From Addition to Multiplication: The Labour Theory of Value and the Economic Institutions of Capitalism. Part Two: Neither Micro nor Macro: Understanding the Evolution of Aggregate Variables in a Capitalist System

This three-parts study propounds an institutional and evolutionary - or qualitative and inter-subjective- re-interpretation of Marx’s version of the labour theory of value. More specifically, this second part begins the general and dynamic extension of the static and partial analysis presented in the first part. Consequently, the analysis of the division of labour among firms is added to that of the division of labour within the firm. The key notion in this regard is that of interdependence between the “sphere of production” and the “sphere of circulation”, that is, the interdependence between the phase of value creation – or appropriation- that takes place within the firm and the phase of its realization – or appropriationthat takes place in the market of goods. Indeed, it follows from the analysis of this interdependence that the aggregate variables should not be understood as being determined by the sum of separate and independent individual variables, nor, even less, as a series of ‘wholes’ endowed with a logic different from the individual ones, without this leading at least to a departure from the same additive framework of the methodologically individualistic approach discussed in the previous part. On the contrary, aggregate variables turn out to be micro-founded by the production relationships that prevail within the firm, and in their turn they macro-found the individual ones making it possible to retrieve and re-interpret the mechanisms of cumulative causation on which, respectively, Marx and Smith based their theories of crisis and growth.In other words, since even the aggregate production function turns out to be non-additively separable, the problem of determining the value of the joint product of the firm arises in basically the same way for the aggregate product. Accordingly, it, too, can be solved with the notion of exchange value introduced in Part One. Consequently, this situation further weakens the neo-classical theory of value and distribution, making it even more appropriate and urgent to retrieve and re-interpret the classical perspective and in particular the Marxian one where, again because of the interdependence between the “sphere of production” and the “sphere of circulation”, such theories are interdependent. From this interdependence there ensues the inseparability of efficiency and distributional considerations, the importance of property rights as a rule rather than an exception, and the role of conflict as a positive principle