[lbo-talk] Marx and marginalist economics

Jim Farmelant farmelantj at juno.com
Mon Dec 21 17:05:50 PST 2015


Some of the early marginalists, like William Stanley Jevons were already publishing when Marx was still around and was still working on Capital. Marx never addressed the work of the early marginalists. On the other hand, he did provide critiques of the work of those people, who he called the vulgar economists, like Say or J.S. Mill, who were precursors of the marginalists.

Probably, the best known Marxist response to the marginalists, was Bukharin's book, The Economic Theory of the Leisure Class (https://www.marxists.org/archive/bukharin/works/1927/leisure-economics/), which focused on the work of the early Austrian School, which Bukharin was intimately familiar with, since while living in Vienna, he spent time attending the lectures of Austrian School economists like Eugen von Böhm-Bawerk, who was famous for his critique of Marx, as expressed in his book, Karl Marx and the Close of His System (https://www.marxists.org/subject/economy/authors/bohm/). Bukharin defended Marx's labor theory of value against the marginalists subjectivist approach towards value theory. In critiquing the Austrians, Bukharin drew upon the work of earlier Marxist writers like Hilferding.

The British economist, Joan Robinson, was not a Marxist, as such. But as someone who had been originally trained in the neoclassical economics of Alfred Marshall, who became a disciple of Keynes, she became increasingly drawn towards Marxism. She was very much a socialist, but she abjured the label of Marxist because she rejected the labor theory of value as well as dialectical materialism, styling herself as a traditional English empiricist. Despite her neoclassical training, she became of the great critics of neoclassical economics. Whereas, many of the American Keynesians, like Paul Samuelson, had held that Keynesian economics could be reconciled with and incorporated into neoclassical economics (creating what Samuelson called the new neoclassical synthesis), Robinson would have none of this. She held that if Keynes's insights into macroeconomics were correct then neoclassical economic theory must be deeply flawed. Joan Robinson, in her 1962 book, Economic Philosophy, attacked both the labor theory of value as well as the marginalists' subjectivist approach to value. Both approaches, in her estimation, relied on the making of assumptions that were not empirically faslsifiable. Both approaches were viewed by her as being metaphysical rather than scientific. (https://fixingtheeconomists.wordpress.com/2014/02/17/joan-robinsons-critique-of-marginal-utility-theory/)

(https://archive.org/details/EconomicPhilosophy)

Many Marxist economists have sought to make peace with marginalism. The Polish economist, Oskar Lange, was a noted example of this trend. He sought to be both a Marxist and a neoclassical economist. He thought Marxism provided the key to understanding the historical evolution of capitalism (including its ultimate displacement by socialism), but he regarded traditional Marxist economics as inadequate in several ways. He considered the “labor theory of value” (as shared to a great extent by Adam Smith and David Ricardo as well as Marx) unscientific, and held that a Marxian concept of exploitation could be restated without it. He made statements like

“If people want to anticipate the development of Capitalism over a long period, a knowledge of Marx is a much more effective starting point than a knowledge of [Friedrich von] Wieser, [Eugen von] Bohm-Bawerk, Vilfredo Pareto or even [Alfred] Marshall (although the last-named is in this respect much superior). But Marxian economics would be a poor basis for running a central bank or anticipating the effects of a change in the rate of discount.”

and

“[I]n providing a scientific basis for the current administration of the capitalist economy ‘bourgeois’ economics has developed a theory of equilibrium which can also serve as a basis for the current administration of a socialist economy. It is obvious that Marshallian economics offers more for the current administration of the economic system of Soviet Russia than Marxian economics does, though the latter is surely the more effective basis for anticipating the future of capitalism."

Over time, Lange's approach became quite popular among Marxist economists in eastern Europe, as did his advocacy of a kind of market socialism.

The young Sidney Hook in his 1933 book, Towards the Understanding of Karl Marx, took an interesting approach to the issue of the LTV versus marginalism. He argued that from the standpoint of pure logic one cannot prove or disprove any theory of value. He drew an analogy with theories of geometry. Just as physical space can be described in terms of multiple systems of geometry (Euclidean, Lobachevskyian, Riemmanian etc.), so the same is true for the description of economic phenomena in terms of multiple theories of value. Experience cannot disprove any given geometric system, only make description in terms of a system, more or less complex. For the physicist, that geometric system, will be "true," to the extent that it in combination with other physical hypotheses, yields the simplest description of his experimental findings. However, to the extent that experimental control is not in question, the physicist can always save the appearances by introducing subsidiary assumptions and ad hoc hypotheses so that he can describe physical reality in terms of any geometric system that he chooses. Hook contended that the same was true for theories of economic value as well.

He argued that economic reality can be described in either marginalist terms or in terms of Marx's LTV. In either case, the economist must necessarily rely upon subsidiary hypotheses, such that it is not possible to refute either Marxian value theory or marginalism on the basis of empirical observations. And Hook argued that Marx in *Capital* anticipated all of the major objections to LTV. In any case, LTV can with sufficient tweaking of subsidiary hypotheses, always be saved from refutation. And in any case, neither LTV nor any other alternative theory possesses any predictive power. .

But then Hook asks, if it is the case that we can always save LTV from empirical refutation, why would we want to save it. And his answer was because LTV is ultimately not a Sorelian myth or an ideology but is ". . . the self-conscious theoretical expression of the practical activity of the working class engaged in a continuous struggle for a higher standard of living - a struggle which reaches its culmination in social revolution. . . To the extent that economic phenomena are removed from the influences of the class struggle, the analytical explanations in terms of the labor theory of value grow more and more difficult. The labor theory of value is worth saving if the struggle against capitalism is worth the fight."

Jim Farmelant http://independent.academia.edu/JimFarmelant http://www.foxymath.com Learn or Review Basic Math

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