Re: Falsifiability and the law of value

["Fred B. Moseley" <fmoseley@xxxxxxxxxxxxx>]

I argue that Marx's LTV is mainly a macro theory of profit, not a micro
theory of prices.  From this perspective, the main empirical test of
Marx's LTV is the explanatory power of its theory of profit.

I have written a paper on this topic, "Marx's Theory: True of False?  A
Marxian Response to Blaug's Appraisal", in Moseley (ed.) *Heterodox
Economic Theories: True or False?* (1995, Elgar).  The Blaug in the title
is Mark Blaug (of *Economic Theory in Retrospect*, etc.).

I argue that Marx's theory of profit has considerable explanatory
power.  It explains inherent technological change, and inherent conflicts
between capitalists and workers over the length of the working day and
over the intensity of labor.  It also explains the increasing composition
of capital, the falling rate of profit, periodic crises, etc.

In striking contrast, the orthodox theories of profit (or interest) -
marginal productivity of capital, time preference, etc. - have little or
no explanatory power.  I argue that there is no contest here.  Marx's
theory wins hands down!  Marx's theory of profit provides a much more
substantial theory of capitalism's important dynamics than do the orthodox
theories of profit.

In Blaug's comment on my paper (in the volume referred to above), Blaug
even concedes this point:

"The point is made as soon as it is said.[!]  Neoclassical economics is
essentially a static theory of resource allocation, and as such it does
not make predictions about the dynamic evolution of the capitalist
system."  (p. 135)

Blaug goes on to say that Marx's attempt to develop a theory of the
long-run dynamics of capitalism is "TOO AMBITIOUS" and suggests that we
"should LOWER OUR SIGHTS THEORETICALLY speaking and ... settle for LOOSELY
STRUCTURED HISTORIES of the evolution of the capitalist system, PREDICTING
LITTLE because we CAN EXPLAIN SO LITTLE."   (emphasis added)

This statement is astonishing, coming from such a staunch Popperian, who
his whole life has emphasized definite predictions as the hallmark of
scientific theory.  This abandonment of the attempt to develop a general
theory of the long-run dynamics of capitalism is a clear admission of the
failure of neoclassical economics.

Therefore, if we want to continue to develop a general theory of the
dynamic evolution of capitalism, Marx's theory would seem to be the best
alternative, and indeed the only alternative.


Comradely,
Fred