Thursday, 12 May 2016

Breaking Bad and Surplus Value

The marxist view of the world is centered around the concept of 'Surplus Value', a concept developed by Karl Marx in the mid-19th century. But the concept itself is quite familiar to most laymen and probably one of the reason the economically illiterate majority of people have an anti-market bias. Following my lame attempts of analysing power or economics using works of fiction for illustration, I'm gonna try to do the same thing for an episode - or scene really - of the popular series Breaking Bad.

As I noted earlier this week, anti-neoliberalism often base its critique on Marx-inspired ideas of exploitation, immiseration of the worker, detachment of productivity from wages etc. In a word, surplus extraction. Let's ignore the fact that most (if not all) predictions made on the basis of such reasoning has been debunked empirically, and even back in 1890 was debunked theoretically (see Böhm-Bawerk). Not that truth ever stopped people from engaging in seriously evil attempts at governing others or objecting towards this or that policy. The faster these misconceptions about the world can die out, the faster we can cast off the yoke of state bondage.

Short summary of Marx's surplus value:
m = c + v + s 
where m is selling price, c is constant capital (machinery, equipment, raw materials etc), v is variable capital (labour cost, which is labour's income: wages) and s is the profit, the surplus value. Since labour is the only source of value - or the only factor of production that can release the value embodied/stored in the constant capital c (since every c was once created through the same process, with c, v and s of its own), the existence of s means value is slowly siphoned off from workers who create value to owners of capital who don't.

Right. Now, I came for Breaking Bad and all I see is Marx - come ON!. On we go: In season 3, episode 9 ("Kafkaesque") of Breaking Bad, Jesse and Walter gets into an argument about numbers, revenue and surplus value. Not in those terms, of course, but it so obviously illustrated the point market-proponents have been making for well over a century that I couldn't resist.

Jesse is upset, because he ran the numbers in his feeble little mind, and found out that the 200 pounds of meth a week they are producing over 3 months (12 weeks), sells for $40k/pound on the market, computes to a total revenue of $96m dollars. For this production, Jesse & Walter are paid a meager 3 million dollars combined.
"That is messed up, yo!"
he concludes and sputters some insults about how unfair it is that the people who actually create the value don't earn the full value of their labour.

And here's the point Böhm-Bawerk and every market proponent since have elaborated for centuries: labour prefers this system over its alternative. Howso?

1) under this establishment, Walt & Jesse don't have to sneak around in chemical shops buying ingredients for producing meth or hide and service their moving lab (in a cleared-out RV). The entire supply chain is taken care of, they can focus on their comparative advantage if you wish: the process of making drugs.

2) the risk Walter & Jesse incurred from trying to sell all the meth they created, a process that previously got Combo (a friend of Jesse) killed in gang violence, and almost had them both killed by Tuco, almost completely avoided. By producing under Gus, in this new facility of theirs, they avoid all problems and risks of distribution. Of selling and unloading the product or even moving it around.

3) and this relates to Böhm-Bawerk's central point about time preference and interest rates: Jesse & Walter are paid up front (or after the 3 months are up, I can't remember), in any case they are paid before the products have been shipped off to the final consumer - something they could not have done on their own (where they obviously would have been paid after having sold the product). Again, Gus takes on the risks of getting caught, not being able to sell the product down the line, loosing parts of it from police actions etc.

That is, even though the existence of s, to speak Marx, of 96m minus 3m of v minus the cost of inputs and equipment (presumably less than 93m) would imply that labour is immiserated, Walter & Jesse are much better off. Not just because of scale, but in risks of getting killed, caught unloading, unpleasantness of enforcing payment, and time preference in waiting for revenue stream down the line etc.

That is, the 1% are not exploiting labour, even though there might be a surplus extracted from the labour process. On the contrary, the evil capitalists are helping labour. Something you can't really say about Marx...

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