ABSTRACT
We are now in a position to take up the issues that we raised at the end of chapter 6. At that point we had examined the labour theory of value (LTV) as put forward Smith, Ricardo and Marx. We had noted that this theory appeared to run into a problem with regard to the presumed equalization of the rate of profit across industries. Specifically, the LTV in its simplest form predicted that the rate of profit would vary inversely with the ‘organic composition of capital’ (Marx’s term) or capital-intensity of the various industries. Both Ricardo and Marx saw this as problematic, and Marx devoted considerable intellectual effort to solving the resulting ‘transformation problem’. And we had put on the table the neoRicardian contentions (a) that Marx failed to solve the transformation problem, and (b) that anyway it wasn’t really a ‘problem’, since all one had to do was get rid of the LTV and shift over to a Sraffian theory of prices of production – ‘erase and replace’ in Samuelson’s phrase. In response to these points we claimed that recent developments, both theoretical and empirical, gave support to the LTV and cast doubt on the neo-Ricardian critique. It is time to make good on those claims.
