Andrew
>The problem is that this is not a *reasonable* null hypothesis. On the
>contrary, I expect that almost all measures of industry size will be
>positively correlated with one another -- and that the correlations will be
>far from zero. If we take aggregate sectoral price as our measure of industry
>size, then I expect that other measures of industry size -- aggregate sectoral
>value, but also employment, energy usage, "capital" stock, total assets,
>advertising expenditures, total profit, etc. -- will be correlated positively
>with it. The mere existence of a positive correlation between aggregate
>sectoral price and aggregate sectoral value no more constitutes evidence in
>favor of the so-called "labor theory of value" than the existence of a
>positive correlation between aggregate sectoral price and advertising
>expenditures constitutes evidence in favor of the theory that value (i.e.,
>price) is determined in the market.
Paul
All of the examples they andrew uses apart from energy usage are in effect
value or price measures. If values and prices are correlated, then these
will also tend to be correlated as a side effect. If one were to be take
a reasonable null hypothesis for something that would be expected to have
a low correlation one would have to chose something like the net weight of
the industry's output against its price.
Andrew
>I realize I still owe Allin a response to his post on the shift-share index.
>I won't have the time in the next week to give a rigorous response, so let me
>just make a few points. He questions whether there is a difference between
>the expectations generated by the naive hypothesis and those generated by his
>(probabilistic) "labor theory of value." That he isn't sure strikes me as a
>mark against his theory. If it is unable to generate hypotheses that allow
>one to discriminate between it and the naive hypothesis, then the two are
>identical for practical purposes, and C-C's claims reduce to the obvious point
>that firms recoup their costs and get some random cut of surplus-value.
Paul
In a sense that is what the Farjoun and Machover theory of value/price amounts
to. What is remarkable is what powerful predictions they are able to make
from that basic proposition given a more sophisticated definition of what
a 'random' cut of surplus-value means.
Andrew
>
>However, C-C have also claimed that "values" are good predictors of prices.
>As generally understood, this implies two things.
>
>First, that they are "unbiased" predictors of prices: a sector's mean price
>will equal its value. The evidence we have indicates that this isn't true.
Paul
This is wrong. Values are unbiased predictors of prices in this sense. The price
value ratio, taken over all industries has a mean of 1.
>Enough evidence -- some coming from C-C themselves -- has been reported on
>this list to allow us to conclude that prices deviate systematically from
>values due to rent but also due to the fact that sectors with larger
>capital/labor ratios tend to have higher price/value ratios.
Paul
This is true, but that does not make values a biased price predictor.
To the extent that oil and oil related products sell above their values, other
commodities sell below their values to compensate, so the predictor remains
unbiased.
Andrew
>Paul Cockshott,
>for instance, reported that prices on average lie midway between values and
>production prices. So values are a biased predictor of market prices.
Paul
This is not a question of bias, but a question of whether, given the value
of a commodity, one can improve on ones prediction of its price by taking
the organic composition of capital that produced it into account. In general
the answer to this is yes.
However the converse is also true, if one took the price of production
of a commodity and then used knowledge of its value as additional
information, one would end up with a more accurate prediction of its
market price than one would obtain from the price of production alone.
What we have produced here is a new and I think hithertoo unsuspected
result. The orthodox position, both of the Sraffians and the defenders
of Marx's Vol 3 results on prices of production, would be that one could
gain no additional predictive accuracy by taking values into account.
What the empirical work shows is that
1. Prices of production and values are of approximately equal predictive
power in explaining actual prices.
2. Insofar as value/price transformation does take place it is only partial,
about
50%.
3. In general industries with a high organic composition earn lower
profit rates than those with low organic composition.
4. In general industries with high organic compsition sell their products
above their values, but not sufficiently above their values to
earn the average rate of profit.
These results have very considerable implications.
On the ideological level they cut the ground from under those economist
like Steadman who have argued that the labour theory of value is unnecessary
in the Occam sense, price of production being taken to explain everything.
They show labour values having a direct impact on prices in a way
that Steadmans theory can not account for.
This has great propaganda implications. If one can prove simply and
directly that labour creates value, then it is much easier to
expose exploitation than if one adopts the price of production theory,
which, at first sight, implies that capital creates value.
On the political level they have implications for the ability of
capitalism to develop the productive forces. If, as appears to be the
case, industries with high organic composition experience a lower rate
of profit, there will be a biase against investment in such industries.
Thus technologies which are both possible and labour saving will
not be exploited because of the high organic composition they may
entail.
An example of this I would submit is the failure of North American
capitalism to develop a modern railway system. Such systems with high
speed trains have only been developed where the railways are state
owned, In the US, the high capital costs of new tracks and rolling
stock have till now proven an insuperable obstacle.
> If, however, they
>do indeed mean to imply that the variance of prices around values is small, I
>think they -- and others working in this field, too, of course -- need to
>provide us with reasonable information about the dispersion.
Paul
We provide this information in our paper 'Does Marx need to Transform'.
> We need to know
>whether (a) the variance of prices is sizably less than would be expected to
>result from a random distribution of surplus-value and (b) the sample size is
>large enough to reject the hypothesis of random distribution (the naive
>hypothesis).
>
Paul
Andrew will have to be a bit more specific as to what he means by a random
distribution of surplus value before we can answer this question.
Paul Cockshott (wpc@cs.strath.ac.uk)