Wednesday, February 10, 2016

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.

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.


  1. I've already explained how you, along with every other person you can shore up to say the same (including the "good many" who apparently aren't worth naming), are wrong. You've had no rebuttal except to scoff at the very idea of scientific realism and then retreat into scriptural eisegesis.

    Which is it: Are you playing dumb, or is this no game at all?

    1. See below, idiot.

      Also, what point is there to debate with a brainwashed cultist, who -- quite possibly -- still thinks that Marx never made any errors of any kind and all volumes of Capital are totally consistent in every way?

      Tell us:

      Marx in vol. 1:

      "Along with the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself.” (Marx 1906: 836–837).

      So tell us Hedlund, is it true that since 1867 in the UK, Germany, France, the US, Canada, that

      (1) the number of the "working-class" has been "always increasing in numbers", and

      (2) the "mass of misery, oppression, slavery, degradation, exploitation: has only ever grown?

    2. And

      (a) if (1) and (2) are false, then why (as Marx goes on to say) would socialism be inevitable? or

      (b) if you think (1) and (2) are true, then why has there hasn't capitalism collapsed into socialism in UK, Germany, France, the US, Canada?? lol..

  2. “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?" <- The real question is: what he did mean with "normal state"? Could it be that he was referring to the state when labor is employed in all production lines in equal amounts, and hence the labor value is equal to the prices calculated by assuming profit equalization? If yes, could it be that your 1000 posts about labor theory of value have been a near complete waste of time?

    1. The answer: if Marx meant vol. 1 to be referring to (1) a totally artificial abstract world or (2) some premodern world where "labor is employed in all production lines in equal amounts", then logic and common sense demands that he should have told us so EXPLICITLY and CLEARLY in the text early on.

      Your rationalisation of the contradiction is only fit for crackpot Marxist idiots, of which I suspect you are one.

    2. LK, i suspect you can't accept the unpleasant for you reality that your posts don't convince an impartial and rational observer of your case.

      I don't deny that Marx is very ambiguous on this. I think ambiguity should be reduced to minimum in any serious science. I think Marx completely fails as a scientist. But despite so many posts you also fail to prove your case that he is in contradiction. I only take note of this failure and remind you.

      P.S: Most ironically, before your posts, i used to think Marx was in contradiction like you say. But you've proven the opposite by finding the footnotes and the relevant passages.

    3. (1) "that your posts don't convince an impartial and rational observer of your case."

      I see. Even though Marxists who think there are no contradictions are a small fringe of crackpot cultists? And a large number of people -- including heterodox economists -- do think there is a blatant contradiction?

      (2) "But you've proven the opposite by finding the footnotes and the relevant passages."

      lol... by demonstrating passage after passage in vol. 1 where Marx says that commodities tend to exchange at true labour values?

      And by showing that there are no statements by Marx in vol. 1 telling us that his law of value is (1) speaking of a totally artificial abstract world or (2) applies only to a some premodern world where "labor is employed in all production lines in equal amounts"?

      All I can say: enjoy your new found Marxism, Mr Anonymous Bloody Idiot.

    4. I'm not going to be trolled by someone who points to 2 obscure footnotes in vol. 1 which -- if taken seriously -- actually cause the law of value in the text of vol. 1 to come crashing down. Yes, Marx's footnotes mentioned in passing prices of production.

      IN NO SENSE are those footnotes statements by Marx saying that:

      (1) Marx's law of value in vol. 1 is speaking merely of a totally artificial abstract world or

      (2) the law of value applies only to some premodern world.

      Even worse, why did Engels strongly protest 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 (that is, explanation 1 above)?

      Why did Engels’ attempt in 1895 to argue that the law of value in volume 1 had still been an empirical reality, when THERE IS NO EVIDENCE in the text of vol. 1 to support this apologetic nonsense?

  3. LK,

    "The proof that labour is exploited, in particular, does not lie in the validity of a quantitative correspondence of surplus exchange value with surplus labour time; this is a misconception that derives from a mistaken acceptance of the argument that the inability to prove such a correspondence might mean that the capitalists contribute to production, that profits reflect their contribution, and that this is the reason why commodities do not exchange in proportion to labours embodied – the argument of the ‘vulgar’ economists and then of the marginalist critics of Marx"

    "Imagine an isolated market economy where production is carried out by self-employed artisans and cooperatives, and the rate of profit is zero: prices of production are proportional to labours embodied. One day Gengis Khan’s army invades this community, but instead of killing everybody Gengis Khan announces that he will be content with collecting a yearly monetary tax at a rate r=20% on the value of the capital employed in each productive activity, a tax he will then use to buy goods on the market. The community is obliged to accept, and prices of production come to include a 20% tax on the value of capital which has the same effect on relative prices, and on real wages, as a 20% rate of profit. Relative prices are no longer proportional to labours embodied, Marx’s r=S/(C+V) does not work, but production is still performed by the same labourers, and the goods appropriated each year by Gengis Khan with the income deriving from the tax do not reflect any productive contribution of the oppressors. One would have little hesitation, it would seem, to say that Gengis Khan is exploiting this community. But if Gengis Khan had imposed the tax as a given percentage of wages, with the rate of profit remaining zero, then relative prices would have remained proportional to labours embodied, but exploitation would be still there. On the other hand, imagine that the 20% tax rate on the value of capital is imposed not by Gengis Khan but by unanimous popular vote because it is decided to use it to help for some years another community struck by an earthquake: in this case the surplus product would again be associated with an impossibility to explain prices with the labour theory of value, but few would call the surplus product the fruit of labour exploitation. All this shows that the proportionality or non-proportionality between exchange values and labours embodied reflects, not the absence or presence of other productive contributions besides that of labour, but only the specific way the mode of appropriation of the surplus product affects relative prices; the origin of the surplus remains to be ascertained"

  4. (1) The issue here is the contradiction between vol. 1 and vol. 3 of Capital in terms of the law of value.

    (2) but instead you post a link that doesn't even discuss that issue, but is simply a discussion of Sraffa's watered down, feeble reinterpretation of the LTV, which simply picks labour as a standard commodity with which one can measure the rate of profit. It also throws overboard Marx's idea of exploitation based on the LTV.

    (3) I discussed this ages ago and this doesn't refute anything I said:

    The trouble here is that Sraffa’s own economic model has serious problems, as identified in Post Keynesian critiques of Sraffianism such as Halevi and Kriesler (1991), Lee (1994: 325–327), Minsky (1990) and Robinson (1979).

    Sraffa’s model excludes real world money (Davidson 2003–2004: 247; Hodgson 1981: 83–84), and even if one might pick some commodity to function only as a numèraire/unit of account in it, everyone knows that this isn’t real world money, just as it isn’t in neo-Walrasian general equilibrium models, as argued by Rogers (1989: 46–47). Once real world money and uncertainty are introduced into Sraffa’s long-run model, one cannot legitimately defend the idea that prices and the profit rate are determined by technological factors and the real wage (Hodgson 1981: 93). A monetary production economy with uncertainty means the determination of wages, prices and profits becomes highly complex and, for want of a better word, messy.

    Even worse is the notion of Sraffian long-run prices, where there is a uniform rate of profit (Lavoie 2014: 176). Many other Post Keynesians would reject the idea that there is any actual tendency to an economy-wide uniform rate of profit (Lavoie 2014: 176), and not just because there are permanent, severe barriers to entry and free competition in many sectors of a real world capitalist economy (and not just based on monopoly but on fundamental factors such as capacity utilisation). In essence, (1) one cannot reduce actual mark-up pricing to a simple practice of a mark-up on labour costs (Lee 1994: 325) and (2) the rate of profit mark-up in each industry and business will be determined by many factors such as custom, convention, different desires and needs for various profit rates, different levels of competition, and what mark-up the market will bear, etc., and these factors will themselves vary in different times and places (Lee 1994: 325–326). Consequently the Marxist and Sraffian notion of a real world tendency in capitalism to long-run prices of production with a uniform rate of profit is untenable (Lee 1994: 326–327).