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On Marx, the Transformation Problem and Opacity Baumol - Samuelson - Morishima This content downloaded from 193.49.18.51 on Mon, 25 Aug 2014 11:37:14 UTC All use subject to JSTOR Terms and Conditions On Marx, the Transformation Problem and Opacity Baumol - Samuelson - Morishima Editor's Note: Few articles in the historyof the JEL have stirred the controversythat Paul A. Samuel- son's "Understandingthe Marxian Notion ofExploitation: A Summary of the So-called Transformation Problembetween Marxian Valuesand CompetitivePrices, "J. Econ. Lit., June 1971, 9 (2), pp. 399-431, did. We have already had one "terminal"discussion of the reaction-Bronfenbrenner, M. "Samuelson, Marx, and TheirLatest Critics,"and "Samuelson's 'Replyon Marxian Matters' "J. Econ. Lit., March 1973, 11 (1), pp. 59-63. ProfessorBaumol has found a history of thought approach to the topic which deserves the attention of all economists who have an interest in Marx, Marxism, or the evolution of classical economic thought. We print his essay here. Professor Samuelson sought to comment on Baumol's work,and wegive his views,as well. In the course ofSamuelson 's reply, he "tookon "Professor Morishimca,who quite naturally wanted to add a few words offurther explanation. We have finally allowed ProfessorsBaumol and Samuelson to share in what we hope are the "last words." M.P. The Transformation of Values: What Marx "Really" Meant (An Interpretation) By WILLIAM J. BAUMOL Princeton and New York Universities I would like to thank the students in my seminar on doctrinal history at Princeton Universitywhose discussions contributedgreatly to the ideas in this paper. I am also grateful to Elizabeth Bailey, Fritz Machlup, Michio Morishima and Paul Samuelson for their very helpful comments on earlier drafts of this paper. I am particularly indebted to ProfessorSamuelson for an extensive, illuminating and delightful corre- spondence on the subject. THIS PAPER will suggestthat the meaningof which is certainly not to be found there unless lne the relationship between values and prices reads into them an interpretation different from described in Capital has been widely misunder- that which Marx repeatedly emphasized. stood. Commentators as eminent as Mrs. Robinson Interpretation of the intentions of the writings of and Professor Samuelson have sought in the trans- the dead is always a questionable undertaking, par- formation discussion issues which Karl Marx never ticularly since defunct authors cannot defend them- meant it to contain. Writers on "the transformation selves. Yet there are some cases in which a careful problem" since L. Bortkiewicz have focussed on an rereading of the pertinent writings indicates that issue that is largely peripheral; and others like E. the author did speak for himself and spoke very B6hm-Bawerk have asserted that there is a contra- clearly-the trouble in such cases seems to be that diction between the analyses of Volumes I and III somethinv aboit the onriinal nresentation nrevents 51 This content downloaded from 193.49.18.51 on Mon, 25 Aug 2014 11:37:14 UTC All use subject to JSTOR Terms and Conditions 52 Journal of Economic Literature most readers, even some very careful ones, from tion of Marx' intentions is equally evident, and seeing what the writer intended. second, because I will suggest that the false anal- A notable case in point is D. Ricardo's discussion ogy between Ricardo's and Marx' value theories of the labor theory of value. It is hard to understand may help to explain our misunderstanding of the how a careful reader of any edition of the Principles latter. can overlook Ricardo's recognition of the role of the quantity and the durability of capital in the determi- Marx' Interpretation of the TransformationProb- nation of price. The labor theory is explicitly lem: Summary proposed as a remarkably good approximation to In Ricardo, the labor theory of value was meant the determination of competitive price. But, ulti- as a good approximation to a full explanation of the mately, Ricardo holds to a cost of production the- determination of prices. However Marx probably ory of pricing, not to a pure labor theory. Yet until never intended to produce such an approximation Stigler's fine article on the subject (1958),2 in which and it certainly was not his intention when he wrote this is documented beyond any shadow of a doubt, about the transformation problem; yet that objec- virtually any text was prepared to ascribe to tive, or something close to it, is often attributed to Ricardo the purest of labor theories, and even J. H. Marx. Hollander and E. Cannan (see G. J. Stigler for refer- I will provide evidence that Marx did not intend ences) suggested that Ricardo retreated grudgingly his transformation analysis to show how prices can under fire to the cost of production model of the be deduced from values. Marx was well aware that third edition. Only a few commentators, notably A. market prices do not have to be deduced from val- Marshall, J. Viner, and P. Sraffa, saw Ricardo's ues (nor, for that matter, values from prices). analysis for what it so plainly was from the first Rather, the two sets of magnitudes which are edition on.3 derived more or less4 independently were recog- I emphasize this case for two reasons; first, be- nized by Marx to differ in a substantial and a sys- cause I will try to show that the correct interpreta- tematic manner.5A subsidiarypurpose of the trans- formation calculation was to determine the nature ' I must emphasize that it is not the purpose of this paper to attack or defend the substance of Marx' transfor- of these deviations. But this objective and, indeed, mation discussion or to argue the significance of the in- any explanation of pricing as an end in itself, was sights it offers. This issue can be discussed profitablyonly of very little consequence to Marx, for the primary after clarification of the content of his analysis-which is transformation was not from values into prices but, the only objective of this article. as Marx and Engels repeatedly emphasize, from 2 Obviously, I disagree emphatically with Samuelson's judgment that "It is a sad reflection on the decadence of surplus values into the non-labor income categories literary economics that so much printer's ink has been that are recognized by "vulgar economists," i.e., wasted on the sterile and ambiguous question of whether profits, interest, and rent. Ricardo had or didn't have a labor theory of value, or a Thus we must surely reexamine the implications 93 percent labor theory, or. ." [13, 1971, p. 405]. If an author speaks for himself as clearly as Ricardo did, it is of Samuelson's conclusion: surely more appropriate to discuss what he did say than The truth has now been laid bare. Strippedof what some commentator has somehow inferred he ought to have said. logical complication and confusion, anybody's I For references on these matters, see Stigler [15, 1958]. methodof solvingthe famoustransformation prob- Note that Marx himself understood Ricardo correctly on lemis seento involvereturning from the unnecessary this issue. Thus in a letter to Engels dated July 6, 1863, detourtaken in VolumeI's analysisof values.... Marx wrote "You know that according to Adam Smith [S]ucha "transformation"is preciselylike that in the 'natural' or 'necessaryprice' is composed of wages, which an eraseris used to rub out an earlierentry, profit (interest), rent.. .. This nonsense was taken over afterwhich we makea new startto end up with the by Ricardo, although he excludes rent, as merely acciden- properlycalculated entry [13, 1971,p. 421]. tal...." (Marx' italics.) All translations, unless other- wise noted, are taken from [8, 1956]. The preceding quotation appears on p. 174. 4Not entirely, since labor time (Marxian value) is a I have chosen to follow the published translations of the technological datum which enters the determination of correspondence, which seem to be reasonably accurate. In cost and, hence, competitive price. a few cases some of the English phrases that Marx scat- ' R. L. Meek [9, 1956] and M. Morishima [10, 1973, tered through his letters have been edited by the transla- Chapter 7] in my view may be the only current authors tnr who have described the transformationproblem correctly. This content downloaded from 193.49.18.51 on Mon, 25 Aug 2014 11:37:14 UTC All use subject to JSTOR Terms and Conditions Colloquium: On Marx, the TransformationProblem 53 I will argue that this conclusion represents no real a given industry withdraw more than it has con- conflict with Marx' intentions, as Samuelson seems tributed, and when will the reverse be true? to suggest. Marx knew perfectly well that price This is a question which cannot, I believe, be determinationcan be explained in terms of the com- answered with the aid of an eraser. Marx proposed petitive process by itself, just as the classical econo- part of the answer, but his argument for even that mists had done, so that if the objective were an portion was incomplete. Morishima, (especially pp. analysis of pricing, Volume I would indeed repre- 80-84) in his excellent book, is, as far as I know, sent an "unnecessary detour." But Marx' interests the first to have supplied a careful answer [10, were not focused on price theory, and as I will 1973]. show, he was well aware that competitive prices can be deduced without prior recourse to Marxian val- The Value Theory Reconsidered ues. In Volume I, Marx does occasionally speak of My contention is that Marx' interest in the trans- values as if they were meant to approximate prices. formation analysis as a sequel to his value theory For example, he asserts "It is true, commodities was not a matter of pricing.
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