> X GO A Refutation of the Myth of Inconsistency Andrew Kliman Reclaiming Marx’s “Capital” Raya Dunayevskaya Series in Marxism and Humanism Series Editors: Kevin B. Anderson, Purdue University Olga Domanski, News and Letters Committees Peter Hudis, News and Letters Committees The Power o f Negativity: Selected Writings on the Dialectic in Hegel and Marx by Raya Dunayevskaya, Edited and introduced by Peter Hudis and Kevin B. Anderson Philosophy and Revolution: From Hegel to Sartre and from Marx to Mao by Raya Dunayevskaya Helen Macfarlane: A Feminist, Revolutionary Journalist, and Philosopher in Mid- Nineteenth-Century England by David Black Karl Marx and the Future o f the Human by Cyril Smith Reclaiming Marx’s "Capital”: A Refutation o f the Myth o f Inconsistency by Andrew Kliman Reclaiming Marx’s “Capital” A Refutation of the Myth of Inconsistency Andrew Kliman LEXINGTON BOOKS A division of ROWMAN & LITTLEFIELD PUBLISHERS, INC. Lanham • Boulder • New York • Toronto • Plymouth, UK LEXINGTON BOOKS A division of Rowman & Littlefield Publishers, Inc. A wholly owned subsidiary of The Rowman & Littlefield Publishing Group, Inc. 4501 Forbes Boulevard, Suite 200 Lanham, MD 20706 Estover Road Plymouth PL6 7PY United Kingdom Copyright © 2007 by Lexington Books All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of the publisher. British Library Cataloguing in Publication Information Available Library of Congress Cataloging-in-Publication Data Kliman, Andrew, 1955- Reclaiming Marx’s Capital: a refutation of the myth of inconsistency / Andrew Kliman. p. cm. - (Raya Dunayevskaya series in Marxism and humanism) ISBN-13: 978-0-7391-1851-1 (cloth : alk. paper) ISBN-10: 0-7391-1851-X (cloth : alk. paper) ISBN-13: 978-0-7391-1852-8 (pbk.: alk. paper) ISBN-10: 0-7391-1852-8 (pbk.: alk. paper) 1. Labor theory of value. 2. Marx, Karl, 1818-1883. Kapital. I. Title. HB206.K55 2007 335.4’ 12—dc22 2006028377 Printed in the United States of America © The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI/NISO Z39.48-1992. For Anne v Contents List of Tables and Figures ix List of Abbreviations xi Preface xiii 1 Introduction: The Question of Internal Inconsistency 1 2 Marx’s Value Theory and Contending Interpretations 19 3 A Brief History of the Controversy 41 4 Making Marx Make Sense: On Interpretive Method 55 5 Simultaneism, Physicalism, and the Law of Value 75 6 Was Marx a Simultaneist? 89 7 The Falling Rate of Profit Controversy 113 8 The “Transformation Problem” (1): Marx’s Solution and Its Critics 139 9 The “Transformation Problem” (2): If It Ain’t Broke, Don’t Correct It 157 10 The “Fundamental Marxian Theorem” 175 vii 11 An Empirical Defense of the Law of Value? 193 12 Summary and Conclusions 205 Bibliography 213 Index 223 About the Author 231 viii List of Tables and Figures Table 2.1 Two Distinctions between Value and Price 26 Table 2.2 Prices of Production and Average Profits 28 Table 5.1 Physical System 85 Table 5.2 Physicalist “Value” System 86 Figure 6.1 Static Equilibrium and Average Rates of Profit 94 Table 6.1 Changes in the Cost of an Input 95 Table 6.2 Marx After Ramsay 102 Table 7.1 Physical Quantities 121 Table 7.2 Simultaneist Value/Price Rate of Profit 123 Table 73 Consistent Physicalist Value/Price Rate of Profit 126 Table 7.4 Temporalist Value/Price Rate of Profit, Given the Law 128 of Value & Constant MELT Table 7.5 Temporalist Value/Price Rate of Profit, Given the Law 131 of Value & 20% Annual Growth of MELT Table 8.1 Marx’s Solution 143 Table 8.2 Bortkiewicz’s Proof of Internal Contradiction 150 ix Physical Quantities 158 Simultaneous Dual-System Solutions 159 NI Value and Price Systems 162 Simultaneous Single System 163 The Effect of Technological Progress 166 Loranger’s Solution 170 Moseley’s Interpretation 172 Failure of the Simultaneous Dual-System FMT 181 A Negative Simultaneist MELT 184 Aggregation Produces Spurious Value-Price Correlations 196 Log-linear Regression Results 201 Two Sets of “Close” Prices and Values 203 x List of Abbreviations FMT Fundamental Marxian Theorem GDP Gross Domestic Product LTFRP Law of the Tendential Fall in the Rate of Profit LTP Labor Theory of Price MELT Monetary Expression of Labor-Time NI New Interpretation NIPA National Income and Product Accounts PNP Price of the Net Product PSE Principle of Scientific Exegesis SSSI Simultaneous Single-System Interpretation TSSI Temporal Single-System Interpretation Preface The economists have changed Marx, in various ways; the point is to interpret him—correctly. This book seeks to reclaim Marx’s Capital from the century-old myth of in­ ternal inconsistency. Since internally inconsistent arguments cannot possibly be right, efforts to return to and further develop Marx’s critique of political econ­ omy, in its original form, cannot succeed so long as this myth persists. The myth serves as the principal justification for the suppression and “correction” of Marx’s theories of value, profit, and economic crisis. It also facilitates the splin­ tering of what was, originally, a political-economic-philosophical totality into a variety of mutually indifferent Marxian projects. Logical considerations compel none of this. As this book shows, Marx’s theories need not be interpreted in a way that renders them internally inconsis­ tent. An alternative interpretation developed during the last quarter-century—the temporal single-system interpretation (TSSI)—eliminates all of the apparent inconsistencies. TTie 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 cor­ rect. It does imply, however, that empirical investigation is needed in order to determine whether they are correct or not. There is no justification for disquali­ fying 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 analy­ sis. In other contexts, these are of course important and interesting topics, but to xiii xiv P r e fa c e 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. I will be glad to discuss these topics with Marx’s critics once the record has been set straight and they have done their part to help set it straight. This book, however, purposely refrains from offering a positive case for Marx’s ideas or for Marxian economic analysis informed by the TSSI. Yet why should readers support the book’s effort to reclaim Capital if they are provided with no positive reasons for it? My answer is that this book seeks to reclaim Capital in a very specific sense; it seeks to show that the charges of inconsistency are improved and implausible. If it succeeds in this task, then everyone who favors integrity in intellectual discourse and opposes suppression, whether or not they favor Marx’s ideas, will support the effort to set the record straight. The personal journey that culminated in my writing of this book began twenty years ago, when I was studying economics at the University of Utah. Ted McGlone, a friend and fellow Ph.D. student studying for a comprehensive exam, asked me to explain why Marx’s account of the transformation of values into prices of production was internally inconsistent. He had listened to our profes­ sors’ explanations, but still didn’t understand what was wrong with Marx’s ac­ count. I faithfully repeated what he and I had been taught—“Marx forgot to transform the input prices.” McGlone asked why Marx needed to transform the input prices. I found that I could not satisfactorily explain why. So I urged him to just accept the fact—after all, everyone agreed that Marx had made an error, including Marxist economists such as our professors—and I noted that it didn’t make any difference, because the error had since been corrected. “Ah, but I was so much older then/I’m younger than that now.” McGlone persisted in his questioning during the next few weeks. My inabil­ ity to defend the allegation of inconsistency persisted as well, finally impelling me to re-examine the primary source—Bortkiewicz’s (1952) proof of Marx’s internal inconsistency.1 After some study, I detected what I thought might be an error. I sat down and, within an hour, produced a refutation of Bortkiewicz’s proof (see section 8.5 below). Over the next few days, McGlone and I, working out the implications of this refutation, discovered what came to be known as the TSSI—or rather, rediscovered it, since a few other researchers had independ­ ently discovered it some years earlier. This proved to be a life-altering experience. It taught me to think for myself, to question authority and to demand rational demonstrations instead of relying on intuition.