3024. More on the So-Called Marx's Transformation Problem

By Fred Moseley, Solidarity, September-October 2018

Thanks very much to Paul Burkett for writing an excellent review of my recent book Money and Totality (with a long subtitle: A Macro-Monetary Interpretation of Marx’s Logic in Capital and the End of the Transformation Problem) and also to Barry Finger for writing a substantial comment on Burkett’s review and my book.

I will reply to three of Finger’s points. It’s hard to tell sometimes if he is criticizing Marx’s theory or my interpretation of Marx’s theory; it seems to me that he is mostly criticizing Marx’s theory and me for following Marx.

Finger’s first criticism is that I uncritically accept Marx’s theory that surplus-value-flows between sectors“ in the transformation of values into prices of production, as if surplus-value is some kind of liquid that can be poured from one industry to the next.

In order to clarify Marx’s theory of the distribution of surplus-value across industries, we must first understand that there are two main levels of abstraction in Marx’s economic theory: a macro theory of the production of surplus-value in Capital Volumes 1 and 2, in which the main question is the determination of the total surplus-value produced in the economy as a whole, and a micro theory of the distribution of surplus-value in Volume 3, in which the main question is the division of the total surplus-value into individual parts (first the equalization of profit rates across industries in Part 2, and then the further division of the total surplus-value into commercial profit, interest and rent in Parts 4, 5 and 6).

The key point about this logical method is that the production of surplus-value is theorized prior to the distribution of surplus-value, i.e. the total surplus-value produced in the economy as a whole is determined logically prior to the division of the total surplus-value into individual parts (the whole before the parts). The total surplus-value is determined in the first level of abstraction (the production of surplus-value), and then this total surplus-value is presupposed in the second level of abstraction (the distribution of surplus-value or the subsequent division of the total surplus-value into its individual parts).

This logical progression from the total surplus-value to the individual parts of surplus-value follows directly from Marx’s labor theory of value and surplus-value, according to which all the individual parts of surplus-value come from the same source — the surplus labor of production workers. Therefore, the total surplus-value must be determined first — by surplus labor — and then this total surplus-value is divided into the individual parts, which also depend on other factors besides surplus labor, such as competition among capitalists which tends to equalize the rate of profit.

Marx referred to these two levels of abstraction in quasi-Hegelian terms of capital in general and many capitals (or competition).

“Flow” of Surplus Value

In order to equalize the rate of profit across industries, individual commodities exchange at their prices of production that differ from their values, and as a result some of the surplus-value produced in industries with a higher than average proportion of labor is appropriated in other industries with a lower than average proportion of labor. So in this logical sense surplus-value does indeed “flow” between industries; surplus-value that is produced in some industries is appropriated in other industries.

There is nothing mysterious about this; it is based on Marx’s logical method of the two levels of abstraction of the production and distributrion of surplus-value, and it happens through the price mechanism of individual prices of production differing from values. The total surplus-value is not a liquid but a quantity of money, ∇M in Marx’s symbol, which is determined by the total hours of surplus labor (SL) in the economy as a whole multiplied by the money-value produced per hour of labor (m).

Written algebraically: ∇M = m (SL). This total amount of money is divided up among individual industries (according to the capital invested in each industry) by commodities exchanging at prices of production.

Finger’s second point is that he interprets the transformation of values into prices of production to be an actual process over successive periods, in which commodities first exchange at their values which results in unequal rates of profit, and then there are transfers of capital from industries with lower than average rate of profit to industries with higher than average rate of profit, which in turn results in changing quantities of output produced and changing prices that gravitate toward prices of production.

But I argue that Marx’s theory of prices of production is about the end result of this equalization process, not about the equalization process itself. Marx’s theory assumes that the equalization of the profit rates has taken place and thus the economy is as­sumed to be in long-run equilibrium, and the prices of production determined under this abstract assumption are long-run equilibrium prices.

Marx’s theory of the production and distribution of surplus-value is in terms of a single period (e.g. a year); first the total amount of surplus-value produced in that period is determined and then the division of the total surplus-value across industries in that same period is determined, in such a way that all industries receive the same rate of profit (as in Marx’s single period tables in Chapter 9 of Volume 3).

This is not to say that the equalization process itself is not important. But Marx abstracted from the process in order to explain the end results of this process — prices of production as long-run equilibrium prices, with equal rates of profit.

The main purpose of Marx’s theory of prices of production was to answer the main criticism of Ricardo’s labor theory of value — that the labor theory of value was contradicted by equal rates of profit across industries and was unable to explain long-run equilibrium prices with equal rates of profit. Marx answered this main criticism of the labor theory of value on its own terms and showed how long-run equilibrium prices could be explained on the basis of the labor theory of value.

Marx’s main purpose was not to explain the adjustment process. Indeed, Marx was of the opinion that Adam Smith had already explained this process pretty well (transfer of capitals in response to unequal profit rates, etc., much as Finger describes). But Marx emphasized that neither Smith nor Ricardo was able to explain long-run equilibrium prices with equal rates of profit that are the end result of this adjustment process, and that was Marx’s decisive advance.

Rates of Exploitation and Profit

Finger’s third criticism is that I follow Marx and assume equal rates of surplus-value across industries, and there are two problems with this assumption. First, Finger asserts, equal rates of surplus-value (rates of exploitation) are not compatible with equal rates of profit; it is not possible to have both equalities in the same price system.

The answer to this criticism is based again on the two levels of abstraction in Marx’s theory — the production and distribution of surplus-value.

The assumption of equal rates of surplus-value applies to the first level of the production of surplus-value, and the assumption of equal rates of profit applies to the second level of the distribution of surplus-value. Equal rates of surplus-value at the level of production is entirely compatible with equal rates of profit at the level of distribution.

In this criticism, Finger interprets the transformation problem in the standard way — as being about two sets of micro prices of individual commodities, where the transformation is from one set of micro prices (values) to another set of micro prices (prices of production).

But I argue — with substantial textual evidence; see Chapter 3 (80 pages) of my book — that the transformation problem is not about two sets of micro prices, but is instead about the transformation from macro total value and total surplus-value to micro prices of individual commodities. The transformation problem is really a disaggregation problem — how a predetermined total is divided up into individual parts.hanism to achieve the equalization of the rate of surplus-value (like the transfer ot capitals to achieve equal rates of profit). I agree with this point, but I argue that the assumption of equal rates of surplus-value is not meant to be a realistic assumption in Marx’s theory, but is instead a simplifying assumption that could be relaxed without changing anything fundamental.

The amounts of surplus-value produced in each industry would be different (from the amounts if equal rates of surplus-value is assumed), but these different individual amounts of surplus-value would still be added up in order to determine the total surplus-value, and this total surplus-value would still be used to determine the general rate of profit and prices of production in the same way as Marx did in Chapter 9 of Volume 3.

I discovered recently in volumes of the German Marx-Engels Collected Works that Marx relaxed the simplifying assumption of equal rates of profit in a few pages in two manuscripts that were written after Volume 3 in 1868 and 1875. (I would be happy to provide references.)

Thanks again to Barry Finger for his substantial and stimulating comments. I hope I have understood his comments correctly and that my reply has helped to clarify the issues, especially the two levels of abstraction in Marx’s theory. And I would be happy to continue the discussion by email: (fmoseley@mtholyoke.edu).

3023. On Fred Moseley's "Money and Totality"

By Barry Finger, Solidarity, September-October 2018

Paul Burkett's review of Fred Moseley’s Money and Totality well captures the logic of Moseley’s refutation of the standard critiques of Marx’s “transformation” problem. This can also be approached somewhat differently.

The price of any given good, and the sum total of goods, is the outcome of the manifold intersections of two schedules: demand and supply, which reflect the intersection of quantities of output and price. Let me emphasize: price not labor-time. So in order to understand the relationship of price to labor-time, there must be an intermediary link — money — the pricing unit, which is reducible to a given quantity of time.

In any given period, say one year, the price of the annual product ($V + $S) is the monetary expression of a sum total of productive labor time worked. From this relationship, the monetary value of an hour, a day or a year of labor-time can be calculated.

If we assume, as does Moseley, that an hour of labor-time has a fixed expression in monetary units over the course of many years (which is an empirical unlikelihood, even if a handy simplifying assumption), then the M in the formula M-C-M’ or M-C-(M+ ?M)has the same value at the end of the years it takes to recoup the initial outlay as it did in the beginning.

Thus the value of inputs can be treated as fixed data and not as moving variables. That’s exactly what Moseley does. In that sense alone, the value of the money capital invested in wages and means of production is invariant and does not need to be “transformed.” M amount of dollars invested in year one with an assumed expression of Y units of labor-time still represents Y units of labor-time in, say, year 10 when the useful life of the machinery has been totally recouped by M dollars.

This is the first problem with Moseley’s solution: the “transformation problem” that he so neatly finesses really only occurs over the course of the years. From a capitalist standpoint, and from Marx’s viewpoint, changes in the labor content of the monetary unit over time have to be reflected in the final M through an inflation premium. Otherwise the value of the dead labor incorporated in the constant capital cannot be preserved. In practical terms this means that capitalists need to recoup an investment commensurate with the purchasing power that the initial M stood for.

Again, there is nothing intrinsically wrong with how Moseley approaches this aspect of the problem. It is a perfectly acceptable heuristic device that allows him to sidestep the unnecessary complication that would result from changes in the value content of the monetary unit. At the same time, as I hope to show. It gets us no closer to an answer to the problem.

Profit Rate Equalization

The real problem comes in with Moseley’s treatment of profit-rate equalization. Here he accepts unreflectively the belief, inconsistently presented by Marx, that surplus value flows among sectors according to the proportional weight that the individual branch’s capital occupies with respect to aggregate investment.

An application of that principle is this: capitals of the same size, but of differing organic composition — that is, made up of different proportions of constant and variable capital — earn the same profit in the same time period.

This is the seeming contradiction at the heart of the “transformation problem:” namely, that profits are no longer proportional to the living labor that variable capital sets in motion.
Surplus value is then treated by Moseley as a social relationship having the quality of a liquid that can spill over from one sector to another. But in fact, surplus value is not what moves when profit rates are unequal. Investment does. Capital withdraws from spheres that underperform and expands spheres that are relatively more lucrative.

This incessant movement changes the production structure of the economy: it shifts sectoral supply (and demand) schedules, changes the value of money, the level of employment and wages until market-clearing prices begin to emerge reflecting a uniform rate of profit.

But this means that the physical structure of the economy, the prices of replacement inputs and final output, the rates at which labor is exploited, are all recruited into the process of profit-rate leveling.

When the competitive dust settles, part of the surplus labor time worked in sectors with proportionally higher labor inputs cannot be totally realized in the form of surplus-value; it cannot take a price form. That which can be is profit. Labor here is effectively exploited at a lower rate than average.

Conversely, the surplus labor time worked in sectors with a lower than average labor component is realized at a premium in price form. It is effectively mobilized at a higher than average rate of exploitation.

Marx, and by extension Moseley, treat a uniform rate of exploitation (and therefore the average rate of exploitation) as data. And for certain purposes that assumption can be employed illustratively. But the closer we approach the surface, the further that simplifying assumption is from reality.

There is no market mechanism that could bring about this uniformity. Neither Marx nor Moseley make any attempt to identify one. Instead, the average rate of exploitation is a function of the many sectorally divergent rates of exploitation. The average rate of exploitation is not data and cannot be treated as such. It is the outcome of capitalist competition and the incessant ebb and flow of investment among sectors of the economy.

Profit rate equalization, in the absence of secondary deductions for merchants’ profit, interest and rent — that is, at the level of abstraction at which Marx introduces the problem — does not involve a transfer of surplus values. To interpret it differently is to be beguiled by averages. From the process of averaging, no redistribution of substance can be implied. If the average height of people in a room is 5’10”, those who are 5’8″ do not transfer two inches to those who are 6′.

Rates of Profit and Exploitation

Moseley is so devoted to the letter of Marx’s presentation that he fails to see the central problem. The same economic structure that yields prices having a uniform rate of profit cannot also be consistent with one that reflects a uniform rate of exploitation, unless capital to labor ratios are themselves uniform throughout the economy. Even then, the various sectoral outputs have to stand in proper proportion to support market-clearing prices that have this attribute.

The problem is that both he and Marx arbitrarily define value as prices that reflect profits that are uniformly proportional to wages. Prices of production are incompatible with values defined in that way and can only be reconciled by tying logic into a pretzel — the pretzel being the redistribution of surplus values.

The secondary knots are the insistence on a series of supposed invariant postulates: the sum of prices equals the sum of values; the sum of profits equals the sum of surplus values; the invariance of input prices, etc. that have become the hallmarks of Marxist orthodoxy. 

The “transformation problem” as Marx poses it cannot be resolved. Neither can it be resolved by means of his neo-Ricardian critics, such as Bortkiewicz, since they work under the same framework: an invariant production structure.

One cannot at the same time argue that capital movements create a uniform rate of profit, and treat that structure-in-motion as values evolve into prices of production as a given rather than an unfolding outcome. One set of price characteristics is incompatible with the economic structure of prices with differing characteristics.

All that is necessary to solve the “transformation” (non) problem is provided by Marx at the outset. Price is value in the form of money — all prices, whatever their characteristics. Once the relationship between labor time and money has been established, prices have been effectively explained. No part of that explanation entails secondary assumptions about a uniform rate of exploitation or, for that matter, a uniform rate of profit.

The singular significance of the average rate of profit is that it functions as a track changer, a spontaneous market regulator adjusting the manifold movements of capital among various sectors of the economy.

2305. Book Review: Money and Totality

By Michael Roberts, Michael Roberts' Blog, April 29, 2016

In a previous post I reckoned that Anwar Shaikh’s magnum opus was probably the best book on capitalism this year.  Well, Fred Moseley’s 20-year work on his new book, Money and Totality, is probably the best on Marxist economic theory this year and for this century so far.

Fred Moseley is Professor of Economics at Mount Holyoake women’s college in Massachusetts and has been for decades. He is one of the foremost scholars in the world today on Marxian economic theory (as a theory of capitalism). He has written or edited seven books, including The Falling Rate of Profit in the Post-war United States Economy (1991), Marx’s Logical Method: A Re-examination (1993), Heterodox Economic Theories: True or False?(1995), New Investigations of Marx’s Method (1997), and Marx’s Theory of Money: Modern Appraisals (2004).

In Money and Totality, Moseley has made a major contribution to a clearer understanding of Marx’s method of analysis.  He shows that a Marxist analysis delivers money, prices and values integrated into a single realistic system of capitalism. Moseley shows that Marx had two main stages of analysis or theoretical abstraction. First, he analyses the production of surplus value in capital as a whole (Volumes 1 and 2 in Capital) and then he analyses its distribution through the competing sectors of many capitals (Volume 3). Marx starts with money so there is no need to ‘transform’ an underlying system based on value into a system based on prices.

At the beginning of the circuit of capital, money capital is taken as given or ‘presupposed’. So total value equals total prices in the ‘totality’ (this is what the title of the book alludes to – the subtitle for Moseley’s book is “A macro-monetary interpretation of Marx’s logic in Capital and the end of the transformation problem” a mouthful for most.  And all that happens with ‘many capitals’ is that the extra value (surplus value) created in each sector will be equalized by the market so that the rate of profit is equalized (or tends to equalize) across all sectors.  Total surplus value equals total profit but the prices of production vary in each sector to equalize profitability across all sectors.  And the whole circuit of capital is one that takes place over real time and is not completed hypothetically and simultaneously, as critics argue.

So there is one real capitalist system, advancing money in order to make more money, namely a profit (a surplus of value) over the money (or value in labour time) paid to the workforce and for the means of production (value contained in constant capital).  We do not start with a certain value of labour time or a certain amount of physical units of workers and technology and finish with that.  We start with money and we finish with money.

Yes, beneath the process of money making money, we can show that this happens through the exploitation of labour and the amount of exploitation or extra money made can be explained by the appropriation of surplus labour time (beyond that needed to keep workers alive and in production).  Thus money is value, or the form of value that we see.  Value explains money; surplus value explains profit.

When we go below the macro aggregates and consider individual prices of production for different products and individual profit rates for each capitalist, then values in labour time do not match prices.  This is the so-called “transformation problem”.  If labour is the source of all value and surplus-value, then one would expect industries with a higher proportion of labour to have higher rates of profit; but this is not the case in reality.

The critics argue that Marx attempted to resolve this contradiction with his theory of prices of production in Part 2 of Volume 3 of Capital, but he failed to solve the problem, because he ‘failed to transform the inputs’ of constant capital and variable capital from values to prices of production.  He left the inputs of constant capital and variable capital in value terms, and this is logically contradictory, because inputs in some industries are also outputs of other industries, and inputs cannot be purchased at values and sold at prices of production in the same transaction.  This was Marx’s crucial mistake, according to the critics.

Moseley argues that, contrary to the critics, that Marx did not ‘fail to transform the inputs from values to prices of production’ because the inputs of constant capital and variable capital are not supposed to be transformed.  Instead, constant capital and variable capital are supposed to be the same in the determination of both values and prices of production; C and V are taken as given as the actual quantities of money capital advanced to purchase means of pf productions and labour-power at the beginning of the circuit of money capital.

Marx solved this issue of the macro to the micro by showing that because individual capitals compete among each other, as a result, sectors with higher profitability get ‘invaded’ by other capitalists seeking to increase their profitability.  In so doing, profit rates tend to be equalised between sectors.  As Marx showed, this did not change the overall value created in an economy, but merely redistributed the surplus value over and above the cost of capital advanced from less efficient capitals to more efficient ones through the equalisation of profit rates across sectors.  This transformation solution was a brilliant one that Marx was very proud of.

“In Marx’s theory, total price = total value but individual prices = prices of production.  There is no contradiction with Marx’s logical structure of the two levels of abstraction” (Moseley, p39 note 13).   The logical approach of Marx is to look at the macro first to show how money makes more money and then look at the micro second to see how that extra money is distributed among many industries and capitals through competition and the equalisation of profitability.  The more efficient get a transfer of value from the less efficient through capitalist competition.  But profits come from the surplus value generated by the labour force employed in the whole economy and appropriated by capital as a whole.

This macro-monetary approach is a realistic view of capitalism.  The circuit and motion of capital starts with money and finishes with money.  It does not start with value (labour time) or with physical things (labour and means of production) and end with value or things.  So it does not need value or things to be converted or transformed into money.  There are not two ‘states of capitalism’ (one with values and one with money or prices).  Marx’s view is a single state system.  So there is no ‘mistake’ or logical contradiction in Marx’s explanation of the transformation of values into prices.  The so-called transformation problem of values into prices and money does not exist.

The mainstream critiques of Marx’s analysis make the mistake (deliberate or not) to argue that Marx had two logical analyses, first based on values which had to be transformed into prices.  They say, if you start with ‘inputs’ of labour and means of production measured in values (as they claim Marx does), surely you must convert these values into money prices?  And if you do so, then using simultaneous equations, you find that total values no longer equal total prices and/or total surplus value no longer equals total profit.  That’s because your original inputs in value will also be converted into prices.  Marx’s analysis is thus indeterminate or logically inconsistent.

This is the kernel of the critique first pronounced by Ladislaus von Bortkiewicz in the early 20^th century, “the most frequently cited justification for rejecting Marx’s theory over the last century” (Moseley, XII).  This critique was enthusiastically adopted by mainstream economics as finally crushing Marx’s value theory of capitalism.  It was accepted by hosts of Marxist economists like Paul Sweezy and others, many of whom spent many years trying to reconcile Marx’s ‘mistake’ with a theory of capitalism or looking for an alternative interpretations of value theory – a “long 100-year detour”, as Moseley describes it.

The Bortkiewicz-Sweezy ‘standard interpretation’ of Marx’s value theory, as Moseley calls it, was destroyed with a seminal paper by the leading mainstream economist of the post-war period,  Paul Samuelson, the author of the major academic textbook on economics in my days at college.  Samuelson showed that if you started with two systems, one in values in labour time and one in prices, the labour values can be cancelled out and play no determination in the real world of prices.  Prices are then determined by the quantities of things produced and the demand for them (supply and demand).  “In summary, transforming from values to prices can be described as the following procedure, 1) write down the value relations; 2) take an eraser and rub them out; 3) finally write down the price relations – thus completing the transformation process”! (Moseley p 229.)  Samuelson’s sarcastic joke may have buried the ‘standard interpretation,’ but his own mainstream theory of prices was equally irrelevant. What determines whether the price of a car is $20,000 or $2,000? – it’s supply and demand.  But why $20,000 and not $2,000? – well, because the market says it is so (revealed preference of individual consumers).  Brilliant!

But as Moseley says, Samuelson was right about the standard interpretation.  If you interpret Marx to have two systems of capitalism, one based on values (in labour time or physical units) and another on prices, then you have to transform values into prices.  But why bother: values can be cancelled out.  Marx’s value theory then becomes a metaphysical unnecessary like the concept of God.  We can explain all in the universe without God and God explains nothing.

But Moseley takes the reader carefully and thoroughly through all the competing interpretations of Marx’s value and price theory, starting with the standard interpretation as expressed by the theory of Piero Sraffa, an epigone of Ricardo.  He shows not only that Sraffa’s approach of looking at capitalism as ‘the production of commodities by means of commodities’ is being unrealistic to the extreme[4]; it is also nothing to do with Marx’s analysis of capitalism as the process of money capital trying to make more money capital (pp. 230-243).

Sraffa ends up with a theory that implies capitalism can go on producing more things from things without any contradiction or limit – the example of automation (p233) shows that.  Marx’s own theory shows that there is an essential contradiction in capitalism between the production of things and services and the profitability of doing it for private capital.  That contradiction is real, explaining cycles of boom and slump, crises and the eventual demise of capitalism as a system.  Sraffa’s theory implies the universality of capitalism, Marx argues for its specificity.

Moseley then shows that other interpretations (Anwar Shaikh’s iterative way; the ‘New interpretation’; Rethinking Marxism etc.); all fail really to break with the standard interpretation and thus cannot resolve the apparent logical inconsistency (Bortkiewicz) or irrelevance (Samuelson) of Marx’s analysis.

However, it is somewhat different with the temporal single state interpretation (TSSI).  The essential points of the TSSI group of Marxist economists were summed up in another seminal work on Marx’s analysis from Andrew Kliman in 2007, with his book, Reclaiming Marx’s Capital.  Those points were that Marx’s theory is temporal.  Money advanced for means of production and the labour force are the initial capital, in time.  The production of commodities and their sale on the market come later.  So we cannot impute simultaneous equations in the conversion of value into prices, as the standard interpretation and others do.  Second, Marx’s theory is single state.  It is not a question of converting initial inputs (means of production and labour) as values into prices of production in the final commodity.  Capitalist start with money (prices of production) and end up with money (prices of production).  But they end up with a different value or price of production as explained by the exploitation of labour power, with its value ultimately measured in labour time in the whole economy.

The TSSI did provide the breakthrough in refuting the standard interpretation by returning Marx to the logic and reality of a money economy.  Moseley agrees.  However, he has two important disagreements with the TSSI.

First, Moseley reckons that TSSI makes prices of production as short-term movements that change with each production cycle to equalise profitability within sectors.  Moseley reckons that this cannot be right as prices of production are predetermined over the long term by the productivity of labour (new value) and the rate of surplus value in the class struggle (deciding the level of the real wage).  So prices of production only change if productivity and real wages alter.  Prices of individual commodities fluctuate around a ‘centre of gravity’ set by prices of production.  Indeed Moseley argues, that unless his interpretation of prices of production as long term centres of gravity for individual prices is accepted, then the two aggregate equalities (total price = total value and rate of profit = rate of surplus) would not hold over successive production periods, thus defeating the very objective of TSSI.

Second, Moseley disagrees that a temporal interpretation of Marx’s circuit of capital means that the cost price of the advanced money capital (for means of production and the employment of the labour force) is fixed and historic after production has commenced.  Moseley reckons that if the price of equipment and other means of production changes after production starts (as it does), it is still okay to revalue the value of the commodity produced to include the current cost of the means of production not the original cost.  So it is not necessary or correct to use historic cost in the measure of constant capital or in the profitability of capital.

This latter point is very important in any empirical analysis of profitability in modern capitalist economies.  Andrew Kliman’s view is that historic cost measures must be used and anything else is a distortion of Marx’s measure of profitability.  And this makes a difference when we try to measure to the movement in the rate of profit in a major capitalist economy like the US.  Kliman’s measure shows a ‘persistent fall’ in profitability of US capital since 1945 without any significant rise, even during the so-called neo-liberal period from the early 1980s to now.  The current cost measure, on the other hand, shows a trough in the early 1980s and then a significant rise through to the end of the 1990s at least.  Which is right has led to different views on the health of US capitalism, the role of the financial sector and what causes capital investment to change.  However, perhaps the differences between the two measures are overdone because, as Basu shows, over the long term, since 1945, the two measures have tended to converge.

One implication of Moseley’s interpretation of Marx’s analysis as a macro-monetary one that starts with money and finishes with money, is that it is perfectly open to empirical verification. There is a view among some Marxist economists as eminent as Paul Mattick Jr for one, that it is impossible to measure empirically a Marxian rate of profit on capital and use official price data to evaluate trends in modern capitalism.  That is because value cannot be calculated from money prices and Marx’s theory of capitalism is a value theory.  We are left with just recognising that Marx was right because of the very occurrence of exploitation and crises.  This is a bit like saying that we cannot determine the existence of black holes in the universe because their mass is so great and gravity so strong that nothing comes out of them.  So we can only tell they exist because of the wobbles they cause in other objects in space nearby.

But if we interpret Marx’s as a single system, an actual capitalist monetary macro-economy, then it is perfectly possible (with all the caveats of measurement problems and data) to carry out empirical analysis to verify or not Marx’s laws of motion of capitalism.  Indeed, Marx did just that.  In 1873, Marx wrote to Frederick Engels that he had been “racking his brains” for some time about analysing “those graphs in which the movements of prices, discount rates, etc., etc., over the year, etc., are shown in rising and falling zigzags.” Marx thought that by studying those curves he “might be able to determine mathematically the principal laws governing crises.” But he had talked about it with his mathematical consultant, Samuel Moore, who had the opinion that “it cannot be done at present.” Marx resolved “to give it up for the time being.”

Times have moved on and now we have lots more data and better methods of analysing it.  Testing theory and laws with evidence is now the name of the game.  Fred Moseley allows us to do that with confidence that we are testing a logical and consistent theory that is verifiable empirically.

A more substantial review by me of Fred Moseley’s book can be found in Weekly Worker here.