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Karl Heinrich Marx (1818–1883)
Gilbert Faccarello, Christian Gehrke & Heinz D. Kurz ∗
Life and Writings
The formative years
Karl Marx was born on 5 May 1818 the eldest son of Heinrich and Hen-
riette Marx in the provincial town of Trier in the Rhineland, where his father
practised as a lawyer. On his father’s side Karl was descended from a Jewish
family with a long-standing tradition of rabbis. But his father Herschel (or,
since 1814, Heinrich) Mordechai had converted to Protestantism in 1816 in or-
der to escape the Prussian restrictions against the Jews, and he also had Karl
and his six brothers and sisters baptized as Protestants. Heinrich Marx was a
cultured man, who had great admiration for Leibniz, Lessing, and Kant, and
raised his children as liberal and law-abiding Protestants. His wife Henriette,
née Pressburg, was the daughter of a Jewish merchant from Nijmegen in the
∗Panthéon-Assas University, Paris (G. Faccarello) and University of Graz (C. Gehrke &
H.D. Kurz). To be published in Gilbert Faccarello and Heinz D. Kurz (eds), Handbook on
the History of Economic Analysis, vol. 1, Cheltenham: Edward Elgar, 2016.
Marx, Karl Heinrich (1818-1883) 2
The person who exerted the most important intellectual inﬂuence on the
young Karl, apart from his father, was Johann Ludwig von Westphalen, a
high-ranking civil servant, who treated the talented young neighbour’s boy
and schoolmate of his son Edgar as an equal partner in discussions on literary
and philosophical themes. While his father acquainted him with the German
and French enlightenment philosophers, Karl would learn about Homer, Sha-
kespeare and the Romantics from his future father-in-law. Presumably, it was
also Baron von Westphalen who introduced him to the ideas of Henri de Saint-
Simon, in which he took a keen interest himself. Until his twelfth year, Karl
was educated privately by his father and the local bookseller. In the gymna-
sium, which he attended from 1830 to 1835, he was conspicuous mainly for his
diligence and for his strong interest in literature and ﬁne arts.
From 1835 to 1841 Marx studied at the universities of Bonn and Berlin.
Following his father’s advice, he enrolled at Bonn University as a student of
law, but attended courses also in history, medicine, and theology. In 1836 he
changed over to the University of Berlin, where at ﬁrst he continued his studies
in law, but then devoted his time and energy mainly to philosophy, after he had
come into contact with some of the so-called Young Hegelians, who gathered
around the radical theologian and religious critic Bruno Bauer (1809–1882). In
1841 he earned a doctorate with a philosophical dissertation on “The diﬀerence
between the Democritean and the Epicurean philosophy of nature” at the Uni-
versity of Jena. However, he quickly realized that there was little chance of
success for an academic career, in view of the strict actions of the Prussian au-
thorities against radical left-wing Hegelians : his mentor Bruno Bauer, whom
he had intended to follow to the University of Bonn, was deprived of his lecture
rights. Being thrown back on his own ﬁnancially by the unexpected death of
his father, Marx turned to journalism and began to write articles for the Rhei-
nische Zeitung in Cologne, which had been founded by enlightened citizens and
industrialists in early 1842. In October, Marx took over the editorship of the
liberal and anti-clerical — and under Marx’s inﬂuence increasingly more radi-
cal — newspaper. Being watched with mounting suspicion by the censorship
authorities, the Rheinische Zeitung was banned in March 1843.
Marx, Karl Heinrich (1818-1883) 3
Revolutionary turmoil in Europe
In June 1843 Karl Marx and Jenny von Westphalen, the daughter of J.L.
von Westphalen, got married. In October the young couple moved to Paris,
then the centre of radical thinking and political activism in Europe, where
Marx came in contact with men such as Heinrich Heine (1797–1856), Georg
Herwegh (1817–1875), Pierre-Joseph Proudhon (1809–1865), and Michail Ba-
kunin (1814–1876), and where he planned to edit, together with Arnold Ruge
(1802–1880), a literary-political magazine called the Deutsch-Französische
Jahrbücher. The ﬁrst (and only) issue of these “yearbooks” was published in
1844. It contained inter alia Friedrich Engels’ contribution “Umrisse zu einer
Kritik der Nationalökonomie” (“Outlines of a critique of political economy”)
and two articles by Marx, “Zur Judenfrage” (“On the Jewish question”) and
“Zur Kritik der Hegelschen Rechtsphilosophie” (“A contribution to the critique
of Hegel’s philosophy of right”). Marx was very impressed by Engels’ contribu-
tion and the ﬁrst meeting of the two men marked the beginning of a lifelong
friendship. In Engels (1820–1895), the son of an industrialist from Barmen,
Marx found a most congenial intellectual ally, who would subsequently stand
by him in his scientiﬁc and political activities as a critical commentator, occa-
sional co-author, generous ﬁnancial helper, and editor of his unﬁnished works.
Shortly after his meeting with Engels, in autumn 1844, Marx began to study
seriously political economy. He ﬁlled several notebooks with excerpts and com-
mentaries on the economic writings of Boisguilbert and the French physiocrats,
and of Smith, Malthus, and Ricardo (which he ﬁrst read in French). He then
used his “Paris notebooks” for drafting out a long text that he himself had
not considered for publication, but which was published posthumously in 1932
as the so-called Ökonomisch-philosophische Manuskripte von 1844 (Economic
and Philosophic Manuscripts of 1844). In these manuscripts Marx formula-
ted a critique of Hegel’s philosophy and also discussed the speciﬁc forms that
“alienation” assumes under capitalistic production relations. (On Marx’s early
writings, see Colletti 1975.)
In early 1845 Marx was expelled from France on the instigation of the
Prussian embassy in Paris. With his wife and his newly born daughter “Jenny-
chen” he ﬂew to Brussels, where he continued to pursue his studies in political
economy. In Die deutsche Ideologie (The German Ideology), written jointly
Marx, Karl Heinrich (1818-1883) 4
with Engels in 1845–46, he again discussed critically Hegel’s philosophy and
developed the main ideas of what was to be called the materialist conception
of history (on the so-called “dialectical materialism”, see Colletti 1969 ),
which he later summarized as follows in his celebrated “Introduction” to the
critique of political economy :
In the social production of their existence, men inevitably enter into
deﬁnite relations, which are independent of their will, namely rela-
tions of production appropriate to a given stage in the development
of their material forces of production. The totality of these relations
of production constitutes the economic structure of society, the
real foundation, on which arises a legal and political superstructure
and to which correspond deﬁnite forms of social consciousness. The
mode of production of material life conditions the general process
of social, political and intellectual life. It is not the consciousness of
men that determines their existence, but their social existence that
determines their consciousness. At a certain stage of development,
the material productive forces of society come into conﬂict with
the existing relations of production or — this merely expresses the
same thing in legal terms — with the property relations within the
framework of which they have operated hitherto. From forms of
development of the productive forces these relations turn into their
fetters. . . . In broad outline, the Asiatic, ancient, feudal and mo-
dern bourgeois modes of production may be designated as epochs
marking progress in the economic development of society. The bour-
geois relations of production are the last antagonistic form of the
social process of production . . . but the productive forces develo-
ping within bourgeois society create also the material conditions
for a solution of this antagonism. The prehistory of human society
accordingly closes with this social formation. (Marx 1859  :
In 1846 Marx also published a scathing polemic against Proudhon, entitled
Misère de la Philosophie (The Poverty of Philosophy) (1847) — thus ridiculing
the title of Proudhon’s book Philosophie de la misère (Philosophy of Poverty )
(1846). In this text as well as in a short tract on “Wage labour and capital”,
which emanated from a set of lectures that he had delivered in 1847 at the Ger-
man Workers’ Association in Brussels, Marx ﬁrst set out his theory of value
and surplus value. In Brussels, Marx and Engels also founded the “Communis-
tisches Korrespondenz-Kommittee” (Communist Correspondence Committee)
in early 1846, which aimed at the uniﬁcation of the revolutionary German and
international workers. They established an international Communist party by
Marx, Karl Heinrich (1818-1883) 5
merging with Wilhelm Weitling’s “Bund der Gerechten” (League of the Just).
At the ﬁrst joint congress in London in November 1847 Marx and Engels suc-
ceeded in establishing the “Bund der Kommunisten” (the Communist League).
From the mandate given to Marx and Engels at the second congress in 1848 to
write a declaration of principle emanated the famous Manifesto of the Commu-
nist Party — which in fact was written by Marx alone after both had agreed
that Engels’ preliminary drafts were unsuitable.
In spring 1848, when the revolutionary movements began to spread throu-
ghout Europe after the February revolution in Paris, Marx was brieﬂy impri-
soned and then expelled from Belgium. Upon an invitation from the newly
installed French government he ﬁrst returned to Paris, but after the March
revolution in Germany he and Engels moved to Cologne in order to lead the
revolutionary movement in the Rhine provinces and edit the re-established
Neue Rheinische Zeitung. After the failure of the revolution, the popular daily
paper was increasingly subjected to censorship and ﬁnally banned in May 1849.
Marx was expelled from Prussia and deprived of his citizenship. After a brief
interval in Paris he moved into exile with his family to England and settled
down in London, where he was to stay until the end of his life.
Exile in London
Over the next 30 years Marx devoted much of his time and energy to po-
litical economy. He used to work in the reading room of the British Museum,
studying the available literature on political economy as well as the so-called
Government Blue Books, the economic and ﬁnancial sections of newspapers
and magazines, and various other sources that provided information on the
economic and social conditions in Britain and in the rest of the world, ﬁlling
several hundred notebooks and thousands of pages with excerpts, commenta-
ries, and bibliographic references. In the evenings and at night he then used his
extensive notes in producing ﬁrst drafts of sections and chapters of his planned
The economic crisis of 1857 induced him to summarize the results of his
economic studies in a ﬁrst manuscript on political economy of some 800 pages.
In the “Introduction” he grouped the topics to be dealt with into six “books” :
“(1) Of Capital (with some pre-chapters). (2) Of landed property. (3) Of Wage-
Marx, Karl Heinrich (1818-1883) 6
labour. (4) Of the State. (5) Foreign Trade. (6) World Market.” This manus-
cript, which Marx composed from August 1857 to March 1858, was ﬁrst publi-
shed in 1939–41 under the title Grundrisse der Kritik der Politischen Ökono-
mie (Rohentwurf) 1857-1858. It is often referred to as a “rough draft” of Das
Kapital (Capital), but Marx’s original plan was in fact much wider in scope.
The three volumes of his later main work, Das Kapital, in fact cover only the
contents of the ﬁrst “book” of the originally planned six “books”. In the course
of working out this part, Marx realized the impossibility of ﬁnishing the huge
task he had set himself and was forced to postpone work on “books” 4, 5 and 6,
while those on “landed property” and on “wage-labour” were partly integrated
into his main work (in volumes I and III of Capital and in the Theories of
In 1859 Marx managed to prepare a revised version of the ﬁrst part of
the 1857–58 “Rough draft” for publication : Zur Kritik der Politischen Öko-
nomie (Erstes Heft) (A Contribution to the Critique of Political Economy ).
However, this book, in which Marx ﬁrst presented his value theory in full,
did not have the desired impact, which prompted him to revise his publica-
tion plans again. As preliminary drafts for his major work, which was now
meant to consist of four “books” (in three volumes), he wrote two extensive
sets of manuscripts, which have been published as Ökonomische Manuskripte
von 1861-63 and Ökonomische Manuskripte von 1863-67 in the new MEGA
edition (for the diﬀerent editions of Marx’s works, see the note below). On the
basis of these manuscripts he then managed to complete and prepare for pu-
blication, in 1867, only the ﬁrst volume of Capital, entitled Das Kapital. Kritik
der Politischen Ökonomie. Erster Band. Buch I : Der Produktionsprozeß des
Kapitals. He did not succeed in bringing the remaining volumes to completion.
These were published only posthumously by Friedrich Engels from the extant
sets of manuscripts, with many changes and additions, in 1885 and 1894, and
by Karl Kautsky, in 1905–10. During the 1870s Marx repeatedly interrupted
his work on the planned volumes II and III of Capital and devoted his at-
tention to various other research ﬁelds (such as Russian society, the Asiatic
mode of production, linguistics, mathematics, and the latest developments in
the natural sciences, in particular chemistry) ; in the early 1880s he ceased to
work on them altogether.
Marx, Karl Heinrich (1818-1883) 7
Engels’s edition of volumes II and III of Capital does not meet today’s edi-
torial standards. As the basis of the text Engels used the manuscripts written
by Marx between 1863 and 1867, which he merged with manuscript fragments
from later working periods and “supplemented” by insertions, changes, and ad-
ditions of his own, without properly indicating the latter. The full extent of
Engels’s editorial intrusions can be assessed only since the original manuscripts
have been published in the new MEGA edition.
According to Marx’s plan, the second volume was meant to comprise the
“Circulation process of Capital (Book II) and the Process as a whole (Book
III)”, but in Engels’s edition book II became volume II and book III became
volume III of Capital. According to Marx’s plan, the ﬁnal and third volume
was to be the “History of the Theory” (“Book IV” in Marx’s outline); this was
published in three volumes from 1905–10 under the editorship of Karl Kautsky
as Theorien über den Mehrwert (Theories of Surplus Value) from a set of
manuscripts that Marx had written during 1861–63. (For a detailed account of
the gestation of Marx’s economic writings, culminating in the three volumes of
Capital and the Theories of Surplus Value, see Rosdolsky 1968  ; Oakley
1983 ; and the volumes published in the new MEGA edition as “Abteilung II.
Vorarbeiten zum Kapital”.)
During the years in London, Marx and his family suﬀered from material
deprivation, in spite of continuous ﬁnancial support from Engels. Bad housing
conditions, malnutrition, and lack of medical care led to the worsening of Mar-
x’s health and that of his wife, as well as to the early death of four of his seven
children. He took on various journalistic jobs, but these did not earn him a
regular income. His work as European correspondent of the New York Daily
Tribune, for which he wrote hundreds of articles (see Ledbetter 2007), forced
him to keep himself well informed about British and European politics. From
1864 to 1872 Marx also often had to interrupt his scientiﬁc work because of his
multifarious commitments in the International Workingmen’s Association, the
so-called “First International”, in whose foundation he was actively involved in
1864. From London he also tried to foster the foundation of a revolutionary so-
cialist party in the German states. At ﬁrst he distanced himself from Ferdinand
Lassalle’s reform-oriented “Allgemeiner Deutscher Arbeiterverein”, which then
however was merged with the “Sozialdemokratische Arbeiterpartei” in 1875,
which Wilhelm Liebknecht had founded six years earlier in close collabora-
Marx, Karl Heinrich (1818-1883) 8
tion with Marx, to form the “Sozialistische Arbeiterpartei Deutschlands”, from
which the German “Social Democratic Party”, the SPD, was later to emerge.
In his last years Marx was plagued by serious health problems. He suﬀered
from chronic liver and lung problems, and also from carbuncles, which are
diagnosed today as psychically caused. In spite of several cure treatments at
the English seaside, in Karlsbad and in Algiers, his health further deteriorated.
His wife Jenny, who fell fatally ill in 1880, died the following year. Marx only
survived her by a little more than two years. He died, presumably from the
after-eﬀects of lung tuberculosis that had never been properly treated, on 14
March 1883 in London.
Marx’s Approaches to Value – Socio-historical, Dia-
The theory of labour value : basic concepts
Marx begins his study of capitalistic production with an analysis of com-
modities, because “for bourgeois society, the commodity-form of the product of
labour, or the value-form of the commodity, is the economic cell-form” (1867
 : 90). Commodities have a use-value and an exchange-value. According
to Marx, this “double character” of the products of labour is a source of “contra-
dictions”. While from a societal point of view economic activities aim at the
production of use-values to satisfy the needs and wants of the members of so-
ciety, the interest of the individual capitalist is directed at the production of
exchange-values and proﬁt — he “wants to produce a commodity greater in va-
lue than the sum of the values of the commodities used to produce it, namely
the means of production and the labour-power” (1867  : 293). What,
then, determines the exchange values of commodities ? Since every commodity
can be exchanged against any other, the exchange relations between commo-
dities, Marx insists, must be based on a common “something” : “The exchange
values of commodities must be reduced to a common element, of which they
represent a greater or lesser quantity” (1867  : 127). He adds :
This common element cannot be a geometrical, physical, chemical
or other natural property of commodities. Such properties come
Marx, Karl Heinrich (1818-1883) 9
into consideration only to the extent that they make the commo-
dity useful, i.e. turn them into use-values. . . . As use-values, com-
modities diﬀer above all in quality, while as exchange-values they
can only diﬀer in quantity, and therefore do not contain an atom of
use-value. If then we disregard the use-value of commodities, only
one property remains, that of being products of labour. (Marx 1867
 : 127–8)
The relative values of commodities are thus taken to be governed by the
relative amounts of embodied labour. Labour itself, however, also has a double
character. In the production process, with all its technical and intellectual
speciﬁcities due to education and formation, it is heterogeneous, “concrete la-
bour”, qualitatively diﬀerent according to productive necessities. However, as
the “substance” and “magnitude” of value, Marx stresses, it is “abstract labour”,
“labour in general”, and as such directly comparable to any other quantity of
abstract labour embodied in some other commodity. For some given prevailing
technical conditions of production, the amount of abstract labour spent in the
production of a commodity is called “socially necessary labour” (1867  :
These are the ﬁrst basic concepts on which Marx’s reasoning is built. Their
understanding, however, is not self-evident, and Marx himself published several
versions of his presentation of his theory of value, for example, ﬁrst in the
1859 Contribution to the Critique of Political Economy, then in 1867 in the
ﬁrst section of the ﬁrst edition of Capital — to which he added an appendix,
“Die Werthform” (the value-form), placed as an afterthought at the end of the
book — a section modiﬁed for the 1872–75 French edition and again in the
fourth German edition (posthumously published in 1890). Marx was not only
facing misunderstandings from his readers, as he wrote, he was also struggling
with important analytical diﬃculties. One problem is the way in which he
“derived” the statement that the only thing that commodities have in common
is labour, leaving “out of consideration the use-value of commodities”. Eugen
von Böhm-Bawerk (1884 ), Philip Henry Wicksteed (1884) and Vilfredo
Pareto (1902), for example, pointed out that this mode of reasoning is not
conclusive : eliminating some items in a list of qualities to retain the remaining
one cannot be a proof because the substance of value could well originate in an
item omitted from the list ; moreover, Marx’s approach could also be turned in
favour of utility because, just as “abstract labour”, as distinct from “concrete
Marx, Karl Heinrich (1818-1883) 10
labour”, is alleged to be the substance of value, “abstract utility”, as distinct
from “concrete utility”, could well form the substance of value.
This aspect is only a symptom of deeper diﬃculties in Marx’s approach. In
particular, the meaning of the central concept of “abstract labour”, “labour in
general”, is not clear. Several deﬁnitions can be found, which are not compatible
with one another. These deﬁnitions express diﬀerent strands of Marx’s thought
concerning value, money and capital — socio-historical, dialectical and classical
(see Faccarello 1983a, 1997, 2000a).
The socio-historical approach to value
A ﬁrst deﬁnition of “abstract labour” is purely socio-historical — or “socio-
logical” — and is tightly connected to the phenomenon of fetishism (see, for
example, “The fetishism of the commodity and its secret”, Marx 1867  :
163-77 ). We encounter it in passages in which Marx stresses the “phantom-
like objectivity” (ibid. : 128) and the “mystical character” (ibid. : 164) of the
products of labour in a market society and speaks of “labour in general” as
the “common social substance” of these products, and of the commodity as
a “social hieroglyph”. “Not an atom of matter enters into the objectivity of
commodities as values”, Marx stresses, and adds :
Commodities possess an objective character as values only in so
far as they are expressions of an identical social substance, human
labour, . . . their objective character as values is therefore purely
social. From this it follows self-evidently that it can only appear
in the social relation between commodity and commodity. (1867
 : 138–9)
Marx’s purpose here is to deﬁne the “speciﬁc diﬀerence” presented by the
capitalist mode of production as compared with other forms of society. This
is an important task, which he deduced from his youthful criticism of Hegel’s
philosophy along Feuerbachian lines. In this perspective, “value” is supposed
to express this diﬀerentia speciﬁca. What matters is the qualitative side of
the analysis. However, the sociological or qualitative characterization of value
inevitably involves a quantitative determination, which proves to be at variance
with the traditional “labour incorporated” analysis (below).
Marx, Karl Heinrich (1818-1883) 11
To single out the speciﬁcity of a market-based economy, Marx refers, in
Contribution and Capital, to four other forms of society : “Robinson on his
island”, the “dark European Middle-Ages”, the rural and patriarchal family,
and a “society of free and equal men”. In these non-capitalist societies, Marx
writes, (1) only “concrete labour” matters, (2) the products of labour are not
commodities and (3) social relations of production are transparent. In a mar-
ket society, on the contrary, (1) concrete labour does not matter as such, (2)
products are commodities and (3) the social relations of production are hidden
behind the apparent equality in exchange relations. Why do such diﬀerences
First, Marx argues, in a non-capitalist society there is an immediate corres-
pondence between (1) the diﬀerent kinds of concrete labour, (2) the produced
use values and (3) the needs of the members of society. There is no place for a
break between a “private” and a “social” side of activities : it is “the distinct la-
bour of the individual in its original form, the particular features of his labour
and not its universal aspect that formed the social tie” (Marx 1859  :
275). Second, the cause of this state of things lies in the existence of a com-
munity that acts prior to production and coordinates it. All the societies he
mentions are, in some way, planned : “the individual labour powers, by their
very nature, act only as instruments of the joint labour-power” (Marx 1867
 : 171).
The “speciﬁc diﬀerence” presented by the capitalist mode of production is
thus deﬁned as the lack of any community prior to production. Producers are
independent and isolated ; they work privately and their activities are not coor-
dinated ex ante. This is why the “natural” forms of labour are not immediately
social. The social link forces itself upon the system ex post through the market.
It is by transforming their products into commodities that independent produ-
cers constitute a coherent set of relationships, that is, a society, and that their
private labour is — or is not — validated as a social commodity. The mar-
ket is the locus of social integration. In this socio-historical line of argument,
Marx called “abstract” or “general” labour the concrete labour that is socially
validated through the exchange of its products in the market, a “concrete la-
bour” that proves itself part of the “social division of labour”. It is a result of
exchange, deﬁned simultaneously with the exchange rate. “Abstract labour” is
not a “substance” prior to exchange nor does it determine it. “Universal social
Marx, Karl Heinrich (1818-1883) 12
labour is consequently not a ready-made prerequisite but an emerging result”
(Marx 1859  : 286 ; translation modiﬁed).
If abstract or general labour is not a substance which exists prior to ex-
change, value cannot be deﬁned other than as the quantity of money for which
a commodity is exchanged : this quantity acts both as the determining factor
and the measure of value. We can now understand the meaning of such sen-
tences as “universal labour time itself is an abstraction, which, as such, does
not exist for commodities” (Marx 1859  : 286). Money acts as the social
link for labours expended independently of each other, without social coordi-
nation. It regulates production. It is, in Marx’s own words, the community (an
indirect, abstract community) that seems to be lacking in a society based on
market exchange and the private ownership of means of production. Producers
meet as owners and
exist for each other only as things, something that is merely further
developed in the money relation, in which their community itself
appears as an external and hence a casual thing with respect to all.
. . . Since . . . they are not subsumed under any naturally evolved
community .. . this community must . . . exist as an independent,
external, casual thing . . . with respect to them as independent sub-
jects. That is precisely the condition for their simultaneously being
in some social connection as independent private persons. (Marx
1858  : 468)
This “sociological” approach is thus at variance with the traditional, or
classical, interpretation of Capital (below). Its most striking feature is the
inversion of the deduction of value and money. If, in the classical approach,
money is deduced from the concepts of abstract labour and value — it is a
commodity which itself has a value and can consequently act as a measure of
value, a medium of exchange and a store of value — in the socio-historical
approach abstract labour and value are deduced from the concept of money.
The dialectical approach
The second deﬁnition of “abstract”, “general” labour is purely conceptual.
Abstract labour can be seen as an “indeterminate abstraction”, as the category
that, in thought, embraces all imaginable kinds of concrete labour : “the mental
product of a concrete totality of labours” (Marx 1857–58  : 104) — just
Marx, Karl Heinrich (1818-1883) 13
as the concept of “fruit” denotes concrete fruits like apples, pears, mangos, and
so on. The concept is here hypostatized, in an idealist way that it is a priori
surprising to ﬁnd in Marx. However, it is in fact in line with Marx’s second line
of argument, which can be called the “dialectical approach” and which stems
from Marx’s plan to build his theoretical construction on a rigorous chain of
deductions of concepts, from the commodity concept to that of money, from
money to capital and then to wage-labour and the diﬀerent kinds of capital —
a plan which is visible in Grundrisse, in Contribution and the manuscript of
it, and of course in Capital.
In Marx’s eyes the theoretical introduction of money from the sociological
approach is no doubt insuﬃcient because all the concepts are given simulta-
neously and are not deduced from one another. This creates a break in his
chain of reasoning : once money and value are given, there seems to be no
place left for a rigorous deduction of the concepts of capital and wage labour,
and a picture emerges eventually of a rather harmonious society of independent
producers, whereas in Marx’s opinion a monetary economy is necessarily a ca-
pitalist one. This is why, of the preceding considerations, Marx retains only
the necessary transformation of products into commodities. He then stresses
that a commodity has a twofold character (exchangeable value and use value)
and that these two are “contradictory”. Then, from this basic “opposition”, he
dialectically deduces money, capital, wage labour and the diﬀerent kinds of
To use Marx’s Hegelian language, what is this “opposition” stemming from
the analysis of the two sides of a commodity and why is there a “contradiction”
between them ? How and with the help of which logical tools is the concept of
money generated as a result of the development of this alleged basic “contra-
diction” ? Marx asserts that, on the one hand, a commodity is not immediately
a value, but “has to become so”. On the other hand, it is not immediately a use
value, but it has also to become so. Of course the exchange process realizes a
commodity as a value (for the seller), just as it simultaneously realizes it as a
use value (for the buyer). In Marx’s opinion, this means a “contradiction” : the
“realization” of use value presupposes in his eyes the realization of the commo-
dity as value, and conversely the “realization” of value presupposes that of use
value. As the solution of each problem implies that of the other, we therefore
face an endless theoretical regression from one determination of the concept of
Marx, Karl Heinrich (1818-1883) 14
commodity to the other. In order to generate this opposition and the endless
regression, the classical meanings of value and use value have been modiﬁed.
Use value is now deﬁned as a direct utility relationship between a thing and
its owner, and value is deﬁned as the quantity of such and such commodities
for which it can be exchanged.
The “inner” contradiction of the commodity, Marx continues, brings about
the “equivalent form”, in which a given commodity assumes the “relative” va-
lue form, and the received commodity acts as a “particular” equivalent. The
commodity is then equated with diﬀerent quantities of all other commodities,
which act as many particular equivalents : it is the “developed” equivalent form.
Marx stresses, however, that every attempt to transcend a particular equiva-
lent in order to give value its “general form” is bound to fail : a commodity
can be successively equated with every other commodity, but each of them
nevertheless remains a particular equivalent. Here we encounter once again a
theoretically endless regression from one determination to another. To obtain
the “general equivalent”, the “money form”, Marx simply reverses the sequence
of the particular equivalents, which, by means of this operation, express their
value in a determined amount of one and the same commodity.
The meaning of this analysis of the “value forms”, that is, the development
of the original “contradiction” of the two aspects of commodity — stated at the
beginning of Contribution and Capital — and the ﬁnal reversal which gene-
rates the concept of money, is problematic. (1) The reversal can be interpreted
as a mere subjective reasoning on the part of the dealer who considers his or
her commodity as a general equivalent for all other commodities. However,
in this case no theoretical derivation of money is accomplished : if each dea-
ler wants his commodity to be accepted by the other dealers as the general
equivalent, no commodity can assume this role (Marx 1867  : 180). (2)
The development of the “value forms” could also be interpreted in an idealist
way, implying the progressive realization of a universal element (value) that
aims at a manifestation appropriate to its concept (money), as Hegel would
have put it. In both cases the dialectical deduction of the concept of money is
questionable, and the concept of “abstract” labour, “substance” of value, either
vanishes, or is at best to be understood as an “indeterminate abstraction” (the
deﬁnition noted above).
Marx, Karl Heinrich (1818-1883) 15
Marx’s classical approach to value
Two further deﬁnitions of “abstract labour” can be found in Marx’s texts,
referring to the usual classical understanding of Marx’s economics. The ﬁrst
conveys a “physiological” conception, which, as for Ricardo at the end of his life,
puts stress on the expense of energy that all labour always involves. “Tailoring
and weaving, although they are qualitatively diﬀerent productive activities, are
both a productive expenditure of human brains, muscles, nerves, hands etc.,
and in this sense both human labour” (Marx 1867  : 134). This is why
Marx states that “all labour is an expenditure of human labour-power, in the
physiological sense, and it is in this quality of being equal, or abstract, human
labour that it forms the value of commodities” (1867  : 137).
The second deﬁnition of “abstract” or “general” labour stresses the growing
indiﬀerence of labourers vis-à-vis their tasks and kinds of labour, an indiﬀerence
that results from the development of the labour market and from a process of
deskilling imposed by technological progress (Marx 1863–66 ). “Indiﬀe-
rence towards speciﬁc labours corresponds to a form of society in which indi-
viduals can with ease transfer from one labour to another, and where the spe-
ciﬁc kind is a matter of chance for them, hence of indiﬀerence” (Marx 1857–58
 : 104). This is evident in the United States : “Here, then, for the ﬁrst
time, the point of departure of modern economics, namely the abstraction of
the category ‘labour’, ‘labour as such’, labour pure and simple, becomes true
in practice” (ibid. : 104-5).
In Marx’s texts, the line of argument expressed by these deﬁnitions is clo-
sely connected to the traditional analysis of Capital and to its stress on the
determination of values in terms of incorporated quantities of labour. This
approach links the analyses of Capital directly to those of classical political
economy and, in systematically developing a quantitative and positive econo-
mic analysis, confers a “naturalistic” ﬂavour on the theory of value. From this
point of view the so-called “socially necessary labour” that must be spent di-
rectly and indirectly to produce a commodity, and which forms its value, is
deﬁned with respect to technical factors, that is, to what can be considered as
the “normal” or “average” technical conditions in each industry at a given place
and time. The “substance” of value, “abstract labour”, is also to be understood
in the same perspective. This is why, among the diﬀerent deﬁnitions that can
Marx, Karl Heinrich (1818-1883) 16
be found in Marx, only the “physical” ones can be coherently accepted : that
is, either the one that stresses the “energetical” nature of abstract labour, or
the one that, in pointing out the process of development in the labour mar-
ket, in the end simply identiﬁes “concrete” and “abstract” labour. This kind of
“technological” or “naturalistic” approach, of course, does away with a socio-
historical speciﬁcation of value. It is also at odds with the dialectical deduction
of concepts : it is impossible to see to what extent its concepts of value and use
value (value is supposed to be a quantity of labour, and use value expresses
the physical and concrete aspects of the product of labour) are “opposed” to
Finally, it is important to note that the ideas expressed by Marx in his dif-
ferent approaches to value — including the classical approach with the attempt
to “prove” that the only thing that commodities have in common is labour —
owe a great deal to Hegel’s philosophy : not only to Hegel’s Science of Logic
but also, and perhaps to a greater extent, to his Philosophy of Right, and that
this source of inspiration is also important for the deductions of the concept of
“capital in general”, wage labour and the diﬀerent forms of capital (see Reichelt
1970, Faccarello 1983a : chs 14—16, 1997, 2000a).
Note that the three conﬂicting approaches coexist in Marx’s texts in dif-
ferent proportions, with the classical deﬁnition being dominant in Capital.
This coexistence of conﬂicting conceptualizations is a source of dire controver-
sies and confusions. In the following we focus on the classical concept of value
Main Themes in Marx’s Classical Approach
From value to surplus value
According to Marx, it is a speciﬁc characteristic of the capitalist mode of
production that human labour-power also assumes commodity-form. Its value
is determined, just like that of any other commodity, by the amount of so-
cially necessary labour required in its (re)production. In order to (re)produce
his labour-power the labourer needs certain amounts of means of subsistence
(for himself and his family), that is, a certain consumption basket, the size
Marx, Karl Heinrich (1818-1883) 17
and composition of which is determined, at any given time and place, by phy-
siological, historical, and cultural circumstances : “Therefore the labour-time
necessary for the production of labour-power is the same as that necessary
for the production of those means of subsistence ; in other words, the value of
labour-power is the value of the means of subsistence necessary for the mainte-
nance of its owner” (Marx  1976 : 274). That the workers’ remuneration
cannot systematically exceed the subsistence level Marx explains with reference
to competitive pressures on the labour market that result from the existence of
an “industrial reserve army”, that is, especially from the existence of a pool of
unemployed workers, which is continuously replenished up again by the displa-
cement of workers consequent upon the introduction of labour-saving technical
The use-value of the commodity labour-power consists in its “productive
consumption” in the production process : the capitalist “consumes” the com-
modity labour-power he has purchased at its labour-value vby employing it,
together with various means of production whose aggregate labour value is
given by c, in the production of a certain commodity. Marx called the raw
materials, intermediate products, and the means of production purchased by
the capitalist “constant” capital, because their value is merely transferred onto
the product without any change, either in a single production cycle (raw ma-
terials and intermediate products) or else over a number of production cycles
(tools and machines). With the “variable” part of the capital advances labour-
power is purchased, which reproduces not only its own value but generates
an additional value conferred to the product. The value of the product, λ, is
given by the amount of (socially necessary) labour which has been used up in
its production in the form of “direct” or “living” labour, l, and in the form of
“indirect” or “previously expended” labour, which is “congealed” in the means
of production, c, that is :
The term sdenotes what Marx calls “surplus value”. Its existence obviously
derives from the fact that a part of the “living” labour performed by the worker
consists of “unpaid” or “surplus labour”, because the labourer has to work longer
than is necessary for reproducing his means of subsistence (l > v). In volumes
Marx, Karl Heinrich (1818-1883) 18
I and II of Capital, Marx supposed all commodities, including the commodity
labour power, to exchange at their (labour-)values. Accordingly, “exploitation”
is not “explained” by him from wages being “too low,” that is, from assuming
that workers have to sell their commodity — their labour power — below its
value. Exploitation, Marx insisted, is a phenomenon that is not generated in
the sphere of circulation, but in that of production.
The “transformation problem”
In volume I of Capital Marx maintained that the value of a commodity
is given by the quantity of socially necessary abstract labour required in its
production. The exchange ratios between any two commodities are then given,
by deﬁnition, by the ratio of their labour values. However Marx, who had
carefully studied the contributions of Smith and Ricardo, was of course aware
of the fact that the “prices of production” (or “natural prices”, as his precursors
called them) must generally deviate from labour values. He was convinced,
however, to have understood much better than his predecessors why these
deviations occur and how their magnitudes can be ascertained. What had
prevented his precursors from developing a correct solution of the problem ?
According to Marx, the reason for their failure is to be found in Adam Smith’s
erroneous idea that the annual social product (exclusive of rent) can be entirely
reduced to wages and proﬁts ; an idea which had also been implicitly adopted
by Ricardo when he supposed in his determination of the general rate of proﬁts
that all capital can be reduced to advanced wage capital in a ﬁnite number
of steps. Both had overlooked that a part of the annual product, which Marx
called “constant capital”, must be used in order to replace the used-up means
of production. If this is taken into account, it becomes immediately obvious
that the deviations of production prices from labour values are caused by the
diﬀerences in the proportions of the two capital components in the production
of the various commodities, that is, by diﬀerences in the proportions between
“living labour” and “dead labour” (“vorgetane Arbeit”). If the constant capital
is again assumed for simplicity to consist only of circulating capital, the value
of an industry’s annual product is equal to c+l, where cis the value of the
constant capital (the quantity of “indirect” labour) and lis the quantity of
“living” (or “direct”) labour. Denoting by vthe value of the wages advanced in
this industry — Marx’s “variable capital” — the industry’s costs of production
Marx, Karl Heinrich (1818-1883) 19
in value terms amount to c+v, and the surplus value generated in this industry
is given by s= (c+l)−(c+v) = l−v. The rate of proﬁts in value terms of
this industry is then given by :
It is thus seen to depend on two magnitudes : on s/v, a ratio that Marx calls
“rate of surplus value” or “rate of exploitation”, and on c/v, which expresses the
so-called “organic composition of capital”. Under competitive conditions (and
on the assumption of the mentioned deskilling of labour and the emergence of a
uniform length of the working day) the rate of surplus value must be the same
in all industries. The organic composition of capital, however, is determined
by technology and will in general diﬀer across industries. An exchange of com-
modities at their labour values would therefore be associated with diﬀerent
proﬁt rates across industries. The tendency towards uniform rates of proﬁts
in competitive conditions therefore leads to systematic deviations of relative
prices from labour values. These deviations are necessary in order to relate the
surplus value of the economic system as a whole, S, which was generated in
the individual industries in proportion to the industries’ variable capitals, to
the capital of the economic system as a whole, C+V.
Marx believed that for the system as a whole these deviations of production
prices from labour values must exactly compensate each other, so that the
general rate of proﬁts is the same as the one which emerges if the economy as
a whole is considered as a single industry, that is, the same as :
where S,C, and Vdenote total surplus value, total constant capital, and total
variable capital, respectively. In Marx’s view, the labour theory of value, al-
though it does not directly give a correct theory of relative prices, nevertheless
provides the basis of such a theory. That Marx felt justiﬁed to make use of
the labour theory of value in volumes I and II of Capital was therefore due
to his conclusion, at which he had already previously arrived (but from which
we now know that it is untenable) that the general rate of proﬁts calculated
Marx, Karl Heinrich (1818-1883) 20
at production prices is the same as the value rate of proﬁts. However, if this
mode of exposition may have seemed justiﬁed to Marx as being easily compre-
hensible for his readers, with the beneﬁt of hindsight it was a mistake, which
has seriously impeded the understanding of his work. The fact that volumes
II and III of Capital became available only much later has contributed to the
solidiﬁcation of the misconception that Marx had meant to determine relative
prices directly by means of the labour theory of value.
When Marx, in section 2 of volume III of Capital, explicated his idea of
the redistribution of surplus value in the course of the transformation of la-
bour values in prices of production, he noted explicitly that his transformation
procedure was not fully accurate, because the means of production have to
be evaluated at production prices rather than at labour values (1894  :
259–60, 264–5). He overlooked, however, the important implication that he
then also had no justiﬁcation for supposing that the ratio of total proﬁts to
total capital is the same as if commodities were exchanged at labour values,
that is, he overlooked that his “successivist”, two-step procedure for the de-
termination of the general rate of proﬁts and relative prices, as Ladislaus von
Bortkiewicz (1906–07  : 38) called it, was thereby undermined.
Reproduction, accumulation, and crises
As Marx explained in his Foreword to Capital, “it is the ultimate aim of this
work to reveal the economic law of motion of modern society” (1867  :
92). Accordingly, the analysis of the dynamism of the capitalist development
process formed a central element in Marx’s work. In this analysis, as in Marx’s
thinking generally, the concept of “reproduction” occupied a prominent place.
Social relations and social formations exist, Marx argued, because the prevai-
ling mode of production systematically reproduces them. In capitalist societies
the reproduction of capital is associated with the reproduction of the class
relations : at the end of the production and circulation process the capitalist
has reproduced his advanced capital, together with surplus value, whereas the
labourer has reproduced only his labour power. If social production is orga-
nized capitalistically, the production process itself thus reproduces capitalists
and labourers as social classes.
Marx, Karl Heinrich (1818-1883) 21
Accumulation of capital requires that part of the previously generated sur-
plus value is used in the production process again. If the reinvested surplus were
used only for increasing the activity levels of the existing production processes,
the constant capital and the variable capital would be increased proportiona-
tely, and there is “reproduction on an extended scale”. However, this need not
be the case. In general, the accumulation process is bound up with changes
in the structure and organization of capital and in production relations ; new
machinery and new methods of production, of transportation, or of organiza-
tion are introduced, and new products and new markets are developed. The
competitive process forces each individual capitalist to search constantly for
less costly methods of production, better product quality, new markets, and so
on. In addition, Marx argued that the accumulation process is also bound up
with an increasing concentration and centralization of capital : larger capitals
displace smaller capitals owing to the exploitation of increasing returns to scale
or scope, and capital becomes ever more centralized by means of take-overs of
The schemes of “simple” and “extended reproduction” in chapters 20 and
21 of volume II of Capital, which Marx developed on the basis of François
Quesnay’s Tableau économique, are widely regarded as one his ﬁnest analytical
achievements (see Gehrke and Kurz 1995). The model of simple reproduction
depicts the commodity circulation between two sectors. The ﬁrst sector pro-
duces capital goods for itself and for the second sector producing consumption
goods, and receives in return the consumption goods required for the alimen-
tation of the workers and the capitalists’ consumptions. For this simple two-
sectoral model with circular production relations Marx showed the conditions
for a stationary reproduction equilibrium. In the next step, he then turned to
the analysis of extended reproduction and showed by means of simple nume-
rical examples that balanced capital accumulation must be associated with an
expansion of the two sectors in lock-step, that is, with steady-state growth.
The original manuscripts published in the MEGA edition show that Marx had
also worked out more elaborate versions of the reproduction schemes with six
sectors, which in terms of their analytical structure are similar to the three-
sector models of Fel’dman (1928 ), Mahalanobis (1953), and Lowe (1976)
(see Mori 2007).
Marx, Karl Heinrich (1818-1883) 22
In Marx’s writings there is no consistently elaborated cycle theory, but there
are several approaches to the explanation of crises. One of these relates to the
reproduction schemes and locates the source of crisis-ridden developments in
disproportions that occur in the accumulation process and that tend to rein-
force themselves. In addition, Marx also put forward theoretical explanations
based on under-consumption arguments, which refer to insuﬃcient purchasing
power of the working class as triggering an insuﬃcient overall eﬀective demand.
However, Marx’s most elaborate explanation for crises and economic stagna-
tion derives from his “law of the tendency of the rate of proﬁts to fall”, which
he set out in volume III of Capital.
The law of the tendency of the rate of proﬁts to fall
Like his predecessors, Marx tried to provide an explanation for the sup-
posed empirical phenomenon of the tendency of a falling rate of proﬁts. His
approach must be seen in connection with the alternative one suggested by
David Ricardo, who had argued that in the course of the accumulation process
the wage share must rise, because the production of foodstuﬀ is subject to
increasing costs as a consequence of the need to have recourse to less and less
productive soils or methods of land cultivation. Accordingly, nominal wages
must rise to keep real wages constant and the rate of proﬁts and the proﬁt
share are bound to fall. Ricardo had also suggested that the rise in money
wages could lead to the substitution of machinery for labour, that is, to the
introduction of machines which have been available already before, but which
could not be proﬁtably introduced at the lower money wages. This can tem-
porarily retard the fall of the rate of proﬁts, but not ultimately prevent it. In
his argument Ricardo explicitly set aside technical progress proper.
Marx had detected an important error in Ricardo’s reasoning. Ricardo had
maintained that the rate of proﬁts depends only on “proportional wages”, that
is, the share of wages in the total product measured in labour terms. With a rise
in the latter the former is bound to fall. In his argument, Ricardo had assumed
for simplicity that the advanced capital consists only of wages, or could be
reduced to direct and indirect wages in a ﬁnite number of steps ; but such a
reduction is possible only with “unidirectional” production processes, that is,
when the reduction series comprises a production stage at which only “original”
Marx, Karl Heinrich (1818-1883) 23
factors of production like labour and land are needed in the production of the
means of production. If Ricardo’s error is corrected and the existence of circular
production relations is taken into account, Marx insisted, the true cause of the
falling rate of proﬁts is revealed.
If we designate the rate of proﬁts with r, the value of the social product
with Y, wages with W, proﬁts with Π, and the wage share with ω, then Ricardo
determined the rate of proﬁts as :
In the special case contemplated by Ricardo, the rate of proﬁts corresponds
to the rate of surplus value : Ricardo thus derived the falling rate of proﬁts
from a falling rate of surplus value (see Marx 1861–63c [1989b] : 73).
Denoting the total quantity of living labour by L, and the maximum rate
of proﬁts by R, the following relationship can be derived (reckoning in terms
of labour values, where Y=L,W=Vand Π = S) :
C/L +V /L =1−ω
1/R +ω=R(1 −ω)
1 + Rω (5)
This shows that the rate of proﬁts depends on two magnitudes, not one
(as Ricardo thought) : on the wage share ω— or the rate of surplus value,
(1 −ω)/ω — and on the maximum rate of proﬁts, R. If the latter falls, the
rate of proﬁts must also fall, given the rate of surplus value. Even a moderately
rising rate of surplus value cannot prevent this tendency of a fall in the general
rate of proﬁts.
For Marx the law of the tendency of the rate of proﬁts to fall had two fasci-
nating aspects. First, he regarded it as a striking refutation of Ricardo’s view,
according to which the falling rate of proﬁts is caused by the “niggardliness of
nature”, which gives rise to increasing production costs of subsistence goods.
For Ricardo, the introduction of agricultural improvements or new machinery
in manufacturing was a counter-acting factor, which could temporarily retard,
but not ultimately prevent, the fall in the rate of proﬁts. Marx believed he
could demonstrate that the rate of proﬁts falls not in spite of, but precisely
Marx, Karl Heinrich (1818-1883) 24
because of technical progress, since the latter is bound up with a rising organic
composition. Secondly, the law also revealed, in Marx’s view, one of the major
contradictions inherent in the capitalistic mode of production : the progressive
element in this mode of production is its capacity to develop the social forces
of production and to raise labour productivity. However, since technical pro-
gress under capitalistic production must inevitably take the form of replacing
living labour by machinery — or, in Marx’s terminology, of a rising organic
composition of capital — it paradoxically deprives the capitalistic system also
of one of its constituting elements, since surplus value cannot be generated by
“dead”, but only by living, labour.
However, as the original manuscripts published in the new MEGA edition
show, Marx entertained doubts about the general validity of the “law” (see, in
particular, Marx 1863-67 ). On the one hand, he was clear about the fact
that not all forms of technical progress are necessarily associated with a rising
organic composition of capital. Moreover, even if the organic composition were
rising and the maximum rate of proﬁts were exhibiting a tendency to fall, this
need not necessarily imply a fall in the actual rate of proﬁts, since the former
could be accompanied by a rise in the rate of surplus value. (For a more detailed
account, see Kurz 2010, 2012–13.)
From the point of view of the development of the surplus approach to
value and distribution it was perhaps one of Marx’s most important analytical
achievements to have carried the analysis of prices and income distribution
which he had inherited from his precursors a step forward : by resurrecting
the aspect of circular production relations he could demonstrate the existence
of a maximum rate of proﬁts and show its importance for the analysis of
distribution, accumulation, and technical change.
Reception and Inﬂuence
It is not possible to summarize the reception and inﬂuence of Marx’s eco-
nomic work, which has spanned more than 150 years, in its entirety within the
conﬁnes of this entry. In order to show some of the main lines of development,
it will be convenient to make use again of the thematic division introduced
above. It is, however, worth noting that Marx’s work, although he was widely
Marx, Karl Heinrich (1818-1883) 25
considered as the scientiﬁc head of the international socialist movement after
the publication of volume I of Capital, was at ﬁrst largely ignored by the so-
called “bourgeois economists”. This was not owing to ideological reasons alone,
but also had to do with the fact that at ﬁrst only volume I of Capital was
available, and this only in German (a French and a Russian edition were pu-
blished from 1872 onwards — the French translation having been published by
instalments until 1875). Until the turn of the century, the scientiﬁc discussion
of Marx’s work was therefore mainly conﬁned to Germany and Russia, and to
some extent also to France and Italy. In England, where Marx was living since
1849, he remained largely unknown during his lifetime. (For more detailed as-
sessments of the reception of Marx’s economics, see Howard and King 1989,
1992 and Steedman 1995.)
The theory of value and prices
From the beginning the discussion of Marx’s work centred on the theory of
value and prices. When Friedrich Engels, in his Foreword to the second volume
of Capital, rejected the idea that Marx had plagiarized the theory of value and
surplus value from Johann Karl Rodbertus, he invited the economists to show
“how an average rate of proﬁts can and must come about, not only without
violating the law of value, but precisely on the basis of this law” (Engels 1885
 : 102), and announced that the third volume would contain Marx’s
deﬁnitive solution of the problem. Of the contributions to Engels’s “prize essay
competition”, which came inter alia from Wilhelm Lexis, Julius Wolﬀ, Achille
Loria, Conrad Schmidt and P. Fireman, none was convincing. When the third
volume of Capital was published in 1894, the interest centred mainly on Marx’s
solution to the so-called “transformation problem”. (For a detailed history of
the controversies, see Dostaler 1978 and Faccarello 1983a, 2000b.)
From the standpoint of the neoclassical theory Marx’s theory of value and
prices was criticized by, among others, Philip H. Wicksteed (1884, 1885) and
Vilfredo Pareto (1902). One of the most inﬂuential critiques of Marx’s pro-
cedure for the transformation of values to prices (and of the rate of surplus
value to the rate of proﬁts) was Eugen von Böhm-Bawerk’s “Zum Abschluß des
Marxschen Systems” [“Karl Marx and the close of his system”] (1896 ).
Böhm-Bawerk accused Marx of having given up the value theory expounded
Marx, Karl Heinrich (1818-1883) 26
in vol. I of Capital with his theory of prices of production expounded in vol.
III. Between the ﬁrst and the third volume of Capital, he contended, there
is “an irreconcilable contradiction”. He declared that a determination of the
general rate of proﬁts and of relative prices in the way Marx intended was
impossible and that Marx’s theoretical work has “a past and a present, but no
permanent future”. But although Böhm-Bawerk failed to notice the real short-
comings of Marx’s theoretical construction, Rudolf Hilferding ( 1949),
who was to play the leading role in defending Marx in the ensuing debates,
could not counter Böhm-Bawerk’s attack convincingly. Note however that, in
his 1904 answer to Böhm-Bawerk and in his book Das Finanzkapital (1910
), Hilferding started a sociological interpretation (see above) of Marx’s
theory of value, which was to be taken up later by a few authors such as Nikolaï
Boukharin in Economic Theory of the Leisure Class (written in 1914, publi-
shed in 1927) and Rosa Luxemburg in her posthumously published Einführung
in die Nationalökonomie (1925) — a line of thought above all developed in
Isaak Illich Rubin’s writings in the 1920s (Rubin 1927 , 1928 ), es-
pecially his 1928 Essays on Marx’s Theory of Value (Faccarello 1983b, 2000b ;
for a historical setting of Rubin, see Boldyrev and Kragh 2015).
Ladislaus von Bortkiewicz (1906–07 , 1907) deserves the credit for
having ﬁrst demonstrated the errors of Marx’s transformation algorithm, and
for presenting a correct solution procedure. Bortkiewicz demonstrated, ﬁrst
for the case of unidirectional production processes (where he harked back to
a contribution by Vladimir K. Dmitriev (1898 ) and then also for a cir-
cular, three-sectoral production system, that the rate of proﬁts and relative
prices can be determined on the basis of Marx’s set of data by solving a sys-
tem of simultaneous equations. Similar ﬁndings were presented in two neglected
contributions by Georg von Charasoﬀ (1909, 1910), who not only anticipated
some of the arguments that were proposed later in the discussion of Marx’s
“transformation problem”, but also noted the duality properties of the price
and quantity system. Moreover, in the course of his investigation he deﬁned
and made use of the concepts of a “production series” (“Produktionsreihe”),
of “original capital” (“Urkapital”), and of “basic products” (“Grundprodukte”),
thus anticipating Piero Sraﬀa (1960) with regard to the related concepts of a
reduction series to dated quantities of labour, the Standard commodity, and the
basics/non-basics distinction. Bortkiewicz’s approach to a solution of the trans-
Marx, Karl Heinrich (1818-1883) 27
formation problem, which was ﬁrst made available in an English translation
by Paul M. Sweezy in 1942, was subsequently generalized by Josef Winternitz
(1948), Francis Seton (1957), and Paul A. Samuelson (1957).
A milestone in the understanding and further development of the surplus
approach of the classical economists and Marx was Piero Sraﬀa’s Production
of Commodities by Means of Commodities (1960). Without entering into an
explicit critique of Marx’s economic theory, Sraﬀa demonstrated that the ge-
neral rate of proﬁts can be ascertained on the basis of the classical set of data
(given quantities, given real wage rate, and given methods of production) only
simultaneously with the prices. The implications of Sraﬀa’s modern reformula-
tion of the surplus approach to the theory of value and distribution for Marx’s
theoretical construction were concisely stated by Ian Steedman (1977) : on the
basis of the classical set of data a consistent determination of the general rate
of proﬁts and of relative prices is possible ; the recourse to labour values is dis-
pensable. Moreover, Steedman also stressed that labour values and prices more
generally depend on income distribution if there is a choice of technique and
that Michio Morishima’s “Fundamental Marxian theorem”, according to which
“the equilibrium rate of proﬁts is positive if and only if the rate of exploitation
is positive” (1973 : 6) need not hold in systems with (pure) joint production.
While Sraﬀa (1960) and Steedman (1977) have implicitly or explicitly
shown that Marx’s (labour) value-based reasoning is diﬃcult to sustain, there
have been various attempts to defend or reinterpret it. Here it suﬃces to men-
tion only the reconstruction of Marx’s labour theory of value suggested in-
dependently from each other by Duncan Foley (1982) and Gérard Duménil
(1983). The reconstruction emphasizes the relation between money and labour
time that preserves the rigorous quantitative relation between paid and unpaid
labour on the one hand and the aggregate wages bill and aggregate gross pro-
ﬁts on the other. It became known as “the new solution” to the transformation
problem, which is a misnomer, because the punchline of the argument is that
there is no transformation problem. The “new view” has been criticized for,
among other things, that it is not a faithful interpretation of Marx and that
it wrongly conveys the impression that the classical surplus-based approach to
the theory of value and distribution stands or falls with the labour theory of
Marx, Karl Heinrich (1818-1883) 28
Theory of capitalist development
At centre stage in discussions about Marx’s theory of capitalist develop-
ment has been the validity of the law of the tendency of the rate of proﬁts to
fall, on which a large amount of literature exists. An important contribution
was made by Nobuo Okishio (1961, 1963), who proved that for a constant real
wage rate the rate of proﬁts cannot fall with technical progress (now known as
the “Okishio theorem”). It ought to be mentioned, however, that Okishio’s re-
sults are clearly foreshadowed in Ricardo’s analysis and have been anticipated
by Samuelson (1959) and Sraﬀa (1960). For many economists this demonstrates
the invalidity of Marx’s entire theoretical construction, because a central ele-
ment of his accumulation theory and his crises theory has been shown to be
false. However, as was argued above, Marx seems to have had doubts about the
correctness of his “law” himself, and it is unclear whether he meant to suppose
a constant wage share (or given rate of surplus value) or a constant real wage
rate. Moreover, his argument seems to have been meant to refer, following Ri-
cardo, to technical changes induced by changes in income distribution, that is,
to “induced innovations”, rather than to technical progress proper.
Marx’s schemes of simple and extended reproduction inspired the develop-
ment of multi-sectoral models of growth and cycles. Michail Tugan-Baranovsky
(1905) and Henrik Grossmann (1929) developed cycle and crises theories from
those schemes ; Rosa Luxemburg (1913 ) used the reproduction schemes
for the development of a theory of imperialism ; and Russian economists like
G.A. Fel’dman (1928 ) developed multi-sectoral planning models from
them (for a comprehensive survey, see Turban 1980). Marx’s schemes also in-
ﬂuenced Wassily Leontief’s input-output analysis and the associated literature.
(Piero Sraﬀa’s “ﬁrst equations”, which he elaborated in 1927–28, however, were
developed independently of Marx’s reproduction schemes ; see Kurz and Sal-
Marx’s analysis of the interrelationship between capital accumulation and
income distribution in an evolving economic system has led to the development
of a still growing class of non-linear cyclical growth models, which generate en-
dogenous cycles around a growth path on the basis of the “predator–prey”
model developed by Richard M. Goodwin (1967). Strongly inﬂuenced by Mar-
xian ideas about the introduction and diﬀusion of technical progress and the
Marx, Karl Heinrich (1818-1883) 29
dynamics of capitalist development is also a branch of the evolutionary econo-
mics literature inspired by Joseph A. Schumpeter’s Theorie der wirtschaftlichen
Entwicklung (Theory of Capitalist Development) (1912). The macroeconomic
eﬀects of the tendency towards monopolization and capital concentration, em-
phasized by Marx, have been investigated by Rudolf Hilferding (1910 ),
Josef Steindl (1952), and Paul A. Baran and Paul M. Sweezy (1966).
See also :
Ladislaus von Bortkiewicz; British Classical Political Economy ; Vladimir Karpovich
Dmitriev ; Marxism(s); Non-Marxian Socialist Ideas in France; Non-Marxian Socialist
Ideas in Germany and Austria; Non-Marxian Socialist Ideas in Britain and the United
States ; Pierre-Joseph Proudhon ; David Ricardo ; Value and Price; Piero Sraﬀa.
References and further reading
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Union. In 1990 the Internationale Marx Engels Stiftung (IMES) assumed the scienti-
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and the originally envisaged 164 volumes were cut down to 114 volumes, of which
62 have been published by 2015. The manuscripts published in the (second) MEGA
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of Capital, necessitate revising the assessments of parts of Marx’s work.
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