Question on Marxist economics

[Led Zeppelin]

I have been reading Böhm-Bawerk's "Karl Marx and the Close of His System" for a few weeks now, and he has some interesting critiques of Marxist economics, I wonder if any of you can refute them without using Hilferding.

Here is his main critique:

"The "organic composition" (iii. 124) of the capital is for technical reasons necessarily different in the different "spheres of production." In various industries which demand very different technical manipulations, the quantity of raw material worked up on one working day is very different; or, even, when the manipulations are the same and the quantity of raw material worked up is nearly equal, the value of that material may differ very much; as, for instance, in the case of copper and iron as raw materials of the metal industry; or finally the amount and value of the whole industrial apparatus, tools, and machinery, which are told off to each worker employed, may be different. All these elements of difference when they do not exactly balance each other, as they seldom do, create in the different branches of production a different proportion between the constant capital invested in the means of production and the variable capital expended in the purchase of labour. Every branch of economic production needs consequently a special, a peculiar, "organic composition" for the capital invested in it. According to the preceding argument, therefore, given an equal rate of surplus value, every branch of production must show a different, a special rate of profit, on the condition certainly, which Marx has hitherto always assumed, that commodities exchange with each other "according to their values," or in proportion to the work embodied in them.

And here Marx arrives at the famous rock of offence in his theory, so hard to steer past that it has formed the most important point of dispute in the Marxian literature of the last ten years. His theory demands that capitals of equal amount, but of dissimilar organic composition, should exhibit different profits. The real world, however, most plainly shows that it is governed by the law that capitals of equal amount, without regard to possible differences of organic composition, yield equal profits."

Can anyone respond to that?

[redstar2000]

Originally posted by Böhm-Bawerk
The real world, however, most plainly shows that it is governed by the law that capitals of equal amount, without regard to possible differences of organic composition, yield equal profits.

This would seem to be more a criticism of bourgeois economic theory than of Marxism. It is bourgeois economics that posits the existence of differing rates of profits in different industries which cause the movement of capital from the "less profitable" to the "more profitable" industry.

However, you shouldn't place much weight on what I say about this. As I've had occasion to mention in the past, I am not an "expert" on economic theory...Marxist or otherwise.

Perhaps you should consult some of the Marxist literature on this subject if it's available on line.

http://www.websmileys.com/sm/cool/123.gif

[Led Zeppelin]

I have, Hilferding refutes him, but I wanted to ask people on the forum to refute him, without using Hilferding, to see who's good at Marxist economics.

[Led Zeppelin]

I guess no one can refute him, well here's the counter-argument by Hilferding:

"Since the capitals invested in the various lines of production are of a different organic composition, and since the different percentages of the variable portions of these total capitals set in motion very different quantities of labor, it follows that these capitals appropriate very different quantities of surplus labor, or produce very different quantities of surplus value. Consequently the rates of profit prevailing in the various lines of production are originally very different. These different rates of profit are equalized by means of competition into a general rate of profit, which is the average of all these special rates of profit. The profit allotted according to this average rate of profit to any capital, whatever may be its organic composition, is called the average profit. That price of any commodity which is equal to its cost price plus that share of average profit on the total capital invested (not merely consumed) in its production which is allotted to it in proportion to its conditions of turnover, is called its price of production. ... While the capitalists in the various spheres of production recover the value of the capital consumed in the production of their commodities through the sale of these, they do not secure the surplus value, and consequently the profit, created in their own sphere by the production of these commodities, but only as much surplus value, and profit, as falls to the share of every aliquot part of the total social capital out of the total social surplus value, or social profit produced by the total capital of society in all spheres of production. Every 100 of any invested capital, whatever may be its organic composition, draws as much profit during one year, or any other period of time, as falls to the share of every 100 of the total social capital during the same period. The various capitalists, so far as profits are concerned, are so many stockholders in a stock company in which the shares of profit are uniformly divided for every 100 shares of capital, so that profits differ in the case of the individual capitalists only according to the amount of capital invested by each one of them in the social enterprise, according to his investment in social production as a whole, according to his shares" (III, 186-187). The average profit is nothing other than the profit on the average social capital; its total, like the total of the surplus values, and like the prices determined by the addition of this average profit to the cost prices, are nothing other than the values transformed into prices of production. In the simple production of commodities, values are the center of gravity round which prices fluctuate. But "under capitalist production it is not a question of merely throwing a certain mass of values into circulation and exchanging that mass for equal values in some other form, whether of money or other commodities, but it is also a question of advancing capital in production and realizing on it as much surplus value, or profit, in proportion to its magnitude, as any other capital of the same or of other magnitudes in whatever line of production. It is a question, then, of selling the commodities at least at prices which will yield the average profit, in other words, at prices of production. Capital comes in this form to a realization of the social nature of its power, in which every capitalist participates in proportion to his share in the total social capital....If the commodities are sold at their values...considerably different rates of profit arise in the various spheres of production...But capital withdraws from spheres with low rates of profit and invades others which yield a higher rate. By means of this incessant emigration and immigration, in a word by its distribution among the various spheres in response to a rise in the rate of profit here and its fall there, it brings about such a proportion of supply to demand that the average profit in the various spheres of production becomes the same, so that values are converted into prices of production" (III, 229-230).

In what relationship does this doctrine of the third volume stand to the celebrated law of value of the first volume?

In Böhm-Bawerk's opinion the third volume of Capital manifestly contains the statement of an actual and irreconcilable contradiction to the law of value, and furnishes proof that the equal average rate of profit can only become established if and because the alleged law of value does not hold good. In the first volume, declares Böhm-Bawerk, it was maintained with the greatest emphasis that all value is based on labor and labor alone; the value was declared to be the common factor which appears in the exchange relation of commodities. We were told, in the form and with the emphasis of a stringent syllogistic conclusion, allowing of no exception, that to set down two commodities as equivalents in exchange implies that a common factor of the same magnitude exists in both, to which each of the two must be reducible. Apart, therefore, from temporary and occasional deviations, which are merely apparent breaches of the law of exchange of commodities, commodities which embody the same amount of labor must on principle, in the long run, exchange for each other. And now, in the third volume, we are told that what according to the teaching of the first volume must be, is not and never can be; that individual commodities do and must exchange with each other in a proportion different from that of the labor incorporated in them, and this not accidentally and temporarily, but of necessity and permanently.

But this, says Böhm-Bawerk, is no explanation and reconciliation of a contradiction, it is the naked contradiction itself. The theory of the average rate of profit and of the prices of production cannot be reconciled with the theory of value. Marx must himself have foreseen that this reproach would be made, and to this prevision is evidently due an anticipatory self-defense which, if not in form, yet in point of fact, is found in the Marxist system. He tries by a number of observations to render plausible the view that in spite of exchange relations being directly governed by prices of production, which differ from the values, all is nevertheless moving within the framework of the law of value, and that this law, in the last resort at least, governs prices. On this subject, however, Marx does not make use of his customary method, a formal, circumscribed demonstration, but gives only a number of juxtaposed casual remarks, containing divers arguments which are summed up by Böhm-Bawerk under four heads.

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."

Value and Average Profit (http://www.marxists.org/subject/economy/authors/hilfer/ch02.htm)

The highlighted part seems to fit redstar as well. :P