Transformation problem

[ComradeRed]

The most common interpretation of the labor theory of value is as a labor theory of price (a theory of price determination) in which Marx's theory roughly corresponds to that of Ricardo. In this view, the price of a commodity derives neither from its utility to the consumer (Marx's "use value") nor from supply and demand but from the labor that society has expended on its production. Early in volume III of Das Kapital, Marx presents an analysis of the relationship between values and prices. This has been read by most as describing the mathematical link between prices and values, i.e., how prices can be calculated from given values. The problems with Marx's "solution" to this mathematical problem have spawned a long-lived debate concerning the "transformation problem." In fact, this famous problem of finding (or rejecting) mathematical formulae linking individual prices to individual values is central to the dominant interpretation of the Marxian labor theory of value. Marx states early on in Das Kapital Vol. I in chapter I that the exchange-value is relative to other goods and therefore never constant, its the relations between the use-values that determines the exchange values, but since the exchange-value is relative to time, place, and person, it is therefore indeterminable.

You know, there was a reason why Marx didn't publish Vol. III in his lifetime.

[redstar2000]

You know, there was a reason why Marx didn't publish Vol. III in his lifetime.

:lol:

More than one, but I don't think it is known if problems with the labor theory of value had anything to do with it.

Marx was notoriously dilatory in his labors; Engels nagged him incessantly to "finish Volume I" of Capital. He worked, at best, sporadically on the subsequent volumes from 1864 to 1872 while he was busy with the 1st International. And even after that, he took considerable interest in working "behind the scenes" of the nascent German Social Democratic Party. In the last years of his life, health problems prevented much in the way of sustained labor. When the young Karl Kautsky suggested to Marx that the time had arrived for an edition of his "complete works", Marx replied that they would first "have to be completed". :D

So Marx died, leaving to Engels an enormous mass of hand-written "loose papers". Engels organized much of this material into Vols. II and III of Capital and Kautsky put most of the remainder into what was titled Theories of Surplus Value.

Accordingly, we don't really know what Marx himself would have retained and what he would have deemed incorrect or unsuitable for publication; given Engels' high regard for Marx, my guess is that he included everything that Marx wrote that wasn't totally nonsensical...or that he simply didn't understand.

The problem with the labor theory of value, in my limited understanding, is that all attempts thus far to turn it into a coherent mathematical expression and derive results that are, in principle, correct...have foundered.

There is "something missing"...or the whole approach is just wrong.

If that problem could be surmounted, then we could go on to the actual "transformation problem" -- how does socially necessary labor-power determine exchange-value (price)?

Another problem is that in Marx's time, labor power was mostly thought of as an hour of unskilled manual labor -- "heave and grunt".

While still important, much labor now is highly skilled and much more is the mental equivalent of "heave and grunt". How do we measure this (and how would exchange-value reflect this) in terms of Marx's 19th century "standard"?

I think it's important to emphasize here that the LTV could still be right...but we just don't know "for sure" yet.

The most solid empirical evidence for the "ultimate" correctness of some kind of LTV is the observed behavior of the capitalist class: increasing production while reducing labor costs is one of their perpetual objectives...and, sure enough, the long-range tendency is for the prices of mass-produced commodities to fall -- presumably reflecting the fact that less and less socially-necessary labor power is required to produce them.

Disclaimer: on matters of economics, please do not "take my word for it". These are very murky waters for me. :P

:redstar2000:

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[ComradeRed]

If that problem could be surmounted, then we could go on to the actual "transformation problem" -- how does socially necessary labor-power determine exchange-value (price)? Ahh, but it doesn't! It creates the value, the worth is based on the value depending on the market, relation to other goods, etc.


I think it's important to emphasize here that the LTV could still be right...but we just don't know "for sure" yet.
Meh, I think its merely fools who cannot read, then criticize the theory without reading the books in Chronological order.


The most solid empirical evidence for the "ultimate" correctness of some kind of LTV is the observed behavior of the capitalist class: increasing production while reducing labor costs is one of their perpetual objectives...and, sure enough, the long-range tendency is for the prices of mass-produced commodities to fall -- presumably reflecting the fact that less and less socially-necessary labor power is required to produce them. Hmm, I suppose but in your words: "I suspect that's one of the major appeals of economic theory...as "hard" as it is to do, it's still a lot easier than actually gathering empirical data on what really happens in a capitalist economy." I'm too lazy, maybe I'll get around to making an attempt to figure out how to acquire empirical evidence :D