What are production work and consumption? Trans-historical re-conceptualisations

repec.nep.pke

n?u=RePEc:hhs:suekhi:0019&r=pke

Stockholm Papers in Economic History, No. 19

What are production, work and

consumption? Trans-historical

re-conceptualisations

Rodney Edvinsson

(Stockholm University and Swedish Collegium for Advanced Study)

Department of Economic History

Stockholm University October 2016


Stockholm Papers in Economic History, No. 19

October 2016

Web address of the WP-series: http://swopec.hhs.se/suekhi

The working papers are reports of ongoing studies in economic history at Stockholm

University. Authors would be pleased to receive comments.

Department of Economic History

Stockholm University

SE-106 91 Stockholm

Sweden


What are production, work and consumption?

Trans-historical re-conceptualisations 1

Rodney Edvinsson 2 Stockholm Papers in Economic History, No. 19

Abstract

October 9, 2016

This paper argues for trans-historical reformulations of the basic economic concepts of production, work

and consumption. The definition of the production boundary by System of National Accounts (SNA) is

inconsistent from a scientific point of view. For example, while some non-market and illegal services

are viewed as productive, others are not, and services and goods are treated differently. The definition

proposed by feminist economics, the so-called third person criterion, is consistent, but in need for further

development; furthermore, it is a definition of work and not of production. The purpose of this study is

to investigate whether it is possible to formulate a non-eclectic set of logically consistent definitions that

could be considered variations of a common underlying understanding across various theoretical

traditions – mainly Classical, Neoclassical, Institutional, Marxist, Feminist and Keynesian Economics

– of how humans consciously change external nature in order satisfy human needs. Important issues

concern how to deal with violence, double counting of transaction costs, human capital formation, nonmarket

activities and causation of final consumption.

Production, work and consumption are defined as relations between events, the subject matter and the

agent, and in the main definitions reduced to non-economic sentences. Even the utility concept is

avoided. First-order logic is used, complemented with modal operators for some of the sentences. In this

study, it is shown that production, work and consumption all share the common feature of intentional

physical transformation of the intrinsic properties of the subject matter. The object transformed during

the productive activity and work must at some point in time be external to the agent. For work, the

purpose of transforming an external object must not lie in the transformation of the agent. A productive

activity must potentially be able to cause the satisfaction of human needs, or final consumption, which

is not a condition for work or required by the third-person criterion. Final consumption involves the

1

I am very grateful for comments received by my colleagues at the Department of Economic History,

Stockholm University, and the Swedish Collegium for Advanced Study, especially to Associate

Professor Elizabeth Coppock. However, all mistakes and flaws of this manuscript are my own only.

2

Department of Economic History, Stockholm University, SE-106 91 Stockholm. Phone: +46-8-

161386. Fax: + 46-8-168108. E-mail: rodney.edvinsson.@ekohist.su.se. Homepage: www.historia.se.

3


transformation of the subject matter that is a final purpose for the consumer or serves as a purpose for

transforming the consumer. Using a criterion applied by the institutional economist Cheung to identify

transaction costs, this study defines social reproduction as an activity that would not occur in a Robinson

Crusoe economy. Social reproduction occurs under an institutional setting. We can further differentiate

between coercive and non-coercive social reproduction.

In this study, eight different definitions of production are presented. The definition of agent external

production is close to the third person criterion, but the possible causation of future final consumption

is included as a condition for a productive activity. It is also related to the basic neoclassical model with

its assumptions of no transaction costs. The definition of agent external non-coercive production entails

that transformations of persons against their own will, whether legally or illegally performed, are

unproductive activities. The definition of agent external non-social production entails that all socially

reproductive activities are unproductive, and comes close to the distinction made by Classical and

Marxist economists of productive and unproductive work. Humanity external production only includes

the transformation of non-persons. The three definitions of time scale invariant production entails that

human capital formation could be considered productive activities. Market production comes close to

Keynesian theory and the present definition of SNA, with the difference that it excludes non-market

goods production. The present study also opens for the possibility of unproductive work, for example

failed production or professional murder, and productive final consumption that does not involve any

work, for example hobby-hunting, play with children or research activity for own pleasure.

Which definition of production is applied greatly affects the modelling and empirical application of

growth theory and the analysis of the driving forces in economic history. For example, assume trade

causes labour productivity outside of trade to increase four-fold due to specialisation, while the share of

GDP in total working time increases from nil to half. With the same value added per productive hour

and with total hours worked kept constant, the value added of agent external production then records a

four-fold increase, while that of non-social production only a doubling. Similarly, during wars the SNA

GDP often increases substantially, while the concept of agent external non-coercive production entails

that all war expenses are treated as unproductive. Time frame invariant production grows faster than

agent external production during expansions of the education system. Market production could serve

important analytical purposes, for example to investigate the relation between money supply and

inflation, but should be rid of inconsistencies such as the inclusion of non-market goods production.

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Introduction

In economics today, production, work and consumption are some of the most important concepts. The

gross domestic product (GDP), labour productivity and private consumption are used as measures of

economic development and welfare across countries and periods. However, defining these concepts

actually are deeply problematic. For production, the main problem consists in ascertain where to place

the so-called production boundary. This paper attempts at redefining production, work and consumption

in such a way as to provide a trans-historical scientific tool to analyze all human societies and the driving

forces of economic history. The starting point is to recognize that these basic economic concepts can

have different meanings depending on the purpose of the analysis and the theoretical perspective.

Principles of national accounts and different classifications have changed over time, and are contingent

on the theoretical perspective. 3 The international standardization is very elaborate and detailed. United

Nation’s System of National Accounts 2008 (2008 SNA) is the most recent international systemization, 4

and is in principle applied by almost every country in the world. In the 2008 SNA, production is defined

as follows:

The activity of production is fundamental. In the SNA, production is understood to be a physical

process, carried out under the responsibility, control and management of an institutional unit, in which

labour and assets are used to transform inputs of goods and services into outputs of other goods and

services. All goods and services produced as outputs must be such that they can be sold on markets

or at least be capable of being provided by one unit to another, with or without charge. The SNA

includes within the production boundary all production actually destined for the market, whether for

sale or barter. It also includes all goods or services provided free to individual households or

collectively to the community by government units or NPISHs. 5

There are many inconsistencies in this respect. What kind of agency is involved for an institutional unit

is not further elaborated. Many economic activities, mostly outside the market economy, are not

included in GDP – for instance, unpaid domestic or voluntary work – while construction of dwellings

for own final use is. Such inconsistencies occur partly since the SNA is “designed for purposes of

economic analysis, decision-taking and policymaking”. 6 It is not a tool for scientific analysis per se. The

definition of the production boundary is historically contingent, since it is based on products that at least

potentially can be sold at the market. In a self-sufficient economy it may not be possible to provide

market goods and services by one institutional unit to another. It is also circular, since the concepts of

goods and services are used to define production, while the definition of production is a condition in

3

Studenski, 1958; Shaikh and Tonak, 1994.

4

United Nations et. al., 2009.

5

United Nations et. al., 2009: p. 6. The same definition is used in Inter-Secretariat Working Group on

National Accounts, 1993: p. 4.

6

United Nations et. al., 2009: p. 1

5


order to define what goods and services are. Despite that the SNA concept of GDP is not specifically

designed for scientific purposes, it is used by economists and other social sciences for analysis of

economic development and social relations. The main reason is that there are no good alternatives that

are internationally comparable.

This study proposes a set of several definitions that represent different theoretical traditions – Classical,

Marxist, Feminist, Institutional, Neoclassical and Keynesian economics – but which are related to each

other. It shows that various definitions, in fact, can be perceived as different variations of a common

understanding. Much focus is given to reassess the distinction made by Classical economists of

productive and unproductive work and to investigate definitions that could include formation of human

capital. This paper also investigates the possibility of production without any involvement of work.

To find definitions of the production boundary, this study follows some guidelines. The production

boundary should be set in such a way as to be adequate for all societies that hitherto has existed, and it

should allow production during all social systems. The production boundary should be set according to

certain criteria that are used consistently. The same criteria should be used for one process as for another.

It should be set independently from legal frameworks, how the production process is viewed by various

agents, or the valuation of the production process (i.e. of the valuation of inputs and outputs). It should

also be possible to analytically separate production from consumption. Preferably at least some of the

definitions should also avoid double counting the same utilities, and be independent from the time frame

of the activity in question.

Although this paper strives towards improving the formalization of national accounting, this is done

within the framework of an anti-formalist and anti-reductionist standpoint. Formalisation of language

can under certain conditions and within certain limits be desirable. In this paper it is mainly used as a

heuristic device to structure the intuitive meanings. We will always be left with some lack of precision

and multiple meanings. It will always be possible to construct examples for which formalization is

problematic, and where intuitive meaning can be superior. That is not by itself undesirable, since we

need a language that retains some flexibility for the user, even within the field of science. However,

greater precision can also reveal new imprecisions and inconsistencies that can be dealt with in future

research.

The historical controversies on the production boundary

Historically there are three main traditions of how to define the production boundary: which we here

term as the surplus, the utilitarist and the market principle traditions. In the first tradition productive

activities are described as productive of surplus or accumulation of wealth, in the second of utility or

satisfaction of human needs and in the third of incomes from the market. Studenski similarly

distinguishes between the restricted material production concept, which includes only “material goods”

6


(and possibly some “material services”), the comprehensive production concept, which includes all

commodities and services, and the restricted market production concept, which only includes goods and

services produced for the market. 7

The mercantilists, Physiocrats, Classical economists and Marxists tend to consider only activities that

produce a surplus to be productive. This was the mainstream view of what production is up to around

1870. In the utilitarist tradition production is broadened to activities that create new utilities that can

satisfy human needs. This view is advocated by neoclassical economists, although according to

Studenski, William Petty and Gregory King held a comprehensive concept of production already in the

late 18 th century. 8

Classical economists regard work to be either productive or unproductive. Adam Smith considers only

those activities that generate a surplus of material products that could be consumed at a later stage as

productive, which restricts the concept of productive work to goods production. 9

John Stuart Mill similarly defines productive labour as “labor productive of wealth”, and unproductive

labour as such “which terminates in a permanent benefit, however important, provided that an increase

of material products forms no part of that benefit”. 10 He argues that both types of labour are useful, but

both could also be wasted. Mill distinguishes between production and distribution. While production is

independent from social structure, distribution is socially determined. While the laws of production are

determined by physical circumstances, the laws of distribution of wealth are “a matter of human

institution solely”. 11 Vardaman Smith argues that Mill’s distinction is rooted in his philosophical

distinction between two empirical laws, the laws of the physics and the laws of the mind. While the laws

of production and the consequences of a given distribution is linked to the laws of physics, the laws of

distribution depend on the laws of the mind. 12

Like many classical economists, Marx distinguishes between productive and unproductive labour. 13

Marx has two concepts of productive labour, one following the surplus tradition, which he links to

capitalist forms of production, and the other the utilitarist tradition, which is historically universal. 14

Productive labour for capital includes, according to Marx, not only goods production, but also services

that create a use value that can be sold for profit. 15 Marx emphasises the dialectical relation between

production and consumption. While being opposite, production involves consumption of at least three

7

Studenski, 1958, p. 11.

8

Studenski, 1958, pp. 13-15.

9

Smith, 1979, p. 430.

10

Mill, 2009, p. 70.

11

Mill, 2009, p. 183.

12

Smith, 1985, p. 278.

13

Marx, 1969, pp. 152-304.

14

Marx, 1969, pp. 152-153.

15

Marx, 1993, pp. 305-306, and Marx, 1967, pp 134-155.

7


objects: the labourer, the means of production that become worn out, and the raw material. Similarly,

consumption also involves production, namely the production of the human body and mind. Production

has the purpose of consumption, and would not be production without such purpose. 16

Neoclassical economists strive to dismantle the earlier Classical distinction between productive and

unproductive labour. This involves arguing against those who view trade as an unproductive activity, or

in the words of Marshall:

It is sometimes said that traders do not produce: that while the cabinet-maker produces furniture,

the furniture-dealer merely sells what is already produced. But there is no scientific foundation

for this distinction. They both produce utilities, and neither of them can do more: the furnituredealer

moves and rearranges matter so as to make it more serviceable than it was before, and the

carpenter does nothing more. 17

Neoclassical scholars criticize the Classical view that only goods production is productive, showing that

goods production is not fundamentally different from providing services. Unlike Marx, they view all

services as productive. Marshall describes consumption as “negative production”. While production

entails a rearrangement of matter that gives new utility, consumption involves the opposite, the

disarrangement of matter that destroys its utility. This viewpoint clearly distinguishes production and

consumption activities at an analytical level. 18 Marshall wants to go beyond the Classical distinction

between productive and unproductive labour:

We may define labour as any exertion of mind or body undergone partly or wholly with a view

to some good other than the pleasure derived directly from the work. And if we had to make a

fresh start it would be best to regard all labour as productive except that which failed to promote

the aim towards which it was directed, and so produced no utility. 19

Marshall’s definition entails that production is viewed wider than the present definition of GDP, since

it does not distinguish between market and non-market activities. Becker later applies the neoclassical

model to household production. 20 To that extent neoclassical theory is close to later feminist economics,

who argue that unpaid domestic services should be considered as production, in accordance with the socalled

“third person criterion”. As Luisella Goldschmidt-Clermont puts it: 21

Non-market productive time is distinguishable from personal time by means of the ‘third person

criterion’. According to this criterion, an activity is deemed productive if it might be performed

by some one other than the person benefiting from it; or, in other words, if its performance can

16

Marx, 1993, pp. 90-91.

17

Marshall, 1997 p. 63.

18

Marshall, 1997, p. 62.

19

Marshall, 1997, p. 63.

20

Becker, 1981.

21

Luisella Goldschmidt-Clermont, 1993, p. 420.

8


e delegated to some one else while achieving the desired result. I can delegate the preparation of

my meal (a productive activity); nobody can eat it for me (a personal activity). 22

Although the third person criterion is probably the best definition we have at present of work and

production in general, it is ambiguous, since it does not define what type of activity that it should be

possible to delegate, and whether the activity must be a consciously directed process. Although the

criterion is used to define personal activities and studying as unproductive, it is possible to not make

such interpretation. 23 The Marshallian definition and the third person criterion fulfil the trans-historical

criterion, since they are relevant for all societies.

The issue concerning what constitutes productive and unproductive labour has been widely debated

among Marxist economists. 24 Some Marxists argue that the distinction between productive and

unproductive labour should be abandoned, which would clearly simplify the different calculations of,

for example, profit, while others hold to that distinction. 25 A problem within Marxist economics is that

the distinction between productive and unproductive labour is made in terms of what activities generate

surplus for the capitalist. This narrows the definition of production to one social form, and does not

provide a trans-historical conceptualisation. Even if Marx opens for the possibility for a wider definition,

neither he nor later Marxists develop that point.

The institutional economist Steven N. S. Cheung argues that transaction costs (although he would prefer

the term “institution costs”) can be defined as costs that would not exists in a Robinson Crusoe economy.

This could be viewed as an operationalization of Mill’s definition of distributive activities, but is also

close to Marx concept of unproductive work in the wider utilitarist sense. Cheung argues that in today’s

world it would be difficult to find a richer country where transaction costs stand for less than half of

GDP. 26

System of national accounts

With its focus on market activity for the purpose of formulating adequate economic policy, the modern

SNA definition of GDP has its roots more in Keynesianism than in neoclassical economics. As Studenski

points, Keynes himself was not particularly skillful in formulating statistical concepts, but his followers

were, 27 and the application of national accounts gained moment after the turn towards Keynesianism.

22

Goldschmidt-Clermont, 1993, p. 420.

23

See, for example, Studenski, 1958, pp. 177-178.

24

Carchedi, 1991: pp. 28-31, Laibman, 1992: pp. 71-87, Shaikh and Tonak, 1994, Mohun, 1996,

Houston, 1997, Marginson, 1998, Savran and Tonak, 1999, Laibman, 1999, Cronin, 2001.

25

Laibman, 1999: p. 62.

26

Cheung, pp. 103-104.

27

Studenski, 1958, p. 25.

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The System of National Accounts 2008 was preceded by the 1953 SNA 28 , the 1968 SNA 29 and 1993

SNA. 30 Until 1990, the former Soviet block used the Material Product System (MPS) 31 while the West

used the SNA. Today the 2008 SNA has no real competition. At the heart of the MPS is the concept of

National Material Product, which consists of physical goods. This “physicalist” notion has been claimed

to be derived from Marx, but its roots can rather be traced back to Adam Smith. 32

The 2008 SNA defines the general production boundary by referring to the third person criterion, but

next concludes that the SNA production boundary must be narrowed. 33 If the 2008 SNA recognises that

unpaid household services are “productive in an economic sense”, it is argued that the “inclusion of

large non-monetary flows of this kind in the accounts together with monetary flows can obscure what is

happening on markets and reduce the analytic usefulness of the data”, 34 and that “there are typically no

suitable market prices that can be used to value such services”. 35

Three types activities that are important to the formulation of various definitions of the production

boundary in this study concerns hurting other persons against their will, transaction costs and human

capital formation. SNA 2008 considers illegal activities such as prostitution and the manufacture and

distribution of narcotics as productive in an economic sense, but not so when it comes to theft, even if

theft does provide an income to the thief:

For example, theft can scarcely be described as an action into which two units enter by mutual

agreement. Conceptually, theft or violence is an extreme form of externality in which damage is

inflicted on another institutional unit deliberately and not merely accidentally or casually. Thus,

thefts of goods from households, for example, are not treated as transactions and estimated values

are not recorded for them under household expenditures. 36

The problem is that if states kill persons or collect taxes against person’s will, or when private companies

legally employ guarding services, these are not treated as zero-sum games by SNA 2008. Although there

is a difference between legal and illegal activities, one of the reasons to consider prostitution and drug

trade as productive is that the production boundary should not depend on whether an activity is legal or

not.

28

United Nations, 1953.

29

United Nations, 1968.

30

Inter-Secretariat Working Group on National Accounts, 1993.

31

Basic Principles of the System of Balances of the National Economy, 1971. See also Árvay, 1994

for a historical overview.

32

Shaikh and Tonak, 1994: p. 4

33

United Nations et. al., 2008: 98.

34

United Nations et. al., 2008: 6.

35

United Nations et. al., 2008: 99.

36

United Nations et. al., 2008: 48.

10


In the 2008 SNA, transfers of income are not viewed as production, since that would entail double

counting. The difference between a transfer and a service provided is sometimes not even noticed by the

agents involved. According to the 2008 SNA, the payment of interest in itself does not add anything to

GDP, while the difference between the receipt and payment of interest in the banking sector is classified

as a “service” and is included in GDP. 37 Wholesale and retail trade is similarly described as a productive

activity, but such that must be separated from the good:

The recording in the SNA of transactions for wholesalers and retailers does not mirror the way in

which those involved view them. The purchases of goods for resale by wholesalers and retailers

are not recorded by these units explicitly, and they are viewed as selling, not the goods, but the

services of storing and displaying a selection of goods in convenient locations and making them

easily available for customers. 38

The problem with this sentence is that it describes what trade is not. The core of trade is about changes

in ownership rights to objects. The main activity of wholesalers and retailers is to sell their goods – other

services they provide are subordinated to that activity. Consumers are not paying for the trade as such,

but for the objects they want to consume. The treatment of SNA 2008 is de facto double counting, which

otherwise the SNA attempts to avoid. Transport and storage of goods is, of course, different, since those

activities physical transform of the spatial and temporal location of a good, while a change in ownership

rights of a good does not in itself transform that good in any physical sense.

Another example of double counting is when a person builds a house for own uses. First the activity is

recorded in GDP as finished construction. Then it is recorded a second time, as the stream of rental

services it provides to its owner. The problem is that the utility of a finished house is not a different

utility from the rental services it will be provide. Furthermore, while “services” provided by owneroccupied

dwellings are treated as productive activities, the consumption of durable goods (as cars and

household machinery) is considered a pureconsumption activity”, 39 which is inconsistent.

In the SNA 2008 formation of human capital is not counted as an investment, and is not included in the

production boundary. 40 The main argument is implicitly based on the third person criterion. However,

if we by the third person criterion mean a change in an object at the time of the activity or later, which

is caused by the agent, then studying could be defined as productive, since somebody can study in the

place of somebody else and cause the same changes in objects later in time (for example, learn how a

computer works to later fix my computer). There is therefore a difference between delegating the task

of studying on behalf of somebody else, which is impossible, and delegating the task of studying in

general for the purpose of performing a type of work at a later stage.

37

United Nations et. al., 2008: p. 45.

38

United Nations et. al., 2008: p. 45.

39

United Nations et. al., 2008: 109.

40

United Nations et. al., 2009: 8.

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Formalizing the definitions

In this study, the core concept of production consists of four main conditions:

1. The physical transformation condition. There must be a physical object, the subject matter, that

undergoes transformation, whereby it loses some of its intrinsic properties, and gains others. This aspect

is shared with many natural processes, which may satisfy human needs.

2. The intentionality condition. The transformation of the object must be intentionally caused by an

agent. Animals are not considered to produce or work, since they lack consciousness at the level of

humans. In the same way some human activities, such as sleeping or digesting the food one have eaten,

are not conscious even if they are highly useful.

3. The externality conditions. There are three types of externality conditions that are relevant: agent

externality, purpose externality and social externality. Productive activity involves the physical

transformation of objects that are external to the agent of transformation. Purpose externality condition

is more of a defining characteristic of work than of productive activity. The social externality conditions

avoid some of the problems of double counting by only considering transformations that do not involve

coercing, convincing, or more generally transforming other persons.

4. The final utility condition. Production must result in changes in the physical world that actually or

potentially can contribute to the satisfaction of human needs, of final consumption, in accordance with

the utilitarist definition.

The different definitions of production share all four points, but differ in restricting or expanding the

exact meaning of those. Definitions of work and consumption rests on the first three points, although in

the case of final consumption there is a purpose internality condition. A fifth condition can also be added

to conform to the SNA definition, namely the market principle condition, i.e. that the production must

be tradable at a market. This condition is, however, only used in one of the definitions of production,

and one of work.

To formalise definitions of production, work and consumption the latter are viewed as relations between

objects, including events. Definitions are formulated by providing the necessary and sufficient

conditions for the relations in terms of other predicates and relations of the same objects. First-order

logic is used, complemented with modal operators for some of the sentences. The focus is on using as

simple logic as possible, and therefore avoid using temporal and higher-order logics. Table 1 presents

the logical symbols applied.

12


Logical symbol

Meaning


if… then

¬ it is not the case that


and


or


For all… is the case that


there exists… such that


if and only if

= is the same as


it is possible that


it is necessary that

s believes that…

Bs

Table 1: The logical symbols used in this study.

An individual constant denotes an object. It can be anything in the discourse of the domain, but must

denote only one object. The symbols for individual constants are here letters in the beginning of the

alphabet: a, b, c, …,w, and a 1, a 2, etc. Variables denote objects as well, but not specific one, and are here

denoted by the letters x, y, z, x 1, x 2, etc. A property states a property of an object, while a relation states

the relation between objects and can have an arbitrary number of arguments. Properties and relations

are designated by capital letters, and are either true or false. The letter K denotes causal relations. The

letter O designates ontological properties and relations between objects (physical objects, persons and/or

events). The letter C designates consumptive relations, Y productive relations, and W work relations.

Persons that are individual constants are denoted by the letter s, or by s 1, s 2, etc. Persons that are variables

are denoted by the letter y, or by y 1, y 2, etc. Events that are individual constants are denoted e, or by e 1,

e 2, etc. Events that are variables are denoted by the letter z, or by z 1, z 2, etc.

Tables 2 and 3 present the properties and relations that are used in this study. Relations of production,

consumption and work are defined through the sentences in Tables 2 and 3, and the logical symbols in

Table 1. Table 2 presents atomic sentences. All the sentences of Tables 2 and 3 are non-economic. In

this way the fundamental economic concepts of production, consumption and work (except for market

production and market work) are reduced to non-economic concepts. Even the utility concept is avoided.

Causation is a difficult concept, and can involve many different relations, which is partly why the causal

relations are here formulated as atomic sentences. It is necessary to include in any definitions of

production, work and consumption. Causation is generally view as a relation between two events. One

of the events cannot be constitutive, or part, of the other. We need to distinguish between actual

causation and spurious relations. Prayer for the sun to rise up does not cause the sun to rise up. Without

prayer, the sun will rise, all else being equal. Causation is here viewed as a physical process.

K 2 1e 1e 2 is the most basic causal relation, and is true if event e 1 causes e 2. Here it is used in its

counterfactual sense, which was originally proposed by Hume. 41 K 2 1e 1e 2 entails that it is necessary that

41

Lewis, 1973.

13


oth events e 1 and e 2 occur, but if event e 1 does not occur, and all else stays the same except for the

causal mechanism, event e 2 does not occur. Determining what stays the same and what is the causal

mechanism are, however, not further elaborated here. Picking an orange by person a could be considered

to cause the final consumption of orange juice made by the specific orange. We may consider that

another person x picks the orange if person a does not picks it up, which enables the consumption of the

same orange juice. However, given no other than a picked the orange, i.e. the world except for the causal

mechanism is assumed to be the same, the consumption of orange juice made from this specific orange

necessitates that a has picked the orange.

K 2 1e 1e 2 must be distinguished from O 2 1e 2e 1. The latter is true if event e 2 is part of event e 1 instead of

being caused by event e 1; then e 2 follows from e 1 by logical rather than physical necessity.

K 2 2se is true if s intentionally causes event e, i.e. that s undergoes a self-directed transformation, which

causes event e, s believes that this self-direct transformation causes event e, and that, all else except for

the causal mechanism stays the same, it is necessary that event e does not occur if s does not exist. A

necessary condition is that O 1 1s is true, i.e. that s is a person. Agency can be explained as a consequence

of changes in the mental state of the agent, which in turn causes the bodily movement of the agent. 42 In

this paper, K 2 2se necessitates an active role for such causation. To identify the agent of production,

consumption or work we have to distinguish between intentional causation and allowing. When s allows

event e then K 2 7se is true, where event e does not presuppose the existence of s. K 2 7se entails that s has

the power to prevent e, i.e. that K 2 3se is true, while s chooses not to prevent event e, i.e. that K 2 4se is

false. For example, owning a factory enables the owner to stop production. However, while the physical

existence of a car worker causes the production of a car, the physical existence of the owner (if passive)

does not cause the production, since, all else being equal, without the owner the production continues.

For the owner to stop the production he/she has to act, which presupposes his/her existence. In the same

way a terrorist can have the power to blow up a car factory, but may choose not to do that. That does

not entail that the terrorist intentionally causes the production of cars. A change in the state of the mind

of the terrorist (from wanting to not wanting to blow up the factory) may, on the other hand, be

considered to cause the production of cars. The act of convincing terrorist not to blow up a car factory,

i.e. changing an obstacle to future production and consumption, does however intentionally cause the

production of cars.

An aspect of intentional causation when production and productivity is involved is to what extent such

causation runs through transformations of other person’s actions, which is related to social externality.

The present study uses Cheung’s definition of transaction costs, as a criterion of social causation (see

above). It is an important criterion to distinguish between what generates new utility and what just

redistributes the utilities that are available for society at large. K 2 6se is true when the intentional causation

42

Davidson, 1980; Dretske, 1988.

14


in question could not occur in a Robinson Crusoe economy, if Robinson is a rational person. To avoid

classifying all activities that must involve more than one person as transactions or social reproduction,

we can expand the Robinson Crusoe condition to a society of individuals, with the same preferences for

all types of combinations of actions of all agents at a time t if all agents have the same information. For

all pairs of agents i and j, and all possible combinations of actions, A k, it is necessary that, if agents i

and j have the same information, and if A k≻ i¬A k, then A k≻ j¬A k. In such society there would be no

conflict over actions, no negotiations, and therefore no transaction costs. Obviously the Crusoe

individuals could have different information, and their collective intentions for action could also change.

Just passing information from one Crusoe to another could therefor occur in the Crusoe society. Even

the lonely Robinson Crusoe can pass information to himself, for example, to remember something later.

Informing therefore does not involve social causation in this sense. The important aspect of a social

causation and a social relation is that there are two individuals that have different intentions that to some

extent clashes with each other.

An important special case of social causation is coercive causation. K 2 5se is true when a transformation

of a person against that person’s will, a non-compliant person, is part of the causal mechanism whereby

person s intentionally causes event e.

A decisive component of the definitions of work and final consumption is the purpose of the activity for

the agent of transformation, which is related to the beliefs held by the agent. Beliefs can be formulated

applying doxastic logic, using the symbol of B, which expresses an epistemic relation. Even if assuming

that s is a consistent reasoner is more straightforward, it would be unfortunate if the definitions would

rule out the possibility of an inconsistent or irrational agent. The sentence P 3 1se 1e 2 is true when the

purpose for agent s of event e 1 lies in event e 2. This concept is used when distinguishing work from final

consumption. The relation P 2 1se is true when s has event e as a final purpose; the concept is used for the

definitions of production and final consumption.

A distinction could be made between instruments and subject matters of production, work and

consumption, which is also made by Marx. 43 Both transformations are intentionally caused by an agent.

An instrument, i, of the transformation of q can be seen as a physical object whose transformation causes

the transformation of q, while the purpose of transforming i for the agent of transformation lies in

transforming q. If the transformation of q is a productive process, the instrument of transformation is an

instrument of production. There are also physical objects that causes the transformation of the subject

matter, but that are neither subject matters nor instruments of transformation. For example, the sun may

affect the subject matter of production, for example, the growth of apple trees, and is therefore a cause

of production. However, the agent of transformation does not cause any transformation of the sun. The

43

Marx (1965, p. 179) uses the terms “instrument of labour” and “subject of labour”.

15


change in the sun during the production process is not part of the production process, although the

labourer can affect whether the sun causes the growth of apple trees or not.

Non-logical Label

symbol

K 2 1e1e2 Event e1 causes event e2.

K 2 2se s intentionally causes event e.

K 2 3se s intentionally prevents event e from happening.

K 2 4se s has the power to intentionally prevent event e from happening.

K 2 5se Agent s coercively causes event e.

K 2 6se Person s socially causes event e.

O 1 1a a is a person.

O 2 1ab a is part of b.

O 2 2ea Event e consists of the physical transformation of a, whereby the intrinsic properties of a changes.

O 3 1e1se2 Event e1 consists of the causal mechanism whereby agent s causes event e2.

Table 2: Dictionary of properties and relations used in this study, constituting atomic sentences.

Non-logical

symbol

K 2 7se

P 3 1se1e2

P 2 1se

Interpretation

in natural

language

The person s

allows event e.

Agent s has

event e2 as a

purpose for

allowing event

e1.

s has event e as

a final purpose

Detailed interpretation through reduction to other

relations

- s has the power to prevent event e,

- s believes s has the power to prevent event e from

happening, and

- s does not to prevent event e from happening.

- s believes that event e1 causes event e2,

- s allows event e1, and

- it is necessary that if s believes that event e1 does not

cause event e2, then s intentionally prevents event e1 from

happening.

There are no object x, person y and event z, such that:

- s believes that event e causes event z, the latter consisting

of the intentional causation by person y of the physical

transformation of object x, and

- agent s has the imagined event z as a purpose for allowing

event e.

Reduction to other

relations

K 2 4se ∧ Bs(K 2 4se)

¬K 2 3se

Bs(K 2 1e1e2) ∧

K 2 7se1 ∧

□(Bs(¬K 2 1e1e2) → K 2 3se1)

¬∃x∃y∃z(Bs(K 2 1ez ∧

O 3 1zyx) ∧ P 3 1sze)

Table 3: Dictionary of properties and relations used in this study derived from the sentences in Table 2.

Production, work as well as consumption involve the transformation of an object by a person (or

collective of persons). Production is, in fact, a type of consumption, since one entity is destroyed in

order to create the product, i.e. some intrinsic properties of the subject matter of transformation are lost,

while some are gained. The definition of production, work and consumption can logically be expressed

as a relation, which is either true or false, between three events, e 1, e 2, and e 3, the subject matter that is

transformed, q 1, and the agent of the transformation of the subject matter, s 1. The three events consist of

the intentional causation of the transformation of the subject matter by the agent, e 1, the physical

transformation of the subject matter, e 2, and the transformation of the agent that causes the

transformation of the subject matter, e 3. Table 4 presents various sentences concerning the properties

and relations between e 1, e 2, e 3, q 1, and s 1, while Table 5 presents the combination of these sentences in

order to derive various definitions of productive, work and consumptive relations.

16


The sentences in Table 4 can be divided into five groups, which conform to the five main conditions of

production discussed above. φ 1,1 belong to the first group, since it states conditions concerning the

physical transformation of object q 1. φ 2,1 and φ 2,2 belong to the second group by stating conditions

concerning the intentional causation by agents by s 1 of the transformation of the subject matter q 1. φ 3,1

to φ 3,7 belong to the third group and are different variants of externality conditions: φ 3,1 agency

externality condition, φ 3,2 to φ 3,5 purpose externality conditions and φ 3,6 to φ 3,7 social externality

conditions. φ 4,1 to φ 4,6 belong to the fourth group and state various conditions concerning the final

purpose of the transformation in satisfying human needs, which also depends on the externality

conditions applied. φ 5,1 states the market principle condition.

For convenience, sentences φ 4,1 to φ 4,6 contain relations of final consumption or production, but it is

possible to reformulate all sentences in Table 4 by only using the sentences in Tables 2 and 3 (there is

no circularity involved).

17


Sentence

Logical expression

Explanation in natural language

φ1,1 O 2 2e2q1 Event e2 consists of the transformation of q1.

φ2,1 O 3 1e1s1e2 e1 consists of the intentional causation of event e2 by agent s1.

φ2,2 O 2 2e3s1 ∧ K 2 1e3e2 ∧ O 2 1e3e1 Event e3 consists of the transformation of s1, event e3 causes event e2, and e3

is part of e1.

φ3,1 ¬O 2 1q1s1 ∧ ¬O 2 1s1q1 q1 is not part of s1, and s1 is not part of q1.

φ3,2 ¬P 2 1s1e1 s1 does not have event e1 as a final purpose.

φ3,3 ¬P 3 1s1e2e3 It is not the case that agent s1 has event e3 as a purpose for allowing event e2.

φ3,4 O 1 1q1 → ¬P 2 1q1e2 If q1 is a person, then q1 has not event e2 as a final purpose.

φ3,5 ¬K 2 5s1e2 s1 does not coercively cause event e2.

φ3,6 ¬K 2 6s1e2 s1 does not socially cause event e2.

φ3,7 ¬O 1 1q1 q1 is not a person.

φ4,1 ◊∃x1∃y1∃z1∃z2∃z3(C 5 3z1z2z3x1y1 ∧

(K 2 1e2z2 ∨ e2=z2))

φ4,2 ◊∃x1∃y1∃z1∃z2∃z3(C 5 3z1z2z3x1y1 ∧

(K 2 1e2z2 ∨ e2=z2) ∧ ¬K 2 5e2z1)

φ4,3 ◊∃x1∃y1∃z1∃z2∃z3(C 5 3z1z2z3x1y1 ∧

(K 2 1e2z2 ∨ e2=z2) ∧ ¬K 2 6e2z1)

φ4,4 ◊∃x1∃y1∃z1∃z2∃z3(Y 5 1z1z2z3x1y1 ∧

O 2 1e1z1∧ (K 2 1e2z2 ∨ O 2 1e2z2) ∧

O 2 1e3z3)

φ4,5 ◊∃x1∃y1∃z1∃z2∃z3(Y 5 2z1z2z3x1y1 ∧

O 2 1e1z1∧ (K 2 1e2z2 ∨ O 2 1e2z2) ∧

O 2 1e3z3)

It is possible that there are/will be objects x1, person y1 and events z1, z2, and

z3 such that:

- event z1 is the final consumption of x1 by y1 whereby event z2 is the

transformation of x1 that is intentionally caused by event z3, the transformation

of y1, and

- event e2 causes or is identical to event z2.

It is possible that there are/will be objects x1, person y1 and events z1, z2, and

z3 such that:

- event z1 is the final consumption of x1 by y1 whereby event z2 is the

transformation of x1 that is intentionally caused by event z3, the transformation

of y1,

- event e2 causes or is identical to event z2, and

- event e2 does not coercively cause event z2.

It is possible that there are/will be objects x1, person y1 and events z1, z2, and

z3 such that:

- event z1 is the final consumption of x1 by y1 whereby event z2 is the

transformation of x1 that is intentionally caused by event z3, the transformation

of y1,

- event e2 causes or is identical to event z2, and

- event e2 does not socially cause event z2.

It is possible that there are/will be objects x1, person y1 and events z1, z2, and

z3 such that:

- event z1 is the agent external productive activity, whereby event z2 is the

transformation of x1 that is intentionally caused by event z3, the transformation

of y1,

- event e1 is part of event z1,

- event e2 causes or is identical to event z2,

- event e3 is part of event z3.

It is possible that there are/will be objects x1, person y1 and events z1, z2, and

z3 such that:

- event z1 is the agent external non-coercive productive activity, whereby event

z2 is the transformation of x1 that is intentionally caused by event z3, the

transformation of y1,

- event e1 is part of event z1,

- event e2 causes or is identical to event z2,

- event e3 is part of event z3.

φ4,6 ◊∃x1∃y1∃z1∃z2∃z3(Y 5 3z1z2z3x1y1 ∧

O 2 1e1z1∧ (K 2 1e2z2 ∨ O 2 1e2z2) ∧

O 2 1e3z3)

It is possible that there are/will be objects x1, person y1 and events z1, z2, and

z3 such that:

- event z1 is the agent external non-social productive activity, whereby event

z2 is the transformation of x1 that is intentionally caused by event z3, the

transformation of y1,

- event e1 is part of event z1,

- event e2 causes or is identical to event z2,

- event e3 is part of event z3.

φ5,1 It is possible that the transformation of q1 causes the transformation of an object that is sold at the market.

Table 4: The sentences used in this study to define consumption, production, and work.

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Consumption

A common feature of all definitions of consumption, production, and work presented in this paper is

that they include at least the sentences φ 1,1, φ 2,1 and φ 2,2, which describes the relation between the three

events involved, i.e. how the transformation of the agent causes the transformation of the subject matter

of transformation. While production generates utility, consumption generates disutility, but that does

not imply that production cannot also generate disutility or that consumption cannot also generate utility.

The most general type of consumption, which can be termed intentionally caused physical

transformation, can be defined as

C 5 1e 1e 2e 3q 1s 1≡φ 1∧ φ 2,1∧ φ 2,2

φ 1,1 states that event e 2 consists of the physical transformation of object q 1. An alternative is to use higherorder

logic to formulate the physical transformation of one object into another as a change in a set of

intrinsic properties of the same object existing at different times. Sentence φ 1,1 entails that the

transformed object cannot be an object of the mind. One option is to add a disutility condition for

consumption, i.e. that the transformation of q 1 entails that other alternative uses are prevented. This

would make the definition of consumption asymmetric to production, as “negative production”.

However, to some extent this is already self-evident in sentence φ 1,1, since transforming the object q 1

involves destroying some of its intrinsic properties. The uses that presupposes the original properties are

prevented, which constitutes an opportunity cost.

Sentence φ 2,1 states that event e 1, which is the productive activity in question, consists of the mechanism

whereby s 1 intentionally causes event e 2, the transformation of q 1. Sentence φ 2,1 also entails that event e 2

is part of event e 1. Sentence φ 2,2 states that event e 3, the transformation of the agent s 1, causes the

transformation of the physical object q 1, event e 2, and that the transformation of the agent is part of the

intentional causation of the transformation of object q 1 by the agent s 1. The time of production, work or

consumption can be stretched longer than the involvement of the active agent s 1. For example, bottled

wine that is stored continues to change in a desirable way even after it has been bottled. Similarly, a

house can continue to be consumed by the agent, even if the agent does not use the house for the time

being.

The order of the objects in the definitions is important. For example, if C 5 1e 1e 2e 3q 1s 1 is a consumptive

relation, and if q 1 is not a person, then C 5 1e 1e 2e 3s 1q 1 is not a consumptive relation.

The definition of C 3 1 does not contain any externality conditions. However, consumption should

normally exclude the possibility of consumption of oneself. Therefore, the sentence φ 3,1, which is the

agent externality condition, could be added. Another definition of consumption is:

C 5 2e 1e 2e 3q 1s 1≡φ 1,1∧ φ 2,1∧ φ 2,2∧φ 3,1

19


The definition of consumption should not include φ 3,2 nor φ 3,3 since the purpose of consumption often

lies in the activity itself.

Final consumption can be defined, as:

C 5 3e 1e 2e 3q 1s 1≡φ 1,1∧φ 2,1∧ φ 2,2∧φ 3,1∧(¬φ 3,2 ∨ ¬φ 3,3)∧φ 3,4

Compared to C 5 2 the sentences ¬φ 3,2 ∨ ¬φ 3,3 and φ 3,4 are added. ¬φ 3,2 ∨ ¬φ 3,3 states that s 1 has either the

transformation of q 1 as a final purpose (sentence ¬φ 3,2) or the purpose of the transformation of q 1 lies in

the transformation of s 1 (sentence ¬φ 3,3). This is an opposite externality condition, i.e. an internality

condition. Final consumption does not necessarily involve a final purpose. For example, consider

teaching students to cook in a restaurant. It is possible that the student in the future will cook a meal in

a restaurant. From the student’s point of view, the activity of the teacher does not constitute final

purpose, since the purpose of the activity for the student lies outside the class. Students that attend the

classes do not do that entirely for the intrinsic pleasures that can be derived from the teaching (i.e.

sentence ¬φ 3,2 is false). However, since the purpose of the transformation of the teacher for the student

lies in the transformation of the student, s 1 (i.e. sentence ¬φ 3,3 is true) we can say that the student finally

consumes the teacher, q 1.

To exclude the possibility of two persons enjoying each other’s company as final consumption of each

other, sentence φ 3,4 is added, which is a purpose-externality condition. Sentence φ 3,4 states that if q 1 is a

person, then q 1 has not event e 2 as a final purpose – the transformation of q 1 then involves some kind of

disutility for q 1. For example, we could not say that the students finally consume the teacher if the teacher

teaches entirely for its own intrinsic pleasure.

A problem with C 5 3 is that it could be true for an activity involving hurting a person against the person’s

will. For example, cannibalism could be viewed as a final consumption of a person, even if that occurs

against that persons will. By including the sentence φ 3,5 this possibility could be excluded in an

alternative definition of final consumption.

In national accounts, in a closed economy, it is generally assumed that gross output always equals final

consumption, intermediate consumption and investment, which excludes the possibility for final

consumption of non-produced objects. The definition of C 5 3 opens for the possibility of final

consumption of non-produced objects, for example, drinking water directly from a lake, breathing air or

enjoying nature. An alternative is to define final consumption only as final consumption of produced

objects. The problem is that final consumption of produced objects and non-produced objects sometimes

could be indistinguishable, for example, drinking water from a non-produced container of water from

drinking water from a produced container of water. Another problem is that a definition of final

consumption that presupposes produced objects is circular, since the definition of production, as

discussed below, in turn, depends on the definition of final consumption.

20


Agent external production

Adding sentence φ 4,1 to the definition of consumption C 5 2 yields the following definition of production:

Y 5 1e 1e 2e 3q 1s 1 ≡ φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ φ 4,1

This definition is closest to neoclassical theory and the third person criterion, given that the basic

neoclassical model assumes no transaction costs, and that transformation of oneself is excluded by

sentence φ 3,1. Y 5 1 may be labelled agent external production, which can be contrasted to production

fulfilling conditions of social externality and time frame invariant production that also allows for human

capital formation.

It is sometimes possible that the agents of production do not know what is actually produced, for

example, in a factory. That is, however, not a necessary condition for a productive activity, even if there

is usually a person that intents the end-product. An unintentional action can merely be generated by an

intentional action. 44 The end-product may not necessary be the subject matter for the agent of production,

i.e. may not be q 1. s 1 may, for example, intend to transform q 1, and this transformation may in turn cause

the end-product without s 1 even intending that or knowing that occurs.

φ 3,1 states that the subject matter of transformation must be external to the agent s 1, which in this

formulation excludes, for example, studying and travel to work from being classified as productive. If

q 1 is the agent of the transformation, then the activity cannot be delegated to a third person.

A problem with sentences φ 1,1 and φ 3,1 is how to treat transformations in the object of the mind, for

example, ownership rights or information. To satisfy sentence φ 1,1 we should examine what type of

physical transformations changes in mental objects actually involve, i.e. to reduce transformations in

the object of the mind to transformations of entities thinking about or processing the objects of the mind.

For example, while trade involves a change in the ownership rights, the actual physical change when

ownership rights are changed are the transformations that occur in the mind of agents. Buying entails

that the buyer transforms the mind of the seller by releasing money (the instrument of transforming the

seller) to the latter, while selling entails that the seller transforms the mind of the buyer by releasing a

good or service (the instrument of transforming the buyer) to the buyer.

A productive activity should cause future final consumption, to fulfil the final utility condition. Sentence

φ 4,1 is future oriented and states that the transformation of q 1 possibly causes future final consumption

or is finally consumed when transformed. This sentence is the most difficult to formulate since we

cannot beforehand state exactly how the production and consumption process will continue after the

transformation q 1. If final consumption occurs later, we should state that it is the possibility of future

44

Anscombe, 1957; Davidson, 1980.

21


final consumption at the time of the production process that makes the activity productive, not the actual

occurrence of final consumption. The production boundary should preferably be defined by the objective

conditions up to the end of the production process. An alternative is to delete the modal operator, and

state that all production must result in final consumption. However, then an activity is categorized as

productive or unproductive based on what happens after the activity.

To exemplify the mechanism whereby production (possibly) causes final consumption consider

transport, storage or trade of an orange. Transport of an orange does not cause final consumption of a

specific orange, since the orange can be consumed somewhere else than the destination. However, it

possibly affects whether final consumption of a specific orange at a specific place by a specific person

occurs or not. Similarly storing an orange does not cause the consumption of a specific orange, but it

does affect whether the possibility of final consumption of a specific orange occurs at a specific time by

a specific person. Transport and storage therefore fulfil φ 4,1. Trade usually shape the consumption

possibilities of an object by a specific person, i.e. by a specific consumer, and therefore also the location

and the timing of the subject matter of consumption, which entails that φ 4,1 is fulfilled as well. However,

in contrast to transport and storage, trade does not alter the intrinsic physical properties of the object.

Trade causes final consumption through the transformation of ownership rights to an object, which, in

turn, involves the transformation of the agent’s minds’ (old and new owners). Such transformations are

material as well since the minds of agents also belong to the physical world. For example, when a seller

releases a good, the subject matter of transformation is the seller itself. Although we can imagine trade

taking place without any changes in the minds of persons, for example if a computer buys something

from another computer, at some level, at some time, it must involve agents intentionally causing such

processes.

Non-coercive agent external production

The needs of some individuals could be satisfied by directly hurting other persons, for example, by

waging war or robbing. A restriction of the concept of production involves adding sentence φ 3,5 and

replacing sentence φ 4,1 with φ 4,2.

Y 5 2e 1e 2e 3q 1s 1 ≡ φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ φ 3,5∧ φ 4,2

This definition applies consistently the conception of SNA 2008 that productive activities cannot involve

a zero-sum game. φ 3,5 states that s 1 does not coercively cause the transformation of q 1. In this way

professional murder and military activities are excluded from the definition of production. If any of the

persons involved are non-compliant, the activity is unproductive. Slaves are forced to labour. Also wage

labour can be perceived as being forced into production, if the alternative is to starve. However, even

when forced to labour, during the labour process the slave and the wage labourer become compliant,

since otherwise they could not perform various tasks. They have always the choice of stop working,

22


even under the threat of being punished. Slave or wage labour cannot be considered unproductive. In

contrast, a person being beaten up, murdered or being stolen from do not have such a choice.

A problem with the sentence φ 3,5 is that it does not preclude coercive causation of the final consumption.

Consider the manufacturing of weapons. What if these weapons can only be used to kill persons against

their will? The manufacturing of weapons does not itself transform persons against their will. The

purpose of killing people with a weapon may lie outside the act, for example, to steal the food. Eating

the food is a final consumption. Sentence φ 4,1 is therefore replaced by sentence φ 4,2 so that a productive

activity must cause final consumption without that necessary entailing any transformations of persons

against their will. This does not entail that all activities that somehow hurt people against their will are

viewed as unproductive. For example, constructing a building may accidently kill a person, but is not

part of the mechanism that causes the final consumption of the building. The building would be

constructed even if the accident would not occur.

Non-social agent external production

Theft and the services provided by a broker to raise the price of a property entail that the needs of one

individual can be satisfied at the expense of the needs of other individuals. No change is then made to

the amount of final consumption possibilities available in society at large. Trade, financial services, and

advertising may add to the utility of products without decreasing utility for other persons. However, the

principle of no double counting involves quantification of production that is independent of the utility

derived from the products. Otherwise, the level of aggregate production should be adjusted to equality

as well, since higher equality increases utility, but that is rather a concept of welfare, and not production.

While production must be quantifiable, changes in the choices persons make are difficult to quantify,

especially if they are treated as objects of the mind. For example, changes in ownership rights could

theoretically be made an infinite number of times during a time interval. Adding sentence φ 3,6 and

replacing φ 4,1 with φ 4,3 is a solution to such problems, and restricts the definition of production to nonsocial

causation:

Y 5 3e 1e 2e 3q 1s 1≡φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧φ 3,6∧φ 4,3

Sentence φ 4,3 entails that activities that only non-socially causes final consumption are treated as

productive. This corresponds to Shaikh’s and Tonak’s (1994) method to also deduct intermediate

consumption in unproductive activities from national income.

This more restrictive definition of production, is closest to the Marxist conception of productive versus

unproductive activities, although it conforms to the utility rather than the surplus tradition. In this

definition trade, financial services, renting, begging, bribing and convincing a terrorist not to blow up a

car factory are unproductive. While the transformation of the owner of an orange from not allowing to

take the orange to allowing to take the orange possibly causes the final consumption of the orange, this

23


transformation occurs through changing the preferences for action by the owner of the orange. Such

transformation would not occur in a Robinson Crusoe island, or in a society of individuals that are

completely altruistic towards each other. Similarly, trade, financial services, bribing, and begging falsify

sentence φ 3,6. The obstacle to final consumption in this case lies in the choices a person makes.

Convincing a terrorist not to blow up a factory does only causes car production by changing the choices

the terrorist make, and would not occur on the Robinson Crusoe island. If sentence φ 3,6 is true, so is

sentence φ 3,5. Coercive activities, which change the choices people can make concerning their body,

would not occur in a Robinson Crusoe island either. Robinson Crusoe could not have intentionally killed

himself against his own will, or waged a war against himself, at least not if he would be a rational person.

An activity that conforms to Y 5 1 but not to Y 5 3 can be termed socially reproductive. Social reproduction

causes redistribution of ownership rights or changes in power relations, or more generally changes in

the choices other people make. Social reproduction can be either voluntary (when φ 3,5 and φ 4,2 are true)

or involuntary (when φ 3,5 and φ 4,2 are false). An alternative term is transaction, to use Cheung’s definition

of transaction costs. Social reproduction is also related to Mill’s concept of distribution. Violence could

be seen as the redistribution of the control of a person’s body to another person.

The definition of non-social agent external production avoids some of the problems of double counting.

For example, assume trade causes labour productivity outside of trade to increase four-fold due to

specialisation, while the share of trade in total working time increases from nil to half. With the same

value added per productive hour and with total hours worked kept constant, the value added of agent

external production then records a four-fold increase, while that of non-social production only a

doubling. Although trade causes an increase in utility, that increase in utility could be seen as already

accounted for by the doubling of non-social production. It should therefore not be counted twice.

Humanity external production

The Marxist conception of productive activity is often confused with Adam Smith’s view that only

goods production is productive. A definition close to Adam Smith’s, is to further restrict the definition

by including sentence φ 3,7, which only considers activities as productive if they involve transformation

of non-persons:

Y 5 4e 1e 2e 3q 1s 1≡φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ φ 3,7∧φ 4,1

This definition of humanity external production contains the most restrictive social externality condition,

since all transformations directed towards other persons are considered as unproductive. According to

this definition many services, such as child care and medical treatment are categorized as unproductive.

However, services such as cooking, cleaning, storage, goods transport and washing are categorized as

productive since they are directed towards transforming non-persons. Therefore, this definition deviates

from Adam Smith’s original conception.

24


Time frame invariant production

Self-reproduction can involve several types of activities. The main difference is between an activity

whose purpose lies in itself and an activity whose purpose lies outside the activity. Time use studies

categorize the first as free time or leisure and the second as personal activities and studying. 45 For selftransformation

whose purpose lies outside the activity, we may distinguish between those whose purpose

is to cause future self-transformations and those whose purpose is to cause transformations of objects

external to the agent. Brushing one’s teeth or studying for future amusements belong to the first category,

while studying for a profession and work travel belongs to the second category. As Becker points out,

as with market production and household production, human capital formation involves both goods and

time spent on the investment. 46

One interpretation of the third-person criterion is that if the subject matter of production is oneself, then

the activity could be considered unproductive. However, that is not self-evident, since the criterion is

ambiguous concerning what type of activity that can be delegated. If an activity is defined as a change

to an agent, such change cannot be delegated to another agent that is different from the first agent.

However, if we by an activity mean that a person causes a transformation to an object, then some

personal activities could actually be delegated to a third person. For example, I can delegate the task of

cutting my hair to somebody else, but I cannot delegate having my hair cut to somebody else. Thus

cutting my hair can be delegated, but not cutting my hair and being cut. In contrast, learning myself

cannot be delegated to another person at all, since nobody can cause me to learn without myself taking

an active part in that process (although somebody can read for me). Anita Nyberg points out that what

can be delegated can change due to technological development. 47 For example, pregnancy can today be

delegated to a surrogate mother (being pregnant, however, violates sentence φ 2,1).

If the transformed object is not the agent of transformation, and therefore can be separated from the

latter, then the activity can be delegated to a third person. A problem is that some self-directed selftransformations

occur for the purpose of later productive activity. For example, while walking from one

side of the workplace to the other is normally considered a productive activity, travel to work is not.

Studying for a profession exemplifies a more drawn out process, but is not fundamentally different from

reading an instruction manual to use a machine at a factory. It is not unreasonable that the production

boundary, if possible, should be determined independently from the time frame of the production

process, i.e. independently of how long time an activity is conducted.

45

Gershuny, 2011.

46

Becker, 1980, 10.

47

Nyberg, 1997: 87.

25


Deleting φ 3,1 opens for the possibility that some self-reproductive activities could be viewed as

productive. A problem is that such definition would consider, for example, eating necessary to perform

work as productive. Another externality condition is therefore necessary. This can be made by including

the sentence φ 3,1∨φ 3,2, which states that either the agent of transformation is separated from subject

matter of transformation (sentence φ 3,1) or the purpose of the activity for the agent lies outside the

activity as such (sentence φ 3,2). Three different variants are considered, corresponding to Y 5 1, Y 5 2 and

Y 5 3. In the first variant φ 4,1 is replaced with φ 4,4. Sentence φ 4,4 states that either the activity in question

fulfils the definition of Y 5 1 or is part of an activity that fulfils the definition of Y 5 1. Time frame invariant

production can be defined as:

Y 5 5e 1e 2e 3q 1s 1≡φ 1,1∧ φ 2,1∧ φ 2,2∧(φ 3,1∨φ 3,2)∧ φ 4,4

Considering that workers would not stop eating if they would get unemployed, eating for the purpose of

work does not fulfil Y 5 5. Only if the purpose of eating lies outside the activity as such, for example, if a

sportsman eats special nutrition to be able to perform at a contest to amuse the audience, can it be

considered productive. Y 5 5 therefore entail that a process must at some stage cause the transformation of

objects external to the agent.

Two other definitions of production allow for human capital formation but add conditions of social

externality. Non-coercive, time frame invariant production is defined as:

Y 5 6e 1e 2e 3q 1s 1≡φ 1,1∧ φ 2,1∧ φ 2,2∧(φ 3,1∨φ 3,2) ∧φ 3,5∧φ 4,5

Non-social, time frame invariant production is defined as:

Y 5 7e 1e 2e 3q 1s 1≡φ 1,1∧ φ 2,1∧ φ 2,2∧(φ 3,1∨φ 3,2) ∧φ 3,6∧φ 4,6

These two definitions also include different sentences for the final utility condition.

Defining human capital formation as productive, while at the same time including sentence φ 3,7 is not

possible given that the latter sentence states that the transformed object cannot be a person, and the agent

of production is a person.

Market production

None of the seven definitions of production discussed above are close to the SNA definition, since no

sentence states that production must potentially be sold at the market. The closest to the Keynesian and

SNA conception of GDP, is to add sentence φ 5,1 stating that it is possible that the transformation of q 1

generates an object that can be sold at the market:

Y 5 1e 1e 2e 3q 1s 1 ≡ φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ φ 4,1∧ φ 5,1

Introducing such definition violates the trans-historical criterion. Another problem is that sentence φ 5,1

is the only one in Table 4 containing economic concepts. However, market production could serve

26


important analytical purposes, for example to investigate the relation between money supply and

inflation, but should then be rid of inconsistencies such as the inclusion of non-market goods production.

Work

It is necessary to distinguish between work and production. Any of the sentences φ 4,1 to φ 4,6 are necessary

to include for a definition of production, but should be excluded in the definition of work. Failed

production, which usually involves work, occurs, for example, if the intent is to produce an object that

can be consumed, while there is no possibility for the latter to occur. Healing and prayers for good

harvests are two examples. The sentences φ 3,5 or φ 3,6 should be excluded in a definition of work. Since

work involves a kind of disutility for the agent, there should be a purpose externality condition.

However, sentence φ 3,2, stating that the agent has the transformation of the subject matter as a final

purpose, should not be included. For example, a parent may work to satisfy a child’s need, and may

have the latter as a final purpose. The purpose externality condition could be instead stated through

sentence φ 3,3, which states that agent s 1 has not its own transformation as a purpose for causing the

transformation of object q 1. Thus one definition of work is:

W 5 1e 1e 2e 3q 1s 1 ≡ φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ φ 3,3

This definition accords quite well with the third person criterion.

“Market work”, which is what is usually considered in economic analysis can be defined as:

W 5 2e 1e 2e 3q 1s 1 ≡ φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ φ 3,3∧ φ 5,1

Comparing the definitions

Table 5 summerizes the definitions of consumption, production and work in this study. The sentences

are combined through conjunctions.

27


Label φ1,1 φ2,1 φ2,2 φ3,1 φ3,2 φ3,3 φ3,4 φ3,5 φ3,6 φ3,7 φ4,1 φ4,2 φ4,3 φ4,4 φ4,5 φ4,6 φ5,1

Y 5 1 Agent external φ1,1 φ2,1 φ2,2 φ3,1 φ4,1

production

Y 5 2 Non-coercive, agent φ1,1 φ2,1 φ2,2 φ3,1 φ3,5 φ4,2

external production

Y 5 3 Non-social, agent φ1,1 φ2,1 φ2,2 φ3,1 φ3,6 φ4,3

external production

Y 5 4 Humanity external φ1,1 φ2,1 φ2,2 φ3,1 φ3,7 φ4,1

production

Y 5 5 Time invariant φ1,1 φ2,1 φ2,2 φ3,1∨φ3,2 φ4,4

production

Y 5 6 Non-coercive, time φ1,1 φ2,1 φ2,2 φ3,1∨φ3,2 φ3,5 φ4,5

invariant production

Y 5 7 Non-social, time φ1,1 φ2,1 φ2,2 φ3,1∨φ3,2 φ3,6 φ4,6

invariant production

Y 5 8 Market production φ1,1 φ2,1 φ2,2 φ3,1 φ4,1 φ5,1

W 4 1 Agent external work φ1,1 φ2,1 φ2,2 φ3,1 φ3,3

W 4 2 Market work φ1,1 φ2,1 φ2,2 φ3,1 φ3,3 φ5,1

C 5 1 Intentionally caused φ1,1 φ2,1 φ2,2

physical

transformation

C 5 2 Agent external φ1,1 φ2,1 φ2,2 φ3,1

consumption

C 5 3 Agent external final

consumption

φ1,1 φ2,1 φ2,2 φ3,1 ¬φ3,2∨ φ3,4

¬φ3,3

Table 5: Definitions of consumption, work and production by combining various sentences using

conjunctions.

Since production and work are defined differently, we can distinguish between productive and

unproductive work. If we here only consider Y 5 3 and W 4 1, productive work in the “Marxist sense” can

be defined as:

Y 5 3e 1e 2e 3q 1s 1 ∧ W 5 1e 1e 2e 3q 1s 1 ∴ φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ φ 4,1∧ φ 3,6

Unproductive work in the “Marxist sense” is then:

¬Y 5 3e 1e 2e 3q 1s 1 ∧ W 5 1e 1e 2e 3q 1s 1 ∴ φ 1,1∧ φ 2,1∧ φ 2,2∧ φ 3,1∧ (¬φ 4,1∨ ¬φ 3,6)

If we broaden the definition of production to Y 5 1sq 1q 2 there is a possibility for work to be unproductive

if ¬φ 4,1 is true. Even Marshall, who advocated a very broad definition of production, opened for that

possibility.

Final consumption and production are not contraries, and neither is consumption and work. It is possible

that the purpose of a productive process does not lie outside the activity as such. Agent external

productive final consumption involves production without the effort of work:

C 5 3e 1e 2e 3q 1s 1 ∧ Y 5 1e 1e 2e 3q 1s 1 ∴ φ 1,1 ∧ φ 2,1 ∧ φ 2,2 ∧ φ 3,1 ∧ (¬φ 3,2∨ ¬φ 3,2) ∧ φ 3,4 ∧ φ 4,1

Activities such as painting for own pleasure, play with children for its own sake, free-time research or

hobby-hunting can generate a product that can benefit others than the agent of transformation. Some of

these products are included in official national accounts, even if the activities are not registered as

28


working time. The driving forces of productive final consumption is different from productive work,

since the latter would normally not occur without any or too low compensation. Estimating the imputed

value of productive final consumption by the costs may therefore be misleading.

Final reflections

This paper argues for trans-historical reformulations of the basic economic concepts of production, work

and consumption. The definition of the production boundary by System of National Accounts (SNA) is

inconsistent from a scientific point of view. For example, while some non-market and illegal services

are viewed as productive, others are not, and services and goods are treated differently. The definition

proposed by feminist economics, the so-called third person criterion, is consistent, but in need for further

development. Important issues concern how to deal with violence, double counting of transaction costs,

human capital formation and non-market activities. The answers are different in different theoretical

traditions – mainly Classical, Neoclassical, Institutional, Marxist, Feminist and Keynesian Economics.

The various definitions of production, work and consumption proposed in this paper could fulfill

different analytical purposes. Despite the large differences between various definitions of production,

there is a core of common assumptions and intuitive understandings across paradigmatic and historical

borders. It reflects the common human experiences of consciously changing the external world in order

to satisfy human needs. In this respect, this study attempts at synthesizing seemingly incompatible

theoretical perspectives.

Production, work and consumption are defined as relations between events and physical objects, and

except for the definitions of market production and market work reduced to non-economic sentences.

First-order logic is used, complemented with modal operators for some of the sentences. In this study,

it is shown that production, work and consumption all share the common feature of intentional physical

transformation of a subject matter. The subject matter transformed during the productive activity and

work must at some point in time be external to the agent. For work, the purpose of transforming an

external object must not lie in the transformation of the agent. A productive activity must potentially be

able to cause the satisfaction of human needs, or final consumption, which is not a condition for work

or required by the third-person criterion. Using a criterion applied by the institutional economist Cheung

to identify transaction costs, this study defines social reproduction as an activity that would not occur in

a Robinson Crusoe economy, or more precise a society consisting of individuals with the same

preferences for action by all individuals of that society, if all individuals have the same information and

act rationally. We can further differentiate between coercive and non-coercive social reproduction.

In this study, eight different definitions of production are presented. The definition of agent external

production is close to the third person criterion, but the possible causation of future final consumption

is included as a condition for productive activity. It is also related to the basic neoclassical model with

29


its assumptions of no transaction costs. The definition of agent external non-coercive production entails

that transformations of persons against their own will, whether legally or illegally performed, are always

unproductive activities. The definition of agent external non-social production entails that all socially

reproductive activities are unproductive, and comes close to the distinction made by Classical and

Marxist economists of productive and unproductive work. Humanity external production only includes

the transformation of non-persons. The three definitions of time scale invariant production entails that

human capital formation could be considered productive activities. Market production comes close to

Keynesian theory and the present definition of SNA, with the difference that it excludes non-market

goods production. The present study also opens for the possibility of unproductive work and productive

final consumption that does not involve any work. The number of definitions can, of course, be

expanded, for example, by introducing more sentences than the ones presented in Table 3. Which

definition of production is used greatly affects the modelling and empirical application of growth theory.

Having consistent definitions that can be applied to all human societies is necessary for the analysis of

the driving forces in economic history.

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