Re: [OPE-L] why does the debate on the "transformation problem" continue?,

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Mar 26 2007 - 12:15:27 EDT

>Well I am not an economist, but I am sympathetic to Paul Cockshott's
>argument - in my opinion though what is really behind the transformation
>controversy is the attempt to understand the modus operandi of the law of
>value in a capitalist economy, and what concepts are really necessary to
>understand the process of mutual adjustments of labour-time, product-values
>and market prices (the process of "market balancing" in a competitive
>setting, as distinct from the presumption of equilibrium).
>If the motivation of Marxist participants in the TP debate is, to try and
>prove that relative market prices of new products (trading ratios) are
>strongly regulated by labour-time, then empirical tests such as we are able
>to construct are appropriate to corroborate that hypothesis. Because no
>purely logical proof of that idea is possible.

Jurriaan,  I think the motivation is to rescue the value concept in
the face of  appearances and then show that the movement of total
capital and the general forms of revenue are indeed susceptible to
analysis in terms of it. Marx's motivation was not to theorize
relative market prices whose grounding in value could only be shown
on average, and in the long term.

The price of production theory also underlines the conflict between
social reproduction and private profiteering, the contradictory
nature of capitalist commodity production To be self constraining,
general commodity production depends on prices being a function of
value, but capitalist production of commodities by means of wage
labor involves each capitalist trying to make maximum profit and
bringing about unintentionally the emergent phenomenon of an average
rate of profit.

This equalization of the profit rate does indeed contradict the law
of value, which Marx criticizes Ricardo for covering up!   But it
also does not annul it as it could not; the consequence of this real,
not logical, contradiction between the law of value and the
equalization of the profit rate is the emergence of prices of
production which are indeed forms of value, as shown by the small
deviation between price of production and value, by the regulation of
the average rate of profit by the total surplus value in the system,
and by the central importance of differential labor productivity
growth in the change of exchange ratios over time.

The price of production is not an emergent phenomenon simply in
itself. It also represents the growing antagonism between the
classes, that antagonism being raised to the level of society as a
whole, as Pilling underlined.

It  oft forgotten that the contradiction between the law of value and
the equalization of the profit rate is not logical. Capitalist
commodity production is the outcome of real contradictory tendencies.

The sad joke is that the contradictions which critics thought closed
Marx's system are actually the real contradictions of capitalist
commodity production. It's even sadder that Marxists treat the
transformation problem as only a logical mathematical problem with
the search for the right equality, not also as an expression of real
contradictory tendencies.

Marx theorizes systems in terms of a kind of dialectics--real
contradictions and real inversions (exchange becoming appropriation,
money from facilitator of exchange to initiator and strangler of

I think Mandel had a more acute sense of the importance of dialectics
for Marx than Mattick or Grossman. Heilbroner begins his short book
on Marx with a chapter on dialectics.


>But if the aim is to understand the process of market-balancing thru time,
>on the hypothesis that it is governed by the law of value, then we need
>concepts and models to understand and explicate how this determinism
>actually works out. And here the transformation problem literature is
>relevant, I think, since it seeks to specify the concepts, conditions and
>relationships involved more rigorously, tracing out the quantitative
>Following Marx, Ian Wright thus suggests that if we cannot explain the
>process in the simplest/purest cases, we cannot explain it at all. Marx
>suggests in his manuscript that a general rate of profit would be the final,
>logical outcome of the competitive, market-balancing process, at least "in
>the purest case". If that case never obtains in reality (he could not verify
>that), that is not necessarily a problem, the theoretical problem here is to
>depict consistently what forces will shape the distribution of the
>surplus-value, and consequently what the developmental dynamic of capitalism
>will be. The additional scientific problem then concerns to what extent the
>theorised process of market behaviour is only an idealisation, and to what
>extent it accurately mirrors the empirically verifiable events - how we
>would move from a simplified model to a richer kind of analysis that would
>make sense of the empiria.
>So if we forget for a moment questions of doctrinal orthodoxy, the real
>problems in the transformation problem literature concern what has to be
>modelled, how it is to be modelled, and why - here various foundational
>arguments are made about logical coherence and consistency. For example, Ian
>Steedman suggested once that Marx is logically committed to the idea that a
>product has two different prices depending on whether it is purchased, or
>whether it is sold, which he regarded as an absurdity.
>It is possible that there are not one, but many labour theories of value
>which could be devised. Marx's writing is open to interpretation, and he may
>have been justified in some assumptions, but not in others. He may have been
>quite correct in the general thesis that the relative exchange-values of new
>products in trade, usually expressed by money-prices, are normally
>proportional to the modal amounts of human labour-time which are currently
>socially necessary to produce them. But he may have been wrong in his theory
>of the specific modes of regulation through which that proportionality is
>established or ultimately asserted.

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