This is a belated follow-up to Allin's (1634) and Andrew's (1637) on Kliman
and McGlone's interpretation of the "transformation problem". Allin said he
would not be disappointed if it took a while to generate a response, so I
hope he is not.
Allin introduced his post as follows:
The following was sparked by the papers for one of the sessions at the
EEA in Boston. Since not everyone on OPE was there, I'll give a little
context to this posting. In one session David Laibman gave a paper
criticizing the approach to value theory favoured by Andrew Kliman,
Ted McGlone, Alan Freeman and others. Andrew presented a paper
responding to David. I wasn't able to attend the session, but I'd like to
comment on one aspect of Andrew's contribution, which I have now had
time to read.
I also presented a paper at the EEA session to which Allin refers - a
response to Laibman and some critical comments on the Kliman-McGlone (KM)
interpretation of the "transformation problem". To further the discussion,
I would like to present here some of my critical comments on the KM
interpretation, probably over several posts to avoid overly long posts. My
comments will be based first on KM's 1988 paper in Capital and Class, and
then will consider more recent versions. This is a little difficult to do
without first presenting my own interpretation, but I think that most or you
are at least a little familiar with my "monetary-macro" interpretation of
Marx's theory, and anyone interested can read my 1993 paper in Marx's Method
in Capital.
First, I want to emphasize that I appreciate very much Andrew's and Ted's
pioneering efforts to break out of the dominance of the Sraffian interpretation
of Marx's theory, and also that there are some important points on which I
agree with KM's interpretation. Specifically, for any single period of
production, they agree with both of the two main points that I have
emphasized in recent work. That is, for any single period of production,
they agree that (1) constant capital and variable capital are taken as
given, as quantities of money invested in the purchase of means of
production and labor-power, and are not derived from the technical
conditions and the real wage, so that the magnitudes of constant capital and
variable capital are in general not equal to (or proportional to) the
labor-time embodied in the means of production and labor-power,
respectively; and (2) the total amount of surplus-value is determined prior
to its distribution and that the rate of profit is taken as given in the
determination of prices of production.
The first point above means that I largely agree with Andrew in his recent
ope-l debate with Allin and Paul C., i.e. I agree that the value transferred
from the constant capital to the output is the value represented by the
quantity of money invested as constant capital, and is in general not equal
to the value of the means of production (i.e. the labor-time embodied in the
means of production).
However, and here is where our disagreements begin, KM also argue that the
transformation of values into prices of production DOES NOT TAKE PLACE
ENTIRELY WITHIN ONE PERIOD OF PRODUCTION, BUT RATHER TAKES PLACE OVER A
NUMBER OF SUCCESSIVE PERIODS, which are understood to be real, historical
periods. In KM (1988), the transformation process takes place over 14
periods. And for the transformation process as a whole, they disagree with
both of the two main points just mentioned. That is, over successive
periods, KM argue that the magnitudes of constant capital and variable
capital are not taken as given, but instead are derived from given means of
production and means of subsistence, and that these magnitudes change from
period to period. Constant capital and variable capital start out as equal
to values of the means of production and the means of subsistence, but the
equalization of profit rates in the first period first alters the prices of
the means of production and the means of subsistence as outputs within that
period and then alters the magnitudes of constant capital and variable
capital that purchase the given means of production and means of subsistence
as inputs in the next period. Over successive periods, the fundamental
givens that remain unchanged are the physical quantities of the means of
production and means of subsistence, as in the Sraffian interpretation.
Similarly, because the magnitudes of constant capital and variable capital
change from period to period, the total amount of surplus-value and the rate
of profit also change from period to period, so that the rate of profit at
the beginning of the transformation is different from the rate of profit at
the end of the transformation, again similar to the Sraffian interpretation.
My main criticism of the KM interpretation is that there is NO TEXTUAL
EVIDENCE, in all of Marx's writings on the subject, to support this
multi-period interpretation of the transformation process. Marx NEVER
explicitly stated, or even hinted, that the transformation process takes
place over multiple periods, or that his discussion and illustrations of the
determination of prices of production was only the first period of a process
that takes place over multiple periods.
I think that this complete lack of any explicit mention of this important
point is very strong evidence against KM's interpretation. Surely, if Marx
intended that the transformation takes place over multiple periods, he would
have at least mentioned this important point somewhere in his various
discussions. Andrew commented in a recent reply to Duncan (1181) that he
thinks that Marx had a clear idea of the transformation process by the time
he wrote Volume 3 (I agree with Andrew). Then why did he never mention that
this transformation takes place over multiple periods?
In more recent work, (e.g. in their paper in Marx and Non-Equilibrium
Economics and in Andrew's EEA paper ) KM have deemphasized this complete
transformation of values into prices of production taking place over a
number of periods. In this more recent work, the transformation process is
illustrated as taking place over only two periods. I would again argue that
there is also no textual evidence to support the view the transformation
takes place over two periods. But the question I wish to explore here is
whether or not the determination of prices of production, acording to KM's
interpretation, is "complete" after the two periods in their illustration.
The answer will of course hinge on what one means by "complete".
Allin (in 1634) argued that KM's explanation of prices of production is not
complete after two periods because rates of profit will not be equal in
period 3 (and beyond) and thus the transformation must continue. I think
that the thrust of Allin's argument is correct, but I also think that the
way he has defined the rate of profit in period 3 (and implicitly beyond),
as the ratio of "disposable profit" to total capital invested, is not
correct. This is a somewhat complicated point, so I will not go into it
here. Perhaps we will come back to it later. (I will present my
interpratation of the appropriate rate of profit in the next paragraph.)
The main point for my purposes is that in his reply to Allin, Andrew (1637)
argued that, according to their interpretation, the transformation is
complete after each period (including period 2) because two conditions are
satisfied: (1) rates of profit are equalized and (2) supply equals demand in
each department, so that balanced reproduction can proceed.
However, and here is the crucial point, I argue, similar to Allin, that even
though the rates of profit are equalized in period 2, RATES OF PROFIT ARE
NOT EQUALIZED IN PERIOD 3, UNLESS PRICES OF PRODUCTION ARE FURTHER
TRANSFORMED. As Allin's Table 3 shows, the "value" rates of profit in
period 3 for the three departments, defined as the ratio of surplus-value
(unredistributed as profit) to the sum of constant capital and variable
capital, are not equal (they are 13%, 38%, and 46%, respectively). The
"value" rate of profit is also shown in KM's illustration and is, according
to their interpretation, the rate of profit whose inequality causes the
transformation of surplus-value into profit and the transformation of prices
of production in periods 1 and 2. In period 3, unless surplus-value is
transformed again into profit and the prices of production transformed once
again, the rates of profit in the different departments in period 3 will not
be equal. Therefore, the determination of prices of production, according
to KM's interpretation, cannot be "complete" after period 2. The
transformation of prices of production must continue in period 3 in order to
equalize the rates of profit, and in period 4 (for the same reason: because
without such a further transformation, the rates of profit in period 4 will
not be equal), and so on. The determination of prices of production will be
"complete" only when, conditions unchanged, rates of profit continue to be
equal in subsequent periods, and thus no further transformation of prices of
production is necessary. In other words, the TRANSFORMATION WILL BE
COMPLETE ONLY WHEN IT STOPS. This condition is satisfied only when prices
are "stationary", as in periods 13 and 14 of KM's original illustration, and
in periods 20 and 21 of Allin's continuation of KM's more recent illustration.
I will stop for now and let Andrew and Ted and Allin (and hopefully others)
respond to the above. My conclusions from the above are: (1) KM's
determination of prices of production is not complete after period 2 of
their recent illustration, but instead requires interations over a number of
further periods, as in their original illustration; and (2) there is no
textual evidence to support this interpretation of a multi-period
determination of prices of production.
In solidarity,
Fred