A critique of Shaikh’s two interpretations of Marx’s ‘transformation problem’

Abstract

Abstract It is argued in this paper that Shaikh has presented two different interpretations of the transformation problem in his works. In his influential 1977 paper, he presented an “iterative” interpretation in which there is a transfer of value between departments in the economy; and in a series of papers in the 1980s and in his recent book, he presented a different interpretation in which there is a transfer of value between firms in Department 3 and capitalist households. An important common feature of these two different interpretations is that total profit is not equal to total surplus-value. The two interpretations present different explanations of this divergence, which are examined in detail in this paper. It is argued that there is no textual evidence whatsoever to support Shaikh’s second interpretation. A few comparisons will also be made to my “macro-monetary” interpretation of Marx theory according to which there is no transformation problem in Marx’s theory and total profit is always equal to total surplus-value.