On the non-naturalness of value:

A defense of Marx and Engels on
the transformation problem (part one)

by Joseph Green in CV #45, November 2010
See article here

[Preface]

The labor theory of value has historically given a tremendous moral authority to the working class struggle, and it has provided activists with a scientific analysis of many features of the capitalist economy. The Marxist elaboration of the labor theory of value gives insight into the basic way in which capitalist firms operate, the exploitative nature of capitalism, the origin of profit in surplus-value, the constant need of the working class to fight over and over again to maintain gains it thought it had achieved, and that ensuring that goods are always priced at their value wouldn't emancipate the working class. So it's not surprising, given the desire of pro-capitalist economists to defend the capitalist system, that most bourgeois economists have sought to discredit the labor theory of value. Many thought they had found the Achilles heel of Marxist economics in the discussion in vol. III of Capital of how the tendency towards the equalization of the rate of profit causes the prices of goods to systematically deviate from their value. They claim that the mere fact of this deviation refuted Marx, and fuss over minor defects in Marx's presentation of the matter. This is the famous "transformation problem".

This article corrects a defect in the mathematical side of Marx's discussion of the transformation problem and modifies certain of the formulas he gave. In doing so, it doesn't undermine, but strengthens the case for Marx and Engels' overall view of the transformation process. Among other things, those mathematical results of the past, which have been taken as refuting Marx, turn out to be in line with the labor theory of value.

Most activists haven't paid much attention to the controversy over the transformation problem. It has appeared to them as an obscure secondary issue. And in fact, this common sense attitude is quite reasonable. The basic proof of the law of value lies in the repeated verification of the basic features of capitalism that it explains, not in the precise calculation of prices of production. Moreover, most of the literature on the transformation problem hasn't been very enlightening.

This article too will have some dry and technical matters. But I hope to express the main modification needed of Marx's calculations with regard to the transformation process briefly and clearly. And I will also seek to connect the transformation problem to some present-day issues of importance in their own right:

• The persistence of the basic laws of capitalism despite their continually varying forms.
• The refutation of "true cost" pricing.
• The "vagueness", and what Marx regarded as the "non-natural" nature, of all marketplace measures, whether financial or value.

Preface

Introductory material

-- Some preliminaries

-- Adam Smith's and David Ricardo's transformation problems

-- Marx and the transformation process

-- The helper formulas for the transformation process

-- Mathematical difficulties

An overlooked feature of value

--The money/value relationship and individual products

--The relation of the total profits to the total surplus value

--The rate of profit

--The modified helper formulas

--Caveats

Relation to some past results on the transformation problem

--The Bortkiewicz-Sweezy results

--Funny money, or the search for the golden numeraire

--The so-called "new solution"

--Anwar Shaikh and the transfer between two circuits of capital

The vagueness and indeterminacy of money

--Inflation

--The index problem

--The aggregation problem

--The Cambridge capital controversy

-- Marx, the aggregation problem, and value as "non-natural"

-- A social and non-natural category is still a real category

 --Money illusion and value

 --True-value pricing and the non-natural nature of value

Appendix 1: List of abbreviations and formulas (roughly in order of appearance)

Appendix 2: A counterexample to Shaikh's view of the transfer between two circuits of capital

Notes

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