Thursday, April 2, 2015

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.

33 comments:

  1. I'm really tired of correcting the same mistakes.

    Newcomers are encouraged to read the last ten or so posts and, ESPECIALLY, the comments beneath them, to see just how little water any of the above holds. LK has been flatly proven wrong, and yet he persists in his explicit and obvious errors. To support his case, he quotes people who also make grave errors — notably absent the lengthy critique of said critics, in which the quotes were embedded.

    I have tried to give LK the benefit of the doubt, as I have been reading this blog consistently practically since it started. However, I can no longer avoid this very sad conclusion: LK's attack on Marx appears to be purely ideologically motivated, without a trace of care for science or the philosophy of science to be found therein. He has demonstrated no concern whatsoever for the misuse of terms, for having his claims flatly refuted, and for a perfect lack of epistemic humility seen in making sweeping, definitive claims based on a limited and frequently erroneous grasp of the subject matter.

    If LK ever decides that understanding a theory might be important to critiquing it, then he will find in me a willing collaborator in the endeavor. However, as things stand right now, I cannot recommend any reader trust the analysis of Marx's theories contained in this blog. If this is your first exposure to the subject, you would be better served by visiting https://kapitalism101.wordpress.com/ or https://thenextrecession.wordpress.com/ . Brendan Cooney and Michael Roberts are both bloggers with a good grasp of Marx's value theory.

    In closing, I would say "one would be better served sticking to LK's criticisms of the Austrian School," but frankly the behavior demonstrated in the past week may be enough to call into question the rigor of those criticisms, too.

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    1. Yes, Hedlund, you are throwing a tantrum and leaving -- probably because you can't answer or actually refute any of the substantive points above. Don't think it worries me in the least.

      In particular, your bizarre claim that Marx doesn't actually explain individual prices by means of labour value in vol. 1 is totally refuted even by the one example of cotton given above (though there are many more).

      It is quite clear from this discussion that you are as dogmatic and as irrational as any Rothbardian Austrian. You are a member of a Marxist cult, and no amount of hard evidence will make you change your views.

      Marxism has always been a cult, and is a ludicrously stupid economic theory with a stagnant research program all deriving from plainly empirically worthless ideas like the LTV and the pseudo-problems it creates.

      Virtually everyone who isn't a Marxist cultist thinks this and rightly so.

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    2. I never said I was leaving. And attributing emotional states to your opponents is a dirty tactic, let alone this other deluge of ad homs ("irrational," "dogmatic," etc).

      I can answer all of the above points. I have answered them. That the ground is barren is no critique of my sowing. Nor does saying you've provided "hard evidence" make it so. What you've provided is evidence of your own lack of a commitment to science — and in those cases where you flatly ignored what I had written, to literacy.

      I implore you to think more about the way you think.

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    3. Very well. Explain why Marx tries to explain the market price of a diminished crop of cotton in terms of SNLT.

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    4. Sure.

      The problem he was attempting to solve in Volume 1 is the one that had confounded Ricardo — namely, how net profits are possible. Since we are starting from the basic empirical understanding that net profits DO exist — i.e., one firm's gain is not necessarily another firm's loss — he begins with the assumption that all exchange is equivalent, to rule out the possibility of one firm benefiting at the expense of another. Thus, all commodities are assumed to exchange at their value. That's the whole point; ruling out "noise" from overpriced or underpriced commodities, etc., since all those things net to zero in aggregate anyway.

      It's actually a very common sort of operation. For instance, Kalecki often uses the simplifying assumption that workers don't save. This doesn't mean he's contradicting himself when he says that in the real economy, workers can and do save.

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    5. And just to be sure there's no misunderstanding, I know you asked about cotton in particular. On one hand, I wasn't sure if you meant that as a stand-in to indicate the approach in general, but whether you did or not, we wind up in the same place. The answer to "why did he use that method in this instance?" is "because he was using that method in general." This then prompts the question, "why was he using that method in general?" Hence, my answer.

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    7. Why earth means "socially necessary"? I suppose Marx is referring to slavery as a distortion of the real value of cotton in the market. Is not the introduction of an Ethical question in the economic question?
      But that is perfectly explained, and in a simpler way, by de neoclassical VT, or the subjective theory of value.

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    8. Socialmente tiempo de trabajo necesario nunca fue debidamente definido por Marx. Se supone que significa el trabajo promedio de un trabajador promedio.


      Marx no se refiere en realidad a la esclavitud aquí, pero al precio de un cultivo de algodón que se ha reducido en un desastre natural. Marx cree que puede explicar el aumento del precio del algodón en términos de tiempo de trabajo, lo cual es ridículo.

      Y, sí, la oferta y la demanda explicarían precios cultivos en esos casos.

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  2. If Marx was really just assuming that "all commodities are assumed to exchange at their value" in vol. 1 he would have said so.

    Tell me: where does he say this in vol. 1? If you can't point to a passage where he does, how do you know?

    What sort of access to Marx's mind do you have the rest of us mere mortals lack?

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    1. It's in chapter 5, dude.

      Is that all?

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    2. The whole chapter makes the case that value isn't created in circulation. If you're in a hurry and just want a brief statement, I guess you can jump to the last few paragraphs, but the general point I'm making is contained in the chapter broadly.

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    3. He makes a case value isn't created in circulation DESPITE "[exchange] value = natural price".

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    4. Natural price for Marx in that context would mean a cost of production price including an average rate of profit. But how does that directly correspond to SNLT?

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    5. Natural price for Marx in that context would mean a cost of production price including an average rate of profit. But how does that directly correspond to SNLT?

      Yeah in this case "natural prices" would refer to "prices of production." Prices of production are equal to value where they incorporate the average organic composition of capital. So, for a given price, a higher-than-average capital intensity implies profit > surplus value, while lower capital intensity implies the opposite. When surplus value and profit on a commodity are equal, then K+s = K+p, and therefore price equals value.

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  3. Impossible conciliation. "The whole chapter". Broadly. Hahaha

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    1. Exactamente. Si digo:

      LK: ¿de dónde Marx dice esto?
      Marxista: es en el volumen 3 de la Capital: acabo de leer 1.000 páginas de texto!! Usted encontrará que es!

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    2. Miguel:

      Impossible? I dunno, I've managed to read quite a lot more than that in a single sitting, even. But to each his own.

      As I said, if you're in a hurry, the chapter's conclusion in the last few paragraphs covers it. The full chapter is just the detailed argumentation. You don't have to read it all; all that matters is that I was asked "does the text contain [X]" and I indicated that yes, it does, in that chapter.

      Sorry for trying to be thorough, I guess. Hope you can forgive me in between crippling paroxysms of laughter.

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    3. I've read the last few pages of Chapter 5 and I see no statement where Marx says in vol. 1 "all commodities are assumed to exchange at their value". No surprises there.

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    4. This is absolutely beyond the point of ridiculousness. Just so readers are not misled by your report, I'll just share it directly.

      "It is therefore impossible for capital to be produced by circulation, and it is equally impossible for it to originate apart from circulation. It must have its origin both in circulation and yet not in circulation.

      "We have, therefore, got a double result.

      "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. [24] Our friend, Moneybags, who as yet is only an embryo 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. His development into a full-grown capitalist must take place, both within the sphere of circulation and without it. These are the conditions of the problem."


      The trouble appears to be that you typed the phrase "all commodities are assumed to exchange at their value" into your browser and hit ctrl+f. Sorry you weren't able to guess the exact phrasing he used in one try, but to be fair I HAD specifically requested that you read the passage.

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    5. That quote just doesn't prove what you want it too.

      Right in Chapter 1 of Capital (vol. 1), Marx explains exchange value in these terms:

      “We have assumed that the coat is worth twice as much as the linen. But this is merely a quantitative difference, and does not concern us ·at the moment. We shall therefore simply bear in mind that if the value of a coat is twice that of 10 yards of linen, 20 yards of linen will have the same value as a coat. As values, the coat and the linen have the same substance, they are the objective expressions of-homogeneous labour.” (Marx 1982: 124).
      -----------------------
      If this was not meant to be an explanation of *any real world exchange values* at all, then Marx was simply one of the most incompetent economic writers ever, as Gray (1946: 320) notes.

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    6. "The continued oscillations in prices, their rise and fall, compensate each other . . . and carry out their own reductions to an average price, which is their internal regulator . . . the problem of the formation of capital . . . [is]: 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 [labour] value of the commodities. I say 'ultimately,' because average prices do not directly coincide with the [labour] values of commodities." [Capital, Vol. 1, p. 269fn]

      I don't know any Marxists who claims that value equals prices and they are all pretty explicit to say otherwise. The reason Marx does this is fairly simple: it would take way too much time to calculate value while we can easily collect information on prices. Furthermore, value acts as a anchor for prices so prices are likely to oscillate around value although very rarely will they be the equal. It is important to remember that Marx was working on the Labor Theory of Value and not the Labor Theory of Prices.

      Steve

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    7. Then why does Marx, say, attempt to explain cotton prices in terms of socially necessary labour time in vol. 1 of Capital as quoted above? (Marx 1982: 317–318).

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    8. Because he is making an assumption as he even says. Economists do this all the time by saying, "assume we have X, Y, and Z." A better question is: why do all Marxists reject that prices and values are equal? And why does Marx himself say "prices do not directly coincide with the [labour] values of commodities."

      Steve

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    9. That quote just doesn't prove what you want it too.

      Only if one has some deep-seated need to read it differently. But please, tell me what else it might mean to say that a phenomenon "must be explained ... in such a way that the starting-point is the exchange of equivalents" — where "the exchange of equivalents" specifically means equal value for equal value. If you're going to contort this into anything but a limiting statement for the purposes of exposition, at least do us the basic courtesy of sharing whatever mutated version you had to create. I'm morbidly curious.

      Steve's subsequent additions also join the heap. Just how many falsifying examples do you need?

      Right in Chapter 1 of Capital (vol. 1), Marx explains exchange value in these terms:

      See, now, THIS passage doesn't say the thing you want it to. (Now watch, as I treat you with more respect than you've shown me, by at least including with my claim the explanation of why that is.)

      “We have assumed that the coat is worth twice as much as the linen. But this is merely a quantitative difference, and does not concern us ·at the moment. We shall therefore simply bear in mind that if the value of a coat is twice that of 10 yards of linen, 20 yards of linen will have the same value as a coat. As values, the coat and the linen have the same substance, they are the objective expressions of-homogeneous labour.” (Marx 1982: 124)."

      Notice how the whole passage discusses "value" and not "exchange value." The only place he uses a word ("worth") that MIGHT be interpreted in those terms, he explicitly states that an "assumption" is operating.

      If this was not meant to be an explanation of *any real world exchange values* at all, then Marx was simply one of the most incompetent economic writers ever, as Gray (1946: 320) notes

      I love how you even have to namedrop to say something as devoid of content as "Marx was incompetent," even if your reason for saying so is that the above paragraph doesn't explain something it doesn't even set out to explain. It reflects poorly upon the reading, not the writing.

      I raised a point earlier that you never responded to, so I'll try it again. The point in science is not to contradict a person, but the theory they've tendered. When you have multiple interpretations of a person's text in a science, you therefore have multiple, separate theories. For all that you struggle to lash out at Marx, in fact all your claims are claims about one of two interpretations of him — an interpretation literally no one, not even Marx himself (as you yourself have admitted!), has ever defended. So, consider yourself victorious, the dead horse was dead long before you began beating it. Now it's time for you to come to grips with the one that we've all been riding around your fields in the meantime.

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    10. (1) "Notice how the whole passage discusses "value" and not "exchange value.""

      Marx does not need to use the phrase "exchange value" explicitly to refer to that concept.

      Right before your eyes Marx, Marx refers to 20 yards of linen being = to a coat, because SNLT is the equal. If that is not an exchange value then what the bloody hell is it?

      Your claim above is about as ludicrous as you can get.

      (2) on the other issue, however, I am willing to concede one point. I did not notice this footnote:

      "The continual oscillation in prices, their rising and falling, compensate each other, and reduce themselves to an average price, which is their hidden regulator. It forms the guiding star of the merchant or the manufacturer in every undertaking that requires time. He knows that when a long period of time is taken, commodities are sold neither over nor under, but at their average price. If therefore he thought about the matter at all, he would formulate the problem of the formation of capital as follows: 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.” (Marx 1906: 184–185, n. 1).

      But even this is hardly the sweeping victory you claim it to be. Even if average price does not "directly coincide with the values of commodities" it must come very close indeed to directly corresponding to SNLT if all firms have the same organic composition of capital.

      What is more, this is hardly a statement by Marx saying, "oh and by the way all commodities are assumed to exchange at their labour value in this book."

      Even if it was, it is proof of how confused and badly written Capital, vol 1. is -- for he should have made his assumptions absolutely clear in main text of Chapter 1, not in an obscure footnote at the end of Chapter 5.

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    11. Right before your eyes Marx, Marx refers to 20 yards of linen being = to a coat, because SNLT is the equal. If that is not an exchange value then what the bloody hell is it?

      An equivalency of the proportion of the total social labor capacity needed to produce each. I don't see what's so hard about this.

      Even if average price does not "directly coincide with the values of commodities" it must come very close indeed to directly corresponding to SNLT if all firms have the same organic composition of capital.

      I've already said that prices of production are equal to value (not merely "close indeed") if all firms have the same organic composition. Your point?

      Even if it was, it is proof of how ... badly written Capital, vol 1. is

      Maybe, maybe not. Certainly you're not alone in believing the book to be confusingly organized. However, it's worth pointing out that in order for that assumption to make any sense at all, he'd need to define quite a few terms and relationships in advance — which is exactly what he does in the preceding chapters.

      (Of course, there are a number of other passages that have been pointed out to you beyond just said footnote.)

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  4. Me gustaría que LK enlazará este magnifico post con la teoría de la plusvalía, que lógicamente se deriva de la LVT, y que imagino que es donde Marx entra en contradicción.

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    1. He tratado de hacer eso aquí:

      http://socialdemocracy21stcentury.blogspot.com/2015/04/matias-vernengo-on-marxs-labour-theory.html

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  5. Have you considered Morishima/Shaikh solutions to the transformation problem?

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