Today’s post is a touching reunion after some thirty years of the minds of the American economist, Martin Bronfenbrenner (Chicago Ph.D., 1939) and the Russian mathematical economist Alexander A. Konüs. As far as I know these two scholars never actually met. The first time Bronfenbrenner encountered work of Konüs was in helping to prepare a translation of a 1924 paper by Konüs written in Russian that Henry Schultz was interested in. That paper, but especially its translation that was published in Econometrica in 1939 after Schultz’s death, has become one of the classics in the theory of cost of living indexes. The winding path of the paper from the Moscow Economic Bulletin of the Institute of Economic Conjuncture to Econometrica is described in Schultz’s introduction:
Konüs paper was published in Russian in 1924, and thus far our only knowledge of it has been the incidental, though appreciative, observations regarding it in Bortkiewicz‘s review of Haberler‘s book on index numbers published in 1928. It is this inadequate summary of Bortkiewicz which Staehle used in 1934 in his important work on international comparisons of cost of living and which constitute a point of departure for his own researches.
From my first reading of Dr. Staehle’s manuscript I got the feeling that there was more to the Konüs condition than was evident from the Staehle-Bortkiewicz statement of it, but could not afford the time to look into the matter. In 1934-35, however, I was called upon to prepare a few lectures on the bearing of the modern theory of utility and exchange on the problem of index numbers, and I decided to look into the original paper by Konüs. Not being able to read Russian, I had a translation prepared of it which has been used in my classes since then.*
*I am grateful to the following graduate students for their reports on various aspects of index-number theory: Miss Fredlyn Ramsey, Mr. Orvis Schmidt, Mr. Martin Bronfenbrenner, Mr. Jacob L. Mosak, and Mr. H. Gregg Lewis.
Source: Henry Schultz, A Misunderstanding in Index-Number Theory: The True Konüs Condition on Cost-of-Living Index Numbers and Its Limitations, Econometrica, Vol. 7, No. 1 (Jan., 1939), pp. 1-9.
Some three decades later, Bronfenbrenner and Konüs exchanged letters on the subject of modern adaptations of Marxian economic theory and Martin Bronfenbrenner reveals some of his family history.
_____________
Letter from Alexander Konüs to Martin Bronfenbrenner
7 July 1966
Dear Professor Bronfenbrenner,
It was a pleasure for me to know that the author of the pro-marxist article in the “American economic review” with the significant subtitle “Cuius regio eius religio” (translation: the religion of the ruler of the realm is the religion of the realm) [“Notes on Marxian Economics in the United States” AER Dec. 1964 ] is the praticipator [sic] of the excellent translation into English of my paper of 1924. I am greatly indebted for this translation to you and to Dr. Jacques Bronfenbrenner.
Your article “A macroeconomic translation of capital”, the reprint of which I received with gratitude, and the article “The Marxian macroeconomic model” in “KYKLOS”, vol. XIX-1966-Fasc. 2, are very interesting and important. I have delayed to communicate you my comments because I thought that my attitude to some points of your paper is obvious from the “Notes to articles by L. Johansen “Labour theory of value and marginal utilities” the reprint of which I sent you (“Economic of planning”, vol. 4, N 3, 1964).
As you could see in my “Notes” the problem is not the “translation” of the “Capital” but rather the “revision” of the 3-d volume to some degree from the point of view of modern economics.
The first key stone of this “revision” was laid by L.v.-Bortkiewicz in his “Zur Berichtigung der grundlegenden theoretischen Konstruction von Marx im dritten Band des “Kapital” (“Jahrbücher für Nationalökonomie und Statistik”, III Folge, B. 34, H. 3, 1907). [English Translation] The main assertion of Marxist labour theory of value is: “the sum of the profits in all spheres of production must equal the sum of the surplus values and the sum of the social product equals the sum of its value” (“Capital”, vol. 3, ch. X). So Bortkiewicz has proved that this assertion is valid only in the case when organic composition of advanced capital is the same in all departments and when consequently the prices coincide with values.
Bortkiewicz’s conclusion is considered, for example by Hans Peter (“grundprobleme der theoretischen Nationalökonomie”, 1933), as the failure of the labour theory of value. As to me I should like to attract the attention to the fact that Marx himself did not publish the theory of prices of production (although he assumed it more than twenty years) because he did not think this theory sufficiently perfect.
The new approach developed in my “Notes to the article by L. Johansen “ is cleared up if we will take into consideration the supposition in one of the models of professor Michio Morishima: “…capital goods are not subject to purchase and sale, only their services being traded on the market” (Equilibrium Stability and Growth”, 1964, p. vii).
Then instead of “depreciation of fixed capital instruments involved in producing W´´ the constant part of advanced capital C in your equations must include the rents paid for the use of durable capital goods as the prices of these goods compared with their values.
Consequently the source of the profit of the owners of buildings and machinery is in the surplus labour spent during their production (the conditions of reproduction are implied).
The main thing is that the exchange value of a commodity is realized not in its sale but in the process of realization of its use value, i.e. in its consumption.
Another basic conception is that the organic composition of advanced capital is not dependent on its technical composition but it is affected by economic considerations.
The equality of values and prices follows immediately from your equations based on Marx’s transformation:
(1) 
(3) 
— if we add to them the well-known equations which tie together the rate of profit (P´) with your expressions of return of capital (s1p1, s2p2) and of the price of production (w1p1, w2p2):
Therefore Hans Peter and Paul Sweezy, following Bortkiewicz, reject Marx’s reasoning. For example Sweezy writes:
“The source of Marx’s error is not difficult to discover. In his price scheme the capitalist’s outlays on constant and variable capital are left exactly as they were in value scheme, in other words, the constant capital and the variable capital used in production are still expressed in value terms. Outputs, on the other hand, are expressed in price terms. Now it is obvious that in a system in which price calculation is universal both the capital used in production and the product itself must be expressed in price terms. The trouble is that Marx went only half way in transforming values into prices”. (The theory of capitalist development, 1942, p. 115).
The right transformation of values into prices according to Bortkiewicz will be as follows.
The equations (1), (2), (3) and, instead of (4),
(4´)
besides that:
(5) 
(6)
But in this case also the prices will be equal to values if we add the above mentioned fundamental equality of Marx’s labour theory of value :
(7)
Indeed, it follows from (4´), (7) and (3):
or
taking into account (6) and (3) we get
Hence p2 = 1, and from (5) we get p1 = 1.
The observed variation in organic composition of the advanced capital (c/v; c + v + s = w) is engendered by the various periods of its circulation and by the presence of the differential rent, in accordance with the labour theory of value.
In the econometric literature there are many assertions that an optimal state of economy requires the proportionality of prices of consumer goods to their values, i.e. to the amounts of labour necessary to produce them. The first author to state this idea was the Russian mathematician N. Stolarof. He published in 1902 the pamphlet: “Démonstration analytique de la formule économique: Les degrés finals de l’utilité (des products librément crées) son proportionnel à la valeur du travail” (Kiev, in Russian). Other references are in Eberkard Fells’s article “Some Soviet statistical books of 1957” (Journal of the American statistical association, v. 54, N 285, March, 1959”).
It is to be noted that there are two limitations arising from the assumption accepted in that demonstration.
First, it is impossible to determine the amounts of labour in the commodities the production of which is tied together, for example—the grain and the straw. Only the sum of their prices can be compared with the total amount of labour necessary to produce them. That is the case of the famous example of Böhm-Bawerk about the prices of new and matured wine. The labour on the vineyard is spent to produce the new and the matured wine together. The prices of these kinds of wine are proportional to their marginal utilities.
Secondly, the prices of the commodities satisfying the same needs, for example—coal and petroleum, are not mutually independent. Only the sum of the prices of the petroleum and the coal must be compared with the total amount of labour spent on the production of fuel. Here arises the phenomenon of the differential rent in oil-extracting industry.
The theory I have developed since 1929 (first publication in 1949) does not find any supporters. I think it is essentially in accordance with your ideas. Any comments and criticism will be very valuable for me.
With best wishes,
Sincerely yours [signed, A. A. Konüs] /Konüs A.A./
- VII.1966
_____________
Carbon copy of letter from Bronfenbrenner to Konüs
18 August, 1966
August 18, 1966
Dr. A. A. Konüs
Box 1587, Moscow Central P.O.
Moscow, USSR
Dear Dr. Konüs:
It has indeed been a pleasure to hear from you, and to learn the extent to which our respective “modernizations” of the Marxian system overlap. I hesitate even to consider our remaining differences, since you know the Marxian literature so much better than I. On the issue of “what Marx really meant” I tend to assume, in the difficult cases, that he meant different things at different stages of his thinking, and that the important issue is what he should have meant, i.e., how can one make sense most readily from his incomplete literary remains, and how might a younger Marx have made use of modern economics.
I am likewise overwhelmed by your ability to keep up with “bourgeois” economic literature at the “Morishima” level of difficulty, in a foreign language into the bargain. You must be over 70 years of age, a time when 99.9 percent of scholars feel exempted from the labor of learning anything new. (I long for such an exemption already, and I am 20 years younger!)
Since my late father (a bacteriologist) [Jacques Jacob Bronfenbrenner] and I collaborated in translating your seminal index-number article for Econometrica [The Problem of the True Index of the Cost of Living (January 1939)] nearly 30 years ago, perhaps you would enjoy hearing some our family legends:
My father was born in Odessa; my grandfather was a chemist at one of the waterfront flour mills. During the 1905 Revolution, my father and two of his brothers engaged in liaison activity between student revolutionary groups and the Potemkin sailors. During the subsequent reaction, my grandfather was shot. My father managed to escape to Paris after two years in hiding, and one uncle escaped from a ship en route to Siberia. My father became an American citizen shortly before the first World War; my uncle became a French citizen and lives near Paris. My late grandmother, a nurse, remained in Russia. She was head of a Red Army hospital during the doctor shortage of the Civil War. My late aunt, who also remained in Russia, died during the German siege of Leningrad in 1941. A second uncle emigrated to America during the famine years of 1920-21, and died last year.
An unusually wide range of political and economic views were represented by my Russian relatives. My grandmother was a good Stalinist. My uncles, repelled by the Terror, were a-political, but generally hostile to the Soviet Government. My father was a Social Revolutionary (SR) in his youth; later, he became a follower of Kerensky; in this country, he was a Roosevelt Democrat. His economics was “maximalist.” He believed there would be no economic problem in a well-run peaceful society. (All goods people “really” wanted could be free, and produced with relatively few years of compulsory labor service.) I should describe myself as a confused and imperfectly-consistent eclectic—considerably more “bourgeois” than Marxist, in my own view.
My mother was not of Russian descent. The family’s only common language was English. I had no opportunity to study Russian, and speak no Russian whatever. My cousin [Urie Bronfenbrenner, 2005 obituary in the New York Times], on the other hand, grew up in a Russian-speaking household. He speaks the language fluently, and does liaison work between Soviet and American workers in his specialty (psychology). I have often felt some jealousy at this superior opportunities.
Sincerely yours,
Martin Bronfenbrenner
Visiting Fellow
MB:has
Source: Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Project. Martin Bronfenbrenner Papers, Box 7, Folder “Marxian Distribution Theory, n.d.”.