Talk:Transformation problem

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an excellent article...I read this about a week ago and it still is very much stuck in my mind. thoughtful. i realize it needs some specialized background knowledge, but it seems as simple as it could possibly be. for someone who is pretty conversant with capital, vol. 1 this comes as an interesting revelation (and gives real impetus to finally reading the other books).

Though the comprehensive explantion of the transformation is complex, its core insight can be explained in suprisingly simple manner. Imagine a class society comprising labourer, capitalist and leisure class, whose industries are defined by such class distinction. Because this is a capitalist economy, production is done by combined input of workers and capital (tool and machinery). The profit of capitalist is determined by...... Industry 1 produce wage goods (food, cloths, housing and so on) which are consumed by workers. Industry 2 produce capital goods (machinery, fuel, tools and so on) which are utlised by industry. Industry 3 produce luxury goods which are consumed by leisure class who does not work.

In the initial state, the ratio of capital to labour (called organic ratio of capital) are different among these industries and in this ecample, arbitraly set at 20%, 30%, 40% respectively. In this system, surplus value is determined by...... Consequently, the rate of profit is determined by ........

Industry\Rate	Organic Ratio of Capital	Surplus Value	Rate of Profit

Wage Goods Industry

Capital Goods Industry

Leizure Goods Industry

(I need help here)

The main feature of this economy is that output of wage and capital goods industries are iput of all three industries while the output of Leizure Goods Industry is not used as input in other industries. Marx, like other classical economists assumed that higher rate of profit attract capitalist to shift his investment toward such industry which result in eventual equalisation of rate of the profit of all industries and change in the organic ratio of capital of each industry.

Marx's fundamental question was the relationship between the rate of profit and the capital (or organic rate of capital? me don't know.). To do this, the "exchange value" among each industries's inputs and outputs have to be transformed (or synchronised) into prices to obtain mathematical solution of the rate of profit in relationship to the capital.

Marx did not solve this "transformation problem". Instead, in Das Capital, he presupposed the mathematical solution, which led to the (hypothesised) conclusion that there is a inverse relationship between the rate of capital accumulation and the rate of profit. This is the fundamental basis of Marxian proposition. Each capitalist must increase capital to increase his profit. However, in totality, such progresive capital accumulation within the capitalist system lead to diminishing retun of profit, which, in turn, force capitalists to progressively exploit and degrade workers which in the end lead to a revoultion and the collapse of the capitalist system.

The actual solution of the equation of the above model can be achived by setting the ratio of transformation to artibary number of 1. The solution actually revealed that there is no fixed relationship between the organic rate of capital and the rate of profit unless such (inverse) relation is presuposed in outset. This imply that Marxian argument over capital accumulation, labour exploitation and the fate of capitalism is incorrect. Another (Slafian) insight is that the capital does not determine the rate of profit which also refute one of the core assumption of neo classical economics. Thefore, the solution to transformation problem is considered as the fundamental refutation of marxian economics and neo classical economics.

These references are certainly relevvant, but it's probably excessiv to include them all on the main page. I mostly placed them there to show how the previous version of the article was pretty much nonsenssical — claiming for example, that nothing had been done on this topic since 1971. The article certainly reflected a position from prior to 1971, but not the current thinkingon the issue (hence thee list of references).

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• Marx, K. (1867) Das Kapital Volume I.
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• Bortkiewicz, L. von (1906) "Wertrechnung und Preisrechnung im Marxschen System" Archiv für Sozialwissenschaft und Sozialpolitik 3, XXIII and XXV [trans. "Value and Price in the Marxian System" International Economic Papers 1952 2 5–60].
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• Makoto Itoh, The Basic Theory of Capitalism.
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• Baumol, William J. (1986). On Marx, the Transformation Problem and Opacity. Microtheory: Applications and origins. W. J. Baumol. Cambridge, Mass and London, MIT Press: 247.58.
• Bellofiore, Riccardo (1989). "A Monetary Labor Theory of Value." Review of Radical Political Economics 21(1-2): 1-25.
• Böhm-Bawerk's, Eugen von (1949). Karl Marx and the close of his system. Karl Marx and the close of his system & Böhm-Bawerk's criticism of Marx. P. M. Sweezy. New York, Augustus M. Kelley: 9-118.
• Desai, Meghnad (1991). The Transformation Problem. Marx and modern economic analysis. G. A. Caravale. 1 ( Values, prices and exploitation): 3-44.
• Devine, James N. (1990). The Utility of Value: The New Solution, Unequal Exchange, and Crisis. Research in political economy. P. Zarembka. Greenwich, Conn. and London, JAI Press. Volume 12: 21-39.
• Duménil, Gérard and Dominique Lévy (1987). "The Dynamics of Competition: A Restoration of the Classical Analysis." Cambridge Journal of Economics 11(2): 133-64.
• Duménil, Gérard and Dominique Lévy. (1987). "Value and Natural Prices Trapped in Joint Production Pitfalls." Journal of Economics (Zeitschrift fur Nationalokonomie) 47(1): 15-46.
• Duménil, Gérard and Dominique Lévy. (1989). "The Competitive Process in a Fixed Capital Environment: A Classical View." Manchester School of Economics and Social Studies 57(1): 34-57.
• Duménil, Gérard and Dominique Lévy. (1991). "Micro Adjustment toward Long-term Equilibrium." Journal of Economic Theory 53(2): 369-95.
• Fine, Ben (1986). The Value Dimension: Marx versus Ricardo and Sraffa: Introduction. The value dimension: Marx versus Ricardo and Sraffa. B. Fine. London and New York, Routledge and Kegan Paul: 1-17.
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• Freeman, Alan (1984). The Logic of the Transformation Problem. Ricardo, Marx, Sraffa: The Langston Memorial Volume. Introduction by, Ernest Mandel. A. Freeman and E. Mandel. London, Verso; distributed in the U.S. and Canada by Schocken Books, New York: 221-64.
• Freeman, Alan and Guglielmo Carchedi (1996). Marx and non-equilibrium economics. Cheltenhaum, UK ; Brookfield, US, Edward Elgar.
• Gleicher, David (1989). "Labor Specialization and the Transformation Problem." Review of Radical Political Economics 21(1-2): 75-95.
• Glick, Mark. (1991). The Classicals and Neoclassicals in Applied Economics: Studies of Competition and Monopoly. Explorations in political economy: Essays in criticisms. R. K. Kanth and E. K. Hunt: 105-22.
• Glick, Mark and D. A. Campbell (1995). "Classical Competition and the Compatibility of Market Power and Uniform Rates of Profit: Comment." Review of Radical Political Economics 27(2): 124-35.
• Glick, Mark and Hans G. Ehrbar (1987). "The Transformation Problem: An Obituary." Australian Economic Papers 26(49): 294-317.
• Hilferding, Rudolf (1949). Böhm-Bawerk's Criticism of Marx. Karl Marx and the close of his system & Böhm-Bawerk's criticism of Marx. P. M. Sweezy. New York, Augustus M. Kelley: 121-83.
• Kliman, Andrew J.. (1998). Value, Exchange Value and the Internal Consistency of Volume III of Capital: A Refutation of Refutations. Marxian economics: A reappraisal: Essays on Volume III of Capital. Volume 2. Profits, prices and dynamics. R. Bellofiore. New York, St. Martin's Press; London: Macmillan Press: 29-42.
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Dualistic Monism and Labor Theory of Value

The essay is in two parts:

The first part is the "positive" definition of economic value, that is, the explanation of the relations between the 6 couples of polar attributes of economics by means of the general meaning of "identity-duality relationship" as engine of changes. This shows that in every considered period of time the price of the gross product is the representation of the totality time of labor of the system, independently from the function of commodities -i.e. the distinction between means of production and consumer goods- and independently from how they are distributed - i.e. how prices can vary accordingly-.

The second shows how the idea of value as incorporated labor and that of the transfer of the value of the means of production into the produced commodity, which imply that the value of the net product (instead of that of the gross product) coincides or is equal to the totality of labor of the system, violate the meaning of identity duality of all the polar attributes of economics, so that the relationship between prices and quantities of labor is lost, and the real value of the various currencies in terms of quantities of quantified human existence remains unknown.