Abstract
This book brings together scholarly articles and blog posts that trace two separate controversies on the ‘transformation problem’ between values and prices. In these controversies, Andrew Kliman, either alone or with co-author Alan Freeman, criticizes the ‘simultaneist’ approach and, as an alternative, proposes the ‘temporal, single-system interpretation’ (TSSI), which he sees as offering a solution that is in line with Marx’s own thinking.
The first controversy discussed commences with a 2001 article by Kliman in which the author seeks to demonstrate that the standard proof of the so-called ‘fundamental Marxian theorem’ (FMT) is inadequate. The FMT demonstrates that in an economy on a balanced growth path profit is positive if and only if surplus is positive. The demonstration of the FMT by various authors (e.g. Morishima 1973; Roemer 1981) is based on a Leontief production system which is characterized by an input–output matrix ‘
Kliman contends that the FMT is too limited because it relies on the overly restrictive assumption that the economy is on the balanced growth path. He points out that there is no guarantee that this condition is fulfilled at each point in time, nor is there a guarantee that the price system conforms to its equilibrium configuration. If the economy is off the balanced path, it is possible that less value is being produced than put into production if the labour embodied in the constant capital used for production is particularly high – the economy could be producing a negative surplus while still showing a profit. If prices deviate from their equilibrium values, profits could be negative while the economy is still producing a surplus.
The debate between Kliman/Freeman on one side, and Simon Mohun and Roberto Veneziani on the other, sees Kliman insisting on the possibility in principle that outputs and prices can deviate from the values required by balanced growth such that the FMT is invalid. Mohun and Veneziani, however, question the economic possibility of such deviations. Indeed, the economy does not need to be on a balanced growth path, but it needs to be able to replicate itself in some fashion and it would not be able to sustain a situation in which more value is reflected in the inputs than in the outputs permanently. Alternatively, if prices are such that total profit is negative one would expect industries that operate at a loss to stop production, thus preventing a situation with negative profit. In my judgement, the discussion on this issue is at cross purposes, with Kliman fundamentally objecting to the FMT approach but doing so within its analytical framework rather than stepping outside of it and accomplishing a more effective critique.
The second topic at issue is the contribution and validity of the alternative, TSSI. This interpretation is ‘single-system’ because it bridges the gap between labour values and prices by using the ‘monetary expression of labour time’ (MELT) as a link between values and prices and it is ‘temporal’ because it allows the MELT to change between periods so that the prices of inputs at the beginning of the production period and the prices of outputs at its end are not required to be the same.
Kliman and Freeman give worked examples of their approach (pp. 91ff) which demonstrate a very different understanding of the problem from the standard FMT. Interestingly, they start with a given value of the MELT which they, in line with the ‘new’ interpretation postulate to determine the monetary value added and thereby also the surplus (wages are zero in the example). When productivity growth is applied with a given labour input, this means that the corn surplus is valued relatively less than seed corn (constant capital) which forces a lowering in output price/value and also leads to a reduction in the rate of profit – although the rate of profit in terms of corn quantities is actually increasing. We are not informed where the MELT comes from or why the surplus is valued differently from constant capital even though they come in the same physical units, but the examples show the fundamental difference in methodologies between the standard FMT and the TSSI. Unfortunately, Kliman fails to explain clearly the dynamic process underlying the TSSI equations and how economic decisions made in prices, wages and quantities are related to the MELT and the corresponding values, which makes it impossible to assess the contribution of the TSSI on the basis of the material presented in the book.
The second part of the book reproduces a 2014 controversy between Robert Paul Wolff and Andrew Kliman which starts with a blog post in which Wolff muses about the arbitrariness of the labour theory of value, given that surplus can equally well be expressed in terms of iron or corn values and that any commodity apart from labour could be chosen as the ‘substance of value’ which supposedly disproves Marx’s labour theory of value.
In a joint response Chris Bryon, Alan Freeman and Andrew Kliman deploy heavy methodological artillery to argue against Wolff, rehearsing the arguments set out in the first part of the book. They also choose to interpret one of Wolff’s remarks about the desirability of a heterodox Marxism that does away with the infallibility of Marx as an attack on TSSI arguments. A rather perplexed Wolff replies and an exchange of emails and blog posts between him and Kliman ensues. In the course of the discussion, it turns out that Wolff considers labour a produced commodity and therefore does not make a categorical distinction between it and any other commodity. Rather than responding to this peculiar notion Kliman continues to make the TSSI argument, proving Wolff right in asserting (p. 164) that he is unable to get Kliman ‘to step outside [his] conceptual framework for a moment’ and respond on a common level.
The introduction to the book by Nick Potts carries the title ‘A Sad Story’. Potts chose this title on account of what he perceives as unscholarly methods by Kliman’s opponents and unacceptable academic practices by the journals (Capital and Class and Metroeconomica) involved in this debate. From my perspective, the title sums up the entire debate well in both form and content. As for form, Potts’s sympathies lie with Kliman and his co-authors but many of the rhetorical methods that he criticizes in Mohun and Veneziani can similarly be seen to be applied by Kliman et. al. The treatment of the unsuspecting Robert Wolff does not cast Kliman’s debating methods in the best light either.
As concerns content, I expect the discussion would have been far more constructive had it focused on the two key issues at hand – the role of equilibrium and the conceptualisation of value – demarcating clearly the differences between the simultaneous dual system and the temporal single system approaches, rather than trying to disprove the standard FMT and establishing the supposed superiority of the TSSI. Alternatively, a textual analysis of Marx and the extent of alignment of either approach to his thinking would have cast a clearer light on what he ‘really’ meant and the interpretative options he left open.
These are long-standing and fundamental concerns that have exercised writers on the topic through the decades. Michael Heinrich (2011 (1999), chapter 6) makes a convincing case that Marx developed a single-system, ‘monetary’ theory of value in which value and price are co-determined in exchange. Labour value is a phenomenon of capitalism; value and price need to be separated conceptually to be able to understand the hidden value logic of capitalism, but they cannot be separated in their actual determination. That value is fundamental to price does not mean that the determination of value ‘precedes’ price or that price can simply be derived from ‘underlying’ value. From this perspective, Marx’s own attempts at a mathematical determination of the relationship between price and value are interpreted as an inconsistency caused by his incomplete break with classical economic thought.
From Heinrich’s (2011(1999): 208) standpoint, the standard FMT framework interprets Marx as a ‘socialist Ricardian’ and fails to appreciate the constitutive role of labour value to capitalist economic relations. This explains how Morishima (1973: 194) who works within the standard paradigm can draw his conclusion that ‘[…] Marx’s economics can acquire citizenship in contemporary economics by detaching it from its root, the labour theory of value, and grafting it onto the von Neumann stock so as to produce the Marx-von Neumann flower!’
For Kliman (p. 81) the ‘controversy is about whether Marx’s theory is internally inconsistent’. Since Marx’s writings on the subject are inconsistent, it may be impossible to make a universally agreed judgement. In principle, the TSSI seems to be an approach that is consistent with a well-founded interpretation of Marx but its elaboration by Kliman et al. falls short of presenting a convincing conceptualisation of a single system reflecting the capitalist dynamic so that the controversies recorded in the present book unfortunately do not offer any greater insights into our understanding of capitalism.