I’m happy to say that my article on Marx’s transformation problem has now been published in the Cambridge Journal of Economics. After a little negotiation with Oxford University Press, I am able to link to a free version of the article from my website. Here it is.
This article is quite theoretical, and I’ve mentioned it previously Here, I want to be a little more blunt, in order to simplify the main message.
First, a frequent claim, both on the right and left of the political spectrum, is that the classical labour theory of value, and especially Marx’s version, is provably false, in virtue of a transformation problem. My paper unequivocally demonstrates the opposite: I prove that equilibrium prices, even in a capitalist economy with positive profits, represent the labour time actually supplied by workers. So the central claim and intent of the classical labour theory of value is ‘on the money’. Don’t let anyone tell you that the labour theory of value is false, or suffers from intractable logical problems ever again. If they don’t want to listen, feel free to send them my way. (This result upends over one hundred years of conventional academic wisdom. So why have such fairly obvious theorems about the relationship between equilibrium prices and labour time been missed for so long? I suggest an explanation here.)
Second, there is a logical problem with the classical labour theory of value, and Marx’s version of it. In other words, the critics, whatever their underlying motivations, have a point: transformation problems do arise if we make a certain kind of conceptual error of comparing prices, which reflect both natural and institutional conditions of production, with classical labour values, which reflect only the natural conditions. So the calumny heaped upon the labour theory of value isn’t a pure example of an ideological attack by a ruling elite that senses a threat to its material interests. Unfortunately, life, including the development of theory over long time scales, is more complex than that. The critics have a point, but that point is easily resolved — and the result is a better labour theory of value, which preserves all of Marx’s insights.
Third, I don’t expect my paper, and the associated development of a more general labour theory of value, to have immediate impact. The current configuration of forces are inimical to it, and I still have a great deal of work ahead of me fully explaining and developing it. There’s demand for straightforward defenses of Marx’s theory of value, since that’s a simple story that might appear, at first glance, to retain the Lakatosian hard-core of Marx’s theory. But my paper will disappoint those readers, since I accept the validity of the existence of a transformation problem and in fact I sharpen the contradictions that give rise to it. There’s also demand for straightforward rejections of Marx’s theory of value, since that’s also a simple story with the added benefit of excising talk of economic exploitation and the theft-based nature of capitalist property relations from the academy and popular political discourse. But this paper will also disappoint those readers, since I point out how to naturally resolve the problems of the classical theory. So readers with established sympathies or antipathies to the classical theory of value will find my conclusions counter-intuitive since they contradict many longstanding and seemingly well-established theoretical positions on both sides of the debate. Claiming that ‘you’re all wrong’ isn’t a popular message, especially to those with existing sunk costs in a wrong position.
Fourth, why is a theory of economic value politically important? Do we need one? Very briefly — yes — because, fundamentally, we need to have an accurate and true understanding of our current mode of production if we are to replace it with a better one. No successful political project can afford to ignore science, because only true ideas are ultimately effective. Lots more to say here, of course, but not today.
Finally, the article is theoretical, and it requires knowledge of linear algebra and production theory. However, the underlying ideas are easy to understand. I created a video that I hope delivers the main insights in a more visual form: