Marx Capital
Marx Capital
Marx Capital
^tatc
OloUi^e of Aettculturc
ffiihrarH
HB
201. S45
Karl
Marx on va|ue,
The
tine
original of
tiiis
bool<
is in
restrictions in
text.
http://www.archive.org/details/cu31924013755156
KARL MARX
ON
VALUE
KARL MARX
ON
VALUE
BV
J.
LECTURER
IN
W. SCOTT,
D.Phil.
MORAL PHILOSOPHY IN THE UNIVERSITY OF GLASGOW AUTHOR OF ''SYNDICALISM AND PHILOSOPHICAL REALISM
A.
4,
&
C.
BLACK, LTD.
1920
&
r' "o1.'^5~3
it
service
to
that large
company of earnest
understanding of the
CONTENTS
CHAPTER
THE LAW OF VALUE WHAT
:
I PAGE 1
IT IS
CHAPTER
II
-
19
CHAPTER
III
-
42
vll
CHAPTER
Karl Makx was born
IT IS
in Treves a small
town
The impor-
of Rhenish Prussia in 1818 and died in London ^ggf^g"''' in 1883. He gave to socialism the biggest ^arx's Law
impetus it ever received and to capitalism he gave perhaps the most drastic examination to which it has yet been subjected. Seventy years and more have passed since he began to write and there is no socialistic author to-day more widely read or with a larger following of believers. When his strength is so great it is important that the limitations of it, if they are serious, should be realised. This little book is devoted It is an effort to to some of these limitations. make clear a point in which he has been held It is It is not a small point. to be wrong.
;
It concerns
what he himself
in his
economic teaching, his Law of Value. We would not have this statement misunder-
stood.
which the writer believes to underlie Marx's theory of value. There is no suggestion that to show the fallacy in the Marxian Law of Value It is probable that is to be finished with Marx.
there
is
much
in
him
still
to be discussed after
I
2
his
MARX'S
LAW
OF VALUE
[chap,
economics is settled with. And we hope at some future time to return to that. Meanwhile what is in question is only the economic system and particularly the main teaching of that system
the hj^othesis regarding capitalistic society on
which
it is built.
The
task.
There seems to be no doubt that Marx's Law and if it is true that everything in him many have believed,
;
then the error is a grave one. not be true. Those may be wrong who believe that all Marx has to teach depends on his Law of Value. Perhaps a great deal of his teaching rests on quite other foundaturns
that,
upon
Of
course this
may
tions.
although
also
foundations.
But the
latter point
must
at
any
With
regard to the
it is
not
of
it,
it would seem that That there is a mistake at the root would seem capable of demonstration.
Law
of Value
so.
with
Marx's economics certainly stands or falls the Law of Value whether the whole Marxian view of life does or not. This demonstration is what we wish to give. It is not new. It has been given before. Our aim here is simply
as far as possible, to set
it
And
he
into
two
parts.
We
CHAP,
i]
WHAT
IT IS
book to say what the Law of Value is and in the next two to explain clearly what is wrong about it.
shall try in the first chapter of the
;
11
is
an answer to a question
Marx's
what the
is.
We
1
shall best
n
open by approaching
raising
it
it
from two
sides
-in
;
>s
bkmT^V^h'at happening
in the world.?
first
most readily to us
and after that consulting Marx to see how the same question emerges under his own hand. We shall then be in a position to estimate his undoubtedly striking
answer.
What
is
then in
its
simplest outlines
is
the
Law
of Value
We
no mere local or national question. of anything merely local or national one of the conspicuous features of Marx's outis
look.
He
is
He
is
an observer of the social life of Europe. The times he lived in invited this width of observaEuropean life was in an interesting state. tion. It was passing through a period of what seemed
who lived in it a period of great changes, and they were common to all countries changes
to those
;
in manners, in standards of
living, in industrial
MARX'S
LAW
life
OF VALUE
[chap,
organisation, political
and religious beliefs. People accustomed to the old ways were anxious And as to what might be the outcome of it all. This is the first so, after a fashion, was Marx.
point
we wish
In
his
own
fashion, he too
was interested
in the passing of
He too was driven to speculate on And his Law of future might bring.
his
guide in
all
that forward-looking
speculation.
But the Law of Value could function as his guide to the future, only because it seemed to hold It the key of the present. Marx was a thinker.
is
us
is
It
is all
very well
;
none of us can prophesy all is that the future comes out of the present, and
that being prepared for
it is
a matter of under-
The
is
to construe
'
what now
" What
Marx
turns his
attention to that.
is
What is in fact now a-preparing ? What is toward ?" This is the problem to which the Law of Value seemed to hold the kev.
his question.
'
Ill
But
this is
The
stated at
its
very broadest.
CHAP,
i]
WHAT
IT|IS
to
it,
5
if
We
we
pro-
particularly
how the Law of Value came in. particularly In general, Marx was out to learn what was ^^^
[^
really
many
age.
happening in the world of his time. Like happening in the economic , , IIother great men he would read his own realm? The particular place to which he looked g^j^^^yj^
, ,
for a clue
was the sphere of economics. He called value is l)6inF crC" would judge of what events were abroad in other ated, whose regions of social life, by what was happening there, ^g^^nds This is a principle with Marx. All other social inquiry.
changes, changes in the field of politics, in the
realm of
realm.
taste,
in
economic
to
With this therefore we have first reckon if we would understand any phase
civilised life.
of
Such is the essence of his so-called economic view of history, the view which he considered materialistic and which he advocated
as against the idealistic reading of history taken
by one of
Hegel.
his
When Marx
during his
as
what actual
own
it is still
Scientist
he seeks his clues as a scientist ought to. back on the universal. The business of He the economic sphere is to create value. What, he asks, does this value-creating consist in ? What What do men do? is the nature of the process? simply enough. Men given can be His answer produce material things and exchange them when he
is,
falls
MARX'S
LAW
OF VALUE
[chap,
they are produced. One man works to produce wheat and another works to produce shoes the one then offers some of his shoes in exchange for the other's wheat, because he cannot live without the wheat. Such, reduced to its very simplest terms, is the story of the economic process. Yet this simple statement cannot be all. There are anomalies in the process of man's making and exchanging of goods. When we look around
;
we observe the greatest differences in the command which various people have of the goods made. Some have many and some have few. Those who have many can exchange their superand so they are in a place of power. What is it in the economic process that brings this about ? How are some richer than others ? Or rather, what is it for one to be richer than another ? In what do differences of wealth consist ? When is a man,
fluity for
This
is
the problem.
little
better
what wealth
those great
to
know how
and growing differences of wealth originate or what properly to do about them. And here the mystery of value emerges upon us. man's wealth, whatever it consists of, does not consist in the abundance of the things he possesses. One may possess a whole barnful of stuff" while another can put all his wealth into a very little casket and yet the latter person may be far the wealthier of the two. The wealth does not lie in the bulk. It is on
CHAP,
i]
WHAT
it
IT IS
depends.
What,
?
then,
is
this
it
thing which
we name
value
And how
does
There must be something in it and in the laws of its behaviour which contains the clue
?
behave
to
much
that
is
the age.
IV
Having found our own way to the
problem
,
ques-
g^^gj con,f
demanding
,
.
solution,
glance at the
first
volume
to
exchange?
of Marx's chief work, Capital, and see how the problem emerges under his own hand. We must go slowly, because his reasoning is very concentrated. But it is worth while not merely because he comes out at the end with the very question which we came upon, but because many important points are brought out by his method of approach which do not appear in our
;
own
simpler statement.
in the opening paragraphs of this first
Marx,
chapter, is examining into the facts connected with exchange-value. Take any commodity, he says we are paraphrasing him freely, of course Offer to exsay, a quarter of good wheat. change it. It will fetch, in exchange for itself,
the most different quantities of different stuffs of straw it would fetch the price of probably
a considerable heap, of apples perhaps the price of a barrel or two, of gold the price only of a
very
little bit.
MARX'S
Apropos of
this,
LAW
OP VALUE
[chap,
makes the following statement. " Exchange- value generally, is only the mode of expression, the phenomenal form, of somesixth paragraph
thing contained in
it."
it,
looks,
is
in
exhibits Marx's
problem very
clearly.
We
gold
and the
Being each the exchange-value of the same thing, the wheat, they They contain an equal are equal in something. measure of something. There is a something
in each of
them
it
throughout the straw, very highly in the gold but a something is present in each to an equal degree. The problem is to say what that is. It is what gives the commodities their power to exchange. It is plainly the " value " on which, we saw above, a man's wealth depends, and not on the mere abundance Marx's name for it is exof his possessions.
change-value. But to say what it consists of, to say what sort of a substance this " thing of
air "
it
is,
is
What
is
which gives it the power to fetch other things in exchange for itself ? By what is its exchange- value measured ? His answer is To this qucstion, Marx, of course, has his ypo e ca g^j^^^gj. Everybody who knows anything about him knows what it is. And we shall proceed to consider it in our next chapter. One thing, howin a thing
.
(;hap. i]
what
it IS
9
raised the
ever,
is
Having
question, "
Where does this mysterious power named exchange-value come from ?" and having
offered an answer to
is
it,
startling,
Marx
upon
page
this answer.
correct one.
after
it
;
gets
and he erects an entire economic system upon it all without offering the reader any test whereby he might try and see for himself whether it is the true answer or not. Such is the great defect in Marx's method of work. By introducing a certain train of perfectly
into all sorts of interesting positions
;
him
how
a question
Having what is
to
raised
at
most a very
;
work with it feeling, most likely, that the mere possibility of working with it was itself
a test
;
led to be able so
much
led to such
to be true.
And
certainly there
Certainly
once the barriers of prejudice are down, the reader feels for a long time as if this intoxicating suggesWhat tion of Marx's could hardly be false. reinforces the feeling, too, is the difficulty, except to one with a certain amount of expert knowledge.
10
MARX'S
LAW
OF VALUE
[chap,
of seeing at once any test to which the suggestion could conveniently be brought.
was such a an interesting question. The best answer would appear to be this. Marx beUeved very immovably in his great hypothesis. And while he probably knew, and knew pretty clearly, that there were some crucial tests it had to pass, he felt very sure that it would pass them all right. So he simply put them oiF. But the test did come. It had to for Marx was not the man to keep shirking crucial issues to the end. And he tried hard to puU his theory through. But he did not manage it. No one I am persuaded unless he has a theory to defend, could say that Marx is really successful when it comes to that supreme issue. But before we can consider this,
see that there
is
test, or
It
we must
look a
little
more
closely at
what
his
hypothesis was.
Marx's hypo-
What
a thing
?
is
On what
does
its
a negative answer.
"At
least,"
he
it
replies, "
it
possesses."
In the
fifth
made
that
'
intrinsic. '
Exchangeintrinsic
and consequently an
CHAP,
i]
WHAT
IT IS
11
value i.e., an exchange- value that is inseparably connected with, or inherent in commodities, seems
a contradiction in terms."
'
By
'
inherent
'
and
meant simply, 'in' the thing comparatively permanently in it, as its physical properties are. And the doctrine is that exchange-value cannot be inherent in that sense. ton of coal which contained its exchangevalue exactly as it contains its weight or its
intrinsic,' here, is
and
blackness would,
Marx
says,
be impossible.
It
would be a contradiction. The poker, for example one example is as good as another is a commodity which has a handle and a point and other properties or features which make it valuable in use. What makes it valuable in exchange ? Not any of these things. Without them, indeed, it would not exchange for much. But these things do not secure its exchange- value. If they did, its exchange- value would remain, so long as they were intact. But this would mean, what is certainly not the case, that it would exchange as
for
none of those circumstances change its physical An article's exchange - value may vary, although its properties do not change. What, then, does exchange-value depend on ? What does it vary with ? What is it fixed by ? This is the question which Marx has to answer and his answer, the answer on which he stakes his entire political economy, is that what fixes
properties.
12
MARX'S
LAW
OF VALUE
[chap,
the value of anything is the amount of labour which has been spent upon it. Ask how much labour was needed for its production and you have the measure of its exchange-value. point j^ jg important not to misunderstand the ^ ^ of this. At first sight, it seems as if Marx were
presenting us here with some ideal standard.
always assume, for example, that a golden bowl is of more value than a wooden one. Usually we attribute the superior value to the
precious metal.
We
Marx
statement that the value is wholly in the labour. There is no superior value in it except in so far In saying this he as it contains more labour. would seem merely to be counselling us to judge
of things by another standard than
we
are ac-
customed
ideal
to.
this way of reckoning would be universal, where nothing would be reckoned precious except according to the toll it took of human time and strength to produce it. To understand him to be speaking in this sense, however, would be a gross mistake. Marx is not in the least telling us how value ought to be reckoned. He is telling us how it is reckoned. He is not concerned with what we ought to do. He is only interested in what we do. In this matter he is only trying to say how human
world where
And
this
is
his finding
value things by the labour on them. commodity, when placed on the market, actually fetches other things having the same labour in
Men
CHAP,
i]
WHAT
it
IT IS
13
is
them
as
has.
If a boll of
wheat
regularly
exchangeable for a barrel of apples, a fraction of an ounce of gold, or a great heap of straw, then this means, in Marx's view, that all of these are produced by the same amount of labour as the wheat. That is why they exchange in equal proportion. Always, the amount of labour in it determines for how much an article will exchange.
VI
nothing
capitalistic
system
is
inherently
elaborated
by Marx
in
his
famous
after
certain quantity
as finished
goods.
It
had a
certain value when it arrived and has a greater value when it leaves. Marx wishes to know where the new value came from which it has
There is no getting away from it. There can be no pretending that the extra money which the finished goods command, as compared with the raw material, is fetched by them without their having really
gained in value. It is not a case, Marx insists, of their being always sold for more than they are There is plenty of sharp practice really worth. Marx will not have it that it but in business
;
14
MARX'S
LAW
OF VALUE
[chap,
is
That the It cannot be. all sharp practice. enhanced prices should be derived always from goods being sold over their worth is, he says, a contradiction. If everybody sells goods over value then everybody must buy over value too if everybody sells his finished product over its value everybody must buy his raw material over its value the thing is as broad as it is long. No. The normal thing according to Marx is that the goods, in passing through the capitalist's hands, have actually acquired a higher value. He wants to know where it comes from. And from his hypothesis is that it comes from labour the capitalist's employees from the work which their hands and brains have put into it. Now all would be fair and square with regard to this if the employees were allowed to own the value which they have thus created. But under the capitalistic system this cannot happen. Wages cannot possibly rise so high as to absorb all the new value which the men gave to the goods by putting their work into them. If they did, the employer would have to sell the goods for what they cost him. He would get no He could not subsist, and production profit.
; ; ; ;
It is to be noted that Marx's complaint not that the system gives the labourer too little. In this many would have agreed with him. Many besides Marx have believed that
CHAP,
i]
WHAT
least
IT IS
15
which he at
Marx's complaint is that the capitalist system does not allow him to have the whole i.e., the whole
helps to produce.
difFerence
it
between the value of the material comes into his hands and its value when
as
it
leaves.
VII The real importance of the Law of Value can The essence now be pointed out. It is not important because charge* ^
supports Marx's economic system, although it does this. It is important because it gives him
it
against the
system
is
his
moral case. Slwlf" In Marx's view something called capital exists ^^^'ias distinct from something else called labour. His moral case, to put it bluntly, is that capital robs labour and ought not to. Capital abstracts something which labour has put into the article.
What
profit.
is
its
value.
it
its
that
it
was doing
this.
But
to
it
knows now,
credit
since
Marx
it
has spoken.
And
its
be
it said,
But
it
any case
this,
according to Marx,
does.
It exploits.
i.e.
And
the
is
Law of Value
speak of
what based on
is
to raise reflections.
a moral case is sure Those familiar with his works are likely to ask what the moral case mattered to Marx ? And rightly for he always disparaged
;
To
Marx having
16
MARX'S
LAW
OF VALUE
[chap,
by the strong moral case his theory gave him. But this is nothing to the purpose. A great many people do want a
have
set
very
little
moral case
and
many
and
And
of his
own
he really knew
how
interest in justice.
on
its side,
wants nothing so badly at the present hour as to be assured that Marx was mistaken. And although Marx was not wholly mistaken although he was not sufficiently mistaken for capital ever to be quite at its ease again in its old conception of itself; still, he was vitally
of a moral nature in
too,
mistaken.
VIII
The
fallacy
m the Law of
Value
Capital certainly takes ? \ ^ i i proht but as to its robbing labour that depends. It all depends on the truth or otherCapital robs labour
r. i
;
its
wise of what
INIarx's
Under
rule, the
CHAP,
i]
WHAT
IT IS
17
value of a thing will be high if the labour spent on it is great, low if the labour is little. Unless
this
is
of value.
true.
Now,
it
We shall go into the matter in our next chapter. But we may indicate at once the nature of the
If p is the source of q then when p is great q will be great and when p is little q will be little. The two will maintain a proportion to
fallacy.
each other all the time. If either varies the other be found to have varied. Value, then, should vary with its source. When the labour is much the value should be much. When the labour is
will
little
little.
Now
with labour that it cannot because it has got to vary with something else, something which goes independently, namely, price of production. The error is one of logic. Suppose one man is going North and another is going East. If I am going parallel with the second man I cannot Because also be going parallel with the first. they are not parallel with one another. That is the situation with labour and cost of production. Value should keep parallel with both if Marx is right but it cannot because they go
;
divergent ways.
not suggested here that labour has nothing That would to do with the creation of value. be an absurd statement. The suggestion is that
It
is
Marx
is
wrong when he
says that
it
is
the
18
entire
MARX'S
LAW
OF VALUE
[chap,
and only cause. We insist that if value came from labour alone, it would vary with it. It does not do so. And there seems to be no reply to this except a surrender of Marx's
principles.
CHAPTER
Marx
II
the sole source and measure of the value of it. If we ask what a thing with ten days' work on it will bring in exchange the answer is "other
things with a total of ten days'
We are now to
law, and
it is fair
Marx
that although
first
truth of
it first
the matter.
it.
If False
objec-
the source of all value is labour, a shoe ought to Law of have more value if there is more labour on it. ^*1"^This may often enough hold good. More work is wrought upon a very fine shoe than upon a coarse But what about a one, and it has a higher value. coarse one which has been made by an incompetent man ? professor or a parson might take thrice the time to. it that a properly qualified workman would take, but the article would not seU any
the better.
It
would
sell
19
20
MARX'S
it
LAW
OF VALUE
[chap,
ii
As
less
time to make a spoon than another to spoil yet the spoilt horn is not therefore more valuable than the spoon. But Marx recognises this and shows that the
a horn
;
difficulty is a
" It
modity is determined by the quantity of labour bestowed upon its production, the lazier a man or the clumsier a man the more valuable his commodity." So says Marx in Chapter VI of his " This, however," he Value, Price and Profit. " continues, would be a sad mistake. In saying that the value of a commodity is determined by
the quantity of labour worked
in
it,
up
or crystallised
we mean
This is quite final. In Marx's view it is by the labour necessary for its production that a thing sells. When I take a piece of work to the market I shall get for it such goods (or the price
of such) as cost the same
to
number of labour-hours
piece of work.
"necessary as things
I
If I overstep
pay for
it.
If I
when
better,
it is all the same as if I were lazy or incompetent or ill or old. I cannot then count on getting for my product the time I gave to it. I can only count on getting the equivalent of the
CHAP,
ii]
THE FALLACY
IN IT
21
time necessary in the given state of society, for doing such a piece of work as this.
II
So far from saying that goods never sell above the amount of labour necessary to produce them Marx teaches that this must occasionally happen.
of his century, he is full of " Production on a a belief in material progress.
spirit
The proper
of the
Law
Quite in the
scale,
grand
ance of chemical and other natural agencies, shortening of time and space by means of communication and transport, and every other
contrivance
by which science
presses
natural
the social and co-operative character of labour is developed," all these things contribute to the
same
is
result
according to Marx.
in the time.
Their effect
amount of labour shall They make labour produce more more productive of goods. And to him it is
to secure that a given
almost part of the nature of things that these It is almost a improvements should occur.
natural law.
Every step
in this process
is
an occasion when
goods are to be found exchanging temporarily at a price above the amount of labour required to
produce them. This too is in the nature of the If an employer hits upon a device which case. enables him to produce shoes per week at, say
22
MARX'S
LAW
OF VALUE
[chap,
ii
number
of pairs per
man employed
for
is
under-
by him
at far
of labour necessary to
make them on
new
method.
But the advantage is temporary. The exchange value cannot stay in that inflated state. That
not its natural level. In a free competitive system the normal result of this man's success is that others learn to put their capital into
is
And
as capital
in this
new
type of thing, competition gradually brings the price of the product down until a man gets for it just what will buy an equal amount of labour
in
And here Marx lays down the formula for his Law of Value. " As a general law we may
therefore set
it
down
com-
modities are
directlj?^
the
times
of labour
employed
in their production,
as the productive
Ill
The
crux.
how Marx states the Law of Value in Chapter VI of Value, Price and Profit. It was important to him, however, to make sure that the law holds, even when it is formulated
This
is
CHAP,
ii]
THE FALLACY
IN IT
23
so as to
make the value vary not with the labour but with the " socially necessary " labour. This
we must now
look into.
was the
sole source of
the value and that therefore it wholly belonged to the labourer, and profit was exploitation of
or in other words robbery. When we examine into the matter, however, we find that things vary in value according to something else, and something their varying with which
him
is
labour.
For there
is
a commodity will fetch in the market. thing must be sold so have seen it already.
We
as
We
IV
It
is
commonplace of
political
economy that
"Equal
'^**
under the competitive system things tend to fetch a price a margin above their cost of production. Marx does not attempt to deny this, yet his system is built on the assumption that things
fetch a price proportioned to the labour-time
of pT^'t
that
is
in
them.
The
difficulty
about having
MARX'S
LAW
OF VALUE
[chap,
ri
both these statements correct is that they are not compatible with one another. In the competitive system things inevitably have to be priced so as to pay. This is elementary knowledge. They cannot be sold for just what they cost or the maker could not subsist. If then, profits tend to keep about a certain fixed percentage of the capitals, the prices of produce
will vary
That
is
with the capitals themselves. do keep about a certain percentage again everyday knowledge. When we go to
profits
invest a little
money we
reckoned a fair return, that three per cent, is modest, and that ten per cent, is good. But there is such a thing as an average rate of profit that can be reckoned on. It is inevitable that there should be. All profits must tend to come to, and stay around, an average. Suppose that, starting a business, you put out a capital of 1,000 and at the end of the year realise 1,100. That is ten per cent on your outlay and rather good. Suppose this well above the average of what men can make in most other businesses at the time. Marx would be the first to see that this would prove a standing temptation to others to put their money into this line too, undersell you, and by bringing your prices down bring your profits to something near the average level which prevails. Special circumstances such as monopolies, patent laws, trade secrets and the
per cent,
is
hke,
may come
in
as
artificial
barriers
which
CHAP.
is
II]
THE FALLACY
IN IT
25
is that goods tend to be priced to show a certain average rate of profit on the capital invested. They must tend to
exchange at a figure a
production.
little
Marx, then, since he does not deny this, is to show how the power of goods to exchange still depends on the amount
for
The problem
how
the price of
it
V
would be quite plain sailing if all the iTie coudiwent to pay wages. The prices could Jj^^gh Marx's then follow the capital and still be in ' proportion l^^ "'
It
capital
,
to the labour.
Value would
hold.
In primitive times this might approximately might imagine a master setting a so. gang of slaves to work, first to make a few rude tools and then to till a piece of virgin soil with them until it brought forth fruit. We might then imagine the master taking all the fruit and after allowing them a portion to keep them alive selling the rest and pocketing the proceeds. If there were many such masters and competition sprang up between them in the selling of their produce if it were open to any of them to leave this business and go into some other if it did not pay him well enough and if it were similarly
be
We
26
MARX'S
LAW
OF VALUE
[chap,
ii
it
open to other people to enter this business if got the reputation of paying very well then very soon, here as elsewhere, profits would find their level. If a master was to stay in this
;
amount
left to
him
after the
the same
amount
And
would tend the same way. One could soon count on getting this produce at a figure per pound or per ton which would repay capital outlay with a margin. No difficulty would in this case arise. Marx's law literally hold. goods would The would always be
profits thus finding their level, prices
them, because
There may have been times in the history which Marx of the world when this was more nearly the way It is certainly not the way ^^ things than now. does not ^'for value does now. Nowadays a man does not spend all his Before he can start his wagea there, capital paying his men. workers at all in the present state of society he may have to spend half or nine-tenths of his
In the condi-
capital providing
raw
not to the purpose to point out, as Engels has done, for how many thousand years in primitive societies circumstances were such that Marx's
held.
Law
of Value
but with
and
is
CHAP.
Ti]
THE FALLACY
IN IT
there.
27
finger
And
there
man must
return on
the
is
societies
not always the same proportion of the whole, and does not even tend to be. It goes its own way and values do not follow it. There lies the
difficulty.
VI
It
1
due to a mis-statement.
-1./I
Marx
in
any
given state
of society,
and
l^d^^ fo'^tir
making him teach that it follows the amount of employer's wages-bill. The wages-bill represents wrought.
are
we
it
may
be
said, to the
labour done.
And
it is
with
Marx makes
But in point of fact, what varies with the labour done, varies also with the labour paid for. The objection does not hold. Although
the wages-bill follows the paid part of the labour the paid part is, on Marx's other principles, a
fixed proportion of the whole.
it oscillate.
Accidents
may
temporarily make of the competitive system is necessarily towards making the part of the labour which is paid for
in
any given state of society, a certain proportion of the whole that is wrought. To see this we
28
MARX'S
briefly
LAW
OF VALUE
[chap,
ii
must
glance at Marx's
conception
of
labour-power and
its distinction from labour. In a given state of society it can be said of any given quantity of raw material, " The labour
necessary to
article is
executed the manufacturer buys from men their labouring-power and gives them wages for it. He then turns on this man-power just as he turns
it
until his
Marx
and mental capacity for work. His actual labour is the expending of that capacity, the using
of
it
up.
We
can always
greater
to
is
labour which
buy."
in
power
labour he
according
greater the amount of manufacturer requires, the the amount of labour-power he has The manufacturer pays for labourhours of labour and the hours of must pay remains a fixed quantity to the cost of production of labour-
say "
The
the
power.
For labour-power
of
production.
"
cost
cal-
with it, the price of the product, takes into account the wear and tear of the instruments
of labour.
If a machine costs him, for example,
CHAP,
ii]
THE FALLACY
shillings,
IN IT
29
one thousand
up
in ten years,
out machine with a new one. In the same manner, the cost of the production of simple labour-power must include the cost of propagation, by means of which the race of workers is enabled to multiply itself, and to replace wornout workers with new ones. The wear and tear of the worker, therefore, is calculated in the same
as the wear and tear of the machine" {Wage-labour and Capital, Chap. IV.) Labour-power thus has its cost of production and it amounts to the " cost of the existence and propagation of the worker." Cost here means cost in the necessaries of life, which again means
manner
Such labour- time will be a constant number of hours per day in any given state of society. The lengthening of the working day does not affect it. A man cannot work beyond a certain length of time upon a certain quota of the means
of subsistence.
Hence, although the labour paid be not the labour done, it must go up and down with the
labour done.
It
is
and
bill.
done
it
will
i.e.
the wages-
In
capital
30
MARX'S
LAW
OF VALUE
[chap,
ii
since in capitalistic societies the amount spent on wages does not form a constant proportion of the whole capital.
VII
No one has rccognised the conditions of this problem more frankly than Marx himself He hifreSg^ sees that the propprtion of the whole capital of the facts, which is Spent on labour varies. On the one varies hand it with time. In course of the progress of invention, the cost of plant becomes greater in proportion to the number of hands
Marxrecogdifficulty in
If the original proportion of these employed. two elements was one to one it will, in the
' '
. .
.
progress of industry,
forth."
become
five to one,
and so
{Value Price and Profit, Chapter XIV.) On the other hand, lapse of time is not needed to produce this variation. Even at the same
moment
most
different
amounts of labour
in different
industries.
almost aU labour.
engineering labour costs are very small compared with other costs. Marx expresses this by saying
that capitals are of different composition, higher
composition
labour
is
Chap. VIII, also the first If, then, the price which the product fetches must tend to keep about enough to show an average profit on the whole
(See Capital Vol.
section of Chap.
XXV.)
CHAP.
Il]
THE FALLACY
how can
it
IN IT
31
capital,
is
vary with the labour, which not a constant proportion of the whole capital ?
To answer
this
Marx
has recourse to
many
But he shows
argument in the thu-d volume of theU-* of Capital; but he has no main line, for no Une?^^*of argument can even approximate to a proof of
different turns of
a mathematical impossibility.
give here a table, adapted from one of Marx's, showing how things ought to fall out, if
We
Marx's Law of Value held good. It will be noted that we are taking five equal capitals of
100 each, and showing the 100 apphed in five several ways according as the industry in which
it is
of
it
We
as being spent
40 down
to 5.
32
MARX'S
;
LAW
OF VALUE
[chap,
ii
up plant and buildings, disposes of any left-over material, and finds that his net spendings come to just 100 and that
a year
sells
when he
there remains in his hands a collection of marketable goods, the year's produce.
If
we
ask, at
what must that produce sell under ordinary mere common sense is enough to teU us that it must sell at a margin over 100 and this, whatever the nature of the product. Yet on Marx's principles, the selling prices should come out differently in the different cases, and should run as shown in the final column. Every figure there is arrived at on Marx's principles i.e. by taking the value of the raw material etc. (column 2) and adding to it the whole extra value accruing from the labour of the workmen,
conditions of industry,
;
the paid part (column 3) plus the unpaid part (column 5). Thus in the case of capital
number
I,
shown
as equal to the
sum
(c)
they should
be
if
where any such values I-IV are being realised for an outlay of 100, the tendency under capitalism is for capital to flood the better paying
as those
But
shown
in cases
CHAP.
Il]
THE FALLACY
IN IT
33
lines
until aU are levelled to something near case V. Profits level themselves down without " the composition " of the capital being changed.
amount of
spent on.
capital
sunk, whatever
it
may
be
VIII
In the ninth chapter of the third volume of AnarguCapital Marx makes an effort, one amongst it amounts many, to get out of this impasse. At the ^^S'^^^^^.^P beginning of that chapter he exhibits in tabular that commodities sell .1 . . n . ! 1 1 1 lorm the situation as it would be if values were by the labour
1
according to labour, in the case of five equal***''** capitals differing from each other only in their " composition." The table is as follows
:
34
MARX'S
LAW
OF VALUE
[chap,
ii
surplus values
shown
is
in the third,
which again
which
spent on Labour.
value
it creates.
For the
new
cent."
These ia the
the profits,
if
final
the values went by labour. But they are not the profits. How does Marx get over this ? He does it by making a distinction
quite
fatal
to
his
theory.
He
distinguishes
between the profits really made and the profits which actually come. The profits which actually
come
to the five capitals are all alike. Nevertheless, he argues in effect, the profits
here set
down
They
The
does not in every case reap the appropriate profit. Through some contingency, by some side wind or
other, there
capitals
a profit of equal amount to all the others, so they all share an " equal average rate of profit."
But
what
is
the meaning
in the table
have only one meaning, namely that his central economic is not true. His central teaching principle hitherto has been that goods sell at their value,
Marx's doctrine of value
meaning
He is
still
telling
CHAP.
II]
THE FALLACY
;
IN IT
35
real value
not
sell at it,
but he is saying now that they do but practically always at some other
if
figure.
But
fact
in
labour,
where
is,
is
The
nothing
which we thought was thrown aside. Marx admits that for goods with a capital of 100 behind them, the price which in the normal way of business you will be able to command will be simply a margin over 100 \be the labour in them great or be it little. He then adds that their real value is nevertheless the imount of labour in them. But if they do not sell at their " real " value, what is it to us to be ;old what their " real " value is ? That is simply ;he old point of view of mere piety which Marx
ising position
Their " real " value is the labour io we "ought " to value them at that. Marx ivas not having this. As we saw in section of
lad exploded.
saying that
all
that the
brings should
come
it.
to labour,
was that
ng
to the labour in
we
no alternative but to go back again and try whence the value really comes. :o And as to this question itself, the utmost we 2'dn say for certain with the data which we have IS that value does not come from labour alone. W^hatever the right answer to his problem may be
lave
see
36
it is
MARX'S
LAW
OF VALUE
[chap,
ii
answer is wrong. He has clearly taken back with his left hand what he gave with his right, and has left the case where he found it.
clear that Marx's
IX
DiagramntetioTo*f the Marxian
^ ^^^'
Let US endcavour to present graphically the ^^ alternatives, what Marx's principles require and what the facts show to be the case, with Let respect to the relations of value and labour. us represent five different capitals by as many squares, and let them be of varying sizes, a larger square representing a larger and a smaller
one a smaller
capital.
The question is as to the total of goods produced by each of these capitals in the year. It has a certain exchange value, but a different What does the value depend one in each case. on ? What does it vary with ? In the diagrams, the part of the square to the
left
is
etc.
The
part to the
If
Marx's principles are correct, the value of the year's produce should tend to go by the amount spent on labour. It should depend on how much
of the right side of the square the dotted Hne cuts off. In other words, it should depend on
CHAP,
ii]
THE FALLACY
line
is
IN IT
it is
37
where the
drawn near to the. right the value should be small, if it is drawn more to the left it should be larger, with the same
drawn.
If
size of square.
drawn anywhere.
point of fact, the value of the total produce of each capital varies simply with the size of the square
itself,
it
and
the place
where the
line is
drawn
within
makes no
difference.
By
fashion
we may we
On
plainly, as
said,
Equally plainly, labour has someThe chances are that it with it. thing to do comes from the labour and the constant capital At least, it varies with that. It together.
laboiu" alone.
Another
his S'by" Marx's ninth the of^^"'^^^*'^ chapter, statements in the same Volume III of Capital; although there is some tautology, difficulty in so. presenting it as to make it even
for Another
look plausible.
The
Law
proposition to be proved was the Marxian of Value, and the difficulty was the uniform
average rate to which profits on capital tend, under competition, to fall. Succinctly, How
38
MARX'S
LAW
OF VALUE
[chap,
ii
if
essentials
if
the argument
is
as
because if you take all the capitals together and average the various amounts of labour they employ, you find that there is an average. That There is is the essential point of the argument. in fact an average. There is an average amount of labour employed per 100 of capital in the community.
Assume
Say,
man.
profit.
the
The
by every
capital in
number of hours worked by the men This number will vary. Sometimes 100 will provide work for 80 hours when
the total
employed.
it
work for 10 when there will be 5 hours of profit, and so on. But since there is an average number of hours per 100 there will be an average amount of profit per 100. And while the real profit on lOO may vary, say, from 40 down to 5, according to the labour it employs, competition will come in and bring the actual profits on each 100 to an equality with the average. But an argument like this has not even the
CHAP,
ii]
THE FALLACY
IN IT
39
appearance of plausibility. What does the mere mathematical truism that there is an average tell us? It tells us nothing except that there is a
Let every hundred-pound unit of capital that exists employ on an average a certain amount of labour per year. What does this state ? It
total.
only states that the total capital which exists employs a certain sum-total of labour. But we can get nothing whatever out of this.
The
labour.
total capital
employs a certain
total of
AU
community taken
We
are
somehow
under equalisation of profits value may still follow labour, or that under labour-values there may still be equalisation of profits. We are to find that somehow these two things are not incompatible. And the argument is that if this total
capital
whole aggregate of produce would equal the said total of labour. To put the argument in another way. Suppose the five capitals in the table on p. 33 represent the entire capitals in the community. Then, just
selling price of the
as, in
this
price of the
their
commodities of I to
would be equal to
aggregate (labour-) value," so in the community " the sum of all the prices of production of aU commodities, comprising the totality of all lines
of production,
(labour-)
p. 188,
is
equal to the
(See
sum
of
all their
values."
Capital,
volume
III,
English Translation.)
40
MARX'S
LAW OF VALUE
[chap,
ii
But, to come at once to the point, what do you actually say when you say that the price
of the total produce " equals " the total labour
--
or that the sum of the prices of all commodities " is equal to " the sum of their labour values ?
The answer
is,
exactly nothing.
What
is
the price equals the labour ? Marx has to say " equals." " follows
"
We
must
observe,
He
cannot say
he is speaking about the not vary. If it did, it just would not be the total. He has, then, to say that the value of it
And the word at it. once makes the statement meaningless. What it says is that the price of the total (what you would get in exchange for it) contains an amount of labour equal to what the total itself contains. But if one asks. What does the total exchange
" equals " the labour in
for
?
or,
What would
is
it
fetch
in
money but
in actual goods,
answer
What
?
can
equivalent in
And
of course the total has the same labour in it as the total. But what can one take from a
fact like this
?
the labour.
How-
ever true this maybe, we have here no reason given for it. It is not only in its labour that the total
is
the same as
itself.
It
is
CHAP,
ii]
THE FALLACY
it
IN IT
41
same labour as itself but it has the same bulk too, the same weight, the same number, the same everything. We can no more reason thus " the total of things exchanges for something with the same
every feature
;
has.
It has the
labour, therefore
we
value is in the labour," than can argue thus " the total of things exits
:
changes for something with the same bulk or weight or density, therefore, its value lies in the bulk or weight or density." So far as this
argument
that
it
is
bulk as
depends on the labour bestowed upon it. can argue nothing from the totality of comIf the difficulties cannot be got over modities. means than that, they must remain. by other
We
CHAPTER
Marxism
economics,
III
Wb
up or down of it.
but a truth, that a social movement can sometimes be both widespread and vigorous although its theoretical It is an exaggerafoundations are very slender. tion, however, to say of the Marxian movement that it has been unaffected by the weakness we have pointed out. It is not the case that Marxists have gone on undisturbed by the presence of the economic fallacy in their system. The difficulty upon which we have dwelt, the failure of the Marxian system to pass the test of economic fact, has by no means remained unperIt is a perplexing fact,
been contemplated by them with equanimity. Indeed, circumstances have so ordered it that the romance of Marxism may be said to have
42
CHAP,
m]
43
gathered round the point. Marx, as we have insisted, was not a man constitutionally afraid of
facts.
(to
always of the existence of this him) particularly fatal fact of the equalisation
little
He knew
of profits,
as he believed
it
to be fatal.
And
took,
he underfrom quite early in his career, that he would deal with it by and by and explain it. And it was his lot to have to confront it at the
last in rather a
dramatic way. As is well known he was, in a manner of speaking, recalled from his grave to face it.
I
It is well
known
that
Marx only
the
first
volume of
his great
work
published.
he died, the manuscripts of the second and the third were left in an incomplete state, to be arranged and edited by his lifelong friend and fellow-worker, Frederick Engels. It had been a thorn in the flesh of Marx during his lifetime, and a great source of annoyance to his friends after his decease, that he had been accused of plagiarism. The followers of Rodbertus, a fellow-countryman of Marx, insisted that Marx had obtained some of his main doctrines from him without acknowledgment;
people underestimating, as usual, the chances
of two competent thinkers independently dis-
When
definitive
way.
He
44.
MARX'S
LAW
OF VALUE
after
[chap, hi
When
Marx's
volume shortly
death he took occasion to insert in the Preface a challenge to the followers of Rodbertus, seeing
Marx's view that value depended on labour to be not his own at all but their master's, to show if they could from the Rodbertian writings how it was that an equal average rate of profit was stiU possible if value followed labour. For Marx's solution of the problem was to appear in a few months' time in the third volume of his works and no doubt Marx who had got everything from Rodbertus had got his solution of this from
that they considered
;
him
too.
It happened that years elapsed before the appearance of Marx's third volume, Engels ex-
much underestimated
it
the
Meanwhile, the challenge to show how Rodbertus solved the difficulty, hung up as it was before the public for this length of time, had had the effect
of putting
together.
solve
it ?
Experts had not been slow to say that the difficulty could not be solved, except by giving up Marx's principles. But that, of course, did not prevent the attempt from being made. And,
in
point of fact, the followers of Marx tried their hand at the task in much greater numbers
than did
the
Rodbertians.
When
at
length
CHAP.
Ill]
45
nounced in the Preface that none of the attempts had succeeded in giving the true Marxian solution, and added that in this volume the true solution would be found although without indicating whereabouts. But by this time interest was intense. The critical intellect was thoroughly awake. People had tried all ways of it. The most vigorous minds in the whole Marxian following had been running over all the solutions they could think of. They were in a condition
both to detect the slightest flaw in the solution, and to feel it to the full, should such, a flaw prove to be present. Now, the "true solution" when it appeared, was the one we have examined. The consternamost impressive list could tion was great. easily be collected of the expressions which it called forth from among the ranks of socialistic
writers.
What was
plain
dropped the great Law admitted that in actual fact value did not follow
labour.
And effbrts
to explain
away the
collapse
were many and various. One tried to say that Another Marx's point of view had " developed. " that the Law of Value was still a very useful Others idea, although it was no longer a law. found that Marx's solution was just their own, while others again were frankly upset. There is little wonder that when we come to one of the strongest of all the followers of Marx, M. Georges Sorel, we should find the attitude
46
MARX'S
LAW
OF VALUE
[chap, hi
taken up, that no store is to be set by the Law of Value at all, that the whole controversy was
mischievous and ought to be
scientific
banished from
socialism
altogether
is
and
forgotten.
We
Marx
II
could
now
take.
The recent
When
Professor
Boehm-Bawerk
presented
when
he presented in acute form the question as to how the value of a bale of goods could depend on the labour in it when it follows the amount
of capital behind
question."
it,
Boehm-Bawerk had
as
his
"fastidious
Strange as it may appear we believe that this wiU be found in the end to be the strongest defence that anybody can put up for Marx in
connexion to pooh-pooh the whole problem and say that it does not matter. The best defence of Marx's economics, in other words, is to sacrifice them, and say that his title to a hearing does not rest there at all. This is what
this
we
when we
said that
after his
much still to be discussed in him economics were finished with. Yet it is not a very good defence. If the whole problem of value is a "fastidious question," what, we naturally ask, is the great thing
there might be
CHAP.
Ill]
47
in
Marx ?
receive
is,
of course,
never to end
by a
own hands
run the industrial enterprises themselves. The great thing in Marx is understood to be his
preaching of the implacableness of this opposition, his view that between capital and labour
there
independent.
It
is
But the
The
class
not peace. And he wishes to inspire men with the determination to go on with it till revolution. He was interested in this kind of thing. But the fact remains that he spent his energies
in other words,
?
upon
Why
did he do this
He
But
we have
pointed out.
he was not working at economics for pleasure. He did not imagine that it was without bearing on the main work of his life. What bearing had it then ? What had his theory of value to do with the class war ?
48
MARX'S
The answer
is
LAW
OF VALUE
[chap, hi
simple.
fication.
all
his
And
knew as
clearly
any other general that the people who are to fight a successful war will be none the worse for
believing in
it
;
do not believe
in the justice.
Marx
Now
inevitable
in the
capitalistic
system,
of
its fruits.
Everything in
able to
this
connexion turns on
is
his
being
being
fruits
;
taken were
those
This
the justification
is
and
if
this justification of
Marxism
not
valid,
then
who want
vide another.
recent
It
more
Marxists to
whom we
;
we cannot
his
inquire here.
water.
Ill
no truth at all hovering around Mora's error. Marx's somewhat cumbrous mind as he works out a theory of value through so many hundred pages of tireless reasoning ? No one could say that. There is no doubt that in some general
The
truth
Is there then
CHAP.
Ill]
49
by
labour.
Every-
thing
we have and enjoy, in the way of material conveniences and comforts, all about us that can take the imprint of the intelligent life of man,
came
which
felled
The
table at
I sit was once a tree which grew, was by human hands, sawn, dried, planed, jointed by dint of human skill with tools which are the legacy of an immemorial past and of everything 1 have and use, the clothes I wear,
;
my head,
essentially
Mankind
are
all,
some
sense,
means of subby labour, from the surface of the planet whereon their abode is cast. Labour in some sense or other is the source of all value. But that is not to say that what Marx calls
task, the task of extracting the
sistence,
capital
is
There he per-
as distinct
of the dead.
How
as
are products
made
They
are made,
Marx himself abundantly shows, through men working upon raw materials with tools, which
required tools to
requiring further tools to
50
MARX'S
LAW
OF VALUE
[chap, hi
back and back indefinitely into the past. do not confront Nature in our own unaided strength. Placed in our hands, as a legacy from the generations before us, are the means whereby we address Nature with authority and command
her to yield her treasures up to us. Strictly it is not to us that Nature yields the wealth, but to a mystic pact between us and our whole social inheritance the pact between intelligent Uving labour and the embodied labour of the past, as
;
We
and
institutions.
what comes
of Marx's unconscious and underlying and entirely just principle that the
to
its
creators
is left
What
it,
is left
much
of
but a httle
It
would seem
to
all
come
who
system running.
The
other partner.
lated past.
The
social
And
cerned nor from them all together, but really from them and the dead in mystical social union and seeing that neither the extent of the several
contributions
calculated
to
capable of being
all,
mathematically
at
either
it
on seems
CHAP, ni]
51
incumbent on us to give up the whole habit of measuring satisfaction in terms of money and the whole hope of achieving satisfaction by merely re-distributing money. There is no way of measuring a man's contribution to the value of a product. Marx himself gives us no way. He recognises differences of skill between labourers, as one goes from one sort of work to another. What he says is that one hour of
is the equivalent of, such and such a greater quantity of labour which is unskilled, or, as he names it, " abstract human labour." But he has no way of measuring how many hours abstract labour there are in an hour of any one grade of skill, the sculptor's, the mason's, the overseer's or the clerk's. He holds that the reward should come to living labour,
by
way
of measuring
man contributes. So he cannot determine how much the capitalist contributes. And certainly he cannot prove that the capitalist contributes nothing, except he be chargeable with social failure. And that depends on what it is that really keeps society together and what
sin against it
is.
Marx
all
to
by mathematical methods. We cannot leave things as they are. That is admitted on all hands. But it is impossible to
settle these matters
52
MARX'S
LAW
OF VALUE
[chap, in
apply a rule and a measure and decide contributions to wealth and titles to reward by a
calculus.
Marx
indelibly in
we
man
that he
is
not
Working.
to say of those
they are doing. He leaves aU these questions where he found them, and the chances are jthat in our efforts to settle them, our one hope
of success will
lie
get altogether the sort of abstract quantitative standards which he endeavoured to use.
INDEX
Boehm-Bawerk, 46
Capital,
"composition"
its
movement.
III.
III.,
iii
30
Capitalism,
vii-viii
on Value in exchange,
iv-v
I.,
ii,
Engels, 43/.
Ethical
48
ii
point
of
view
in
Economics, 12,
1,5-16, 35,
Neo-Marxism,
Profits,
III.,
of,
Labour
28-29
and
labour-power,
this
fact
fatal
to
Marx,
II., vii-ix
Rodbertus,
his
Marx and, 43
Sorel, 45-46
Surplus- value,
I.
vi
III.,
I., iii
method, 8-10
moral
ii
his
case,
I.,
vii
Value in
doctrine
53
exchange, Marx's
of, I., iv-v
III.,
54
Value,
MARX'S
Law
it,
LAW
in
OF VALUE
Law
of
it,
of:
fallacy
Value,
of:
formulation
II.
it, II., i
false objection to
it
is
22 tables showing 36
how
it
not everjrthing in
1-2,
Marx,
Marx's
48-52
de2
it
economics
it,
of,
pend on
Wages,
II., v-vi
BILLING
AND
ENGLAND
WORKS ON PHILOSOPHY
BY THE SAME AUTHOR.
ALREADY PUBLISHED.
of illuminating thought
and sound
criticism."
OBSERVER
is
to
become a philosopher and in leading the philosopher become a student of social facts."
IN
THE
PRESS.
LIFE
and Colleges.
and
for Universities
The aim
of the
book
is
way which
is
minimum