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Now when one uses the present economic sciences to describe and investigate economic phenomena, it often happens that in applying the different economic theories to the same object the results and their success differ greatly from one another.(3)
Most of the present economic theories are based on the observation of economic phenomena from which laws are inferred, which of course, can only be valid with reference to the particular prevailing conditions. Particular rules arrived at in this way do not permit generalization and just as little do they permit any meaningful accordance with other systems of special rules. It therefore appears that each economic scientist stubbornly holds to his own theory like the proverbial blindmen who insisted on their judgment of the elephant according to that part which they were touching. Only when we return to the basic theory of economics and research and verify it anew is there a real possibility of arriving at comprehensive, consistent and complete science of economics which is then in a position to solve the problems of human society successfully.
Among all economists it was Karl Marx in particular who pursued such a fundamental research, and only by doing this was he able to construct a complete system of economics like his at all. Unfortunately, Marx in his work on the basic theory of economics, viz. the labour theory of value, did not think it through perfectly or to its conclusion. Thus his complete economic theory could not possibly be correct. In the foreword to the first edition of 'Capital' Karl Marx drew attention himself to the fact that his first chapter and particularly the passage on the analysis of products would cause the most difficulties. In this Marx was right.(4) The value of his theories consists indisputably in his pointing out the way in which the contemporary factory owners exploited and oppressed their workers and in showing the workers the way in which they could get out of their enforced situation. Moreover, on account of the level of general and scientific knowledge which had been reached by that time, Marx, by utilising this knowledge, was able to bring his views into a connected system.
The general conditions of his time impelled Marx to intercede on behalf of the rights and interests of the exploited and oppressed workers so that they were made aware of their situation and so that they could successfully unite among themselves. This attitude of Marx contributed very considerably in historical reality to the extensiveness of the growth of awareness of the enslaved workers towards their situation, and to the freeing in many lands, through solidarity and class-consciousness, of the workers from the yoke of those who had ruled them up to that time.
By overrating the productivity of the direct production worker it was unavoidable that Marx, in his basic theory, made mistakes which originated in his one-sided engagement for the workers of his time. Such a defective theory cannot possibly accord with the facts of the economic development of human society. At any rate the basic findings of Karl Marx are still completely correct today - viz. that the development of human society moves forward, legally and inevitably, to overcome oppression and exploitation, to permit every person to work according to his abilities, to remunerate him according to his achievements, and to satisfy his needs. This veiw of things is the truth as I see it.
Now among all possible theories which one is the basic theory of the economic sciences? As we know, humans cannot exist without material things, and cannot live without producing and consuming material things. This means that the human being produces and consumes material in order to make his life secure, and in addition to this continuously to improve the quality of his life. Between the human being and the material object there is something further, and this is value. All researches on the existence of value belong to the field of philosophy; all researches and considerations which are concerned with the creation, production, distribution, exchange and consumption etc. of value belong to the field of the economic sciences.
These reflections show us that value is the starting point of all the economic sciences. The theory of value is thus recognised as the basic theory of the economic sciences.(5) If we want to construct a correct theory of value we must first of all, of course, work out a correct concept of value. Labour-value theoreticians maintain that value has its sole origin in the labour of human beings.(6) All things which are not concerned with human labour are valueless.(7) As human labour productivity can only be achieved through joint work, it must follow that the fruits of human labour productivity belong jointly to all humans.
From the consept of 'labour-value' one can arrive at a theory of labour-value which does not necessarily have to be correct. We will only achieve a correct theory of labour-value when we have above all also recognised correctly, besides the nature of value, the nature of human labour. First then will it be possible to arrive at the desired and correct labour theory of value. Without such a theory, on the other hand, the question: "How and in which way is value achieved in human society?" must remain unsolvable for us. But among theoreticians of labour-value there is not one who has, up to now, analysed the nature of human labour.(8)
Therefore all the theories of such scientists have become like trees without roots; such trees one can, it is true, set up in the earth for a short time as decoration, but very soon they will die off completely. Theories of this sort have described certain economic phenomena in a completely satisfactory way, and have been able to answer the questions arising from them. These 'successes' can, however, only be achieved by coincidence or by a forced handling of facts, but not through logical deduction from these rootless and partial theories.
In comparison to all other theories, the labour theory of value of Karl Marx is in some ways better, because he has analysed the value of things in the production and distribution processes by means of a scientific method. But Marx, too, took over the concept of 'labour-value' relatively uncritically from other economists, and did not investigate and research the nature of human labour any further. Thus his theory of labour-value has grave mistakes. The subsequent theories and laws built on this theory by Marx and his successors therefore frequently fail either to agree with economic development or to permit themselves to be brought into line with other theories which have arisen through the observation and investigation of isolated economic phenomena.
As Marx failed to recognise the nature of human labour he committed grave mistakes, using concepts like 'the productiveness of labour' and 'labour-quantity' to calculate the amount of labour in his labour theory of value. This caused a fundamental confusion in his reflections.
To begin with we must take a look at Marx's labour theory of value, in order to be able to analyse where its mistakes lie. Marx writes:
"A use-value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialized in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article. The quantity of labour, however, is measured by its duration, and labour time in its turn finds its standard in weeks, days, and hours."(9)
"The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour power. The total labour power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour power of society, and takes effect as such; that is, so fas as it requires for producng a commodity no more time than is needed on an average, no more than is socially necessary. The labour time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time. The introduction of power looms into England probably reduced by one-half the labour required to weave a given quantity of yarn into cloth. The handloom weavers, as a matter of fact, continued to require the same time as before; but for all that, the product of one hour of their labour represented after the change only half an hour's social labour, and consequently fell to one half its former value."(10)
"Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value. The value of one commodity is to the value of any other, as the labour time necessary for the production of the one is to that necessary for the production of the other. 'As values, all commodities are only definite masses of congealed labour time. ' "(11)
"The value of a commodity would, therefore, remain constant, if the labour time required for its production also remained constant. But the latter changes with every variation in the productiveness of labour. This productiveness is determined by various circumstances, amongst others, by the average amount of skill of the workmen, the state of science, and the degree of its practical application, the social organization of production, the extent and capabilities of the means of production, and by physical conditions."(12)
"In general, the greater the productiveness of labour, the less is the labour time required for the production of an article, the less is the amount of labour crystallized in that article, and the less is its value; and vice versa, the less the productiveness of labour, the greater is the labour time required for the production of an article, and the greater is its value. The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labour incorporated in it."(13)
The above-quoted assertions, especially the two last stated, at first appear perhaps logical and then with closer inspection are found to be completely false. These statements are the central core of the Marxian labour theory of value, and at the same time, the origin of the cardinal mistake in his theoretical system. Although he tried subsequently to correct these errors in that he recognized the objective justification of such concepts as 'mental labour', 'indirect labour', and the like, these late attempts at repair, instead of removing the contradictions in his system, only increased them.
In the assertions cited there are three main mistakes:
1. Marx misunderstood the nature of production.
According to its nature production is the total of all activities in the production of things or in output, which is either accomplished by a single person, or by more than one person working togather or in succession; production is, however, not only the last stage in manufacture or output in a multi-stage production process. In all multi-stage production processes the general level of the production methods and the development of human society reached at that time is to be taken into consideration with relation to the worker occupied in the last stage of production as much as the achievement of those people who have up to then contributed to the production process. in his concept of production, Marx only took into account the last stages in multi-stage production processes. This fatal bias prevented Marx from being able to recognize the fundamental facts of the production process correctly.
2. Marx has the mistaken conception that the productiveness of the worker
can change from instance to instance.
When Marx maintains that the productiveness of labour is changeable, this is mistaken. In reality, in human society indirect labour-quantities can be taken over by workers in the last production stages in multi-stage production processes. This does not mean, of course, that the productiveness of individual workers has increased.
3. Marx misused his own terminology.
In the application of his concepts 'labour time' and 'labour quantity', Marx used the concepts 'labour time' and 'time' arbitrarily, interchanging and distorting them.
We will now analyse these mistakes and show their significance for the defects in Marxist theory.
We can represent the assertions of Marx, quoted above, in the following
simplified formula:
'Value' of an article = the 'labour quantities' contained in this article.
or = the 'labour time' necessary for the production of this article.
Marx thus used the concept 'labour time' as a measuring unit for 'labour quantity' as well as in place of 'labour quantity'. As a concept 'labour time' is a term which is composed of the two basic concepts 'labour' and 'time'. As a thing 'labour time'is something which consists of the real components 'labour' and 'time', insofar as both these elements have a real and not an abstract conceptual character. Consequently 'labour time' no langer has an unequivocal relation to 'labour' or 'time', but still only corresponds to 'labour quantity'. In this way one uses, for example, in mechanics the term 'meter-kilogram' (mkg) as the unit of measurement of work, whereby 'meter' and 'kilogram' can be regard as abstract terms as well as concrete measurable and weighable lengths and power. In physics the formula for the calculation of work is - as everybody knows - :
work = force (kg) x distance (m) = mkg
In the economic sciences we can thus also calculate 'labour quantity' according to a formula constructed in like manner:
labour-quantity (Q) = labour (K) x time (t) = labour time (Kt)
In physics power has its own unit of measurement, viz. the 'kilogram'. With this we can give clearly the strenghts of physical powers in 1, 2 kilograms etc.. In the economic sciences, however, 'labour' itself has no unit of measurement of its own. According to the Marxist method the so-called 'average labour power of society' is the basis which alone can be used for the measurement of labour as it is conceived in the economic sciences. Thus when we want to give the amount of labour as it is understood in economics, we can only speak of one labour-unit, two labour-units etc.. In the 'average labour power of society' the amount of individual productivity no longer plays a role.(14)
While in physics force must first of all take effect over a particular distance before one can speak of 'work' and measure it physically, in the economic sciences one must connect labour with time, before one can speak of or measure a labour-quantity. In the economic sciences labour must first be used for the production or creation of value, which means that labour must be considered in connection with time, and only in this way does one then obtain 'labour-quantity'.
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Footnotes:
1) P.A. Samuelson acknowledges that economics is the queen of the social sciences.
Paul A.Samuelson, Economics, 11th edition, McGraw-Hill Inc., New york
1980, p.4.
2) A: "Investment in man meant the traditional concept of capital had to be extended to make room for human capital. I was perplexed by the omission of human capital in the economic growth models that dominated the economic literature."
Theodor W. Schultz, Investment in human capital -- the role of education
and of research. The free Press, New York 1971, preface p. v-vi.
B: "Economic theory needs to be restructured on a brand-new postulate: Knowledge creates productivity. Economic theory in its early days was much concerned with the question: 'What creates economic value?' The traditional answer from Ricardo (around 1810) to Marx was 'labour'. It is still the answer given in Marxist economics."
Peter F. Drucker, The age of discontinuity - guidelines to our changing society, Harper & Row Publishers, New York & Evanston 1968, p.150.
3) Peter F. Drucker, ibid. P.137f.
4) Karl Marx, Das Kapital. 1 Band, in Marx-Engels Werke, Bd. 23, Berlin 1968, p.11.
5) What kind of theory of value is used by the traditional economist? From Adam Smith, David Ricardo to Paul A. Samuelson all economists have used the labour theory of value. There are a lot of economiss who do not want to recognise it, but they have not found a better one to replace it. As Samuelson said: "Our discussion of comparative advantage has until now followed David Ricardo and has measured all costs in terms of labour. Modern econoists know that the theory is still valid even if you do not want to assume a labour theory of value." op.cit p.638. He also said: "When labour alone counted, when land was freely available to all, and before the use of capital had begun, what determined pricing and distribution in this simple and timeless dawn? Answer: The undeluted labour theory of value." Ibid. p.682.
6) Marx differed from this point. He said: ".... Labour is not the only source of material wealth, of use-values produced by labour. As William Petty puts it, labour is its father and the earth its mother." Karl Marx, Capital, Great Books of the Western World, No.50, translated by S. Moore & E. Aveling, ed. by Friedrich Engels, publisher William Benton Encylopaedia Britannica Inc., London, Tonoto, Chicago 1952, p.17.
German edtion: Op.cit. p.58.
7) See Chapter III of this book.
8) "Only a real scholar knows how important an analysis of human labour is for the labour theory of value." cf. Ulrich Krause, Lausige Zeiten fr Arbeitswert-lehrer, in 'Leviathan', Zeitschrift fr Sozialwissenschaft,
Opladen 1979, Heft 4, p.574.
9) Marx, Capital, op.cit., P.15.
10) Marx, Capital, op.cit., p.15.
11) Marx, Capital, op.cit., p.15.
12) Marx, Capital, op.cit., p.15.
13) Marx, Capital, op.cit., p.15f.
14) Sometimes modern economists misunderstand Marx's ideal concerning labour. Marx said: "The total labour power of society.... no more than is socially necessary." (See above footnote 11) If this is misunderstood, as is was by Paul A. Samuelson, it can lead to unjustified criticism, as for example, where Samuelson says: "Marx, for simplicity, assumed all labour was homogeneous. Or if, say, women are twice as productive as men in both departments or industries, he'd reckon each woman-hour as 2 lowest-common- denominator man-hours. There is no harm in this simplification, provided we realize it won't work in cases where women are three times as productive as men in welding, twice as productive in mining, and three-fourths as productive in distilling. Then general-equilubrium methods are mandatory. Like Marx, we at first ignore land."
Paul A. Samuelson, Economics, p.801, footnote 5 and where Samuelson shows he has forgotten the condition Marx gave, viz. that labour has the character of the average labour power of society. (See Marx, op.cit., p.15f. above)
