Karl Marx and the Close of His System

Summary

Karl Marx and the Close of His System is the Austrian economist Eugen von Böhm-Bawerk's critique of the theory of value at the heart of Marx's Capital. It first appeared in German in 1896 as Zum Abschluss des Marxschen Systems, a contribution to a volume of essays honouring the economist Karl Knies, two years after Friedrich Engels published the third volume of Capital from Marx's manuscripts. The English translation by Alice M. Macdonald, with a preface by the British economist James Bonar, was published in London in 1898; the library text is that translation, without Bonar's preface. The problem Böhm-Bawerk examines had been debated for nearly thirty years. In the first volume of Capital (1867) Marx held that commodities exchange in proportion to the labour time socially necessary to produce them, and that profit is surplus-value created by labour alone. Yet in real economies capitals of equal size earn roughly equal rates of profit whether they employ many workers or few. Marx had promised to reconcile the two in a later volume. In the third volume he explained that competition turns values into prices of production, which include an average rate of profit, while the totals of prices and of values remain equal. Böhm-Bawerk argues that this solution concedes the point. If individual goods regularly sell at prices that differ from their labour values, the law of value no longer explains actual exchange, and saying that the totals agree is, in his view, a statement that tells nothing. He then traces the error to the first volume, where, he argues, Marx reached labour as the common substance of value by excluding without proof every other common property of goods, such as their usefulness and scarcity, and by setting aside natural resources that have value without labour. A final chapter answers Werner Sombart, who had defended Marx's value as a fact of thought rather than of experience. The essay became the best-known economic critique of Marx and drew a reply from the Marxist Rudolf Hilferding in 1904. It remains a standard reading in debates over the labour theory of value, alongside the subjective theory of value developed by Carl Menger, Böhm-Bawerk's teacher in the Austrian School.

Top Lessons

• Testing a theory against its own conclusions

  Böhm-Bawerk's method is to take Marx's premises seriously and ask whether the third volume of Capital is consistent with the first. Students can learn from this how a fair critic states an opponent's view accurately before attacking it.

• What makes things valuable?

  The essay sets the labour theory of value against the subjective theory of the Austrian School, which explains value by the importance people attach to goods. The difference matters for questions about wages, profits and prices that are still debated.

• Ideas and their consequences

  Böhm-Bawerk wrote before any state was governed in Marx's name, yet he predicted that the system would keep its hold because it appealed to its followers' hopes. Students can compare this forecast with the twentieth-century history of Marxist regimes.

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