In The Work-Standard (3rd Ed.) and to some extent The Third Place (1st Ed.) and Work-Standard Accounting Practices (1st Ed.), I described how the Values and Prices of everyday goods and services are evaluated under Neoliberalism. The significance of providing a methodology of judging the Value of goods and services is to create the framework for gauging the Price of those same goods and services. In doing so, a Theory of Money is allowed to form, resulting in the development of ideas conducive to fiscal and monetary policymaking. This in turn enables an Ideology like Neoliberalism to assume its discernible characteristics, not to mention how other Ideologies will distinguish themselves from Neoliberalism within everyday economic life.
The mainstream neoclassical economic consensus in Neoliberalism regarding the valuation of goods and services has a long history dating back to philosophical musings from the Enlightenment. Liberal Capitalists rely on the “Utility Theory of Value (UTV),” which was derived from concepts found in earlier Theories of Value. UTV argues that the Value of goods and services are determined based on the Marginal Utility provided by those goods and services, whether they offered the greatest pleasure for the least amount of pain to the Individual. With Marginal Utility, the Prices of goods and services could be settled on that basis, thereby giving rise to one of Neoliberalism’s Modes of Production, Production for Profit. After tracing its historical antecedents, one will discover that UTV borrowed aspects of the “Subjective Theory of Value (STV), the “Labor Theory of Value (LTV),” and the “Cost-of-Production Theory of Value (CPTV).”
Although Adam Smith initially devised LTV in The Wealth of Nations, he was more so in favor of CPTV where the Value is determined by the cost of everything that went into the production process. From here, the Prices for any given good or service could be provided and paid for with Kapital. Smith’s descriptions of LTV would later be developed further by David Ricardo, where the Value is determined by how much Kapital it took for a good to be produced or a service rendered. Rather than the cost of the creating the product, the Value stems from the cost of hiring the people tasked with producing it and paying them to continue the production process.
Conversely, it was Jeremy Bentham, the Liberal philosopher who conceptualized Utilitarianism, who laid the philosophical foundations for UTV. Whether something yields the greatest amount of pleasure for the least amount of pain, in keeping with the Utilitarian ideal of the “greatest happiness for the greatest number,” is what determines the Value of goods and services. It is significant that aspects of UTV did find its way into STV vis-à-vis the Austrian School’s Carl Menger. Menger introduced the concept of Marginal Utility, which not only conceptualized STV but also gave UTV a larger degree of credibility to its own claims. The persistent desires of a Civil Society, which can always be subject to manipulation, are what drive Incentives of Supply and Demand, enabling the Prices of goods and services to be supported by the Marginal Utility of the Private Citizen.
If one has not already realized this, then let it be clear that we have the philosophical groundwork behind the two Modes of Production in Neoliberalism: Production for Profit and Production for Utility. Capped by UTV, the Prices of goods and services are driven by Supply and Demand, and whose Values are influenced by the Marginal Utility of Civil Society as a collection of Private Citizens governed by Parliament. The costs of running production processes, from paying employees to procuring materials, are also factored. Whatever brings the most pleasure, the greatest happiness, is what will be valued the most and vice versa.
Obviously, the limitations of UTV are centered in how it portrays humanity and the Totalities of people that comprise entire nations. UTV presupposes that everyone is rational beings who can always be expected to have consistent and well-defined desires that can then be quantified to create a valuation of different goods and services. There may be all kinds of factors, both personal and interpersonal, that cannot be easily quantified or fit the expectations of whoever is applying UTV. Even so, one has to wonder why Neoliberalism specifically chose UTV over other Theories of Value, especially when it came to making value-judgments and using it as part of the basis behind its own Theories of Money, such as Bimetallism (“Commodity Theory of Money”) and Chartalism (“Credit Theory of Money”).
A few questions deserve to be raised here. Is there a philosophical origin for why Neoliberalism opted for UTV? Why does UTV, at least as it is being applied in Market/Mixed Economies and Fractional-Reserve Banking Systems, resemble the subtle synthesis of the other well-known Theories of Value and Utilitarian philosophy?
“The fact that proponents of the Labor Theory of Value argued for reform of Capitalism and that utilitarians contended social harmony already existed hinted at
-Ross A. Nichols, An Attempt to Reshape Capitalism’s Image
a split within classical political economic thought that was deeper than the Utility and Labor Theories of Value. Treatment of class conflict was the root cause of the
schism in classical political economy. The class that economic thinkers identified with dictated how they viewed the struggle between social classes.”
As Neoliberalism was undergoing its consolidation during the 19th century, the Liberal philosopher John Stuart Mill sought to reconcile the differences between what seemed at the time to have been opposing Theories of Value. Even though Adam Smith did outline the notion of basing the Value of a good or service based on its Price (which, remember, is derived from the Cost-of-Production), there still needed to be some other basis for making value-judgments besides the Price. It was because of that ambiguity that Bentham and Ricardo sought to develop their own Theories, UTV and LTV respectively. Ricardo formulated the early model for Production for Profit, while Bentham did the same for Production for Utility. Here, the “Capitalism” in Liberal Capitalist Parliamentary Democracy, in Neoliberalism, became conceivable.
In Liberal Capitalist Parliamentary Democracy, “Capitalism” tends to foster an inherent social harmony that is governed by the Incentives of Supply and Demand. This social harmony is said to exist within the Market of Civil Society, whose activities are driven between the Customer and the Firm, and where the Parliament acts as a third party to ensure that they both act in good faith. At the same time, social disharmony also tends to occur because the Market cannot assume the proper role of economic governance. It may serve the purposes of economic organization through which Kapital and Schuld, goods and services are constantly being exchanged between Customers and Firms, but it cannot govern itself as a truly political entity because it still exists as part of Civil Society. This fact alone necessitated not only the rise of labor unions and social welfare but also the increased role of Parliament within the affairs of everyday economic life.
Where Mill entered the picture was when he noticed that Ricardo and Bentham were not as diametrically opposed to each other as it would have seemed. On the one hand, the peculiar social harmony of “Capitalism” should be protected and that reforms required to sustain its continued existence in the State of Total Mobilization ought to be pursued. Thus, he tried to synthesize the two Theories of Value, and while he became embittered by both men and their philosophies, it did however give ample credence to Production for Profit and Production for Utility being two Modes of Production in Neoliberalism. More importantly, it also made entertainable the idea of combining both Modes of Production, resulting in the later conceptualization of Social-Democracy and Social Corporatism as recognizable tendencies within the Market/Mixed Economy. If there are any Corporatist, State Capitalist, Socialist, Syndicalist or other opposing conceptions of economic life, then a Liberal Capitalist Parliamentary Democracy could adopt either Social-Democracy or Social Corporatism to dissuade Civil Society from abandoning Neoliberalism.
In Social-Democratic or Social Corporatist conceptions of economic life, the various institutional actors remain in place as they seek to bolster their own power. Even more significant is that both Social-Democracy and Social Corporatism reveal the extent to which Neoliberalism defines itself in every facet of the Liberal Capitalist nation. The Market and Parliament foster closer ties, cooperating with each other and ascertaining their respective roles within the Market/Mixed Economy and Fractional-Reserve Banking System, thereby yielding the distinctive “Private Sector” and “Public Sector.” Welfare Capitalism redistributes Kapital between different members of Civil Society, as Parliament implements social welfare programs and expects Civil Society to sustain them through taxation policies. A Panopticon-like form of mass surveillance becomes necessitated, either to curtail dissidents or to ensure that Kapital is in fact being spent properly and that any Schuld incurred can be justified.
Something similar did happen in the UK when the Labour Party ditched its Social-Democratic tendencies and embraced Neoliberalism between the 1990s and 2000s. While it is beyond the focus of this post, I do find it interesting how aspects of the synthesis envisaged by John Stuart Mill was at one point popular within recent memory.
Categories: Philosophy
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