Achille Loria on the Contradiction in Marx’s Labour Theory of Value

When volume 3 of Marx’s Capital was published, many economists and even commentators sympathetic to Marxism found volume 3 badly inconsistent with volume 1. Even Post Keynesians like Joan Robinson have pointed to these contradictions (Robinson 1966: 10, 14).

But amongst the early critics of Marxism was Achille Loria (1857–1943), an Italian political economist.

Achille Loria’s book Karl Marx (1920) reproduced his critique of Marx from an earlier article of 1895:

“... by a vigorous deduction from his premise that the value of commodities is measured by the mass of labour incorporated in them, Marx arrives at the fundamental and logical distinction between constant capital and variable capital. If, however, the value of products be exclusively determined by the mass of labour incorporated in them, it is evident that the capital invested in machinery or in raw material can only transmit to the product a value exactly equal to the quantity of labour contained therein, without adding any surplus, and that it is therefore constant capital; whereas wage capital transmits to the product value equal to all the quantity of labour which it maintains and sets in motion, a quantity which, as we know, exceeds the quantity of labour contained in the capital itself. In other words, wage capital, besides reproducing its own value, furnishes a supplement or a surplus value, and is therefore variable capital. Consequently surplus value arises exclusively from variable capital, and is therefore precisely proportional to the quantity of this capital. It further ensues that of two undertakings employing equal amounts of aggregate capital, the one which employs a larger proportion of constant capital ought to furnish a profit and a rate of profit lower than that furnished by the other. But free competition among the capitalists enforces an equal rate of profit upon the capitals invested in the various undertakings, and leads to the immediate abandonment of undertakings requiring a greater proportion of constant capital, and to the correlative expansion of the others. There consequently results an increase in the value of the products of the former undertakings, and a diminution in the value of the products of the latter. This process continues until the value of the respective products furnishes an equal rate of profit to the capitals respectively employed in producing them. Value, therefore, though in the first instance it is equivalent to the labour employed in producing the products, necessarily diverges from that standard in the end, and has then an utterly different measure. Thus the theory we are discussing is peremptorily refuted, or is reduced to absurdity.

From the outset Marx is distinctly aware of the existence of this striking contradiction, which emerges in so formidable a manner in the first stage of his investigation; he frankly recognises it, but postpones its solution to the later volumes of his treatise. On the very morrow, indeed, of the publication of the first volume, he ardently set to work once more, and sketched to his friend, in monumental pages, the design of the complete book.” (Loria 1920: 71–72).

“… [but], on the one hand, Marx clearly affirmed, and showed by his actions, that he definitely wished to devote himself to the completion of his treatise, whereas, on the other hand, it is undeniable that after the publication of the first volume of Capital, he never wrote another line of the book, and that all the posthumous additions to this volume were composed prior to 1867.” (Loria 1920: 72–73).

“Most distressing of all, [sc. when Marx died] he had taken with him to the grave the solution of the formidable enigma which everyone, the vulgar and the thinkers alike, had expected his genius to solve, and which no one else could unravel. It is true that shortly before his death he showed his friend the bulky manuscripts dictated in earlier days relating to the Criticism of Political Economy, suggesting that something might be made of this collection. It is also true that Engels, faithful executor of his divinity’s wishes, devoted himself with splendid zeal to the publication of the manuscripts. But alas what delusion was in store for the admirers of the master! What a Russian campaign of disaster organised by enthusiastic lieutenants to the hurt of this Napoleon of thought!

In 1885, two years after the death of Marx, there was published under Engels’ supervision a so-called second volume of Capital. But the careless and pedestrian editorship, the long theoretical disquisitions making no appeal to facts for their justification, disquisitions in which the argumentative thread is continually broken, suffice to show that what we have before us is not a book, hardly even a sketch for a book, but a series of casual writings composed for the purposes of study and for personal illumination.” (Loria 1920: 74–75).

“But absolutely nowhere [sc. in volume 2 of Capital] does it touch on or even hint at the theoretical enigma left unsolved in the first volume. Solely in Engels’ preface do we find an announcement that the definitive solution will be furnished in a subsequent volume, and a suggestion that in the interim economists engage in a sort of academic debate, and bring forward their respective solutions. There actually took part in this strange competition, with varying success, Conrad Schmidt, Landé, Lexis, Skworzoff, Stiebeling, Julius Wolf, Fireman, Lafargue, Soldi, Coletti, Graziadei, and myself. At length, however, in 1894, appeared the third volume, which was to reveal to an impatient world the desired solution.

The solution reduces itself to this. It is true, says Marx, that the value commensurate to labour ends by assigning to the capitals respectively employed as constant and as variable, different rates of profit, and that this is radically incompatible with competition. But it is likewise true that products are not actually sold for their value, but for their price of production, which is equal to the capital consumed plus profit at the ordinary rate on the total capital employed. Certainly if we consider the mass of products sold, we find that their total price is precisely equal to their total value. But this integral value is not distributed among the various products in proportion to the quantity of labour incorporated in them, but in a lesser or greater proportion, according as the products themselves contain a greater or less proportion of the mean between the constant capital and the total capital; that is to say, the products containing a proportion of constant capital superior to the mean are sold at a price above their value in order to eliminate the deficiency of profit due to the preponderance of the capital which does not produce surplus value; whereas the products containing a proportion of constant capital inferior to the mean are sold at a price less than their value so as to eliminate the excess of profit due to the preponderance of the capital that produces surplus value; whilst only the products containing the mean proportion of constant capital and total capital are sold at a price precisely identical with their value.

But it soon becomes apparent that this so-called solution is little more than a play upon words, or, better expressed, little more than a solemn mystification. For when economists endeavour to throw light upon the laws of value, they naturally consider the value at which the commodities are actually sold, and not a fantastical or transcendental value, not a value which neither possesses nor can possess any concrete relationship to facts. It may well be that value as determined by abstract economic theory will not always correspond precisely with value as a concrete fact, for the complexities and the manifold vicissitudes of real life impose obstacles; it may well be, indeed, that to the rigidity of normal value, constituting the type of the relationship of exchange, we ought to counterpose the comparatively transient fluctuations of current value. But it must be understood that no logical fact should stand in the way of the realisation of normal value, for this, conversely, ought to be derived by logical necessity from fundamental economic premises. Of a value, indeed, which not only is not realised, but is not logically capable of realisation, the economist neither can nor ought to take any account; he should show in what respect, instead of being the expression of what value is, it is the expression of what value is not and cannot be; he should point out the negation of every correct and positive theory of value. Now this value commensurate to labour, value as defined by Marx’s theory, not merely has its realisation restricted or modified by the vicissitudes of reality, but further, as Marx himself is constrained to recognise, it is not logically capable of realisation, seeing that it would give rise to results incompatible with the most elementary advantage of those who effect the exchange of commodities; consequently, it is not merely an abstraction remote from reality, but is incompatible with reality; not only is it an impossibility in the realm of fact, but further and above all it is a logical impossibility. Thus, far from effecting the salvation of the threatened doctrine, this alleged solution administers a death-blow, and implies the categorical negation of what it professes to support. For what meaning can there possibly be in this reduction of value to labour, the doctrine dogmatically affirmed in the first volume, to one who already knows that the author is himself calmly prepared to jettison it? Is there any reason for surprise at Marx’s hesitation to publish this so-called defence; need we wonder that his hand trembled, that his spirit quailed, before the inexorable act of destruction?” (Loria 1920: 76–79).

BIBLIOGRAPHY
Loria, Achille. 1895. “L’opera postuma di Carlo Marx,” Nuova Antologia di Scienze 55.3 (February): 460–496.

Loria, Achille. 1920. Karl Marx. (trans. Eden and Cedar Paul), George Allen and Unwin Ltd., London.

Robinson, Joan. 1966. An Essay on Marxian Economics (2nd edn.). Macmillan, London.

Achille Loria and Alexander Gray on Marx’s Labour Theory of Value

Critics of Marx have long contended that volume 1 of Capital (1867) and volume 3 of Capital (1894) contain a catastrophic contradiction on the labour theory of value. By volume 3 of Capital, Marx has retreated into a position on the relation between labour value and price where that equality only holds in a kind of aggregate situation.

When volume 3 of Capital was published by Engels, Achille Loria was a major critic of the contradiction between volume 3 and volume 1 (see Loria 1895 = Loria 1902: 71–150).

In the supplement to volume 3 of Capital, Frederick Engels quoted some of Achille Loria’s criticisms:

“No economist with any trace of sense has ever concerned himself or will ever want to concern himself with a value which commodities do not sell for and never can sell for (ne possono vendersi mai) .... In asserting that the value for which commodities never sell is proportional to the labor they contain, what does Marx do except repeat in an inverted form the thesis of the orthodox economists, that the value for which commodities sell is not proportional to the labor expended on them? ... Matters are not helped by Marx’s saying that despite the divergency of individual prices from individual values, the total price of all commodities always coincides with their total value, or the amount of labor contained in the totality of the commodities. For inasmuch as value is nothing more than the exchange ratio between one commodity and another, the very concept of a total value is an absurdity, nonsense ... a contradiction in abjecto....”

“Was there ever such an utter reductio ad absurdum, such complete theoretical bankruptcy? Was ever scientific suicide committed with greater pomp and more solemnity! (Nouva Antologia, Feb. 1, 1895, pp. 478–79.)”
https://www.marxists.org/archive/marx/works/1894-c3/supp.htm

Alexander Gray, in analysing the extraordinarily absurd attempts by Marxists to harmonise Marx’s views, states:

“… we are still left very much in the dark as to the nature of that peculiarly Marxian value, which flits back from the third Volume to illumine the dark places in the first Volume of Capital—that value described by Loria as a ‘fantastical or transcendental value’ which neither possessed nor could possess any relationship to facts. Dr. Lindsay at least realises that some definition of the elusive ‘value’ is required, and he suggests that ‘intrinsic exchange value is for Marx the value which a commodity would have in a properly organised society where labour was performing its proper function.’ Apart from legitimate doubts as to where such a view could be founded in Marx, it will be observed that we are very properly left to guess for ourselves what is a properly organised society, and when labour is performing its proper function—two very sizable hares to start in one sentence.

It is to Mr. Cole that we owe the alluring and confident title: What Marx Really Meant. On the immediate question, he argues—and rightly, if regard is to be had to the third Volume—that the Marxian theory of value is somewhat unique in not being a theory of prices; indeed, as he adds, it is doubtful whether in the end it has any point of contact at all with prices. As to the elusive Marxian ‘value,’ we are told that in Marx’s writings, ‘value’ came to mean what commodities were really worth in consequence of the amounts of labour incorporated in them, as something quite distinct from the prices which they actually fetched, or tended to fetch, in the market. But the identity of value and embodied labour was surely something that Marx thought he had proved (and which therefore required proof) in the opening pages of Capital. It is true that Croce also says that Marx assumed the equivalence of value and labour. If the identity of value and labour is a matter of definition and assumption, then at least we know the meaning Marx attaches to ‘value’; but in that case the pretended proof in the opening chapter is mere eye-wash; since one states, but does not prove, definitions. Also in that case it is to be feared that the whole of Capital, resting on an arbitrary definition which implies the conclusion to be reached, is an example of wandering vainly in a circle, even more glaring than the most critical critics had thought possible. If, on the other hand, the identity of value and labour is a matter of proof and not of definition, we are still left to grope for the meaning Marx attaches to ‘value.’” (Gray 1946: 318–319).

“If throughout Volume I Marx speaks quite generally as if commodities tended to sell at their values, the plain man would suggest that it was probably because this idea was most frequently in Marx's mind. Marx was almost criminally careless in neglecting to define his terms, and the natural result of such carelessness is that words jostle about in the mind, each trailing half a dozen potential meanings, with consequent confusion of thought. With just a touch of scorn, Croce speaks of Marx as having ‘despised and neglected all such preliminary and exact explanations as might have made his task plain.’ It is significant, in connection with Mr. Cole’s question, that Engels, playing the part of official interpreter, also speaks as if the opening chapters of Capital provided a guide to the price-tickets in Bond Street. Anti-Dühring is for the most part a most dreadful book—fit only to be one of six books given to Hitler on a desert island—yet it has its uses as an official summary of Marxism as then understood. It is instructive to ponder what Engels implies when he speaks of ‘the law of value of modern bourgeois economics, according to which the value of a commodity is measured by the socially necessary labour embodied in it.’” (Gray 1946: 320).

That is most insightful, and a tactic I see myself: Marxists are forced to reduce that LTV to an analytic statement, a mere tautology or equality true by definition. But in that case, why did Marx go to so much trouble in Chapter 1 of Capital to try and prove empirically that exchange values really are, ultimately, an equality determined by abstract socially-necessary labour time? Why does he actually try to explain real, individual exchange values in terms of socially-necessary labour time?

Just to take one example from volume 1 of Capital, Marx refers to the labour value and price of cotton:

“Suppose that the price of cotton is one day sixpence a pound, and the next day, as a result of a failure of the cotton crop, a shilling a pound. Each pound of the cotton bought at sixpence, and worked up after the rise in value, transfers to the product a value of one shilling; and the cotton already spun before the rise, and perhaps circulating in the market as yarn, similarly transfers to the product twice its original value. It is plain, however, that these changes of value are independent of the valorization of the cotton in the spinning process itself. If the old cotton had never been spun, it could be resold at a shilling a pound after the rise, instead of at sixpence. Further, the fewer the processes the cotton has gone through, the more certain is this result. We therefore find that speculators make it a rule, when such sudden changes in value occur, to speculate in the raw material in its least worked-up form: to speculate, therefore, in yarn rather than in cloth, and indeed in cotton itself rather than in yarn. The change of value in the case we have been considering originates not in the process in which the cotton plays the part of a means of production, and in which it therefore functions as constant capital, but in the process in which the cotton itself is produced. The value of a commodity is certainly determined by the quantity of labour contained in it, but this quantity is itself socially determined. If the amount of labour-time socially necessary for the production of any commodity alters –and a given weight of cotton represents more labour after a bad harvest than after a good one – this reacts back on all the old commodities of the same type, because they are only individuals of the same species, and their value at any given time is measured by the labour socially necessary to produce them, i.e. by the labour necessary under the social conditions existing at the time.” (Marx 1982: 317–318).

It quite clear that Marx is trying to explain movements in the real prices of cotton here in terms of unit socially necessary labour used to produce them. But, by the time of volume 3 of Capital, this analysis in volume 1 would make no sense, since by that time Marx will say that abstract labour time does not determine individual commodity prices.

BIBLIOGRAPHY
Gray, Alexander. 1946. The Socialist Tradition: Moses to Lenin. Longmans, Green and Co., London and New York.

Loria, Achille. 1895. “L’opera postuma di Carlo Marx,” Nuova Antologia di Scienze 55.3 (February): 460–496.

Loria, Achille. 1902. [1895]. “L’opera postuma di Carlo Marx,” in Achille Loria, Marx e la sua Dottrina. Sandron, Milan. 71–150.