Louis Boudin on the Contradiction between Volumes 1 and 3 of Marx’s Capital

From Louis Boudin’s book The Theoretical System of Karl Marx in the Light of Recent Criticism (1920):

“The appearance in 1894 of the third volume of Capital created a sensation in interested circles. While it does not stand in any direct relation to the Revisionist movement, it can hardly be denied that it made its formal argumentation more plausible. The solution of the Great Contradiction contained in the third volume, and the rest of the matter therein contained and intimately connected with this solution, opened the door to no end of discussion as to the relation between the first and third volumes of Capital. So that the problem to many has turned into the question how to reconcile the supposedly opposed doctrines taught in these two volumes of Marx’s life work. The Great Contradiction, in the opinion of many, was not solved, but extended so as to embrace the whole Marxian theory. This was confidently asserted by all the opponents of Marxism, who drew breath. It was heralded from one end of their camp to the other, and it took its classic form in Bohm-Bawerk’s, ‘Karl Marx and the Close of his System.’ The opponents of Marx were not, however, alone in this opinion. The discussion which has continued until the present day has shown that a good many Marxists, of different shades of orthodoxy, shared in this view. So much so, that a Russian Marxist of some prominence and of strict orthodox profession of faith, being unable to reconcile the doctrines laid down in the two volumes, respectively, denied, in his desperation, the genuineness of the ‘unfortunate’ third volume! He claimed that because the third volume was published long after his death, and was compiled from unfinished manuscripts and random notes, Marx appears therein as saying things which he really never intended to say and which are in crass contradiction to his real views, which are contained only in the first volume. Engels’ preface to the third volume is sufficient to show the absurdity of this last assertion. So that there was the great contradiction, which made plausible the assertion that Marx completely abandoned his own theory of value, laid down by him in the first volume, and returned to the theory of the cost of production, of the economists dubbed by him ‘vulgar.’ The half-and-half Marxists, a la Bernstein, would not go so far (timidity and eclecticism being their specialty), and they tried to minimize the discrepancies between the first and third volumes, claiming that Marx did not abandon his theory of value as laid down in the first volume, but merely modified it, on second thought, in the natural course of the evolution of his theory. Modification by evolution, or evolution in modification became their favorite theme.” (Boudin 1920: 131–132).

“Professor Werner Sombart, the noted German economist, best known to English readers through his graceful study ‘Socialism in the 19th Century,’ opened the discussion on the subject soon after the appearance of the third volume in an essay entitled, ‘Some Criticism of the Economic System of Karl Marx.’ ....

According to Sombart, the theory laid down in the third volume of Capital is not much different from the traditional theory of the cost of production. This does not conflict, however, with the theory of value expounded in the first volume, for the simple reason that the labor theory of value was never intended by Marx to represent the actual facts, or, as he puts it, ‘the (Marxian) value does not reveal itself in the exchange relation of the capitalistically-produced commodities.’ Nor does it play any part in the distribution of the yearly product of society. It has no place in real life. Its office is merely that of an aid to our thinking, by means of which we can understand the economic phenomena, and its place is in the mental operations of the economic theorist. In short, ‘it is not an empirical but a mental fact.’ Value, thus banished from economic life into the realms of pure thought, can no longer come into conflict with the gross facts of this life. Its existence is none the less real, at least to the mind of the German scholar who must have been educated on the writings of the great German idealist philosophers.” (Boudin 1920: 133–134).

“Slonimski says: ‘Contrary to all expectations the theory of surplus-value is repeatedly asserted (in the third volume); in reality, however, it is denied by its author and replaced by the old theory with all the familiar elaborations on the cost of production as the only regulators of value. The equality of profits is derived from the phantastic assumption that the capitalists amicably divide among themselves the incomes of the different undertakings, by equalizing the sums of surplus-value which they separately drew from wage-labor, and that this is accomplished either by way of brotherly arrangement or through competition. As to the special surplus-value for which the rival capitalists fight so mercilessly, why that is lost sight of and plays no part either in the income of the individual capitalist, or in the establishment of the rate of profits or in the formation of prices. ….” (Boudin 1920: 136–137).

So Boudin is quite clear that the contradiction between volume 1 and volume 3 of Capital in the law of value was admitted by “a good many Marxists” who “shared in this view.”

Boudin also makes it very clear that the contradiction was as follows:

“In what does this abandonment consist according to the Marx-critics? Stripped of their verbiage the statements of these critics amount to this: In the first volume Marx said (1) that the value of a commodity depends on the amount of labor necessary for its (re)production, and that such value was the point about which its price will oscillate; (2) that the profits of the capitalist, therefore, come from the amount of surplus-value created by his workingmen; and (3) that the cost of production has nothing to do with the value or price of a commodity or the profits of the capitalists. In the third volume, on the other hand, he admits that (i) the price of a commodity may be, and usually is, permanently fixed at, or oscillates about, a point which is different from its value as measured by the amount of labor necessary for its (re)production; (2) that the amount of profits which a capitalist obtains from his capital does not depend upon the amount of surplus-value produced by his own workingmen; and (3) that the old theory of cost of production as to value, price and profit holds good.” (Boudin 1920: 140).

This description of Marx’s “law of value” in volume 1 of Capital is correct, as I have shown here.

That the labour value of a commodity “was the point about which its price will oscillate” in volume 1 is shown by Marx’s statement as follows:

“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.” (Marx 1906: 176–177).

If Marx didn’t mean this, then why did he write it?

And as Boudin notes, since many Marxists themselves later found a straightforward contradiction between volume 1 and volume 3 of Capital in the law of value, it follows that they must have interpreted Marx to have meant what he wrote here in volume 1.

Moreover, we know that Engels strongly protested against Werner Sombart’s view that the law of value in volume 1 had no place in real life, was not an empirical concept and was a purely “mental” one (Boudin 1920: 134; see Engels’ letter here). Engels’ attempt in 1895 to argue that the law of value in volume 1 had still been an empirical reality in an “historical” sense is very telling (see Engels 1991 [1895]). It is difficult to see why Engels did this if the law of value in volume 1 – that commodities tend to be sold at their true labour values – had only ever been interpreted as a purely abstract theory, not referring to reality.

BIBLIOGRAPHY
Boudin, Louis Boudianoff. 1920. The Theoretical System of Karl Marx in the Light of Recent Criticism. Charles H. Kerr, Chicago.

Engels, F. 1991 [1895]. “Supplement and Addendum” to Volume 3 of Capital,” in Karl Marx, Capital. A Critique of Political Economy. Volume Three (trans. David Fernbach). Penguin Books, London.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Wicksteed on the Contradiction in Chapter 1 of Volume 1 of Capital on the Labour Theory of Value

I point to this contradiction here.

But it is nice to see that the Victorian economist Philip Henry Wicksteed (1844–1927), as early as 1884, identified the same contradiction:

“With reference to the theory of value, it will be convenient to follow Marx in his fundamental analysis of the process of exchange.

He begins by pointing out that the fact of two wares being exchangeable (no matter in what proportion) implies of necessity both Verschiedenheit and Gleichheit; i.e. that they are not identical (else the exchange would leave things exactly where it found them), and that they are different manifestations or forms of a common something (else they could not be equated against each other). In other words, things which are exchangeable must be dissimilar in quality, but yet they must have some common measure, by reduction to which the equivalent portions of each will be seen to be identical in quantity.

Now with regard to the qualitative dissimilarity, I do not see that there is any room for difference of opinion. It consists in the divergent nature of the services rendered by the respective wares. Cast-iron nails and new-laid eggs differ in respect to their ‘value in use.’ They serve different purposes. Even a red and a blue ribbon, though they both serve purposes of adornment, are capable each of rendering some particular services of adornment under circumstances which would make the other a mere disfigurement. I agree with Marx, then, that the Verschiedenheit of the wares is to be found in the respective Gebrauchswerth of each, or, as I should express it, commodities differ one from another in their specific utilities.

But in what does the Gleichheit consist? What is the common something of which each ware is a more or less? Marx replies that to get at this something, whatever it is, we must obviously set on one side all geometrical, physical, chemical and other natural properties of the several wares, for it is precisely in these that they differ from one another, and we are seeking that in which they are all identical. Now in setting aside all these natural properties, we are setting aside all that gives the wares a value in use, and there is nothing left them but the single property of being products of labour. But the wares, as they stand, are the products of many different kinds of labour, each of which was engaged in conferring upon them the special physical properties in virtue of which they possess specific utilities. Now to get at that in which all wares are identical we have been obliged to strip off all these physical properties in which they differ, so that if we still regard them as products of labour, it must be labour that has no specific character or direction, mere ‘abstract and indifferent human labour,’ the expenditure of so much human brain and muscle, etc. The Gleichheit, then, of the several wares consists in the fact that they are all products of abstract human labour, and the equation x of ware A = y of ware B, holds in virtue of the fact that it requires the same amount of abstract human labour to produce x of ware A or y of ware B … .

Now the leap by which this reasoning lands us in labour as the sole constituent element of value appears to me so surprising that I am prepared to learn that the yet unpublished portions of Das Kapital contain supplementary or elucidatory matter which may set it in a new light. Meanwhile the analysis appears to be given as complete and adequate, so far as it goes, and I can, therefore, only take it as I find it and try to test its validity. But instead of directly confronting it with what seems to be the true analysis of the phenomenon of exchange, I will follow it out a little further, and we shall see that Marx himself introduces a modification into his result (or develops a half-latent implication in it), in such a way as to vitiate the very analysis on which that result is founded, and to lead us, if we work it out, to what I regard as the true solution of the problem.

A few pages, then, after we have been told that wares regarded as ‘valuables’ must be stripped of all their physical attributes, i.e. of everything that gives them their value in use, and reduced to one identical spectral objectivity, as mere jellies of undistinguishable abstract human labour, and that it is this abstract human labour which constitutes them valuables, we find the important statement that the labour does not count unless it is useful (pp. 15, 16, 64 [16a, 35a]). Simple and obvious as this seems, it in reality surrenders the whole of the previous analysis, for if it is only useful labour that counts, then in stripping the wares of all the specific properties conferred upon them by specific kinds of useful work, we must not be supposed to have stripped them of the abstract utility, conferred upon them by abstractly useful work. If only useful labour counts, then when the wares are reduced to mere indifferent products of such labour in the abstract, they are still useful in the abstract, and therefore it is not true that ‘nothing remains to them but the one attribute of being products of labour’ (p. 12 [146]), for the attribute of being useful also remains to them. In this all wares are alike.” (Wicksteed 1933: 710–712 = Wicksteed 1884).

We can see here that Marx’s flawed argument attempting to prove the labour theory of value was spotted by Wicksteed early on.

Moreover, Wicksteed’s criticism of Marx’s argument for the labour theory and his broader critique was so influential that George Bernard Shaw (1856–1950) abandoned his early flirtation with Marxism (Shaw 1885 = Shaw 1933), and was one of the many factors that caused the emerging British socialist movement to largely free itself from Marxist dogma.

Furthermore, as Wicksteed points out, under Marx’s initial argument, we could just as easily argue that there is indeed a common basis for a commodity exchange, and this is that both goods exchanged have subjective utility to the people receiving them in the trade:

“The exchange of two wares implies a heterogeneity (Verschiedenheit) and a homogeneity (Gleichheit). This is implied in the fact that they are exchangeable. And here I must challenge the attention of students of Das Kapital to the fact that the analysis by which ‘labour’ is reached as the ultimate constituent element of (exchange) value, starts from the naked fact of exchangeability and is said to be involved in that fact. It is true that in the instances given by Marx the articles exchanged are wares (i.e. commodities which have been produced for the express purpose of exchange), and moreover wares which can practically be produced in almost unlimited quantities. It is true also that Marx elsewhere virtually defines value so as to make it essentially dependent upon human labour (p. 81 [43a]). But for all that his analysis is based on the bare fact of exchangeability. This fact alone establishes Verschiedenkeit and Gleichheit, heterogeneity and homogeneity. Any two things which normally exchange for each other, whether products of labour or not, whether they have, or have not, what we choose to call value, must have that ‘common something’ in virtue of which things exchange and can be equated with each other; and all legitimate inferences as to wares which are drawn from the bare fact of exchange must be equally legitimate when applied to other exchangeable things.

Now the ‘common something,’ which all exchangeable things contain, is neither more nor less than abstract utility, i.e. power of satisfying human desires.” (Wicksteed 1933: 710–712 = Wicksteed 1884).

Although Wicksteed is wrong to go on from this to Jevonian marginal utility analysis with a quantitative measure of utility, he is still correct in one respect: you could just as easily conclude, contrary to Marx, that some kind of subjective utility is the common, underlying and necessary element of the exchange of commodities, though there does not need to be an equality of subjective utility. Rather, when one person exchanges one good for another, it seems likely that in most cases he values the good he receives more highly than the good he gives up in the trade, and the same thing can be said of the other person in the trade.

Indeed Marx’s argument in Capital here as it stands is badly flawed:

“Let us take two commodities, e. g., corn and iron. The proportions in which they are exchangeable, whatever those proportions may be, can always be represented by an equation in which a given quantity of corn is equated to some quantity of iron: e. g., 1 quarter corn=x cwt. iron. What does this equation tell us? It tells us that in two different things—in 1 quarter of corn and x cwt. of iron, there exists in equal quantities something common to both. The two things must therefore be equal to a third, which in itself is neither the one nor the other. Each of them, so far as it is exchange value, must therefore be reducible to this third.” (Marx 1906: 43–44).

Now in a barter exchange, there is an equality in the sense in which, say, 2 sheep might exchange for 1 cow, and only two sheep and nothing more are exchanged, and vice versa. But this is trivial sense of equality. There is no further and obvious logical or empirical sense that the exchange is an equality of some third quantity, such as abstract socially-necessary labour time.

Marx’s leap to the conclusion that there must be an additional, fundamental unit in which both commodities can be measured quantitatively and by which they can both be shown to be equivalent simply does not follow. It is a non sequitur. Marx’s argument was shoddy and commits a straightforward logical fallacy.

BIBLIOGRAPHY
Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Shaw, George Bernard. 1885. “The Jevonian Criticism of Marx,” To-day n.s. 3 (January): 22–26.

Shaw, George Bernard. 1933. “The Jevonian Criticism of Marx,” in Philip H. Wicksteed, The Common Sense of Political Economy and Selected Papers and Reviews on Economic Theory. Routledge & Kegan Paul Ltd, London. 724–730.

Wicksteed, Philip H. 1884. “The Marxian Theory of Value. Das Kapital: A Criticism,” To-Day n.s. 2 (October): 388–409.

Wicksteed, Philip H. 1933. The Common Sense of Political Economy and Selected Papers and Reviews on Economic Theory. Routledge & Kegan Paul Ltd, London.