The Subjectivist Outlook in Economics

From Austro- Marxism, Tom Bottomore and Patrick Goode (eds), Clarendon Press, Oxford: 1978

Rudolf Hilferding

It is precisely the phenomenon of variations in the price of production which has shown us that the phenomena of capitalist society can never be understood if the commodity or capital is considered in isolation. It is rather the social relationship in which they exist, and changes in that relationship, which dominate and account for the movements of individual capitals, which are themselves no more than parts of the total social capital. But the representative of the psychological school of political economy fails to see this social context, and hence he is bound to misunderstand a theory which intends precisely to reveal the social determinism of economic phenomena, and whose starting point therefore is society and not the individual. He always subordinates the concepts and terms of this theory to his own individualistic outlook and so he finds contradictions which he ascribes to the theory, whereas they are in truth ascribable solely to his conception of the theory.

This incessant quid pro quo is to be found at all stages of Bohm-Bawerk's polemic. Even the fundamental concept of the Marxist system, the concept of value-creating labour, is understood in a purely subjective manner. For him, 'labour' is identical with 'trouble' or 'effort', and making this indi¬vidual feeling of distaste the source of value naturally leads us to see in value a purely psychological fact, and to deduce the value of commodities from our evaluation of the labour they have cost. As is well known, this is the basis which Adam Smith always adopts for his theory of value, for he is always inclined to abandon the objective standpoint for a subjective one. Smith writes: 'Equal quantities of labour must at all lines and places be of equal value to the labourer. In his ordinary state of health, strength, and spirits, in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness.’ (Wealth of Nations, bk. i, Chapter 5). If labour regarded as 'trouble' is the basis of our personal estimate of value, then the 'value of labour' is a constituent, or a ‘determinant' as Bohm-Bawerk puts it, of the value of commodities. But it need not be the only one, for a number of other factors which influence the subjective estimates made by individuals take their place beside labour and have an equal right to be regarded as determinants of value. If, therefore, we identify the value of commodities with the personal estimate of the value of these commodities made by this or that individual, it seems quite arbitrary to select labour as the sole or such an estimate.

Hence, from the subjectivist standpoint, on which Bohm-Bawerk bases his criticism, the labour theory of value appears untenable from the very outset. And it is because he adopts this standpoint that Bohm-Bawerk is unable to perceive that Marx's concept of labour is totally opposed to his own. in A Contribution to the Critique of Political Economy Marx had defined his opposition to Adam Smith's subjectivist outlook: '(Smith) fails to see the objective equalization of different kinds of labour which the social process forcibly carries out, mistaking it for the subjective equality of the labours of individuals. (Kerr ed., p. 68) In fact, Marx is entirely unconcerned with the individual motivation of the estimate of value. In capitalist society it would be absurd to make 'trouble' the measure of value, for generally speaking the owners of the products have taken no trouble at all, whereas the trouble has been taken by those who have produced but do not own them. With Marx, in fact, every individual relationship is excluded from the conception of value-creating labour: laboour is regarded, not as something which arouses feelings of pleasure or its opposite, but as an objective magnitude inherent in the commodities, and determined by the degree of development of social productivity. Whereas for Bohm- Bawerk labour seems merely one of the determinants in personal estimates of value, in Marx's view labour is the basis and the connective tissue of human society, and the degree of productivity of labour, and the method of organization of labour, determine the character of social life. Since labour, viewed in its social function as the total labour of society of which each individual labour forms merely aliquot part, is made the principle of value, economic phenomenn are subordinated to objective laws that are independent of the individual will and controlled by social relationships. Beneath the husk of economic categories we discover social relationships, relationships of production, in which commodities play the part of intermediaries, the social relationships being reproduced by these intermediate processes, or undergoing a gradual transformation until finally they require a new type of mediation.

Thus the law of value becomes a law of motion for a definite type of social organization based upon the production of commodities, for in the last resort all change in social structure can be referred to changes in the relationships of production, that is to say, changes in the productivity and the organization of labour. Thus, in striking contrast with the outlook of the psychological school, we are led to regard political economy as a part of sociology, and sociology itself as a historical science. Bohm-Bawerk has never become aware of this contrast. In a controversy with Sombart as to whether the 'subjectivist method' or the 'objectivist method' is the proper method in economics he concludes by saying that each method must supplement the other; when in fact the issue does not concern two different methods, but contrasting and mutually exclusive outlooks upon social life as a whole. So too it comes about that Bohm-Bawerk, invariably carrying on the controversy from his subjectivist and psychological standpoint, discovers contradictions in the Marxist theory which seem to him to be contradictions only because of his own subjectivist interpretation of the theory.

If labour is the only means for estimating value and thus the only measure of value, it is only logical from the subjectivist standpoint that commodities should exchange solely in proportion to the equal quantities of labour embodied in them. Otherwise it is impossible to see what would induce individuals to deviate from their personal estimates of value. If, however, the facts do not conform to these premises, then the law of value loses all significance, even if labour is no more than one determinant among others. This is why Bohm- Bawerk lays so much stress upon the contention that commodities are not exchanged on the basis of equal quantities of labour. This necessarily appears to be a contradiction when value is conceived, not as an objective quantity, but as the outcome of individual motivation.

Marx's outlook is entirely different. In his view, the fact that goods contain labour is one of their intrinsic qualities; that they are exchangeable is a quite distinct characteristic solely dependent on the will of the possessor, which presupposes that they are owned and alienable. The relationship of the quantity of labour to the process of exchange does not come into consideration until goods are regularly produced as commodities, produced that is to say as goods specifically destined for exchange; thus this relationship makes its appearance only at a definite stage of historical development. The quantitative ratio in which they are exchanged thus becomes dependent upon the time taken to produce them, and this in turn is determined by the level of social productivity.
Thus the exchange relationship loses its fortuitous character and ceases to be dependent upon the caprice of the owner. The social conditions imposed upon labour become objective limitations for the individual and the social complex controls the individual's activities....

The exchange relationship between commodities is no more than the material expression of the social relationships among persons, and what is actually realized in the exchange relationship is the equality of the agents of production. Since, at the stage of simple commodity production, equal and independent workers, each of whom possesses his means of production, confront one another, exchange takes place at prices which tend to correspond to the values. Only in this way can the mechanism of the simple production of commodities be maintained, and the conditions needed for the reproduction of the relationships of production be fulfilled.

In such a society the product of labour belongs to the labourer. If, as a result of permanent deviation from this rule (chance deviations compensate each other), a portion of the product of labour is taken away from the labourer and assigned to another person, the basis of the society will be modified; the former will become a wage labourer (engaged in domestic industry) and the latter a capitalist. This is actually one of the ways in which simple commodity production is dissolved. But it cannot finally cease unless a modification of social relationships has occurred, accompanied by a modification of exchange, which is the expression of social relationships.
In the capitalist process of exchange, the purpose of which is the realization of surplus value, the equality of the economic units is once more reflected. These units, however, are no longer independent producers, but owners of capital. Their equality finds expression in the fact that exchange is only normal when the profits are equal, when they are average profits. The exchange which expresses the equality of the owners of capital is of course determined in a different way from that which is based upon equality in the expenditure of labour. But just as both societies have the same basis—the division of property and the division of labour—and just as capitalist society can be conceived simply as a higher, modified form of the earlier type of society, so also the basis of the law of value is unchanged, for it has merely undergone certain modifications in its realization. These result from the specific mode of capitalist competition, which brings about the proportional equality of capital. The share in the total product, whose value remains directly determined by the law of value, was formerly proportional to the individual's expenditure of labour, but now becomes proportional to the expenditure of the capital that is needed to set labour in motion. In this way the subordination of labour to capital is expressed. It appears as social subordination; the whole society is divided into capitalists and labourers, the former being owners of the product of the latter, the total product determined by the law of value, which is divided among the capitalists. The capitalists are free and equal; their equality is shown in the price of production = c (cost) +p (profit), where p is proportional to c. The dependent position of the labourer is shown by the fact that he appears as one of the constituents of c, along with machinery, lubricating oil, and beasts of burden; this is all he means to the capitalist as soon as he has left the market and has taken his place in the factory to create surplus value. Only for a moment did he have a role in the market, as a free man selling his labour power. This brief glory in the market and the prolonged debasement in the factory illustrate the difference between legal equality and economic equality, between the equality demanded by the bourgeoisie and the equality demanded by the proletariat.

The capitalist mode of production socializes mankind to a greater extent than did any previous mode of production; this is its historical significance, and the reason why we can regard it as a preliminary stage on the way to socialist society. That is to say, capitalism makes the existence of the individual dependent upon the social relationships in which he is placed. It does so in an antagonistic form, by the formation of two great classes, making the performance of social labour the function of one of these classes, and enjoyment of the products of labour the function of the other. The individual is not yet a 'direct expression' of society; that is, he does not yet have a direct relationship to society, for his economic position is determined by his position as member of a class. The individual can only exist as a capitalist because his class appropriates the product of the other class, and his own share is solely determined by the total surplus value, not by the surplus value which he individually appropriates. The significance of class reveals the law of value as a social law. The theory of value would only be refuted if it were shown to lack confirmation in the social domain.

In capitalist society the individual appears as ruler or slave according to whether he belongs to one or other of the two great classes. Socialist society makes him free, by abolishing the antagonistic form of society, and by promoting socialization in a conscious and direct manner. At that stage, social interrelations are no longer concealed behind enigmatic economic categories which seem to be the natural qualities of things, but manifest themselves as the freely willed outcome of human co-operation. Political economy then ceases to exist in the form which we have known so far, and is replaced by a science of the 'wealth of nations'.

Inasmuch as the productive power of human society, in the specific organizational form which society confers upon it, is for Marx the fundamental idea of political economy, he portrays economic phenomena and their modifications in terms of their law-governed regularities, and as causally dominated by the changes in productive powers. In his demonstration, following the dialectical method, conceptual development runs parallel throughout with historical development, since the development of the social powers of production appears in the Marxist system, on one side as a historical reality, and on the other side as a conceptual reflection. Moreover, this parallelism furnishes the strictest empirical proof of the correctness of the theory. The commodity form is necessarily the starting point; it is the simplest form, and becomes the object of economic observation, as the object of a specific science. For in the commodity form there already emerges that illusory appearance which results from the fact that the social relationships of individuals assume the aspect of material qualities of things. It is this illusory material appearance which so greatly confuses the issues of economics. The social functions of individuals masquerade as material qualities of things, just as time and space, the subjective forms of perception, masquerade as objective qualities of things. In so far as Marx dispels this illusion, discloses personal relationships where previously material relationships had been seen, and social relationships where individual relationships had been seen, he succeeds in providing a unified and consistent explanation of the phenomena which the classical economists had been unable to elucidate. The failure of the classical economists was inevitable, for they regarded bourgeois relationships of production as natural and unalterable. Marx, having demonstrated the historical conditioning of these relationships of production, was able to take up the analysis at the point where the investigations of the classical economists were bound to stop.

But the demonstration of the historical transitoriness of bourgeois relationships signifies the close of political economy as a bourgeois science and its foundation as a proletarian science. Only two ways now remained open to the champions of the bourgeoisie if they wanted to be anything more than simple apologists, adopting an uncritical eclecticism to shore up the crumbling pillars of their harmonious systems. They might, like the historical school in Germany, ignore theory and try to fill the gap with a history of economic science; but they would then be hampered, as the German historical school has been hampered even within its chosen field, by the lack of any coherent understanding of economic events. The psychological school of economics has chosen the other path. The members of this school have endeavoured to construct a theory of economic events by excluding economics itself from their purview. Instead of economic or social relationships they have chosen as the starting point of their system the individual relationship between men and things. They regard this relationship from the psychological aspect as one which is governed by natural and unalterable laws. They ignore the determinate social character of the relationships of production, and the idea of a law-governed development of economic events is alien to their minds. This economic theory means the repudiation of economics. The last word in the rejoinder of bourgeois economics to scientific socialism is the self-destruction of political economy.