Book Review from the May 2017 issue of the Socialist Standard
'Money and Totality'. By Fred Moseley. (Haymarket Books, 2017. 400 pages)
The subtitle sums up what the book is about: A Macro-Monetary Interpretation of Marx's Logic in Capital and the End of the 'Transformation Problem'.
We sometimes say that universities neglect Marx on economics. This is not strictly true as there is a sub-section which does look at Marx's views here, from an academic point of view. One of their fields of study is the so-called 'transformation problem'.
In Volume I of Capital Marx assumes, for explanatory purposes, that 'commodities', as items of wealth produced for sale, exchange at their 'value', determined by the amount of necessary labour expended to produce them from start to finish. In Volume III, published after Marx's death by Engels in 1894, he has commodities selling at their 'price of production', defined as their monetary cost + the average rate of monetary profit; which is what tends to happen in practice.
Marx-critics immediately cried 'contradiction' and one of the more mathematically-minded of them used algebra to try to demonstrate that it was impossible to 'transform' values into prices of production without dropping the assumption that total profit = total surplus value; in which case, the labour theory of value was wrong, or at least useless and irrelevant. This became what Moseley calls the 'standard' interpretation and criticism of Marx. Over the years it has provided academics, both those who consider themselves Marxists and those who don't, with plenty to argue about.
Moseley's argument is that, if you understand properly what Marx meant by 'capital', there is no such problem. Marx, he says, meant 'money capital' as 'money that becomes more money', i.e., as Moseley puts it, 'money advanced into circulation in order to extract more money from circulation'.
Capital is not something physical, not 'capital goods' (machinery, buildings, raw materials) but also not labour time. In both Volumes I and III, argues Moseley, capital is assumed to be the same given sum (any sum) of money used to buy physical goods and labour power, whose use leads to the creation of a given amount of surplus value. Volume I explains where this comes from (the unpaid labour of the working class). Volume III explains how this same amount is distributed amongst the various competing capitals (in proportion to size). There is no period of time during which values need to be 'transformed' into prices of production. The basic assumptions in both volumes are the same. There is no 'transformation problem.'
Moseley identifies the false problem as having arisen from a misunderstanding of what Marx meant by 'value' and 'capital'. Capital is a sum of values but value (the amount of necessary labour embodied in a commodity) cannot be measured directly but only via the market as price, i.e. only as money. So capital is in practice a sum of money, one that seeks to grow larger. Like value, capital is a social relation rather than a thing. Contradictions only arise if you assume that it is something physical.
Another valid point made by Moseley (Andrew Kliman disagrees) is that by 'price of production' Marx meant the same as Adam Smith and David Ricardo meant by 'natural price', ie a long-run price around which market prices oscillate (Moseley calls it the 'long-run centre of gravity price') consisting of cost + a mark-up for profit. Smith and Ricardo just accepted the mark-up as a fact of life. Marx provided an explanation of where it came from and that it wasn't just an arbitrary addition to costs.
Moseley's book, although clearly written, is rather technical, but it does provide a comprehensive guide to all the arguments, for and against, the so-called 'transformation problem'