MARX & MMT, PART 5 – Why a Single System & What Did Marx Say?

The previous post introduced the temporal single-system interpretation (TSSI) of Marx. It was seen that, under this interpretation, Marx’s three aggregate equalities all hold. It was noted that the same can be said for other single-system interpretations. As long as constant capital and variable capital are defined as the amounts paid for the means of production and labor power, the equalities are logically valid. In this post, a possible rationale is offered for defining constant and variable capital in this way. Attention then turns to Marx’s own writings on the matter to consider whether the single-system understanding accords at all with his view.

Note. References to Marx’s work. With so many different editions and translations of Marx’s major works, page numbers for a given passage often vary, and the wording can slightly differ as well. In this post, I reproduce passages that have already been highlighted by various (sometimes many) scholars. Since I consider the textual interpretations of a few of these scholars, I reproduce the passages as quoted by them and provide the page numbers and editions they cite (along with references to the secondary sources). Full references are listed at the end of the post. When multiple authors refer to different editions of the same work of Marx, all dates are given, separated by semicolons, and all publishers are listed, also separated by semicolons.

Emphasis in quoted passages. Unless indicated otherwise, any emphasis in the passages quoted is in the original text, or in Marx’s text when the quote is of him.

Why adopt a single-system interpretation?

On encountering the single-system replication of Marx’s aggregate equalities, a reaction might be to wonder, why? Why should it be input prices and not input values that are transferred to the final commodity’s value in Marx’s theory?

Different answers could be offered in response to this question. The following is my own way of looking at the matter, but not necessarily Marx’s or anybody else’s in every respect. Even so, the main ideas are drawn from the existing literature, as will become apparent. This post (particularly this section) is one of the more contestable parts of the series. It is intended more to explain the motivation for my own adoption of a single-system view rather than as anything definitive. Previous parts of the series are essentially indisputable given the initial definitions and assumptions, provided no error of logic has been made. But in this post we are touching on possible reasons for the actual definitions adopted, and such choices are obviously always contestable.

Capitalist commodity production. In my view, an answer to the question posed is implicit in Marx’s definition of value itself, when applied to capitalist commodity production. The value of a commodity in Marx’s theory is equal to the amount of labor time needed to produce it. Since we are here considering capitalism, the value of a commodity will be the amount of labor time needed to produce it under capitalist conditions.

But needed by whom?

Capitalism, as depicted by Marx, is a system with incentives geared first and foremost toward the interests of those who own the means of production. This is true, at least, to the extent that the economy is organized along the lines of capitalist commodity production to which Marx’s theory of value specifically applies. The main driver of behavior under capitalist commodity production is the profit motive.

From the perspective of society as a whole, it may well make sense to argue that the value of labor power – the amount of socially necessary labor needed to reproduce the working class – is the amount of society’s labor time actually embodied in the goods and services that workers consume. Similarly, from the perspective of society as a whole, the value of the means of production could be seen as the amount of labor embodied in inputs.

But capitalist commodity production, in Marx’s view, does not directly serve the interests of society as a whole but is rather tailored to the interests of capitalists. From the perspective of capitalists, the amount of labor time that must be devoted to reproduction of the working class – i.e. the value of labor power – is not the labor embodied in workers’ consumption goods but, instead, the labor-time equivalent of the monetary amount capitalists must outlay on wages in the form of variable capital. These wages must be sufficient for workers to be able to pay the prices, not values, of the goods they consume. It is this monetary outlay on wages, equivalent to a definite quantity of society’s labor time, that capitalists need to make in order for commodities to be produced under capitalist conditions. This monetary amount may be greater or less than the labor embodied in workers’ items of consumption.

Likewise, from the perspective of capitalists, the amount of labor time that must be devoted to constant capital is not the amount of labor embodied in the elements of constant capital but the labor-time equivalent of the monetary outlay required of capitalists if they are to obtain the necessary inputs at going prices.

The divergence between value and price means that the amount of labor that, in effect, needs to be “tied up” in monetary form (from the perspective of the capitalist making the outlay) in order for a particular commodity to be produced under capitalism will in general differ from the amount of society’s total labor time that would need to be devoted to the equivalent good or service under some other system. This can be so even if everything about the technical aspects of production under the two different systems are the same. We could imagine, for instance, a socialist society without private profit in which prices of a range of goods and services were set equal to the amounts of labor time embodied in them. In such a system, the prices of inputs would be different than under capitalism (sometimes higher, sometimes lower) and so the amount of labor needed to produce a particular final good or service would also be different. Marx sometimes contrasted capitalism with ‘simple commodity production’. Under simple commodity production, each commodity exchanges at its value and, unlike in capitalist societies, the amount of labor needed to produce each commodity equals the labor embodied in each commodity.

The suggestion that commodities produced under capitalist conditions will require different amounts of socially necessary labor than if they were produced under simple commodity production – and so will have modified values – seems highly reminiscent of an argument provided in two papers by Wolff, Roberts and Callari (1982, 1984) in which they present their own single-system interpretation. I will use the abbreviation WRC for the authors’ names. The interpretation they offer differs from the TSSI in two respects. First, they view value and price determination as simultaneous rather than temporal. Second, they regard the prices of production of inputs and wage goods to be the relevant prices when considering the amount of labor time needed to produce a commodity. (In the TSSI, prices of production are considered to be just a special case.) Despite these differences, the relevant point in the present context is the rationale for defining constant and variable capital as the amounts actually paid for them. It is on this point that WRC’s argument seems reminiscent of the one suggested here.

WRC argue that Marx, having defined value as socially necessary labor time, then proceeded to relate the definition more specifically to capitalism, in which price – the ‘form of value’ – necessarily deviates from value at the level of individual commodities. The way in which the deviations are envisaged to occur is systematic, as we have seen in a previous post, influenced by the sectoral compositions of capital. Because these deviations apply to all commodities, including inputs and wage goods, the specifically capitalist form of value (price, and more specifically price of production for WRC) enters into the determination of value itself.

Price of production is therefore that magnitude of labor-time just exactly large enough (socially necessary) to reproduce the capitals of each industry on an equal profit footing with those in all other industries. As a magnitude, then, price of production, the relevant particular form of value in exchange will in general deviate from the value of the commodity … This new form of value, as a constitutive element of the capitalist economy, enters directly into the determination of commodity value, i.e., into the determination of the abstract labor-time “socially necessary” to reproduce the commodity. This general definition must, we argue, be concretized by constructing its particular meaning within the context of the particular production and circulation processes considered in Volume 3. As Marx stated several times (for example, 1967:175), this requires consideration of the factors socially necessary to reproduce the commodity as a product of capital. Thus, the specifically capitalist conditions of circulation, initially assumed away in Volume 1, will now impact on the social necessity of the labor time involved in production. (Wolff, Callari and Roberts 1984, p. 125)

Since capitalist production is for profit, a good or service will not be produced as a commodity unless doing so promises a return on capital competitive with alternative investments. It is for this reason, above all, that the amount of society’s labor time called upon to make production of a particular commodity worthwhile for the capitalist will in general differ from the amount suggested by purely technical considerations. The amounts of society’s labor time devoted to various commodities will differ, as far as capitalists are concerned, from the actual labor that physically goes into each. The choice of how to allocate society’s available aggregate labor time between its many possible uses will be decided according to what is profitable for capitalists rather than what is desirable to the community as a whole.

The quantity of labor-time physically/technically embodied in the means of production is no longer adequate to express what is socially necessary for the reproduction of output. Given the altered form of exchange equivalence, the quantity of labor-time in money form which each capitalist must actually advance to get his constant capital goods (their production price) becomes a constituent part of the value of the output produced with those constant capital goods. Since production price is “a prerequisite of supply, of the reproduction of commodities in every individual sphere” (Marx 1967:198), the form of value in exchange is then a constituent element in determining the magnitude of commodity value.

In effect, both quantities (value-form and value) are transformed. Where commodity exchange-values are transformed into production prices via market exchange of equivalents, this transformation must include those commodities purchased as elements of constant capital. Their prices of production are then incorporated into the value of newly produced output, since these production prices express the labor-time now socially necessary to produce that output. (Wolff, Callari and Roberts 1984, p. 126)

Capital as a sum of money. The argument presented so far emphasizes the distinction between the value of inputs and the value of the money with which capitalists purchase inputs. In a single-system view, it is the latter – the value of the money – that enters the value of the new commodity. The sum of money used to purchase inputs is functioning as money capital. It is equal in amount to the prices, not values, of the inputs multiplied by their quantities, and is equivalent to a certain amount of socially necessary labor time. This amount of labor time is the value of constant capital in real terms.

Capital, in this view, already exists independently of the particular use values (inputs) purchased with it, as a sum of money. Already in this monetary form, the capital represents an amount of society’s socially necessary labor, which can be deduced through division by the MELT (monetary expression of labor time). Capitalists, as possessors of capital, can command portions of society’s aggregate labor time. They then choose how much money capital – and therefore how much of society’s labor time – to devote to the production of particular commodities.

Kliman and McGlone (1999, p. 38) argue that, for Marx, as in single-system interpretations, it is this sum of money, existing prior to its conversion into inputs at going prices, that defines the amount of capital (and amount of society’s labor time) that must be devoted to the acquisition of the elements of constant and variable capital. They draw attention, for instance, to the following statement by Marx:

The means of production on the one hand, labour-power on the other, are merely different forms of existence which the value of the original capital assumed when it lost its monetary form and was transformed into the various factors of the labour process. (Marx 1977, p. 317; cited in Kliman and McGlone 1999, p. 38)

Kliman and McGlone comment as follows:

The value of capital is therefore not synonymous with the values of inputs purchased with it. Before being tied up in production, the capital value first exists as a sum of money. The capital-value is this sum, the sum of value advanced to acquire inputs, which can clearly differ from the values of the inputs themselves. (Kliman and McGlone 1999, p. 38)

Kliman and McGlone (p. 39) then note Marx’s argument, a page or so on, that if the price of cotton doubles, it transfers double the value to the new commodity into which it enters as an input. The authors also draw attention to chapter 6 of the third volume of Capital in which Marx wrote:

the effect that these price fluctuations have on the profit rate … is just as valid if prices rise or fall not as a result of fluctuations in value, but rather as a result of the intervention of the credit system, competition, etc. (Marx 1981, pp. 201, 208)

And, further:

the same causes that raise or lower the price of the product also raise or lower the value of the capital. (Marx 1981, p. 209; emphasis added by Kliman and McGlone 1999, p. 39)

Whenever input prices differ from values, the amount of socially necessary labor needed to acquire the inputs (represented by a sum of money capital) will differ from the values of the inputs. Nonetheless, this amount of socially necessary labor will remain equal to the value of the capital advanced for the inputs, and it is this value that enters as constant capital into the value of the new commodity. This, at least, is the TSSI reading of Marx.

Did Marx adhere to a labor theory of value? From a single-system perspective, it could be argued that Marx’s theory of value is not a labor theory of value. Actually, it is for this reason that nowhere on this blog do I ever refer to Marx’s theory by this name. It is not, under a single-system interpretation, a theory of embodied labor. Nor, as far as I am aware, did Marx seem to refer to his own approach as a labor theory of value. Even so, labor time is still central to Marx’s explanation of both value and price. Individual prices are connected to values in a systematic way, and value aggregates determine the average rate of profit irrespective of the ultimate configuration of individual prices. It is just that the connection between labor time and value in Marx’s theory is not simply about embodied labor. With all this in mind, I can understand why many refer to Marx’s approach as a labor theory of value, but tend not to use the term myself in connection to his theory.

How did Marx understand constant and variable capital?

Whatever the merits of single-system interpretations, it may in any case be wondered whether they match what Marx wrote on the matter. We have already considered a few brief snippets of Marx’s writings that appear to be consistent with the single-system view. But, at this stage, we have not encountered statements by Marx specifically explaining his understanding of constant and variable capital.

Quoting passages can never be definitive. This is why Andrew Kliman (2007) places emphasis on replicating the results of Marx’s theory from explicitly stated premises, as was mentioned in the previous post. But there certainly are passages that appear to be highly consistent with a single-system perspective. Here, we can consider a few.

The following passage is quoted by Freeman (1996). In evaluating the passage, note that the term ‘cost-price’ in Theories of Surplus Value, from which the passage is taken, was Marx’s term at the time for ‘price of production’. This differs from his usage in Capital, where price of production refers to the output price that would apply if the sector received the average rate of profit.

The conversion of value into cost-price works in two ways. First, the profit which is added to the capital advanced may be either above or below the surplus-value contained in the commodity itself, that is, it may represent more or less unpaid labour than the commodity itself contains. This applies to the variable part of the capital and its reproduction in the commodity. But apart from this, the cost price of constant capital – or of the commodities that enter into the value of the newly-produced commodity as raw materials and machinery [or] labour conditions – may likewise be above or below its value. Thus the commodity comprises a portion of the price which differs from value, and this portion is independent of the quantity of labour newly added, or the labour whereby these conditions of production with given cost-prices are transformed into a new product. It is clear that what applies to the difference between the cost-price and the value of the commodity as such – as a result of the production process – likewise applies to the commodity insofar as, in the form of constant capital, it becomes an ingredient, a precondition, of the production process. Variable capital, whatever difference between value and cost price it may contain, is replaced by a certain quantity of labor which forms a constituent part of the value of the new commodity, irrespective of whether its price expresses its value correctly or stands above or below the value. On the other hand, the difference between cost-price and value, insofar as it enters the price of the new commodity independently of its own production process, is incorporated into the value of the new commodity as an antecedent element. (Marx 1972, p. 167; cited in Freeman 1996, p. 9, except that I have included an additional sentence: the second-last one referring to variable capital).

Freeman comments on this passage as follows:

This is totally clear. It states that if an input to production is priced above or below its value, it transfers correspondingly more or less value to the output from production. Equally, if wage goods are priced above or below their value, the value of variable capital is correspondingly higher or lower. (Freeman 1996, p. 9)

Marx appears, in the above passage, to be arguing in a way that is consistent with the single-system view. The value of constant capital equals the monetary outlay on inputs, which depends on their prices, not values. Any difference between the price and value of an input enters the value of the new commodity “as an antecedent element”. Likewise, the value of variable capital equals the monetary outlay on wages, which purchases for workers an amount that depends on the prices, not values, of wage goods.

On this latter point, Wolff, Callari and Roberts (1984, p. 130) draw attention to an even more explicit statement by Marx regarding the value of labor power:

the value of labor power … is determined by the production price of the means of subsistence. (Marx 1967, p. 868.)

Note, though, as Marx does in the passage from the Theories of Surplus Value, and as we did in the previous post, that the value of variable capital is replaced in the value of the new commodity by the actual amount of living labor performed in production. Therefore, the value of variable capital does not affect the value of the new commodity in the same way that constant capital does.

In light of this textual evidence, the meaning of another passage sometimes cited as an indication that Marx was aware of an internal inconsistency in his theory for which he had no solution can, to the contrary, be seen as consistent with a single-system perspective. It should be noted that this next passage comes from the third volume of Capital, in which, as already mentioned, Marx uses the term ‘price of production’ for the output price that would yield the average rate of profit whereas ‘cost-price’ here refers to c + v (that is, the outlay on constant and variable capital necessary to produce the final commodity):

As the price of production of a commodity can diverge from its value, so [can] the cost price of a commodity, in which the price of production of other commodities is involved … . It is necessary to bear in mind this modified significance of the cost price … if the cost price of a commodity is equated with the value of the means of production used up in producing it, it is always possible to go wrong. (Marx 1981, p. 265; cited in Kliman and McGlone 1999, p. 39)

Read from a single-system perspective, Marx here is telling us not to mistake cost price for the value of the means of production used up in the production process. Doing so causes error. Once we are taking account of key characteristics of capitalism, such as production for profit, the tendency under competitive conditions for profit rates to converge, or the existence of monopolies or economic rents, the significance of cost price is “modified”. The situation is no longer akin to simple commodity production.

Here is one more relevant passage from volume III of Capital:

We have already seen that the divergence of price of production from value arises for the following reasons: (1) because the average profit is added to the cost price of a commodity, rather than the surplus-value contained in it; (2) because the price of production of a commodity that diverges in this way from its value enters as an element into the cost-price of other commodities, which means that a divergence from the value of the means of production consumed may already be contained in the cost price, quite apart from the divergence that may arise for the commodity itself from the difference between average profit and surplus-value … Let us assume that the average composition is 80c + 20v. It is possible now that, for the actual individual capitals that are composed in this way, the 80c may be greater or less than the value of c, the constant capital, since this c is composed of commodities whose prices of production are different from their values. The workers must work for a greater or lesser amount of time in order to buy back these commodities (to replace them) and must therefore perform more or less necessary labour than would be needed if the prices of production of their necessary means of subsistence did coincide with their values. (Marx 1981, pp. 308-309; cited in Freeman 1996, p. 10).

In this passage, Marx notes that a commodity of the average composition can still have a cost price that differs from the value of its inputs and labor power. In his example, this is because “the 80c may be greater or less than the value of c”. In other words, the monetary sum advanced for inputs, which depends on input prices, can differ from the value of the inputs purchased.

Since, in the single-system view, cost price enters into both the price and value of the new commodity, the passage seems to indicate that the difference between the value of constant capital and the value of the inputs purchased with that constant capital will, by affecting the cost price, also affect the value of the new commodity. If so, this is consistent with Marx’s statement, quoted earlier, that differences between input prices and input values are “incorporated into the value of the new commodity as an antecedent element”.

Regarding the single-system position that cost price enters both the value and price of a commodity, Kliman writes:

There is no separate cost price that depends upon the values of means of production and subsistence. Indeed, Marx seems invariably to have referred to “the” cost price (see, e.g., the passage about the “modified significance of the cost price” quoted above), never to two separate cost prices. Moreover, Alejandro Ramos (1998-1999) has called attention to a passage left out of Capital, volume III by Frederick Engels, its editor, which expresses the value of the commodity as K + s (cost price + surplus-value) and the price of the commodity as K + p (cost price + profit). Marx’s use of the same symbol, K, in both expressions makes it especially clear that values and prices share the same cost price. Basically the same symbol (k) appears throughout volume III as edited by Engels. That k does not represent a “value” magnitude in some places and a “price” magnitude in others is clear from two passages that use k in connection with both the price and the value of the commodity (Marx 1991a: 309, 897). (Kliman 2007, p. 107)

On the basis of the passages considered above, it seems at least plausible to suggest that the single-system view is consistent with Marx’s understanding of the determinants of constant and variable capital. Considering the single-system understanding appears not to be obviously out of line with the textual evidence and is able to replicate Marx’s three aggregate equalities, it seems to hold up reasonably well as an interpretation of his theory.

Looking ahead

There are a couple of issues that, though raised, have been left up in the air at this stage of the series.

One issue concerns the implications of temporality. So far, the emphasis has been on the single-system aspect of the TSSI, since this is responsible for the replication of Marx’s aggregate equalities. There is still a need to consider the consequences of explicitly introducing time into the determination of values and prices. In view of the fact that Marx’s theory of value centers on labor time, this introduction of time might be expected to have significant effects.

The second issue concerns the basis of value itself. Why might it make sense to consider labor the sole creator of value? It will not be possible (at least for me) to provide a proof of this proposition, but we can at least consider a possible rationale for it. Much like the present post, the argument presented will be contestable.

Once the issues of temporality and labor as source of value have been considered, the way will be clear for an exploration of Marx in relation to MMT.


Freeman, A. (1996), ‘The Psychopathology of Walrasian Marxism’, in A. Freeman and G. Carchedi (eds.) (1996), Marx and Non-Equilibrium Economics, Cheltenham: Edward Elgar, pp. 1-29.

Kliman, A. (2007), Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency, Lanham: Lexington.

Kliman, A. and McGlone, T. (1999), ‘A Temporal Single-system Interpretation of Marx’s Value Theory’, Review of Political Economy, Vol. 11, No. 1, pp. 33-59.

Marx, K. (1972), Theories of Surplus Value, Volume III, London: Lawrence and Wishart.

Marx, K. (1977), Capital, Vol. I, New York: Vintage Books.

Marx, K. (1967; 1981; 1991a), Capital, Vol. III, New York: International Publishers; New York: Vintage Books; London: Penguin.

Ramos-Martinez, A. (1998-1999), ‘Value and Price of Production: New evidence on Marx’s transformation procedure’, International Journal of Political Economy, Vol. 28, No. 4, pp. 55-81.

Wolff, R., Roberts, B. and Callari, A. (1982), ‘Marx’s (Not Ricardo’s) “Transformation Problem”: A Radical Reconceptualization’, History of Political Economy, Vol. 14, No. 4, pp. 564-582.

Wolff, R., Callari, A. and Roberts, B. (1984), ‘A Marxian Alternative to the Traditional “Transformation Problem”‘, Review of Radical Political Economics, Vol. 16, Nos. 2/3, pp. 115-135.