Marxist economics

James Miller jamiller at
Sat Sep 23 19:15:55 MDT 1995

This posting is intended to initiate a discussion on
some of the central questions that have been debated
in theoretical Marxian economics in the 20th century.
It is structured around the themes raised in the recent
book _Invisible Leviathan_, by Murray E.G. Smith (Univ.
of Toronto Press, 1994, Library call number HB206.S55).

   Smith's book is a fairly comprehensive review of the
major trends of thought that have emerged in 20th
century Marxist economics. He attempts to focus on
those discussion topics which are the most critical
for the acceptance or denial of the scientific validity
of Marx's work. I think he succeeds very well in
identifying which topics are the most important for
this purpose. Foremost among these topics are the
transformation problem and the tendency of the rate
of profit to fall.

   In my view, the scientific character of Marx's work
has been obscured by various misunderstandings and
misinterpretations which have arisen in the course of
these modern debates. Smith recognizes this problem and
takes steps to clarify Marx's intentions, but in my
opinion does not go far enough in this direction. What
is needed today is an approach based on the clearest
possible understanding of Marx's work.

   Let's see how Smith treats the development of the
discussion on the transformation problem. The question
here deals with the transformation of values into prices
of production. If Marx's position on this question, as
outlined in Chap. 9 of _Capital_, Vol. III, is seriously
muddied or misrepresented, then it becomes impossible
to really judge whether Marx's law of value has any
scientific validity.

   What is at stake in the discussion of the transformation
problem is whether or not the law of value (or "labor
theory of value") is valid. If it turns out not to be
valid (which is what most bourgeois economists believe),
them Marxism can be junked as useless. Marxism is no good
if it is not scientifically valid. Only if it is valid can
it provide a means to indicate the future course of social
development, and thus serve as a guide to social and
political activity.

   The fact that the scientific validity of the law of
value was at stake in the transformation problem was
recognized by Bohm-Bawerk and Hilferding in their exchange
on this question. Smith reviews this debate. Bohm-Bawerk
argued that the incongruity between a system in which
prices oscillate around values, versus a system in which
prices oscillate around their "prices of production,"
is proof that Marx's "law of value" is not valid.

   Marx had indicated that prior to the rise of capitalism,
commodities had tended to exchange at their values, as
determined by labor time, and that with the rise of
capitalism, prices tended more and more to gravitate
toward their prices of production, i.e., the price levels
established by the formation of an equal rate of profit
among different spheres of industry with different
organic compositions of capital.

   Smith quotes Bohm-Bawerk as saying, "to speak plainly
his [Marx's] solution is obtained at the cost of the
assumption from which Marx has hitherto started, that
commodities exchange according to their values. This
assumption Marx now simply drops." (see Smith, p. 71)

   It is not true that Marx "simply drops" his earlier
statement on value, nor is it true that it was an
"assumption." Yet Smith responds to Bohm-Bawerk with
the following comment: "what Bohm-Bawerk conveniently
neglects to add is that the 'assumption' that
'commodities are sold at their value' is just that:
an assumption that Marx posits at different points
in order to lay bare specific features of the capitalist
mode of production. Moreover it is an assumption that
is posited as part of a procedure of theoretical
abstraction from certain other features of capitalism
that are in no way regarded by Marx as incidental to
a concrete theoretical reconstruction of the capitalist
totality. But what this 'assumption' most emphatically
is not is a necessary or constitutive postulate of
Marx's value theory." (p. 71)

   Smith's comment here is misleading, at best. The
tendency for commodities to exchange at their values
was, for Marx, far more than an assumption. As Marx
explained, "the exchange of commodities at their values,
or approximately at their values, thus requires a much
lower stage than their exchange at their prices of
production, which requires a definite level of
capitalist development." (_Capital_, Vol. III, 5th
page of Chap. 10)

   In the course of developing his point in Chap. 9,
Marx treated the transformation of values into prices
of production as a historical transition from one stage
to the next. Exchange at value is no less "real" than
exchange at prices of production. The transition from
one "central price" to the other is thus susceptible
to empirical measurement. Of course, if empirical
measurement is attempted, all the external factors which
distort commodity prices must be taken into account.

   I will resume the discussion soon. Those interested
in this topic should read Smith's book, Chap. 9 and 10
of _Capital_, Vol. III, Chap. 7 of _The Theory of
Capitalist Development_, by Paul Sweezy, and "On the
Correction of Marx's Fundamental Theoretical Construction
in the Third Volume of Capital," by Ladislaus von
Bortkiewicz, published as an appendix to _Karl Marx
and the Close of His System and Bohm-Bawerk's Criticism
of Marx_, by Bohm-Bawerk and Hilferding, 1949, Augustus
M. Kelley, publisher, library call number HB501.M37B6513.

   In my next posting I will discuss Sweezy's introduction
of Bortkiewicz's criticism into the debate within Marxism,
and Smith's response to this.

Jim Miller

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