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Marx and Modern Economic Analysis, 2 vols.

Professor Caravale has done us all a service by collecting evaluations of Marxian economics by leading economists: Desai, Baumol, Garegani, Steedman, Hollander, Blaug, Sarnuelson, Caravale himself, and many others from Italy and elsewhere. They have expressed their various views earlier in the journal literature, but these essays are more than reprints; they represent careful and considered expositions. Caravale steps back and allows the essayists to speak for themselves. There is a price nonspecialists must pay for such modesty, because the writers assume that the reader has been closely following developments and simply jump in."

From the very outset the contributors draw a narrow compass for their efforts. The first volume is almost entirely concerned with the "transformation problem" from Marxian values to prices, and the modern economics with which it is analyzed is identified solely with Sraffa's closed input-output system. It becomes clear that Sraffa was concerned to solve Ricardo's problem of the "invariable standard of value" by which prices, wages and profit rates would be determined simultaneously by making the last an eigenvalue of an homogeneous linear system of commodities produced by commodities. It would appear from the universe of discourse, especially in first volume, that both advocates and critics of Marx are implicitly accepting Samuelson's gibe that Marx was a minor post-Ricardian.

Neither the presupposition of linearity or the identification of Marx with Ricardo seems warranted. How can it be that two volumes purporting to reflect modern economics never mention the influence of demand on values? The answer lies in Sraffa's suppositions: (a) commodities are produced by commodities, none of which are scarce exogenously determined resources; (b) the relations between commodities, including labor (labor power for Marx) are representable by fixed coefficients; (c) all the sectors of the economy are in complete equilibrium with each other, so that the inputs into each industry and worker's consumption are exactly matched by the output of those industries and workers; (d) consistency of inputs and outputs is sufficient to explain the rate of profit and prices, so that valuation reflects the balance in production.

There is no place for demand in such a rigid, completely consistent, equilibrated model. But let some resources be limited (or non linear) then production possibilities no longer represent a unique point in the vector space of outputs where all the conditions are met with equality, but a convex set of outputs subject to inequality constraints of available inputs. If this is the case, then prices are no longer determined technologically, but the menu of alternative shadow prices in production offers up a choice to the subjective demands of individuals as to what prices they are willing to pay for alternative mixtures of goods. By the same token preferences for labor-leisure and consumption-savings have a governing role and the labor theory of value gives way to utility maximization.

There are voices raised in opposition to the fixed coefficient straitjacket. Roy Rotheim echoes the observation of Claudio Sardoni and the late Dudley Dillard in pointing to the similarity between Marx's and Keynes's versions of the failure of the labor market to clear. How, Rotheim asks, can this Marx be reconciled with the Sraffa model which leaves less room for even microeconomic gluts than Say's law? Yet even though there is a case for Marx anticipating Keynes, none of these authors find anything in Marx that is superior.

William Baumol complains that the whole debate is irrelevant, since his Marx was attempting to explain surplus labor not values. Yet this explanation sounds suspiciously like an ex post accounting system which records labor flows but accords them no causal influence.

Mark Blaug refers to a little book in which I suggested that the labor theory of value could be understood in linear programming terms (Karl Marx, Columbia University Press, 1971). It was a device to minimize the labor which Marx's norms took to be the sole social cost. The idea was subsequently adopted by Morishima and Catephores, and later by Roemer and Steedman. The equalization of the rate of surplus value which gives rise to the transformation problem would have meaning not as a description of capitalist markets, but a way to carry out that minimization. Characteristically of Marx, it would describe what he thought ought to be as if it were the essence lying beyond the observed market. If this were the case then the debate would turn on two issues: the moral justification for property as opposed to labor incomes; and, whether a laboristic social valuation is best achieved by efficiency distorting over-ride of market allocations, or by accepting the market verdict and compensating some participants. Samuelson comes to the same conclusion: this is a genuine and painful exercise in second best which Marx painted in extreme terms as class war to the death rather than an uneasy social compromise.

We cannot review all the interesting and important readings of Marx in these volumes. Most of the contributors are able to point to a valid point or insight while at the same time rejecting effors. The labor theory does not explain exchange but it is a norm. The rate of profit might tend to fall but it is subject to counteracting forces. Society may not reasonably be considered as constituted of autonomous individuals, but of groups with historically conditioned attitudes. Value theory should express social norms as well as individual interests. The list could be lengthened.

What none of these papers completely faces up to is that Marx wanted it all. He thought his labor theory of value was part of a materialist view of the primacy of productive practical labor activity over the development of ideas. It was to serve as a positive explanation of exchange as well as a nonnative and historical statement. It would demonstrate exploitation under a perfectly competitive market. It would show why capitalism could not maintain full employment and would eventually collapse. The over-arching outcome of this volume-interesting though it is - is that Marx could not have it all. In his monistic hublis, Marx hoped to be judged by historians of economic thought as a system builder rather than a post-Ricardian or pre-Keynesian contributor. In that he did not succeed, even though he left a legacy of insight, issues and confusions that are even now not resolved.
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Author:Wolfson, Murray
Publication:Southern Economic Journal
Article Type:Book Review
Date:Jul 1, 1992
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