Tuesday, May 12, 2015

Dühring’s Review of Capital and Marx’s Letter to Engels of 8 January, 1868 on the Labour Theory of Value

Eugen Dühring (1833–1921), the German socialist economist and philosopher, published in 1868 the following review of volume 1 of Marx’s Capital:
Dühring, E. “Marx, Das Kapital, Kritik der politischen Oekonomie, 1. Band, Hamburg 1867,” in Ergänzungsblätter zur Kenntnis der Gegenwart 3.3: pp. 182–186.
There is a copy of the German text and rather inaccurate transcription of the German review here:
http://nam-students.blogspot.jp/2013/04/duhring-e-1867-marx-das-kapital-kritik.html
In the review, Dühring had criticisms of the labour theory of value, and Marx in a letter to Engels on the 8th January, 1868 had the following to say about Dühring’s review:
Dear Fred,

With regard to Dühring. It is a great deal from this man that he almost positively receives the section on Primitive Accumulation. He is still young. As a follower of Carey, he is in direct opposition to the free-traders. Added to this he is a university lecturer and therefore not grieved that Professor Roscher, who blocks the way for all of them, should get some kicks. One thing in his appraisal has struck me very much. Namely, so long as the determination of value by working time is left ‘vague’, as it is with Ricardo, it does not make people shaky. But as soon as it is brought into exact connection with the working day and its variations, a very unpleasant new light dawns upon them. I believe that an additional reason for Dühring to review my book at all was malice against Roscher. His fear of being treated like Roscher is certainly very easily perceptible. It is strange that the fellow does not sense the three fundamentally new elements of the book:

1) That in contrast to all former political economy, which from the very outset treats the different fragments of surplus value with their fixed forms of rent, profit, and interest as already given, I first deal with the general form of surplus value, in which all these fragments are still undifferentiated – in solution, as it were.

2) That the economists, without exception, have missed the simple point that if the commodity has a double character – use value and exchange value – then the labour represented by the commodity must also have a two-fold character, while the mere analysis of labour as such, as in Smith, Ricardo, etc, is bound to come up everywhere against inexplicable problems. This is, in fact, the whole secret of the critical conception.

3) That for the first time wages are presented as an irrational manifestation of a relation concealed behind them, and that this is scrupulously demonstrated with regard to the two forms of wages – time rates and piece rates. (It was a help to me that similar formulae are often found in higher mathematics.)

And as for Dühring’s modest objections to the determination of value, he will be astonished to see in Volume 2 [sc. of Capital] how little the determination of value ‘directly’ counts in bourgeois society. Indeed, no form of society can prevent the working time at the disposal of society from regulating production one way or another. So long, however, as this regulation is accomplished not by the direct and conscious control of society over its working time – which is possible only with common ownership – but by the movement of commodity prices, things remain as you have already quite aptly described them in the Deutsch-Französische Jahrbücher...
Letter of Karl Marx to Friedrich Engels in Manchester, 8 January 1868
https://www.marxists.org/archive/marx/works/1868/letters/68_01_08.htm
It is the passage at the end that interests me: when Marx said that Dühring would be “astonished to see in Volume 2 how little the determination of value ‘directly’ counts in bourgeois society,” what did he mean by this?

Earlier in the letter, Marx notes that if the theory of labour value as a determination of price is left “vague” or “underdetermined” (the latter word is used in the translation of this letter in Marx and Engels 1987: 514), then people do not seem to have so much doubt about it. The gist of what Marx is saying here appears to be that, when he attempts to explain how labour value actually determines price, this is when the troubles begin.

But the final statement of Marx seems to me to be very significant:
“So long, however, as this regulation is accomplished not by the direct and conscious control of society over its working time – which is possible only with common ownership – but by the movement of commodity prices, things remain as you have already quite aptly described them in the Deutsch-Französische Jahrbücher...”
This is significant because Marx wrote this in 1868 after volume 1 of Capital had been published in 1867.

Marx appears to be saying that when labour time’s relation to value is determined by the “movement of commodity prices” then labour time counts for little and prices are actually determined as described by Engels in his essay “Outlines of a Critique of Political Economy” in Deutsch-Französische Jahrbücher (1844).

But a careful reading of this essay shows that Engels, although he thought that labour is the main factor in production and the fundamental “source of wealth,” nevertheless did not think that abstract socially necessary labour time determines exchange value.

Instead, for Engels, exchange value is determined by (1) cost of production and (2) the interaction of supply and demand:
“It is, however, quite correct, and a fundamental law of private property, that price is determined by the reciprocal action of production costs and competition. This purely empirical law was the first to be discovered by the economist; and from this law he then abstracted his ‘real value,’ i.e., the price at the time when competition is in a state of equilibrium, when demand and supply cover each other. Then, of course, what remains over are the costs of production and it is these which the economist proceeds to call ‘real value,’ whereas it is merely a definite aspect of price.”
Frederick Engels, “Outlines of a Critique of Political Economy,” Deutsch-Französische Jahrbücher, 1844
https://www.marxists.org/archive/marx/works/1844/df-jahrbucher/outlines.htm
If Marx was agreeing with Engels that in reality prices in real world capitalism are not determined by abstract socially necessary labour time, then this was a frank admission by Marx in private to Engels that the analysis in volume 1 of Capital was grossly deficient and misleading.

For in volume 1 of Capital, Marx does try to explain individual commodity prices in terms of their abstract socially necessary labour time (SNLT). For example, Marx argues that rising unit SNLT in a reduced cotton crop after a bad harvest is supposed to explain the rising price of cotton and even the price rise of cotton produced in previous production (Marx 1982: 317–318). Marx argues that when commodities exchange for one another, this is because there is ultimately an equality of socially necessary labour time embodied in them (Marx 1982: 124, 127–128). Even worse Marx wants to make prices directly corresponding to SNLT an anchor or equilibrium value around which market prices fluctuate:
“The production of commodities must be fully developed before the scientific conviction emerges, from experience itself, that all the different kinds of private labour (which are carried on independently of each other; and yet, as spontaneously developed branches of the social division of labour, are in a situation of all-round dependence on each other) are continually being reduced to the quantitative proportions in which society requires them. The reason for this reduction is that in the midst of the accidental and ever-fluctuating exchange relations between the products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him. The determination of the magnitude of value by labour-time is therefore a secret hidden under the apparent movements in the relative values of commodities.” (Marx 1982: 168).
But if market prices are not determined in this way, but by cost of production and the interaction of supply and demand, then this makes a nonsense of Marx’s statements in volume 1 of Capital.

I can only conclude that there is a fundamental contradiction in Marx’s thinking here, and that Marx’s letter to Engels of 8 January, 1868 was a private and tacit admission of this contradiction too.

BIBLIOGRAPHY
Dühring, E. “Marx, Das Kapital, Kritik der politischen Oekonomie, 1. Band, Hamburg 1867,” in Ergänzungsblätter zur Kenntnis der Gegenwart 3.3: 182–186.

Engels, Frederick. 1844. “Outlines of a Critique of Political Economy,” Deutsch-Französische Jahrbücher
https://www.marxists.org/archive/marx/works/1844/df-jahrbucher/outlines.htm

Marx, Karl and Frederick Engels. 1987. Collected Works. Volume 42. Marx and Engels 1864–1868. Lawrence & Wishart, London.

12 comments:

  1. As I've suggested before, volume 1 of Capital assumes various abstractions -- not least, no competition, the same level of capital investment in all industries (i.e., one industry) -- in order to show that surplus value (rent, interest, profit) is derived from the exploitation of labour and to lay the basis for the discussion of competition (namely regulated by production).

    Before the late 1850s, Marx was a Ricardian -- in the disgraceful "The Poverty of Philosophy" he proclaims that Ricardo was right and commodities exchanged directly in accord with the labour theory of value. He later came to the conclusion that this was not the case -- it operated indirectly due to the existence of non-labour incomes (which meant he implicitly acknowledged Proudhon was right after all).

    Volume 3 of Capital introduced competition, differences in investment ratios, etc. and he used this to explain how the labour theory of value worked indirectly -- this was required to make profit rates equalise across the market.

    Labour-time in production -- or, the cost of production -- regulates the market (to use Proudhon's term) by means of the law of value. Namely, if the market price is higher than the cost price then capital will flow into that industry, increase supply and reduce excess profit. The opposite happens when the market price is lower than cost.

    All this is obscured because Marx did not make his assumptions and abstractions clear in volume 1 -- a couple of comments in footnotes don't cut it.

    Why did he not make it clear? Not sure -- perhaps political as Capital volume 1 is full of statements which suggest that Proudhon had been right after all in 1846 (for example, on the division of labour and machinery).

    To proclaim openly that the labour theory of value did not operate directly due to non-labour income would mean that one of his central assertions against Proudhon was completely wrong -- and he was fighting against the mutualists in the First International for influence at the time...

    Don't discount the role of politics in Marx's work -- as can be seen from "The Poverty of Philosophy" he was happy to distort both Proudhon and Bray in his quest to dominate the socialist movement. In terms of Capital, this may explain why volume 1 is so lacking in clear statements on his assumptions and why it appears to be in contradiction to volume 3.

    Iain
    An Anarchist FAQ
    http://www.anarchistfaq.org.uk

    ReplyDelete
  2. Hi LK! Couple quick notes:

    If Marx was agreeing with Engels that in reality prices in real world capitalism are not determined by abstract socially necessary labour time,

    He was.

    then this was a frank admission by Marx in private to Engels that the analysis in volume 1 of Capital was grossly deficient and misleading.

    I've provided you with months of highly detailed comments showing how the analysis is neither deficient nor misleading, save in the case of incautious or uncharitable readers (e.g., Herr Böhm-Bawerk) making a bungle of it. Thankfully, we've surmounted such troubles here.

    But if market prices are not determined in this way, but by cost of production and the interaction of supply and demand, then this makes a nonsense of Marx’s statements in volume 1 of Capital.

    ...I said, we've surmounted such troubles here. Let's please not resurrect the "hurf durf marx say price is same as value" shtick. Can't we do something else, instead? How about "Who's On First"?

    I can only conclude that there is a fundamental contradiction in Marx’s thinking here, and that Marx’s letter to Engels of 8 January, 1868 was a private and tacit admission of this contradiction too.

    The "only" thing you can conclude...?

    Hm. Okay. Yes, Marx could have been presenting a separate, second, and contradictory theory in which price equals value for each commodity, contrary to his published work and, as you note with some puzzlement, also his unpublished letters. Hell, let's throw in another, while we're at it: I'd submit that it is also equally likely that when Marx speaks of "alienation," he is actually referring to the transformation of human beings into extraterrestrial organisms. It's right there in the word, after all.

    I submit another thing he could have meant, and it's the thing I've been saying all along: The regulation in question is a systemic constraint, such that prices cannot be absolutely arbitrary in the last analysis; in a given period, one cannot consume (nor exchange for) more than has been produced.

    I'm a bit saddened that I've been discussing it this long and it never even came to your mind.

    Please consider adding a correction!

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    Replies
    1. "I've provided you with months of highly detailed comments showing how the analysis is neither deficient nor misleading, save in the case of incautious or uncharitable readers (e.g., Herr Böhm-Bawerk) making a bungle of it. Thankfully, we've surmounted such troubles here."

      You've done no such thing.

      If you admit what I say, you have 2 alternatives:

      (1) if none of Marx's statements in vol. 1 about SNLT determining exchange value are meant to be taken seriously (e.g., if they were just meant to be totally unrealistic abstract model) and were not meant to be an explanation of any real world exchange values at all, then Marx was one of the most incompetent economic writers ever. He never explicitly tells us his comments are just a model. Also, the value of vol. 1 as economic science plunges if you admit this.

      (2) or more likely Marx meant what he said and there is a real contradiction between vol. 1 and vol. 3
      -------------------
      Either way Marx is damned, and the statements to which I point in vol. 1 cannot be taken seriously.

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    2. (1) They are meant to be taken seriously, but not in the particular way that you do. If you feel that this makes Marx a poor economic writer, fine; I am not one to argue over opinions. Just don't get what he wrote ("poorly") twisted.

      Vol 1 ch 3 is the first in which he even addresses price, and he lays out the individual value/price incongruity plainly. Whereas there is not enough space to include full quotes (can you increase max comment length?), I'll just point it out: right in the very first section of the chapter there is a span of 2-3 paragraphs starting with "Price is the money-name of the labour..." that explain it.

      So, he lays out the case of inequality in chapter 3 (after first defining the terms of equality in chapter 1, since inequality requires a principle of equality). Chapter 4 does not discuss price, since he then goes into the abstracted exchange procedures of C-M-C vs. M-C-M'. But chapter 5, when discussion of price and value resumes, spells out the assumption.

      "It is true, commodities may be sold at prices deviating from their values, but these deviations are to be considered as infractions of the laws of the exchange of commodities, which in its normal state is an exchange of equivalents, consequently, no method for increasing value. ..."

      "The conversion of money into capital has to be explained on the basis of the laws that regulate the exchange of commodities, in such a way that the starting-point is the exchange of equivalents. Our [capitalist] must buy his commodities at their value, must sell them at their value, and yet at the end of the process must withdraw more value from circulation than he threw into it at starting. ... These are the conditions of the problem."

      In other words, to explain net profit, we must rule out gains from trade that are also another party's loss. Thus, buying and selling at value is assumed.

      See also the last footnote of the chapter: "If prices actually differ from values, we must, first of all, reduce the former to the latter. ... The continual oscillations in prices, their rising and falling, compensate each other, and reduce themselves to an average price, which is their hidden regulator. ... How can we account for the origin of capital on the supposition that prices are regulated by the average price, i. e., ultimately by the value of the commodities? I say “ultimately,” because average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe."

      "Ultimately." As in, "in the last instance," as I have said above.

      You've even acknowledged this last one, in comments and at least one post. That you pretend not to have done so now rings dishonest.

      I get that you'd prefer if it had been in chapter 1, but by then he was still spelling out the terms on which it depended. Either way, it's there, and I think it appears at a perfectly sensible point. But again, de gustibus non est disputandum.

      (2) As I have said time and time again, in light of (1), you cannot meaningfully point to a contradiction between volumes 1 and 3, even on your own criteria; that would necessitate that volume 1 says P and volume 3 says ¬P. Instead, I have shown that your uncharitable, deficient reading would require that you interpret volume 1 to say both P and also ¬P, and therefore volume 3's ¬P is consistent with volume 1's ¬P, and the real "contradiction" is between volume 1 and itself.

      Of course, it's very much harder to pretend that it's a contradiction when you've got the text right in front of you spelling out what he's doing.

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    3. And it is clear in vol. 1 Marx thinks SNLT is an anchor of price, and a type of equilibrium anchor around which prices fluctuate:

      "in the midst of the accidental and ever-fluctuating exchange relations between the products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him. The determination of the magnitude of value by labour-time is therefore a secret hidden under the apparent movements in the relative values of commodities.” (Marx 1982: 168).

      That Marx is admitting even in vol. 1 that prices diverge from true SNLT does not change the fact that he says SNLT directly determines price/exchange at some natural price so that 2 commodities exchange as true equivalents in terms of equal SNLT.

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    4. I've already explained: The regulation in question is a systemic constraint, such that prices cannot be absolutely arbitrary in the last analysis; Marx, a materialist, is keenly sensitive to the point that, in a given period, one cannot consume (nor exchange for) more than has been produced.

      He does not anywhere make the claim you're attributing to him, and it's becoming harder and harder for you to build this case, since I've left you with basically no planks.

      But hey, I will now take a different tack and humor your insistence that Marx MUST have been inconsistent (because he's Marx!). I will wave a wand, and now all of the things that you insist he must have been saying, as thin as they are, are valid interpretations. Poof!

      Where does that leave us? Well, I hope you're ready for what follows: Now, we have two separate interpretations of Marx. In one, he says that prices are always and everywhere equal to value. In another, he says that prices are NOT individually equal to value, but value nevertheless exerts a regulative effect on price in the last instance. I support the latter reading, while you believe the former is correct. (Note that by your own criterion this makes your reading "idiosyncratic," since literally no Marxist economist I have ever read agrees with you on this point, even though many vociferously disagree with one another on other issues.)

      You argue that, if Marx is claiming what you say, his theory is plainly false, since it is obvious that price can change on a good without any reference to the SNLT required to produce it. I, in turn, agree with you; that theory is bollocks. Let's discard it. If Marx said that, he's 100% wrong.

      That leaves us with my reading, which is at least as well supported by the text as yours — in fact quite a lot moreso, as I and other scholars would contend. Now, you have spent the past two months shifting the focus from the theory I support to the one you would rather rebut; some would call this a straw man, but I will be generous and assume that you did not conflate your reading with mine.

      Therefore, you are now at the place you have wished to be. You and I both agree that the theory you oppose is flatly wrong. You stand victorious.

      However, you still have to contend with the economic theory I support, which you claim to oppose (but in fact I think if you understood it you'd find nothing contradicting your own take on the economy).

      So, lay on, sir. Hic rhodus, hic salta.

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    5. " Now, we have two separate interpretations of Marx. In one, he says that prices are always and everywhere equal to value. In another, he says that prices are NOT individually equal to value, but value nevertheless exerts a regulative effect on price in the last instance. I support the latter reading, while you believe the former is correct. . "

      I haven't attributed that view to Marx: that is a straw man if it is supposed to be my view.

      So you are either

      (1) so confused that debate with you is clearly pointless, or

      (2) are now resorting to outright dishonesty.

      Either way your comments add nothing to this tread.

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    6. Don't you dare dismiss me. I have endured your petty slings and arrows, I have endured every dirty tactic you've brought to bear to get a leg up in this discussion, and I've done so with a respect that is almost never reciprocated. If you dismiss me now because you claim I've misread you (which would be a bit of a flip, but even this I'm prepared to roll with), then that just tells me you've no arguments left.

      Now. If you are NOT claiming that the inconsistency you claim to have spotted in Marx is on the point of whether or not value equals price, then WHAT on earth are you claiming? Please spell it out for me, in your own words.

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    7. In vol. 1 Marx gives us the impression that

      (1) there are exchange values/real prices in capitalism that directly correspond to SNLT;

      (2) that SNLT does exert a real influence on individual determination of exchange values/prices, and

      (3) that even though supply and demand drives prices away from real labour values frequently the labour value prices are anchors for the price system around which market prices fluctuate

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    8. Now we're getting somewhere.

      (1) It's clear from my examples that "vol 1" does not give this impression — or at least certainly not uniformly, and those statements made in unequivocal terms say otherwise (e.g., ch 3).

      (2) That much is fine. Value does exert a real influence on price, but not in a direct and certainly not in a conscious fashion. Rather, it asserts itself "in the last instance," since it limits the horizon of outcomes. By way of analogy: If you have ten balloons in a box, then the amount that each one can be inflated is in most respects independent of all the others, except in the respect that they're brought into relation via the box itself. If there's only enough space for the last one to be inflated halfway, then that's a systemic constraint asserting itself reciprocally via the volumetric limits of the box. Similar limits prevent total price from exceeding total value; we can't eat food that doesn't yet exist any more than we can inflate a balloon into space the box hasn't got.

      (3) I didn't get that impression, since I see him saying things like "prices are regulated by the average price" in the same breath as "average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe."

      All the same, sorry to have misread you before.

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    9. (1) untrue. In chapter 1, Marx assumes that in an exchange there is an equality that is explained by equal SNLT (Marx, 1982. Capital. Volume One. A Critique of Political Economy, trans. Ben Fowkes, Penguin Books, pp. 126-129). He tries to explain the high price of diamonds in terms of high SNLT (ibid. Chapter 1 p. 130).

      Later on we read that rising cotton prices can really be explained by rises in unit SNLT:

      http://socialdemocracy21stcentury.blogspot.com/2015/03/more-mystical-labour-theory-of-value.html

      If I read through vol. 1 from beginning to end, I am sure many, many more examples would quickly accumulate.

      (2) is laughable waffle

      (3) I really couldn't care less that you can't see what any reasonable non-Marxist can see clearly:

      "in the midst of the accidental and ever-fluctuating exchange relations between the products, the labour-time socially necessary to produce them asserts itself as a regulative law of nature. In the same way, the law of gravity asserts itself when a person’s house collapses on top of him. The determination of the magnitude of value by labour-time is therefore a secret hidden under the apparent movements in the relative values of commodities.” (Marx 1982: 168).

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    10. (1) The correspondence or non-correspondence of price to value is only an important datum in the context of the broader system of prices and values, though, so I don't get why it's important that you even bring it up.

      (2) Not at all. But hey, at least one of us is learning something from this discussion: I am learning that a hostile, unwilling student is no student at all.

      (3) Yes, please keep parading around your incomprehension of that passage. It really drives my point home.

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