MARXIAN POLITICAL ECONOMY 45 exposited. In the present article, we prepare the ground for the above two extensions of our analysis by dealing with certain preliminary problems. Value and Prices In the second of this series of articles,, we had developed the concept of value. In its qualitative aspect, value is the social property common to all commodities, namely., that of their being products of abstract labour or human labour-in-general; quantitatively, value of a commodity is measured as the amount of socially necessary labour-time required to reproduce the commodity. Until now, we have assumed that commodities exchange at their values. However., we had also stated in the article referred to above: "In the further development of the argument, Marx's law of value does not state that commodities are sold at their value but rather that commodities tend to exchange at their prices of production. The latter...can be understood as values modified to take into account the tendency und^Y capUalht competition towards a uniform rate of profit on capital.'51 The questions that we now address ourselves to are: 1 What are "prices of production"? 2 How are they related to values? 3 Why is it necessary to develop the concept of "prices of production"? The problem of deriving prices of production fiom values— implicit in the above set of questions—is known as the "transformation problem". It has been the source of a great deal of academic fuss, and its alleged "insolvability" has been taken by academic economists and other professional anti-Marxists to imply the total breakdown of the labour theory of value. We shall take up this problem in some detail below. Before dealing with the set of questions raised above, however, one point needs to be made clear. Marx regarded neither value nor price of production as being the actual rate at which a commodity is sold. This latter item is what we in our everyday experience identify as "price", and Marx calls it "market-price". Marx handles the question of prices of commodities at three distinct levels of abstraction. At the highest level of abstraction, there is the fundamental or basic determinant of prices, and this is value. At a lower level of abstraction, when some more specific requirements of the capitalist mode of production are brought into the picture, we have a more complex determination of prices in the category price of production. Finally, on the surface of capitalist reality itself, taking into account all the accidental fluctuations of supply and demand, we have the ruling market-price. This point will become clearer following our exposition of the transformation problem.