On Wed, 24 Sep 1997, andrew kliman wrote:
>
> A response to Alejandro Valle's ope-l 5504.
>
> Alejandro: "1. Petrovich disussed briefely that MAD is better than
> correlation coeficients because spurios correlation is present in this
> problem. Ochoa adopted MAD in his excelent analysis of value-price deviations
> for the US economy. By the way, MAD claculated for Ochoa are lower than 20%."
>
> I'm very glad to read this. Alejandro, who has done work in this area, and I
> agree that spurious correlation is present when aggregate prices and values
> are correlated. This was the crucial criticism that Alan raised and I
> reiterated. It follows, doesn't it, that the aggregate correlations are very
> misleading and fail to test what they purport to test?
> > Ochoa has also noted that spurious correlation is present.
More about this: As Lefertis pointed out, Shaikh paper about price-value
correspondence is seminal. He used published data (the purpose of the data
of Leontief and the Italians was not this) to analyse value-price
deviation in "The transformation from Marx to Sraffa". He made a new
question to the data. Until I know, the first version of this paper
(photocopy, maybe in 79 or 80) he used correlation coeficients but in the
last version of such paper (translated to Spanish in Colombia) he used MAD also.
I supose, because the problem of spurious correlation.
> Alejandro: "2. A MAD of 27 0oes not mean that value and prices 'differ quite
> significantly' as Andrew assert[s]. The problem of 'reasonable
> correspondence' between empirical data and a theoretical law is a very
> hard one. It is convinient for this 'The problem of measuring in modern
> physics' of T.S. Kuhn. He showed that there is no rule for deviations in
> physics: a very large deviation could be aceptable in astronomy and not in
> another sort of problems."
>
> Well, if a MAD of 27 0oes not mean that values and prices differ quite
> significantly, it also doesn't mean that they fail to differ quite
> significantly, either. This is a matter of judgment. But it is certainly
> true, isn't it, that a MAD of 200r 27% means that we should reject the
> conclusion that variations in values account for ("explain") almost all of the
> variations in prices?
My point on this is: Marxian theory of labor value(MTLV) is not a sort of
explanation of prices based on labor values. Hence, it is an incorrect
aproach to say values explain approximatly prices because MAD is 27%.
MTLV is (among other things) an rigurous analisys of the performance of
the system of prices to regulate social labor. Regulation of social labor
is not possible without measuring social labor, this is a PRACTICAL
necesity of the capitalist society (CS). Hence a MAD of 27huld be
analysed to understand its significance for the reproduction of CS. In my
paper presented to the 4th IWGVT I tried to make this point clear.
> I agree that what constitutes reasonable correspondence between empirical data
> and a theoretical law depends on the problem at hand. The problem in this
> case, however, is that if there's any "theoretical law" involved, I don't know
> about it. I don't mean that I reject the supposed law; rather, I don't know
> that anyone has given a *theoretical reason* for why price-value deviations
> should be small.
My comment on this is in the previous paragrph. I tryd to suport this
assertion of Marx: values dominate prices.
> But it is also possible to understand "reasonable correspondence" as a matter
> of how well the data support the claims made for them, i.e., the conclusions
> drawn from them, irrespective of theory. For instance, Shaikh wants to put
> the "transformation problem" in the proper "perspective," i.e. to suggest that
> since prices are actually "very close" to values, it doesn't matter if he
> can't resolve the theoretical problem because it lacks empirical significance.
> Similarly, Cockshott and Cottrell have asked whether Marx "needed to
> transform."
I agree with you on this. I am very sympathetic with Shaikh, Ochoa, Paul
C. an A. Cotrell works; however I do not think that the closenes between
values and prices means that the transformation problem is not important.
By the way this is the concusion of Ochoa also.
> The data lead to an unambiguous answer: yes, he did. MAD's of 20-27 0mply
> that the amount of value that is redistributed across sectors and across
> countries is not negligible. In other words, it is illegitimate to conclude
> that the factors which cause redistribution of value are unimportant in
> accounting for ("explaining") observed price magnitudes.
>
I think that there are two different importante problems involved:
1. The statistical correspondence between labor values and prices, is a part
of the explanation, why capitalism works well?.
2. Individual devations between values and prices could be big and shuld
be considered for analysing individual industries or sectors. It is
imposible to understand oil industry in Mexico without the concept of
rent, i.e. extraordinary surplus obatined from other industries.
Therefore even if on the average MAD is small it does not means that
divergences between labor values and prices are unimportant.
> The more important point, by far, is that the presence of significant value
> redistribution means that one needs to be able to explain how, and in what
> sense, the law of value holds, even though prices *do* differ from values --
> and the numbers must add up. So when I said that they prices and values
> "differ quite significantly," I meant that they differ enough that the data do
> not permit one to dismiss the theoretical problem that led the Ricardian
> school to disintegrate and has more recently led also to a disintegration of
> "Marxian economics." The problem is a real one and it must be addressed
> honestly, in theoretical terms, and not dismissed by reference to misleading
> and meaningless aggregate correlations.
>From my point of view Neoricardians do not try to vinculate prices with
values because they see values as an inecessary and inexact explanation
of prices (Many Marxist acept this asertion too). Hence they do not dismiss
MTLV because it is an inexact explantion of prices but because it is
unecessary. In fact, I do not know Neoricardian responses to empirical
works about value price correspondence.
Un saludo
Alejandro Valle Baeza
P.S.
Andrew, sorry for the delay to response your interesting posting.