August 30, 2021
From The Real Movement


This post continues from here

Michael Heinrich thinks Marx prediction of capitalism’s inevitable collapse as a result of progressive substitution of machinery for human labor was itself simply the result of his (Marx’s) irrational exuberance in the 1850s.

So, for shits and giggles, let’s assume Heinrich is wrong about this.

I know, I know — Heinrich’s been published by Monthly Review for God’s sake! He’s actually German or some shit. He actually LIVES in Germany.

He just HAS to know what he is talking about, right?

Bear with me.

Let Marx speak for himself — even though he wasn’t published by Monthly Review, lived in England for a good period of his life and was prone to irrational exuberance in the 1850s.


In the 1850s, Marx and Engels think capitalism was headed for collapse for reasons I already explained above.

In the 1880s, Marx and Engels apparently still think capitalism was headed for collapse — again, for reason I already explained above. (Weren’t you listening, edwad?)

Between those two decades, in the 1860s, Marx writes Capital, which, according to Heinrich, contains not a trace of this irrationally exuberant prediction.

It turns out that another critic, Eugen von Bohm-Bawerk, made a criticism similar to Heinrich’s that Marx made some sort of 180 in his thinking while writing Capital. The issue was not expressly the same as the one directly touched on by Heinrich, but, I want to suggest, it is related to it: the transformation of labor values into prices of production.

Why the two criticisms are related is the subject of this series.

To be clear, although Volume Three was only published in the 1890s, according to Rudolf Hilferding, two years before he publishes Volume One Marx had already completed at least portions of the draft for the third book concerning the transformation of values into prices.

Specifically, Hilferding says:

Before we consider these “arguments” and the counter-arguments of Böhm-Bawerk, it is necessary to say a word or two concerning the “contradiction” or the “withdrawal” which Marx is supposed to have perpetrated in the third volume. As regards the alleged withdrawal, those who use this term have forgotten that the first volume was not published until the tenth chapter of the third volume, which forms the bone of contention, had already been composed. For the draft of the last two books of Capital was composed by Marx during the years 1863 to 1867, and from a note by Engels (III, 209n) we learn that the tenth chapter of the third volume, the one containing the solution of the riddle, was written in 1865. To speak of a withdrawal in this connection is tantamount to saying that Marx, in order to remain at a definite point, first moved a mile forward and then a mile backward. Such is, nevertheless, the view which the vulgar economists have formed of the essence of the dialectic method, because they never see the process but only the completed result, so that the method always seems to them a mystical “hocus-pocus.” Nor is there any better justification for the accusation of contradiction than for the accusation of withdrawal.

I offer this statement only in order to establish a timeline, of sorts, for when Marx formulated his argument on the transformation problem in Volume Three. It seems that Marx was writing portions of several volumes at once, although they were published serially — and two of them posthumously.

Like Bohm-Bawerk on the transformation problem, many post-war Marxists like Michael Heinrich expect us to believe that Marx somehow made a prediction of a collapse of production based on exchange value in the Grundrisse, only to later withdraw that prediction when he set down to write Capital. According to this conspiracy theory, Marx then later stood by, in silent acquiescence, as his life long collaborator, Frederick Engels, revived his allegedly long abandoned prediction in the latter’s own book, the highly popular primer on Marx’s ideas: Socialism, Utopian and Scientific.

Well, I am not buying the “Marx made a U-Turn on his collapse theory” argument.

Instead, I propose an alternative theory:

Das Kapital is Marx’s presentation of the theory of the inevitable collapse of production based on exchange value in its complete form.


This is where the discussion of the transformation of values into capitalist prices of production in Volume Three may be relevant.

And to understand why the transformation problem is relevant, we have to talk about … uh, why Albert Einstein never won the Nobel Prize for his General Theory of Relativity.

Yeah, that’s right.

Einstein won the Nobel Prize in 1925, but not for Relativity. Instead, he won it for settling a long-standing controversy, much like the one Marx settled in Volume Three. Only for Einstein, the controversy was about the nature of light.

What was the controversy about the nature of light that Einstein settled?

About 2400 years ago, the philosopher, Democritus and the mathematician, Euclid proposed models that assumed light was composed of particles. About 1000 years ago, the scientist, Ibn al-Haytham, described light as a ray composed of particles traveling from a point of illumination to the eye.

That view of the nature of light mostly held sway until about 400 years ago, when philosopher, mathematician and scientist, Rene Descartes, proposed an alternative model in which light was a wave that behaved much like sound waves through a medium he called the “aether.”

The controversy over the nature of light, whether it was a particle or a wave, continued until Einstein proposed a rather startling answer: Light was both a wave and a particle, simultaneously — a superposition of the two states.

To borrow a quote from the Wikipedia, which is usually accurate about this sort of thing, except when it comes to Marx’s labor theory of value:

It seems as though we must use sometimes the one theory [of the nature of light] and sometimes the other, while at times we may use either. We are faced with a new kind of difficulty. We have two contradictory pictures of reality; separately neither of them fully explains the phenomena of light, but together they do.

-Albert Einstein, 1938


We have a similar controversy in classical economics prior to Marx.

The problem was this: if value is an objective thing, having a real influence on the real world market, how do we go from this objective thing to actual prices that this objective thing (namely, value) is supposed to determine?

Now, basically, this doesn’t seem like a really big problem to explain, if the only thing you cared about was how value and price worked together in simple pre-capitalist commodity producing societies — although even there some difficulties arise.

But when political economists like Smith and Ricardo tried to describe how prices and profit worked in the more modern complex capitalist mode of production — (and who wasn’t trying to do this in the 18th and 19th century?) — they kept running into an irreconcilable contradiction.

The problem: In theory, at least, there appears to be not one, but two determinants of price in the capitalist mode of production. Further, the two determinants are irreconcilable because they don’t agree on the price of the commodity.

As Sam Williams of the Critique of Crisis blog explained, those two determinants of price are the Law of Value and the Law of the Average Rate of Profit.

The first law says that the price of a commodity is determined by the socially necessary labor time required for production of the commodity:

The law of value as developed by classical political economy held that the value of a commodity is determined by the amount of labor that under the prevailing conditions of production is on average necessary to produce it.

According to the classical economists, the value of a commodity determines its natural price around which market prices fluctuate in response to changes in supply and demand. The fluctuations of market prices around values—or what comes to exactly the same thing, according to classical political economy, natural prices—regulate the distribution of capital among the various branches of production.

But the second law says that the price of a capitalistically produced commodity is determined by the average rate of profit on the total capital of society:

However, it was realized already by Adam Smith that the law of value thus formulated is in apparent contradiction with the tendency of competition to equalize the rate of profit. Under the relentless pressure of competition, no individual capitalist can afford to settle for a lower rate of profit if a higher rate of profit can be achieved. Every capitalist under pain of bankruptcy must seek the highest rate of profit possible.

Assuming there are no barriers to the free flow of capital among the various branches of production—that is, free competition or, as Adam Smith called it, “perfect liberty”—competition among capitals will tend towards a situation where capitals of equal size earn equal profits in equal periods of time.

To put this in terms that might be familiar to folks who are acquainted with the physical sciences, the problem of the price of capitalistically produced commodities result from the fact that they occupy a superposition of both a commodity and a capital.

Marx described it this way:

The whole difficulty arises from the fact that [capitalistically-produced] commodities are not exchanged simply as commodities, but as products of capitals, which claim participation in the total amount of surplus-value, proportional to their magnitude, or equal if they are of equal magnitude. And this claim is to be satisfied by the total price for commodities produced by a given capital in a certain space of time. This total price is, however, only the sum of the prices of the individual commodities produced by this capital.

-Marx, Capital, Volume Three

If, in the case of light, we find it to behave both as a particle and as a wave and neither of these behaviors, taken separately, completely explain physical reality, so in the case of capitalistically-produced commodities, their prices behave simultaneously as if they are the product of labor carried on separately, and the product of directly social labor carried on in cooperation.

This has several implications that I will discuss in the next post.