On the "Transformation Problem"
Publisher: Against the Current
Date Written: 01/09/2018
Year Published: 2018
Resource Type: Article
Cx Number: CX23406
Further discussion of Marx's "transformation problem." References a previous column reviewing Fred Moseley's "Money and Totality."
The real problem comes in with Moseley's treatment of profit-rate equalization. Here he accepts unreflectively the belief, inconsistently presented by Marx, that surplus value flows among sectors according to the proportional weight that the individual branchs capital occupies with respect to aggregate investment.
An application of that principle is this: capitals of the same size, but of differing organic composition - that is, made up of different proportions of constant and variable capital - earn the same profit in the same time period.
This is the seeming contradiction at the heart of the "transformation problem:" namely, that profits are no longer proportional to the living labor that variable capital sets in motion. Surplus value is then treated by Moseley as a social relationship having the quality of a liquid that can spill over from one sector to another. But in fact, surplus value is not what moves when profit rates are unequal. Investment does. Capital withdraws from spheres that underperform and expands spheres that are relatively more lucrative.
This incessant movement changes the production structure of the economy: it shifts sectoral supply (and demand) schedules, changes the value of money, the level of employment and wages until market-clearing prices begin to emerge reflecting a uniform rate of profit.