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Eugen von Böhm-Bawerk argues that Marx ignored the fact that the same amount of labor time should be rewarded differently depending upon where along the structure of production it took place (1898)

The Austrian economist Eugen von Böhm-Bawerk (1851-1914) wrote a devastating crique of Marx’s economic theory shortly after the publication of the posthumous third volume of Das Kapital in 1894. Among many criticisms, he points out that Marx ignored the fact that the same amount of labor time should be rewarded differently depending upon where along the structure of production it took place:

Now Marx’s hypothesis assumes that the prices of the commodities I and II are determined exactly in proportion to the amounts of labor expended in their production, so that the product of six years’ work in commodity I only brings as much as the total produce of six years’ work in commodity II. And further, it follows from this that the laborer in commodity I should be satisfied to receive for every year’s work, with an average of three years’ delay of payment, the same return that the laborer in commodity II receives without any delay; that therefore delay in the receipt of payment is a circumstance which has no part to play in the Marxist hypothesis, and more especially has no influence on competition, on the crowding or under-stocking of the trade in the different branches of production, having regard to the longer or shorter periods of waiting to which they are subjected.

The Third Argument

It is inherently altogether improbable. For it requires that it should be a matter of complete indifference to the producers at what time they receive the reward of their activity, and that is economically and psychologically impossible. Let us make this clear to ourselves by considering Marx’s own example point by point. Marx compares two workers—I and II. Laborer I represents a branch of production which requires technically a relatively large and valuable means of production resulting from previous labor, raw material, tools, and auxiliary material. Let us suppose, in order to illustrate the example by figures, that the production of the previous material required five years’ labor, while the working of it up into finished products was effected in a sixth year. Let us further suppose—what is certainly not contrary to the spirit of the Marxist hypothesis, which is meant to describe very primitive conditions—that laborer I carries on both works, that he both creates the previous material and also works it up into finished products. In these circumstances he will obviously recompense himself for the previous labor of the first years out of the sale of the finished products, which cannot take place till the end of the sixth year. Or, in other words, he will have to wait five years for the payment for the first year’s work. For the payment for the second year he will have to wait four years; for the third year, three years, and so on. Or, taking the average of the six years’ work, he will have to wait nearly three years after the work has been accomplished for the payment for his labor. The second worker, on the other hand, who represents a branch of production which needs a relatively small means of production resulting from previous labor, will perhaps turn out the completed product, taking it through all its stages, in the course of a month, and will therefore receive his compensation from the yield of his product almost immediately after the accomplishment of his work.

Now Marx’s hypothesis assumes that the prices of the commodities I and II are determined exactly in proportion to the amounts of labor expended in their production, so that the product of six years’ work in commodity I only brings as much as the total produce of six years’ work in commodity II. And further, it follows from this that the laborer in commodity I should be satisfied to receive for every year’s work, with an average of three years’ delay of payment, the same return that the laborer in commodity II receives without any delay; that therefore delay in the receipt of payment is a circumstance which has no part to play in the Marxist hypothesis, and more especially has no influence on competition, on the crowding or under-stocking of the trade in the different branches of production, having regard to the longer or shorter periods of waiting to which they are subjected.

I leave the reader to judge whether this is probable. In other respects Marx acknowledges that the special accompanying circumstances peculiar to the work of a particular branch of production, the special intensity, strain, or unpleasantness of a work, force a compensation for themselves in the rise of wages through the action of competition. Should not a year’s postponement of the remuneration of labor be a circumstance demanding compensation? And further, granting that all producers would as soon wait three years for the reward of their labor, as not at all, could they really all wait? Marx certainly assumes that “the laborers should possess their respective means of production”; but he does not and cannot venture to assume that each laborer possesses the amount of means of production which are necessary to carry on that branch of industry which for technical reasons requires the command of the greatest quantity of means of production. The different branches of production are therefore certainly not equally accessible to all producers. Those branches of production which demand the least advance of means of production are the most generally accessible, and the branches which demand larger capital are possible only for an increasingly smaller minority. Has this nothing to do with the circumstance that, in the latter branches, a certain restriction in supply takes place, which eventually forces the price of their products above the proportionate level of those branches in the carrying on of which the odious accompaniment of waiting does not enter and which are therefore accessible to a much wider circle of competitors?

About this Quotation:

The Austrian economist Eugen von Böhm-Bawerk (1851-1914) wrote a devastation crique of Marx’s economic theory shortly after the publication of the posthumous third volume of Das Kapital in 1894. He begins by carefully and methodically showing how Marx contradicts himself over the course of the three volumes (vol. 1 appeared in 1859, volumes 2 & 3 posthumously in 1894). He also shows how Marx’s views about the theory of value (based upon the amount of labor expended to produce something) were flawed because his sources (Smith and Ricardo) had been wrong, how he ignored crucial aspects of the economic process which influence the price of goods (such as competition between producers, changes in the supply and demand of raw materials and labor), how he neglected both empirical studies which showed how the market system actually worked as well as the recently developed Austrian approach of the “economico-psychological analysis of the social motive forces”, which later would be known as the theory of human action, and how the same amount of labor time had to be rewarded differently depending upon where along the structure of production it took place. Our quotation comes from Böhm-Bawerk’s analysis of this latter important point. Böhm-Bawerk concluded that Marx’s theoretical work was “contradiction … heaped upon contradiction” and that “the great radical fault of the Marxist system at its birth; from it all the rest necessarily springs” was his blind attempt to force his economic theories to fit into the Procrustean bed of his formal “dialectic” methodology.

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