The second class had what I regard as a pellucid account of capitalism from Duncan Foley. The main points that I took away from it are:

1) Capitalism has to be seen as a quasi-natural form of social organization, which is rooted in the division of labor. The key point of reference here is Book 1 of Adam Smith’s The Wealth of Nations. By our nature, individuals cannot be self-sufficient. They must exchange in order to survive. Exchange also invariably increases productivity. (cf. Angus Maddison, The World Economy). Accordingly the spread of exchange does 2 things: it organizes production and organizes the distribution of the product. Here we have the root of the famous distinction between use value and exchange value. But this distinction also introduces a problem, which cannot be solved through economics: Where do we draw the line between production for exchange and production for use?

2) To facilitate the division of labor we introduce money, “a socially accepted general equivalent,” and thereby prices. We can subsume this under the general process of the mathematicization of the world-picture. But what is crucial here is the distinction between “natural price” and “market price,” which is also to be found in the classical Political economists, including Smith. The natural price responds to structural forces, which make themselves felt through feedback; the market price is determined by supply and demand. In theory, market prices fluctuate around natural prices. Much more needs to be said here. But it is important to see that at a certain point, labor itself has an exchange value (i.e., becomes a commodity).

3) The implication of the above is that a capitalist system (let us call it a system) is homeostatic self-regulating, aims toward some equilibrium or balance. Feedback is its central mode of operation; algorithms its typical form of command. c.f. here, Donald Fleming, “Walter B. Cannon and Homeostasis,” Social Research, 1984, 51:609-640. A capitalist system cannot be centrally directed. The experience of communism demonstrated that. Also relevant here is the significance of new branches of mathematics, such as complexity and advances in probability theory. The distinction between risk and uncertainty seems important here.

4) Once labor acquires an exchange value it becomes abstract labor: mobile and fungible. Labor can no longer be sold (i.e. slavery is abolished) but rather labor is rented out: this is labor-power. The capitalist who rents the labor-power takes the whole risk, and receives the full profit from the sale of the product. This is the source of the unparalleled growth in productivity accomplished by capitalism. This capital/labor relationship: a) gives the capitalist an interest in providing incentives (a key word) for workers in order for them to work harder and b) gives the capitalist an interest in substituting machinery for living labor, since the most common of these incentives is higher pay. These two attributes can be considered laws of the capitalist system. We can also contrast the success of capitalism in generating increased productivity from within to the failure of other modes of production, such as slavery in ancient Rome, which expanded by military conquest (land and slaves) but not by introducing technology. Similarly nations that lack capitalist classes, such as post-Communist Russia or post-mercantile Holland, run into trouble.

5) The idea of a surplus. There is a built-in tendency to increase productivity in this model, so there is a built-in tendency to produce a surplus, certainly a surplus above what is necessary to reproduce the laboring class. Perhaps this surplus should be called exploitation; perhaps not. What is important in Duncan’s model is to see that the surplus cannot be understood in terms of the relation between any particular individual capitalist and a particular worker, but rather on a collective scale. In other words, there is a world pool of surplus value, and capitalists compete for that surplus value. Very often that is what a business plan is.

6) Afterward, I raised 3 questions for future discussion: 1) Isn’t there a wholly different account rooted in consumption, namely post-classical economics, and what are the differences between the two accounts at this level of generality, 2) are there laws in capitalism that inequality as certain and lawlike as the laws that generate productivity and, if so, what are they? and 3) what are the differences in the constraints exerted by natural prices and constraints generated by “artificial” institutions, such as central banks.