transformation problem

Hey Mike, is it possible to post the PDF file on Libcom? That would be a valuable resource for many people. thanks for the succinct discussion, as it was quite helpful.

Unfortunately, I don't think I can. It was an article published in International Journal of Political Economy, which is copyrighted. But if you send me your e-mail address in a private message I'd be happy to send it to you.

There are a number of free papers you can read, available here, which explain the issue clearly. These papers are written by Andrew Kliman, whose book I mentioned in the post above. Really I'd recommend getting the book or checking it out of a library if you're at a university (although they may still not have it since it was published in January), since the best arguments made in the papers on the website are in the book and in general are more informative because of their place in a text that goes through pretty much every aspect of the controversy. As for writings on the website, I think the best introductions to the controversy are the following:

The Production of “Internal Inconsistencies” by Means of Simultaneous Valuation (9 pages long, as basic as these things can be explained)

Value in Process: On the Temporality and Internal Consistency of Marx's Capital (A bit longer, and a bit more detailed.)

The Physicalist Approach To, and Critique of, Marx: A Conceptual History (40 pages but well worth it, very detailed but very clear.)

This is interesting. Does he derive any conclusions regarding labor and value, or surplus-labor and profit?

I think almost all classical political economists were working with some kind of corn model. A good example of this is Marx's critique of Torrens in Theories of Surplus-Value. Torrens argued that if you plant 100 bushels of corn, and up with 120, the rate of profit is 20%, because the surplus is 20 bushels divided by the capitalist investment of 100 bushels. This is just like the physicalist theory I described above: price is irrelevant, physical quantities determine profit. Marx thought this notion was ridiculous given that it is entirely conceivable that the 120 bushels of corn is worth no more than, or even less than the 100 bushels planted initially (because we're dealing with two different points in time, and price can fall over time). If the 100 bushels of corn planted is worth $100, and the 120 bushels harvested is $100 because the price per bushel has dropped, the profit is not $20, but 0.

2.

Planting is labour, as is harvesting.

This is getting too bogged down in the details of the example. Certainly the example is not realistic. But change it around, if you'd like, to 10 machines that produce 11 identical machines of themselves, with no living labor.

In any case, the amount of profit would not vary with the amount of living labor, because the living labor could be the same in each example (say, approaching zero) while the profit and rate of profit vary only with differences in physical productivity. Clearly labor is not determining anything here. In this view of the capitalist mode of production, labor is irrelevant and there is no special sense in which labor is exploited.

By the way, there is a funny example in a footnote in Vol. 3 of Capital where Marx mentions an economist who claims that the rate of interest is determined by physical surplus. The economist says something like "if in a forest the growth rate of trees is 10%, the natural rate of interest in this case is also 10%." Marx jokingly refers to this as (paraphrasing) the "primordial forest rate of interest." He apparently thought such an idea was entirely absurd. I agree.

Mike - I think there are some major problems with this solution and with the interpretation of the transformation problem as it's outlined here.

I agree with you that the transformation problem is not a problem, but not for the same reasons as you. In my understanding, when we talk about value we are having an abstract discussion about the nature of things, and what they are in terms of human social relations and how they are produced - humans expend energy in order to produce things (value), and some of that gets solidified through the process of property ownership (capital). Surplus value is merely the additional human energy that is produced through the production process, as we become ever more efficient in production, so it becomes possible to get more out than we put in. This is all an abstract discussion of the way that things are in order for things like profit, prices, labour, capital, etc., to exist. When we come to consider the actual, surface-level, appearance of these things like prices, wages, profit, then we come to much more contingent quantities that have no direct relationship to the abstract nature of things, but are rather fought over on a day-to-day basis (through processes like the class struggle, market exchange/competition, etc.). There is no reason why the individual value should equal individual price - or, more like, there is no way that total value can equal total price, precisely because they are two completely different things - one (value) is an abstract depiction of the nature of certain categories within capitalism, another (price) is an actual quantitative phenomenon produced through the multiple human activities that form contemporary capitalism in its ongoing reproduction. To discuss whether value equals price is analogous to discussing whether the concept 'atoms' equal the quantity of apples - they simply aren't concepts dealing with the same thing.

I think one of the best pieces of writing I've seen on this is by Alfredo Saad-Filho (2002), The Value of Marx: Political economy for contemporary capitalism, (Routledge), where he says

and also

As an example of what would have to change on the basis of your understanding of the relation between price and value, in which price cannot be derived from value in any direct sense, consider the theory of exploitation.

Surplus-value can no longer be said to be the determinant of profit since surplus-value is neither a necessary nor a sufficient condition for the production of profit. (See my numerical examples above, and I can provide more examples if desired.) Neither can value be said to be the basis of price, for the same reason.

These two claims (that value is the basis of price and surplus-value is the basis of profit) are probably the two most important quantitative claims of Marx's, and they are the basis from which much of the rest of his theory rests (for example, the distribution of surplus-value among capitalists as well as the tendency of the rate of profit to fall).

Lest this purging of all quantitative aspects of Marx's theory be greeted with joy (as it indeed has been by certain theorists), I should note that this would also overturn Marx's theory of alienation, or of the reversal of subject and object in capitalist society, since this theory speaks of a self-domination of labor over itself (capital, which is dead labor, dominating living labor). If, on the other hand, surplus-value is not the basis of profit, then neither is surplus-labor its basis (since surplus-value is only another name for the surplus-labor embodied in commodities). Accumulated capital, which is accumulated profit, is then not produced by labor. If this is the case, then capital is not a form of labor, and the domination of capital over labor is not a form of self-domination.

So it seems that all major aspects of Marx's theory (namely alienation and exploitation, which are two aspects of the same thing in Marx) would have to fall down with his transformation procedure.

Mike

Hi John,

I don't think you've actually responded to my points. You say that you would "prefer to think of it in a different way" but I explained above why it cannot be thought of in a different way. Perhaps my reasons are incorrect, but in order to show this my arguments would have to be addressed.

You are arguing here in a direction which is precisely the reverse of the way an argument should run. You say that "if we just stick in the realm of wages, prices, profits, there is no basis upon which to portray the employment of wage-labour and the production of profit through it as something which creates a transfer of power from workers to capital-owners." But this is begging the question. The conclusion of the argument about value should be that it shows that a transfer of power from workers to capital-owners takes place. You are instead using this as a premise for the theory you are proposing. But what basis do you have making your statement except the theory of value? You are arguing in a circle: because workers transfer their power to capital-owners, we need to show this theoretically. You are assuming something that can only be known after we have already used the theory of value to deduce it.

Even aside from this, if you take your statement "if we just stick in the realm of wages, prices, profits, [then] there is no basis upon which to portray the employment of wage-labour and the production of profit through it as something which creates a transfer of power from workers to capital-owners", it doesn't actually present any argument in favor of value-theory. The if, then, conclusion is precisely what is argued by the Sraffians. You are just restating their position.

This is unclear. The entire point of the Sraffian critique is that if we do understand the relation between value and price, then we see that value is just a substratum of physical quantities: physical quantities plus the real wage determine both surplus-value and profit (as well as value and price), rather than surplus-value determining profit. This is why value-theory has been characterized as an unnecessary detour by the Sraffians. (This should be fairly agreeable: if technology and real wages determine both profit and value, but value is not experienced by anyone and has no determining power, then there is no reason to even theorize it. We would be more clear and direct if we just stuck to prices and technology.) You are not actually showing the possibility of deriving profit from surplus-value, and you cannot show this possibility unless you refute the Bortkiewiczian critique of Marx.

This is not the case. Whether the rate of profit falls depends entirely on how one understands value. The Sraffians have proved (by means of Okishio and Roemer, although this was anticipated by Tugan-Baranowski and many others) that on their interpretation of Marx's value-theory the rate of profit cannot fall for the reasons that Marx stated. In order to defend Marx's theory, one has to repudiate the simultaneist interpretation of Marx (i.e. the interpretation which holds that Marx understood input and output prices to be necessarily equal).

No one has said that price=value. Marx said that in the aggregate, i.e. on the level of society as a whole, total price equals total value (as well as total surplus-value equals total profit).

You never responded to the point given in a post above: given Bortkiewicz's "correction" of Marx, if total value equals total price, then total surplus-value cannot equal total proft. If this is the case, then where does the excess of profit over surplus-value come from (or conversely, where does the excess of surplus-value over profit go)? If, on the other hand, you decide that total surplus-value equals total profit, then where does the excess of price over value come from (or, conversely, where does the excess of price over value go)? Since value is just another name for what you call human activity above, deviations of price from value on the aggregate level would seriously call into question the theory that price is derived from "human activity" (i.e. value).

This has never been responded to successfully by any Marxist besides those who have dropped the assumption of equal input and output prices (Kliman, McGlone, Carchedi, Giussani, Freeman, Ernst, etc.).

This doesn't show anything. To say that Marx "inevitably" contradicts himself sheds no light on where it was that Marx contradicted himself, nor whether or not the contradictory aspects of his theory can be salvaged. You say that the "transformation problem" is "just one example" of these contradictions, but you have not shown how this is in fact a contradiction. What are you basing this statement on? How do we know that Marx contradicted himself? Basing this on "inevitable" contradictions is less than adequate. Following this line of thought, one could attack any theory on the basis that it has "inevitable" contradictions, making it impossible to have anything more than purely subjective criteria for deciding between theories.

I should add that allowing logical contradictions to pass on the grounds that they are "inevitable" is not how genuine sciences are carried out. While it may be true that they are "inevitable", no scientist would satisfy herself with a contradictory theory on these grounds. She would either show that the supposedly contradictory theory was not in fact contradictory, or would revise the theory in such a way that the contradictions disappeared, or would drop the theory altogether. For some reasons Marxists rarely accept scientific these kinds of criteria. I think it's high time that we take what we say seriously enough to subject ourselves to scientific standards.

Take care,
Mike

hi Mike, Red,

I don't think we're ever going to arrive at a theory that enables "the proletariat to reason about itself". theory is necessarily incomplete, which is in itself a form of contradiction.

In response to some of Mike's points:

I don't see any problem with this - that's exactly what I'm doing - workers are being exploited, so we should devise conceptual schemes to illustrate this point - where's the problem here?

this is unavoidable. to think otherwise is to fall for the positivist illusion that reality can simply be grasped through experience. of course we use our conceptual schemes to interpret reality. again, I don't differ with how you depict my view, I just don't see it as a problem.

I don't follow your reasoning here. I'm saying that value theory gives us something additional to that which a theory focusing merely on prices/wages gives us. It allows us conceptually to understand why the exchange of labour power for wages is exploitative (because we exchange more value for less). That's my argument in favour of value-theory.

that's right, because I don't really care about it. and, more importantly, I don't think there is any reason why the two should correlate.

value-theory, for me, is a discussion in the abstract of what capitalists and workers are doing when we abstract from their daily conditions to consider, in more essential forms, various acts of exchange. In actuality, the way in which these exchanges occur is much more complex and may actually (and often does) result in a loss for the capitalist, in workers becoming capital-owners, in hyperinflation that grossly disrupts the quantitative values that are being exchanged, and so on. For these reasons (which, from what you say, are quite diffferent to the Sraffian critique) I think value theory is useful, but should not be validated in terms of its ability to derive price.

I can't understand this, however many times I read it. Undoubtedly this is because I'm not that familiar with a lot of this Marxist economist literature - apologies. My only response would be that I see no real reason why ( in a static 'snapshot' this should be the case). Total value = exchange value + surplus value = total price = total costs of production + total profit. I don't see where the problem lies here? Again, undoubtedly through my own ignorance. there is of course always a problem in terms of realizing surplus value when we come to view the reproduction of capitalism as a dynamic process. Here we are left with a surplus that always struggles to realize itself. (David Harvey is very good at detaling this problematic reproduction of capital). So, we see in chapter 15 of Capital volume 3, a general discussion of this problem, summed up by the claim that:

also, :

My reason for giving these quotes, is that I think it kind of shows that if we consider the process of capitalist reproduction as an internally problematic one, precisely because total quantitative values are constantly disrupted by the changes that capitalist reproduction itself engenders. This probably still doesn't answer your point?

I'm trying to argue that is precisely the problem for capitalism, not for Marx's Capital. David Harvey makes very similar claims - citing this as reasons for the necessity of both expanded reproduction and accumulation-by-dispossesion - and periodic crises.

I don't think price is derived from human activity, so not sure I need to respond to this.

I think this is right. The purely subjective criteria I use are - do I think it's going to improve my life?

To be honest, I think all theories are contradictory in the sense that they are always-already unable to capture reality in its entirety. Unless you accept that, you're going to give yourself a big headache trying to construct the perfect theoretical construct. I think there is another thread on science - what it is/isn't? - here , to which I have little to add.

thanks,

john