I might later on in the year do a presentation on the philosophy of science issues that are raised by the debates over the labor theory of value that the young Sidney Hook had been concerned with. The following is a rough draft.
----------------------------------------------------- Let me begin with a classic puzzle in economics. Imagine a small market town. A barrel of water costs almost nothing, while a diamond of similar size may cost thousands of dollars. Yet water is obviously far more necessary for human life than diamonds. Why, then, is the diamond more expensive? This puzzle is known as the *diamond–water paradox* , and it played an important role in the development of economic theory. Different economists offered different answers to it, and those answers eventually developed into two major theories of value. One of these is the *labor theory of value* , associated with Karl Marx. According to this theory, the value of a commodity ultimately depends on the socially necessary labor time required to produce it. The other is the *marginalist theory of value* , developed in the late nineteenth century by economists such as Jevons, Menger, and Walras. Marginalists rejected the labor theory and argued instead that value arises from subjective preferences. Prices reflect the interaction of supply and demand and the marginal utility of goods to consumers. So here we have two very different theoretical frameworks explaining the same economic phenomena. One of the most famous criticisms of Marx’s theory came from the Austrian economist Eugen von Böhm-Bawerk, in his book Karl Marx and the Close of His System. Böhm-Bawerk argued that Marx’s theory fails because actual market prices diverge from labor values. Marx himself recognized this issue and introduced the concept of prices of production, which adjust labor values to account for the equalization of profit rates across industries. Böhm-Bawerk argued that this transformation undermined the labor theory of value. Marxist economists such as Rudolf Hilferding and Nikolai Bukharin attempted to defend Marx against this criticism. But what interests me tonight is a somewhat different perspective on this debate. In his 1933 book Towards the Understanding of Karl Marx , the philosopher Sidney Hook suggested that the dispute between Marx’s labor theory of value and the marginalist theory might not be resolvable simply by looking at empirical data. Hook argued that economic theories are not simply mirror images of reality. Instead, they function as conceptual tools for interpreting complex phenomena. As Hook wrote: > > > > “Theories are instruments of inquiry, not photographic copies of reality; > their value lies in the insight they yield into the processes they seek to > explain.” > > >From this perspective, rival economic theories may interpret the same >observable phenomena in different ways. Marginalists see prices as the outcome >of subjective preferences and market equilibrium. Marxists see prices as >surface expressions of deeper relations rooted in the organization of >production and the extraction of surplus value. Hook therefore suggested that the choice between theories cannot always be settled by empirical evidence alone. Instead, theories may be evaluated partly in terms of their explanatory power—how well they illuminate the structure and dynamics of the economic system. Interestingly, this line of reasoning has an important precedent in the work of the French mathematician and physicist Henri Poincaré. Poincaré was one of the great scientific thinkers of the late nineteenth and early twentieth centuries, and his work on the foundations of mathematics and physics influenced the young Einstein when Einstein was developing the theory of relativity. In his book Science and Hypothesis , Poincaré argued that empirical observations do not uniquely determine the geometry we use to describe physical space. He famously wrote: > > > > “The axioms of geometry are neither synthetic a priori judgments nor > experimental facts. They are conventions.” > > His point was that the same physical phenomena could be described using different geometrical frameworks—such as Euclidean or non-Euclidean geometry—provided that the corresponding physical laws were adjusted appropriately. In other words, empirical data alone may not uniquely determine the theoretical framework we use to interpret them. Philosophers of science later developed this idea more systematically. Pierre Duhem argued that scientific hypotheses cannot be tested in isolation; experiments always test a whole network of assumptions. Later, Willard Van Orman Quine extended this idea, suggesting that our scientific theories form an interconnected web of beliefs. This idea is now known as the Duhem–Quine thesis, and it illustrates the broader problem of the underdetermination of theory by evidence. Hook’s analysis of economic theory can be seen as an application of this insight. If multiple theoretical frameworks can interpret the same economic data, then empirical evidence alone may not be sufficient to determine which theory is correct. At this point it is useful to connect this discussion with a broader debate in the philosophy of science: the debate between scientific realism and instrumentalism. Scientific realists generally hold that successful scientific theories describe real structures in the world. If a theory works well, that is taken as evidence that it is at least approximately true. Instrumentalists, by contrast, tend to treat theories primarily as tools for organizing experience and guiding inquiry, without necessarily claiming that their theoretical entities literally correspond to reality. Hook’s interpretation of Marx leans toward the instrumentalist side. The labor theory of value can be seen as a powerful framework for analyzing capitalism, even if it is not interpreted as a literal explanation of everyday market prices. Not everyone accepted this interpretation. Marxist thinkers such as Hilferding and Bukharin generally treated Marx’s value theory as an objectively true scientific theory about the structure of capitalist society. A later Marxist critic, George Novack, argued in Pragmatism Versus Marxism that pragmatist interpretations of Marx undermine the scientific claims of Marxism by reducing truth to practical usefulness. So we can see a philosophical divide emerging here. Hook interprets Marx through a *pragmatist and instrumentalist lens* , emphasizing the usefulness of theoretical frameworks. Critics such as Hilferding, Bukharin, and Novack defend a more *realist interpretation* , according to which Marx’s theory is literally true as a scientific explanation of capitalist society. Finally, a later Marxist economist, Paul Sweezy, offered a perspective that partly bridges this gap. In The Theory of Capitalist Development , Sweezy argued that Marx’s labor theory of value should not be interpreted primarily as a direct theory of market prices. Instead, it is a conceptual framework for analyzing the deeper social relations of capitalist production, particularly the origin of surplus value and exploitation. This interpretation suggests that rival economic theories may operate at different explanatory levels. All of this raises some interesting philosophical questions. Can empirical evidence alone decide between rival economic theories? If two theories explain the same phenomena, how should we choose between them? Should economic theories be judged primarily by their truth, their predictive success, or their explanatory insight? And finally, do the social sciences face deeper problems of theory choice and underdetermination than we usually encounter in the natural sciences? -=-=-=-=-=-=-=-=-=-=-=- Groups.io Links: You receive all messages sent to this group. View/Reply Online (#41098): https://groups.io/g/marxmail/message/41098 Mute This Topic: https://groups.io/mt/118302882/21656 -=-=- POSTING RULES & NOTES #1 YOU MUST clip all extraneous text when replying to a message. #2 This mail-list, like most, is publicly & permanently archived. #3 Subscribe and post under an alias if #2 is a concern. #4 Do not exceed five posts a day. -=-=- Group Owner: [email protected] Unsubscribe: https://groups.io/g/marxmail/leave/13617172/21656/1316126222/xyzzy [[email protected]] -=-=-=-=-=-=-=-=-=-=-=-
