Saturday, February 28, 2015

Labour Defended Against the Claims of "Human Capital"

According to Guang-Zhen Sun, "Xenophon discussed in somewhat [sic] details the sexual division of labor within a family, a topic that was to be picked up by Thomas Hodgskin (1827) and Marxists in the 19th century and nicely integrated into a neoclassical theory of human capital in the 20th century (e.g., Becker 1985)." Except that Hodgskin's analysis of the topic was not "nicely integrated into a neoclassical theory of human capital." It was adamantly ignored because the point of human capital theory is to naturalize ideological claims about the utility maximizing motives of individuals and returns to factors of production attributable to their marginal contribution to production.

In Labour Defended Against the Claims of Capital, Hodgskin stated explicitly that the purpose of his essay was to refute the arguments of John Ramsay McCulloch and James Mill to show that: "the effects attributed [by them] to a stock of commodities, under the name of circulating capital, are caused by co-existing labour." In a prefatory note, Hodgskin wrote:
In all the debates on the law passed during the late session of Parliament, on account of the combinations of workmen, much stress is laid on the necessity of protecting capital. What capital performs is therefore a question of considerable importance, which the author was, on this account, induced to examine. As a result of this examination, it is his opinion that all the benefits attributed to capital arise from co-existing and skilled labour. He feels himself, on this account, called on to deny that capital has any just claim to the large share of the national produce now bestowed on it. This large share he has endeavoured to show is the cause of the poverty of the labourer; and he ventures to assert that the condition of the labourer can never be permanently improved till he can refute the theory, and is determined to oppose the practice of giving nearly everything to capital.
In Marx's discussion, in Capital, of the division of labour, he cites a passage from Hodgskin's "admirable work" in support of "The fact that the detail labourer produces no commodities." It is worthwhile quoting Hodgskin in full, here, with the passage cited by Marx highlighted in bold:
Whatever division of labour exists, and the further it is carried the more evident does this truth become, scarcely any individual completes of himself any species of produce. Almost any product of art and skill is the result of joint and combined labour. So dependent is man on man, and so much does this dependence increase as society advances, that hardly any labour of any single individual, however much it may contribute to the whole produce of society, is of the least value but as forming a part of the great social task. In the manufacture of a piece of cloth, the spinner, the weaver, the bleacher and the dyer are all different persons. All of them except the first is dependent for his supply of materials on him, and of what use would his thread be unless the others took it from him, and each performed that part of the task which is necessary to complete the cloth? Wherever the spinner purchases the cotton or wool, the price which he can obtain for his thread, over and above what he paid for the raw material, is the reward of his labour. But it is quite plain that the sum the weaver will be disposed to give for the thread will depend on his view of its utility. Wherever the division of labour is introduced, therefore, the judgment of other men intervenes before the labourer can realise his earnings, and there is no longer any thing which we can call the natural reward of individual labour. Each labourer produces only some part of a whole, and each part having no value or utility of itself, there is nothing on which the labourer can seize, and say: “This is my product, this will I keep to myself.” Between the commencement of any joint operation, such as that of making cloth, and the division of its product among the different persons whose combined exertions have produced it, the judgment of men must intervene several times, and the question is, how much of this joint product should go to each of the individuals whose united labourers produce it?
Hodgskin was defending labor against the (illegitimate) claims of capital. Becker was extending the claims of capital into the household. One of these things is not like the other.


Peter T said...

From a brief look at MaxSpeak and at Nick Rowe's blog, I am struck at how confused the discussion of capital is. How does one teach a university course without a clear and agreed definition of a key subject?

Denis Drew said...

>>> there is no longer any thing which we can call the natural reward of individual labour. <<<

My general outlook on the marginal utility (to use and economist's term) of labor is -- how much is the labor worth to the ultimate customer; a.k.a., what is the max labor can extract from the consumer for (labor's contribution to) the product?

This is usually left at the road side in non-unionized markets -- where labor only extracts what it is worth compared to other labor (two-tier/two-dimension).

This is often left at the side of the road even in unionized markets where nonunion firms start the race to the bottom anyway. (Centralized bargaining only sure cure here.)

In the instant example laborers can only get together (depending on their level of communication or differing levels of unionization) and dicker with each other about how much each will get out of what they communally extract from the consumer.

Magpie said...

@Peter T

There, courtesy of the Penguin Dictionary of Economics (one of many similar dictionaries/encyclopedias of economics):

"Capital. 1 Assets which are capable of generating income and which have themselves been produced. Capital is one of the four FACTORS OF PRODUCTION, and consists of the machines, plant and buildings that make production possible, but excludes raw materials, LAND and LABOUR. (...)
"2. In more general usage, any asset or stock of assets - financial or physical - capable of generating income."

If you have the chance of perusing an intro economics book (pretty much any such book), chances are you'll find something similar. Likewise, if you are interested in economic statistics you'll find more detailed, but largely coincident, definitions in their glossaries. Check statistics offices/central banks websites.

Some heterodox schools of economic thought have slightly different definitions (the definition above is - or was, apparently - generally accepted as the mainstream). Some call factors of production differently, some say there are less factors of production, et cetera.

Now, why on earth would mainstream economists either ignore their own definition or act as if they ignored it, that's not for me to say. Ask them.

Peter T said...


Yes I've seen that and similar. Seems a reasonable, and quite precise, definition. But, as you note, this is often ignored in a frenzy of discussion about financial capital, human capital, intellectual capital, social capital...

It's a mystery to me.

Robert Vienneau said...

Mainstream economists do not want to acknowledge much of what they teach and preach was shown to be incoherent nonsense 50 years ago, in the Cambridge Capital Controversy. The ignorance and muddle serves an ideological purpose. The radicals won (although I find it hard to see how any tight connection must exist with politics and the technical details of the CCC).