Transformation of Values Into Prices
Like Ricardo, Marx knew that relative labour values— in the above example—do not generally tally with relative competitive prices— in the same example. However, in the third volume of Capital he argued that competitive prices were obtained from his values through a transformation process, whereby capitalists redistributed among themselves the given aggregate surplus value of the system, in such a way as to bring about a tendency toward a more equal rate of profit between sectors of the economy. This happened because of the capitalists' tendency to shift their capital towards the sectors where it earned higher returns. As competition become fierce in a given sector, the rate of return comes down, while the opposite will happen in a sector with a low rate of return. Marx describes this process in detail in chapter 9 of Volume III.
Read more about this topic: Transformation Problem
Famous quotes containing the words transformation of, values and/or prices:
“The transformation of the impossible into reality is always the mark of a demonic will. The only way to recognize a military genius is by the fact that, during the war, he will mock the rules of warfare and will employ creative improvisation instead of tested methods and he will do so at the right moment.”
—Stefan Zweig (18811942)
“What we often take to be family values—the work ethic, honesty, clean living, marital fidelity, and individual responsibility—are in fact social, religious, or cultural values. To be sure, these values are transmitted by parents to their children and are familial in that sense. They do not, however, originate within the family. It is the value of close relationships with other family members, and the importance of these bonds relative to other needs.”
—David Elkind (20th century)
“To expect to increase prices and then to maintain them at a higher level by means of a plan which must of necessity increase production while decreasing consumption is to fly in the face of an economic law as well established as any law of nature.”
—Calvin Coolidge (1872–1933)