So this is what Sweezy should have said to Bortkiewicz (assuming he was still alive). Marx could not have had the inputs in prices of production because that category is not even logically derived until the completion of the transformation tableau. You seem not to understand the logically rigorous and systematic manner in which Marx's explanatory concepts are derived. This first rate philosopher was not illogical. Marx of course himself pointed out that our calculations would go wrong unless the inputs are also modified and the cost prices thereby modified. You seem to make the fantastic assumption, derived from equilibrium thinking, that the inputs should then be transformed into the same prices of production as the outputs. This is implicit in the way you put Marx's transformation tableau back into a simple reproduction scheme, forgetting that inherent in the latter are constant values which was an unrealistic assumption Marx only made to simplify the study of the realization of capital. The assumption was not meant as a controlling methodlogical postulate to be reintroduced in the analysis of any economic problem. In a recent mss by Henryk Grossmann which unfortunately was suppressed by Max Horkheimer, there is a rather spirited attack on the rise of equilibrium thinking in economics. I intend to pay careful attention to all his work and the studies by his students William J Blake and Paul Mattick, not yet Sr for a few more years. For the sake of argument I will still play this game with you, though it is somewhat unbecoming for a Marxist. Now note that Marx has three, not two, equalities sum of value=sum of production prices sum of value minus sum of cost prices=sum of surplus value sum of surplus value=sum of profits. You want to follow through on Marx's insight on the need to transform the *prices* of the inputs. Well, that means we are not going to change the direct and indirect labor embodied in the commodity output, so we will have to keep total value invariant. The same total value from the unmodified scheme will thus have to equal the sum of prices of production in the the modified scheme as well. Now by transforming the prices of the inputs, you will modify cost prices which necessarily means that you will modify the sum of surplus value and thus the average rate of profit determined in terms of it ( which is now modified sum of surplus value/modified cost prices). The sum of surplus value and thus the rate of profit will not remain invariant in the transformation. However, in the transformed scheme, the sum of profits must still equal this modified sum of surplus value. This problem gives us the set of equations which Rakesh has helpfully given us (his mathematical skills are something to be wondered at). Once we solve for these equations in which all three equalities are indeed maintained, we do find that Marx was correct that if the cost prices are not modified, it is possible to go wrong in the determination of the profit rate and prices of production. So my thanks to you for spurring us on in formalizing this rather minor insight of Marx's. Since all of Marx's equalities hold in this demonstration even on your own absurd equilibrium assumptions, there is no transformation problem which we will need the sterile formalisms of neo Ricardianism to solve. I am glad that you did not trick me into opening up a can of worms which would eat out the insides of Marxian theory for 60 years. All the best, Rakesh
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