56 SOCIAL SCIENTIST that problem has been dealt with rather cursorily. But what has been said above perhaps suffices to demonstrate the essential correctness of Marx's approach to the problem of price determination under capitalist competition. A purely ^supply and demand9^ approach fails to see (a) that ^supply and demand" are themselves derived from more fundamental relations, and (b) that they can only explain why prices are ^high" or ^low" in relation to a certain 'normal' value or range of values. The modern classical approach recognizes that prices are basically determined not so much by ^supply and demand" but by the ^costs of production", these in turn being ultimately traceable to the quantities of labour time directly and indirectly required to produce the commodities. But the approach stops short of a full-fledged theory of price determination because it leaves prices dependent on the distribution of ^net product" between ^profits" and ^wages"^ in which distribution in turn is left unspecified. Marx,, on the other hand., starts with the theory of value and surplus value; he sees in value the basic or simplest determination of prices; he then brings in intra-capitalist relations to develop ^profit" and ^price of production" on the basis of ^surplus value" and ^value" and completes the edifice by bringing in ^supply and demand",, and thus market-price. We have tried by our discussion to place the ^so-called" transformation problem in a proper perspective. We shall next deal with the circuits of capital and the process of capitalist circulation, before going on to crises. A V BALU (To be continued) 1 "Marxian Political Economy, Part Two", Social Scientist 47, pp 50-51. 2 Karl Marx, Capital, vol I, Moscow 1967, p 307. 8 Capital, vol III, p 153. < Ibid, pp 142-143; see also p 175. 5 Bourgeois economists have on many occasions loudly proclaimed that Marx^s more complex theory of price-formation elaborated in volume III of Capital is utterly incompatible with his value theory of volume I, and that Marx wrote of prices of production and so forth in the third volume after realizing that his value theory of volume I was erroneous. This view is of course utterly wrong. Not only had Marx completed the draft of volume III of Capital before volume I was published but we also have specific references in volume I itself to the inadequacy of the simple form of the law of value in the task of providing a complete theory of price-formation. See for instance the first of the quotes from Marx in the above section, and the entire paragraph following those lines in volume lot Capital. 6 Capital, vol III, pp 164-165. 7 See P M Sweezy, The Theory of Capitalist Development, Monthly Review Press, New York 1942, chapter VII, and the references cited therein. 8 The basic reference is P Sraffa, Production of Commodities by Means of Commodities, Cambridge University Press, 1960. For lucid, non-mathematical expositions, see (a) Joan Robinson, "A Reconsideration of the Theory of Value" in her Collected Economic Papers, vol 3, Macmillan, 1965 (b) Joan Robinson, "The Relevance of Economic Theory" in Monthly Review, January 1971, and (c) R Meek "Sraffa's Rehabilitation of Classical Political Economy" in his Economics and Ideology, Chapman and Hall, 1967. For a good survey, see M H Dobb, Theories of Value