Value price transformation as a real process

Almost all of the voluminous literature on the Marxian ‘transformation problem’ is predicated on the assumption that, whether or not he succeeded, what Marx was trying to do in Part II of Capital, volume III—namely, derive a set of prices consistent with the equalization of the rate of profit across all capitals— was correct. Those neo-Ricardians who argue that there is really no ‘transformation’ problem as such (on the grounds that labour values are theoretically redundant—see Steedman, 1977) most emphatically share this assumption. A rare exception to this orthodoxy is Farjoun and Machover’s Laws of Chaos (1983). Farjoun and Machover, like Steedman, conclude that there is really no transformation problem, but for a very different reason, namely that the assumption of a tendency toward the equalization of the rate of profit is both empirically false and theoretically untenable. Rather, they claim, the predictions of the simple labour theory of value, as in Volume I of Capital , are in better accord with the facts. Our aims in this paper are to explain this claim, to present some empirical data by means of which the claim may be assessed (based mainly on analysis of the UK input–output tables), and to offer some thoughts on the economic mechanisms that might be responsible for generating the observed data. We begin with a brief examination of the logic of the standard equalized-profit assumption.