[OPE-L:3972] Fwd: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: TheTransformationProblem
From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Thu Oct 05 2000 - 13:22:55 EDT
attached mail follows:
A further reply to Allin:
> > [T] mistake you are making here is thinking that Marx wants
>> to derive the prices at t+1 via a determination of the
>> average rate of profit.
>No, I don't see any "t"s in this analysis.
Well by putting them there, everything works out, there is no
transformation problem, and Marx's value theory does not have to be
discarded. The only people who are going to think there is still a
transformation problem are those who like the kinds of mathematical
problems general equilibrium exercises generate--counting equations
and unknowns which seems to make Sraffa so pleasingly familiar to
some of you. If I am going to do math, it will be things like Thom's
catastrope theory or Goodwin's Lotka-Volterra equations.
> > Marx's main concern is not price determination. It is to
>> solve a major problem which bedeviled Ricardian value
>False opposition. The only way for Marx to solve that "major
>problem" (as he saw it -- as you know Paul and I think it's not
>so major after all) is to show the precise theoretical
>relationship between the system of values and the system of
>prices of production. Hand-waving won't do: that's just what
>Marx claims is inadequate about Ricardo's own treatment of the
No Marx's major problem is --I will say for the millionth time-- to
show that that not only does the principle of the average rate or
profit not contradict or modify the law of value, it can only be
explained on the basis thereof. He is not aiming at a price theory;
he makes no effort to break his prices of production down into unit
prices; he makes no effort to account for various factors which would
allow him to descend to the world of unit prices (deductions from SV,
Why? Because he is taking up the debate between Ricardo and Malthus
on the contradiction between the average rate of profit and the law
of value. It is this contradiction that has to be resolved, and in
resolving it, Marx shows that the law of value cannot account
directly for the phenomena of bourgeois society, i.e., the explanadum
for value theory is no longer relative prices.
>> "Dynamic stuff is off the agenda for the moment.
>> When we get past the main transformation argument we get a whiff
>> of dynamics: "In spite of the great changes occurring
>> continually, as we shall see, in the actual rates of profit
>> within the individual spheres of production..." Note: "as we
>> shall see": this will come later, it's not germane to the
>> transformation argument as such."
>> Notice that you didn't give the page numbers here. Why?
>No particular reason. Moscow ed., p. 166.
Fine. But my point still stands. Marx is not saying here that prices
of production are not changing; he is saying that why they change in
the first instance is due to change in the underlying values of
commodities, not changes in the average rate of profit. You simply
misrepresented these passages. Marx shows no indication in this
chapter that his analysis is so static that prices of production
cannnot and are expected not to change; time subscripts are indeed
implicit as he is trying to account for the various reasons prices of
production are changing. Your response is fully non-responsive.
>> "In the given theoretical context, then, a difference between
>> input and output prices for a given commodity can only be a
>> symptom of an incomplete analysis."
>> 1."Then"?? did I miss the proof, argument here?
>In using the term "incomplete" I'm assuming a background
>knowledge of the idea that Marx's tableau represents the first
>step of an iterative solution (Morishima, Shaikh and others).
Doesn't speak to my point. Many have argued that it was illogical for
the inputs in the second tableau to be in "values". I have argued
that it would have been illogical to have transformed them in terms
of a category that is not derived until the completion of the second
Now all the confusion begins with a simple, yet devastating, slippage:
Marx admits that the inputs have to be transformed into prices of
production. He does not say that they have to be transformed into the
SAME prices of production as the outputs.
An iterative or a recursive or simultaneous solution aims, if I
follow you, to do the latter, i.e., not only to remove time
subscripts from the analysis but to make fantastic appeals to
At least admit that these are two different things, and that hitherto
the entire literature has simply conflated them (or denied that Marx
is admitting a need to transform the inputs).
>> 2. Note that you have said incomplete, not logically
>> incorrect, as Ajit does. That is, you seem to be agreeing
>> that Marx was correct not to have the inputs in the second
> > tableau in prices of production because the very category is
>> not derived until the completion of the tableau.
>In step 1 of an iteration the inputs must in values. There's
>also the simultaneous equations solution, though (which jumps
>straight to the result upon which the iteration converges, as
>Lefteris has pointed out by analogy with the Keynesian
Yes, I noted this in my reply to him, which I must have sent to his
private address. Strictly speaking, cost price is the money sum laid
out for the inputs--Fred is right. But that money sum is determined
initially on the assumption that means of prod and wage goods
(indirectly) are purchased by the capitalist at value.
>> 3. We seem to be both agreeing that there could be a third
>> tableau, but as I shall point out, such a tableau is not
>> needed for Marx to complete his reversal of the Malthus
>> Which is to say Marx could now concoct a third tableau in
>> which the cost price is no longer equal to c+v....
>It's not a matter of "concocting" anything: it's a matter of
>replacing the cost-prices you started with, with cost-prices
>revalued in terms of the (first-step) prices of production you
>just derived. And so on.
Again this is non responsive. I suggested to you why such a
procedure, which is nothing but the fallacy of backward causation, is
absurd. And there is no reason to discard Marx's value theory if he
does not want to make this ridiculous assumption.
The only leg you have to stand on then is to say then that while Marx
recognizes the need to transform the inputs, he has no way of doing
it. And I counter for the umpteenth time we would only have to know
the cost prices derived from transformed inputs if we were after the
quantitatively correct prices of production for the outputs, but we
don't need to know the exact modified cost prices to understand in
logical and abstract terms how Marx resolves the debate between
Ricardo and Malthus by showing that the more capital develops, the
more the average rate of profit itself becomes the form in which the
law of value asserts itself.
Marx's value theory does not collapse if we make the only reasonable
assumption--that the modified cost prices would have been derived
from different prices than the prices of production for the outputs.
That is the *only* assumption one has to make for Marx's Capital 3,
ch 9 resolution of said contradiction to "go through", as Ajit puts
I also suggest that if such a simple assumption saves the entire
theory, it is only perverse behavior welded to the interests of the
powerful that disallow such a simple "saving" assumption from being
>> It simply does not matter....
>That's what Marx said, off-handedly. We know now he was wrong.
>The properties of the fully-transformed system are subtly
>different from those Marx asserted on the basis of a first-round
Yes, yes. Only if you continue to make the slippage that by saying
that inputs would have to be transformed into prices of production,
Marx is also saying that there should be an equilibrium price
solution such that the prices of production for the inputs are the
same as the prices of production for the outputs. But as I have
already noted, Marx shows himself actively disinterested in such a
thing in this very chapter where he is already analyzing why prices
of production change.
> Have you looked at, say, Sweezy's exposition of
>Bortkiewicz? (A clear, relatively non-technical treatment.)
Yes. And wrong. The other mischief was in promulgating Bauer and
Hilferding over Grossman. I am much more indebted to the other great
American intro to Marx--Wm J Blake Marxian Economic Theory and Its
Criticism, 1939. Married to the novelist Christina Stead, Blake would
later visit Grossmann in Leipzig in 1949. Both Geoffrey Pilling and
Geoffrey Kay have expressed similar admiration for Blake's synthesis.
It's about 700 pages. At one point, I could pretty much tell you the
main point of any paragraph once a few lines of it were delivered.
But now I am old and stupid. Unlike most Marxists, I was not
introduced to Marx by Meek, Dobb and Sweezy but Grossmann and Korsch
and their students Blake and Mattick. Bernice Shoul seems to have
been another American student of Grossmann's, so I look forward to
reading her 1947 Radcliffe dissertation.
>Whether this "matters" in a larger theoretical sense depends on
>how seriously you take the equalized-profit benchmark. Marx
>took it seriously.
As he should have.
>> However in this hyothetical third tableau total value will
>> equal total price, total profit equal total surplus value.
>In the nth such tableau these results will, in the general case,
>not both hold. This is very well known.
Again only if insist on the workings of backward causation.
> > 4. What you seem be saying is that the only way to modify
>> the cost prices in a non arbitrary way is to do so on the
> > basis that prices of production are the same for the inputs
>> as the outputs--that is, to determine the prices of
>> production of the inputs on the basis of the IDENTICAL data
>> as the outputs, thereby creating a replicating system as if
>> the economy were a crystal.
>You can if you wish pack in all sorts of real-world dynamics,
>try to analyse the transformation as a real-time process with
>ongoing technical change and so on. But it's clear that's going
>to make the analysis _much_ more difficult, and it's simply
>changing the subject in relation to what Marx tackled in vol 3
I don't see how this is a response at all.
>Let me try again. Marx's thought experiment is this: Consider
>a state A in which organic composition differs across sectors
>and commodities exchange at their values, and consider a state B
>in which everything that can be held the same is held the same,
>except that all capitals gain a common rate of profit -- what is
>the relationship between these states? He makes a pretty good
>stab at the problem, but his solution can be faulted in this
>way: His state B is a hybrid, in that it represents an economy
>in which all commodities have exchanged at their values right up
>till the beginning of the current "period" (inputs were
>purchased at their values) but "now", all of a sudden, today's
>profit rates are equalized.
>Almost all comentators on Marx
>(sympathetic and unsympathetic) have argued that the second term
>in the hypothetical comparison should be an economy in which
>profit rates have "always" been equalized.
All commentators don't seem to realize that Marx could not have had
his inputs sell to capitalists at prices of production until the very
category is derived at the completion of this so called hybrid
tableau. A dehybridized model at this point (the second tableau)
would have been an logical error in terms of introducing concepts
without having rigorously derived them.
Again that the profit rate was equalized in the previous period does
not logically entail that the inputs were bought at the same prices
of production as the outputs. It only means that the inputs would
have been transformed, not transformed into the identical prices of
production of this period.
Again there is simply a logical slippage here. I see no reason why
we need the same prices of production on both sides or why it would
be reasonable to study the properties of such a replicating system as
a model of anything.
All the best, Rakesh
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