“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).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.”
“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).
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 ). 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 . “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.