[OPE-L:1375] Determination of Value, 1

From: Andrew_Kliman (Andrew_Kliman@email.msn.com)
Date: Thu Sep 30 1999 - 12:50:11 EDT

Determination of Value in Marx and in Bortkiewiczian Theory

by Andrew Kliman

1. Bortkiewicz's Critique of Marx

Among academic economists, discussion of Marx's Capital has always
been dominated by allegations that internal inconsistencies and
errors vitiate his value theory. The critique made by Bortkiewicz
(1952, 1984) in 1906-07, directed at Marx's account of the
transformation of values into production prices (Capital III,
Chap. 9), has been the most influential one by far. After
purporting to prove that Marx's account was self-contradictory,
Bortkiewicz set out to solve the "transformation problem" in an
internally consistent manner.

Marxist economists as well as non-Marxists have accepted his
alleged proof nearly universally. The correctness of Bortkiewicz's
solution, or of some variant of it, is likewise conventional
wisdom. Yet his influence, and the implications of his solution,
extend far beyond the "transformation problem." Generalizations of
this solution have become the fundamental models of the economy
employed by mainstream Marxist economists. They use these models
to derive theoretical conclusions concerning a wide variety of
matters, not only the relation of values to production prices.
Moreover, I will argue, Bortkiewicz's construction is by no means
a simple correction of a specific error contained in an
unpublished manuscript, a mere matter of *calculation*. It is
rather a quite general model of value and price *determination*
that differs radically from Marx's concept of their determination.

In Bortkiewicz's work, determination is simultaneous or "mutual."
I will argue at length that Marx's concept of value determination,
on the other hand, is temporal or "successivist." Thus, what have
been taken to be internal inconsistencies in Marx's value theory
are instead simply signs of the theory's incompatibility with
simultaneous valuation. Attempts to derive his theoretical results
on the basis of simultaneous valuation have failed, but these
results do follow when valuation is conceived in temporal terms
(see Freeman and Carchedi, eds., 1996; Kliman and McGlone 1999).

It is worth noting first that, even with respect to the
"transformation problem," Bortkiewicz's model does not *correct*
Marx in the sense of affirming his results by more acceptable
means. It rather implies that competition does indeed alter the
aggregate profit rate and value of output (total price diverges
from total value). These conclusions, diametrically opposed to
Marx's own, seem to invalidate the principle that value is
determined by labor-time.

As Bortkiewicz himself recognized, his model also invalidates
several other of Capital's theoretical conclusions. The issue of
foremost importance is Marx's law of the tendential fall in the
profit rate. He considered it the most important law in political
economy and grounded a theory of economic crisis in it. In direct
contradiction to this law, the Bortkiewiczian model and its
generalizations (e.g., Okishio 1961) imply that the profit rate
tends to rise, not fall, as a consequence of productivity
increases resulting from mechanization.

Several other implications of the Bortkiewiczian model also impugn
the theory that value is determined by labor-time: (a) relative
prices and the profit rate are determined independently of value
magnitudes, rendering value production "redundant" (see Steedman
1977); (b) the general profit rate is determined independently of
production conditions in luxury industries (as Ricardo held and
Marx denied); (c) commodities can have positive prices but
negative values, and vice-versa; and (d) aggregate profit can be
negative although aggregate surplus-value is positive, and
vice-versa. [1] Clearly, very little of the quantitative
dimension of Marx's value theory is left intact.

(Note [1]: Kliman (1999) shows that this is true even when each
industry produces only a single product.)

Of course, if Bortkiewicz's proof of Marx's error were valid, and
his alternative construction were a necessary corrective, matters
would end there. Marx would simply be wrong, with respect both to
the transformation and to the host of other issues. Yet the
attempted proof has been refuted.

In Bortkiewicz's interpretation of Marx's account of the
transformation, inputs (means of production and subsistence) are
bought at their values, but the same commodities, as outputs, are
sold at production prices differing from values. He attempted to
prove that this would lead to a spurious breakdown of the economy,
because reproduction cannot occur on the same scale if input and
output prices differ. The sum of money advanced at the start of
this period to purchase a raw material, for instance, will not be
enough, at the end of the period, to buy an equivalent amount for
use in the next period, if in the meantime its price has

This argument, however, fails to substantiate Bortkiewicz's
conclusion. It has been demonstrated that, if next period's input
purchases are financed out of the sales revenue received at the
end of this period, rather than by means of money advanced at the
start, changes in prices during the period have no bearing upon
reproduction. Differences between input and output prices
therefore do not prevent reproduction from taking place on the
same scale (see Kliman and McGlone 1988, 1999). This demonstration
refutes Bortkiewicz's proof, thereby eliminating the need to
substitute his concept of value and price determination for

This archive was generated by hypermail 2b29 : Sun Feb 27 2000 - 15:27:10 EST