During half a century after the publication of the first volume of Karl Marx's book Das Kapital (1867) the marxist labour theory of value was one of the main currents in the economic science. However in the first decades of the twentieth century the theory of Marx became obsolete. For that two clear reasons can be mentioned. The first reason is the rise of the theory of marginal utility, with important contributions by J.S. Jevons, K. Menger and L. Walras. The second reason is the well-founded criticism, that was passed on the marxist theory. E. Feess-Dörr has written a book about this criticism, titled Die Redundanz der Mehrwerttheorie, with two noteworthy characteristics: clarity and completeness. Therefore a review is justified, even though since the date of publication (1989) a quarter of a century has passed. Incidentally, until recently the publisher Metropolis could supply the book from its stocks. Apparently the demand is not overwhelming.
These days it is common to formulate the criticism of the theory of Marx in terms of the so-called neoricardian theory. The neoricardian theory has first been presented by P. Sraffa, in a book with the mysterious title Production of Commodities by Means of Commodities1. Apparently one is not enough. In retrospect the argument of Sraffa is surprisingly simple. Namely, he sets up the price relations for all branches in the economic system. The production costs of each type of good are analysed with a mathematical precision. In this way his theory is related to the theory of Marx, which also divides the economic system in a number of departments, each with its own assortiment of goods.
Feess-Dörr explains both the marxist and the neoricardian theory in a clear manner. He is familiar with both of them. He illustrates his explanation with simple calculations, based on an economic system with just two branches, namely the agriculture and the industry. That is of avail. Practical applications appeal more to the imagination than abstract discourses. Thanks to his well-chosen limitation to just two branches Feess-Dörr can formulate the theory in common mathematical equations. More than two was an alternative, but then he would have to resort to complicated matrix calculations. But now everybody with a rudimentary knowledge of mathematics should be able to understand his arguments. Incidentally, the major part of the book consists of ordinary text, notably theoretical interpretations and historical contemplations, and not formulas2. If necessary (and this happens more than once), Feess-Dörr gives extensive citations from the works of others.
Lovers of marxism will be pleased to note, that Feess-Dörr displays a marked sympathy for the work of Marx. He helps the reader to improve his understanding of the views of Marx. Moreover, as has just been said, the neoricardian theory itself resembles the theory of Marx. A knowledge of both facilitates cross-breeding. In the neoricardian theory the profit is also calculated simply by a multiplication of the production costs with a markup factor. Feess-Dörr provides this explanation of profit with the rather pompous designation surplustheoretical paradigm. When the profit is zero, then the marxist and neoricardian theories even yield the same results. Then the prices will be just the labour values.
It is nice and an extra, that Feess-Dörr also makes room for a succint interpretation of the theory of marginal utility, of course not in the old-fashioned way of the trio Jevons, Menger and Walras, but in the form of the modern neoclassical theory. He submits her to an crushing criticism. Thanks to a comparison of the present neoclassical theory with the results of the neoricardian theory Feess-Dörr can even prove, that the first-mentioned of the two is applied erroneously in macroeconomics. To be precise: the neoclassical theory commonly presents the stock of capital goods as a fixed wealth, with a total size of K. However, that is not any good on the macroeconomic level, because in reality K will depend on the wage level and on the profit rate. The reader should remember this, since too often the neoclassical arguments are wrongly used in macroeconomics.
After this side-leap Feess-Dörr returns to his main theme, the marxism. He explains where the ideas of Marx deviate from the old ricardian theory, which has been developed already at the beginning of the nineteenth century by David Ricardo (David is his forename). Marx presents price equations, that derive the prices from the labour values. In his vision the real value of a product is determined by the amount of expended labour time. Therefore Marx presents the wage level as an endogen quantity (determined within the model). For the wage level is simply the amount of value, that is needed in order to secure the existence of the workers. It is in the true sense of the expression a basket of wage goods. Then the profit, in the form of surplus value, is the remainder, says Feess-Dörr. He equals the nett product after the payment of the wages. In this antagonistic duo, income from labour and from capital, the wages come first, at least in the analysis. The distribution of the wealth is already determined in the production process.
Unfortunately the price transformation of Marx turns out to be wrong3. Again the refutation stems from the neoricardian theory, which brings down other theories, first the neoclassical theory, and now this. Apparently Marx is mistaken in his attempt to reconcile the dichotomy of the product (namely the price-value) on the macro level. Feess-Dörr proves clearly, that these are two different quantities. It is true that the marxist price transformation can be repared, but then it is no longer possible to calculate the prices directly from the labour values. Obviously this casts doubt on the sense of the construction of the labour theory of value.
In the seventies and the eighties of the last century the marxist economists have tried with all their might to repare the criticism of Sraffa. It was not enough to understand the theory of Marx, she also has to be changed. In this way the Fundamental Marxist Theorem (FMT) has been invented. It says: The uniform average profit rate is positive only, when the rate of surplus value is positive. Who can follow this? Your reviewer, who had already encountered the FMT in other books, was mystified, until he was enlightened by Feess-Dörr. The FMT is an attempt to give the duo price-value a new meaning, notably in their interconnection. Unfortunately the FMT has also been criticised. It turns out (and Feess-Dörr gives a proof) that in the situation of coupled production4 the FMT yields negative labour values! Of course this is impossible. Thus Feess-Dörr makes the painful conclusion, that the labour theory of value is acually redundant. It is a waste of brain-work. Despite this sad ending your reviewer does not know any other book, which explains the marxist debate so clearly. Just these paragraphs make the book valuable and precious.
Next Feess-Dörr discusses again the different points of view of the ricardians (mainly Ricardo himself, although more names could be mentioned), the marxists, and the neoricardians. Also he sketches how the theory of Keynes influences the neoricardian theory. According to Feess-Dörr the comparison is mainly relevant for the yield of capital and for the interest rate, and the way that they are interpreted5. In the end he shorty analyses the marxist law of the tendency of the falling rate of profit, and the attempts that have been made to refute him (the law, not the profit rate). This is really a complicated subject-matter, and at least for your reviewer not the most enlightening part of the book. In these pages, as an epilogue, Feess-Dörr sketches a perspective for advanced students. Next anybody who feels challenged can consult the very complete reference list at the back of the book, witn many useful references to other authors.