In 20th-century discussions of Karl Marx's economics the transformation problem is the problem of finding a general rule to transform the "values" of commodities (based on socially necessary labour content according to his labour theory of value) into the "competitive prices" of the marketplace. This problem was first introduced by Marx in Chapter 9 of Capital's draft Volume III, where he also sketched a solution. The essential difficulty was this: given that Marx derived profit, in the form of surplus value, from direct labour inputs, and that the ratio of direct labour input to capital input varied widely between commodities, how could he reconcile this with the tendency to an average rate of profit on all capital invested?
Read more about Transformation Problem: Marx's Theory, British Classical Labour Theory of Value, Transformation of Values Into Prices, Critics of The Theory
Famous quotes containing the word problem:
“How much atonement is enough? The bombing must be allowed as at least part-payment: those of our young people who are concerned about the moral problem posed by the Allied air offensive should at least consider the moral problem that would have been posed if the German civilian population had not suffered at all.”
—Clive James (b. 1939)