Marx and the State of Nature

Stanley Williams Moore

Journal of the History of Philosophy, Volume 5, Number 2, April 1967, pp. 133-148 (Article) Published by The Johns Hopkins University Press DOI: 10.1353/hph.2008.1147

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Marx and the State of Nature

STANLEY MOORE

I
THROUGHOUT HIS CRITIQUES of p o l i t i c a l e c o n o m y M a r x m a k e s t h e c l a i m t h a t b o u r g e o i s e c o n o m i s t s , w h e n d i s c u s s i n g c e r t a i n c r u c i a l issues, offer in p l a c e of t h e o r e t i c a l a n a l y s i s o n l y i m a g i n a r y h i s t o r y . I n t h e e a r l i e s t of t h e s e c r i t i q u e s , The Economic-Philosophical Manuscripts, he w r i t e s : Let us not resort to a fictitious primordial condition, as the political economist does when he tries to explain. Such a primordial condition explains nothing. The question is merely pushed back into the grey and nebulous distance. What the theorist is supposed to deduce-for example, the necessary connection between division of labour and exchange--he assumes in the form of facts, events occurring in the past. In like manner theology explains the origin of evil by the fall of man: what ought to be explained is assumed as a fact of history.1 I n l a t e r c r i t i q u e s t h i s c r i t i c i s m is r e p e a t e d a n d e l a b o r a t e d . T h e s t a n d a r d p r o c e d u r e of c l a s s i c a l e c o n o m i s t s , M a r x c l a i m s , is to s t a r t w i t h t h e m y t h of t h e i n d e p e n d ent, self-sufficient, i n d i v i d u a l p r o d u c e r . T h e s e c o n d s t e p is to i n t r o d u c e a s e c o n d m y t h , t h e classless e c o n o m y of i n d e p e n d e n t c o m m o d i t y p r o d u c e r s . A n d t h e t h i r d s t e p is t o p r o v i d e a p s e u d o h i s t o r i c a l a c c o u n t of t h e t r a n s i t i o n f r o m t h i s classless e c o n o m y t o t h e class e c o n o m y of c a p i t a l i s m . D i s c u s s i n g t h e p r o b l e m of m e t h o d in his Introduction to the Critique o] Political E c o n o m y , he w r i t e s : The single, isolated hunter or fisher with whom Smith and Ricardo start belongs to the fantasies of the eighteenth century. Such Robinsonades do not by any means represent, as historians of culture believe, a reaction against overrefinement and a return to an erroneously conceived natural state. They represent such primitivisim as little as does Rousseau's social contract, which brings individuals who are independent by nature into intercourse and association through express agreement. Instead they are reflections of that civil society which, starting its development in the sixteenth century, had made giant strides toward maturity in the eighteenth. In that society of free competition the individual seems freed from the bonds of nature and the like which in earlier epochs made him an appendage of some definite, limited, human conglomeration. Before the prophets of the eighteenth century, upon whose shoulders Smith and Ricardo still stand, this individual of the eighteenth century--a product, on the one hand, of the dissolution of the social forms of feudalism, and on the other, of the development of new productive forces since the sixteenth century--hovers as an ideal whose existence belongs to the past. He seems to them, not the result of history, but its starting point. 2 1 Marx, "0konomisch-philosophische Manuskripte," Marx/Engels Gesamtausgabe, div. 1, I I I (Berlin: 1932), man. 1, sec. 4 (Entfremdete Arbeit), para. 5. Cf. Hegel, Phdnomenologie des Geistes (Leipzig: 1937), chap. 7, div. 3, para. 28. For convenience in using other editions, all passages are identified by paragraph number. .. 2 Marx, "Einleitung zur Kritik der politischen ~)konomie," Zur Kritik der politischen Okonomie (Berlin: 1951), sec. 1, para. 2. For further references, see my The Critique of Capitalist Democracy: An Introduction to the Theory of the State in Marx, Engels, and Lenin (New York: 1957), chap. 2, sec. 4, note 3. [133l

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Discussing, in his Critique o] Political Economy, Smith's t h e o r y of value, M a r x writes: Adam, it is true, determines the value of commodities by the labour time they embody; but he relegates the applicability of this principle to pre-Adamic times. What seems clear to him with respect to simple commodities becomes unclear when he considers more complex forms, such as capital, wage labour, and ground rent. So he asserts that the value of commodities once was measured by the labour time they embodied in a lost paradise where men dealt with one another, not as capitalists, wage workers, landlords, tenants, moneylenders, and so on, but only as simple producers and exchangers of commodities.* Discussing, in the first v o l u m e of Capital, the origins of capitalism, he writes: This original accumulation plays the same role in political economy as does the fall of man in theology. Adam bit the apple, and as a consequence sin fell upon mankind. Supposedly the source of sin is explained by relating an anecdote about the past. Now at some time long ago there were two sorts of people: on the one hand, an industrious, intelligent, and above all thrifty, elite ; on the other, lazy rascals, spending all they had and more in riotous living .... So it happened that those of the first sort accumulated wealth, and the others at last had nothing to sell but their own hides. From this original sin dates the poverty of the great mass, who in spite of all their labour still have nothing to sell but themselves, and the wealth of the few, which increases constantly though they have long since ceased to work? This critique of the m y t h i c element in bourgeois economic t h e o r y can be developed in two directions. On the one hand, it offers a k e y for u n d e r s t a n d i n g the role p l a y e d b y the c o n c e p t of a state of n a t u r e in the social p h i l o s o p h y of the seventeenth a n d eighteenth centuries. Consider, for example, the theorist M a r x mentions. R o u s s e a u ' s Discourse on the Origin o] Inequality distinguishes three stages in the d e v e l o p m e n t of the state of n a t u r e : individualism w i t h o u t society, society with equality, and society with inequality. C a n the stage of individualism w i t h o u t society be c o m p a r e d with the economists' independent, self-sufficient producer? C a n the stage of society with e q u a l i t y be c o m p a r e d with the economists' classless society of c o m m o d i t y p r o d u c e r s ? A n d can R o u s s e a u ' s a c c o u n t of the transition to society with i n e q u a l i t y be c o m p a r e d with the economists' a c c o u n t of original acc u m u l a t i o n ? W h a t solution does this i n t e r p r e t a t i o n suggest for the problem of discerning the central thesis of the Discourse? Or for the p r o b l e m of relating the Discourse to Emile and The Social Contract? Or for the p r o b l e m of relating R o u s seau's t h e o r y of the state of n a t u r e to the theories of L o c k e and H o b b e s ? Such questions illustrate a M a r x i a n a p p r o a c h to the p h i l o s o p h y of n a t u r a l rights. 5 3 Marx, Zur Kritik der politischen ()konomie, chap. 1, sec. A, para. 6. (For grammar's sake I have changed Marx's "paradise lost" into "lost paradise." Milton's expression, as the name of a process, would apply more appropriately to what Marx calls original accumulation.) For further references see my Critique, chap. 2, sec. 5~.note 2. 4 Marx, Das Kapital. Kritik der politischen ~Jkonomie, I (Volksausgabe, Moscow: 1932), chap. 24, sec. 1, para. 2. For further references, see my Critique, chap. 2, sec. 5, note 3. On Marx's comparison of economic and religious superstitions, see also the latter work, chap. 4, sec. 5, para. 2; chap. 4, sec. 3, paras. 8-10. On Rousseau see Marx, "Zur Judenfrage," Marx/Engels Gesamtausgabe, div. 1, I, half-vol. 1 (Frankfurt a.M. : 1927), essay 1, paras. 63-94; Engels, "Herrn Eugen Dtihrings Umw~ilzung er wissenschaft," Marx~Engels Gesamtausgabe, spec. ed. (Moscow: 1935), intro., chap. 1, paras. 2-3; part 1, chap. 10, paras. 6, 17-22. On Locke see Marx/Engels, "Die deutsche Ideolo" 1, V (Moscow/-Lemngrad: 9 - 1, part 2, gie ," Marx/Engels Gesamtausgabe, dlv. 1933), chap. 3, dlv. sec. 5, subsec. "Moral, Verkehr, Exploitationstheorie," paras. 7-9; Marx, Theorien iiber den

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On the other hand, these attacks upon bourgeois economic theory can be turned against Marx himself. Suppose some careful student first reads The Critique o] Political Economy, pondering its attacks on the myth of Robinson Crusoe and the myth of a classless exchange economy. Suppose this student then reads Capital. Imagine his astonishment to find Marx, in the analysis of commodity fetishism at the start of the first volume, arguing from the case of Robinson Crusoe. And to find Marx, in the account of the connection between value and price at the start of the third volume, initially assuming a classless economy of commodity producers. Has the theory of value expounded in Capital no firmer foundation, he would ask, than these fantasies of the eighteenth century? Marx, it might be replied, does not base his argument upon these myths. He treats them as analytic fictions rather than historical descriptions. And he uses them for illustration rather than for proof. His argument would be as firmly based, though not as easily understood, without them. Since the time of Hume this has been the standard defense for theorists who talk about a state of nature, in reply to attacks like that of Marx on Smith and Ricardo. In some cases, and to some extent, this defense is valid. To what extent it is valid in the case of Marx can be decided only by examining his arguments. II Marx's theory of value is developed in two sections of Capital, separated by over a thousand pages. One section comprises the three opening chapters of the first volume; the other, the twelve opening chapters of the third volume. To distinguish clearly between what he attempts to prove in the first section and what he attempts to prove in the second is the key to understanding his argument. To facilitate this task, it is useful to provide labels for three different propositions. There is the proposition that long-run prices of freely producible commodities are determined solely by labor costs. I shall call this the labor doctrine of price. There is the proposition that the real cost of any thing is the quantity of effort or sacrifice entailed by the labor of producing it. I shall call this the labor doctrine o] real cost. There is finally the proposition that for any economy--viewed as a whole and through time--natural resources are free requisites of production and capital goods are produced requisites of production, so that for a capitalist economy--viewed from this standpoint--the aggregates of rent and profit represent deductions from the aggregate product of labor. I shall call this the labor doctrine o] surplus, e Two theses are central for Marx's theory of value: first, that the labor doctrine of surplus entails the labor doctrine of real cost; second, that a scientific theory of price must be based upon the labor doctrine of real cost. I n the course of his argument both the labor doctrine of surplus and the labor doctrine of real cost are unequivocally affirmed.

Mehrwert, I (Berlin: 1956), app. 4. On Hobbes see Marx/Engels, Die deutsche Ideologic, chap. 3, div. 1, part 2, sec. 5, subsec. Aneignungdurch zusammengesetzte Antithese, para. 1; subsec. Das Gesetz, para. 10; Marx an Engels 18. Juni 1862, Marx/Engels Briefwechsel, III (Berlin: 1950), para. 3; Marx, Theorien iiber den Mehrwert, I, app. 1; app. 4, para. 2. 6 For a discussion of these doctrines in Marx~s predecessors, see my ( t Ricardo and the State of Nature," Scottish Journal of Political Economy, XIII (1966), secs. 5-6.

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By comparison, the labor doctrine of price plays an ambiguous role. At the start of the first volume Marx seems prepared to show that this doctrine--embodied in what he calls the law of value--holds true for all commodity exchange. But at the start of the third volume he admits that capitalist prices are not normally proportionate to labor costs. The labor doctrine of price, he asserts at this point, holds only for pre-capitalist exchange. What he writes in the two volumes is not formally inconsistent, in the sense that proportionality of capitalist prices to labor costs is explicitly asserted in one and explicitly denied in the other. Only after his general exposition of the law of value in the opening chapters of the first volume does he open his discussion of specifically capitalist exchange. At this point, for the first time explicitly equating capitalist prices with labor costs, he leaves open the possibility that this equation is a contrary-to-fact simplification, useful for exposing the basic laws of capitalist production. 7 To commence by adopting and end by withdrawing an assumption of this sort does not involve self-contradiction. Yet though Marx's exposition is formally consistent in the sense just stated, it is highly misleading. His explanation of capitalist price, which in prospect seems to pivot on the labor doctrine of price, turns out in retrospect to pivot on the labor doctrine of real cost. The task Marx sets himself in the opening chapters of his first volume is to prove the proposition that the real cost of any thing is the quantity of effort or sacrifice entailed by the labor of producing it. He discusses the case of Robinson Crusoe because he believes that the truth of this proposition, obscure when we consider a capitalist economy by itself, becomes clear when we compare a capitalist economy with a Crusoe economy. The task Marx sets himself in the opening chapters of his third volume is to base a theory of price on the labor doctrine of real cost. He discusses a classless economy of commodity producers because he believes that the divergence of capitalist prices from labor costs can be most easily understood by comparing a capitalist exchange economy with a classless exchange economy. In both cases, Marx claims, analysis of a fictitious economy reveals what observation of a capitalist economy obscures. But in neither case, I propose to show, is this claim justified. Closely examined, his fiction of a Crusoe economy provides no more persuasive arguments for the labor doctrine of real cost than does the actuality of a capitalist economy. Carefully analyzed, his fiction of a classless economy of commodity producers involves the same divergence of prices from labor costs as does the actuality of a capitalist economy. In both cases Marx commits the same error that he attributes to Smith and Ricardo: he has recourse to a fiction in order to assume what he finds it difficult to prove. 7 See Marx, Kapital, I, chap. 1, sec. 2, pars. 10, note 2; chap. 4, sec. 2, pars. 23, note; chap. 7,see. 1, para. 20, note; III (Volksausgabe, Moscow/Leningrad: 1933-1934), chap. 8, pars. 33; chap. 9, pars. 50 Marx "Randglossen zu Adolph Wagners 'Lehrbuch der politmchen (~konomm, Kap~ al, I, pars. 5. For hm resort to the contrast between appearance and reahty m thin connection see my "The Metaphysical Argument in Marx's Labour Theory of Value "J~tudes de Marxologie (Cahiers de l'Institut de Science t~conomiqueAppliquSe, Series S), no.'7 (1963), sees. 2, 4.

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III
Marx's discussion of commodity fetishism in the first chapter of Capital turns on a distinction between content and form in the process of adjusting work to wants. The content of this process he finds in all economies. Its fetishistic form he finds only in exchange economies. I n his usage the expression 'determination of value' is associated with the enduring content of this process, while the term 'value' is associated only with its transitory fetishistic form. The mystical character of commodities does not derive ... from the content of the determination of value. In the first place, however different useful labours or productive activities may be, it is a physiological truth that they are functions of the human organism and that each such function, whatever its content and form, is essentially an expenditure of human brains, nerves, muscles, sense organs, and so on. In the second place, with regard to the basis for determining the magnitude of value--the duration of this expenditure, the quantity of labour--it is clearly perceptible that the quantity of labour is distinguishable from its quality. The cost in labour time of producing the means of subsistence is of interest to men in all situations, though it is not of equal interest at different stages of development. Finally, whenever human beings work for one another in any way, their labour acquires a social form. The content of the valuation process is described in three propositions. First, the various kinds of human labor are comparable as work in the physiological sense. Second, they are measurable in units of time. Third, this comparison and measurement are in some degree necessary wherever there is division of labor. From what source then arises the enigmatic character of products of labour, when they take the form of commodities? Clearly, from this form itself. The comparability of human labours takes the thing-like form of the comparability of the products of labour as embodiments of value. The measure of the expenditure of human labour power by its duration takes the form of the magnitude of the value of the products of labour. And lastly, the relations of the producers, in which the social character of their labour affirms itself, take the form of a social relation between the products of their labour. The fetishistic form of the valuation process is described in three propositions. First, comparability of different labors is disguised as comparability of commodity values. Second, measurement of different labors is disguised as measurement of commodity values. Third, relations between people in the social division of labor are disguised as relations between things in commodity exchange, s Commodities are products endowed with a fetish character, n o n - h u m a n things to which human qualities are ascribed; because when products become commodities, productive relations between people take on the form of exchange relations between things. But since this conflict between appearance and reality is confined to exchange economies, Marx argues, it can be exposed b y comparing commodity exchange with less mystifying mechanisms for adjusting work to wants. I n support of this contention he cites four examples of economies where this adjustment takes place directly, without the intervention of a market, and where as a consequence 8 Marx, Kapital, I, chap. 1, sec. 4, paras. 2-3. For further references, see my Critique, chap. 2, sec. 3, note 3; note 4; sec. 4, note 1.

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the process of value determination does not t a k e a fetishistic form. 0 I these examples, the first is a Crusoe economy. Since political economy loves Robinsonades, let us take a look at Robinson on his island. Moderate as he is, he still has different wants to satisfy and must therefore undertake different kinds of useful labour, such as making tools and furniture, taming goats, fishing, and hunting .... In spite of the variety of his productive activities, he knows that they are simply different forms of his own activity, that they are therefore simply different modes of human labour. Necessity compels him carefully to distribute his time between these different occupations. The amount of his total time allotted to each is proportionate to the difficulty of attaining the useful effect desired. Robinson learns this from experience, and.., like a good Englishman sets up a system of bookkeeping. His inventory lists the useful objects in his possession, the different activities required for their production, and the amounts of labour time which specific quantities of the different products have, on the average, cost him. All relations between Robinson and things which comprise the wealth he has created are.., simple and clear.... But everything essential to the determination of value is contained in them? W h a t truths, obscured b y the mechanism of exchange, does M a r x claim to have revealed in this example? One seems to be the labor doctrine of surplus; the other, the labor doctrine of real cost. The labor doctrine of surplus asserts t h a t for a n y e c o n o m y - - v i e w e d as a whole and through t i m e - - n a t u r a l resources are free requisites of production, and capital goods are produced requisities of production, so t h a t for a capitalist e c o n o m y - viewed from this s t a n d p o i n t - - t h e aggregates of rent and profit represent deductions from the aggregate product of labor. Crusoe has free access to the natural resources of his island. His capital goods are products of his own labor. W h a t is normally a p p a r e n t only when the economy is viewed as a whole is in this case a p p a r e n t f r o m the standpoint of the individual producer. Suppose now t h a t the island's natural resources are appropriated by a second man, who receives a rent for their use. And suppose Crusoe's capital goods are appropriated b y a third man, who m a k e s a profit on their use. Crusoe will now be compelled to share the product of his labor with the landowner and the capitalist. Consideration of a Crusoe economy reveals w h a t observation of a capitalist economy conceals. Incomes in the form of rent and profit are not p a y m e n t s to land and capital for their productive contributions: they are tribute levied by private owners for use of nature's gifts and products of p a s t labor. The labor doctrine of real cost asserts t h a t the real cost of a n y thing is the q u a n t i t y of effort or sacrifice entailed by the labor of producing it. As M a r x describes his system of bookkeeping, Crusoe's method of adjusting work to wants rests squarely on this principle. I n deciding w h a t kinds and w h a t quantities of things to produce and b y w h a t methods to produce them, the sole factor he considers on the cost side is the q u a n t i t y of labor time required. Cost of production is identified with labor cost. H e r e again, if M a r x ' s a r g u m e n t is correct, consideration of a Crusoe economy reveals w h a t observation of a capitalist economy conceals. T h e capitalist method of adjusting work to wants, as the third volume of Capital points out, entails for the great m a j o r i t y of commodities a disparity between cost of production and labor cost. Marx, Kapital, I, chap. 1, sec. 4, para. 12.

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But Marx's argument is not correct. Whether or not we agree that the example of Crusoe establishes the truth of the labor doctrine of surplus, we must certainly deny that it establishes the truth of the labor doctrine of real cost. Some of the natural resources on Crusoe's island are in limited supply. Choosing between plans of production requiring different quantities of limited resources, he would be foolish to consider only the amounts of labor time involved. Every tool he produces ties up quantities of his labor during the period required to produce it and during the period of its useful life. Choosing between plans of production involving tools which tie up labor for different periods, he would be foolish to consider only the amounts of labor time involved. To equate cost of production with labor cost is no more plausible for a Crusoe economy than for a capitalist economy. As an argument for the labor doctrine of real cost, Marx's appeal to Robinson Crusoe simply begs the question. What is the source of Marx's error? Apparently his belief in a necessary connection between the labor doctrine of surplus--an assertion about an economy considered as a whole--and the labor doctrine of real cost---an assertion about each product in that economy. He is not content to argue that the truth of the labor doctrine of surplus, obscured by the phenomenon of commodity fetishism, becomes apparent when we turn to the natural economy of Crusoe. He assumes, without argument, that the truth of the labor doctrine of real cost must be revealed at the same time. Marx does not rest his exposure of commodity fetishism on this single example. In addition to the case of Crusoe, he discusses three others: a self-sufficient peasant family, a feudal economy, and a socialist economy. But for these cases also the connection between the labor doctrine of surplus and the labor doctrine of real cost is not argued but assumed. In discussing his last example, Marx provides an answer for the crucial question as to whether socialist planning will equate cost of production with labor cost. And what is the basis for that answer? A reference to his first example, the planned economy of Robinson Crusoe. 1~ IV Marx's discussion of value in the opening chapters of Capital reaches two conclusions: first, that the labor doctrine of real cost holds true for all economies; and second, that in capitalist economies the truth of this doctrine is obscured by the phenomenon of commodity fetishism. At this stage of his argument he does not attempt to analyze the connection between cost of production and real cost in capitalist economies. Instead he adopts, as a useful simplification, the contrary-tofact assumption that in such economies price and value coincide. Embarking upon his analysis of capitalist production, he writes: Even if prices actually diverge from values, we must start by reducing the former to the latter, that is, we must disregard this divergence as an accidental circumstance. We can then deal with the phenomenon of capital formation in its purity, and our examination will not be complicated by accidental factors which have no bearing upon the essential process.~
lo Ibid., I, chap. 1, sec. 4, paras. 13-15. 11Ibid., I, chap. 4, sec. 2, para. 23, note.

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Throughout the rest of the first volume and the whole of the second, Marx retains this assumption. But in the opening chapters of the third volume he drops it, to face the fact that capitalist prices are not proprotionate to labor costs. These chapters constitute the second section of his argument. Accepting as already proven the labor doctrine of real cost, he now attempts to base upon it an explanation of capitalist price. TM The divergence of prices from values in a capitalist economy Marx ascribes to two circumstances. One is variation in the ratio of stored-up labor to living labor among different lines of production. The other is variation in the period of capital turnover among different lines of production. Since the two factors vary independently and may strengthen or weaken one another, the problem is most easily stated by assuming one of them inoperative. According to Marx, the value of any commodity produced by capitalist methods can be broken down into three parts:

V = c+v+s
where c stands for constant capital, the value of the raw materials used up plus the value of the portion of plant and machinery used up; v stands for variable capital, the value of the labor power used up; and s stands for surplus value, the difference between the value of the labor power used and paid for and the value created by that labor power in the process of production. For the divergence of price from value three ratios are crucial: s/v, the rate of surplus value; c/v, the organic composition of capital; and s~ (c+v), the rate of profit} 3 Marx assumes that if in a capitalist economy labor power of a given quality sells for the same wage throughout the different lines of production, the rate of surplus value is uniform throughout the different lines of production. ~ Let us consider then a model of a capitalist economy, constructed upon the following assumptions: prices are proportionate to values; the rate of surplus value is uniform among the different industries; the period of capital turnover is uniform among the different industries; and the organic composition of capital varies among the different industries. From the assumptions that s/v is uniform and that c/v varies, it follows in these circumstances that s~ (c+v), the rate of profit, varies among different lines of production. But this result shows that something is wrong with the model. As Marx states the problem, in the eighth chapter of his third volume,
We have shown that in different branches of industry different rates of profit may prevail, corresponding to differences in the organic composition of the capitals involved, and also, within the limits indicated, to differences in their period of turnover. Given a uniform rate of surplus value and a uniform period of turnover, the law (operating as a general tendency) that profits are proportionate to amounts of capital--that equal amounts of capital yield equal profits in equal times--holds only for capitals of the same organic composition. This follows from the assumption, which up to this point has been the basis of our analysis, that commodities are sold
i~ Ibid., III, chap. 1, paras. 2-7, 33-35. See also Marx, "Randglossen zu Wagner," para. 5. ,8 Marx, Kapital, I, chap. 6, paras. 20-23; chap. 7, sec. 1, paras. 2, 9; chap. 23, sec. 1, para. 2; III, chap. 2, para. 4. 14 Ibid., III, chap. 8, para. 1; chap. 10, para. 8.

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at their values. On the other hand, there is not the slightest doubt that in reality--apart from accidental and mutually compensating distortions--variation in the average rate of profit among different branches of industry does not exist and cannot exist without abolishing the entire system of capitalist production. It seems therefore that the theory of value is incompatible at this point with the actual process of production, with the factual data, and that the attempt to understand these facts must be abandoned. 15 B u t M a r x is not p r e p a r e d to abandon his theory of value, merely because it seems incompatible with the facts of capitalist price. Surface p h e n o m e n a m a y obscure it. B u t they cannot refute it, because it rests upon nothing less t h a n a law of nature. The exchange or sale of commodities at their values is the rational arrangement, the natural law of their equilibrium. We must start from the law to explain the deviations, not from the deviations to test the law.~ H o w then does M a r x explain the deviations? One of his m a j o r arguments is an appeal to history. I n pre-capitalist economies, he asserts, exchange ratios were determined solely b y labor costs. B u t with the rise of capitalism secondary determinants emerge, which n o r m a l l y - - t h o u g h not d r a s t i c a l l y - - d i s t o r t the proportionality of prices to labor costs. Only for a capitalist economy is there a p r o b l e m of connecting price with real cost. Only there do t h e y diverge. I t follows t h a t one w a y of explaining this divergence is to trace the history of its development. H o w does M a r x prove t h a t the labor doctrine of price holds true for pre-capitalist exchange? H e does not commence b y examining exchange in slave or feudal societies. I n s t e a d he examines the connection between price and labor cost in a classless economy of c o m m o d i t y producers. Like Smith and Ricardo before him, he argues from a m y t h - - t h e lost paradise of classless exchange. The decisive point can be revealed most clearly if we consider the matter in this way. Let us assume that the workers themselves are in possession of their respective means of production and that they exchange their products as commodities.... According to the technical nature of the work involved, the value of the instruments of labour and raw materials employed would vary among different lines of production. Furthermore, apart from the unequal values of the means of production employed, different quantities of these means of production would be required for equal quantities of labour because one commodity can be finished in an hour, another only in a day, and so on. Furthermore, let us assume that on the average these labourers work equal periods of time, allowing for differences in the intensity of labour and so onY M a r x ' s first assumption characterizes his model as a classless economy of comm o d i t y producers, w h a t he calls an economy of simple c o m m o d i t y production. His last assumption asserts t h a t in a n y given period the value created b y a single worker is the same in all lines of production. H i s second and third assumptions assert t h a t the period of capital turnover and the ratio of stored-up to living labor v a r y a m o n g different lines of production. B u t since these two factors create the same sort of complications, for the sake of simplicity I shall consider only the second in discussing his model.

15Ibid., III, chap. 8, para. 33. Also para. 22. ch:p/b/ld ~IaIrIa:~h?p, 10a,rPa:na 37ugeSleme :lSnOlI1 ,. cjh~p l ~ e c . . . . . . para. 3. 17Marx, Kapi~al, I I I , chap. 10, para. 10.
9 "

4riP~:aa:;KIIuIel2:Pn 1O, paras. 4~5; " " (Berlin: 1952),

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M a r x concludes t h a t in such an economy equilibrium prices coincide with labor costs. Using the terminology he applies to capitalism, we can describe his model by three equalities and three inequalities. On the one hand, all workers receive the same wage; all receive the same profit; and the rate of surplus value is uniform throughout the economy. Value created in any given period, v + s , is uniform by Marx's last assumption. But the wage, v, is also uniform, because it equals the value of a laborer's means of subsistence. Therefore surplus value, s, is also uniform. And since where price coincides with value profit coincides with surplus value, the amount of profit is uniform too. On the other hand, the value of the means of production consumed in a given period varies among different lines of production. So does the value of the products turned out in a given period. And so does the rate of profit. The value of the means of production consumed, c, varies b y Marx's second assumption. B u t since v + s is uniform, the value of the products, c + v + s , must v a r y with c. And the rate of profit, s / ( c + v ) must v a r y also. W h a t distinguishes this economy from capitalism, according to Marx, is the fact t h a t inequalities in the rate of profit do not throw it off balance. If one worker has greater expenses, these are made good by the greater size of the "constant" component in the value of his commodity : and for the next period he must reconvert an equal portion of the total value of his product into the material factors which this constant component represents. If another worker collects less for this purpose, it is because he requires that much less for reconversion. Under these circumstances differences in the rate of profit would be a matter of no concern .... i s Up to this point in his discussion M a r x says nothing about competition. The crucial characteristic of his model, leading to the coincidence of prices and values, seems to be the absence of exploitation. But in discussing unequal rates of profit M a r x introduces an additional assumption, t h a t workers are not free to shift from one line of production to another. TM And upon analysis this, rather than his assumption concerning exploitation, turns out to be decisive for his argument. The issue can be clarified by constructing a model of fully competitive simple commodity production. Let us replace Marx's assumption about competition with the assumption t h a t workers are free to shift from one line of production to another, while we retain unchanged his other statements about simple commodity production. Is such an economy in equilibrimn when prices equal values but the rate of profit varies among different industries? In such a situation any worker in a line of production with an organic composition of capital, c / v , higher than the lowest in the economy can realize a gain by shifting at the end of a turnover period to a line with a lower composition. According to Marx's assumptions his income, v + s , will remain unchanged. And he can pocket the difference between c in the old line and c in the new. More generally, in such a system variations in the organic composition of capital from industry to industry represent variations of incentive to enter and of security
is Loc. cit. 19 Ibid., III, chap. 10, para. 13.

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to remain. The incentive for workers to enter different industries is weighted against industries of high organic composition, since these require investing larger amounts for equal incomes. The security of workers to continue in different industries is also weighted against industries of high organic composition, since these involve risking larger amounts for equal incomes. The effect of any or all of these factors is to induce a movement of workers out of lines of high organic composition into lines of low organic composition. One tendency of this movement is to decrease the supply of commodities produced in lines of high organic composition, with the result that ti~eir prices are forced above their values through competition of buyers. The complementary tendency is to increase the supply of commodities produced in lines of low organic composition, with the result that their prices are forced below their values through competition of sellers. The equilibrium condition for termination of both tendencies is a uniform rate of profit throughout the entire economy. The relation of prices to values in such an economy is identical with that which Marx ascribes to capitalism. In Marx's own model of simple commodity production, freedom to transfer from one line of production to another is sharply restricted. But where the mobility of factors of production is limited, proportionality of prices to labor costs, far from being necessary, is most unlikely. Difficulties in transferring means of production from one line to another are obstacles to the maintenance of any uniform relation between the prices and the values of the different commodities involved. Suppose we assume an initial equality of prices and values. Under conditions of partial immobility, changes in techniques or tastes will produce disparities in the relation of supply to demand for specific commodities. In lines where shortages develop, competition of buyers will force prices above values. In lines where surpluses develop, competition of sellers will force prices below values. To the extent that difficulties of transfer exist, these divergences will remain. A return to equality of prices and values would be wholly accidental. More generally, to the degree that difficulties exist in transferring means of production from one line to another, competition is imperfect. To the degree that competition is imperfect, elements of monopoly are present. And to the degree that elements of monopoly are present, price is determined, in Marx's own words, "neither by the price of production of the commodity, nor by its value, but by the needs and solvency of the buyers." 20 Marx's appeal to the myth of simple commodity production is no more successful than his earlier appeal to the myth of Robinson Crusoe. To the extent that competition prevails in a classless economy of commodity producers, prices must diverge from values for the same reasons as in capitalist economies. To the extent that competition does not prevail, the relation of individual prices to values must be indeterminate. In so far as it relies on this example, Marx's attempt to explain the divergence of capitalist prices from real costs is a failure.
2o I b i d . , III, chap. 45, para. 29; chap. 46, para. 4. In chap. 10, para. 14, Marx states as a conditlon for the coincidenceof prices and values in simple commodity production that there be no accidental or artificial monopolies. But his assumption of limited mobility entails that this condition will not be met.

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Marx, it is true, does not state his argument in terms of a single example. Exchange of commodities at their values, he claims, is normal for all economies except the capitalist. This principle applies where the means of production belong to the worker, that is, to the situation of the peasant who owns the land he works and to the situation of the independent artisan, in both ancient and modern times.... It also applies to economiesbased on slavery and serfdom, and to the guild organization of handicrafts--providing that the means of production installed in each line of production can be transferred only with difficultyto another branch, so that in their relations with one another the different branches of production resemble to a certain degree foreign countries or the communisticsocieties of primitive times.~ But these appeals to history beg the question. Marx points to the fact that mobility of factors was limited in pre-eapitalist economies. He concludes from this fact that in these economies prices coincided with values. He does not test the principle that limited mobility entails proportionality of prices to labor costs by examining any historical evidence. Instead he treats this principle as a truth already established by his analysis of simple commodity production. The hypothetical example of simple commodity production and the hypothetical example of Robinson Crusoe play the same role with respect to the actual examples that follow them. In each case Marx claims to establish a general principle through his analysis of the hypothetical example. And in each case this general principle is assumed, without further proof, to hold for the actual examples as well. In each case his assertions of fact depend on his analysis of a fiction. If that analysis is erroneous, the entire argument fails. V Suppose that these two arguments are rejected not because they appeal to fictions, but because the generalizations Marx bases on these fictions do not follow from the premises on which the fictions are constructed. How much of his theory of value then remains? Marx's exposition of his theory in C a p i t a l does not rest solely on these two arguments. His attempt in the first volume to establish the labor doctrine of real cost relies heavily on his comparison of capitalist with non-capitalist economies in the section on commodity fetishism. And that comparison turns on his account of Robinson Crusoe. His attempt in the third volume to explain the divergence of capitalist prices from real costs relies heavily on his comparison of capitalist with pre-capitalist economies in the chapter on equalization of the rate of profit through development of competition. And that comparison turns on his account of simple commodity production. But in each case he presents a second line of argument, which does not rest on a comparison between capitalist and non-capitalist economies. Yet these non-comparative arguments have weaknesses of their own, weaknesses which become far more obvious when the support of the comparative arguments
~1Ibid., III, chap. 10, para. 13. Also paras. 20, 54-63.

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is removed. T h e plausibility of M a r x ' s theory is drastically, if not decisively, reduced b y eliminating its question-begging appeals to fiction. The n o n - c o m p a r a t i v e argument b y which M a r x a t t e m p t s to establish the labor doctrine of real cost is his derivation of value from exchange value. T h a t derivation rests upon two premises. First, since all relational properties reflect non-relational properties of the things related, the ratios in which commodities exchange m u s t be explained in terms of some p r o p e r t y possessed b y each c o m m o d i t y separately. Second, the only non-relational p r o p e r t y possessed b y every c o m m o d i t y is t h a t of being a product of labor. 22 This a r g u m e n t is invalid, but its invalidity is to some extent obscured b y the order of M a r x ' s exposition. Some exchangeable things---virgin land, for e x a m p l e - - a r e not products of labor. B u t such troublesome things are not mentioned in the first three sections of the opening chapter of Capital, where M a r x presents his derivation of value f r o m exchange value. T h e first mention of virgin land occurs two chapters later, where M a r x asserts without a n y a r g u m e n t t h a t such things h a v e a price b u t not a value. T h e statement t h a t any exchangeable things lack the p r o p e r t y of value is inconsistent with his opening argument. B u t before m a k i n g this s t a t e m e n t he has presented, in section four of the first chapter, his c o m p a r a t i v e argument, basing the labor doctrine of real cost upon the labor doctrine of surplus. T h e compatibility of his statement about virgin land with this intervening a r g u m e n t m a s k s its incompatibility with his initial argument. To delete the intervening a r g u m e n t is to lay bare the contradiction. I t is interesting in this connection to consider the response of M a r x to a reviewer's c o m m e n t on the first volume of Capital. The a n o n y m o u s reviewer wrote: The fundamental axiom, which we encounter at the very beginning, is "that the quantity of socially necessary labour, or the labour time socially necessary to produce a commodity, determines the magnitude of its value (the amount of its exchange value)". For Marx this statement is axiomatic: it is not proved but simply repeated in various forms.... The rejection of the theory of value is the single task of Marx's opponent; for if one accepts his axiom, one must grant almost all the consequences derived from it by his rigorous logic. Fortunately there is no necessity to believe this basic dogma. Marx himself recognizes the difficulty of reducing to a common unit the different grades of skilled labour. The question of how his formula explains the value of commodities whose supply cannot be increased at will, instead of being satisfactorily answered, is simply ignored. And finally, nowhere does he provide the slightest evidence that his alleged law of nature actually governs the world. ~ M a r x commented on this criticism in a letter to K u g e l m a n n : The poor fellow does not see that, even if there were no chapter on "value" in my book, the analysis of actual relations that I give would contain the evidence for and the demonstration of the real value relations .... Every child knows that obtaining the quantities of different products which correspond to the magnitudes of different needs requires quantitatively determined amounts of different types of society's total labour. That this necessity of distributing social labour in definite proportions cannot be transcended owing to the particular ]orm of social production, but can only change its mode o] appearance, is self-evident9 No law of nature ~2For a discussion of both premises, see my "Metaphysical Argument." ~8Rezenslon uber Das Kapltal, L~teramsches Centralblatt [Zentralblatt] fur Deutschland, 1868, no. 28 (4. Juli), paras. 2-3.

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can be transcended. What can change with different historical circumstances is only the ]orm in which such a law prevails. And the form in which this proportional distribution of labour prevails in a state of society where the interconneetion of social labour is asserted through private exchange of the individual products of labour is precisely the exchange value of these products. ~ T o a criticism concerned with ratios of exchange in a capitalist economy, Marx does not reply by defending his derivation of value from exchange value. Instead he restates his comparative argument. The labor doctrine of surplus is presented as self-evident, the statement of a law of nature governing all economies. The labor doctrine of real cost is presented as a logical consequence of this universal law. I t follows t h a t in spite of all appearances both principles apply in a capitalist economy. But this is the argument which at its crucial p o i n t - - t h e connection between the labor doctrine of surplus and the labor doctrine of real cost--turns on the appeal to Robinson Crusoe. The non-comparative argument b y which Marx attempts, in the third volume of Capital, to explain the divergence of capitalist prices from real costs consists in his solution for what is usually called the transformation problem. In addition to his historical explanation, which compares the relation of price to value in capitalist and pre-capitalist economies, he presents a method for calculating from a given set of values the corresponding set of capitalist prices. B u t here, to an even greater extent t h a n in the first volume, the plausibility of the non-comparative argument depends on the acceptability of the comparative. Considered apart from his account of pre-capitalist economies, Marx's procedure for calculating capitalist prices from values amounts to nothing more than the concluding half of a circular argument. In a capitalist economy, according to Marx, labor costs are not observable quantities. The only way to discover the values of the different commodities is to calculate them from prices. But such a calculation involves the assumption that the rate of surplus value is uniform throughout the different lines of production. In a capitalist economy this assumption is untestable. I t cannot be confirmed or refuted without calculating a set of values; yet any calculation of values must assume its truth to get started. For a capitalist economy considered by itself, a set of values is an a r b i t r a r y translation of a set of prices. T o reverse the process, calculating from a set of values the corresponding set of prices, is not a scientific explanation but a mathematical exercise. 26 F o r Marx's method of calculating prices from values to constitute an explanation of capitalist price, it must connect---however indirectly--one set of observable facts with another set of observable facts. Since the labor costs involved are not themselves observable, to connect them with prices is at best only part of an explanation. W h a t then is the other part? Is it Marx's derivation of value from exchange value in the first volume of Capital? For a capitalist economy considered b y itself, his derivation in the first volume starts from the same capitalist prices to which his calculation in the third volume returns. I f this is the other part, then ~4 "Marx an Kugelmann 11. Juli 1868," para. 3. 25For further discussion of this point, see Joan Robinson, "The Labour Theory of Value," Collected Economic Papers (New York: 1951).

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Marx's proffered explanation of capitalist price turns out to be a pseudoexplanation. And his labor doctrine of real cost turns out to be wholly superfluous, a fit victim for Occam's razor. As an alternative, it might be claimed t h a t the other part of Marx's explanation of capitalist price is his account of non-capitalist price. I n pre-capitalist economies, he asserts, prices and values coincide. His method of calculating prices from values, it might be argued, serves to connect observable facts in capitalist economies with observable facts in other economies. But if his comparative argument is rejected, this escape route is cut off. I t is interesting in this connection to consider the response of Engels to some reviewers' comments on the third volume of Capital. Loria had denied any empirical significance to the law of value. Sombart, while rejecting Marx's theory of precapitalist price, had defended the labor doctrine of real cost in very general terms: In its empirical significance Marx's concept of value is simply the economic expression of the fact that the productive power of society's labour is the basis of economic existence.~ Commenting on these reviews in his Supplement to the Third Volume Vf "Capital," Engels centers his defense of Marx on the t h e o r y of pre-capitalist price. W h a t Sombart misses, he asserts, is the connection between the logical explanation and the historical process it reflects. His argument concludes: Thus the Marxian law of value has general validity for a period lasting from the beginning of exchange, which transforms products into commodities, down to the fifteenth century of the present era. Commodity exchange dates from a time before all written history, which in Egypt goes back to between 3500 and 5000 B.c. and in Babylonia to between 4000 and 6000 B.c. The law of value has therefore ruled during a period of from five to seven thousand years. And now let us admire the thoroughness of Mr. Loria, who calls the value which is generally and directly prevalent in this period a value at which commodities never have and never can sell, and with which no economist having a spark of common sense would concern himself! ~ The premises from which Engels reaches this conclusion differ from those of Marx. Ignoring M a r x ' s assumption of limited competition, he tacitly assumes full mobility of factors. For the major part of his discussion he also ignores effects of differences in the organic composition of capital and in the period of capital t u r n over. The little that such a family had to obtain by barter or purchase from outsiders.., consisted principally of products of handicraft. The manufacture of such things was no mystery to the peasant, and he did not produce them himself only because he lacked the raw materials or because the purchased article was much better or much cheaper .... The peasants, as well as the people from whom they bought, were workers; both sides exchanged their products as direct producers. What had they expended in making these products? Labour and labour alone. For replacing tools, for producing the raw material, and for working it up they spent nothing but their own labour power. How then could they exchange their products for those of other working producers otherwise than in proportion to the labour expended on them? ~8

soziale Gesetzgebung und Statistik, VII (1894), sec. 3, paras. 16, 45-49. 27Engels, "Nachtrag," in Marx, Kapital, III, sec. 1, para. 16. 38Ibid., sec. 1, para. 12.

2s Werner Sombart, "Zur Kritik des 5konomischen Systems yon Karl Marx," Archiv fiir

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I] we assume full mobility of factors and i] we assume uniformity in the organic composition of capital and in the period of capital turnover, then prices coincide with labor costs in conditions of pre-capitalist commodity exchange. And, under these assumptions, in conditions of capitalist exchange as well. At the end of his discussion Engels mentions that some commodities involved in pre-capitalist exchange had longer periods of production than others. But after dropping his assumption that there were no significant variations in the period of capital turnover, he retains his conclusion that prices equalled values. In support of this conclusion he asserts that cattle---the commodity which in the era he is discussing had the longest period of production--"became the first rather generally accepted money commodity." 29 This evidence, however, proves merely that commodities were priced in terms of a standard commodity. It does not prove that these prices were proportionate to labor costs. Engels simply assumes that the equality of prices and values which obtains where periods of turnover are equal also obtains where periods of turnover are not equal. But this assumption is what he set out to prove; and since he offers neither analytic argument nor historical evidence to support it, his discussion begs the question.
VI The arguments of this paper can be summarized in three propositions. First, Marx's criticism of Smith and Ricardo, on the ground that through appeal to fictions of the eighteenth century they assume what they ought to prove, can be turned against the argument of Marx himself in Capital. Second, apart from the defensibility of his method, the generalizations Marx bases on his accounts of Robinson Crusoe and simple commodity production do not follow from the assumptions on which these fictions are constructed. Third, to delete from Marx's exposition the arguments turning upon these appeals to fiction is drastically, if not decisively, to weaken his theory of value as a whole. Though Hegel has not been mentioned, this discussion is not intended to challenge his position as the major philosophical influence on Capital. Hegel, however, was more important for suggesting to Marx the statement of his problems, even the outline of his solutions, than for providing him with proofs that these solutions were correct. When it came to establishing the truth of his theory of value, Marx switched at crucial points to the very un-Hegelian tradition of reasoning from a state of nature. Beneath the swirling flood of dialectic lie, like hidden rocks, the myths of the Enlightenment.

University o] Cali]ornia, San Diego ~, Ibid., sec. 1, para. 14.