[OPE-L:2527] Marx's critique of Ricardo

Fred Moseley (fmoseley@laneta.apc.org)
Sun, 16 Jun 1996 16:43:30 -0700 (PDT)

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Even though Allin is away, I want to comment on the stream of discussion
that he initiated about Marx's critique of Ricardo, both to keep the
discussion going and because it relates to other current streams.

1. Allin has argued in recent posts that Marx never criticized Ricardo for
thinking that the values of individual commodities are a good approximation
of their prices, and that this lack of criticism is evidence that Marx's
agreed with Ricardo on this important point. This argument is in the
context of a general debate on the role of individual prices in Marx's
theory. Allin said the following in his original post (2494):

The question has come up again recently (under the rubric of 'Lenin as
non-dualist'), as to whether Marx's theory of value is (at least in part)
a theory of relative prices, or whether it should be understood at a
purely aggregative level.

I think that this way of posing the question is misleading. The issue here
is not an "EITHER / OR" choice. I do not argue that Marx's theory is
"PURELY" an aggregate theory. I argue instead that Marx's theory is
PRIMARILY an aggregate theory of the total amount of surplus-value. But it
is also a theory of individual prices, (which is not a theory of relative
prices, but which is at a similar level of disaggregation). The issue is
not whether Marx's theory is one or the other, but the order of
determination between the two. I argue that Marx did present a theory of
individual prices of production in Volume 3, and that this theory
presupposed a prior aggregate theory of the total surplus-value and the
general rate of profit in Volume 1.

2. With respect to Marx's critique of Ricardo, one of Marx's main
criticisms - discussed at length in TSV, v. 2, ch. 10, especially Section 4
- was that Ricardo "identified cost-prices (or prices of production) and
values" (as both Jerry and Andrew have already pointed out in earlier
posts). This criticism was not meant in an empirical sense (the sense that
Allin seems to be emphasizing) that Ricardo failed to recognize significant
actual deviations of prices from values, but instead was a theoretical
criticism: that Ricardo failed to provide a theory of prices of production
and implicitly assumed in his theory that prices of production are equal to
values. Marx argued that Ricardo failed to explain how the labor theory of
value was compatible with equal rates of profit across industries with
unequal compositions of capital. Whether or not there are significant
acutal empirical deviations of prices of production from values, it is still
necessary to explain prices of production on the basis of the labor theory
of value.

There are at least three reasons why Marx considered a theory of prices of
production to be necessary: (1) to refute the criticisms of Malthus,
Torrens, etc, that the labor theory of value is contradicted by equal rates
of profit, which had been one the main justifications for rejecting the
labor theory of value by the classical economists; (2) as the first step in
his theory of the distribution of surplus-value, which would then serve as
the basis for the determination of the other forms of surplus-value of
merchant profit, interest, and rent (and also of the determination of market
prices differing from prices of production); and (3) as the first step in
the explanation of the surface appearances of capitalism as necessary forms
of appearance of the underlying law of value (in prices of production and
the average rate of profit on which they are based, surplus-value appears to
come from the total capital, rather than just the variable capital).

Allin (and Paul C) seem to be arguing that we can forget about a theory of
prices of production today because prices of production are highly
correlated with labor-values. I don't think Marx would agree.

3. Related to the above criticism, Marx also criticized Ricardo for failing
to provide a theory of the general rate of profit, but instead simply took
the rate of profit as given (another criticism that Jerry has already
pointed out). Marx argued that Ricardo failed to follow the appropriate
"method of abstraction" of first determining the rate of profit and then
taking this rate of profit as given in the determination of prices of

How from the mere determination of the "value" of the commodities their
surplus-value, the profit and even the rate of profit are derived remains
obscure with Ricardo. In fact the only thing which he proves in the above
illustrations is that the prices of commodities, in so far as they are
determined by the general rate of profit, are entirely different from their
values. And he arrives at this difference by postulating the rate of
profit to be law. One can see that though Ricardo is accused of being too
abstract, one would be justified in accusing him of the opposite: lack of
the power of abstraction, inability, when dealing with the values of
commodities, to forget about profits, a factor which confronts him as a
result of competition (TSV, v. 2, p. 190-91)

Marx's criticism of Ricardo on this point provides further evidence of
Marx's own method of detemination of prices of production and of the logical
relation between the rate of profit and prices of production. Marx's method
was what he criticized Ricardo for failing to do: first determine the rate
of profit by a prior abstract analysis of capital in general and then
determine prices of production with the predetermined rate of profit taken
as given.

Marx's criticism of Ricardo also sheds additional light on the recent
discussion about the relation between Marx's theory of surplus-value and his
theory of prices of production: the former does not depend on the latter,
but rather the reverse.