# [OPE] Reply to Paul Cockshott on Ochoa indirect labour methodology

Date: Fri Jul 18 2008 - 15:05:33 EDT

```Paul,

Don't have much time just now, but back in the 1990s about 27 important methodological issues occurred to me, having to do with classifications, estimation and accounting procedure, data collection, definitions of concepts etc.) but I would have to think hard to remember all of them. As I said I did not write that up in a technical paper. You can solve some of these issues using data available, but not all of them.

Suppose you accept the Leontievan definition of inputs and outputs (where total inputs equal total outputs in the account matrix) and apply the Ochoa-type procedure. Assume for example at the first step in the iteration that direct labour hours worked in a sector A = 100 and output of sector A = \$2000. The labour/output ratio will then be 1 hour : \$20 or 0.05, let's call that ratio "N1". Assume that 4 sectors B,C,D,E purchase A's output in unequal amounts as will usually be the case, then we can calculate the indirect labour hours using N1, such that e.g.

B receives \$700 input and labour content=35 hours of indirect labour added to the labour content of sector B 's output
C receives \$600 input and labour content=35 hours of indirect labour added to the labour content of sector C's output
D receives \$500 input and labour content=25 hours of indirect labour added to the labour content of sector D's output
E receives \$200 input and labour content=10 hours of indirect labour added to the labour content of sector E's output

But note that the ADDITIONAL assumption is that the indirect labour content contained in each part of the output sold and transferred as input to B,C,D,E will be allocated IN THE SAME WAY as for A's total output, namely in a ratio of 1 hour for \$20. But suppose that in reality the ratios DIFFER for each sector, deviating from N1, for example because different sorts of products are exchanged with other sectors, in a different relationship, such that e.g.

added to B: \$700 where labour content=25 hours (deviation from assumed labour content = -28.6%, where N2=0.0357, i.e. \$28 of output per hour worked)
added to C=\$600 where labour content=20 hours (deviation from assumed labour content = -33.3%  where N3=0.0333) i.e. \$30 of output per hour worked)
added to D=\$500 where labour content=10 hours (deviation from assumed labour content = -60%    where  N4=0.02)    i.e. \$50 of output per hour worked)
added to E=\$200 where labour content=45 hours (deviation from assumed labour content = +350%  where N5=0.225)   i.e. \$4.44 of output per hour worked)

(The raw average of (N2... N4) will be 0.0785 and the weighted average of (N2... N4) will be ><.  The raw average dollar value of output per hour worked will be \$28.11 and the weighted average will be ><.)
If you compare this result with N, you will immediately notice a substantial quantitative difference, but more importantly, this is a problem which further iterations WILL NOT CORRECT so that the results hypothetically "converge on the true labour-value" because the same sort of problem will reappear in each further iteration - in each case, the intersectoral transaction volume may differ in labour-content proportion from the average labour-content proportion established for the transacting sector itself, by an unknown margin. And thus if these deviations occur the "true labour-value" is not established, however many iterations are done.

Theoretically, one possible way to correct for this is to go to micro-level data and resectorize, such that there is only one type of specific commodity output (one type of specific product) for every distinct set of intersectoral transactions identified, but this is not really possible, since the given data is not collected in that way.

For true believers and mathematical wizards, there may be a "robust correlation" between observed output prices and derived labour-values, but when a research statistician has to uncover what it all means, there is a loss of faith in the method. I do not deny that input-output tables are very valuable and useful for all sorts of exciting purposes, but I doubt the data enable a "convergence on labour-values". Leontief's legacy was regrettably not really that he stimulated a better macroeconomics, but that he got the whole world to think of work in terms of inputs and outputs... defined in all sorts of ways according to tastes and whims.

As for Marx, he didn't really believe that the value of inputs exactly equalled the value of outputs. Instead, he thought that the outputs were greater in capital value than the inputs, because they contained an additional value, surplus value, which upon exchange yielded gross profit. If more new value did not arise out of production than went into it, capitalists would not invest in production. To acknowledge this we would need to create a different set of production accounts from top to bottom.

Jurriaan

Fidget with the digit dots and cry an anxious tear
As the XU-1 connects the spot
But the matrix grid don't care
Get a message to my mother
What number would she be
There's a million angry citizens
Looking down their tubes at me

Com-pu-pu-pu-pu-pu-pu-pu-pu-pu-pu-puter-puter, puter games
Com-pu-pu-pu-pu-pu-puter-puter-puter-puter, computer games

There's safety in numbers, they say
'Cause the figures never lie
No perfect persons ever noticed one computer die
I'm programmed to a schedule
Is it suicide run till the work gets done
'Cause the matrix grid don't say

Com-pu-pu-pu-pu-pu-pu-pu-pu-pu-puter-puter, puter games
Com-pu-pu-pu-pu-puter-puter-puter-puter, computer games

Jammed up tight by red traffic lights
These opportune commuters
They're blasting on their hooters
I fidget with the digit dots
Frustration rules out there
As the XU-1 connects the spot
But the matrix grid don't care

Com-pu-pu-pu-pu-pu-pu-pu-pu-pu-puter-puter, puter games
Com-pu-pu-pu-pu-puter-puter-puter-puter, computer games

- MI-SEX, "Computer Games"

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