1.0 Introduction I have previously quoted authorities disparaging Böhm-Bawerk's pamphlet examining the supposed contradiction between volumes 3 and 1 of Marx's Capital. I refer to Karl Marx and the Close of His System, first published in German, in 1896. Engels brought out volume 3 of Marx's Capital in 1894. Böhm-Bawerk's treatment, although it ultimately misses the point, is important from a historical angle: "...the historical importance of Böhm-Bawerk's criticism of Marx ... should not lead us into the error of falsely evaluating the work itself. The truth is that in its essentials Karl Marx and the Close of His System is not a particularly remarkable performance." -- Paul M. Sweezy, from the editor's introduction. I find I also agree with Andrew Kliman. A good bibliography on
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I have previously quoted authorities disparaging Böhm-Bawerk's pamphlet examining the supposed contradiction between volumes 3 and 1 of Marx's Capital. I refer to Karl Marx and the Close of His System, first published in German, in 1896. Engels brought out volume 3 of Marx's Capital in 1894. Böhm-Bawerk's treatment, although it ultimately misses the point, is important from a historical angle:
"...the historical importance of Böhm-Bawerk's criticism of Marx ... should not lead us into the error of falsely evaluating the work itself. The truth is that in its essentials Karl Marx and the Close of His System is not a particularly remarkable performance." -- Paul M. Sweezy, from the editor's introduction.
I find I also agree with Andrew Kliman. A good bibliography on the transformation problem would be much longer than below, with more recent work.
Böhm-Bawerk's major work is set out in three volumes. The first, History and Critique of Interest Theories is a work of massive scholarship. In the second, Positive Theory of Capital and Interest, Böhm-Bawerk sets out his own failed theory of capital and its returns. Although he does not view capital as a social relation, he sets out the problem of explaining the returns to capital in an insightful manner. I think the categorization in his history influenced Joseph Schumpeter in his History of Economic Analysis.2.0 Outline of The Close Of Marx's System and First Two Chapters
The Close, after an introduction, has two chapters of exposition of Marx. The third chapter contains Böhm-Bawerk's main critique. A fourth chapter is about how Marx came to make his supposed mistake, and the last chapter is focused on Werner Sombart.
In the introduction, Böhm-Bawerk notes Engel's prize essay competition in the introduction to volume 2 and the awarding of prizes in volume 3 of Capital. Both Marxists and non-Marxists consider the problem treated here of some importance. You can find many Marxists subsequently decrying this focus, to the detriment of other issues.
Chapter 1, the first chapter of exposition, is about volume 1 of Capital. The exposition is narrow. Nothing is said about the form of value, commodity fetishism, the drive to increase absolute and relative surplus value, the consequent changes in technology and organization of capitalist organizations, or the illusions created by competition.
Chapter 2 skips over volume 2, to focus on a few chapters in volume 3. He presents Marx's tables showing how surplus value is redistributed over spheres of varying capital intensity to form prices of production. Like Marx, he evaluates inputs of constant and variable capital at labor values, not at prices of production. He does NOT note that Marx says a possibility of error exists here:
"The foregoing statements have at any rate modified the original assumption concerning the determination of the cost price of commodities. We had originally assumed that the cost price of a commodity equalled the value of the commodities consumed in its production. But for the buyer the price of production of a specific commodity is its cost price, and may thus pass as cost price into the prices of other commodities. Since the price of production may differ from the value of a commodity, it follows that the cost price of a commodity containing this price of production of another commodity may also stand above or below that portion of its total value derived from the value of the means of production consumed by it. It is necessary to remember this modified significance of the cost price, and to bear in mind that there is always the possibility of an error if the cost price of a commodity in any particular sphere is identified with the value of the means of production consumed by it. Our present analysis does not necessitate a closer examination of this point." -- Karl Marx, Capital vol 3, chap 9
Böhm-Bawerk does say that the price of production of a commodity produced with average organic composition of capital is the same as its (labor) value. He quotes Marx as asserting that simple commodity production prevails in a pre-capitalist historical period.3.0 The Third Chapter
In chapter 3, Böhm-Bawerk provides his criticisms, somewhat disjointedly. In some sense, he does not see a need to do this, since he thinks a contradiction between volume 1 and volume 3 is never resolved:
"I cannot help myself; I see here no explanation and reconciliation of a contradiction, but the bare contradiction itself. Marx's third volume contradicts the first. The theory of the average rate of profit and of the prices of production cannot be reconciled with the theory of value."
He mistakenly thinks the point of the labor theory of value, in volume 1, is to explain relative prices:
"the chief object of the 'law of value' ... is ... the elucidation of the exchange relations of commodities"
But it is to explain why their is a return to capital:
"To explain the general rate of profits, you must start from the theorem that, on average, commodities are sold at their real values, and that profits are derived from selling them at their values, that is, in proportion to the quantity of labor realized in them. If you cannot explain profit upon this supposition, you cannot explain it at all. This seems paradox and contrary to everyday observation." -- Karl Marx, Value, Price, and Profit
Much of Böhm-Bawerk's criticisms of Marx are merely unknowing echoes of Marx's criticisms of his predecessors in classical political economy. I refer here to Theories of Surplus Value, sometimes called the fourth volume of Capital.
Anyways, Böhm-Bawerk organizes his rebuttals around four arguments he finds in Marx:
- Total prices equal total values.
- The law of value governs the movement of prices.
- The law of value rules in a pre-capitalist reign of simple commodity production.
- "The law of value regulates the prices of production at least indirectly and in the last resort."
Böhm-Bawerk accepts that total prices equals total values:
"...therefore, it is quite true that the total price paid for the entire national produce coincides exactly with the total amount of value or labor incorporated in it [,a] tautological declaration..."
He does have some carping, including the complaint that nobody ever trades this total gross output against something or other.
I skip discussion of the second argument, on price dynamics.
In discussing simple commodity production, Böhm-Bawerk takes the opportunity to contrast his own theory about the period of production and waiting. Why should this theory not apply to simple commodity production?
In discussing Marx's fourth argument, Böhm-Bawerk thinks it reasonable to accept Marx's premise that the sum of total variable capital and total surplus value does not vary with wages. He does not see that, since this sum is the labor value of net output when profits are zero and his acceptance of a tautology in Marx's first argument, the capital replaced in producing the net output must be equal to its labor value in the system of prices of production. Böhm-Bawerk has some carping here, too, in which he mistakenly asserts that capital income can be reduced to a finite series of dated labor inputs, with the first term one in which a good of higher order is produced with unassisted labor.
We are almost home. Böhm-Bawerk recognizes prices or production vary with wages. Some may rise and some may fall. He insightfully notes that the total of the prices of wage goods may therefore deviate from the total labor value of this aggregate.
But, Böhm-Bawerk, finds coherent Marx's application of the rate of profits from the labor value system to the system of prices of production. Given Marx's premises, the rate of profits in the system of prices of production is the ratio of surplus value in the economy as a whole to the total labor value of the capital advanced. Much of the further literature on the so-called transformation problem questions the internal consistency of the volume 3 argument.4.0 Sundry Observations on The Fourth Chapter
Böhm-Bawerk finds Marx's order of exposition incredibly weak and says this cannot be how Marx came to accept his theory of value. He reads marginalist functions into Marx's use of 'supply' and 'demand'. He recognizes that Marx knew about the transformation problem before publishing volume 1. In this point, he is advanced beyond some later commentators.5.0 Conclusion
Philip Wicksteed was another early marginalist who reesponded to Marx. Other early treatments of the so-called transformation problem or of Ricardo or Marx's system include works by Ladislaus Bortkiewicz, Vladimir Dmitriev, Georg von Charasoff, Wolfgang Mühlpfordt, and Mikhail Tugan-Baranovsky. Maurice Potron, as I understand it, was the first to apply the Perron-Frobenius theorems to linear economic systems. John Von Neumann drew on Robert Remak in formulating his growth model. Aside from Wicksteed, these authors advanced an objective theory of value, in the tradition of classical or Marxist political economy, in some sense.
I do not see any contradiction in the inequality of relative prices of production and of labor values. On the other hand, Böhm-Bawerk will not lead you to question whether Marx's invariants can all hold simultaneously if capital inputs are transformed. Nor does he pose the so-called transformation problem such that you can see how Charasoff's urkapital (original capital) or Sraffa's standard commodity solve it. For understanding the transformation problem, Böhm-Bawerk is not helpful.Reference
- Eugen von Böhm-Bawer. 1949. Karl Marx and the Close of His System (ed. by Paul Sweezy).Orion Editions.
- Eugen von Böhm-Bawerk. 1959. Capital and Interest (Three volumes). Libertarian Press.
- Andrew Kliman. 2007. Reclaiming Marx's "Capital": A Refutation of the Myth of Inconsistency Lexington Books.
- Fred Moseley. 2016. Money and Totality: A Macro-Monetary Interpretation of Marx's Logic in Capital and the End of the 'Transformation Problem'. Brill.
- Paul A. Samuelson. 1971. Understanding the Marxian notion of exploitation: a summary of the so-called transformation problem between Marxian values and competitive prices. Journal of Economic Literature 9 (2): 399-431.