Eugen von Böhm-Bawerk’s Review of Conrad Schmidt (1890)

Eugen von Böhm-Bawerk’s review of Conrad Schmidt’s Die Durchschnittsprofitrate auf Grundlage des Marx’schen Wertgesetzes examines an attempted reconciliation of Marx’s labor theory of value with a uniform rate of profit. Published before the promised third volume of Capital, it argues that Schmidt inadvertently confirms the contradiction he seeks to resolve: commodities cannot consistently exchange in proportion to embodied labor while profits equalize across capitals with different compositions.

The review begins with the difficulty as Böhm-Bawerk understands it. Marx attributes surplus value to variable capital, the portion spent on wages, whereas actual profit is proportional to the entire capital invested. Schmidt’s solution distinguishes the product replacing capital outlays from the surplus product constituting profit. He then applies different measures of “necessary labor” to these portions: labor actually embodied in the former, but labor advanced by the capitalist, weighted by the duration of the advance, in the latter. Böhm-Bawerk acknowledges that this produces the required proportionality between profit and total capital. His objection concerns its compatibility with Marx’s value law:

Wenn der Wert der »Mehrprodukte« sich auf einer anderen Grundlage aufbaut als der Wert der »Produkte«, so muss es ja vorkommen können, dass die Gütereinheit, z. B. die Tonne Eisen, die zufällig zu den 200 Tonnen Mehrprodukt unseres obigen Beispiels gehört, einen andern Wert hat, als die ganz gleiche Tonne Eisen, die zu den 800 Tonnen einfachen »Produktes« gehört.

English translation: If the value of the "surplus products" is built up on a different basis from the value of the "products," then it must indeed be able to happen that the unit of goods — for instance the ton of iron which happens to belong to the 200 tons of surplus product in our above example — has a different value from the entirely identical ton of iron which belongs to the 800 tons of simple "product."

Identical commodities would thus receive different theoretical values according to their accounting classification. Böhm-Bawerk follows Schmidt’s numerical example: fifty units replacing capital are valued at £10 each, while fifty surplus units are valued at £1.60 each. Combining the two portions yields a uniform market price of £5.80. For the reviewer, this averaging does not reconcile the theory with exchange; it concedes that exchange follows a resultant different from embodied labor. Differences in the duration of capital advances further imply that equal quantities of embodied labor need not command equal prices.

The second major movement addresses Schmidt’s defense that, although individual prices diverge from values, the price sum of the annual national product coincides with its total value. Böhm-Bawerk shifts the discussion from calculating prices to identifying what a value theory must explain:

Was ist denn überhaupt die Aufgabe des »Wertgesetzes«? Doch nichts anderes als das in der Wirklichkeit beobachtete Austauschverhältnis der Güter aufzuklären.

English translation: What, then, is the task of the "law of value" at all? Surely nothing other than to explain the exchange ratio of goods observed in reality.

An aggregate equality cannot, he argues, explain the relative prices of particular goods. Summation suppresses precisely the differences under investigation. His analogy is a race: the total time taken by all competitors does not tell us how far the winner outperformed the others. Schmidt therefore preserves the law only at a level where, in Böhm-Bawerk’s account, it no longer answers the original question.

The objection then becomes stronger: the alleged aggregate confirmation is not merely irrelevant but tautological.

Jede in Austausch tretende Ware ist zugleich Ware, aber auch der Preis ihrer Gegengabe. Die Summe der Waren ist somit identisch mit der Summe der dafür gezahlten Preise.

English translation: Every commodity entering into exchange is at once a commodity, but also the price of the thing given in return for it. The sum of the commodities is thus identical with the sum of the prices paid for them.

Looking through monetary transactions to exchanges of goods for goods, Böhm-Bawerk treats the aggregate commodity bundle and its aggregate counterpart as identical. Their equality therefore supplies no independent evidence that labor governs exchange ratios. His reductio substitutes weight for labor: the combined weight of gold and iron exchanged necessarily equals the weight of the same goods counted as payment, yet this establishes nothing about their relative prices.

The conclusion returns to the incompatibility between proportional labor exchange and equalized capital returns. Böhm-Bawerk presents Schmidt’s concessions as especially significant because they come from a committed Marxist. He also predicts that Marx’s forthcoming third volume will fail to deliver the promised reconciliation. The review’s conceptual force lies in its distinction between explaining individual exchange ratios and preserving an aggregate identity: Schmidt’s reconstruction, Böhm-Bawerk contends, achieves conformity with observed profit only by abandoning the substantive claim of the value law.