[OPE] Market socialism [the false assumption of the law of value]

From: Alejandro Agafonow (alejandro_agafonow@yahoo.es)
Date: Fri Jul 04 2008 - 18:15:47 EDT

1)COCKSHOTT: «We are opponents of the transformation theory, taking a simpler vol 1 of Capital theory of price: that prices will be largely determined by labour content and that transformational effects will be relatively small.»
Have you put your critique to the transformation theory in any paper? What I have read so far only expresses support.
What do you mean by the transformation theory as taking a simpler vol. 1 of Capital?
What is the transformation theory but prices being determined by labour content and that transformational effects are relatively small?
2)COCKSHOTT: «what predictions does your theory it make that are not made by the labour theory of value, and what observations could be performed to validate or falsify your theory?»
Our predictions are the opposed of those predicted by transformation theory, that is, that prices are not determined by labour content and that transformational effects are large.
This is constantly falsified by the phenomena of monopolies in market economies. If transformation thesis were true, we were in presence of markets in equilibrium.
3)WRIGHT: «Why do you think that any economist, Marxist or otherwise, would claim that in reality the cost structure of an economy is *fixed*? […]But as far as I understand it your argument against the LTV in this thread is that consumer and entrepreneurial activity result in changes to the objective cost structure and therefore -- and here's the jump that I do not understand -- the LTV is false.»
You, or the transformationists, inevitably have to make the assumption of the fixation of the cost structure. If you don’t make this assumption you would realize thattransformational effects are relatively large and then prices can never be proportionate to labour values.
4)WRIGHT: «If you are saying that the "transformation problem" is a critique of the LTV then I agree -- it is indeed a critique.»
What? Transformation theory alleges to be a theoretical and empirical prove of the LTV.
5)WRIGHT: «Under the assumptions of my model […] the formalization of the dynamics in terms of a system of differential equations can be
interpreted as a negative feedback control system in which labour-values are "reference signals". […] For example, consider a bird flying through the air. Does this empirical fact negate the law of gravity? […] In fact the law of gravity explains why birds need wings to fly. Think of the "law of value" like that. It does not claim that "prices will be proportional to labour values".»
If LVT does not claim that "prices will be proportional to labour values", which is the direction of the attractor force of your “negative feedback control system”, but to push prices toward this proportionality?
The problem is that you give an extreme force to labour costs, but what deserves this role in a market economy are the factors that introduces non-tractable uncertainty (See below).
6)ZACHARIAH: «Put it in a different way: the deviations of market prices from prices proportional to labour values are claimed to serve as feedback signals. The deviations are indeed the norm or else there would not be any feedback.»
This point relates the former point by IAN and you are right ZACHARIAH, but my worry is that the transformationists say that prices reach indeed proportionality.
7)WRIGHT: «I *do not* believe that simple prices (or prices of production for that matter) are feasible in the sense you define. But I *do* believe that labour-values are attractors for prices.»
Ok, then you have to reject the transformation hypothesis. But you don’t indeed.
8)WRIGHT: «So in one sense you are right -- we need to consider much more than the "law of value" to explain the trajectory of market prices -- but you are also very wrong, since we will never be able to explain the trajectory of market prices without it.»
We think that the most important thing to explain the trajectory of market prices, are factors that introduces non-tractable uncertainty, that is, entrepreneurship action and changes of preferences. With this factors being determinant, we are able to explain the trajectory of prices. What we can not discover in advance in the direction of this trajectory.
This is an important point because LTV alleges to be able to discover which will be this direction. The key is the uncertainty in the system, non-tractable uncertainty.
Kind regards,A. Agafonow

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