Capitalist Economics

C→M→C

A process in capitalist economics representing the cycle of commodity production and exchange, where capital (C) is transformed into money (M), which is then used to purchase commodities (C) for consumption or further production.

△C

The change undergone in a capitalist production process from the initial commodity inputs (means of production and labor- power) to the final commodity product after production. ∆C denotes both the material distinction between C and C’ and the mathematical difference in value between them. In order for the value of this final commodity (C’ ) to be realized, it must be sold.

Capital

Capital is any element— money or commodities within an active capitalist process of production. Any entity (commodity or money) actively taking on the role of M, C, C’ , or M’ in that process is capital. Capital is not a thing, but a thing can be capital.

Capitalism

A social order that is organized, structured, and maintained by and through a capitalist mode of production, which is to say a mode of production where production is oriented toward proit in the form of money. A capitalist mode of production is characterized by the following formula:

M→ C…P… C’→ M’

Capitalist Economics

The shape that decisions about production, consumption, distribution, and exchange take in a social order characterized by a capitalist mode of production. By distinguishing between capitalism and economics, we are emphasizing that economic forces are different in different types of social orders.

Capitalists

Those who live not by selling their labor- power but by using M to achieve M′. Capitalists may be entrepreneurs, bankers, or merchants. Capitalist production could not take place if entrepreneurs did not advance money capital (the initial M in the capitalist code). Entrepreneurs themselves can only access that money capital by borrowing it from bankers for a fee (interest).

Class Relations

The social, legal, and political relationships that characterize a given mode of production. Each social order develops a distinct set of patterns and connections between relations of production and broader categories of power and identity. Production under capitalism is distinguished by the widespread sale and purchase of labor- power from wage laborers: people who must rent out their time in order to earn the money needed to purchase the necessaries of life.

Commodity

A useful thing produced in order to be sold. The fullest development of the commodity only occurs within a capitalist mode of production, where production is oriented to exchange. A capitalist commodity is metaphysically dual: it is both a use- value and an exchange- value.

Credit

That which can redeem a debt; a specific denominated claim held by one party on or against another party.

Entrepreneur

A capitalist enterprise owner. Someone with access to money who invests it— that is, someone who buys labor- power and means of production in order to begin a capitalist production process.

Exchange-Value

The value of a commodity as expressed in a ratio with some other commodity or commodities, or the price of the commodity (as posited in money). The realization of exchange-value in the form of money is the aim of capitalist production

Investment

An action undertaken by entrepreneurs to purchase the raw materials, means of production, and labor- power needed to undertake capitalist production.

Labor- power

Not simply the generic capacity to labor but rather the unique shape the capacity to labor takes under capitalism, where it is given the form of a commodity through the wage contract. Capitalist production depends on the short- term sale of labor- power. Because of the special nature of the wage relation— the entrepreneur pays less for labor- power than the value the labor of the worker generates during the production process— labor- power can serve the role of pro1t commodity and is consequently the source of all surplus value.

M→C...P...C′→M′

The formula for capitalist production. Money is used to purchase commodities (means of production and labor- power), which are then used up in a capitalist production process that generates new commodities. These commodities must then be sold in order to realize their value, and doing so permits capitalists to make a profit.

Mode of Production

The broad structures, systems, techniques, and practices that create overall societal output. The overall “system of production” and “the process of production” are both synonyms for “mode of production.”

Money

Money is a “first- class credit.” To have money means to have a credit with some other entity that recognizes that credit as their debt. Money is always an asset for one person and a liability for someone else. A completed money transaction always involves at least three parties:2buyer, seller (who receives credits), and debtor (individual or institution on which those credits are held).

Optimality

Optimality concerns the best distribution of resources in a society. Economists sometimes confuse optimality with the narrower, technical question of effciency. However, the question of the “best distribution of resources” cannot be answered on purely technical grounds because it involves broader social, political, and moral concerns.

Political Economy

The study of economics and politics not as discrete areas of social life but as different types of forces that interact with each other in complex ways. Political economy does not take economic forces to be natural and timeless but rather understands them as manifesting differently across different historical periods and social orders. Thhus it is more attentive to the historical status of economic “rules,” including those that characterize capitalism.

Primacy of Production

While the neoclassical paradigm takes exchange as its primary concern, we focus instead on the different ways that societies produce— with respect not only to their levels of technical development but also to the social relations that characterize their production processes. For example, while production under feudalism was largely undertaken by serfs who were legally bonded to lords and forced to work on lords’ estates, production under capitalism is generally characterized by the “formal freedom” of waged workers, who must voluntarily contract with capitalists in order to acquire the money necessary for their survival. Further, while production under feudalism was oriented toward private consumption, production under capitalism is oriented toward the constant expansion of value/ money via the sale of commodities for pro1t. By focusing on exchange instead of production, the neoclassical paradigm emphasizes an element common to many modes of production (i.e., markets for the exchange of goods and services) rather than what makes a mode of production unique (the purpose of production and the social relations that characterize it).

Profit Commodity

A commodity whose use generates more value than its own exchange- value. Only labor- power can function as the profit commodity because of the unique nature of the wage relation (i.e., labor- power costs less to buy than the value labor- power generates in production). While the relationship between a waged proletariat and large scale factory production is one of capitalism’s most apparent and historically novel features, especially in its early industrial period, labor- power’s subordination to capital has taken (and takes) a variety of different forms (including, perhaps most notably, New World slavery).

Profit

The “cut” of overall surplus value (as created through global capitalist production) that shows up on the spreadsheets of entrepreneurs after they have paid out rents to bankers and landlords (who will in turn book those rents as profits on their spreadsheets).

Robinsonade

The name given to a genre of literary tale that began in the seventeenth century and flourished after the publication of Daniel Defoe’s Robinson Crusoe. Such stories portray some individual (or group of individuals) becoming outcast from developed society and seeking to recreate its conditions on their own. Robinsonades make contemporary societies seem necessary by naturalizing the tendencies, mores, norms, and so on, that are present within them. Much of mainstream economic analysis works within the Robinsonade genre, but proper studies of capitalist economics must operate as anti- Robinsonades, asking how capitalist societies developed historically rather than treating them as natural or timeless.

Rules of Capitalism

1. Money must beget more money.

1a. Money is the means of survival.

2. Markets regulate prices.

3. Producers must produce profitable commodities.

4. Technological change and “innovation” are required (not optional).

5. Crisis is unavoidable.

Surplus Value

Surplus value is a system-level result achieved in a capitalist social order. It describes the total increase in money/value that results from overall capitalist production. This can be understood as the difference between C and C′, or it can be grasped as the system- wide ΔM that captures the difference between M′ and M. Surplus value is generated in the process of production. While it serves as the basis for all profit, it is not itself simply identical to profit. The profits of individual firms, entrepreneurs, or merchants are instead a cut of overall surplus value. Recognizing that surplus value is generated in production explains how capitalist economies grow despite goods and services being bought and sold at their values.

Twofold Nature

This term describes the character of capitalist commodities. Capitalist commodities do not have both a use- value and an exchange-value but rather are both use- values and exchange- values (i.e., useful things that people want to buy). Whether a good is an exchange- value depends on whether it can satisfy a given social need of whatever type, which in turn requires it to be a use-value.

Use- Value

The direct, physical existence of a good or product that makes it intrinsically useful, regardless of whether any person has an immediate need for the good.

Workers

Under capitalism, the members of a society who must sell their time as labor- power in order to survive. They are essential to the production process. Capitalist production could not take place if there were not large numbers of people who have to act as workers, contrary to myths supposing everyone could be an entrepreneur.