The Specter Haunting Marxian Economics

by

Andrew Kliman, h!"! Associate ro#essor "epartment o# Economics ace $ni%ersity & leasant%ille leasant%ille, '( )*+,* $SA hone- ./)01 ,,232/45 6ax- ./)01 ,,232/+) a7liman 8 pace!edu Andrew9Kliman 8 msn!com

:e%ision o# discussant;s comments at the 'inth Annual Minicon#erence o# the <nternational =or7ing >roup on ?alue Theory, at the Eastern Economic Association meetings, @oston, March )+, A**A! And "ra#t, April A**A!

B Andrew C! Kliman! Absolutely not to be Duoted, cited, circulated, or reproduced in any #orm without #irst recei%ing the express written permission o# the author!

The Specter Haunting Marxian Economics

<n the domain o# political economy, #ree scienti#ic inDuiry does not merely meet the same enemies as in all other domains! The peculiar nature o# the material it deals with summons into the #ray on the opposing side the most %iolent, sordid and malignant passions o# the human breast E! & Karl Marx, re#ace, )st edition o# Capital .Marx )/,,-/A1 E%ery day the buc7et goes to the wellF Gne day the bottom will #all out! & @ob Marley and the =ailers, < Shot the Sheri##

The Marxian economists; ha%e persistently claimed to ha%e pro%en that Marx;s critiDue o# political economy is riddled with technical errors and internal inconsistencies! They ha%e used these alleged proo#s as a Husti#ication #or suppressing Marx;s own wor7, 7eeping it #rom being taught and de%eloped in classrooms and Hournals, including Hournals o# radical economics! TheyI%e also used these alleged proo#s as a reason to re%ise Marx;s wor7 in a way that underminJesK E his basic propositions about how capitalism #unctions and how it de%elops through history .Mongio%i A**)-21! And yet, a specter is haunting Marxian economics & the specter o# Marx! The Marxian economists; alleged proo#s ha%e been decisi%ely dispro%ed, and the disproo#s ha%e stood the test o# time! Thus Marx;s critiDue o# political economy & in the #orm in which he himsel# stated it & has re3emerged #rom the gra%e! <t ho%ers o%er Marxian economics as an logically consistent alternative to its own doctrines and methods! >ary Mongio%i tries to exorcise this specter! His paper purports to be A critiDue o# temporal single3system Marxism, but the real target is Marx himsel#! As < shall explain below, the paper is in #act part o# a continuing ideological attac7 on Marx;s body o# ideas!

Mongio%i .A**)-2+1 denies that an ideological attac7 is at wor7! Gne argument he uses to deny it is that the Marxian economists; re%isions o# Marx;s wor7 do not underminJeK any o# his basic propositions about how capitalism #unctions and how it de%elops through history .Mongio%i A**)-21! To substantiate this claim, he would ha%e to pro%e that the Sra##ian interpretation o# Marx is correct, rather than a myth designed to ma7e it seem as though Sra##ianism;s basic propositions were also Marx;s! @ut Mongio%i does not pro%e this! He does not e%en try! He merely summarJiLesK .Mongio%i A**)-01 the interpretation o# Sra##a, "obb, and >aregnani & without e%en bothering to de#end it! This is Hust a dogmatic appeal to authority! <n #act, Mongio%i;s claim is simply preposterous! Surely one o# Marx;s most basic propositions about how capitalism #unctions is his theory that exploitation o# wor7ers, the extraction o# surplus3labor, is the sole source o# pro#it! (et all o# the Marxian economists; re%isions o# his wor7 imply the opposite! E%ery single one o# the simultaneist re%isions o# Marx & re%isions in which input and output prices are determined simultaneously & imply that the extraction o# surplus3labor is neither necessary nor su##icient #or pro#it to be positi%e! <n Kliman .A**)F c!#! Kliman A**Aa1, < pro%e that this is true e%en #or economies without Hoint production that reproduce themsel%es o%er time! Gnly Marx;s %alue theory, as understood by its temporal single3system interpretation, is compatible with the proposition that surplus3labor is necessary and su##icient #or pro#it! =hen Mongio%i .A**)-2+1 as7ed at last year;s con#erence why Marx, a#ter Sra##a, reDuires a labor3%alue analysis at all, < answered him in part by re#erring him to this proo#! So Mongio%i has had more than a year to study my proo# and, i# possible, to dispro%e it! @ut he has not dispro%ed it, nor has anyone else!

Another reason why Mongio%i;s claim is preposterous is that Marx;s law o# the tendential #all in the pro#it rate is certainly one o# his most basic propositions about how capitalism E de%elops through history! Marx himsel# said it is! He wrote that this law is in e%ery respect the most important law o# modern political economy .Marx )/,2-,051! (et the physicalist3simultaneist re%isions o# Marx;s theory, codi#ied in the G7ishio theorem, negate his law .see, e!g!, G7ishio )/4)F :oemer )/5), Mhs! 03+1! =hereas Marx .)/5)-20,1 held that The pro#it rate does not #all because labour becomes less producti%e but rather because it becomes more producti%e,) the neo3:icardian models o# physicalism3simultaneism conclude that rising producti%ity must tend to raise the pro#it rate! The reason these models negate Marx;s law is simply that they misrepresent his theory, not that the law is #alse! "uncan 6oley, himsel# #ormerly a proponent o# the G7ishio theorem .6oley )/54, Mh! 51, has ac7nowledged that the G7ishio theorem is wrongF the actual .money or labor1 pro#it rate can indeed #all #or the reason Marx stated! 6oley .A***-A5A, emphasis added1 writes that I understand Freeman and Kliman to be arguing that Okishios theorem as literally stated is wrong because it is possible for the money and labor rates of profit to fall under the circumstances specified in its hypotheses. I accept their e amples as establishing this possibility.!A Mongio%i .A**), n! )*1 tries to a%oid the whole issue, claiming that the #ocus o# this paper is on Marx;s %alue theory, JnotK Marx;s law o# the tendency o# the pro#it rate! This is

See also Marx .)/45-02/1- The rate o# pro#it E #alls, not because labour becomes less producti%e, but because it becomes more producti%e!
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6oley is re#erring to examples in wor7s such as Kliman .)//41 and 6reeman and Kliman .A***1!
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disingenuous!2 He has Hust told us that physicalism does not underminJeK any o# JMarx;sK basic propositions about how capitalism E de%elops through history .Mongio%i A**)-2, emphasis added1! This is a sweeping, all3encompassing claim! <t encompasses Marx;s law! So Mongio%i cannot ha%e it both ways! He must either directly con#ront the law and physicalism;s inability to deri%e it, or renounce his claim that physicalism is compatible with the totality o# Marx;s basic propositions! <n order to deny that he is waging an ideological attac7 on Marx;s body o# ideas, Mongio%i also asserts that Marx is indeed guilty o# the technical errors with which he;s been charged! < am certainly willing to entertain the possibility that Marx committed technical errors! <;%e been doing so #or )4 years! (et the issue be#ore us isn;t whether Marx could have committed some technical error, but whether he did in #act commit the specific errors with which he;s been charged! <;ll happy to concede that he did & i# and when the charge o# error is pro%ed! @ut Mongio%i #ails utterly to pro%e it! He does not e%en try! He merely repeats prior physicalists; charges o# error .Mongio%i A**)-)3A1! That would be #ine, i# one o# them had pro%ed the point, but none o# them did! The only one who e%en tried to prove it was @ort7iewicL .)/+A-53/1, but his attempted proo# has itsel# been dispro%ed! Although Mongio%i chooses to 7eep all this #rom his readers, he is well aware that @ort7iewicL has been dispro%ed! Gne %ersion o# the re#utation appears in the paper he critiDues at greatest length .Kliman and Mc>lone )///1, a paper that appeared in the Hournal he co3edits!0 The separation o# %alue theory #rom the pro#it rate is also absurd, both because Marx;s law is wholly %alue3theoretic && it #ollows immediately #rom his %alue theory && and because the one and the same physicalist3simultaneist model is used to re%ise his %alue theory and to negate his law o# the #alling pro#it rate!
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The #irst such re#utation appeared in Kliman and Mc>lone .)/551! See also Mc>lone and Kliman .)//41, Kliman .A**Ab1!
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Mongio%i .A**)-)3A1 writes that physicalism3simultaneism attributes three interrelated errors to MarxJs;K account o# the trans#ormation o# %alues into production prices! The second and third ones are errors only i# the #irst one is, so we can concentrate on it! Marx, we are told, neglected to weight the inputs o# each production process by their prices o# production .Mongio%i A**A-A1! Setting aside the tendentious neglected, the rest is correct! Marx did not %alue his inputs and outputs simultaneously! The outputs in his example were priced at their end3o#3year production prices, while the inputs .means o# production and labor3power1 committed to production earlier in the year had di##erent per3unit prices!+ So whatN How is that an errorN <t is a simple, well37nown #act! rices change o%er time!

"nlike some of his epigones# $ortkiewic% did not make the idiotic claim that the difference between the input and output prices was itself an error. &e said that this difference was the cause of 'ar s error. (he error itself# according to $ortkiewic% .)/+A-53/1# was that 'ar s transformation procedure creates a spurious breakdown of the reproduction process! SweeLy .)/,*-))23)+, emphases added1 put the issue wellThis is Marx;s method o# trans#orming %alues into prices! @e#ore any general comments can be made it is necessary to test the internal consistency o# the results! (ables I and II )containing the value calculation* were both constructed on the hypothesis of +imple ,eproduction E! If the procedure used in transforming values into prices is to be considered satisfactory# it must not result in a disruption of the conditions of +imple ,eproduction. >oing #rom %alue calculation to price calculation has no connection with the Duestion whether the economic system as a whole is stationary or expanding! <t should be possible to ma7e the transition without preHudicing this Duestion one way or the other! E A moment;s inspection E re%eals that the 'ar ian method of transformation results in a violation of the e-uilibrium of +imple ,eproduction! E E Gnly one conclusion is possible, namely, that the Marxian method o# trans#ormation is logically unsatis#actory!
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=hether the input prices eDualed the %alues o# those inputs, or the production prices o# the prior period, or mar7et prices possibly di##erent #rom both, is an interesting and contro%ersial issue, but one that is not necessary to discuss in this context!

This is simply a summation and clari#ication o# what @ort7iewicL himsel# wrote! So, once again, the #act that Marx;s input and output prices di##er was not e%en alleged .much less pro%ed1 to be an error! The alleged error was that Marx;s method led to a %iolation o# the conditions o# simple reproduction! <n other words, nonstationary prices were not a problem per seF they become a problem only because they supposedly lead to a spurious disruption o# the reproduction process! @ut in #act they do not lead to a disruption o# the reproduction process! This is what Kliman and Mc>lone ha%e pro%ed time and again during the last )4 years! "uring this time no one has been able to challenge this proo# && Mongio%i does not e%en try! @y dispro%ing the %iolation3o#3reproduction allegation, we ha%e dispro%ed @ort7iewicL;s .)/+A-/1 claim to ha%e pro%ed that we would in%ol%e would in%ol%e oursel%es in internal contradictions by deducing prices Jo# productionK #rom %alues in the way in which this is done by Marx!4 And since @ort7iewicL;s is to this day the only attempt to prove that Marx committed an error by not eDuating input and output prices, his critics ha%e no proo# o# error on Marx;s part! End o# story! Marx;s critics disagree with him, and ha%e methodological criticisms o# him, but such things clearly are not proofs of error! Although Mongio%i 7eeps repeating error, error, technical error, one loo7s in %ain #or any proo# o# one in his paper! All one #inds is a bunch o# Mongio%i .A**)-A01 thus has e%erything turned upside down when he says that @ort7iewicL;s critiDue called into Duestion the %alidity o# Marx;s %alue rate o# pro#it and there#ore that Kliman and Mc>lone assume what they need to pro%e when we used his rate o# pro#it to compute production prices! Since @ort7iewicL;s #alse proo# goes out the window, so does his correction o# Marx & inasmuch as no error on Marx;s part has been pro%ed, there is no need to correct him & and there#ore so does the alleged de%iation o# the actual price rate o# pro#it #rom Marx;s %alue rate that #ollows #rom this correction! .Kliman and Mc>lone did not need to pro%e that Marx;s theory o# the pro#it rate is true# since we were only interpreting the theory!1
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disagreements and methodological criticisms! <ndeed, although Mongio%i tries to gi%e the opposite impression, a care#ul reading o# his paper re%eals that he actually admits that the temporal single3system interpretation o# Marx;s trans#ormation procedure manages to deri%e Marx;s own conclusions without ma7ing any technical error whate%er! @oth o# Marx;s in%ariance postulates E holdJF EK no mathematical contradictions arise E .Mongio%i A**)-A21! <t a%oidJsK a mathematical inconsistency .Mongio%i A**)-A01! There is an absence o# arithmetic error .Mongio%i A**)-221! <t is clear that Mongio%i doesn;t like what Marx;s theory becomes when it is interpreted in a manner that renders it internally coherent and #ree #rom technical error, but that is his problem, not mine! < don;t do theory in order to please >ary Mongio%i! He certainly #ails to substantiate the charge that the TSS< tri%ialiLes Marx;s %alue theory and renders it incapable o# answering non3tri%ial Duestions .Mongio%i A**)-), 241! He simply does not examine any o# the important Duestions that proponents o# the TSS< answer by means o# our interpretation o# Marx;s theory! Much less does he show that these Duestions are tri%ial! As < discussed abo%e, Marx;s theory, as understood by the TSS<, gi%es answers & diametrically opposed to those gi%en by physicalism3simultaneism & to such Duestions as what is the e##ect o# rising producti%ity on the pro#it rateN and what is the source o# pro#itN "oes Mongio%i really want to suggest that these Duestions are tri%ialN =e are #inally in a position to see why his paper is part o# an ongoing ideological attac7 on Marx;s body o# ideas! <t is not at all clear, Mongio%i .A**)-2+1 writes, in what sense the exposure o# a technical error in Marx;s analytics constitutes Oan ideological attac7 on his ideas; E! G# course not! The e posure o# a technical error would be simply that & the exposure o# a technical error! @ut when Marx;s critics allege without any legitimate proof that he committed

technical errors, is it unreasonable to suspect that an ideological attac7 is at wor7N =hen the critics continue to allege technical error even after their alleged proo#s ha%e themsel%es been dispro%ed, then is it not clear that we are certainly dealing with an ideological attac7N =hen critic a#ter critic o# Marx suppresses the #act that the proo#s ha%e been dispro%ed, is it not e%en clearer that an ideological attac7 is at wor7N They tell us that logical rigor demands that we renounce 'ar s own theories and methods and adopt theirs instead! <s this an ideological attac7 on Marx;s body o# ideasN Again, it all depends! <# they had actually e posed some errors that absolutely could not be corrected except along physicalist lines, then no, it wouldn;t be an ideological attac7! @ut this is not the case! The Marxian economists lac7 any proo# o# error! They continue to allege error e%en a#ter their alleged proo#s ha%e been dispro%ed! They continually #ail to in#orm the public that the disproo#s ha%e been dispro%ed! =hen, in these circumstances, they continue to spea7 o# their re%isions o# Marx as corrections, then yes, we are certainly dealing with an ideological attac7! Apart #rom the #act that the economists continue to be hired priLe3#ighters #or capital, the core o# the problem is dogmatism! <t seems that nothing we demonstrate will ma7e the Marxian economists willingly retract their #alse charges against Marx or their #alse claims to be de%eloping his own critiDue o# political economy! That is sheer dogmatism! To a%oid dogmatism, one must be able to answer the #ollowing- under what conditions would you be willing to concede that your interpretation is incorrect, i!e!, contradicted by the textual e%idenceN < as7ed Mongio%i this Duestion last year! <;m still waiting #or an answer! <;%e been as7ing it o# all the Marxian economists #or se%eral years now! As < discuss in a related paper .Kliman A**Ac1, there does exist a clearcut way o# answering this Duestion! The entire tradition o# scienti#ic hermeneutics holds that an

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interpretation which understands a text as a uni#ied whole, an interpretation that can eliminate what at #irst appear to be internal inconsistencies in the text, is superior to one that can;t! Moreo%er, eminent historians o# economic thought such as Stigler, @ar7ai, and Hollander ha%e all agreed that =e increase our con#idence in the interpretation o# an author by increasing the number o# his main theoretical conclusions which we can deduce #rom .our interpretation o#1 his analytical system! The test o# an interpretation is its consistency with the main analytical conclusions o# the system o# thought under consideration! <# the main conclusions o# a man;s thought do not sur%i%e under one interpretation, and do under another, the latter interpretation must be pre#erred! JStigler )/4+-005K <t is clear that by these standards, Marx is acDuitted o# the charges o# error and internal inconsistency, and that the TSS< emerges as the pre#erred interpretation! "oes Mongio%i accept Stigler;s testN (es or noN <# not, why notN $nder what conditions would he be willing to concede that his interpretation is incorrectN Monceding that one;s interpretation is incorrect does not mean renouncing one;s %iews! Marx;s critics are certainly entitled to their theories! Marx is also entitled to his! As < pleaded during this con#erence six years ago, $sing his alleged sel#3contradictions as Husti#ication, Marx;s sympathetic critics ha%e Ocorrected;, #ragmented, and truncated his critiDue o# political economy, andPor subsumed it into other doctrines! Qess sympathetic critics ha%e used his alleged sel#3 contradictions as a Husti#ication #or dismissing Marx;s wor7s outright and #or marginalising and silencing those who see7 to learn #rom and de%elop them! All this must stop! The historical record must be corrected! Marx;s critics should certainly be #ree to express their di##erences with his ideas, but to express them as differences and not as .proofs. JKliman A**AbK 'o Custice, 'o eaceR

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References @ort7iewicL, Q! %on .)/+A1 ?alue and rice in the Marxian System, International /conomic 0apers# A, pp! +34*! 6oley, "!K! .)/541, "nderstanding Capital1 'ar s economic theory! Mambridge- Har%ard $ni%ersity ress! 6oley, "!K! A***! :esponse to 6reeman and Kliman, ,esearch in 0olitical /conomy )5! 6reeman, A! and Kliman, A! A***! Two Moncepts o# ?alue, Two :ates o# ro#it, Two Qaws o# Motion, ,esearch in 0olitical /conomy )5! Kliman, A!C! )//4! A ?alue3theoretic MritiDue o# the G7ishio Theorem, in Alan 6reeman and >uglielmo Marchedi .eds!1, 'ar and 2on3e-uilibrium /conomics! Mheltenham, $K- Edward Elgar! Kliman, A!C! A**)! Simultaneous ?aluation %s the Exploitation Theory o# ro#it, Capital 4 Class ,2, Spring! Kliman, A!C! A**Aa! <# it Ain;t @ro7e, "on;t Morrect <t, in Q! ?asapollo .ed!1, "n 5ecchio Falso 0roblema67n Old 'yth. :ome- Qaboratorio per la Mritica Sociale! JThe paper also appears in <talian in the same %olume!K Kliman, A!C! A**Ab! Marx %s! the OA*th3century Marxists;- A reply to Qaibman! <n Alan 6reeman, Andrew Kliman, and Culian =ells .eds.1# (he 2ew 5alue Controversy in /conomics. Mheltenham, $K- Edward Elgar J#orthcomingK! Kliman, A!C! A**Ac! Stigler and @ar7ai on :icardo;s ro#it :ate Theory- Some methodological considerations 2+ years later! resented at Eastern Economic Association con#erence, @oston, March )+! Kliman, A!C! and Mc>lone, T! )/55! The Trans#ormation 'on3 roblem and the 'on3 Trans#ormation roblem, Capital and Class 2+, Autumn! Kliman, A!C! and Mc>lone, T! )///! A Temporal Single3system <nterpretation o# MarxIs ?alue Theory, ,eview of 0olitical /conomy ))-), Canuary! Marx, K! .)/451 (heories of +urplus35alue, art << .Moscowrogress ublishers1!

Marx, K )/,2! 8rundrisse1 Foundations of the criti-ue of political economy .'ew (or7?intage @oo7s1! Marx, K! .)/,,1 Capital1 7 criti-ue of political economy, ?ol! < .'ew (or7- ?intage @oo7s1! Marx, K! .)/5)1 Capital1 7 criti-ue of political economy, ?ol! <<< .'ew (or7- ?intage @oo7s1!

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Mc>lone, T! and Kliman, A!C! )//4! Gne System or TwoN- The Trans#ormation o# ?alues into rices o# roduction %s the Trans#ormation roblem, in Alan 6reeman and >uglielmo Marchedi .eds.9# 'ar and 2on3e-uilibrium /conomics. Mheltenham, $K- Edward Elgar, )//4! Mongio%i, >! A**)! ?ulgar Economy in Marxian >arb- A MritiDue o# Temporal Single System Marxism! resented at Eastern Economic Association con#erence, 'ew (or7, March! G7ishio, '! .)/4)1 Technical Mhanges and the :ate o# ro#it, Kobe "niversity /conomic ,eview# :# pp! 543//. :oemer, C! )/5)! 7nalytical Foundations of 'ar ian /conomic (heory .MambridgeMambridge $ni%! ress1! Stigler, >! .)/4+1 Textual Exegesis as a Scienti#ic roblem, /conomica 2A! SweeLy, !M! )/,*! (he (heory of Capitalist ;evelopment. 'ew (or7- Modern :eader aperbac7s!

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