NEWS & LETTERS, April - May 2007 - Reclaiming Marx's Capital, A Refutation of the Myth of Inconsistency

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NEWS & LETTERS, April - May 2007

Book announcement

Reclaiming Marx's Capital, A Refutation of the Myth of Inconsistency

by Andrew Kliman

About Reclaiming Marx’s CAPITAL

This book seeks to reclaim CAPITAL from the myth of internal inconsistency, a myth that serves to justify the censorship of Marx’s critique of political economy and present-day research based upon it. Andrew Kliman shows that the alleged inconsistencies are actually caused by misinterpretation. By modifying the standard interpretation of Marx’s value theory in two simple ways, the recent “temporal single-system interpretation" eliminates all of the alleged inconsistencies. Reclaiming Marx’s CAPITAL introduces readers to Marx’s value theory and contrasting interpretations of it, the history of the internal inconsistency controversy, and interpretive standards and methods. Kliman then surveys Marx’s falling-rate-of-profit theory, the relationship of prices to values (the “transformation problem"), Marx’s exploitation theory of profit, and other topics. The book ends with a discussion of why the myth of inconsistency persists, and a call to set the record straight. The book is written especially for the non-specialist reader, in a clear, accessible style and with the bare minimum of mathematics.

EXCERPTS

Marx’s theories need not be interpreted in a way that renders them internally inconsistent. An alternative interpretation developed during the last quarter-century--the temporal single-system interpretation (TSSI)--eliminates all of the apparent inconsistencies. The very existence of the TSSI carries with it two important consequences. First, the allegations of inconsistency are unproved. Second, they are implausible. When one interpretation makes the text make sense, while others fail to do so because they create avoidable inconsistencies within the text, it is not plausible that the latter interpretations are correct. Thus the charges of inconsistency, founded on these interpretations, are implausible as well.

None of this implies that Marx’s theoretical conclusions are necessarily correct. It does imply, however, that empirical investigation is needed in order to determine whether they are correct or not. There is no justification for disqualifying his theories a priori, on logical grounds.

In recent years, Marx’s critics have found it increasingly difficult to defend the allegations of inconsistency against the TSSI critique. Thus they generally try to avoid this issue altogether. Instead, they now prefer to debate the pros and cons of Marx’s work and of alternative approaches to Marxian economic analysis. In other contexts, these are of course important and interesting topics, but to discuss them here and now is to fall into a diversionary trap, at the very moment when correction of the record has become a real possibility.

* * *

One main reason why the question of internal inconsistency is important is that the alleged proofs of inconsistency are ubiquitous and influential. As the following examples show, their influence extends far beyond the small circle of radical and Marxist economists, into the rest of economics, other disciplines, radical thought outside of academia, and public opinion generally.

In 1995, the leading journal of the history of economic thought published a symposium on Marx. Anthony Brewer’s lead paper argued that, even “in Marx’s own terms...Capital must be counted a magnificent failure." As his principal supporting evidence, Brewer rehashed the allegations of logical error in Marx’s value theory and law of the tendential fall in the rate of profit. “If both fail, as they do, not much is left." Marx’s economic writings are of historical interest only. Papers that refuse to accept this conclusion and instead attempt to “resuscitate Marx’s ideas...should not be published in journals devoted to the [history of economics]."

Nine eminent economists and historians of economics, some quite sympathetic to Marx, were invited to respond. They typically took issue with the last four words of Brewer’s conclusion that “[i]f both fail, as they do, not much is left," yet all of them implicitly or explicitly endorsed the first part. It would seem that even if Marx is not exactly a dead dog, we have to accept the fact that two of his internal organs have permanently stopped functioning.

John Cassidy’s widely discussed essay, “The Return of Karl Marx," was published in a 1997 issue of The New Yorker, a magazine that appeals to a general educated audience. The overline hailed Marx as “The Next Thinker," and the text of the essay was likewise chock-full of praise for Marx. “Many of the contradictions that he saw in Victorian capitalism...have begun reappearing in new guises...[H]e wrote riveting passages about...issues that economists are now confronting anew, sometimes without realizing that they are walking in Marx’s footsteps."

Yet when he turned to Marx’s value theory, Cassidy was uncharacteristically curt and dismissive: “His mathematical model of the economy, which depended on the idea that labor is the source of all value, was riven with internal inconsistencies and is rarely studied these days." The alleged proofs of internal inconsistency are so pervasive and little-challenged that he did not need to elaborate, except to suggest that Marx lacked the necessary mathematical tools. Since the particular tools that Cassidy--a journalist, not an economist--mentions are irrelevant to the issue he is discussing (the “transformation problem"), it is clear that “riven with internal inconsistencies" is not a judgment he arrived at on his own. In any case, it is hard for the reader to avoid concluding that, if even a great admirer of Marx has to acknowledge that his value theory is inconsistent, this surely must be so.

The following year, a major radical journal devoted an entire issue to a book-length essay on economic crisis by Robert Brenner, an eminent Marxist historian. Its fortuitous appearance in the midst of the Asian economic crisis has helped make it the most widely discussed Marxist work, by far, of the last two decades. So has the editor’s introduction, which suggested that Brenner should be awarded the Nobel Prize and which concluded, “Marx’s enterprise has certainly found its successor."

Yet in his 265-page essay on economic crisis, Marx’s successor devoted only one footnote to his law of the tendential fall in the rate of profit--and only in order to dispose of it and the theory of crisis based upon it. To dismiss the law summarily, he needed only to cite the Okishio theorem, which purportedly proves that the law is false: “Formal proofs of this result can be found in N. Okishio...as well as in J. Roemer." After rejecting some other theories (on the basis of somewhat more evidence and argumentation), the rest of the essay develops Brenner’s own account of falling profitability and economic crisis. It is this account rather than Marx’s that became the focal point of the ensuing discussion of Brenner’s essay. Such is the power of the Okishio theorem.

In 2000, the leading U.S. journal of sociology carried a symposium in which the lead paper, written by a noted Harvard University professor, put forth a new theory of exploitation as the basis for class analysis. Given that “Marx’s explanation of inequality and oppression is a very attractive one," Alase B. Sørensen felt the need to disqualify it before setting out his alternative. He did so by appealing to authority, especially to the fact that even the Marxist economists have abandoned Marx’s value theory: “For most of this century, there has been agreement that the original concept of exploitation proposed by Marx is untenable. It is based on a labor theory of value abandoned long ago, even by Marxist economists." It is true that Sørensen then tried to defend the notion that the “transformation problem" is genuinely a problem, but his argument evinces a near-total lack of understanding of the issue, even on a charitable reading. It thus seems clear that he declared Marx’s theory untenable without having first seriously studied the value theory controversy. But if Sørensen was not qualified to reject Marx’s theory, he also had no basis for recommending his own theory of exploitation to replace it.

* * *

Dozens of accounts have told us that rigorous mathematical demonstrations--often coming from the Marxist camp itself--have proved that Marx’s theories of value, profit, and economic crisis are riddled with logical inconsistencies and errors, and that these proofs have withstood the test of time. It is therefore necessary either to reject or correct his work. Those who refuse to accept that such inconsistency has been proved have [as M.C. Howard and J.E. King put it] “done much damage to the intellectual credentials of Marxian political economy"...[T]he internal inconsistency allegations are implausible as well as unproved, because there exists an interpretation of Marx’s value theory that removes the apparent inconsistencies.

On the standard interpretation, Marx had a simultaneist and dual-system theory:

inputs and outputs are valued simultaneously, so input and output prices are necessarily equal, and
there are two separate systems of values and prices.

According to the temporal single-system interpretation (TSSI) of Marx’s theory, however:

valuation is temporal, so input and output prices can differ, and
values and prices, though quite distinct, are determined interdependently.

Once these two simple modifications are made, all of the alleged inconsistencies in the quantitative dimension of Marx’s value theory are eliminated.

These results have been established during a quarter-century of TSSI research.

* * *

The main reason why I consider the question of internal inconsistency so important--important enough to devote a whole book to it--is precisely that Marx’s value theory would be necessarily wrong if it were internally inconsistent. Internally inconsistent theories may be appealing, intuitively plausible and even obvious, and consistent with all available empirical evidence--but they cannot be right. It is necessary to reject them or correct them. Thus the alleged proofs of inconsistency trump all other considerations, disqualifying Marx’s theory at the starting gate. By doing so, they provide the principal justification for the suppression of this theory as well as the suppression of, and the denial of resources needed to carry out, present-day research based upon it. This greatly inhibits its further development. So does the very charge of inconsistency. What person of intellectual integrity would want to join a research program founded on (what she believes to be) a theory that is internally inconsistent and therefore false? The reclamation of Capital from the myth of inconsistency is therefore an absolutely necessary and vital precondition to any efforts to reclaim it in more ambitious ways.

Another reason why I consider the question of internal inconsistency so important is that the whole of the century-long controversy over Marx’s value theory has fundamentally been about this one question. Only incidentally and derivatively has it been a debate about the meaning and significance of his work. His critics’ primary, conscious, and avowed aims have been to discredit the logic of his arguments--thereby disqualifying his theory, in its original form, from further consideration--and then to correct his supposed logical errors. The different schools that have arisen in and around Marxian economics since the 1970s (Sraffianism, the New Interpretation, value-form analysis, and so on) are in essence just different ways of correcting or circumventing these supposed errors and working out the consequences.

These facts are often insufficiently appreciated. It is sometimes suggested, for instance, that there are many things wrong with the way in which Marx’s critics have understood and modeled his value theory. The specific problems that the TSSI focuses upon--simultaneous valuation and the severing of values and prices into two systems--are not even the most important problems. However, the question is “Important for what purpose?" The critics’ models are attempts to disqualify Marx’s value theory on logical grounds and to correct its errors. Their purpose is not to provide a descriptively rich, comprehensive account of the original theory. Accordingly, the purpose of the TSSI is different as well. It seeks to overturn the findings of inconsistency, and the narrow issues upon which it focuses are important for this purpose. Indeed, they are the only important issues; the jettisoning of simultaneism and the dual-system interpretation is both necessary and sufficient to acquit Marx of the internal inconsistency charges.

A similar failure to appreciate the centrality and import of the question of internal inconsistency arises in connection with the so-called “transformation problem," the alleged inconsistency in Marx’s account of the relationship between values and prices of production. Many Marxists (and some non-Marxists) have tried to dismiss the issue by arguing that Marx’s critics have missed the point he wanted to make; he was not really interested in explaining prices. But it is this dismissal that misses the point. The critics are not concerned with what Marx wanted to say. They are trying to prevent what he did say from continuing to be said, on the ground that it is logically invalid. And if it is indeed invalid, a better understanding of what Marx was really getting at does not make it any more valid. Questions of meaning and intent are relevant only insofar as they directly alter our understanding of the actual logic of the arguments.

Those who would downplay the question of internal inconsistency also seem not to appreciate that there is little point in discussing many of the topics they prefer to discuss unless Marx can be acquitted of the errors with which he is charged. Since an internally inconsistent theory simply cannot be right, it is worth studying and discussing, if at all, only as a historical artifact and source of inspiration for a better theory. It is certainly a waste of time to devote scarce research time to employing it in empirical analysis.

Would-be defenders of Marx who try to minimize the importance of the question of internal inconsistency often seem unaware that they are repeating a key theme of his critics. The latter frequently claim that his inconsistencies and errors are ultimately insignificant, because they have corrected these inconsistencies and errors in a manner that substantiates Capital’s essential theoretical conclusions. One of the present book’s principal aims is to show that this claim is false. Contrary to what Marx’s critics often claim, for instance, their “corrections" of his theory contradict his conclusions that technological progress can cause the rate of profit to fall and that the exploitation of workers is the exclusive source of profit.

In sum, there is really no way of getting around the logical issues; they need to be confronted head-on. And given that the alleged proofs of inconsistency serve a suppressive function, evasion of the logical issues is certainly not in the interests of those who seek to develop Marx’s work.

* * *

Acclaim for Reclaiming Marx’s CAPITAL

“Almost everyone, orthodox and Marxian economists alike, has accepted the view that Marx’s value theory is internally inconsistent. This book sorts out a bewildering tangle of approaches and issues in order to demonstrate that the charge of internal inconsistency is false. Reclaiming Marx’s CAPITAL is a fresh attempt to get it right, in terms Marx himself would have recognized."

-- Thomas Jeannot, Professor of Philosophy, Gonzaga University

“Kliman’s arguments -- and it is largely a book of arguments -- operate like a buzz saw clearing away the underbrush of misplaced criticisms that have kept the real Capital hidden from most of its potential readers. The project is much needed, and brilliantly and clearly (and for this reader, convincingly) executed. Highly recommended for all those who need Capital (and who doesn’t?)."

-- Bertell Ollman, Professor of Politics, New York University

“Marxist economists tend to treat Marx as a distant basis upon which to build their own individual opinions. This al la carte approach stems from acceptance of the supposed errors and internal inconsistency in Marx’s theory of value. In contrast, Reclaiming Marx’s CAPITAL, by decisively refuting the allegations of error and internal inconsistency, returns Marx’s own work to centre stage. It is thus an important unifying work, rather than just another divisive personal opinion."

-- Nick Potts, Reader in Economics, Southampton Solent University

“Someone has finally rescued Marx from the Marxists. If you want access to the real ideas of the man who famously quipped ‘Me, I am not a Marxist’ and if you don’t trust anyone or anything ‘til you’ve checked for yourself,’ this is the place to start."

-- Alan Freeman, Department of Social Sciences, University of Greenwich

“This is the first comprehensive introduction to all aspects of the transformation ‘problem.’ It will become the standard reference work in the years to come. No serious work on value theory can afford to ignore it."

-- Guglielmo Carchedi, author of Frontiers of Political Economy

* * *

Contents

Preface

Introduction: The Question of Internal Inconsistency

Marx’s Value Theory and Contending Interpretations

A Brief History of the Controversy

Making Marx Make Sense: On Interpretive Method

Simultaneism, Physicalism, and the Law of Value

Was Marx a Simultaneist?

The Falling Rate of Profit Controversy

The ‘Transformation Problem’ (1): Marx’s Solution and its Critics