I would like to report some interesting results that
Allin and I have just produced this week in dealing with
empirical value theory. There consequence is, I think
to completely disprove the whole problematic of the
transformation problem and confirm the simple labout
theory of value. I would be interested if anyone can
confirm them.
Our previous work with UK input output tables indicated that:
1.There was some degree of equalisation of profit rates between
industries with different organic compositions.
2.That this equalisation was only partial, so that industries with a low
organic composition of capital tended to gain a higher rate of profit.
However since our work with UK input-output tables used a flow rather
tha a stock measure of organic composition it was not conclusive. Using
capital stock data from the BEA for the USA we have attempted to test
these hypotheses for the US economy. In computing the organic
compositionsby industry we found it necessary to aggregate some of the
indstrial categories in the I/O tables as the capital stock figures were
not so broken down into such fine categories. But we found that the
results indicate, even more strongly than the UK data, that any tendancy
toward profit rate equalisation is very weak, and that the effects of the
raw labour theory of value predominate. Organic composition is negatively
correlated with profit rates for the US. This is true whether we specify
the rate of profit as s/c ( correlation -0.47) or as p/c (correlation
-0.43).
The consequences of this can be shown by graphing three sets of points:
1 the observed rate of profit, measured as s/v,
2 the rate of profit that would be predited on the basis of Volume 1 of
caital, where it would be given by v*s'/c where s' is the mean rate of
exploitation in the econmy,
3 the rate of profit that would be preicted by volume III of capital or
any other variant of transformed values.
When this is done it can be seen that the observed rates of profit fall
clse to the asymtotic distribution of profit rates that would be
predicted by the vol 1, theory. The exception is for a few industries
with unusually high orgnaic compsitions >10. But what are these
industries?
At an organic compition of 23.15, we have the electricity supply
utilities with a rate of profit half way between that predicted by the
simple labour theory of value and that predicted by the price of
production theory. Then we find at an organic composition of 16.4, the
crude petroleum and natural gas industry, with a rate of profit
substantially in excess of that predicted by the labour theory of value,
and approximating much more closely to that predicted by an equalisation
of the rate of profit. But an industry like this, would, on the basis of
the Ricardian theory of differential rent, be expected to sell its
productabove its mean value, and hence report above average profits. In a
similar position we find the oil refining industry with an organic
composition of 9.4. Both oil production and oil refining have similar
rates of profit, at 31% and 32%. Since the industry is vertically
integrated, this would indicate that the oil monopolies chose to report
their super profits as earned pro-rata to capital employed in primary and
secondary production. In both cases, however, the super profit can be
explined by differential rent.
Next we come to the gas utilities with a rate of profit of 200n an
organic composition of 10.4. The labour theory of value would have
predicted 7% and the production price theory 32%. But like the
electricityutilities, these industries are regulated and the assumptions
built into the regulatory system include that the utilities should earn
an average rate of profit.
There is a positive correlation between the rate of surplus value s/v and
the organic composition of capital c/v. This can be interpreted either
as:
A result of profit equalisation boosting the apparent rate of surplus
valu in high organic composition industries.
Both high rates of profit and high organic compsitions being due to a
thir independent variable - low wage rates in some industries, which
reduces the denominator in both cases.
Thus whilst there may be some support for the production price theory in
this correlation, it would need further investigation to confirm that the
correlation was not an effect of low wage rates in some sectors.
With these exceptions, the observed rates of profit are much better
explained by the labour theory of value than the prices of production
theory.