The Marxist Encounter with the Subjective Theory of Value

Hilferding’s complaint against Werner Sombart was certainly one that could not be levelled against the Austrian School of economic theory, to which we turn in Documents 14 and 15.

In an article that Isaak Rubin wrote for the Great Soviet Encyclopaedia in 1926, he recounted that the rudiments of marginal utility theory had already been developed in the eighteenth century, but

It was in the 1870s that works appeared almost simultaneously by Carl Menger, [William Stanley] Jevons and Leon Walras, the founders of the new school, among whom Menger developed most thoroughly the psy­chological foundation of the theory and Walras the mathematical. During the 1880s [Friedrich von] Wieser and [Eugen von] Bohm-Bawerk, stu­dents of Menger (all three of them lived in Austria), worked out in detail the psychological theory that is also frequently called the Austrian theory. By the end of the nineteenth century it became widespread in bourgeois university science in almost all countries of the world.^[63]

The new economics that grew out of early marginalism, and that generally prevails to this day, ignores the structurally specific features of capitalism as a whole and aims instead to predict particular prices, interest rates, gnp or other such data in order to formulate practical business decisions and social policy.

With such fundamental issues in contention, it was to be expected that Marxists would mount a vigorous response. One of the earliest to do so was Conrad Schmidt in 1892, with his essay in Die Neue Zeit on ‘The Psycholo­gical Tendency in Recent Political Economy’^[64] Hypothetically adopting the perspective of a consumer, Schmidt agreed that if a single individual already has determinate quantities of two goods at his disposal, he will surely judge the utility of an additional unit of one good or the other on the basis of his subjective expectation of relative satisfaction. But if the same individual must also produce the goods in question, then ‘the greater or lesser difficulty in repla­cing the goods would manifest itself in the larger or smaller quantity of labour which the individual would have to expend in reproducing those goods’. The isolated individual then gives way to individual commodity producers, whose own self-interest leads them to produce and exchange according to the labour expended in production.

In 1892, the same year when Schmidt’s article appeared, Parvus (under the pseudonym j.h.) also published a review of Bohm-Bawerk’s book Kapital und

Kapitalzins.65 Parvus called marginalism ‘the “new” tendency in vulgar political economy’ because, instead of explaining the actions of the individual from his social conditions, it explained social conditions from the conduct of the individual. In reality, Parvus commented, ‘the laws of economic phenomena are neither in the individual things, nor in the individuals, but in the relations into which people enter with regard to each other and to things - in the economic structure of society’.^{[65] [66] [67] [68]}

In 1902, the Austro-Marxist Gustav Eckstein also published a satirical re­view of the main works of Bohm-Bawerk and Carl Menger under the rather extravagant title of ‘The Fourfold Root of the Principle of Insufficient Reason of Marginal Utility Theory: A Robinsonade’ - a reference to Arthur Schopen­hauer’s doctoral dissertation On the Fourfold Root of the Principle of Sufficient Reason.

The better-known early Marxist critiques of marginalism are, of course, Hilferding’s essay on Bohm-Bawerk’s Criticism ofMarχ6 and Nikolai Bukharin’s The Economic Theory of the Leisure Class, written in 1914,6⁸ both of which are readily available online and in print. To summarise these works would be beyond the scope of this introductory essay, just as a serious examination of Austrian theory would require another book. Since our concern in this anthology is the historical development of Marxist political economy, we will limit ourselves to referring readers to our Document 15 by Isaak Rubin, which discusses the key issues of concern to Marxists, and to which we have added an appendix drawn from Rubin’s Essays on Marx’s Theory of Value.

The significance of Rubin’s appendix is twofold. First, he demonstrates that Marx himself, not to mention Adam Smith, was perfectly familiar with the fact that total demand falls with a rise in price and that supply increases, the con­sequence being a diagrammatic representation of what are commonly known as the ‘curves’ of supply and demand. None of this, Rubin points out, would have been the least bit unfamiliar to Marx. The second distinction of Rubin’s essay, however, is that he explains these phenomena strictly in terms of the Marxist theory of value. Rubin notes that writers in the marginalist school neg­lect to ask why prices change, dealing only with how. To ask why is to return to the categories of Marx's labour theory of value.

a theoretical tendency that corresponds with the ideology of the bour­geoisie in the epoch of capitalism's decline, a time when any objective study of the tendencies of social development leads to the conclusion of capitalist economy's inevitable destruction. In this epoch the objective, social and historical method (the nucleus of which was established by the classics, as the leading ideologists of a young and progressive bourgeoisie) becomes the exclusive property of Marxist economic theory, while bour­geois science appeals to the subjective, psychological and anti-historical method. The allegedly unchanging psychological ‘nature' of man comes to serve as the starting point for theoretical research and as an argument for the impossibility of a socialist economy. It is not surprising that the Austrian school has come out with a zealous polemic against Marxism and has enjoyed rapid and clamorous success amongst bourgeois schol­ars, who have seen in it... an acute theoretical weapon for the struggle against Marxism and socialism.^[69]