The Transformation Problem

[∞]

Is there any real way to solve it? Or should we rely on improvision?
I'm also very curious to the exact intruqicies of the development in putting exact value into commoditie w/o surplus of a surplus labor. Please don't use very complicated formulas without explaining the variables....it confuses the shit out of me.

[NewSocialist]

The TSSI theory, outlined in Andrew Kliman's Reclaiming Marx's Capital, solves the so-called "transformation problem."

Brendan Cooney explains it in very simple language on YouTube:
http://www.youtube.com/watch?v=3eTTm90LAWQ

http://www.youtube.com/watch?v=RjqO2a8eMb0

http://www.youtube.com/watch?v=zhvEzIsurA4

[Lyev]

The contention lies in how Marx's original reproduction model was interpreted, specifically by a Russian economist around the 20s or so, called Rabonwicz or something like that. This Russian chap, who's name escapes me, was quite a dry, academic (i.e., orthodox, classical - accepts capitalism as the norm) kind of economist, and the way he tried to use Marx's model would not be how the economy would work in the real world; it's meant to be dynamic and flexible, but this Russian put calculations into the model that simply would not work how things were originally intended by Marx. I posted this about a while ago:
Basically, in the 1900s there was this Russian economist called something Bortkiewicz, or something like along those lines, who came along and published a paper that tried to discredit Marx, and he claimed that when Marx was taken to his logical conclusion the numbers simply didn't add up. However, the way Bortkiewicz went about this was wrong, at least for trying to work with Marxian economics and formulas and such.

The dialectic informs the economic aspects of Marxism, in that everything Marx (and Engels) did, they tried to put it into a dynamic, ever-changing framework. Bortkiewicz used a static, unmoving model to try and figure out what was going on with the perceived transformation "problem". Such a static model is totally divorced from reality because, of course, an economy is not something that is simply on graphs, charts and paper pages - it is a living, breathing thing, constantly in motion. The way said bourgeois economist tried to do his research is not the way things would happen in an economy in real life. So, if we look at the economy and prices of production through the eyes of the TSSI, through a dynamic model, rather than a static one (like Bortkiewicz did), much of the unnecessary confusion first dragged up is simply melts away.

Also, I should mention that there's a "hole trinity" that makes up an analysis the prices of production, also needed for examining the transformation problem, and I think it it's used by the TSSI. It almost goes without saying, but all the following need to be looked in the aggregate, on the whole. So, firstly: the total amount of profit is equal to the total amount of surplus-value. Secondly: the total amount of value is equal to the total amount of prices. And lastly: the total rate of profit measured in value is equal to the total rate of profit as measured in money.

Brendanmcooney is useful and informative on the matter, as always: http://kapitalism101.wordpress.com/what-transformation-problem/ and you could google "Andrew Kliman", as he's a fairly well known Marxist economist that upholds the TSSI. As for underconsumptionism, I don't really know about that. Also, some of what I say might be a bit unclear, so if anyone else who knows a bit more about it wants to pick me up on anything, that's totally fine. (Oh and this should probably be moved quickly to economics.)

EDIT: I'm a nice guy, so I googled him for you: http://akliman.squarespace.com/ http://www.revleft.com/vb/../revleft/smilies/001_smile.gif there's various papers, essays, talks etc. that apply the TSSI to the recent economic crisis and things like that.The basic crux of the issue is that some Marxian economists (such as Andrew Kliman, Alain Badiou(?) and I think possibly David Harvey) uphold the temporal single-system interpretation as a way of understanding the problem. Urm, I hope I've explained a bit. I'll come back to this after reading about it for a while. I have some graphs or spreadsheets around that actually let you plug in numbers to test out the TSSI, which I'll try and find. I think brendanmcooney has some stuff on it too.

[∞]

I now know...the problem is the problem. It doesn't exist

[Zanthorus]

Really, I wouldn't worry about the TP that much until you have a fairly decent grasp of Marx's economics, but if you're interested, apart from the whole static vs dynamic issue, there was an interesting paper in the International Working Group on Value Theory site about how Marx's theory of the release and tying up of productive capital provides something of a rebuke to the 'transformation problem':

http://www.iwgvt.org/files/97Maldonado.pdf


The contention lies in how Marx's original reproduction model was interpreted, specifically by a Russian economist around the 20s or so, called Rabonwicz or something like that. This Russian chap, who's name escapes me, was quite a dry, academic (i.e., orthodox, classical - accepts capitalism as the norm) kind of economist,

Borkewiecz wasn't an orthodox economist, he was a Ricardian (Of a sort), and was also involved in a controversy with the Bohm-Bawerk over the Austrian school theory of interest. Most of those contributing the transformation problem debate have been Neo-Ricardians and other economists on the left including some Marxists themselves who see the need to 'correct' Marx's supposed errors to make Marxian economics viable.

In general, it is not a good idea to simply assume that all the critics of Marxism are just dry orthodox academic economists, for the most part those types don't even bother with Marx. Most of the major counter-critiques of the critique of political economy have come from the left and from within Marxism itself. The Okishio theorem, which purports to prove an inconsistency in Marx which means that an increase in productivity does not cause a fall in prices, was advanced by the Japanese Marxist economist Nobuo Okishio.


and the way he tried to use Marx's model would not be how the economy would work in the real world; it's meant to be dynamic and flexible, but this Russian put calculations into the model that simply would not work how things were originally intended by Marx. I posted this about a while ago:The basic crux of the issue is that some Marxian economists (such as Andrew Kliman, Alain Badiou(?) and I think possibly David Harvey) uphold the temporal single-system interpretation as a way of understanding the problem.

The issue for Bortkiewicz wasn't one of simply putting Marx's model into a static Walrasian equilibrium table, he acknowledged that Marx's schema of the transformation of values into prices of production was 'succesivist' and not static:


Alfred Marshall said once of Ricardo: ‘He does not state clearly, and in some cases he perhaps did not fully and clearly perceive how, in the problem of normal value, the various elements govern one another mutually, not successively, in a long chain of causation’. This description applies even more to Marx … [who] held firmly to the view that the elements concerned must be regarded as a kind of causal chain, in which each link is determined, in its composition and its magnitude, only by the preceding links … Modern economics is beginning to free itself gradually from the successivist prejudice, the chief merit being due to the mathematical school led by Léon Walras.

Apart from merely thinking that equilbrium was a better model than 'succesivism', Bortkiewicz also attempted to prove that Marx's transformation schema in it's original form would break down at the leve of simple reproduction. This was refuted by Kliman and Freeman twenty years ago, and noone has replied since, so I think it's safe to say that that particular issue can be laid to rest. Most of Bortkiewicz's epigones do indeed merely attempt the transformation procedure with the assumption of static equilibrium and use it to show how Marx has been discredited. The basic problem with this is that if you ignore time, you've automatically assumed that value cannot be determined by socially necessary labour time, which is what was meant to be proved in the first place.

[∞]

Really, I wouldn't worry about the TP that much until you have a fairly decent grasp of Marx's economics, but if you're interested, apart from the whole static vs dynamic issue, there was an interesting paper in the International Working Group on Value Theory site about how Marx's theory of the release and tying up of productive capital provides something of a rebuke to the 'transformation problem':

I've already did my research tyvm, I understand it now.

[Dean]

I'm not sure if your "holy trinity" is accurate Zanthorus. As MArx says in Capital:


Magnitude of value expresses a relation of social production, it expresses the connexion that necessarily exists between a certain article and the portion of the total labour-time of society required to produce it. As soon as magnitude of value is converted into price, the above necessary relation takes the shape of a more or less accidental exchange-ratio between a single commodity and another, the money-commodity. But this exchange-ratio may express either the real magnitude of that commodity’s value, or the quantity of gold deviating from that value, for which, according to circumstances, it may be parted with. The possibility, therefore, of quantitative incongruity between price and magnitude of value, or the deviation of the former from the latter, is inherent in the price-form itself. This is no defect, but, on the contrary, admirably adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another.



The price-form, however, is not only compatible with the possibility of a quantitative incongruity between magnitude of value and price, i.e., between the former and its expression in money, but it may also conceal a qualitative inconsistency, so much so, that, although money is nothing but the value-form of commodities, price ceases altogether to express value. Objects that in themselves are no commodities, such as conscience, honour, &c., are capable of being offered for sale by their holders, and of thus acquiring, through their price, the form of commodities. Hence an object may have a price without having value. The price in that case is imaginary, like certain quantities in mathematics. On the other hand, the imaginary price-form may sometimes conceal either a direct or indirect real value-relation; for instance, the price of uncultivated land, which is without value, because no human labour has been incorporated in it.

You seem to have investigated some points I've not even touched on yet, but your statement seems inconsistent with what I read earlier today nonetheless.

[Zanthorus]

First of all, it was Lyev who mentioned the 'holy trinity'. Second of all, Marx's statement in the passage you quoted means that the prices of individual commodities can be greater or lesser than their value, but this doesn't exclude the fact that in the aggregate total surplus-value = total profit and total price = total value:


...if the price of grain rises after a bad harvest, then its value rises, for one thing, because a given amount of labour is contained in a smaller product; for another thing, its selling price rises by much more still. What has this to do with my theory of value? The more the grain is sold over its value, the more other commodities, whether in their natural form or in money form, will be sold under their value by exactly the same amount, even if their own money price does not fall. The total value remains the same,http://www.marxists.org/archive/marx/works/1881/01/wagner.htm

[Dean]

First of all, it was Lyev who mentioned the 'holy trinity'. Second of all, Marx's statement in the passage you quoted means that the prices of individual commodities can be greater or lesser than their value, but this doesn't exclude the fact that in the aggregate total surplus-value = total profit and total price = total value:

http://www.marxists.org/archive/marx/works/1881/01/wagner.htm
Well, here's the problem I have. Why should aggregate value necessarily quantify to the same number in price and value? I think this implies some self-restraint on the part of the capitalist model, which indicates, for instance, that adding the total price of the total extant quantity of commodities x, y & z would equal the total value - but does not seem to take into account the relevant leverage that some might have against the consumer base.

But then, if its just a definition which reflects the quantification of value, then we simply don't have different variables to compare to one another. In which case, how could it be wrong?

[Die Neue Zeit]

The Okishio theorem, which purports to prove an inconsistency in Marx which means that an increase in productivity does not cause a fall in prices, was advanced by the Japanese Marxist economist Nobuo Okishio.

The Fundamental Marxian Theorem was an attempt to explain exploitation without resorting to the labour theory of value. The core mathematical statement is that there can be no profitability without exploitation. What's wrong with that?

BTW, Paul Cockshott wrote this about the FTM:

http://thoughcowardsflinch.com/2010/03/19/is-the-marxian-labour-theory-of-value-correct/


OK, I did not know that Okishio had invented that, I came across it in Morishima.

In practical terms it is pretty hard to estimate exploitation accurately that way. One can approximate it using the input output tables, but the problem is that the final consumption columns of the tables are not broken down by social class so it is hard to get at the data you need.

In practice you have to do something like estimate the monetary equivalent of labour time, and then look at the division of value added in key sectors of the economy between labour income and property income. You can then back estimate it in terms of hours if you want, but Marx’s quantity s/v is a dimensionless number so one can derive it directly from monetary aggregates in the national income tables.

[Paul Cockshott]

in the end there was no problem. Prices correlate very well with pure labour values, there is no need to transform. Lots of econometric papers now show this.

[S.Artesian]

in the end there was no problem. Prices correlate very well with pure labour values, there is no need to transform. Lots of econometric papers now show this.

Well, that might be a problem since Marx states several times in his economic manuscripts that correlation between any commodity's price, or commodities' prices, and its value is accidental, and Marx makes it clear in his analysis of cost-price, equalization of rates of profit, rationing of profit by the markets, the distributive functioning of price, that in most cases value should not correlate with price.

That's what I take away from reading Theories of Surplus Value and the other economic manuscripts from 1857-1864. I'd like to hear other people's take.

[Dean]

Well, that might be a problem since Marx states several times in his economic manuscripts that correlation between any commodity's price, or commodities' prices, and its value is accidental, and Marx makes it clear in his analysis of cost-price, equalization of rates of profit, rationing of profit by the markets, the distributive functioning of price, that in most cases value should not correlate with price.

That's what I take away from reading Theories of Surplus Value and the other economic manuscripts from 1857-1864. I'd like to hear other people's take.
Well, the quote above from Marx indicates that he didn't feel that prices necessarily equaled value. I feel like the issue was resolved in Chapter 3 - he is describing the basis (and more accurately, labor as a regulatory value function of pricing) of price development, but points out that pricing insofar as it is reached in the market (and translated through various systems we would call marginal theories today) ultimately fails at accurately reflecting value.

Later on (it is said) he modifies the model to reflect pricing effects which aren't accounted for in this early stage. And that's a very valid tangent - even if it doesn't reflect value per se, but pricing.

[S.Artesian]

Well, the quote above from Marx indicates that he didn't feel that prices necessarily equaled value. I feel like the issue was resolved in Chapter 3 - he is describing the basis (and more accurately, labor as a regulatory value function of pricing) of price development, but points out that pricing insofar as it is reached in the market (and translated through various systems we would call marginal theories today) ultimately fails at accurately reflecting value.

Later on (it is said) he modifies the model to reflect pricing effects which aren't accounted for in this early stage. And that's a very valid tangent - even if it doesn't reflect value per se, but pricing.

Yes, but I mean Paul' statement that prices do correlated with values might b a problem.

[Paul Cockshott]

I am unaware of any ref to correlation by marx, what you say must be wrong , I am pretty sure concept of correlation is post marx death.

[SocialismOrBarbarism]

How close prices approximate values depends on the total profit and how generalized productivity is, so in the past I'd think it'd make more sense to "transform" values into prices.

[S.Artesian]

I am unaware of any ref to correlation by marx, what you say must be wrong , I am pretty sure concept of correlation is post marx death.


I'm not the one saying prices correlate to value. You are. So we have to ask what you mean by that "correlation."

Do you mean that commodities with higher prices are ones with higher values, with more labor time involved in their reproduction?

Do you mean that when a commodities price rises, it does so because more value is embedded in the commodity? That in essence the time of reproduction has increased?

If the answer is yes to either one of those, then how do you explain the cyclical, and severe, changes in prices say... of semiconductors-- the boom and bust cycle, and the dramatic lowering of price of reproduction per MIPS-- which in the long is truly a lowering of the labor time necessary for social reproduction-- but which in shorter runs produces rises in prices and then declines in prices-- deviation from the time of reproduction?

[Paul Cockshott]

if the profit share of value added is very high, say well above half then the correlation of prices to calues could be lower but these are not speculative questions but ones for empirical science

[Paul Cockshott]

I am using correlation in Pearsons sense, the percent of the variation in prices that is explained by the variation in values. For most oecd economies this is over 95 percent.

[S.Artesian]

Marx in TSV, part 2 [Ricardo's and Smith's Theory of Cost Price ] goes into the deviation between price and value. Among other things, Marx says [and this is, I think, his most succinct, and brilliant formulation] that capital's of equal size, containing different proportions of variable to constant capital must result in commodities of unequal values and thus yield different profits; the leveling out of these profits must therefore result in cost prices [which are average prices; which are made up of the capitalists' reckoning of their costs plus a rate of profit] which differ from the values of commodities.

Further on Marx says that:


Even assuming that capitals of equal size produce equal values.... the period within which they appropriate equal quantities of unpaid labor and convert these into money, still varies in accordance with their turnover period. Thus arises a second difference in the values, surplus values and profits which capitals of equal size must yield in different branches of production in a given period of time.

Hence, if profits as a percentage of capital are to be equal over a period, say of a year, so that capitals of equal size yield equal profits in the same period of time, then the prices of the commodities must be different from their values. The sum total of these cost-prices of all commodities taken together will be equal to their value.

This, it seems to me at least, follows inexorably from the logic of the socially necessary labor time of reproduction actually being the value all commodities, no matter what the individual time of reproduction is for any commodity.

Marx says exactly this a bit further on:


The thesis set out above can be expressed in general terms as follows: The value of the commodity—which is the product of a particular sphere of production—is determined by the labour which is required in order to produce the whole amount, the total sum of the commodities appertaining to this sphere of production and not by the particular labour-time that each individual capitalist or employer within this sphere of production requires. The general conditions of production and the general productivity of labour in this particular sphere of production, for example in cotton manufacture, are the average conditions of production and the average productivity in this sphere, in cotton-manufacture, The quantity of labour by which, for example, [the value of] a yard of cotton is determined is therefore not the quantity of labour it contains, the quantity the manufacturer expended upon it, but the average quantity with which all the cotton-manufacturers produce one yard of cotton for the market.

The deviation of price from value is the distributive mechanism accomplishing this.

So perhaps what Paul sees as correlation is correlation for the whole set of commodities in a sector or sectors, while the deviation is the individual variations that accomplish the "leveling" so essential to capital.

[Paul Cockshott]

he was wrong on theleveling out. High organic composition industries tend to have below average profit. If you don't believe me go check it yourself using the US iobound tables. seek truth from facts not old working notes

[S.Artesian]

he was wrong on theleveling out. High organic composition industries tend to have below average profit. If you don't believe me go check it yourself using the US iobound tables. seek truth from facts not old working notes

High organic composition of capital industries certainly report lower than average profit rates. Take for example the petroleum majors in the 1986-1998 period-- and what was the response to that lowered profit rate?

Just two years after rates of return had finally gotten into the 10% area, rates plummeted back into the 6% range [I think, doing this from memory]. And the next step, after 1998 and oil breaking below the $10/barrel level?

Hell-O OPEC! And the driving of oil prices up to the point where the US FRS [Federal Reporting Sytem for energy companies] Petroleum companies were alone garnering about 30% of all the profits of the S&P 500 for 2005, 2006, with a sharp decline in 2007, which got the rate of return for these petroleum companies back where they think it belonged.

I would be the first to admit I don't have this all worked out yet, but I don't think Marx is wrong about the leveling out, the role of cost-price, the distributive properties of price, and average rates of profit.



We can look at similar pattern in the semiconductor fabrication industry, with tremendous capital intensity reducing the cost [in DRAM and NAND chips] per MIPS [million instructions per second] dramatically, but prices going through boom and bust as new technologies reduce those costs and create more powerful chips. The price climbs not only offset the lower average profit of the industry, but have a "pull" effect on older techniques of production, allowing them to be sustained by the increased prices.

For example prior to this latest bust, the boom in semiconductor prices based on the demand for more powerful, but cheaper to produce, chips coming off the 300mm wafer fabrication lines] pulled the older 200mm wafer fabrication systems along in its wake to meet demand.

Since 2008, however, the fabrication industry has reduced capacity by 1/3-- and almost all of that 1/3 being the 200mm wafer fabrication lines... driving prices back up in late 2009 and 2010, where they stand right now, ready to crater again, after another bout of capital spending by the largest producers.

Like I said, I don't have all of this worked out, but I'm not ready to say Marx was wrong about the role that the deviation of price from value plays in apportioning the total available profit.

[Dean]

This, it seems to me at least, follows inexorably from the logic of the socially necessary labor time of reproduction actually being the value all commodities, no matter what the individual time of reproduction is for any commodity.
This has been my understanding for a long time, as well. I'll have to look into TSV at some point.

[S.Artesian]

I agree, obviously. But like I said, I don't have it all worked out, because clearly not all industries report the same, the average rates of return, profit rates on their net product, plant, equipment and wages.

So I think somewhere along the line we get individual rates operating like individual prices, above or below the average rate of profit, with the higher organic composition capitals expressing lower rates, but... but with price increases in the products of those higher composition capitals, above their cost prices, redistributing profit.

Now I know this goes in the opposite direction from how Marx describes the apportionment, the claiming of "excess" profits. Marx states that the more efficient production lowers the socially necessary time of reproduction, allowing those higher organic composition products to be sold above their costs of production, below their prices of production, and below the average prices, thus realizing a profit , but at the expense of the other capitals in the same sector.... [I]except when it comes to the products from landed property and there we get rent.

However, I don't "buy" [every pun intended] the "monopoly rent" or "monopoly capital" school of political economy's explanation for increased prices of products from capitals of higher organic composition.

I don't buy it with oil prices, where Cyrus Bina [no monopoly capital theorist] has done really excellent work in support of the rent theory driving the price of oil. The argument is essentially that the socially necessary time of reproduction is determined by the least efficient producer as that least efficient production is itself socially necessary, with the US being the least efficient oil producer [greater capital costs per barrel of oil produced] and OPEC being the US bagman, collecting the rent keeping the US petroleum business in business. I mean I do buy that OPEC really is the US bagman, but I don't buy that the bagman is collecting rent based on the degraded efficiency of US production.

Why? Because if you look at the US oil industry's "lifting costs"-- direct production costs over the past twenty years... you see a long term decline as advanced technologies-- seismic imaging, computer assisted surveying, horizontal drilling-- reduced those lifting costs in the most difficult production areas, and the most depleted areas. Lifting costs decline steadily for US producers throughout the 1990s, dropping to about $3.40/barrel [I]unadjusted for inflation in 1998, which put the adjusted production cost below the previous historic lows of around $2.50/barrel for US production. And what do we get? A decline in the rate of return, the collapse of oil prices to around $10/barrel. The emergency call to OPEC ["Sheikh, it's those guys from Texas again. They sound like the world is coming to an end"], and the grand uptick [not without a downtick in the rate of return in 2002 which brought the panic calls to Bush Jr. to get on with the attack on Iraq and get some volatility back into the markets] in prices over the 1999-2007 period.

Anyway, it's not just oil-- in the US in the post 1991 period, railroads increased, massively, their capital improvements-- new, much more efficient locomotives, new signal systems, while at the same time removing excess track, centralizing and concentrating traffic control, traffic management, and train control functions, new yards, etc.--- all while at the same time reducing rates charged for commodities hauled by rail.

After 2001, even before the OPEC initiated price increases and the RRs' application of fuel surcharges, railroads reversed that process and began raising rates, shifting profit from the shippers to the haulers. Certainly not the first time railroads have done this in the US.

Just doesn't fit the rent scenario, at least to me. Be interested in comrade Cockshott's take on this, and anybody else who wants to have a go.

[S.Artesian]

This has been my understanding for a long time, as well. I'll have to look into TSV at some point.


Part I of TSV is joy to read. Part II, mostly the part on rent, drove me near stark raving mad. Part III, which I reread after rereading Part II and nearly being driven stark raving mad again, was.... beautiful... almost like reaching a protected harbor after two weeks in violent storm-tossed seas.

My reaction to part II was largely due to my gut disagreements with, I believe, an implicit "scarcity theory" behind Marx's theory of rent.

[turquino]

Engels believed production prices and values were identical for commodity exchange in precapitalist societies all the way back to ancient Mesopotamia 7000 years ago. In the absence of expanded reproduction prices were not required to diverge from social labour time; the commensurable value of an item was the mean sum of livelihoods required for its components to become the whole. It makes intuitive sense, but its historical validity is problematic I think given the pervasive price controls in Medieval Europe.

I don't know much about this transformation problem, but I wonder why it's assumed the sum of values must always equal the sum of cost prices? As Marx demonstrated, a commodity's value can only become an exchange value in a unit of another commodity. The measurable price is the exchange value of a commodity in terms of a money commodity capable of measuring the exchange values of all other commodities. Logically the money commodity cannot measure its own price, yet it possesses value as a commodity. Any measurement of prices will exclude the one commodity that measures prices, so it would be a coincidence if total prices were ever discovered to equal total value.

[Paul Cockshott]

High organic composition of capital industries certainly report lower than average profit rates. Take for example the petroleum majors in the 1986-1998 period-- and what was the response to that lowered profit rate?
We can look at similar pattern in the semiconductor fabrication industry, with tremendous capital intensity reducing the cost [in DRAM and NAND chips] per MIPS [million instructions per second] dramatically, but prices going through boom and bust as new technologies reduce those costs and create more powerful chips. The price climbs not only offset the lower average profit of the industry, but have a "pull" effect on older techniques of production, allowing them to be sustained by the increased prices.

For example prior to this latest bust, the boom in semiconductor prices based on the demand for more powerful, but cheaper to produce, chips coming off the 300mm wafer fabrication lines] pulled the older 200mm wafer fabrication systems along in its wake to meet demand.

Since 2008, however, the fabrication industry has reduced capacity by 1/3-- and almost all of that 1/3 being the 200mm wafer fabrication lines... driving prices back up in late 2009 and 2010, where they stand right now, ready to crater again, after another bout of capital spending by the largest producers.

Like I said, I don't have all of this worked out, but I'm not ready to say Marx was wrong about the role that the deviation of price from value plays in apportioning the total available profit.

At root these are empirical questions, one needs to look at all industries in the economy and see if there is a negative correlation between profitability and organic composition. When you do this you find that there does appear to be such a negative correlation. This of course is just what would be expected from vol 1. For the UK we found though that there was an excess profit/wage ratio in industries with a high organic composition, which indicate a partial tendancy to transform prices from being proportional to values to being proportional to prices of production. However later studies by Zachariah covering many more countries indicate that this partial transformation is not general, it only seems to occur in about half the countries, so the evidence for there being a general transformation process is not strong.

On rent. In the UK and the USA for the years I have studied, oil and petroleum products sell significantly above their values which is consistent with a rent effect.

[Paul Cockshott]

I don't know much about this transformation problem, but I wonder why it's assumed the sum of values must always equal the sum of cost prices?



It is a simple normalisation condition. Values are measured in hours, prices in dollars, you have to set up an equivalence ratio between them :how many dollars is an hour equal to?
You do it by setting total value = total price and read off from this the monetary equivalent of one hour's work.

[S.Artesian]

At root these are empirical questions, one needs to look at all industries in the economy and see if there is a negative correlation between profitability and organic composition. When you do this you find that there does appear to be such a negative correlation. This of course is just what would be expected from vol 1. For the UK we found though that there was an excess profit/wage ratio in industries with a high organic composition, which indicate a partial tendancy to transform prices from being proportional to values to being proportional to prices of production. However later studies by Zachariah covering many more countries indicate that this partial transformation is not general, it only seems to occur in about half the countries, so the evidence for there being a general transformation process is not strong.

On rent. In the UK and the USA for the years I have studied, oil and petroleum products sell significantly above their values which is consistent with a rent effect.


That needs a bit more explaining. Marx's argument concerning ground rent is not that the commodities sell above their values, but that they sell at their values, as the socially necessary labor time for reproduction is determined by the least efficient producer, and the excess profit accruing to the commodities of more efficient producers [in effect, an excess of price over the individual values of these commodities] is then "interdicted" by rent, acting essentially as the landholders' tax on production.

Behind the notion of rent are notions of scarcity, that demand cannot be satisfied, that applications of capital lead to declining rates of productivity; that wage rates in "landed-property" production are below that of industrial production; that overall, the application of capital to production is less in "landed" production than in industrial production.

None of those things correlate with what has happened with petroleum in since OPEC's first "spike" in 1973.

[turquino]

It is a simple normalisation condition. Values are measured in hours, prices in dollars, you have to set up an equivalence ratio between them :how many dollars is an hour equal to?
You do it by setting total value = total price and read off from this the monetary equivalent of one hour's work.
That seems to be a mistake of commodity fetishism, equating values with prices when price is merely a commodity exchange value. If the money commodity is exchanged above or below its value, that moves all measurable prices inversely, yet the total value is unchanged. This is implicit in Marx's concept of the commodity, and the inequality of total prices and values does not refute him as his critics claim.

[Paul Cockshott]

do you put oil revenues down to absolute ground rent then?

[S.Artesian]

do you put oil revenues down to absolute ground rent then?


No. This is one of the things I haven't worked out yet. Price is a distributive mechanism for capital. The price of oil redistributes profit from all, or almost all sectors of capitalist production, to the oil sector where the organic composition is much, much higher than the social average. This offsets the reduced rate of return in the oil sector.

This does not occur when productivity is declining; it does not occur when "less fertile" reservoirs of oil are brought into production, or when more fertile sectors make other sectors less productive but still essential to social reproduction. And it does not appear to be the "always" condition of oil production as prices fall, as prices have a tendency to fall which require dramatic counter-actions.

My difficulty is that IMO no aspect of rent theory can both be "Marxist" so to speak, and explain the increase in prices of oil as a result of overproduction, when in fact the historical evidence shows that OPEC rides to the rescue during or because of overproduction.

Which is why I am so bold in admitting my own perplexity, and asking, in public no less, if anybody else has had this same sort of problem with rent explanations for the changes in oil prices.

[Paul Cockshott]

That seems to be a mistake of commodity fetishism, equating values with prices when price is merely a commodity exchange value. If the money commodity is exchanged above or below its value, that moves all measurable prices inversely, yet the total value is unchanged. .
Better to try to forget about money commodities today.