Here's Dobb in his Theories of Value and Distribution, p.159 : "It is quite true that Marx never satisfactorily demonstrated how these Prices of Production were related to or derived from Values; and without such a demonstration there was no logical ground for declaring that the former were determined by the conditions of production and the socal relations of production that he had dealt with in Vol 1. Indeed the arithematical examples that he uses to show the connection are unsatisfactory, since the transformation into Prices of Production is only applied to the outputs, and not to the inputs (whence it follows that he uses the same rate of profit as in the value situation). Although Marx shows awareness of the incompleteness of his own solution and hints at the real nature of the problem, he nowhere improves on these examples--possibly because of the incompleteness of the manuscript of Vol III, which he never succeeded in finishing, let alone rewriting. Moreover, he seems to maintain *both* that total prices will equal total values *and* that total profit will equal total surplus value: two conditions that are incompatible save in exceptional circumstances...But since both inputs, including labour power, and outputs have to be transformed into price terms, and hence in all probability the rate of profits will be affected, these have all to be determined simultaneously and interdependently, by solving a set of simultaneous equations." 1. Dobb is correct that the transformation procedure is incomplete. Here I disagree with Fred. 2. I agree with Fred however that Marx's original, unmodifed transformation tableau (Capital 3, p. 256) is not in values, as Dobb suggests. The cost price (c + v) is the money sum which has been laid out as constant and variable capital. However the prices at which the input means of production and means of subsistence were sold has been determined on the controlling assumption that all commodities exchange at prices *proportional* to value (that is, all commodities are required to exchange at their full labor value * the monetary expression of labor value which has remained constant throughout the demonstration). So the inputs are not in values; they are in prices proportional to the values of the input means of production and means of subsistence. There is indeed no value table--you, Alejandro, Andrew and others are correct. The original table is denominated however in direct or simple prices, and the inputs are not already in the form of prices of production. 3. While Marx holds total price (422), total cost price (312) and total surplus value (110) invariant in his own *incomplete* transformation (Capital 3, p. 256), it follows from Marxian theory that given an output of fixed value and price, total surplus value would have to be modified in inverse direction to the modification of cost price consequent upon the transformation of the inputs while this modified sum of surplus value should equal the sum of profits in the final transformed scheme. In short, the second equality (sum of surplus value = sum of profits) simply cannot be an invariance condition as well as an equality in a complete transformation procedure. Dobb is wrong about this. There is only one invariance condition in the complete transformation. (Both Andrew and Allin have objected that if surplus value is defined as total price minus modified cost price, it is possible that after the complete transformation, the total cost price of the commodities could be less than the value of the commodities consumed in the output and surplus value thereby increased; in other words, unpaid *direct* labor would no longer be the sole source of surplus value. It seems to me impossible however to come up with an example with the remotest relation to reality in which such a result would obtain. At any rate, Marx did not argue that only unpaid direct labor is the source of surplus value; he argued that in his gedankenexperiment in which he has postulated that all commodities exchange at prices proportional to their values, the consumption of labor power was the sole source of surplus value. In the real history of capitalism--as opposed to Marx's thought experiment--the consumption of freely sold labor power, i.e., unpaid direct labor, has indeed *not* been the exclusive source of surplus value, e.g., plantation slavery, colonialist extraction of raw materials, various forms of unfree labor.) 4. It is grossly antithetical to Marxian theory to transform the inputs and outputs via the use of simultaneous equations into the identical unit prices of production, as recommended by Dobb. This has the effect of excising dynamic changes in unit values from the formalisation of Marx; Marx simply cannot be formalized in terms of simultaneous equations--Carchedi and Alan F are right! Ricardo himself recognized: "alterations in the quantity of labour necessary to produce commodities are a DAILY occurence. Every improvement in machinery, in tools, in builidngs, in raising the raw material saves labour, and enables us to produce the commodity to which the improvement is applied with more facility, and consequently its value alters." (principles, p. 36, Sraffa's ed; my emphasis). It does not follow from the recognition that the inputs have to be put in the form of prices of production that their magnitude should be identical to the output unit prices of production. In fact we know that the technical conditions in the period t - 1 to t could not have been the same for the data in Marx's one period tableau of t to t + 1. We thus cannot determine the unit prices of production for the inputs at (t) from the one period data at hand (t to t + 1). Marx was correct to leave the inputs as they were and only make a mental note that the cost price should not be equated with the value of the used up commodities. One does not need to know what the unit input prices of production and the cost prices were in order to understand the *logic* of Marx's transfomration procedure which demonstrates how the average rate of profit itself can become the form in which the law of value asserts itself. A modification of cost price would have minor effects on the magnitudes of the average rate of profit and the prices of production; it would not change the logic in terms of which they are determined. Yours, Rakesh
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