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Reconstituted Socialist Party of Great Britain (1991) Socialist Education Series - Marx, Capital and Consistency

Marx’s warning to readers in volume I of CAPITAL

Marx explained why commodities in capitalism do not sell at their value but at their prices of production. Marx gave warning to readers of volume 1 of CAPITAL that he was making assumptions to which they should pay attention. The assumptions would be dropped in the third volume of CAPITAL.

When, after Marx’s death, Volume III was published some critics said that it contradicted what Marx had written in Volume I, in which, so they said, Marx had shown that commodities sell at, or oscillate about, their value. There are still, today, people who think the same. They are quite mistaken. They have failed to take note of Marx’s explanation of what he was doing.

In Volume I Marx presented an elementary stage of the relationship between value and price which correspond to earlier conditions of production, and warned readers several times that fuller treatment would have to wait until Volume III. Here are three of his warnings:

The possibility, therefore, of quantitative incongruity between price and magnitude of value, or the derivation of the former from the latter is inherent in the price form itself
(CAPITAL VOL. I, Kerr Edition, p. 115).

In the text on page 244 Marx gave calculations of the amounts of surplus value, which he arrived at, “assuming that the price of the product is the same as its value”. To which he appended a footnote reading:

The calculations given in the text are intended merely as illustrations. We have in fact assumed that prices equal values. We shall see, in Volume III, that even in the case of average prices the assumption cannot be made in this very simple manner”.

In the text on page 335 of Volume I Marx anticipated the argument he was to present in Volume III based on variations in the “composition of capital”; that is to say the fact that in some industries there is much “constant capital” and relatively little “variable capital”, and in others the reverse.

It is the variable capital (human labour power) which creates surplus value but, as Marx wrote, this does not result in a cotton spinner with little variable capital pocketing less profit than a baker, with the same total capital but more variable capital. Marx then warned: “for the solution of the apparent contradiction many intermediate terms are yet wanted”. The solution lies in the fact that the cotton spinner’s commodity sold above value and the baker’s below value, as elaborated in volume III.

Prices of Production defined by Marx

In CAPITAL VOLUME III (Kerr edition, p.186) Marx defined price of production as:

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.

Treatment of the question by Kautsky, Boudin, and Engels

Karl Kautsky dealt with the alleged question of the inconsistency between volume I and Volume II in chapter IV of his “THE ECONOMIC DOCTRINES OF KARL MARX” (pub. By A.& C. Black Ltd., London, 1925).

It is not the value, but the production price which, under a developed capitalist mode of production, forms the level about which its market price, under the influences of supply and demand, oscillate. The price of production itself, however, does not oscillate in vacuo, but is based upon value…Under developed capitalist commodity production, the prices of most commodities permanently deviate from their values, inasmuch as the prices of one-half of these commodities are permanently as much below their values as those of the other half above them” (p.89).

Louis B. Boudin dealt extensively with the theory and with the critics of Marx in his THE THEORETICAL SYSTEM OF KARL MARX (Pub. J. Kerr, 1918). His criticisms are contained in Chapters IV, V, and VI).

With regard to the critics who argued that Marx changed his mind after he had written Vol. I of CAPITAL and wrote a revised version for Vol. III, Boudin pointed out (p. 133):

It appears that most of the third volume, and particularly those portions which are supposed to modify the first volume, were actually written down by Marx in its present form before the publication of the first volume”.

Frederick Engels dealt with the issue in a SUPPLEMENT TO CAPITAL, VOLUME THREE, which was published as F. Engels on Marx’s Capital (Progress Publishers, Moscow 1965).

Among other aspects Engels dealt with the development of industrial capital and, with it, the replacement of price and value being equal, by the later condition of commodities selling at “price of production”; some permanently above value and others below value.

Another criticism of Marx’s Theory

Another criticism of mar’s theory rested on an alleged “flaw” in Marx’s presentation of the transformation of value into prices of production. It was discussed in 1979 in THE NEW STATESMAN (January), REREADING CAPITAL, B. Fine and L. Harris Part 2 p21-39 1979) and in 1981 in THE MONTHLY ECONOMIC LETTER, (New York 1981)

It also was dealt with in a new edition of BOEHM-BAWARK'S KARL MARX AND THE CLOSE OF HIS SYSTEM which contained an article by Rudolf Hilferding, a text known to early members of the SPGB an appendix by L. von Bortkiewiecz and an introduction by Paul Sweezy, the editor.

In the introduction Sweezy wrote that while the article by von Bortkiewicz held that Marx’s presentation contained a flaw, “the aim of the article, and in my judgement, its effects as well, was not to attack Marxist theory but to vindicate it”. It did no such thing. If Bortkiewicz is correct Marx’s value theory is untenable in its original form in the third volume of CAPITAL.

However, Bortkiewicz did not prove that Marx’s account of the value-price transformation is internally contradictory. Simple reproduction can occur when input and out put prices differ so there was never any need to correct Marx’s account.

An attempt has been made to prove the accuracy of Marx’s “price of production” theory of prices by taking specific commodities and costing them from thje start of their production to their final sale in the market. It failed to be conclusive because some of the necessary information is not available and had to be left to guesswork. The result did however give broad support to Marx’s theory.


Marx did not set out to provide, nor did he intend to provide, a theory of market prices. He showed, instead that the sum of values equals the sum of the prices of production around which market prices are located. He also showed that the total surplus value equals total profits.

Two categories of price arise out of special circumstances. First, the high price where there is a monopoly in the production of the commodities where one or a group of capitalists can temporarily gain at the expense of other capitalists. And, second, the existence of low prices in some commodities when governments subsidise some capitalists as a matter of policy.

Marx’s “price of production”, based on his labour theory of value, which shows some commodities selling permanently above value and other permanently below value does provide us with a reasonable explanation for the wide range of prices. We find nothing in Marx’s presentation of his transformation of commodities into prices of production as being inconsistent. This has recently been supported by A. Kliman “RECLAIMING MARX'S CAPITAL: A REFUTATION OF THE MYTH OF INCONSISTENCY” (chapter 8 and 9, Lexington Books 2007)

And what other explanation can the critics of Marx offer? Not forgetting that among the critics are the various rival schools of economists who have been unable to account fort continuous inflation, support a mystical school of banking, can offer no account for the origin of profits and claim “boom and bust” is a thing of the past.

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