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DOI: 10.1177/0486613410375070
2010 42: 560 Review of Radical Political Economics
Ajit Sinha
Hollander; New York: Cambridge University Press, 2008, pp. 549
Book Review: The Economics of Karl Marx: Analysis and Application. Samuel

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560 Review of Radical Political Economics 42(4)
quantitative data as well as formal mathematics could also be considered another weakness. While
I have no desire to equate rigor with quantification and mathematics when discussing affinities
between self-organization theory and dialectics, if the discussion is not to remain at the level of
metaphors and analogies, mathematical models may be a necessary extension. The wish-list in the
concluding chapter is to be lauded for its comprehension but would obviously require an intense
and global level of political action. There is little discussion in the book of such politics,
particularly, given the books Global North focus, politics of the type which seeks to challenge the
North-South divide. Lastly, I found a plethora of typos, grammatical errors, and awkward
sentence constructions which a good job of copyediting should take care of, and I would strongly
advise the publishers to do this as the errors are frequent enough to be distracting.
All said the book is a very stimulating read and I highly recommend it.
Amit Basole
University of Massachusetts Amherst
Amherst, MA 01003-9254
E-mail: abasole@gmail.com
References
Bell, D. 1973. The coming of post-industrial society: A venture in social forecasting. New York: Basic Books.
Benkler, Y. 2006. The wealth of networks: How social production transforms markets and freedom.
New Haven: Yale University Press.
Binde, J. 2005. Towards knowledge societies. UNESCO World Report. http://unesdoc.unesco.org/
images/0014/001418/141843e.pdf
Castells, M. 2000. The rise of the network society: The Information Age: Economy, society, and culture, vol. 1.
Wiley Blackwell.
Drucker, P. F. 1992[1968]. The age of discontinuity: Guidelines to our changing society. New Brunswick:
Transaction Publishers.
Dyer-Witheford, N. 1999. Cyber-Marx: Cycles and circuits of struggle in high-technology capitalism. Chi-
cago: University of Illinois Press.
Fuchs, C. 2003a. Co-operation and self-organization. tripleC 1 (1): 1-52.
Fuchs, C. 2003b. Globalization and self-organization in the knowledge-based society. tripleC 1 (2): 105-69.
Fuchs, C. 2008. Internet and society: Social theory in the information age. New York: Routledge.
Kraft, P. 1999. To control and inspire: U.S. management in the age of computer information systems and
global production. In Rethinking the labor process, ed. M. Wardell, T. L. Steiger, and P. Meiksins. Albany:
SUNY Press.
Sahasrabudhey, S. 2008. Knowledge flux and the demand on thought. Unpublished paper presented at the
Indian Association for Cultivation of Sciences, Kolkata, April, 15. http://vidyaashram.org/
The Economics of Karl Marx: Analysis and Application.
Samuel Hollander; New York: Cambridge University Press, 2008, pp. 549.
DOI: 10.1177/0486613410375070
Date accepted: November 24, 2009
Since the publication of The Economics of Adam Smith in 1973, Samuel Hollander has been a phe-
nomenon on the world stage of history of economic thought; some years ago Paul Samuelson referred
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Book Reviews 561
to him as this World Master of the History of Thought (Forget and Peart 2001: 500). Though
Hollander apparently did not start with an agenda, his distinguished and massive body of work now
shows a distinct and singular theme running through them: the theoretical paradigm of the classical
economists was largely the same as the theoretical paradigm of the modern economists. This thesis
would not have come as a shock or surprise to Alfred Marshall, but coming after the publication of
Sraffas Collected Works and Correspondence of David Ricardo in the early 1950s and his classic
The Production of Commodities in 1960, where Sraffa declared his standpoint to be that of the old
classical economists from Adam Smith to Ricardo, Hollanders thesis assumes an air of audacity.
The strength of Hollanders oeuvre, however, lies in his erudition. The reader is hard pressed to find
any relevant evidence, particularly of the original sources, to have been overlooked or suppressed by
the author. Disputes with Hollander can only be about interpretations and not the facts. After massive
tomes on Adam Smith, David Ricardo, J. S. Mill, T. R. Malthus, and J.-B. Say, now the world has
been presented with his long awaited book on Karl Marx.
The book is divided into five parts. The first part is devoted to Hollanders reading of Marxs three
volumes of Capital, and the review that follows will largely deal with this part only. Parts two to four
are devoted to Marxs economic writings from 1843 to 49, the Grundrisse of 1857-58, and Economic
Manuscripts of 1861-63 respectively. In these sections Hollander meticulously draws the origin and
developments of the fundamental economic concepts used in Capital. This part of the book will
prove invaluable to all serious scholars of Marxian economics and Marxism in general. The fifth and
the last part of the book is devoted to Topics in Application. In this section Hollander traces a
development in Marxs thought from a revolutionary to an evolutionary position. He first makes the
case that Marx had no faith in social engineering and that he had objected to egalitarian reforms
based on the claims of justice. However, later on he goes on to argue: The evidence we shall bring
points rather to increasing appreciation on Marxs part, as time passed, of the potential for welfare
reform within capitalist organization. Indeed, social reform comes to be represented as a necessary
characteristic of advanced capitalism. Marx emerges as the first revisionist (444). This section,
indeed, would prove most controversial for the scholars interested in the politics of Marx.
At the heart of Hollanders attempt to establish Marxs General Equilibrium credentials lies his
interpretation of Marxs transformation algorithm from values to prices of production, which largely
follows his earlier paper (Hollander 1981). Hollander argues that Marx did not assume a uniform
organic composition of capital in the first two volumes of Capital and therefore his prices that are
supposed to be proportional to values are disequilibrium market prices. Since Marx subscribed to the
classical gravitation mechanism, it would be logical to think that when the system adjusts to prices
of production or equilibrium prices he would expect the outputs of various sectors to change. From
here on, Hollander argues that as prices adjust due to supply adjustments from disequilibrium value-
ratios to equilibrium prices of production ratios, it cannot be maintained that the total demand for
labor would remain constant through this process. Now, either a rise or a fall in the total demand for
labor due to supply adjustments cannot fail to have an impact on the wages and the rate of profits.
Thus the determination of the prices of production is dependent on the level of demands as the
distribution of income cannot be taken as given from outside the system of market adjustments.
Now, there are aspects of Marxs theory that support Hollanders position that the transforma-
tion algorithm is a real movement of disequilibrium prices to equilibrium prices; e.g., Marxs
theory of absolute ground rent would become incomprehensible if it is not granted that the system
was actually exchanging commodities at their value ratios before competition impinged upon the
system to bring about a uniform rate of profits for all the capital invested. This notwithstanding,
I find Hollanders argument not entirely convincing. When we look at the chapters dealing with
the transformation of values to prices of production, we find that Marx clearly raises the prob-
lem as a contradiction between his assumed prices as value ratios and the requirement of the
uniform rate of profits due to competition. This is a theoretical problem and not a problem of
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562 Review of Radical Political Economics 42(4)
description of a movement in real time. Furthermore, Marx clearly stated that his procedure had
a theoretical problem as he needed to use the prices of production on the input side as well:
As the price of production of a commodity can diverge from its value, so the cost price of
a commodity, in which the price of production of other commodities are involved, can also
stand above or below the portion of its total value that is formed by the value of the means
of production going into it. It is necessary to bear in mind this modified significance of the
cost price, and therefore to bear in mind too that 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. (Capital III: 264-65, emphasis added)
This ought to settle the issue. Once it is admitted that prices of production ought to appear both
on the input as well as the output side then it can no longer be argued that the problem is of
moving from one set of prices to another set. The problem is reduced to determining the set of
prices that appear on both sides of the equations. Thus the transformation algorithm is not about
transforming values to prices of production; rather it is about determining prices of production of
a system which is first described in terms of labor-values.
A question, however, remains. If Marxs outputs are not equilibrium outputs, then Hollander
insists that the supply adjustments to equilibrium outputs would most likely either increase or
decrease the total demand for labor, hence affecting wages and prices of production. Here lies the
fundamental difference in our understanding of the classical gravitation mechanism. Hollander
begins his analysis with a given set of commodities and labor needing to be allocated according
to the utility functions expressed by demand functions for the commodities. I, however, think that
the classical economists and Marx begin with a given empirical system of inputs and outputs. On
the assumption of linear techniques, the total labor employed in the given empirical system can
be reallocated in all sorts of ways to produce various different sets of net outputs. Any one of
these sets of possible net outputs can be taken as effectual demands, and the gravitation
mechanism is a description of how the empirical system would converge to the set of effectual
demands. In this process, the demand for total labor employment remains fixed and therefore
wages have no reason to change. In my opinion, the classical effectual demands are given
demand points (Hollanders demand curves must pass through those given demand points) and
those points cannot be taken to be given unless we begin with a given size of the economy (for
details, see Sinha 2010).
On Marxs theory of accumulation and reproduction schemas, Hollander makes a
controversial argument that it is incorrect to think that Marx maintained that capitalists were
nothing but personified capital and hence there is no genuine choice to be made between
accumulation and consumption. He points out that Marxs famous statement: Accumulate,
accumulate! That is Moses and the prophets. . . . Therefore, save, save, i.e., reconvert the
greatest possible portion of surplus value or surplus product into capital was not Marxs own
position but rather a position he attributed to classical economics. According to Hollander,
For he [Marx] points out that with the development of capitalist production the capitalist
ceases to be the mere incarnation of capital. He has a fellow-feeling for his own Adam, and
his education gradually enables him to smile at the rage of asceticism, as a mere prejudice of
the old-fashioned miser. While the capitalist of the classical type brands individual consumption
as a sin against his function, and as abstinence from accumulation the modernised capitalist
is capable of looking upon accumulation as abstinence from pleasure (62). Hollander also
points out that there is no possibility of a traverse from a simple reproduction to an extended
reproduction schema in Marxs theory, and for steady growth in Marxs extended reproduction
schema it is department I (the capital goods sector) that sets the pace to which department II
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Book Reviews 563
must adjust. Hollander works out the results by reversing the lead sector in Marxs example.
He finds that this does not lead to any steady state growth, and concludes: It is not clear
whether this imbalance is an inherent feature of the system precluding treatment of II as lead
sector and, if so, why (83).
On the question of Marxs theory of wages, Hollander, again following an earlier paper
(1984), argues that Marx maintained an increasing immiseration of the working class thesis.
On this score, I find Hollanders argument convincing and we have no disagreement (see Sinha
1998, 2010). Many Marxists, however, will have a problem with this. Marxs statement in volume
one of Capital that in proportion as capital accumulates, the lot of the labourer, be his payment
high or low, must grow worse is regularly invoked to suggest that Marx maintained that the real
wages would rise but still the workers conditions compared to the capitalists would worsen,
hence the reference to wages being high or low. Hollander (2008), in my opinion, correctly
interprets the above statement as Marx intended a decline in the general wage rate which affects
all classes of laborersthose high on the wage scale as well as those at a lower level (86).
In his 1984 paper, Hollander, however, had argued that Marxs thesis was crucially or
strategically dependent on a Malthusian-type theory of population, a thesis that was challenged by
Sinha (1998). In the present book Hollander writes: For all that, it probably mattered less to Marx
whether at subsistence population growth is zero or positive (or even negative); than that there is
a general downward trend of the real wage. And Sinha too insists on the absolute immizeration
interpretation (1998: 104, 100), and agrees that the population growth rate is naturally positive
during normal circumstances (110, also 115) (91: f.n. 8). Thus, we clearly witness a weakening
of the link with the Malthusian or the classical theory of population in the present book. It seems
what really matters to Hollander now is the postulation of a positive rate of growth of population
in Marxs theory, as he quotes Marx from Capital III: it is but a requirement of the capitalist mode
of production that the number of wage workers should increase absolutely, in spite of its relative
decrease (Hollanders emphasis), and again from Capital I: A development of productive forces
which would diminish the absolute number of labourers, i.e., enable the entire nation to accomplish
its total production in a shorter time span, would cause a revolution, because it would put the bulk
of the population out of the running, to make his point (Hollander 2008: 96ff.). Now, there is no
denying the fact that Marx took a positive rate of growth of population as natural. And again, it
would be reasonable to expect that a negative rate of growth in demand for labor would create a
revolutionary situation if the population growth is positive. The question, however, is: does Marxs
abstract theory need the demographic variable to generate the increasing immiseration result? I
think not. Marx maintained that Capitalist production can by no means content itself with the
quantity of disposable labor-power which the natural increase of population yields (Capital I:
788). Thus the labor-saving technical change was introduced as an endogenous solution of the
system to the excess demand for labor problem. A zero rate of growth of population does not
change the terms of the problem; it only accentuates it and its solution would simply be a relatively
faster rate of technical change. This is the exact theoretical point Marx makes by alluding to the
case of Ireland (see Capital I: 862). The fundamental difference between Professor Hollander and
me lies in the fact that Hollander (2008) takes such technical changes as exogenous whereas I
maintain that Marxs reasoning is functional in nature.
On the falling rate of profits, Hollander works out the conditions for the rate of profits to fall
and shows that whether the rate of profits would fall or not is an entirely empirical matter. He
also argues that the condition for the rate of profits to fall depends on the behavior of employment
per $100 invested and not the rate of surplus value (s/v). Hence the usual argument against Marx
that the surplus per hour increases continuously with the fall in v is not correct and that, quite
unexpectedly, Marxs case is strengthened by assuming a relatively faster productivity increase
in wage-goods production (114).
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564 Review of Radical Political Economics 42(4)
On the question of crisis and business cycles, Hollander argues that the weight of evidence is
against the under-consumptionist theory of crisis. According to Hollander, the cause of upper
turning point could be attributed to rising wages and raw material costs due to diminishing
returns in agriculture and mining. Hollander identifies two causes of cycles in Marxs analysis.
One is the long-term tendency of the rate of profits to fall that encourages (as in J. S. Mill) more
and more investments into speculative ventures leading to periodic bubbles. Though Marx
explicitly maintained that credit variations were passive reflections of output variations,
Hollander nevertheless concludes that to the extent that the sources of the disturbances in the
real sector is to be found in the operation of the contemporary credit system this apparent
passivity must be qualified (154). Another cause of the cyclical pattern is the inter- and intra-
departmental imbalance. Marx argues that in a simple reproduction schema, the replacement of
fixed-capital elements necessarily introduces periodical departmental imbalances and thus the
cyclical movements. But this process may not remain pronounced when there is net investment
and the system is steadily growing. The argument, however, could be reintroduced via the idea of
periodical technical changes. But then why must technical changes happen in bunches and not
continuously for the whole economy? Hollander tries to construct a plausible causal story for
Marx. He starts with a burst of innovatory investments leading to falling rate of profits due to a
rise in organic composition of capital as well as rising wages and raw material costs leading to
increase in speculative ventures and crisis. But then he acknowledges that in Capital II Marx had
explicitly argued that it was the crisis that caused the large scale new investments. For this
Hollander could suggest no resolution.
This is a book by a major historian of thought of the modern era. No serious scholar of
Marxian economics or Marxism in general can afford to pass this book by.
Ajit Sinha
Indira Gandhi Institute of Development Research
Mumbai, India
E-mail: sinha_a99@yahoo.com
References
Forget, E. L., and S. Peart, eds. 2001. Reflections on the classical canon in economics essays in honor of
Samuel Hollander. London: Routledge.
Hollander, S. 1981. Marxian economics as general equilibrium theory. History of Political Economy
13: 121-54.
Hollander, S. 1984. Marx and Malthusianism: Marxs secular path of wages. The American Economic
Review 74: 139-51.
Marx, K. 1977 [1867]. Capital, vol. I. New York: Vintage.
Marx, K. 1992 [1885]. Capital, vol.II. London: Penguin Classics.
Marx, K. 1991 [1894]. Capital, vol.III. London: Penguin Classics.
Ricardo, D. 1951-52. The works and correspondence of David Ricardo, ed. P. Sraffa, vols. I-IX. Cambridge:
Cambridge University Press.
Sinha, A. 1998. Hollanders Marx and Malthusianism: A critique. The History of Economic Review 29:
104-112.
Sinha, A. 2010. Theories of value from Adam Smith to Piero Sraffa. London, New York, and New Delhi:
Routledge.
Sraffa, P. 1960. Production of commodities by means of commodities. Cambridge: Cambridge University Press.
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