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

From: Dave Zachariah (
Date: Thu Jul 10 2008 - 04:09:57 EDT

on 2008-07-09 23:30 Alejandro Agafonow wrote:
> That Vol. 1 doesn’t require the transformation doesn’t mean that it 
> doesn’t imply it. Marx’s Capital was incomplete until the publication 
> of the Vol. 3. All the critics waited for this last volume where Marx 
> supposed to demonstrate the statements made in Vol. 1 and 2.

You miss the point completely. What Marx wrote is of secondary 
importance. We are saying "Forget trying to transform labour-values into 
production price and see how well the theory's predictions hold up anyway".

> No Zachariah, you don’t find a strong correlation between labour 
> values and their prices. You find this correlation between labour 
> values and an “artificial variable”, an average monetary profit. If 
> you really compare labour values with real monetary single profits 
> without averaging, this correlation is not so strong.

Please answer these two questions:

   1. Would you mind showing us this empirical result?
   2. Has anyone in the literature suggested that there should be a
      correlation between profits and labour-values?

> This is part of the methodological tricks I am against. Does this 
> offer an answer to your example of the 2D graph?

Certainly not. The example of the 2D graph had nothing to do with 
methodological issues of testing the labour theory of value. It was even 
more basic than that, it was a demonstration that your claim that 
"labour-values gravitate around market prices" is conceptually speaking 
nonsense. You have yet to answer this.

> 3)ZACHARIAH: « Ok, so the trajectory of market prices is determined by 
> "entrepreneurship action and changes of preferences". Now how would 
> you construct predictions that are testable on the basis of this 
> claim? So far you are not able to explain any trajectory of prices 
> even remotely as accurate as in the empirical literature on the labour 
> theory of value.»
> You are confusing explanation with prediction. Some times explanations 
> let us make predictions, other times don’t. This depends on the nature 
> of the phenomenon. As Oskar Morgenstern emphasized, how can we 
> demonstrate the stability of market economies if we can not even 
> demonstrate a much more simple system, that of the moon’s orbit around 
> earth.
> No one is able to predict the trajectory of prices because 
> entrepreneurship action and changes of preferences introduce non 
> tractable uncertainty in the system.

No Alejandro, you are confusing 'prediction' with 'forecast'. I'm 
speaking of 'predictions' as in the philosophy of science. Simply put: 
Given a set of input data a scientific theory generates output data. The 
output data is the prediction, and it is irrelevant whether that 
corresponds to an actual outcome that occurred yesterday, 1 million 
years ago or occurs tomorrow, as long as we can test its validity. So 
'prediction' is here not different from 'explanation', it just 
emphasizes that the claim has to be testable.

To give a few examples:

   1. Given data on the technical conditions of production and the
      labour requirements, the LTV can predict the relative market
      prices between commodities. And therefore also the trajectory of
      relative prices.
   2. Given the number of workers in an industry, it can predict its
   3. Given the average wage rate and the aggregate profit-wage rate it
      can predict a certain statistical distribution of the price to
      labour-value ratios.

What is the input data of your theory? How do you classify, detect or 
measure "entrepreneurship action" and "changes of preferences" across 
the economy? Suppose, you had that imaginary input data, what output 
data does you theory generate? Is it testable? By your last statement it 
seems like it generates nothing at all.

I have to say that your critique has a long way to go before it can 
reach its target.

//Dave Z
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