Nick Potts and Andrew Kliman
Is Marx's Theory of Profit Right? The SimultaneishTemporalist Debate, Lanham, MD: Lexington Books, 2015; 180 pp.: ISBN 978-0-7391-9631-1, 60 [pounds sterling] (hb)
This book brings together scholarly articles and blog posts that trace two separate controversies on the 'transformation problem' between values and prices. In these controversies, Andrew Kliman, either alone or with co-author Alan Freeman, criticizes the 'simultaneist' approach and, as an alternative, proposes the 'temporal, single-system interpretation' (TSSI), which he sees as offering a solution that is in line with Marx's own thinking.
The first controversy discussed commences with a 2001 article by Kliman in which the author seeks to demonstrate that the standard proof of the so-called 'fundamental Marxian theorem' (FMT) is inadequate. The FMT demonstrates that in an economy on a balanced growth path profit is positive if and only if surplus is positive. The demonstration of the FMT by various authors (e.g. Morishima 1973; Roemer 1981) is based on a Leontief production system which is characterized by an input-output matrix 'A' that specifies the input requirements of each of the n inputs for the production of each of the n outputs. In order for an economy that is defined in such a way to be productive, there needs to exist a bundle (vector) of outputs x such that Ax [less than or equal to] x, that is, the amount of each input required for production cannot exceed the amount of each output. Whether such an economy furthermore produces a surplus depends on the labour requirement for production as well as the wage goods bundle. Similarly, the generation of profit depends on the labour requirement, the wage and the resultant price structure, which is predicated on equal rates of profit in each industry.
Kliman contends that the FMT is too limited because it relies on the overly restrictive assumption that the economy is on the balanced growth path. He points out that there is no guarantee that this condition is fulfilled at each point in time, nor is there a guarantee that the price system conforms to its equilibrium configuration. If the economy is off the balanced path, it is possible that less value is being produced than put into production if the labour embodied in the constant capital used for production is particularly high--the economy could be producing a negative surplus while still showing a profit. If prices deviate from their...