transformation tsurris.

["Devine, James" <jdevine@xxxxxxx>]

[was RE: [PEN-L:23070] Re: On the necessity of socialism]

I'm very tired, so I can't think about concrete/empirical stuff. So...

Gil writes:>Depends on what you think the "transformation problem" refers
to.  As I read Marx, the "problem," as he posed it in Chapter 9 of Volume
III, lies in showing that aggregate prices equal aggregate values and
aggregate surplus value equals aggregate profits even if commodities
exchange at prices of production which are disproportional to their values
(which is the general case).<

The problem is one of disaggregation or one of moving from a high level of
abstraction to a lower one.

Unlike modern orthodox economics which starts with so-called
"microfoundations" and tries to explain all macro phenomena, Marx started
(in volume I) with "macro" issues, the conflict in production between
abstract capital and abstract labor (since he abstracts from the use-value
of all commodities except labor-power) on the level of capitalist society as
a whole. That is, he uses his "law of value" to break through the confusions
implied by commodity production, i.e., the fetishism of commodities, to
focus on what he thought was most important, the societal capital/labor
relationship _in general_.

This abstraction means that he actively ignores -- abstracts from --
differences amongst heterogeneous capitals, including the technical
differences such as those represented by the "organic composition of
capital" and social differences such as those represented by the rate of
surplus-value, so that prices and values are proportional (as this
literature notes). In other words, he starts with the average capitalist
exploiting the average worker. (Unfortunately, rather than explaining this
clearly, he simply uses the 19th century British cotton textile industry as
representing the average. That's confusing, since it probably wasn't the
average industry.) At this level, we see the general conditions of the class
struggle determining the rate of surplus-value and the mass of
surplus-value. (General conditions of class struggle in turn depend on the
rate of accumulation, political institutions, etc., which in turn depend on
previous conditions of the class struggle, which in turn depend on ... a
long historical process.)

In volume III, he moves away from the macro level to address the issues how
the participants in the capitalist system see things and respond
("microfoundations") so that suddenly issues like supply and demand become
relevant (having been irrelevant at the volume I level of abstraction). The
so-called "transformation problem" is about the distribution of value among
the sellers of commodities with heterogeneous use-values and the
distribution of surplus-value among capitalists with heterogeneous technical
conditions and social roles (and degrees of exploitation, though that's not
his emphasis). (Values and prices also differ because there is exploitation:
a simple way to get values and prices to equal in the standard mechanical
vision of the transformation problem is to assume that the rate of
surplus-value = 0.)

Gil is absolutely right that the key issue is whether or not "aggregate
prices [i.e., nominal national income] equal aggregate values and aggregate
surplus value equals aggregate profits [i.e., nominal property income]."
However, grammatical parallelism says the issue is whether or not "aggregate
values equals the sum of prices and aggregate surplus-value equals the sum
of property incomes." This reading from value quantities to prices fits with
Marx's emphasis on the macro-determination of micro-results, i.e., that the
context set by capitalist class relations shapes and limits all of the
things we puny individuals do on the micro level. (Marx did not put enough
emphasis on the feed-back from the micro-level back to the macro-level for
my taste, but maybe he was overcompensating for the excessive individualism
of his contemporaries doing political economy.)

Of course, these pairs (values, prices; surplus-value, property income) have
to be measured in the same units if equality is to be even conceivable.
Let's measure them in value terms (i.e., measured in terms of
socially-necessary abstract labor time).

On the first, Marx made the distinction between values and exchange-values
(though he assumed these to be equal in volume I). The values of commodities
represent workers' contributions to society's pool of value, whereas
exchange-values (prices stated in value terms) represent how the
commodity-sellers are rewarded from that pool. It's like Dobb's distinction
between the two "labor theories of value" that Adam Smith employed, i.e.,
how much labor it took to produce something and how much labor a commodity's
sale could command.

This distinction suggests that there's a clear relationship between values
and exchange values (related to prices) on the macro-societal level: the
total amount of exchange-values (exchange-value times quantity of output
added up for all of society) should equal the total amount of value (value
times quantity added up) because the total amount of labor commanded cannot
differ from the total amount of labor actually done.

On top of that, as Marx argues at length, value cannot be created in
exchange. (Rather, what happens is that the benefits of value are
redistributed. When the exchange-value of a commodity exceeds its value,
that means that the seller benefits from value redistribution, while the
buyer loses. To Marx, the redistributions cancel out, adding to zero on the
macro level, since the rate and mass of surplus-value depend on general
conditions of class power.)

Given this equality between the total value and the total exchange-value,
the Duménil/Foley "new solution" (which is hardly new these days) argues
that the total surplus-value equals the total property income. Fred Moseley
has a related approach, but I'll leave such controversies aside. The key
point is that if a capitalist gets property income, he either is gaining
from a redistribution from other capitalists (as moneylenders usually do) or
is directly exploiting workers (as industrial capitalists usually do), with
the redistributions adding up to zero on the macro level. In order for the
capitalist to get command over labor-time beyond what he pays for (i.e.,
profits ), some worker, somewhere, has to be doing more labor than she's
being compensated for.

>Issues have been raised with the logic of Marx's original demonstration,
and interpretations of his value theory have been offered that get around
these issues at the cost of raising others.  But the real question, it seems
to me, is whether anything at all that is  critical to Marxist political
economy hinges on this demonstration.  And I agree with Doug's negative
response to this question.<

At a minimum, it's important to understand Marx's methodology (his "law of
value," which is very different from the technical fiddling with the
mathematics of "transformation" in volume III). That helps one understand
what Marx was saying (rather than thinking that the "transformation" tables
were a stab at price theory or that volume I is about microeconomics or
etc.) and also the limits of his theory. Also, I find that the macro/micro
contrast is crucial to such issues as crisis theory.

Jim Devine