George Bernard Shaw finds one of two crucial mistakes in Karl Marx; George Stigler finds the other.
One of the late George Stigler's many contributions to economics, one that was not recognized by the Nobel Committee when it made its award in 1982, but that I briefly recognized in my bio of him in The Concise Encyclopedia of Economics, was his work on the history of economic thought. He did this relatively early in his career, but it's some of his best work.
Here's a lengthy quote from his 1959 piece "Bernard Shaw, Sidney Webb and the Theory of Fabian Socialism," reprinted in Kurt R. Leube and Thomas Gale Moore, The Essence of Stigler:
The criticisms of Henry George by English Marxists drove Shaw to the French edition of Volume 1 of Das Kapital. He was captivated without being persuaded of the validity of all its economic theory. These doubts spilled into print in a letter to a weekly, Justice, entitled "Who Is the Thief?" It is a tribute to Shaw's penetration that he had found for himself a crucial flaw in Marx's labor theory of value.
Marx's central argument was that the capitalists, by their control over capital equipment and the means of subsistence, forced a worker who added ten shillings of value to ten shillings of material, to work for only three shillings (his assumed subsistence requirement), yielding up seven shillings of surplus value.
[This is Shaw.] But mark what must ensue. Some rival capitalist, trading in tables on the same principle, will content himself with six shillings profit for the sake of attracting custom. He will sell the table for nineteen shillings; that is, he will allow the purchaser one shilling out of his profit as a bribe to secure his custom. The first capitalist will thus be compelled to lower his price to nineteen shillings also, and presently the competition of brisk young traders, believing in small profits and quick returns, will bring the price of tables down to thirteen shillings and sixpence.
[Back to Stigler.] But if the worker is being robbed of seven shillings, then the purchaser is committing thirteen-fourteenths of the theft--every English consumer is the thief. The criticism received no reply.
The assumptions of competition and of surplus value are indeed incompatible, and even today I would like to amend Shaw's argument in only two respects. The competition of capitalists would also take place in the labor market, and force wages up. And, secondly, the customer-thieves are, of course, chiefly the workmen and their families.