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

From: Ian Wright (
Date: Thu Jul 10 2008 - 13:42:24 EDT

> You are extremely brave to be so heterodox. Do you know what does it
> mean to say that LTV’s predictions hold up anyway? So VOL. III was
> unnecessary to hold VOL. I’s thesis. This is what you have been saying
> all this time. If Böhm-Bawerk were still alive…

Hi Alejandro

The high correlation between aggregated market prices and labor-values
(and not other real-cost measures, such as oil-value, corn-value etc.)
is an established empirical fact. There's a long literature trail on
this, which begins, I believe, with Anwar Shaikh's work in the 80's and
followed up by many other researchers, including Allin Cottrel and Paul

As scientists we must respect the facts. So what this empirical finding
really tells us about the economy is a good question. And one well worth
pursuing if we are serious about understanding the real function and
meaning of prices.

But in another sense this information is not too surprising. You find it
in classical economics at the very birth of the labor theory of value
(LTV). For example, Ricardo thought that existence of uniform returns to
capital invested only introduced a "modification" to the LTV. Stigler
(1958) wrote about Ricardo's "93% LTV" since the relative value between
two commodities could not vary by much more than 6 or 7% due to factors
other than the quantity of labor. So the Ricardian approach to the
"transformation" is pragmatic: in quantitative terms factors other than
labor are relatively unimportant.

In the 80's Shaikh arrived at a similar conclusion but with slightly
different reasoning: the difference between prices and labor-values is
due to the transfers between the "circuit of capital" and the "circuit
of revenue" where capitalists spend their income on consumption goods.
He explains why, for economic reasons, this difference must be
quantitatively small.

Farjoun and Machover (1983) reject the assumption of a realized uniform
rate of profit (an assumption which many standard critiques, such as
Bohm-Bawerk's and Bortkiewicz's, rely upon). Firm profits are not
uniform. So they argue that Marx was "wrong" to transform labour-values
to prices, since his "crude" Volume 1 assumption, once situated in a
probabilistic theory of the economy, is a better predictor of market
prices than his "sophisticated" Volume 3 theory. And the empirical data
appears to confirm this claim.

So Dave is not being "brave". If anything he is being strictly
Popperian. He wants to know whether your alternative theory of prices
can be made operational and tested against the data, especially as he
has expended prodigious efforts to test his theory of prices against the

ope mailing list

This archive was generated by hypermail 2.1.5 : Thu Jul 31 2008 - 00:00:09 EDT