My favorite example of Samuelson's wit is his "algorithm" for solving the Transformation Problem:
1. Write down labor values
2. Erase
3. Write down prices.
And then I think he said, "Voila," if memory serves! (I should confess that when I first read it, I was spitting: at that time I thought, a., that the TP was solvable and, b., that it was very important that it be solved -ah, youth!- and how dare Samuelson ridicule the likes of me).
Of everything he did that I know, I think Samuelson 1958 was the best. A beautiful, simple, funny and earth-shaking paper that changes the way you see the world forever. Anyway, he was a mensch. RIP.
Kevin,
ReplyDeleteKrugman reports the delightful footnote from his 1958 OLG paper in which he states: "Surely a sentence that begins with 'surely' cannot end with a question mark? But one paradox is more than enough for one paper..."
But the "transformation problem" in Marx doesn't exist, but is a neo-classical invention. Marx' actual claim is that distributions of surplus-value must be determined first (between profits, rents, interest, wages, etc.), before one can determine prices-of-production. The neo-classical mis-reading, that labor-values must be converted into prices-of-production before any "simultaneous" set of market prices can be determined, such that LTV is redundant at best, inconsistent at worst, is an exact inversion of Marx' point, which is what you'd expect from those who would read a dialectical presentation in terms of their own flat-footed logic. Another way to put the point is that the neo-classicals re-normalized prices with each production period as at equilibrium, which is precisely what Marx was not doing, as it would have defeated his purpose. Marx assumed that money-wages were readily approximate to labor-values and labor-power generally was exchanged at fair value, (as this was still the hard commodity-money, gold standard era), which is a reasonably "empirical" assumption, but then some of the wages paid in advance during each production period would be paid to produce new, improved capital goods, which would alter values and output-prices in the subsequent period, so that dis-equilibrium tendencies would accumulate in the long-run, which was his aim to delineate. Also, labor-values don't need to be traced back in some sort of infinite regress, because, as an aggregate "mass" simultaneous with the production process, inter-sectoral differences in capital intensities, "the organic composition of capital", drop out "macro-economically". It's in the discrepancies between accumulations of "value" and nominal prices, supposedly at equilibrium, that the point of delineating the dynamics of the economy in terms of "value" rather than just nominal prices comes out, especially at times of periodic crises.
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