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

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Sat Jul 12 2008 - 08:04:22 EDT

Ian Wright wrote:

"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". 

I think the reference to "established empirical fact" is too strong. At most it is an empirical corroboration, since the same data can be interpreted in various different ways using different statistical assumptions (see e.g. Kliman 2002 for example, who finds that the strong price-value correlation discovered by Ochoa/Shaikh/Cockshott disappears if variations in the size of industries - which he defines according to their aggregate input costs - are controlled for; I can send you a pdf of the article). 

And, among other things, 

(1) the input-output table is itself a stylized construct, founded on numerous price and computational assumptions, as well as classification criteria (which often differ from industry to industry) 

(2) the Ochoa/Shaikh methodology (also used by Kliman) for obtaining the "labor-content" of output, itself still relies on an assumed relationship between price aggregates and a quantity of labour-hours worked, i.e. using this methodology, we cannot obtain the magnitudes of the (direct and indirect) labor-content without reference to price data, or independently from price data.

An alternative, simpler methodology (using fewer assumptions) might be to establish average unit-prices for particular types of product cited in the CPI regimen, estimate the average labour-time necessary to make them from business operations, and trace out the correlations between the prices of different products, and comparative costs in labour time, across a long time interval. 

Using a somewhat similar idea, W.M. Cox, WM and R. Alm ("Myths of rich and poor: why we're better off than we think". New York: Basic Books, 1999, p. 43) estimate for instance how long an average American had to work (in selected years 1920-1999) in order to earn the money to buy half a gallon of milk, a three pound chicken, 100 kilowatt hours of electricity, and a 3 minute coast-to-coast telephone call. 

Using those kinds of sources and others, it may be possible to derive the three relationships essential to the argument: the relationship between changing product prices across time; the relationship between changing product prices and average labour-time; and the relationship between the changing quantities of average labour-time used to make different products.

In Marx's theory, labour-values constrain production prices (set upper and lower limits for them) and production prices regulate market prices (set upper and lower limits, and determine the direction of longer-term market price movements). However the problem there is, that no distinction is drawn between unfinished, semi-finished and finished goods, and between the factory-gate price, and the final consumer price. Consequently different production prices and product prices can be computed using different assumptions; presumably the fully-formed production price (the economic production price in an integrated market) regulates the final product price. The way these problems are overcome in the input-output table is by making some standard accounting conventions (about producer's prices, and the mark-up in wholesale and retail) but one ought to be aware that they are accounting conventions.


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