The Transformation Problem: An Anti-Critique

Abstract

This article takes up the neo-Ricardian challenge to locate the logical flaws in the various ‘correctives’ offered to Marx's transformation problem from the time of Böhm-Bawerk and Bortkiewicz to Sraffa. I propose to show that the technological concept of the ‘value’ suggested by volume I of Capital is extensively modified in volume III to explain the concept of ‘price’ and once that is adequately established, the transformation problem properly understood becomes an issue of ‘repricing’. Because repricing requires a change in the physical structure of production—of labour reallocation, the neo-Ricardian approach, which lacks any dynamic component, is inadequate to the task of explaining how the redistribution of surplus value takes place through the movement of capital. Moreover, the neo-Ricardian approach is shown to be inadequate both in establishing a uniform, average rate of profit and in establishing a unique average rate of profit. These conceptual flaws nullify the neo-Ricardian approach to the general question of price formation based on the labour theory of value because they break the conceptual linkages between labour-time, value, capital and money. Once these linkages are properly established, it can be shown that Marx's approach is internally consistent and empirically useable.