Marxism and Bourgeois Economics. Paul Mattick

The Transformation Problem

At this point we might as well interrupt our outline of Marx’s critique of political economy and attend to the so-called transformation problem, which agitated academic Marxism from time to time and only recently flared up again with special vehemence. Academic Marxism--pro and contra--is a phenomenon of the impact of Marxism upon the bourgeois world. The rise of socialist movements, the growing difficulties of capital production, the business cycle, class struggle, war and revolutions have induced the educated bourgeoisie to pay some attention to the critics of capitalism, not only in self-defense but also out of curiosity and sometimes even out of sympathy for the aspirations of the working class.

Especially Marxism, or “scientific socialism,” was a challenge to the bourgeois social sciences and had to be met on theoretical grounds. This interest, to be sure, was not an overwhelming one, but an inescapable acknowledgement of the existence of Marxism, which remained a side-issue, but an issue nonetheless. Within the bourgeois social sciences economics is highly esteemed for being the only discipline supposedly approaching in its exactness that of the natural sciences. It is highly formalistic and thus inclined to concentrate its criticism and comments on the more esoteric aspects of Marx’s theory, such as the reproduction schemata in the second volume of Capital and the “transformation” of values into prices of production as formulated by Marx.

The simplest way of challenging Marx’s theory was the obvious one, by pointing to the apparent contradiction between the first and the third volume of Capital, where Marx has been seen as turning from an exclusive concern with value relations to concern with price relations. This simple way was chosen by Eugen von Böhm-Bawerk, who felt sure that Marx’s transformation of values into prices was an ad hoc construction that could not bridge the contradiction. It is clear at once, however, that Böhm-Bawerk’s assertion that “the theory of the average rate of profit and of the prices of production cannot be reconciled with the theory of value”[1] rests upon no more than his own inability to comprehend the Marxian theory of value and surplus value. Böhm-Bawerk assumed that Marx, like himself, “conceives the explanatory object of the law of value ... as a question of the exchange relations between different separate commodities among each other.”[2] In Böhm-Bawerk’s view this is a question that cannot be answered by looking at the system as a whole, as Marx does, for then, in fact, it is not even a question but a simple tautology. Indeed,

as every economist knows, commodities do eventually exchange with commodities--when one penetrates the disguise, due to the use of money. ... The aggregate of commodities therefore is identical with the aggregate of the prices paid for them; or, the price of the whole national product is nothing else than the national produce itself. Under these circumstances, therefore, it is quite true that the total price paid for the entire national produce coincides exactly with the total amount of value or labor incorporated in it. But this tautological declaration denotes no increase of true knowledge, neither does it serve as a special test of the correctness of the alleged law that commodities exchange in proportion to the labor embodied in them.[3]

However, as we have seen in the preceding chapter, it was Marx’s contention all along that commodities cannot be exchanged in proportion to the labor time embodied in them. He also held that the sum of the prices of the social total of products cannot be larger than the total value produced, but may be smaller--and no doubt is smaller--in reality. The equation of value and price for society as a whole is a theoretical assumption denoting perfect exchange relations, which do not exist in the real capitalist world. But even so, it remains true that the profits realized on the market are identical with the realized surplus value and that the realized prices of commodities are equal to the realized value and surplus value incorporated in them. We know too that for Marx the “explanatory object of the law of value” was not to be found in the simple exchange of commodities, but in commodity exchange under capitalist relations of production, in the specific allocation of social labor associated therewith, and in the circumscribed laws of motion of capital accumulation.

There is not much sense in dismantling Böhm-Bawerk’s arguments against Marx’s treatment of the value-price problem, for the simple reason that Böhm-Bawerk did not merely deny the cogency of Marx’s procedure but the validity of the labor theory of value as well. If the latter is itself erroneous, nothing worthwhile can be derived from it. Böhm-Bawerk was an adherent of the psychological theory of value who would not admit that labor is the sole source of value, but saw in it, at best, an exchangeable good like others of equal relevance, such as the gifts of nature (or their scarcity) and the element of time, all of which, in his opinion, entered into the determination of price. If he is mentioned here, it is for the reason that he is the prototype of the bourgeois Marx-critic down to the present day, in general as well as with regard to the value-price problem in particular.

The critics of Marx’s value-price “transformation” divide themselves into those who, like Böhm-Bawerk, deny its possibility outright, and those who find an investigation of its feasibility worthwhile. Ladislaus von Bortkiewicz stands in the same relation to the latter as Böhm-Bawerk does to the first. Bortkiewicz, too, was a bourgeois economist, an anti-Marxist, who approached the value-price problem as an intellectual puzzle, which, as such, deserved a solution. In distinction to Böhm-Bawerk, he maintained a soft spot for classical economy, especially for Ricardo, and therefore had some interest in the value-price problem.[4] This interest, at first dormant, was awakened by Tugan-Baranowsky’s Marx critique, which, based on the reproduction schemata in the second volume of Capital, objected, among other things, to Marx’s calculations regarding the establishment of an average rate of profit--which, in Tugan-Baranowsky’s opinion, could be done much better without any recourse to Marx’s value theory.[5] Although Bortkiewicz shared Michael Tugan-Baranowsky’s marginal utility concepts, he thought it nevertheless “interesting to show that Marx erred, and in what way, without reversing his way of posing the problem.”[6]

As already noted, Marx’s reproduction schemata do not distinguish between values and prices; that is, they treat values as if they were prices. The reproduction schemata for which they were designed fulfill a pedagogical function--namely, to draw attention to the need for a certain proportionality between the different spheres of production, if the total social capital is to be reproduced. They do not claim to depict the real world of capitalism, but merely serve as an aid in its understanding. For this purpose it does not matter whether the relations of production and exchange are dressed in value or price terms. Only in the third volume of Capital does Marx deal with the “transformation” problem. Here he uses different diagrams to illustrate how the establishment of an average or general rate of profit changes values into prices.[7] The diagrams show that if a number of different spheres of production (five in Marx’s example) constitute one total capital, the divergence of their individual profit rates, due to the different organic compositions of capital involved, takes the form of deviations of prices from values in the course of the establishment, through competition, of an average rate of profit, without altering the equivalence between total value and total price for the system as a whole.

Bortkiewicz, however, brought into this discussion Marx’s division of the total social capital into two departments, taking it from the Volume II reproduction schemata, with one producing means of production and the other consumption goods. To suit his own calculations and simplifying assumptions, he added a third department, which under the rubric “luxuries,” includes that part of total production which in his opinion does not enter into the determination of the general rate of profit. For our own purposes there is no need to replicate Bortkiewicz’s system of equations and numerical examples, which are supposed to show that Marx’s value-price transformation was erroneous “because it excludes the constant and variable capital from the transformation process, whereas the principle of the equal rate of profit, when it takes the place of the law of value in Marx’s sense, must involve these elements.”[8]

Bortkiewicz’s own solution lies in extending, or completing, the transformation of values into prices throughout the system. The latter is treated as in a stationary state of simple reproduction. Equilibrium conditions cannot be maintained, he asserts, unless the constant and variable capital, left by Marx in their value form, are also transformed into prices of production. It must here be repeated, however, that although Marx left the constant and variable capital in their value forms, this has nothing to do with the assumed “equilibrium conditions” of either simple or expanded reproduction as dealt with in the second volume of Capital. The apparent “equilibrium” of Marx’s reproduction schemata does not refer to the real world of price relations but is a methodological device that is supposed to mediate our understanding of these relations. “Aside from our ultimate purpose,” Marx wrote in Volume II,

it is quite necessary to view the process of reproduction in its fundamental simplicity, in order to get rid of all the obscuring interferences and dispose of the false subterfuges, which assume the semblance of scientific analysis, but which cannot be removed so long as the process of social reproduction is immediately analyzed in its concrete and complicated form.[9]


the fact is that the production of commodities in the general form of capitalist production implies the role which money is playing not only as a medium of circulation, but also as money-capital, and creates conditions peculiar for the normal transactions of exchange under this mode of production, and therefore peculiar for the normal rate of reproduction, whether it be on a simple or on an expanded scale. These conditions become so many causes of abnormal movements, implying the possibility of crises, since a balance is an accident under the conditions of this production.[10]

As the price form of value, dealt with in the third volume of Capital, is necessary for the analysis of the actual capitalist production and exchange process, the imaginary equilibrium conditions of the reproduction schemata in the second volume have no connection with the transformation problem. Furthermore, although approaching reality, Marx’s treatment of the value-price problem is itself an explanatory model of the formation of a general rate of profit. The equality of value and price for society as a whole does not imply an equilibrium state, but indicates the identity of value and price under all economic conditions, in the sense that whatever the prices, their sum cannot exceed that of the actually produced value and surplus value. The injection of the notion of equilibrium into the value-price problem is due to the equilibrium concept of bourgeois economics and is not a requirement of Marxian theory. For Marx, moreover, the general rate of profit exists as a tendency over time, not as an actuality at any particular moment. The prices of production are not, at any given time, identical with the cost prices plus average profit, but deviate from this magnitude in one direction or the other; so that it is only through the dynamic of the system as a whole that value and price tendentially coincide.

Stating the quantity of constant and variable capital in price instead of in value terms, as Bortkiewicz recommended, would not yield their cost prices--that is, would not express the value of constant and variable capital--because cost prices, as we have seen, actually exist only as prices of production already containing the average profit. This holds true whether we deal with an individual capital or with the system as a whole. But for the latter it is at least possible to make a theoretical division between the cost price and the price of production of the total product, distinguishing the value of constant and variable capital and the mass of surplus value. It is the relationship between value and surplus value for the system as a whole that determines the magnitude of the general rate of profit, a relationship that would be needlessly beclouded if in Marx’s transformation example the constant and variable capital were expressed in price terms. There is no point in shifting from value to price when dealing with the constant and variable capital, even though it is only in the price form that both appear in reality.

In Bortkiewicz’s opinion, “Marx not only failed to indicate a valid way of determining the rate of profit on the given value and surplus-value relations; more, he was misled by his wrong construction of prices into an incorrect understanding of the factors on which the height of the profit rate in general depends.”[11] Bortkiewicz adopts Ricardo’s position that a change in the structure of production affecting only goods that do not enter into the consumption of the workers does not influence the rate of profit. On the assumption of simple reproduction, the supply of product from each of the three sectors must equal the demand for it, as this arises from the sum of income generated in the three departments. But the rate of profit, with a given rate of surplus value, depends entirely on the organic compositions of the capital invested in the two sectors producing either wage or capital goods, and not on that of Bortkiewicz’s third sector, producing luxury goods and gold.

As a result, the average rate of profit does not lead to the equality of total value and total price, except under the condition that the organic composition of capital in the gold-producing industry is the same as that of the total capital. According to Marx, so Bortkiewicz relates, “with a given rate of surplus-value the only circumstance which affects the height of the rate of profit is whether the share of constant capital in total capital ... is larger or smaller; and it would make no difference at all what differences existed between the organic compositions of the capital in the different spheres of production.”[12] But as the rate of profit, according to Bortkiewicz, depends only on the rate of surplus value and the organic composition of capital invested in the departments I and II, the rate of profit on total capital is always smaller than the rate of surplus value, from which it follows that it is the general rate of profit, not the rate of surplus value, that accounts for the prices of production.

Bortkiewicz’s “correction” of Marx’s mistake consists, then, in the assertion that the equality of value and price depends on a particular relationship between the organic composition of total social capital and on that prevailing in the gold industry; total price, he thinks, can exceed total value or fall below it, depending on this relationship. On the assumption, for instance, that gold production requires a higher organic composition of capital than that which is characteristic for society as a whole, the price of gold would exceed its value. Because all commodities are expressed in terms of money prices, or gold, total price would be less than total value. Should the organic composition of capital in the gold industry be lower than for society as a whole, total price would exceed total value. Only in the special case where the organic composition of capital in the gold industry is the same as the social average organic composition of capital would total price and total value, total profit and total surplus value, coincide. And thus, while in general prices are not proportional to values, they may nonetheless be derived from value relations--which, though not vindicating Marx’s transformation procedure, also does not impair Marx’s contention that the rate of profit depends in general on the organic composition of the total social capital.

However, Marx’s concept of total capital, to which the law of value applies, embraces all production, regardless of the different spheres of production in which it is carried on. Whatever the character of the various industries, all of them produce for the sake of surplus value, which falls to them, via competition and in terms of prices, in the form of the average rate of profit in accordance with the magnitude of their capitals. Prices of production are expressed in units of the money commodity (gold) because the latter is itself subjected to the law of value, that is, determined by socially necessary abstract labor time. It is therefore not possible to separate gold production from production in general and to deduce from the peculiarities of the gold industry the instrumentarium for calculating the divergence or convergence of value and price. Whatever the organic composition of the gold industry may be, it, like any other type of production, is overruled by the necessities of the system as a whole and thus by the law of value coming to the fore in price relations. The price of gold is therefore part and parcel of the total sum of prices, as it is of the total sum of value produced, for just as the prices of commodities are measured in terms of the price of gold, so does the latter find its measurement in its buying-power vis-à-vis all other commodities. A fall or rise of the price of gold finds its compensation in the rise or fall in the prices of other commodities without disturbing the equivalence between total value and total price.

Bortkiewicz’s “solution” of the value-price problem is a “technical solution,” that is, a logical exercise, which attempts to test the inner consistency of a theory without regard to its empirical implications. It is a question of finding a mathematical solution for a mathematical problem, based on the concept of general equilibrium, which actually concerns no more than the supply-and-demand mechanism of the exchange process. The Bortkiewicz “solution” depends on the static situation of simple reproduction. It will not hold under conditions of expanded reproduction, when the capitalists of the third sector invest part of their profit in the departments producing wage and capital goods. It is perhaps for this reason that the transformation problem has played a rather minor role in Marxian theory, and found its locus of cultivation in bourgeois economics. The circulatory static conditions of simple reproduction bear a resemblance to bourgeois equilibrium theory--the main tool of bourgeois price theory. Marx’s theory is thus approached as if it were a sort of Walrasian equilibrium theory, whether looked upon from the viewpoint of value or that of price, and presumably accessible to mathematical treatment. As capital by its nature is self-expanding, Bortkiewicz’s “solution” has no connection with the real capitalist world. It remains a mere intellectual exercise, which may excite mathematically inclined economists but is no substitute for economic analysis, in which mathematics may serve for some purposes, as an aid to understanding, but never as a replica of real economic processes.

Just as Marx’s reproduction schemata in the second volume of Capital do not claim to depict the concrete capitalist production and exchange process, so the transformation examples in the third volume do not profess to accomplish the impossible--namely, the actual transformation of definite values into definite prices--but serve merely as an instrument for the comprehension of the relations between values and prices. Not searching for an equilibrium in terms of prices, Marx’s mixture of value and price relations suffices to illustrate the statement that prices and values will be altered through the competitive establishment of an average rate of profit. Whereas Marx’s example of the transformation process has only an explanatory function, Bortkiewicz approaches the value relations as if they were actually ascertainable in price relations. Like Ricardo, he conceives of labor-time value in terms of physical commodity units, and not, like Marx, in terms of socially necessary abstract labor time. He therefore thinks it possible for analysis to proceed directly from technically determined observable production prices with a uniform rate of profit. But if this were so, there would be no need for value theory, for it would yield no more than can be found in price relations.

The concern with the “transformation problem” thus rests upon a profound misunderstanding of Marx’s value concept. In Marx’s conception there is no transformation, except as a mental construction based on the social production relations that underlie the actual price and market relations. Because the transformation of values into prices is a fact not of experience but of theory, the idea arose that the law of value is itself a mere fiction, though perhaps a necessary one, and not a real phenomenon. For Marx, however, the law of value is as real as capitalism itself, even though it manifests itself only in market and price relations. The fact that value relations are not observable does not imply that the results of the law are also unobservable, but only that they are experienced in other forms, in the various contradictions of capitalist production and in its crisis-ridden development.

There is, to repeat, no actual transformation of values into prices; there are always only prices, and the whole search for a mathematical transformation of one into the other is entirely superfluous. Still, to reiterate, if we start with price relations, the question immediately arises, what constitutes price? There are sellers who ask certain prices, and these sellers are also buyers who question the prices of other sellers. There must be a profit for capitalist sellers--a higher price for the commodities they sell than what their own production has cost them. Prices must be decomposed in order to be understood, although they do not need to be understood in order to function. The theoretical decomposition is hampered by the fact that the prices of production, which all buyers have to pay and all sellers ask, already include the capitalist profit. But it is obvious that each price must be composed of costs and profit, even though it appears as an indissoluble price of production containing both costs and profits. By mentally abstracting from the profit, one gets the cost prices. They are real, though not observable. By decomposing the cost prices, one comes to the real wages of the workers and to that part of capital that is used up in production and must be regained in selling the newly produced commodities. As only labor can produce surplus value, the profits in the prices of production are traced to their real source, to the unpaid labor of the workers.

It should be clear, of course, that a theoretical treatment of this process can never more than approximate reality. But it is not impaired thereby, so long as it concerns itself with the real basic structure of society. There is no doubt that the clear division between necessary and surplus labor in value terms does not exactly correspond with the division between them in terms of prices, because the prices of the consumption goods that fall to the workers are not equal to their values but to their prices of production, and enter as such in the value-determination of labor power as the price of labor power. But, although the workers buy only consumption goods, production of these goods is not separate from production in general. The price of labor power is expressed in commodity prices, which, as prices of production, incorporate, besides their value content, also a portion of the total surplus value. The price of labor power, like all prices, is thus composed of a mixture of value and profit. This commingling of value and surplus value does not prevent the division of the social product into necessary and surplus labor in the form of value and surplus value, for all that is here required is that wages be kept on a level securing the profitability and the accumulation of capital in price terms. In this manner, the profit content of the commodity prices that enter into the workers’ consumption is appropriated by the capitalists through the price relations which play the attainable total surplus value into their hands. This of course implies the social struggles between labor and capital over wages and profits, which at times and to some extent may affect the level of profits as well as their distribution. In any case, our practical inability to reduce price to value, or value to price, cannot alter the fact that whatever the workers receive in terms of prices must be less than what they produce in terms of prices, and whatever falls to the capitalists in the form of profit must be extracted from the workers in the production process. A realistic analysis of prices and profits leads inescapably to value and surplus value.

According to Marx, the confusions of the classical economists with regard to value and price can be traced to their various attempts to abstract from the difference between surplus value and profit, in order to maintain the value concept, or to give up the latter altogether in favor of market prices. What was necessary, however, were further abstractions, so as to disclose the identity of value and price, of profit and surplus value, for society as a whole, in the value form of necessary and surplus labor, which underlies all other economic categories. As it is necessary to abstract from individual labor time to reach the socially determined abstract labor time, and to abstract from supply and demand to discover the market value behind the market price, so it is necessary to abstract from profit to reveal the value content in the cost prices beneath the prices of production and thus to lay bare the fundamental social production relations. Only then is it possible to comprehend the bewildering complexity of the capitalist world.

Marx did not especially concern himself with individual price determination, that is, with the relative prices of bourgeois “microeconomics,” nor with the aggregates, such as national income, investment, and employment of the “macroeconomics” practiced by present-day equilibrium theory, whether static or dynamic. His concern was with the system as such, which rules out the artificial division into micro- and macroeconomics. It is the system as a whole that determines all prices in capitalism, even though their formation is left to the anarchic exchange relations. However, as the productivity of labor changes only slowly, the changes in the general price level are also slow in coming. This does not preclude more rapid changes in relative prices, due to the movements of capital and the profit disproportionalities that initiate these movements. The influence of value relations upon the movements of prices comes to the fore not so much in changing relative prices as in the changing general price level, wherein the various “abnormalities” of individual prices from the prices of production compensate one another without affecting the general price level determined by the changing productivity of labor and the accumulation of capital.

The distribution of the total social surplus value via the formation of the general rate of profit, as enforced by the system as a whole, not only overrides the different organic compositions of individual capitals, but also embraces the unproductive spheres of the capitalist system, such as merchant and banking capital, and that part of the total surplus value falling to monopolies or being absorbed through various forms of taxation. The general rate of profit is not all there is to the mechanics of the distribution of total surplus value, but is merely the first, decisive step in the process of price formation. The derivation of prices from value relations becomes increasingly more blurred through the wide dispersion of profits and finds its reflection in a practically impenetrable amalgam of price relations.

As there is no practical way to isolate value from surplus value, either with respect to the single commodity or for society as a whole, the derivation of price from value can only theoretically be deduced from the fact that the sum total of value and surplus value can be nothing but the sum total of prices, as well as from the corollary that whatever the distribution of profits may be, the profit itself cannot exceed the surplus value actually produced. In whatever complex manner the actual prices may come about, they cannot escape the boundaries set by the underlying value relations. This does not say much about relative prices. But this inability to pinpoint the value content of the single commodity in its price, Marxian theory shares with bourgeois price theory, which also is not able to account for the actually given price relations except by the imaginary textbook equilibrium of “pure theory,” which can find no verification in actual price relations and is now in the process of being abandoned by bourgeois economics itself.

There is no need to consider the numerous attempts that have been made since Bortkiewicz either to prove or to disprove the validity of Marx’s solution of the value-price problem. To repeat, for Marx there are no values that must be equated with their prices; there are only prices derived from, and circumscribed in their movements by, the value relations upon which the capitalist system rests. The recent rash of contributions to the “transformation problem” indicates not so much a serious concern with Marx’s theory as a real disturbance in the minds of the economists. On the one hand, there is a loss of conviction in bourgeois price theory and, on the other hand, an urgent need to fortify this theory despite its failure as a realistic description of economic events. But the Marxian alternative is not open to bourgeois economists. In their search for a price theory more convincing than the standard theory of neoclassical economics, the Marxian alternative must first be set aside as a false, insufficient, or unnecessary approach to the price problem. To be sure, the defense of capitalism does not really require the concern they display with value and price, for its ideological value is quite limited; rather, this concern finds its explanation in the ongoing crisis of bourgeois economic theory. However, the debate around the value-price problem has taken a new turn.

It is now widely claimed that, whatever the difficulties involved in the transformation of value into price, the labor theory of value has its own virtue quite apart from price theory. It is said, for instance, that it is a necessary feature of the Marxian model

that we have value equations and price equations as two separate systems. What is visible at the surface in the system of exchange relationships and price equations describes the system. Underlying the exchange relations are relations of production where the class division becomes manifest. A transformation from value to price and vice versa is essential for understanding the reality of the class divisions beneath the phenomenon of equality and free exchange under law. ... [While] not a theory of relative prices or a theory of resource allocation, [the labor theory of value is essential as a theory] which brings out the influence of the class struggle in capitalism on the economic relationships of exchange.[13]

But even a superficial reading of Capital should make clear that Marx was developing not merely a theory of exploitation and class struggle and their effects upon exchange relations, but a theory of capitalist production and its developmental tendencies. Classical theory had already posited the class relations and the fact of exploitation. What Marx was concerned with were the immanent contradictions of value production, quite apart from the class struggle, even though these contradictions imply the appearance of class struggles specific to capitalism and even promise to bring the system to its end. Although the contradictions of capitalism are a feature of its underlying production relations, these relations appear in fetishistic form as value relations, and therefore as price relations, which, as they are identical with value relations for society as a whole, cannot be set against them. Since value is only a reality in its price form, it is not possible to have two sets of equations, one in value and the other in price terms. Moreover, the derivation of price from value is a one-way street; there is no way to reverse the procedure and go from price to value, The theoretical separation of value and price reveals, no doubt, the exploitative class relations, but also the derivation of price from value and therewith the value determination of resource allocation via the price relations. The price form of value merely affects the distribution of surplus value, but not the labor-time determination of the value of commodities, or their distribution in accordance with the allocation needs of capital production. The price relations do not make the exploitation relations less obvious, they merely dress them in different garb; instead of value and surplus value we have wage labor and capital expressed in terms of prices.

Meghnad Desai, for whom value theory has no other function than to unmask the hidden exploitation relations, suggests the need for two separate theories, one dealing with value, the other with price, and for a solution of the transformation problem that can accommodate “any quantitative empirical study seeking to understand the world in Marxian terms.”[14] It will remain his secret, however, how this transformation can be accomplished, when, as he himself observes, the value relations are in principle “unobservable and unmeasurable” and the ascertainable price relations are far too misleading and unreliable to be counted as empirical evidence.

The separation of value theory from price theory seems to be common ground for many of the participants in the transformation controversy. Even Paul A. Samuelson recently felt obliged to recognize “two Walrasian systems” in Marx’s theory--one in value terms, the other in price terms. Each may be justified, he says, but there is no bridge between them, no transformation of values into prices; we must choose either the one or the other. And of course, since value relations do not exist in reality, there is no point in elaborating Walrasian relations in terms of labor-time values, although this may bring out the fact of exploitation. But since the “exploitation hypothesis” may just as well be derived from a Walrasian system of price relations, the labor theory of value is redundant even as a theory of exploitation. According to Samuelson, “the tools of bourgeois analysis could have been used to discover and expound this notion of exploitation if only the economists had been motivated to use the tools for this purpose.”[15]

But of course the economists were not so motivated, for in their minds the term “exploitation” is merely a misnomer for some objective necessities that face any economic system employing factors of production in addition to labor power. For them profit is no evidence of exploitation; to “give profit a bad name” is only to show a lack of sophistication. But even if one wants to use such foul language, there is no need to turn to Marx, as the alleged exploitation can be just as well defined in terms of bourgeois price theory. On this point, too, there seems to emerge a consensus among professional economists. If there is still some disagreement on Marx’s intentions regarding the value-price transformation and on the merits of Marx’s value theory in general, when it comes to profits and prices the value analysis is superseded by the better mathematical formulations of modern price theory. According to Michio Morishima, for instance, even though it is clear “that the long-run equilibrium rate of profit is possible if and only if the rate of ‘exploitation’ is positive,” this proposition--which Morishima calls the “Fundamental Marxian Theorem”--“is completely independent of the concept of value. ... Anyway, we may conceive of Marx without the theory of value, as long as we agree that the Fundamental Marxian Theorem is the core of his economic theory.”[16] In this way, despite its analytical shortcomings, Marxism and the whole of classical economy may be reintegrated into the established science of economics and Marx’s “pioneering work” recognized as an important contribution to this science.

It is clear that Marx, aiming as he did at the abolition of the price system, could not be deeply interested in a theory of relative prices. In William J. Baumol’s opinion, “the value theory was never intended as a theory of prices,” and in any case, Marx’s “transformation was not from value into prices, but from surplus value into nonlabor income categories,” such as profit, interest, and rent. For Marx, the transformation of value into price “was worth discussing only to reveal its irrelevance and to tear away the curtain it formed before our eyes, so that the basic truth about the production of surplus value could be reached.”[17] Morishima seconds this interpretation by stating that “it is clear that the transformation problem has the aim of showing how ‘the aggregate exploitation of labor on the part of the total social capital’ is, in a capitalist economy, obscured by the distortion of prices from values; the other aim is to show how living labor can be the sole source of profit.”[18]

But even if labor is the sole socially relevant source of production, and profit a deduction from the product of labor, Samuelson argues in reply to these points, one “cannot neglect the labor previously performed and embodied in raw materials and in equipment--i.e. ‘dead’ or indirect labor.”[19] This “dead” labor happens to be the property of the capitalists, Samuelson points out, and is also a factor of production, adding to the value gained in the production process. Capitalist income, in the form of profit or interest, cannot be considered exploitation as long as it does not exceed the value of the capitalist contribution to production. The analysis of this factual situation, quite apart from the ethical issues it may raise, requires not a theory of value and surplus value but a general price theory operating on the undifferentiated national income.

It was perhaps unavoidable that the bourgeois economists’ concern with the transformation problem should arouse a new interest in the subject matter in Marxist circles, leading, in some instances, to a revision of Marx’s treatment of this issue. For both groups, this fresh interest in the transformation problem was a by-product of concern with the so-called neo-Ricardian approach to economic theory, which was itself a by-product of the crisis of bourgeois economic theory in its neoclassical form. Although the neo-Ricardians find ancestors in Dimitriev and Bortkiewicz, the current interest in the transformation problem is mostly due to the work of Piero Sraffa, even though the latter does not deal with it at all.[20] Most likely, Sraffa’s intense concern with classical theory, as the editor of The Works and Correspondence of David Ricardo, led him to challenge the ruling marginalist conceptions by a return to Ricardo’s preoccupations. Sraffa returned, however, not to Ricardo’s labor theory of value but to his early attempt to determine exchange relations and the rate of profit “directly between quantities of corn without any question of valuation,”[21] or, in Sraffa’s wording, by a consideration of the “production of commodities by means of commodities.” As there is no value in the Sraffa system, the issue of a transformation of values into prices does not arise. Bypassing value relations, and referring to Marx not at all, Sraffa concerns himself exclusively with the critique of the conceptions of marginalism.

As a bourgeois economist, Sraffa joins his numerous colleagues in assuming the existence of a science of economics that has relevance for all economic systems in the historical sense of classical theory. His critique of marginalism remains within the general conceptual field of bourgeois theorizing, and even of neo-classical theory, in which the notion of marginal utility refers to nothing but the use-value aspects of commodity production as defined by consumer choices on the market. However, whereas neo-classical theory takes its starting point and seeks its validation in the sphere of consumption, Sraffa finds it in the sphere of production, in which the exchange relations are regulated by wage and profit relations.

Thus the crisis of bourgeois economic theory has led to its modification in two directions. The major one was the belated Keynesian recognition that Say’s “law of the market,” whether stated in terms of an objective or in those of a subjective theory of value, does not hold for the capitalist system, which tends toward a permanent disequilibrium between its production and the effective demand. However, Keynes thought it not necessary to restore the production-consumption equilibrium, i.e., to change the system, but rather to support it from outside, through government interventions that would bring effective demand in line with a scale of production guaranteeing full employment. The other direction, taken by Sraffa and the neo-Ricardians, assumes that effective demand depends on the distribution of the total social product as determined by the wage-profit relations. A way must then be found to make possible a wage-profit ratio that would lead to a less crisis-ridden capitalist development.

Sraffa’s own work is offered as a mere “prelude” to a more thorough examination of the distribution relations of commodity production. As a prelude--and moreover, one that treats the problems involved within the rarified realm of “pure theory”--it is a preliminary undertaking for the clarification of economic concepts, quite apart from their possible confrontation with the actual capitalist world. This “pure theory” is dressed in use-value terms, in accord with the assumption that all relations of production and distribution are ultimately based on nothing but the material-technical conditions of production, which determine the structure and the functions of any economic system. Nevertheless, the collapse of Keynesian theory, as a result of the ineffectiveness of its policy recommendations, put neo-Ricardianism in the center of economic interest as a sort of refuge from the shambles in which bourgeois economic theory finds itself. And just as Keynesianism was to some extent able to influence some self-professed Marxists, neo-Ricardianism has done even better, because of its apparent return to considerations of social class relations and their effect upon the distribution of the social product.

We will deal here only with the reception Sraffa’s work found among such professed Marxists as, for example, Mario Cogoy.[22] Sraffa’s work convinced Cogoy that the transformation problem is of far greater complexity than Marx had imagined it to be. Although Sraffa’s work does not deal with this issue, in Cogoy’s opinion it nonetheless throws light upon the difficulties of Marx’s transformation procedure. Among other things, Sraffa assailed the marginalist capital concept and the marginal determination of factor prices by constructing an alternative system of economic analysis that concerns itself exclusively with such properties “as do not depend on changes in the scale of production or in the proportions of ‘factors’.” In such a system “the marginal product of a factor (or alternately the marginal cost of a product) would not merely be hard to find--it just would not be there to be found.”[23] In the light of Sraffa’s construction, the notion of capital as an entity given and measurable independently of price formation cannot be sustained, because it itself is determined only after the profit and price relations are known. Cogoy convinced himself that this critique of the traditional capital concept also applies to Marx’s capital theory because “capital cannot enter as a definite magnitude in the production process, since this magnitude can be established only after the determination of the relationship between wages and profits. The result of Sraffa’s analysis destroys any and all concepts of capital as a magnitude existing prior to production and distribution.”[24]

This would come as a great surprise to the capitalists, were they aware of the wondrous world of academic economics, for they do base their respective claims to the social surplus value on the size of their particular investments as measured by their market values. For the economics of the economists, capital may not be a definite magnitude to behold, but each capitalist knows quite well what his capital amounts to in money terms, and all capitals together constitute the monetary value of the total social capital, whether this is measurable or not. Originally, “capital” was identified with the physical means of production in the hands of the capitalists, along with the money “advanced” as wages to the workers. There was no problem with the concept of capital, and its accumulation expressed the growing value of capital in terms of money. This concept of capital prevails today--if not for the economists, at any rate for practicing capitalists. The goal of their production is a greater money capital, expressible in commodities of all descriptions, including means of production and labor power. The accumulation of capital is an extremely simple and transparent procedure, requiring no more than the existence of owners of capital and the wages system. The complexities begin with the distribution of the extracted surplus value. To understand this it is essential to distinguish the production of surplus value from its distribution, so as not to lose contact with the social production relations upon which the whole capitalist edifice rests. For this reason Marx’s basic categories are “constant capital,” “variable capital,” and “surplus value.” A capitalist system requires a definite relationship between these categories: the variable capital must yield sufficient surplus value to expand the total capital beyond its previous size in terms of money. Without this, there is no capitalist production.

Because of the complexities which the capital-producing system brings into the distribution of surplus value, the categories constant capital, variable capital, and surplus value lose their unambiguous meaning, for they are thoroughly intermixed within price relations. As Cogoy observes, “prices change not only because capitals of various magnitudes have to yield a uniform rate of profit, but also because these price changes alter the quantitative relationships between the different capitals. ... Not only the prices change, but, because they do so, the magnitudes of different capitals fluctuate, which, again, influences the price relations.”[25] He concludes from this that the transformation problem cannot be solved on the assumption that the value relations between total capital and total surplus value are identifiable with the general rate of profit and that the transformation of values into prices must be accompanied by a simultaneous transformation of the value rate of profit into a price rate of profit. Cogoy must be reminded, first, that there is no such thing as a value rate of profit, but only a price rate of profit and, second, that no matter how price changes may alter the quantitative relationships between different capitals, and these again the price relations between different commodities, this cannot alter anything with respect to the concept and the reality of the total capital and total surplus value or, therefore, to the dependence of profits on the total surplus value.

Marx criticized the classical economists precisely because of their inability to recognize profit, interest, and rent as derivations from surplus value, which must be confronted as such with total capital if we are to understand its movements as well as the price relations bound up with it. This advance beyond classical economics Cogoy sees as Marx’s “mistake,” because it led to the false equation of total value with total price and total profit with total surplus value. For Cogoy, if total value equals total price, total profit could equate with total surplus value only if the product combinations in the profit category--with respect to quantities of the concrete labor time they embody--are the same as those in the total social product; this, however, is not the case. It is therefore not enough to know the mass of values entering and leaving the production process; it is also necessary to know the use-value combinations of each value unit that partakes in the formation of the price structure and of the rate of profit. Because this is so, “value is not the basis of price because the sum-total of all prices is equal to the sum of all values, but because the prices mediate an average rate of profit, which, though not identical with the value structure remains dependent on it.”[26] It is thus necessary to give up the concept of capital as a definite given magnitude and to break it down into its various components with respect to both use value and exchange value.

Marx’s mistake, Cogoy asserts, was to equate the sum of values and prices, of profits and surplus value, without bothering to investigate the interdependence of social production in terms of use values, or the technical conditions of production. He suggests a reformulation of the transformation problem that implies no less than an undoing of Marx’s value theory, since it involves the replacement of abstract labor-time value by concrete labor-time relations defined in terms of the physical production process. Of course, this reformulation is not undertaken, but left to the future. But its implications are spelled out and prove to be so formidable as to warrant the certainty that it will never be endeavored.

Cogoy regards the traditional identification of value relations with the social production relations as an “empty phrase.” People use this phrase, he says, to avoid making quantitative statements about value-price relations or about the organic composition of capital, under the pretense that this would be an unwarranted empiricism. But if, for reason of theory, the connection between the value and price level of analysis cannot be reconstructed in quantitative terms, then the whole transformation problem is only of methodological importance and the relations between the value-system and the price-system are equally irrelevant, whether one assumes that the price system does not require a value basis or that the value system suffices to explain the price mechanism. Cogoy believes that a way must be found to derive prices from values in a logically consistent system. In short, he assumes that there is an internal value structure of capitalist production and an external price structure, each existing in its own right, so to speak, and that it is only by a rigorous scientific analysis--an admittedly difficult task--that the quantitative value relations can be traced to quantitative price relations, in order to establish exactly what these relations imply for either value or price. But as value relations, to repeat, only exist as price relations, there is no way to conduct such comparative calculations. This condemns Cogoy to remain in the sphere of “pure theory” and to occupy himself with the playful construction of imaginary mathematical models in a search for the solution of a problem that does not exist.

It was of course as obvious to Marx as it is to Cogoy and the neo-Ricardians that the interdependencies of the capitalist economy, with respect to both value and surplus value, determine the movements of capital, profits, and wages, in an ever-shifting pattern, so that the system’s basic determination by value relations asserts itself only in the course of capitalist development as an averaging of ceaseless deviations of price from value and profit from surplus value. If it were possible to arrest the developmental process and to distinguish the elements in the price structure representing the value of labor power from those referring to surplus value, the actual division between necessary and surplus labor in value terms would be revealed, whatever this may imply in terms of prices and profits. It is precisely because capital is not a given, but is a changing magnitude, that it is necessary to stick to the unchangeable relations of capital production, which prevail no matter what the effect of the movements of capital upon the price relations, and of the price relations upon the movements of capital, may happen to be. The concept of total capital excludes a division other than that into constant capital, variable capital, and surplus value. These categories include all spheres and branches of production, no matter what, or under what conditions, they may produce. The production of means of production is not differentiated from any other kind of production. All products, including labor power, are commodities of equal standing. They are equalized by the abstract money form of value and surplus value. Value exists, then, only as a social phenomenon, as an average of abstract labor-time relations with regard to the single commodity as well as the total social capital, for which the general rate of profit is determined in relation to the social average organic composition of capital.

What characterizes Marx’s concept of value is its determination by exchange value, which overrules all use-value aspects of capitalist production. To be sure, the very existence of capitalist society depends on the production of use values and on their allocation through market relations in the pursuit of exchange value. Accomplished in one fashion or another through capitalist competition, as determined by the accumulation of capital, the social profit, or surplus value, is distributed in accordance with the magnitudes of the various capitals, which reflect, in their existence, the social allocation of labor. To bring this about, the general rate of profit must be independent of any particular capital and its specific organic composition, for it is only in this manner that the use-value requirements of capitalist production can be met.

The interdependency between the units involved in capitalist production determined by the use-value aspects of commodities presupposes the interdependence of production units established in terms of exchange-value. The technical relations of social production are a mere aspect of the value relations, as is expressed in Marx’s concept of the organic composition of capital. The domination of exchange value precludes any determining role for the use-value character of commodities outside of the constraints of value production. The technically determined interdependencies of capital production, in other words, are subordinated to the interdependencies of the value relations, which determine capitalist development through their regulation of the accumulation of capital. It is the latter which determines the character of the technical relations, not vice versa, and with them the interdependencies of social production that come to the fore as use-value relations.

Because all production in all possible economic systems is the production of use values, this fact is totally meaningless with respect to the description and analysis of a specific economic system such as capitalism. For Marx, use value as such has no economic significance, except as the material basis of exchange value. Bourgeois economic theory asserts, of course, that there are general economic laws valid for all social systems, and thus feels enabled to see in capitalism only a special case of these general laws of economics. But these “general laws,” which amount to the inescapable necessity for any system to reproduce itself, are just as meaningless as the fact that all production is the production of use values. In either case, the nature of capitalism as a historically specific form of social production is overlooked in favor of a pointless generalization of the obvious, namely, that all economic systems are subject to some natural necessities and thus share some similarities within their historical differentiations.

In capitalism, labor time appears as value and is determined by social necessity in a double sense, namely, with respect to both the time socially necessary for the production of any particular commodity, and the time required to produce the quantities of various commodities required for the enlarged reproduction of capital. Labor-time value is thus not identical with the actual labor time employed in production, but only with the abstract labor-time content of commodities considered products of the system as a whole. It is also only insofar as surplus value in the form of abstract labor-time value is produced that total surplus value equates with the total profit, and total value with total price. Unproductive labor--that is, labor not yielding surplus value--is not part of strictly capitalist production, whereas the labor time actually applied in society includes unproductive labor, which does not enter into the socially necessary labor time defining value. The value of labor power, moreover, is derived not from labor time as such, but from the value of the commodities that the workers buy with their wages. It is thus always from abstract value and surplus value that prices and profits are derived, never from the use-value character of commodities or the technical peculiarities of their production.

However, although Cogoy agrees with Sraffa’s finding that the rate of profit together with all prices can be directly derived from relations between physical quantities of commodities, he would like to retain Marx’s concept of value, if only to establish a connection between the price relations and the actual social organization of the labor process. His early treatment of the matter carried the title “The Dilemma of neo-Ricardian Theory,” and maintained that Sraffa’s analysis cannot replace Marx’s value theory. While it is necessary to criticize Marx with Sraffa, he held, it is also necessary to criticize Sraffa with Marx, for it remains true that the value relations are the rational foundation for the analysis of price and profit formation, even though the relations between value and price are not those assumed by Marx. In his second and more extensive treatment of the same subject matter, Cogoy still speaks of a “value structure and price structure,” but only to reject the former in favor of the latter.[27] If a transformation of values into prices in the Marxian sense is not possible, he asserts, the internal connection between the regulative function of the law of value and the interactions of the different capitals in the formation of the rate of profit is lost and precludes any meaningful analysis of capitalism. Marx’s shortcomings with regard to the transformation procedure are now seen as shortcomings of Marx’s value theory, due to his failure to pay attention to the complex structure of technological interdependence linking the various industries. If the law of value still has a central place in the comprehension of the system and its developmental tendencies, this is only as a reflection of the social relations of production in a broad, nonquantitative way. Actually, the technical forms that realize the socialization of labor are more important than the vague value relations that seemingly point to the socialization of capital production via the average rate of profit. The abstract value concept must therefore make room for principles based on the technological use-value structure of capitalist production, or for that matter, of any kind of production. But at this point we can take leave of Cogoy, for he has made the irrevocable jump from Marxism to neo-Ricardian theory, with which we will deal at another place.[28]

To sum up: the insistence of neoclassical theory upon the point that there is no transformation of values into prices, and the concurrence with this position on the part of the neo-Ricardians, is also shared by Marx, if only for the reason that there is no way to expose the value relations in quantitative terms, to prove their equivalence with the price relations. If the transformation of values into prices were possible, it would suggest choice between value and price theory. Why, then, deal with value at all, since the real world of capitalism is one of price relations? Indeed, it has been said that

in so far as the problems which are posed for solutions are concerned with the behavior of the disparate elements of the economic system (prices of individual commodities, profits of particular capitalists, the combinations of productive factors in the individual firm et cetera) there seems to be no doubt that value calculation is of little assistance. Orthodox economists have been working intensely on problems of this sort for the last half century and more. They have developed a kind of price theory which is more useful in this sphere than anything to be found in Marx and his followers.[29]

Nevertheless, the value concept should be retained because “it makes it possible to look beneath the surface phenomena of money and commodities to the underlying relations between people and classes.”[30] As we have seen, some of the more recent contributors to the literature on the value-price problem share this opinion, which reduces the value theory to a mere theory of exploitation.

In this whole discussion the relevance of bourgeois price theory is taken for granted. The problem is with value, not with price. After all, prices are observable; they are what they are, whether or not they are traceable to underlying value relations. But they are what they are also aside from bourgeois price theory, which deals with a “pure price system,” not with the prices encountered in the real world. This “pure theory” plays the same role with regard to actual prices that Marxian value theory plays with regard to the prices of production. The prices of “pure theory” are also unobservable. “The economist’s definition” of price, it is said, “is surely not easy to implement except in the most artificially simplified instances. That is why businessmen do not follow the economist’s mode of analysis but adopt simplified rules of thumb.”[31] Within its limited field, bourgeois price theory has only explanatory functions; if it had operational meaning, it would no longer refer to the assumed self-adjustability of market relations.

Bourgeois price theory presents a static system and as such has no connection with the dynamic reality. It makes theoretical assumptions and draws conclusions from them that preclude empirical verification. It always remains the theory of an imaginary price system. It insists upon the interdependence of all prices and their derivation from the prices of final goods, as equilibrium prices, although it is now admitted that the aggregate demand may not equate with the aggregate supply. The resulting discrepancy between theoretical price and real price leaves the latter unexplained. Until recently, price theory disregarded the distribution of income, for it assumed that each factor of production, be it labor or capital, finds its proper reward in accordance with its marginal product, so that all incomes of factor owners equate with the respective contributions of these factors to the production process. In this way, the price system determines the distribution of income, whatever it may be, and in any case, the “science of economics” restricts itself to the study of the allocation of commodities through the “revealed preferences” of the consumers under whatever conditions of distribution. This theory, which is now under attack, cannot account for the actual price relations and their changes. It does no more “than to translate the queer concepts of the capitalists, who are in the thralls of competition, into a more theoretical and generalizing language and to attempt a vindication of the correctness of these conceptions.”[32]

It could not have entered Marx’s mind to have a price theory apart from value theory. The actual price relations and their historical development are only the market expression of value relations, which are the determining element of capital expansion. Prices change with changes in value relations and the latter change with changes in the system as a whole, following on the accumulation of capital. The derivation of prices from values shows itself in changes in the general price level and in the average rate of profit. Outside of these changes, alterations of relative prices signify no more than temporary reactions to shifts of supply and demand within the existing value relations. They are met by counter-shifts and can be disregarded. Whatever these changes in relative prices may imply for individual capitals, they do not affect the state of the economy as a whole and its developmental tendencies.

Not being a primer for businessmen, Marxian theory has no desire to trouble itself with individual price determination, or with particular businesses and their profitability. In a dynamic system, such as capitalism is, “economizing” on the basis of price is in any case dependent on the behavior of the system as a whole, a fact to which the bourgeois theory of “risk and uncertainty” bears witness in its own fashion. Insofar as empirical proof of the determination of price by value is possible, it is by comparing general price levels of the past with those of the present, or those of more with those of less capitalistically developed nations. As the increasing productivity of labor decreases the value of commodities, lower values find their expression in lower prices.

We may as well point out at once that value may fall without a change in price, or even with increasing price, though this would merely indicate a devaluation of money. Just as for any other commodity, the value of a money commodity, gold or silver, is determined by its cost of production plus the average rate of profit; its price falls with the decline of its value, somewhat modified by changing supply and demand relations. But as commodity money is supplemented by other types of money, an inflation of the money supply may lead to prices that seemingly contradict the reduction of the commodities’ value content. It is therefore on the assumption that the law of value extends over the money supply that the decreasing value of commodities finds its expression in lower prices.

Aside from statistically ascertainable changes in the general price level, it is the existence of a general rate of profit that verifies the effect of the value relations upon the price and profit relations. It is of course only in a manner of speaking that the establishment of the average rate of profit constitutes a “value transfer” between different capital entities. Actually, the “transfer” is not observable, but is the outcome of price movements enforced, unbeknownst to economic agents, by value relations. The general rate of profit does not take the place of the law of value; the latter shows itself in the average rate of profit. Price movements are dependent on value relations because the reproduction and accumulation of capital is accomplished not in terms of use values but in terms of exchange values. The physical production process serves the reproduction of the physical requirements of society only insofar as they are compatible with the maintenance and the enlargement of capital. As the use value aspect of commodity production, and of the commodity itself, precludes an exchange of goods measured in terms of quantities of abstract labor time, due to the different rates of exploitation, different conditions of production, and different organic compositions of the various capitals, commodity exchange in a capitalist society is possible only in terms of prices that both derive and deviate from labor-time values.

Prices precede the capitalist system and continue with it, even though they are now associated with the specifically capitalist relations of production. It was their existence that raised the question of their meaning within capitalist commodity production and led to the discovery of the value relations upon which they rest. But the emergence of value theory changed nothing in the fact that price relations determine the exchange process. No question of an actual transformation of values into prices could, or can, arise in a system that functions only on the basis of price relations. But the value relations also exist; that is, it is a self-evident fact that commodities must be produced, and are produced, by human labor, so that the various commodities may be distinguished in terms of the quantities of labor time required for their production. The social character of commodity production demands an allocation of the total social labor in such proportions as assure the existence and the enlarged reproduction of the system, and this must be accomplished by means of a process of exchange in which no one is aware of the actual requirements of the system as a whole in its material or use-value aspects. A substitute for this “awareness” must be reached through price movements, which by themselves have no direct connection with the labor-time quantities incorporated in commodities. Because it is through price, and not value, that social production and exchange find some sort of regulation, price must account for the necessary allocation of labor among the various spheres of production, and the profitability of any kind of production, required for the existence of the system as a whole.

That such a system cannot be conceived as an equilibrium system seems obvious. But this has nothing to do with its existence and its continuation. As the regulator of capital production, Marx’s law of value implies no more than the setting of definite social boundaries to the movements of prices and profits through which the system operates. These boundaries, again, are recognizable only in price and profit relations, which turn an apparent “equilibrium”--suggested by the expansion of capital--into the disequilibrium of crisis. This leads us into the next chapter. At this point it suffices to state that it is most importantly in the disturbances and the recurrent crises of capitalist production that the determination of the price system by value relations shows itself empirically, though still not in value terms but in terms of price and profit relations. We can thus leave the “transformation problem” to the mathematical wizards of the “post-Marxian production economics.”


1. In P. Sweezy, ed., Karl Marx and the Close of His System (New York: Kelley, 1949), p. 30.

2. Ibid., p. 34.

3. Ibid., p. 36.

4. L.V. Bortkiewicz, “On the correction of Marx’s fundamental theoretical construction in the third volume of Capital,” in Sweezy, ed., op. cit.

5. Theoretische Grundlagen des Marxismus (1905).

6. Bortkiewicz, p. 199.

7. Cf. Capital Vol. III, p. 185: “If we consider capitals I to V as one single total capital, it will be seen that the composition of the sum of the five capitals amounts to 500, being 390 C + 110 V, so that the average composition is 78 C + 22 V.

Capitals Rate of
Rate of
up c
Value of
I. 80c + 20v 100% 20 20% 50 90 70
II. 70c + 30v 100% 30 30% 51 111 81
III. 60c + 40v 100% 40 40% 51 131 91
IV. 85c + 15v 100% 15 15% 40 70 55
V. 95c + 5v 100% 5 5% 10 20 15
390c + 110v 110 110% Total
78c + 22v 22 22% Average

If we allot this surplus-value uniformly to capitals I to V, we arrive at the following prices of commodities:

Capitals Surplus-
Value of
Cost-Price of
Price of
Rate of
Deviation of
Price from Value
I. 80c + 20v 20 90 70 92 22% +2
II. 70c + 30v 30 111 81 103 22% -8
III. 60c + 40v 40 131 91 113 22% -18
IV. 85c + 15v 15 70 55 77 22% +7
V. 95c + 5v 5 20 15 37 22% +17

Summing up, we find that the commodities are sold at 2 + 7 + 17 = 26 above, and 8 + 18 = 26 below their value, so that the deviations of prices from values mutually balance on another by the uniform distribution of the surplus value, or by the addition of the average profit of 22% per hundred of advanced capital to the respective cost-prices of the commodities of I to V.”

8. Bortkiewicz, p. 201.

9. Capital, Vol. II, p. 532.

10. Ibid., p. 578.

11. Bortkiewicz, p. 266.

12. Bortkiewicz, p. 206.

13. Meghnad Desai, Marxian Economic Theory (London: Gray-Mills, 1974), p. 3.

14. Ibid., p. 55.

15. P.A. Samuelson, “Understanding the Marxian Notion of Exploitation...,” in Journal of Economic Literature (June 1971), p. 422.

16. M. Morishima, “The Fundamental Marxian Theorem: A Reply to Samuelson,” in Journal of Economic Literature (December 1971), p. 73.

17. In Journal of Economic Literature (December 1971), p. 58.

18. M. Morishima, Marx’s Economics (Cambridge: Cambridge University Press, 1973), p. 86.

19. In Journal of Economic Literature (December 1971), p. 65.

20. P. Sraffa, Production of Commodities by Means of Commodities (Cambridge: Cambridge University Press, 1966).

21. P. Sraffa, Introduction to Ricardo, p. xxxi.

22. Cf. M Cogoy, “Das Dilemma der neo-ricardianischen Theorie,” in H.G. Backhaus et al., eds., Gesellschaft (Frankfurt: Suhrkamp, 1974), pp. 205-263.

23. Sraffa, p. v.

24. Cogoy, pp. 252-3.

25. Ibid., p. 218.

26. Ibid., p. 255.

27. Cf. M. Cogoy, Wertstruktur und Preisstruktur. Die Bedeutung der linearen Produktionstheorie für die Kritik der Politischen Ökonomie (Frankfurt: Suhrkamp, 1977).

28. Unfortunately, this further discussion of Cogoy’s work was not written.

29. P. Sweezy, The Theory of Capitalist Development (New York: Monthly Review, 1942), p. 129.

30. Ibid.

31. R. Dorfman, The Price System (Engelwood Cliffs, N.J.: Prentice-Hall, 1964), p. 40.

32. Capital, Vol. III, p. 271.