marginal utility of the consumption goodsproduced to provide for the workers wants the wage - must be equivalent to the marginal

dis-utility of labor if the production of consumption goods is to be optimal.Neoclassical theory

from Gossen onwards begins with Schopenhauers notion that human living activity is toil, itis effort, it is pain and want (Bedarf) in search of provision (Deckung), as Bohm-Bawerk styles them in thePositive Theorie. It follows from this perspective that human living

activity is conceptually separated from its object, from its environment which supplies it

with the means of production. Consequently, human living labour is seen from the outset aspure and utter destitution, as poverty, as want. Accordingly, the means of production, the

tools utilized by labour, cannot serve as means for the expression or objectification of human

living labour but rather as labour-savingtools! We should note the difference between Jeremy

Benthams Utilitarian or hedonistic calculus of pleasure and pain and the strict nexusestablished by Schopenhauer between operari as Arbeit (labor) and A-skesis as release from

Pain, as renunciation of the World and therefore the identification of labor with want

and pain. This nexus is entirely missing in Bentham just as it is in JS Mill who espoused theLabor Theory of Value as the last great representative of Classical Political Economy. But it is

this Schopenhauerian nexus that is vitalto the early development of the theory of marginal utility.

What this means is that human living labour itself is already considered, for one, as a tool, asan instrument whose productivity can be measured in terms of units of output per unit of

time. Andfor another, living labour is seen as an activity or a labourpower that, just like

Schopenhauers Will to Life and its objectification, the Body, is purely abstract, mere

potentiality, utter possibility, sheer pro-ject not bound by any phylogenetic and social

needs of any description whatsoever. In practice, it is the latter view of living labor the

assumption that living labor is only mere potentiality - that serves as the premise that leads

inexorably to the former conclusionthat is, that living labor is only a tool, a force or powerthat can be rendered homogeneous not through organic co-operation but exclusively through

mechanical conflict between human wills. Marxs critique of political economy as founded on

abstract labor is all here.

In this perspective, abstract labour is sheer, naked, destitute poverty, barren misery potentialthat can only become actual if, and only to the extent and manner that, it is allowedby the

laws of supply and demand to come into contact as a toolwith the means of production that

are the endowment and possession of the capitalist.Labor is a fire that devours or consumesor at best transforms its object simply to keep itself burning - and yet cannot for all its burning

cannot pro-duce anything. For the Neoclassics, then, labour and workers are by defi ni tionthe

factor of production that is in want or need, thatsufferstoil and pain and dis-utility and that needs capital (the means of production as labour-saving tools) in order to satisfy itswants that are made immediate, urgent in contrast with the capitalist owner who can

defer consumption by the very fact that it does not now have provisions for its subsistence

and reproduction and survival!


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The blunt brutality of Schumpeters illations conclusions drawn from utterly ludicrous

premises need not detain us long here. Bohm-Bawerks theory of the greater

productivity of more roundabout methods of production (a feat of metaphysical

fantasy unequalled in the sorry history of the Economics a bedtime story to make

children laugh) is yet another version of the Schopenhauerian renunciation

(Entsagung), the refusal of the pain (Leid) of the Will to Life in its abulic, incessant

and insatiable search for pleasure (Lust) that can never be satis-fied, least of all at the

moment of its ful-filment (Schopenhauer)! Bohm-Bawerk is clearly intimating under the

pretense of economic theory that the capitalist is rewarded with higher

productivity of the tools (capital) hepossessesby virtue of his ascetic renunciation or

deferral of immediate consumption in order to devote his labor and existing capital

to the construction of more roundabout methods of production that will yield higher

productivity and therefore profit when they are utilized. As we will see in PartTwo,

Weber argues in the Ethik that it is the Protestant calling (Beruf) of labor as an end in

itself that makes up the spirit of capitalism and constitutes a specifically bourgeoiseconomic ethic. We can see already from the quotation above that in fact it is

Neoclassical Theory that provides such a specifically bourgeois economic ethic

because it lays emphasis of the source of Value on the renunciation of immediate

consumption by the capitalist through the preference of more roundabout means of

production (capital) rather than Webers devotion to or calling for labor as an end

in itself which, of course, is much closer to the Labor Theory of Value of Classical

Political Economy. Here, the entire concept of interest or profit is evidently founded

in Neoclassical Theory on the idea of a price strugglebetween capitalists and workers

that, given the premises of this theory, is always decided in favour of the capitalists.

Contrary to the Protestant Ethic, this negativeview of labour and indeed of human agency in the

world contends that labour is not ascetic deliverance fromthe world and from wealth; it is notrenunciation but resignation, mere operari or passive acceptance of the world. The negatives

Denkencontends that labour is mere consumption of existing wealthor of Nature through its

transformation (see the first part of Bohm-BawerksPTCon this). For the negatives Denken,labour cannot produce and create greater wealth as value-in-exchange unless capital intervenes to

aid labour in its interaction with nature. Indeed, the very notion of labour as the positive

creation and accumulation of wealth (as input in productive output) is meaningful only

within the perspective of the Labour Theory of Value first outlined in Classical Political

Economy.

For the negati ves Denkenand then for Neoclassical Theory, wealth quite simply cannot be

pro-duced by labour without the intervention of capital. Capital here is not seen as an

inert pile of labour-saving goods but rather as the pro-duct of the capitalists wilful

renunciation of consumption represented by labour through the production of labour -

saving tools! Quite simply, capital is the capitalists will to employ labor and dominate or

command labor, that is, the worker! It follows that for the negati ves Denkenand for


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Neoclassical Theoryjust as for Karl Marx!capital is not a thing but is rather a

will opposed to labour.(One of the major Marxist objections to Neoclassical Theory is

that it treats capital as a thing and not as a social relation of production. We can see

how erroneous this objection isand indeed the Marxistnotion of Value is itself tainted

with the reification of socially necessarylabour-power where this necessity seeks to

turn the Marxian critiqueof capitalist social relations of production into a reifiedquantitative science, as we are about to show.)

In the Protestant Ethic and even in Socialist movements, labour is seen as renunciation also;

but this renunciation is purely the substitution of time for the consumption of goods with moretime devoted to labour and not necessarily to production of production goods to produce

Objective Value. As such, the renunciation of the Protestant Ethic may be seen as expiation or

penance or self-flagellation or even as parsimony and as a form of saving: but it is not

necessarily saving for production intended as accumulation! The negatives Denkenandneoclassical theory insist that only this specific type of saving constitutes capital. Capital

therefore is not just any saving of consumption: rather, capital is the delayof consumption in

favour of production of Objective Value.

Unlike the Protestant Ethic for which devotion to labour is a necessary and sufficient condition

for the accumulation of wealth, for neoclassical theory such devotion to labour is still a form

of consumption if the labourer is paid more in consumption goods (wages) to compensate forsuch devotion. The devotion to labour can be a sufficient condition for the creation of wealth

only if direct consumption is replaced with direct production of production goods. Only in such a

case, only when devotion to labour is also a postponement of consumption as its renunciationinfavour of production, can such devotion to labour become the production of capital. In effect, it

is diversion of labour from consumption to production goods, and therefore the deferral of

consumption in favour of production, rather than devotion to labour as expiation or parsimony,

that constitutes the true renunciation for neoclassical theory.

The ultimate purpose of this diversionof labourand delay of consumptionis at once the negation

of labour as consumption, the sublimation of ones selfish wants, and the exaltation of capital aslabour-saving production. The aim of the capitalist here is not devotion to labour as parsimony

for its own sake or for religious reasonsand such devotion to labour certainly does notnecessarily lead to the accumulation of wealth.As Bohm-Bawerk puts it,

Adam Smith's celebrated proposition therefore"Parsimony and not industry isthe immediate cause of the increase of capital"is, strictly speaking, to be turned

just the other way about. The immediate cause of the origin of capital is production;

the mediate cause is a previous saving. (PTC, II.4, fn.30)

In other words, the previous saving is not just any saving (parsimony) but rather a specific kind of savingthat mediates production, one that is intended to increase production by means of labor-saving tools.

VALUE

There is no objective quantity such as labor to explain prices no substance behindvalue. Value is quite simply the actual phenomenon indicated by market prices: no Freudian


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oceanic feeling (in reply to Romain Rolland, Preface to Civilisation and Its Discontents), no

Schopenhauerian sympathy (Mit-Leid) derided by Nietzscheonly the physiological sign of

the subjective marginal utility, its visible manifestation, the body as the objectification ofWill. Therefore, no inter esse: labor is the aimless consumption of the world by the Will

and the Will is the thing in itself. There is no common being, no inter esse, only strict

phenomenalism, only sensations (MachianEmpfindungen). To be is the same as to beperceived. Sichtbar machen: to render visible is the task of science, and to con-nect facts orpublic sensations in the simplest possible relation mathematicallyso that they can speak

for themselves. In short, Simplex sigillum verisimplicity is the seal of truth. Truth is

certainty. That is the aim and scope of science.

It is not Labor that is the substance behind the Value that is distortedby market prices, as

Classical Political Economy had it. Labor does not create pro-ducts or goods. Labor rather

consumes what is already there, in Nature (!). (See for what follows the first chapters ofBohm-BawerksPositive Theory of Capital.) Physical science tells us that nothing can be created;

everything is conserved; everything is transformed. Labor simply trans-forms the natural

resources available to it so as to be able to reproduce itself, to survive and provide (Bedarf) forits wants and needs. Labor has no utility therefore: it has only dis-utility in that it needs

the existing wealth of Nature to preserve itself. The only way in which labor can make possiblethe pro-duction of Value, then, is by utilizing labor-savingtools. And that is the precise definition of

Capital. It is Capital, not Labor, that allows human labor to be productive; it is tools that

allow workers to produce more wealth and value: not in thepositive substantive and objective

sense that they would have if wealth and value were viewed as universal human endowments,but only in the negative subjectivesense of providing for the wants of individuals by saving

labor for them individually, reducingtheir subjective pain (Leid) of and effort of work, of

the operari, its strife (Kampf) in a world in which pleasure (Lust) is only the Provision

[Bedarf] for Want, the satis-faction of unlimited wants, their partial extinction their ful-filment and com-pletion only in a negative sense of the appeasement of a want or desire,neverin

the positive sense of its full gratification, for that is impossible!

Neither labour nor utility nor wants are intended as universal entities: they are all purely

subjective but they are made objective through exchange in the market (this is a major

definition in B-B[PTC]). That would be Nirvana, the extinction of all wants (Robbins). And it isonly by saving labor, by curbing the Will, by deferring consumption that the tools of

productive capital can be produced precisely, bysubstituting present consumption with

labor-saving tools.

Here then is the inversion of Max Webers proposition in theEthikthat saw the ascetic devotion

to labor as the specifically bourgeois economic ethic. No! It is not devotion to labor, it is

rather the savingof labor devoted topresentconsumption that allows its diversion to theconstruction of tools or productive capital that will permit labor to be more productive!Labour is seen here as an abstract quantity, as labour-power that is made more or less

productive by the capital or means of production that it uses. In the words of Bohm-Bawerk,

Classical Political Economy has been turned just the other way about!

Adam Smith's celebrated proposition therefore"Parsimony and not industry is

the immediate cause of the increase of capital"is, strictly speaking, to be turned


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just the other way about. The immediate cause of the origin of capital is production;

the mediate cause is a previous saving. (PTC, II.4, fn.30)

It is industry and not parsimony that is the immediate cause of the increase of capital. But

industry here does not mean Labor!To be sure, both labor and capital are needed for

production, yet capital alone is already wealthand wealth alone, not labor (which is need) canproduce other wealth. Capital alone can wait until production is complete, whereas labor cannot

because it is need that requires tools to realize itself. It means the renunciation of consumptiongoods in favour of labor-saving devices, the savingof labor as the operari of the Will through the use

of productive capital! Labor is not and cannot be the sourceof Valuebecause Value is the saving

of Labor as Want! So here finally!we have what Max Weber was looking for but could not find

with his definitions and approach in the Ethik: - A specifically bourgeois economic ethicin which

labour and capital are antithetical and capital is mastery overrenunciation and sublimation of

labour as want, as poverty, as appetitus! The Neoclassical Counter-revolution against the Socialistideology of the industrial proletariat had finally arrived to found aneconomic science.

Hence, it is not more labour that produces wealth as objective value or value in exchange.Instead it is the diversion of labour to labour-saving production as a deferral of consumption that

leads to greater value. Here the sacrifice, the toil or effort, the true parsimony is not that

of labour which is in any case condemned to being present consumption, the immediate

provision for wantbut much rather that of the capitalist the labourer who defersconsumption to produce labour-saving tools.

This is the conundrum of historical economic analysis that Joseph Schumpeter and JM Keynesset out to explain. Bohm-Bawerk himself allows of Uncertainty as a source of variations in

expectations as to the marginal utility of future goods. But again this is something that can

be arbitraged (agio) away by the market mechanism at any one time. As he rightly notes,

neither abstention nor Uncertainty can determine marginal utilities or prices for the verysimple reason that they are negative or passive emotions that cannot increase the

productivity of labor through labor-saving devices or means of production or capital.

Abstention in and of itself cannot be the source of Value. It has to be the switched preferencebetween consumption and production goodsabstinence in this specific economic context

involving labor-saving devices that is economically relevant. It is not frugality or mere

industry that leads to the diversion of the existing powers of nature, but the diversionoftime preferences to labor-saving tools, the substitution not the mere abstinence or

frugality or saving of consumption goods with labor-saving goods that leads to a different

distribution or exchange of marginal utilities. Exchange is always relative but its content

(marginal utility) can be of a higher or lower order for the individuals involved because oftheir endowments whose stock is raised by the preference for labor-saving devices. These

are not strictly time-saving devices; they are labor-saving devices because the object is

always to save labor to provide forgiven wants, which will rise in kind as more capital is

employed in production through roundabout methods.

Wants expand to absorb the available outputby labor: that is why economic science deals

always with scarce resources. (Recall the description of economics as the dismal science.)Resources are inevitably scarce because human wants are insatiable and because wealth cannot


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be created but only conserved or transformed or consumed. Capital is therefore stored-up labor

at a given time of exchange in the sense that capital increases the productivity of labor by

permitting the production of Objective Value that can then be used to command more labor: notlabor understood absolutely orpositivelyas utility, but rather negativelyas dis-utility at a

given time, given that labor too is subject to time preference. Capital is saved or suppressed or

extinguished labour.

Thus, Franklins formula, time is money, is to be preferred to Smiths parsimony is the source

of wealth because parsimony in and of itselfis neither a necessary nor a sufficient condition for

the creation of wealth unless it is exercised in the sphere of production, whereas the saving oflabour-time in production (which is what Franklin meant by time) is a necessary condition for

the making of money or, more precisely,profit. Franklins slogan must be read as money is

saving of labor-time for provision of goods for immediate consumption [therefore not exchange

values but only use values] and diversion of it to production of labor-saving goods for the futureproduction of goods [values-in-exchange] for consumption (cf. Keynes, money is a bridge

between present and future).

Webers Askesis ascetic idealis not relevant to the spirit of capitalism because it understands

devotion to laboras an ascetic end in itself! Similarly, Smiths labour theory of valueis also not

relevant because it mistakes parsimony and frugality assufficient conditions for industry (that is,

capitalist production) when in fact they are only a renunciation of consumption! On the contrary, for the

Neoclassics, what createswealth and value (or rather, makes it possible through the diversion of the

powers of nature) is not labor as an end in itself, even for ascetic goals; nor is it frugality as the

renunciation ofconsumption. This moralistic sense of frugality is absent in the Neoclassical

scientific and positivist theories. Quite to the contrary, what occasions wealth or value is the diversion

of l abour fr om present consumption to production of tools for production, that i s, of means of production as

labor-saving tools!It is not labor that is the source of wealth or value, as Adam Smith and Weber

had it. Instead, it is the deferral of consumption that comes from the diversion of labour to the

production of labor-savingtools or capital - or the sacrifice or deferral of present consumption in

favour of production goods that can then pro-duce those consumption goods with less labor andthereforebe relatively more valuable!If labour were the true source of value, then more labour wouldproduce more value; yet in reality it is labour-saving tools or capital that allow labour to produce more wealth

as goods for immediate consumption that can purchase fresh labour through labor-saving tools. From which

it follows that it is these tools or capital, not labour by itself, that produce greater wealth and potentially value-in-exchange. Here time becomes the essential scientific element of Value. All capitalist economy is economy

of time. Thus, time is money means labor-time-saving tools or capital not labor! - is money or

generic social wealth or claim on social resources remembering that labor means labor-power

or productivity in terms of output per unit of time - that is, not a quantity but a rate.Thesaving of labour timepermitted by capital allows its owner to control more labour as want. The

capitalist can wait (B-B, Schumpeter).

To produce capital, the renunciation of consumption goods must be aimed at the production ofproduction goods aimed at values in exchange- because otherwise the goods produced would

still be used in consumption by the labourer, not in pursuing renunciation as a means of

dominating more labour-power! The production of values in exchange through the adoption of

labour-saving tools (capital) allows the owner of these tools, the capitalist, to these values for theindividual labours of other individuals whose wants are too pressing for them to delay

consumption, in such a way that their provision for want (Bedarf) becomes dependent on their


16/46

being employed by the owner of capital, who now becomes a capitalist employer (a giver of

labour,Arbeit -geber) to the dependent employee ( a taker of labour,Arbeit-nehmer).

From this radically altered perspective, it is no longer the worker who gives wealth or

value-creating labour to the employer to increase his wealth or capital, but rather the

other way around:it is the employer who allows the labourer to consume capital so asto earn a wage (life-means or provisions, Lebens-mitteln). It is capital, not labour, that

creates wealth or utility.

Clearly therefore it is not labour as such that creates wealth but rather the delay in theconsumption of consumption goods through the diversion of labour to the production of

production goods. Labour here remains at all times a mere operari, a mere mechanical

consumption of wealth. Furthermore, human wants are seen as insatiable and inextinguishable.

Therefore, the decision to divert labour to production goods and to delay the consumption ofconsumption goods represents for the negativesDenkena Schopenhauerian ascetic renunciation

and sublimation not just of ephemeral worldly pleasures but also a transcendental refusal of

the Arbeit, of Labour, and of the Will to Life that motivates itin short, a renunciation oflabour as consumption of the world in favour of labour-saving tools or capital as rational

domination over and extinguishmentof the Arbeitand of the world of Nature - through

the rational sublimation of the Will to Life. In the words of Lionel Robbins, Nirvana is the

satisfaction of every desire. As we will see, this renunciation turns the Schopenhauerian Will toLife into a Nietzschean Will to Power or, in Schumpeters version, a capitalist entrepreneurial

will to conquer the Unternehmersgeist.

Without the intervention of capital, individual labours can only either consumeor transform

existing wealth (nature) to ensure provision for their insatiablewants, but they cannot, as

labour(!),producegreater wealth. (Similarly, Adam Smith completely ignores the possibility of

social labourin his analysis of exchange as the basis of specialization and higher productivitysomething that Rousseau did insteadsee L. Colletti inIdeologia e Societa.) Labour by itself is

a negative factor of production in the sense that it can only satisfy the most immediate wants in

terms of the duration of the goods it can obtain for the satisfaction of individual wants if unaidedby tools. Only through the use of capitalcan labour produce wealth in a form that can be

accumulated. But the use of capital does not change the essential quality of labour which is that

of being sheer operari, mere mechanical exertion. Capital becomes therefore the only positivefactor of productionhence thepositivetheory of capital.

For the negatives Denken,labour has no utility in and of itself because in and of itself, by itself,

without the intervention of capital, labour is mere immediate consumption of nature andcannot be the cause for the accumulation of wealth or goods with utilityremembering that

nature alone is a source of utility or Subjective Value. All values-in-exchange are also part

of nature except that they have been trans-formed by labour with the aid of capital. Labour

therefore is want, or rather, it is the only means of providing for want through theconsumption of nature. But this consumption cannot produce greater wealth or utility unless it

is mediated by capital, because capital aloneas labour-saving tools, as means of production

can yield to labour the productivity that can free it from its status as provision for want (hand-to-mouth existence or mere subsistence).


17/46

Labour therefore is mere want, mere operari; it is poverty by definition or at least it is the

simplest form of subsistence living. Consequently, labour can have only dis-utility because it ismere effort or toil, mere labour-power or abstract labour. (Marx will later object that the

unique use value of the commodity labour-power, of abstract labour or rather, of labour

made abstract by capitalist command -, is precisely to produce surplus value for capitalistsunder their violent command. This vital Marxian distinction of theDoppelcharakterof thecommodity labour-power - that is, its being a mere exchange value for capitalists but in fact

being the source of all exchange value - is what re-connects the appearanceof market

capitalism as a scientistic eternal human conditionto its actual realityas a historically specificexploitative social system.)

Wealth and nature are seen by the negati ves Denkenas being antitheticalto human being

(in Schopenhauers phrase, the Will to Life), as ob-jects (Gegen-stande) literally

standing against human beings, first, because human wants are bottomless; and second,

as a corollary, because each individuals wants andlabour must be antithetical to and incompetition and conflict with the wants and labours of other individuals. Wealth and

nature do not and cannot represent a source of uniform homogeneous commensurable and

compatible objectification of human potential, of social l abour, but are seen rather as the

source of satisfaction of strictly individual wants that are absolutely incommensurable

between individuals and indeed are a source of universal conflict between one another and

between them and Nature, individually and collectively.

Wealth and nature therefore are not seen as resourcesby means of which human beings

through their labour - understood as social labour, that is, as being also a resource indivisible

and inseparable from nature - necessarily and constructively objectifytheir abilities andfulfil

their needs as a species,phylogeneticallyand collectively. On the contrary, both nature andwealth are seen as resources made scarce by the insatiable subjective wants of human beings

understood as atomistic in-dividuals, that is, ontogenetically, in competition and in conflict both

with nature and with one anotherinfinite subjective wants for which labour can provide onlyimmediate provision as hand to mouth subsistence. Thus, labour is first broken down into

individual labours that can in no manner shape or form be regarded as social labour, and

then, as a direct corollary, these individual laboursare seen as unable to do more than providefor the immediate wants of labourers without the intervention of labour-saving tools or capital.

Once the possibility of social labour is deni ed, it i s obvious that the only sour ces of social

co-ordination for individual labours are capital at the point of production (supply) and the

market at the point of distribution (demand).In any case, this social co-ordination takes

place onlyas the expression of the capitalists desire to accumulate wealth.Wealth itself

therefore is not a universal intersubjective human valueleast of all is it made so by the uniform

measure provided by labor. Rather, wealth is a purely and entirelysubjectivevalue thatbecomes objectiveonly in exchange between individuals only as artificial convention

denoted by market prices. (This position is wholly identical with Nietzsches vitriolic critique of

human conventions, including language, that form the basis of Western humanismespecially inUber Wahrheit und Luge.) A direct corollary of this position is that there can be no such


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entity as social labour and that therefore labour must be understood as simply a

collective noun denoting absolutely incommensurable individual labours.

Unlike Classical Political Economy and the Labour Theory of Value, which saw nature as

universal use value for the human species, all wealth or value or utility is subjectivefor

the negatives Denkento the extreme point that it is incommunicable and incommensurablebetween individuals and certainly not quantifiable either individually or socially. Even socialwelfare can be assessed only relativelyas in Pareto optimality, in terms of the increase of welfare

of the last individual, but cannot be aggregated because wealth is objective only to the extent

that its value or utility to each individual can be exchanged betweenin-dividuals. Clearly then,the market economy envisaged by the negatives Denkenand Neoclassical Theory is one that is

always in equilibrium, as a static economy that can grow only by moving from one

equilibrium to another. (The point was made by Schumpeter in the Theorie. The theoreticians

who formalized general equilibriumArrow, Debreu and Hahnlater concluded what anyserious reflection on neoclassical theory could have told them from the outset: - that equilibrium

theory is incompatible with the notion of money as a means of exchange and a store of value.)

The culminationof this blatant nihilism implicit in the Weltanschauungof the negatives Denkencan be found in the principal theoretical works of the most prestigious member of the early

Austrian School, none other than the bourgeois Marx himself Eugen Bohm-Bawerk. Here is

how his greatest pupil, Joseph Schumpeter, summarises his work in a manner that needs littlecommentary from us to be placed in the context of our discussionand that in connection with

interest, that is the most fundamental aspect of profit as the most unabashedly natural

claim by the bourgeoisie over social wealth (in the form of what Marx called fructiferous

capital):

In 1884 there appeared Bhm-Bawerk's critical work which established not

only the untenable but also the superficial character of the existing

explanations of interest and opened a new era for the theory of interest. This

book and the one entitled Positive Theorie, which followed four years later,

trained numerous theorists of interest and hardly a single one remained

unaffected by them. Of all the works on the theory of marginal utility these

two volumes had the deepest and widest effect. We find the traces of their

influence in the way in which almost all theorists of interest phrased their

questions and proceeded to answer them.

There are signs of this influence even in those writers who rejected theconcrete solution of the problem of interest as offered by Bhm-Bawerk. This

solution is based on the fundamental idea that the phenomenon of interest

can be explained by a discrepancy between the values of present and future

consumer goods. This discrepancy rests on three facts: first, on the difference

between the present and the future level of supplies available for the

members of the economy, secondly, on the fact that a future satisfaction of

wants stands much less vividly before people's eyes than an equal but

present satisfaction. In consequence, economic activity reacts less strongly to


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the prospect of future satisfaction than to that of present enjoyment and the

individual members of the economy are in certain circumstances willing to

buy present enjoyment with one that is greater in itself but lies in the future.

The discrepancy between present and future values is, thirdly, based on the

fact that the possession of goods ready to be enjoyed makes it unnecessary

for the economic individuals to provide for their subsistence by

HISTORICAL SCHOOL AND MARGINAL UTILITY 199producing for the moment, e.g. by a primitive search for food.

The possession of such goods enables them to choose some

methods of production which are more profitable but are more

time-consuming: the possession of goods ready to be enjoyed in

the present guarantees, as it were, the possession of more such

goods in the future.

In this 'third reason' for the phenomenon of interest there are

contained two elements: First, the establishment of a technical fact

which so far had been unknown to the theorists, namely that the

prolongation of the period of production, the adoption of 'detours'

of production, makes it possible to obtain a greater return which

is more than proportionate to the time employed. Secondly, the

thesis that this technical fact is also an independent cause of an

increase in value of consumption goods which are in existence at

any given time.

Interest as form of income then originates in theprice struggle

between the capitalists on the one side, who must be considered

as merchants who offer goods which are ready for consumption,

and landlords and workers on the other. Because the latter value

present goods more highly and because the possible use of present

stocks of consumer goods for a more profitable extension of the

period of production is practically unlimited, the price struggle is

always decided in favour of the capitalists.In consequence, landlords

and workers receive their future product only with a deduction,

as it were, with a discount for the present.

The achievement which this formulation contains was epoch-making

and a great deal of the theoretical work of the last twenty

years has been devoted to a discussion of it and to its criticism.

(Schumpeter, Economic Doctrines and Methodology.)

An increase in wealth can be obtained by human beings only through the use of tools.But fortools to be produced, labour must first be divertedfrom producing goods for immediate

consumption. Because labour is always and everywhere a consumption of wealth, even when it

is devoted to the production of tools, the real source of greater wealth for humans cannot belabour itself but rather the decision by the labourer to divert his individual labour from direct

consumption and the production of consumption goods to the production of production goods

that increase its productivity, notfor the sake of personal consumption but exclusivelyfor the


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sake of exchange. So long as the aim of production is to satisfy the labourers personal wants,

only Subjective Value (what neoclassics, inappropriately adapting the term from Classical

Political Economy, call also use value) is created. But this subjective value does not andcannot constitute wealth because it is not measured against the subjective values produced by

other labourers. Only (subjective) values in exchange only those consumption goods that can

be exchanged with the consumption goods of other labourers - can be said to constituteObjective Value to the extent that their value is validated by their exchange in the marketbeing priced against other values-in-exchange.

In connection with the discussion about the admissibility or

possibility of introducing psychological factors into economics

there stood the question of a standard of value.This question became

essential as soon as the theorists saw the excellent objective

measure of labour vanish. Even before Smith people had discussed

the question of a standard of exchange value and it had been recognized

that there could be no standard that was unchangeable in

itself. All the classical writers taught this, while the old supporters

of the theory of value in use, as e.g. Say, insisted on equating theexchange value of a commodity simply with the quantity of goods

which it was possible to obtain for it in the market. It was, however,

simply considered impossible to measure the value in use,

although in practice everybody definitely compares values of commodities

with each other. The psychological theory of value now

seemed to demand such a standard of value in use also in economic

theory. Against this doubts were raised whether it was substantially

possible to measure 'quantities of intensity' and in particular whether

valuations of different people could actually be compared.Yet

1 Cf. Bhm,Bawerk,'Exkurs' IX in the third edition of the Positive Theory

HISTORICAL SCHOOL AND MARGINAL UTILITY 193

there is really no need for such a comparison and in measuring thevaluations of one person it is quite possible to proceed merely from

facts that can be observedif we start from the following formulation:

The value of a quantity of a commodity for somebody is measured

by that quantity of another commodity which makes the

choice between both a matter ofindifference to the economic individual.

(Fisher, Mathematical Investigations into the Theory of

Prices, 1892.)This method of basing the measurement of values

on acts of choice of the individualsgained more and more adherents

(Pareto, Boninsegni and others). Yet it is possible to overcome

the difficulties of the problem also in a different way.1

The primary fact with which the theory of marginal utility is

concerned and in which its fundamental achievement consists andon which everything else is based, is the proof that in spite of

appearances to the contrary the factor of wants and as a result from

this the utility character of commodities determine all individual

occurrences in the economy. At first it was necessary to deal with

the old antinomy of values, the opposition between utility and

value. This had already been done. The distinctions between categories

of want and the incitement of want, between the total value


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of a store and the value of partial quantities of which the store held

by the economic individual is composed, help to overcome this

opposition. In this lies the importance of the conception of 'marginal

utility'.2 Thus all facts relating to the determination of prices

could be explained with the help of the basic principle.

.in cases in which somebody estimates acommodity according to the value in use of commodities which he

can obtain for it in the marketsubjective exchange valuethe

'exchangeability' and with it the subjective exchange value is

based on alternative estimates of the value in use. This led to a

uniform explanation of all occurrencesin the exchange economy

with the help of one single principle and in particular also to a

classification of the relation between costs and prices.1

(Schumpeter, Economic Doctrines and Methodology)

But in order to produce values-in-exchange, the labourer has to utilize tools that will enable

him to produce more than is needed for the satisfaction of his bodily wants. And this can beachieved only by diverting labour to the production of tools in substitution of consumption goods.

This roundabout decision then and not labour itself or devotion to labour as

understood by the Protestant Work Ethic and the Labour Theory of Value - represents thereal Entsagung, the true renunciation, and the true source of greater wealth.For thenegatives Denken, therefore, wealth does not consist in consumption but in production of values-

in-exchange.

Indeed, it is possible for us to anticipate at this early stage the important realization made first by Hayek

and more recently by Hahn that because objective value for Neoclassical Theory can consist only of

strictly subjective information offered by individuals about their individual utility schedules, it can then

be concluded that a neoclassical economy in equilibrium would amount to and can certainly be reduced

to and be theorized as an economy of information (Hayek) or as an exchange of ideas and actions

(Hahn). Such an equilibrium economy can even be given a temporal dimension, but only formally, by

specifying the instantaneous utility schedules of market agents. In this scheme, time is taken as a

purely formal entity that can be discounted for future calculation. (Bohm-Bawerk suggests that even

uncertainty can be arbitraged away!) Because wealth is interpreted by Neoclassical Theory as a

uniquely subjective entity that has only a nominal and relative manifestation in exchange between

individuals indicated by market prices, then it follows that in equilibrium this exchange is purely an

exchange of information or of signals as to what would be the optimal exchange of existing subjective

individual wealth in accordance with the utility schedule of each individual market agent. Because

exchange occurs instantaneously, it can then be said that no real exchange of material goods need ever

take place except virtually, that is, as an exchange of ideas and actions (Hahn) or information

(Hayek). In a neoclassical economy wealth cannot be aggregated socially because it exists always and

forever as subjective estimation, which is why no real money can exist as a store of value. Wealth or

welfare can only be compared relatively as in Pareto optimality. Even Pareto optimality can be assessed


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only once all exchanges are concluded and the present endowments or utility schedules of each

individual are visible and fixed, that is to say, final. In any case, wealth cannot be estimated

intersubjectively but only on the basis of such individual utility schedules.

B. The Problem of Co-ordination: Market Prices and Labour Values as Meta-physics.Stigler in his formidable review of utility theory insightfully denigratesfrom the point of view of

Neoclassical Theorythis Smithian position as the Scotsmans greatest fallacy: labour cannot pro-

duce wealth or be the measure of exchanged wealth or value in exchange because wealth is notthesocially objectivequantitative sum of use valuesmeant for exchange but rather their value-

in-exchange which is a purely qualitative subjective estimation, a function of utility, whose

sole objective manifestation and calculation or valuation can be obtained only through

observable market prices.

Drawing upon a long line of predecessors, Smith gave to his immediate successors, and they uncritically accepted,the distinction between value in use and value in exchange:

The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility ofsome particular object, and sometimes the power of purchasing other goods which the possession of thatobject conveys. The one may be called "value in use"; the other, "value in exchange." The things whichhave the greatest value in use have frequently little or no value in exchange; and on the contrary, thosewhich have the greatest value in exchange have frequently little or no value in use. Nothing is more usefulthan water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. Adiamond, on308 GEORGE J. STIGLERthe contrary, has scarce any value in use; but a very great quantity of other goods may frequently be hadin exchange for it.2

The fame of this passage rivals its ambiguity. The paradox - that value in exchange may exceed or fall short of valuein use - was, strictly speaking, a meaningless statement, for Smith had no basis (i.e., no concept of marginal utilityof income or marginal price of utility) on which he could compare such h eterogeneous quant i t ies. On anyreasonable interpretation, moreover, Smith's statement that value in use could be less than value in exchange wasclearly a mora l judgment, not shared by the possessors of diamonds. To avoid the incomparabi l i ty of money andut i l i ty, one may interpret Smith to mean that the ratio of values of two commodities is not equal to the ratio of theirtotal utilities.' On such a reading, Smith's statement deserves neither criticism nor quotation. This passage is notSmith's title to recognition in our history of utility. His role is different: it is to show that demand functions, as a set ofempirical relationships, were already an established part of economic analysis.

From thejusnaturalistviewpoint of Smiths and Webers Protestant Ethic, wealth as capital is a

dependent quantitative function of labour productivity. For them the market mechanism can onlyserve to facilitate the exchange of goods, but cannot determine the intrinsic substantial value of

goods measured by the amount of labour-power they contain. This is a rationalist and humanist

worldview in which human labour has a creative universal role in the world that makes all

exchange values comparable and measurable, that is, homogeneous(Hegels dialectic of self-consciousness and Marxs materialist elaboration are perhaps the highest expression of this

Judaeo-Christian onto-theology).


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Yet from thepositivistperspective of Neoclassical Theory (which Smith also paradoxically

promoted and probably founded) all wealth is subjective: there are no use values that are

universally recognized as serving human needs and wants. Rather, use values and wealth can beobjective (that is, be socially recognized) only through the relative estimation of their value-in-

exchange by market agents as displayed in market pricesbecause only these market agents can

determinesubjectivelythe value in exchange of goods sold on the market. For NeoclassicalTheory there can be no distinction between use values and exchange values because all Value isSubjective Value; and Values can become objective only to the extent that they are

exchanged by means of prices fixed on the market.

Consequently, for Neoclassical Theory use values as the universally recognized qualities of

goods for human beings whose prices are then determined by the amount of labour necessary

to bring them to market (to pro-duce them) simply cannot form the basis of economic analysis -

only observable market prices can. If it were at all possible to calculate scientifically the amountof labour time socially necessary for the production of a given good, it would then also be

possible to decide scientifically the just distribution of the value produced according to the

labour time expended. Yet this objective value independent of market prices is precisely whatNeoclassical Theory denies is possible!

For the Protestant Ethic and for the Labour Theory of Value, all wealth is objective; wealth is

the totality of use values and is inseparable from human existence, and neither is the labourthat forms the substance of exchange values. Indeed, given the homogeneity of all exchange

values as products of and measurable by labour, Classical Political Economy identifies Value

with exchange value because exchange values vary in relation to the labour that is embodiedby goods on the market. Thus, use values are not omitted from economic analysis but are simply

replaced by their labour content. In total contrast, neoclassical theory omits use value from

economic analysis because all use values are seen as being strictly subjective and therefore the

only objectivity possible for goods, their Objective Values, are the observable prices in marketexchange. Thus, neoclassical theory can eliminate the notion of Value from economic analysis

altogether and merely concentrate on market prices! The only reason why utility is reta ined by

Neoclassical Theory to explain market prices, even if only as marginal utility, is precisely toemphasise the subjectivity and metaphysical character of use values as adopted by

Classical Political Economy.

And yet, if use values and labour as the substance of exchange values (that is, exchange values as

the amount of labour required to bring their use values to market) are meta-physical because

they are un-observable, then utility is equally meta-physical! Neoclassical Theory

acknowledges that utility is a metaphysical notion; but then it simply attributes to prices thequality of showing this utility at the margin, that is, at the point of exchange between

individuals. (The vulgarity, first,of taking prices at theirface value, as thepositivistic

verdict of the market on the value of goods, and second, of assuming that individuals

constitute the basic and decisive economic decision-making agents that determine prices - is thereason why Classical Political Economy referred to the early exponents of Neoclassical Theory

as vulgar economists. Cf. Rowthorn essay in CC&I. Also Marx, Cap.1 at pp174-5, fn.34:Let me point out once and for all that by classical political economy I mean all the economists who, since the time

of W. Petty, have investigated the real internal framework [Zusammenhang] of bourgeois [175] relations of

production, as opposed to the vulgar economists who only flounder around within the apparent framework of those


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relations, ceaselessly ruminate on the materials long since provided by scientific political economy, and seek there

plausible explanations of the crudest phenomena for the domestic purposes of the bourgeoisie. Apart from this, the

vulgar econom

Documents

Weber's Protestant Ethic and Neoclassical Economics