The labour movement of the nineteenth century obtained its legitimacy from the introduction of the innovative theory of surplus value by Karl H. Marx. This cross-polination of a social movement and a theory is probably unique in the economic history. Therefore it is interesting to study how the Dutch workers parties applied this economic paradigm. A special aspect for the Netherlands is, that the formation of theory started only around 1900. At the time the theory of surplus value had already got competition from the economic theory of the marginal utility. That complicated the situation for the Dutch marxist pioneers1.
In the past this webportal has already drawn attention to Sam de Wolff and Jacob van der Wijk, who both called themselves marxists. In those columns it has been shown, that they actually completely accept the theory of the marginal utility. The theoreticians Rudolph Kuyper (1874-1934) and Pieter Wiedijk (1869-1938, writer's pseudonym J. Saks) published their work several decades before De Wolff and Van der Wijk2. This obviously awakens the curiosity with regard to their assimilation of the knowledge of their times. The present column confines itself to the study of several articles, which have been written by Kuyper and Wiedijk in the social-democratic monthly magazine De Nieuwe Tijd, concerning the theory of value of Marx.
In 1902 and 1903 Kuyper wrote in De Nieuwe Tijd a series of articles with the title Over waarde, where he explains his views on the labour theory of value (ltv) of Marx3. The present paragraph summarizes the contents. Kuyper is in two minds with respect to the marxist system. He states that the system as a whole is completely defensible, and at the same time believes that a part, the ltv of Marx, is contradictory. His main objections concern the transformation problem, which is applied during the capitalist value modification. This is remarkable, because the famous "refutation" of the ltv by Ladislaus von Bortkiewicz would appear only four years later. Kuyper tries to compare the ltv of value with the theory of marginal utility (which he calls the marginal value paradigm).
Kuyper accepts the ltv for a primitive society, where capital is hardly used, and so the interest can hardly affect the product price. He describes how Adam Smith and especially David Ricardo introduce the profit as a second price-determining factor, besides the labour4. Kuyper disapproves, that Ricardo ignores the scarce and not producible goods. Think about unique works of art and the like. The price of these unique goods is no longer related to the production costs. This is not a mistake of Ricardo, but it is a limitation.
At this point Kuyper introduces the theory of marginal utility in his arguments. He cites among other from the works of E. von Böhm-Bawerk and of the Dutchman N.G. Pierson. It is striking that Kuyper uses the word intensity for the (marginal) utility, just like later De Wolff. Due to the intensity the individual can give a subjective value to the satisfaction of that need. According to Kuyper subjective value equals the modern concept of marginal utility5. Overall his explanation follows the usual approach. Contrary to Gossen,Jevons and later De Wolff, Kuyper does not mention the displeasure (disutility or in German Leid).The disutility of labour is equated to the lost utility of leisure time.
Kuyper discusses an example, where five individuals each dispose of certain quantities of goods (q) of type X and Y. The individuals each have a cardinal utility function un(qX, qY), with n=1, ..., 5 6. They can increase the utility of their property by means of an exchange of goods. Kuyper presents a calculation, which shows that the clearing of the market occurs only for a single price ratio of X and Y 7. Kuyper stresses, that the exchange value (price or exchange ratio) follows by necessity from the needs of the five individuals, and from their properties. Incidentally, he prefers to call this the ratio of stocks instead of the property or richness.
Next Kuyper extends the model of marginal utility with a production theory, where the three factors labour, capital and land are combined. In the simplest case merely labour is employed8. Then the production prices must be reconcilable with the supply of labour and with the wage. There is an exchange according to quantities of labour. Thus a general economic equilibrium is formed on the markets for goods and labour. It is common to introduce a money-commodity, in order to facilitate the exchange. Also the money-commodity has its own marginal utility.
In an advanced economic system with a division of labour the entrepreneur appears, because the various labour efforts must be coordinated. The entrepreneurs receive a wage for their activities, and in addition the risk premium9. In the next step the capital goods are used, so that a market for credits is established. Capital is a scarce good10. And finally the costs of the land use must be taken into account. It goes without saying, that those costs appear only, as long as land is indeed a scarce production factor.
However, as soon as the enterprises must be content with unfavourable land, they will have a lower productivity at the same costs. Then the price of the product will rise, and the enterprises with excellent land have an extra income. These extra incomes (special assets) become the rent of the land.
Kuyper calls this Walrasian equilibrium model with production the subjectivistic economics. For the marginal utilities of the individuals are entirely subjective. Kuyper notes, that the cardinality is not really necessary for this model11. He appreciates the merits of the model, but he misses the historical analysis, such as the historical materialism of Marx. He also views the subjectivistic model as the refutation of the work of Ricardo, because Ricardo calculates the prices exclusively from the production costs.
Here Kuyper is a bit harsh towards Ricardo, and he seems to admit this in several footnotes. For Ricardo did not have the intention to describe the functioning of markets in detail. It was actually his intention to develop mainly a production theory. Loyal visitors of this webportal know from the column about P. Sraffa how he completed the work of Ricardo, a few centuries later. It is clear that Kuyper did not yet know this, so that this part of his argument is now outdated12.
Now Kuyper returns again to the theory of Marx, which is the actual subject of his study. A crucial part of the ltv of Marx is the description of the exploitation process, which leads to the appropriation of the surplus value by the capitalist class. Now Kuyper reproaches Marx the same as Ricardo, namely that the market process is hardly described. This may be true, but neither Ricardo nor Marx had this intention. Marx studies merely the distribution process: the conflict between the factors labour and capital. Besides, the interest of Marx is focused on the dynamics, and not on the static equilibrium, in the way that Walras did. So the statement of Kuyper is correct, but it can not be a criticism.
Next Kuyper describes the origin of the ltv of Marx. In a rudimentary form she has been published first in Lohnarbeit und Kapital (1849). Since the appearance of Zur Kritik der politischen Oekonomie (1859) Marx presents a more advanced model. According to Kuyper Marx introduces four new elements in his theory.
Kuyper analyzes how Marx derives the product price by means of the use value, the exchange value, and the (modified) value form14. In principle the products are exchanged according to the ratio of the expended quantity of labour (expressed in a unit of time). However, in the developed capitalism the role of the production capital becomes important. The financial markets command, that the interest on capital is equal in all productive branches. A general average interest (profit) rate is formed. Therefore the exchange process is distorted.
The problem is, that the interest gives the capital owners a claim on the totally produced value. That claim can only be satisfied, when the exchange ratios of the products are adapted. According as the production process in a branch requires larger quantities of capital, that branch must get more value at its disposal. A part of that value is taken from branches, which use little capital. This transfer of value is not voluntary, but extorted by the financial system. Therefore the exchange in the developed capitalism proceeds by means of the modified value form.
Kuyper is not really pleased with this ltv of Marx. First, he criticizes the hypothesis, that individuals will take into account the effect of the interest during their exchange of goods. Your columnist assumes, that the people will accept the modified values, as a fact of life. Kuyper does not believe this, and therefore he reproaches the price theory of Marx a lack of logic. He says: "A curious conclusion"15. But there is more. It has already been remarked, that Kuyper misses the price theory of unique goods (antique art and the like) in the works of Ricardo. He obviously makes the same objection against the ltv of Marx.
Second, Kuyper is dissatisfied with the fundamental hypothesis of the ltv, that all value (including the profit) is related to the quantity of labour, which is embodied in the product. He prefers the Walrasian equilibrium model with production, which computes the yield from capital as a separate quantity, independent of the factor labour. Your columnist does not truly understand, what Kuyper tries to say. For one can not reject a model, merely because another model yields different results. It may be, that Kuyper likes the hypotheses of the Walrasian model. In that case it is a matter of taste. However that may be, Kuyper concludes: "The foundation of his (EB: Marx's) analysis is elusive. And: I do not accept the idea of the ltv as a working hypothesis" (!)16.
In the same breath Kuyper also rejects the hypothesis, that the concept of the socially necessary average labour is an economically relevant variable. He complains of the absence of a proof. He concludes, that the ltv is "untenable", and "an artefact to somehow or other preserve an idea, which is fundamentally unsound". Moreover, Kuyper makes additional objections, which will not be mentioned here, because in fact they are a matter of taste.
Another remark of Kuyper does deserve mentioning, namely his discomfort with the price transformations of Marx. The computation of the modified product values is based on the costs, which are expressed in un-modified values. That is odd, because the modification is in fact merely a profit markup, and thus it ought to be applied to the modified cost values. That remark is not new, and can even be found in the third volume of Das Kapital.
Several years later Ladislaus von Bortkiewicz has shown in a scientific paper, that the price transformation of Marx is actually quite complicated. This aspect of the theory is called the transformation problem. At the time Marx will certainly have been confused by the complications of his formula, and this may explain his hesitation to publish the remaining parts of Das Kapital. Only three-quarters of a century later a conclusive argument has been presented with the invention of the Temporal Single System Interpretation. The TSSI is described in a separate column. When Kuyper wrote his article, all these considerations were still unknown.
After this rebuke of the ltv, he presents his own variant. She maintains the assumption of an objective process. The historical materialism is a conflict theory, which describes the ongoing exploitation of classes. That exploitation is based on a manipulation of the labour time, resulting from the division of the labour quantity. The expression of that division is the interest, which is appropriated by the capital owner. Since Kuyper supports the Walrasian theory, he admits that capital is indeed productive. However, he makes moral-ethical objections against the property right.
Kuyper maintains that the profit (including interest etcetera) and the surplus value are synonyms. Now he proposes to apply the ltv merely to an economic system, where the so-called organic composition of all branches is equal. It is well known, that for that special case the introduction of the general average profit rate does not require a forced redistribution of value between the branches. There is no value modification. In other words, the products are still exchanged according to their labour value. And indeed this proposal eliminates the transformation problem. Your columnist is not really satisfied by the proposal. For in reality there are enormous differences in organic composition. And this variant gives no information about the price differences between branches.
This concludes the article "Over waarde" by Kuyper. It is surprising, that Kuyper asks for a proof of the hypotheses in the ltv, and at the same time does not object at all to the hypotheses of the Walrasian equilibrium model. His attack against the ltv of Marx is vehement, and littered with fatuity. One gets the impression, that he wants to discredit the ltv, and gives up an objective evaluation. Your columnist can only speculate about the motives of Kuyper. It is conceivable, that there are political motives, for instance that he wants to belittle the fundamental (orthodox) marxists17.
And what is the motive of Kuyper to eagerly accept the Walrasian equilibrium model with production? A marxist can hardly be pleased by the supposition, that the economic system is the very picture of stability. Also Kuyper ought to be annoyed, that the model assumes a perfect competition. For Marx stresses the importance of the phenomenon of capital concentration, and of the concentration of economical power in the hands of a small elite. It is true that Marx himself has not predicted the monopoly, but her emergence is a logical consequence of his work. It is conceivable, that here Kuyper makes ideological concessions in order to facilitate a discussion with otherwise-minded economists18.
Between 1905 and 1907 Wiedijk wrote in De Nieuwe Tijd a series of twelve articles with the title De minder-waardigheid der meerwaarde-theorie, where he explains his view with regard to the labour theory of value (ltv) of Marx. It is notably an effort to defend the ltv against an attack of the liberal W.F. Treub. Unfortunately, the series of in total some 300 pages has never been collected in a separate edition. Wiedijk himself was later dissatisfied with his work. He regretted, that "the reader had been swamped with excellence"19.
Unfortunately your columnist does not own the original editions of De Nieuwe Tijd. And a visit to the national archives is too time-consuming - at this moment. Therefore this paragraph must rely on second sources, notably various annals20. Wiedijk wonders, just like Kuyper, whether the ltv has a universal validity. Again, three years after Over waarde, the value modification is analyzed.
De Jong writes about these texts of Wiedijk: "The tenor of his argument is more ideological and philological than economical, and considers the philosophical ideas of Marx, notably from the years 1842 and 1843". On the next page De Jong states: "Although his text is original and independent in the elaboration of marxism on many terrains, sensational finds are absent".
It is striking, that Wiedijk accepts the ltv as a hypothesis - contrary to Kuyper. De Jong writes: "Wiedijk presents in his value study a scientific creed. He stresses the role of the hypothesis for the acquisition of knowledge. Any science which uses laws - but in his view this is a tautology - assumes that the hypothetical laws have a general validity, which surpasses the available empirical confirmations". Wiedijk states: "The special contains the general". That is to say, when the laws describe a real situation, then the tendencies can be present in other situations.
In another article, with the title Ter herdenking van Karl Marx (1908), Wiedijk writes: "Marx overthrew the idea of the unchangeable relations of the individual man and the natural things, and stressed the changes in human relations due to the dependency on the advancing social-economical conditions"21. It is clear, that Wiedijk does not accept the Walrasian equilibrium model and its marginal utility.
Incidentally, the style of that article shows, that Wiedijk is a polemicist and a satirist. In another article, Een fopschel (1904), this becomes very clear. There he criticizes an opponent, who rejects the value theory. According to that opponent the value theory equates the value of an able dentist and an interloper, as long as the tooth is extracted. Wiedijk replies: "Incidentally, Bernstein said that situations exist, where the marxist value theory can be replaced in a successful manner by the Böhmsche (EB: Eugen von Böhm-Bawerk), which assumes an individual utility; but the question remains: what is the marginal value of this rotten tooth for its owner, what will be the difference between its present and future value, the empirical value before the labour process, and after its completion? It may be that the value originates from scarcity, but the paradigm of Böhm does not offer a straightforward answer".
Wiedijk concludes: "Protect us against such an interpretation of value, which in this example equates half a minute of torture with a complete hour of pain! Few people will be such orthodox marxists, that they will resist this painful examination and criticism, and will refrain from renouncing the first volume of Das Kapital and accepting the third volume. Most people will prefer to express the product price in a labour time, which does not reflect the duration of the task, but is precisely the reverse"22.
By now it will be clear, that Wiedijk opposes the view of Kuyper. Once he called the article Over waarde "a thick blob of misconception"23. However, in his later years he was also negative about his own series of articles. He admits that the series should be rewritten. He even proposes to find other (new) ways to begründen the marxist theory of value24. These comments are not very encouraging for those, who hope to find a justification for the ltv in the series.
The most elaborate discussion of the value studies of Wiedijk is published by Frank Kalshoven. Unfortunately also his work is merely a summary. The explanation of Kalshoven confirms, that Wiedijk used a rather philosophical approach. According to Kalshoven, Wiedijk stresses the capitalist distortion of the natural exchange ratios by means of the value modification25. Wiedijk writes: "We know that the social coherence itself, whith their being-a-value as its precondition, will only be able to modify the law of value of simple commodity production. So, in any case the law of value is a tendency towards equal-value exchange". That is to say, the simple equal-value exchange is still valid, albeit somewhat in the background.
In the same summary Kalshoven describes how Wiedijk explains the general average profit rate in the theory of Marx. It seems that here Wiedijk simply ignores all emerging problems and contradictions. At least Kalshoven does not mention them. Yet he states that the series of Wiedijk has exceptional qualities, and deserves to be reprinted. Your columnist is not convinced - since then the interpretation of marxism has advanced.
It is remarkable that Buiting also states that "the effect (EB: of the article Over waarde by Kuyper) is outstripped by the brilliant study of Pieter Wiedijk". He states that Wiedijk "remedies in a superbe manner the apparent weakness of the ltv, namely the unequal exchange of value. On the one hand he states that in capitalism the transformation of labour values into product prices is valid for the economy as a whole. On the other hand, the nature of the commodity labour-force is such, that the exchange of equal surplus value is necessary for the exchange of unequal value"26. Your columnist is confused.
Buiting adds, that thanks to the interpretation of Wiedijk the transformation problem and the criticism of Von Bortkiewicz can be rejected. In the main text and in a footnote Buiting argues: "Marx states that the sum of the labour values equals the sum of the production prices and the sum of the surplus values equals the sum of the profits. Just like Wiedijk and Mandel, also Mattick and Moseley believe that the method of Marx differs fundamentally from the neoricardian interpretations".
This is indeed a belief, and Buiting could also have cited the scientists from the former Leninist states in Europe. When economics is used as a subjective social science, then this view can indeed be advanced. The value laws of Marx can simply be used as hypotheses. And indeed the neoricardian criticism can be rejected, because that paradigm itself contains controversial hypotheses, certainly from the marxist perspective.
However, the modern economics tries to use objective methods, and to test them with empirical data. Therefore a model must be causal, that is to say, it must contain a set of cause-consequence relations. That is impossible, when the credibility is replaced by a mere phantasy. And that is the proposal of Buiting. Then the theory is just a philosophical argument, and in fact reduces to an ideology. That would place marxism largely beyond the current economical debates. Incidentally, it contradicts the character of the three volumes of Das Kapital, because they clearly try to be credible. When Wiedijk really restricts his arguments to a philosophy, although brilliant, then his work will not give a better understanding.
This column has studies the ideas about the labour theory of value of the two leading names from the early history of the Dutch marxist science, namely R. Kuyper and P. Wiedijk. The first one turns away from the ltv, because she produces quantitative errors, notably in the value modification. The second one defends her with passion, but still is struggling to find valid arguments. In any case he fails (as far as your columnist understands the cited sources) to formulate a plausible causality in the ltv. It can also be concluded, that although the two writers have proven their expert knowledge, they did not add new ideas to the international marxist research of their times.
One must appreciate the influence, which was exercized by Kuyper and Wiedijk on the next generation of Dutch marxists. Here notably De Wolff and Van der Wijk must be mentioned27. It is known that De Wolff was inspired by the work of Wiedijk. However, in their scientific work De Wolff and Van der Wijk have used the Walrasian equilibrium model without hesitation. De Wolff excels in combining the elements of this model and of the ltv. Therefore it is not a coincidence, that precisely his name is linked to this webportal. So the work of Kuyper may be called pioneering, as far as the acceptance and dispersion of the Walrasian model is concerned.
When the marxism has no other future than as a philosophical economics, such as Wiedijk uses, then it can merely play a marginal role in the social debate. That is not satisfactory. As an alternative the need for the value modification could be denied. Empirical studies have shown that this standpoint is defensible28. Then the ltv is again plausible, both at the quantitative and causal level, however at the price of abandoning the third volume of Das Kapital. A more appealing alternative is offered by the Temporal Single System Interpretation, which has been discussed in a preceding column. The quantitative element is restored, and thus the causal relations, without infringing upon the economic dynamics of marxism.