Notes on Three Economies: Hyper-real, Real and Hidden

by David Mertz

<approx. 5000 words>

Thesis. There are three structurally different, but always interlocked, economies of visibility within late Capitalism (possibly elsewhere): The hyper-real, the real, and the hidden. I want to start with a very preliminary and tentative sketch of my distinction. I will follow this with a few preliminary correctives to my initially simplifying language. During the discussion, after I talk for a bit, I would be enormously interested in comments on all the myriad areas I've missed in my complexifying correctives. So first, the simplest story.

• The hyper-real is the economy of status and the spectacle. Hyper-real commodities gain a value, not on their use-value, but rather on their power to signify a social-status that is itself meaningless apart from its embodiment in these commodities. In an old case, art as social signifier is sold for amounts unrelated to any objective measure of labor-input, and according to an economy of class-marking. Brand-names extend this process hugely such as to make the "use-value" itself of a commodity its ability to signify its own process/context of manufacture. T-Shirt and handbag logos of popular products have a status completely divorced from the product which they simulate; even on products used for identifiable purposes, what is sold is the brand-label which just happens to need a product on which to stick. An incommensurability exists between different products of the same apparent category, as no rational-choice substitution is possible between them (i.e., "Air-Jordons" are not better or worse as shoes than other brands, since their function is not to cover feet, but to signify their own label). The exchange of these commodities not only depends upon a visibility in the marketplace, their very value is this visibility.

What is required in hyper-real commodities is a wild divorce from "socially necessary average labor time" (hereafter, SNALT) of production, as in a painting which can fluctuate overnight in "value" by multiple orders of magnitude. Another example of hyper-real commodities is stock-options, and to a lesser (though significant) extent, stocks and securities. Most stocks tend toward a prevailing Price/Earnings rate -- historically situated, of course. What fluctuates the value of an option, on the other hand, is not just concrete reported changes in quantifiable things like P/E, Debt/Equity, but also is information, rumor, and hearsay: the very stuff of the hyper-real economy.

Still another example is that of antiques and "collectibles" -- which objectively are nothing more than the cheap mass-produced items of a bygone day, but which function so as to mark an imagined status for their possessor.

• The real is the classical commodities of Marxist or neoclassical analysis. These products are consumed because of a use-value preexisting their manufacture which they can fulfil. The value/price of these commodities is determined by the usual considerations of manufacture costs according to the most efficient existing technological methods -- plus fluctuations due to competitive considerations of overproduction and scarcity. However, a base-line price is determined by an objective value (i.e., labor time embodied in all inputs = SNALT); modulations from this price are more-or-less "accidental." The exchange of these commodities depends upon their visibility in the marketplace; I.e., they must be known to be purchasable commodities in order to function economically. However, the market visibility of real commodities, contra that of the hyper-real ones, exists merely to represent an underlying use-value that is not inherently connected to their visibility in the exchange process.
• The hidden is the economy of information and other products that are "too easily" reproduced. Production techniques themselves have production costs: in basic research, engineering, prototyping, Taylorist micromanagement of production, and other "information" costs. However, such techniques may be reproduced much more cheaply than they may be produced. A piece of software, in the extreme case, may take many thousands of person-hours to produce (and in cases a similarly large materials input -- as where software represents a physical process that must be tested), but may be reproduced in five-minutes with $0.50 of raw materials. There is a continuum here between products that are merely slightly cheaper to (re)produce than prototype to those with gaps of five or six orders of magnitude (or more!). The basic distinction between production and reproduction costs, however, always marks a certain hidden economy. In a sense, this type of commodity is "knowledge" -- but it is not necessarily freely and instantly communicable, as is our stereotype of knowledge.

In another example, it may take $X to perform an initial Taylorist analysis of a given plant's process, and $X/2 to repeat the analysis in a second plant in the same industry. It is not possible simply to communicate abstractly what was discovered by the analysis of the first plant, but nonetheless, a significant gap exists between production and reproduction costs. This is to be contrasted with the "real" economy where one widget costs the exact same amount to produce as the next (absent a contribution from the "hidden" economy -- i.e. absent technological change). Within competitive-capitalism "hidden" commodities must not be visible in the marketplace, or else no competitive advantage is attached to them -- in fact, their visibility would amount to an unreimbursed capital transfer to competitors. The inputs of hidden commodities, however, themselves generally belong to the real economy (as in technicians' salaries), or even to the hyper-real economy (as in Ivy-League education).

As hence indicated, the essential mark of "hidden" commodities is the restriction of their circulation. The principle of this economy insists that "hidden" goods be purchasable, but that they be finitely rather than indefinitely purchasable. The hidden is a class of commodities which are produced specifically in order not to be reproduced. The kind of commodities whose nature brings them into this sphere and manner of circulation is knowledge-commodities; other commodities may also sometimes fall within this tendency -- as, perhaps, with commissioned artworks (to be opposed to generally circulated artworks, though the tendencies intertwine).

Initial Criticisms (thanks go to Karen G.):

• Q: Aren't real and hyper-real already really the same because of the social determination of necessary consumption, purchasing preferences, and technology/means-of-production? That is, are not supply and demand already social facts, rather than natural-objective ones?
  
  
• A: I don't really suppose that my three economies are the economies of three separate sets of commodities, but rather three tendencies (potentially) within every commodity. Of course, I do think that a given commodity might be almost entirely subsumed under just one of the tendencies. The tendential talk is a little bit of a dodge, but I'll try to explain it in more detail in later sections.

  Supply and demand do already play into a hyper- real economy to a certain extent. But I think it is clear that SNALT really is at issue in some commodities. The whole "status" issue becomes a non-issue at any but a retail level: nobody's going to pay for the status of a certain brand of raw iron or corn (or at least not very much). Some retail products are like this too. The Ricardo/Marx point is that there is a tendency for price to converge to SNALT (you know, "falling rate-of-profit" and all that).
  
  

• Q: Couldn't it be shown that the inflation of certain prices above the level of SNALT-of-production is merely a reflection of the dictates of marketing and advertisement, which involves large capital outlays, which must be made up for in pricing structure? For example, perhaps the extra cost of "Air Jordans" is simply a result of the extra marketing spent on them.
  
  
• A: If the rate-of-profit of "Air Jordans" is not substantially higher than that of Brand X, then they shouldn't be included in the hyper-real (at least at a preliminary analysis). I don't know these particular details, but in "production costs" I would INCLUDE the costs of marketing/advertising. Certainly marketing may well play a crucial role in the hyper-real economy, but if its role is simply a:

  Production + Profit + Func(Marketing) = Cost

  type relation, then this has nothing to do with the hyper-real. In the hyper-real it would be required that giving "Air Jordans'" advertising budget to Brand X not have any functional (i.e., linear multiplicative) relation to price or profit. The hyper-real is where price/profit become socially divorced from (inclusive) production costs. This is why the fine arts are such a good example: NO amount of paid publicity can make a Lichtenstein into a Van Gogh; there is a whole separate economy of "tastes" and "fashion."

Genealogies.

• The hyper-real is the economy in my picture with the most interesting and variegated theoretical history -- or at least it's the tradition that some of you might not be entirely familiar with. I suppose it should be confessed that the "real" economy itself has quite an interesting and scandalous history of theoretical construction, going from the Physiocrats, through Smith and Ricardo, to the Classical economists, taking a detour with Marx, being restored to its ahistorical purity by the Neo-Classicals, being deconstructed by Sraffa, and restored to its pristine positivism by Econometrics. However, this story is painfully familiar to most everyone in this room, so I shan't repeat it. What I'd like to mention briefly instead is the history some of you may not recognize of the theoretical genealogy of my notion of a hyper-real economy. I was originally hoping to talk in length about some of the figures I'll mention, but I have so many remarks about the theoretical picture that I'm going drastically to abbreviate my summary of my predecessors. If anyone wants to discuss any of these people further, I'd be happy to do so in discussion.
• Marcel Mauss, in The Gift, in conscious opposition to Neo-classical economics, attempted to identify a pattern of what he called "symbolic exchange" in a variety of societies. In the "primitive" societies he looked at, certain exchanges took the form of potlatch -- or, in other words, gifts given symbolically to others that simultaneously incur a symbolic debt to the giver, and which raise the giver's symbolic status within the community. Claude Levi-Strauss borrows much from Mauss' picture of symbolic exchange, most particularly in his analysis of the "exchange of women" which Levi-Strauss understands quite closely on the model of inculcation of symbolic debt.
• Georges Bataille is probably my favorite of all my predecessors in analyzing the hyper-real. Bataille picks up the notion of symbolic exchange from Mauss, then tries to universalize it spectacularly to cover not just the fundamental economics of every society, but the basic principles of biological life, and of consciousness. In his book, The Accursed Share, Bataille proposes what he calls a "General Economy" to be opposed to the "restricted economy" of the economists. The central feature of General Economy that Bataille alleges economists have overlooked is the portion of every economic system that necessarily cannot be consumed productively. Seen from the perspective of General Economy, the problem that all societies face is not one of management of scarcity, but rather the exact opposite: the expenditure of the excess of the productive economy. I think Bataille would claim that the status consumption within the hyper-real economy of late-Capitalism is nothing more than one historically situated technique, amongst many, for the utilization of inherently unusable products.
• Thorstein Veblen's Theory of the Leisure Class was probably the first book to bring home Mauss' analysis of symbolic exchange, and hold that analysis as a mirror to Western societies. With the anthropologists, Mauss and Levi-Strauss, symbolic exchange was still a tool for understanding the savages, with only an implicit nod to the fact that we are amongst them; and while Bataille's General Economy produces as a result the inadequacy of the real economy to understanding the West, the analysis is not specific to late-Capitalism (and, at any rate, Bataille's fully developed version of his theory comes later than Veblen). What Veblen did was to analyze leisure-time and consumption in terms of their social function in marking status. In particular, he saw leisure-time not simply as time away from economic activity, but as time meant specifically to mark that one had the freedom not to be at work -- and hence leisure must be conspicuous, as must other status-marking consumption.
• The Situationists, chiefly Guy Debord, attempted a critique of late Capitalism which went beyond the productive economic categories of Marx. They believed that much of the repressive mechanism of the Society of the Spectacle (Debord's book title) fell on the side of consumption. In similarity with Veblen, the Situationists saw a cycle of consumption which served, not to fulfill any primarily economic needs, but to indicate class position. The Situationists upped the ante, however, by casting class-marked consumption as a major mechanism for the maintenance of class relations.
• Jean Baudrillard, in two books from either side of 1970, For a Critique of the Political Economy of the Sign and The Mirror of Production, effected a synthesis of all the aforementioned authors to produce a theory of what I -- and he -- call the hyper-real economy. Baudrillard, as many of you will know, subsequently did some very different work that, with various merits, disallowed anything "real" to exist behind the hyper-real; but it is not the post 1972 work which is of interest to me in this analysis. Depending on the exact stage in the development of his theory, Baudrillard develops in contrast to the "real" economy either a) a conflicting tendency toward a "status" economy; or b) a set of commodities which fall outside the SNALT economy. If my notion of a hyper-real economy appeals to you, Baudrillard, in the works I mention, is the place to turn -- although I think my analysis is non-identical with his.
• The real: I think the real economy will be quite familiar enough to a group of people who analyze it for a living that I need not explore its genealogy. I might mention, however, that the term might well remind one both of an ironic use both of Lacan's "Real" and the old state-socialist division of "real" productivity from mere service-provision.
• The hidden: As far as I know, the "hidden" is my own. Economists have always been interested in the productive activity underlying technical change; and they've hardly been unaware of protections like patents, nor of the violations of secrets in industrial espionage. But I know of no one who places the specific production of the means of technical change, and of the "too easily reproducible" generally, within the specific context of differing economies of visibility. If anyone can point me to example of predecessors to my analysis, I would welcome the information. Unfortunately, I think I'll hence wind up giving the "hidden" economy somewhat short shrift in this paper, even though I wish it to be considered fully on the level of the real and hyper-real, and not a mere addendum.

Base and Superstructure is an orthogonal division to the division of three economies I suggest; each "economy," in the sense I speak of the three, has its own superstructural and "economic" (in the sense of opposition to superstructure) formations. My hypothesis on how to understand base and superstructure vis-a-vis my own tripartite division will have to be particularly sketchy, within an already sketchy idea I'm trying to explore. The main point to understand, though, is that although I do believe, in a certain way, in the distinction between base and superstructure, it's a different kind of distinction than that I'm getting at in these remarks.

• For example, in one of the initial objections I mentioned, my imagined conversant (who is, in reality, Karen G.) hinted to the fact that necessary consumption, whether necessary for the reproduction of persons or of productive processes, is a social rather than a natural necessity. This I admit -- or rather, beyond admitting this, I'm quite adamant about it. Marx himself already somewhere remarks on the social necessity of millet to the English working class, versus rice to the Chinese -- or something to this effect. Without wanting to speak too broadly of actual national food preferences, I'd like to run with this example for a bit. Marx's kind of social facts -- such as what is necessary for the reproduction of a given working class -- is probably properly considered a superstructural fact insofar as it's somehow extrinsic to the productive process the workers engage in. I don't mean to be too hard and fast with this distinction; I don't believe, for example, that a factory could always be transported from England to China while functioning unchanged. But there is a certain independence of these things, and there is an extent to which it's not an English worker qua worker, but rather an English worker qua Englishman or Englishwoman, who requires millet for sustenance.
• Still, an English worker's need for millet is not hyper-real. Millet is not consumed by an English worker as a specific marker of status -- or, more accurately, millet may be consumed as a marker of extrinsic status, but it is not consumed as a marker of intrinsic status. Let me explain my use of intrinsic and extrinsic, which are certainly not transparent. Millet marks a certain kind of status, namely the status of being English rather than Chinese. I'd like to call this kind of status "extrinsic" both insofar as it marks a difference between external large groups, such as nations, and also insofar it is more of a background assumption than a deliberative bit of status negotiation (Erving Goffman would call it facework -- but I don't wish herein to attempt to explain Goffman along with everything else). Intrinsic status, on the other hand, is something one personally negotiates in one's actions and purchases; it is the more-or-less conscious choices of distinction which juxtaposes one with the people one daily encounters: friends, coworkers, neighbors, bosses, even family. It is the markers of intrinsic status which fall under the tendency of the hyper-real economy. Again, caution is warranted here. I don't suppose that extrinsic/intrinsic form an absolute line across which nothing may cross -- for example, many an English worker may proudly devour millet in conscious and deliberate contrast with her rice-eating Chinese friend and coworker -- but I think the pair represents real poles between which particular status-markers are arranged.
• Now that I've indicated features of base and superstructure within what's essentially the "real" economy, I'd like at least to hint that the base/superstructure pair is simultaneously present within hyper-real and hidden economies.
• Within the "hidden" economy, features of base and superstructure are readily apparent. As I've said, the hidden economy is that concerned with commodities whose production cost dramatically exceeds their reproduction cost -- particularly informational commodities. The base of this economic tendency or realm is quite simply the lack of reproductive circulation of the commodity; the superstructural support for this limitation of circulation is all the legal and cultural forms which implement and enforce this circulatory limitation. For example, in modern Capitalism, the superstructural mechanism of enforcement of the hidden economy is all the laws concerning intellectual property: patents, trademarks, copyrights, fair-use rules, security classification of knowledges, and the like. In other societies this takes other forms; for example, in feudal Europe the guild apprenticeship system prevented ready transferability of acquired skills between competing guilds.
• The features of base and superstructure may prove a bit more difficult to discern with the hyper-real economy. While all economic facts are inherently cultural facts, in one sense, the status economy of the hyper-real participates in culture in that special sense which opposes culture to "economics" -- as superstructure is opposed to base, even while both base and superstructure are already really superstructural facts. I think the hint of a base/superstructure opposition may exist even within the hyper-real economy, however, insofar as the intrinsic versus extrinsic status which marked the difference between the hyper-real and the real is, in fact, repeated within the hyper-real. Some status markers which are intrinsic in the sense of placing them within the hyper-real domain may indicate an extrinsicly hyper-real status, while others indicate a doubly intrinsic status. To put this in what may be more intelligible form: some commodities which are intra-cultural markers mark a status independent of the commodity itself, while others mark a status in no way separable from the commodity. For example, sports cars and expensive artwork both function chiefly to mark a cultural status -- a class status, basically -- and this marker is only available to those who really belong to the class indicated, because the price itself excludes other classes. These commodities we might well describe as the base of the hyper-real economy. Other commodities form an intermediate status, they still serve to mark a pre-existing class status (or status of gender, race, etc), but their inherent commodity-form does not exclude other classes. For example, readership of Forbes magazine marks bourgeois class status, but the magazine cover price does not inherently exclude other readers, and the distribution channels do so only very weakly. Still other commodities, which we would call entirely superstructural within the hyper-real, mark no pre-existing status outside themselves, but rather create a doubly intrinsic status. As an example, paraphernalia naming different entertainers who essentially appeal to the same demographics may nonetheless mark internally meaningful status differentiations (i.e. hip-hop vs. heavy-metal).

Consumption and Production, as a well known economic distinction might easily be confused with the typology I suggest. A first reading -- and a reading suggested by the hyper-real's roots in the Situationists, and in parts of Baudrillard -- could conflate the hyper-real with the realm of consumption, while assuming the real occupies the lonely place of production. Insofar as consumption nearly always has a hyper-real tendency within it which has been generally unrecognized by economists, this reading is well motivated. But it's nonetheless wrong.

• All three of my economies have their primary focus on the consumptive side of the commodity equation. I don't think production and consumption can properly be separated, mind you, being altogether too intimately connected for this -- but the focus of my analysis is consumptive. My point is that there are these structurally different manners in which things can be consumed. The fact that the price/SNALT ratio is somewhat correlated with this categorization is not really the central feature I'm interested in, although it's probably the most obvious indicator. I will admit, further, that much on the production side of things is geared towards promoting appropriation in a particular consumptive mode -- to wit, advertising. The overall trend of American advertising seems to be to try to move products into appropriation in a hyper-real mode, and hence allow for a degree of profit disproportionate with PRoP. But where this advertising fails, or where it's never attempted, there's still a mode of consumption associated with the "real" economy: namely, consumption according to the dictates of a superstructurally determined necessity of reproduction of worker qua worker, as opposed (insofar as such is possible) to worker qua bearer of status.
• From the PoV of my tendential analysis of three consumptive economies, production is homogenous within the lacunae of my scheme. Productive consumption -- consumption in the manufacture of commodities -- may use inputs belonging to all of my economies, and may use these inputs according to the principles of all my economies. This is perhaps most strikingly true in the case of labor-commodity, as will be discussed below. However, the consumptive economies which subsume the particular inputs of a particular productive process are quite independent of the economic principle within which a produced good may be consumed. That is, both Nike and K-Mart may use hyper-real, real and hidden inputs in the production of their shoes, but Nike's shoes will be consumed dominantly in a hyper-real economy, and K-Mart's dominantly within a real one. For that matter, Nike might well have a predominance of real inputs, and K-Mart a predominance of hyper-real inputs, without changing the relative consumptive economies of their outputs.

Inclusion of the Commodity Labor. That most central and mysterious of commodities, labor, does not escape a trifurcation into my three economies -- or at least a bifurcation into the first two (the hidden may exclude this commodity).

• The tendency for wages to fall to the level of the SNALT of their inputs (food, shelter, training, etc.) is really not too far off, despite the bad rap Marx has gotten in this regard. This tendency seems to be on even firmer footing once it is admitted that the SNALT for the production of the labor-commodity, like the SNALT of all commodities, is itself a more-or-less superstructural phenomenon. Of course, as I've suggested, superstructural phenomena, such as the determination of the SNALT of labor-commodity production, themselves fall into all the three tendential economies I examine. We must hence expect labor-commodity to be itself produced in all three of my three economies.
• Some labor-commodity, however, seems to divorce itself from it's earthly SNALT determinants, and become wholly (or predominantly) hyper-real. As an example, the namesake of the hyper-real 'Air Jordons' mentioned above, Michael Jordon, probably receives a wage quite unrelated to the cost of production of his skills and sustenance (I don't know what this wage is, but I assume it to be in the millions of dollars per annum). It will probably be argued that this wage, in fact, reflects the use-value of Jordon to his ball-club, i.e. the increased profitability of the club brought about by his playing in it. I actually don't believe this, but it would be difficult to demonstrate one way or another conclusively. At any rate, I am quite certain that there is a strong tendency within entertainment industries (including sports) to include stars within their employ purely as a status indicator, rather than from econometric calculations of profitability. As an example, I'm sure everyone is familiar with entertainers in music, film or sports who are prevented from the desired production/distribution of their products, even while the owning interest wishes to maintain them under contract.
• Be that as it may about entertainers, I think the clearest example of a hyper-real economy of labor-commodities is within upper management. The top managers of large corporations, despite their increasing overt indistinguishability from owners, are still technically employees of their companies. And yet, wages paid to such management is objectively independent of the scarcity, SNALT of production, or use-value of their labor. Upper management increasingly participates in the "star system" of Capital, after the style of the 1940's Hollywood star system of film (still continuing, as I say previously). Perhaps simply to name Lee Iaccoca demonstrates my point. Iaccoca's skills, such as they are, are not substantially different from those of a million other managers who perform largely the same job with largely the same education. But Iaccoca's labor is not purchased by Chrysler primarily because of it's SNALT or its use-value, nor even because of mechanisms of supply and demand. Rather, it is Iaccoca himself, his person/persona, who serves as a high-profile iconic signifier of the class-position of Chrysler as a company. It is precisely in employing a well-know "star" at a multi-million dollar salary that Chrysler is able to represent itself as the kind of company which employs a multi-million dollar CEO. The question here is a question of status and visibility, not primarily one of production and use-value.
• At the same moment, however, in our post-Modern late-capitalist world, consumers consume automobiles largely within a hyper-real economy of status -- and part of a Chrysler automobile's ability to represent status lies in the Chrysler corporation's ability to represent its own status. Even the adjectives one might use to describe one's automobile purchasing decision have, in a way, "slid under the signifier" -- it's no longer easy to discern whether someone's description of a Chrysler as "solid, reliable and efficient" is meant as a description of the car, or of the company. In fact, such discerning may well be more than merely difficult, it may be entirely non-sensible insofar as consumers no longer themselves distinguish between the commodity and the status carried along with the name of its manufacturer. Hyper-real salaries paid Iaccoca and other "star" executives probably isn't simply irrational, as certain liberal critiques would have it, but may in fact be the central necessity of the non-real economy within which automobiles are actually consumed. It's not that one cannot ask whether Iaccoca's salary is profitable or costly for Chrysler -- indeed, this question probably well has a determinate answer -- it's rather that this question is one which belongs to the wrong economy for describing the hyper-real circuit of automobile production and consumption.
• All labor is, nonetheless, partially hyper-real -- and perhaps all still retains an iota of "reality." EXPLAIN.