Any comments on this line of reasoning would be gratefully received.
I've just been pouring over the labour reduction literature -
Himmelweit, Rosdolsky, Rubin, Chai-on Lee etc. - where I think it can be
justified if wages are to provide the basis for analysis.
M.thanks.
Andrew Trigg
> -----Original Message-----
> From: David Laibman [SMTP:DLaibman@brooklyn.cuny.edu]
> Sent: 21 February 1999 21:05
> To: OPE list
> Subject: [OPE-L:458] Value-price correlations
>
> (Sorry! I have forgotten the thread name.)
>
> Dear OPEople,
>
> I have been reading the discussion between Andrew, Allin, and
> Alejandro
> on Andrew's new work showing absence of correlation between labor
> values and
> observed money prices. I am technologically challenged; the only way
> I
> could study these posts carefully would be to print them all, but then
> after
> a few weeks I would not have a working printer left, and I can't
> afford to
> replace toner/drum, etc., at the moment. So I must work entirely from
>
> memory. I also have not personally done this sort of empirical study,
> so my
> contribution to the discussion (in the spirit of Jerry's encouragement
> of
> participation) is truly more questions than answers.
>
> Surprise! For once, I find myself agreeing with Andrew and Alan!
> I
> have always been suspicious of the labor values derived from I-O data,
> and of
> the high correlation coefficients between them and observed prices.
> With
> Andrew, I see no reason in theory why we should expect to find a high
> correlation. Alan's point, further studied by Andrew, that a high
> correlation would emerge simply from the fact that absolute (rather
> than
> unit) values and prices are both highly correlated with the size of
> industries seems on the mark. Alejandro's point about the general
> reliability of the data is also quite important. The Shaikh-Ochoa
> matrix
> inversion procedure produces *not* unit values (direct plus indirect
> labor
> time per unit of output), but rather: direct plus indirect labor time
> per
> dollar (or other money unit) value of sales. Without obtaining a
> separate
> series proxying physical output by sector, the coefficients themselves
> are
> distorted (I suspect), except along the principal diagonal. This
> alone, and
> independently of the scale effect, may explain the high correlations
> found in
> those studies and related ones. There is also the matter of
> heterogeneous
> labor, and I doubt if there is an agreed-upon method of dealing with
> this
> complication.
>
> Even 80-sector I-O data are highly aggregated. Full
> disaggregation,
> were it achievable, would most likely reveal wider dispersion in
> compositions
> of capital. If it were possible to measure unit labor values, unit
> production prices and market prices at a moment in time, one would
> want to
> know the extent of deviation among all three measures, and I would
> expect
> each deviation (production price from value; market price from
> production
> price) to be significant. Even here, however, there is the question:
> how
> large is significant? If labor values turned out to "explain" 93% of
> observed prices, is that a lot or a little? I think we can have
> significant
> difference among the measures, and still retain Allin's insight that
> the
> price difference between a peanut and a computer (or, as Joan Robinson
> once
> put it, between an automobile and a packet of pins) is most centrally
> explained by the different quantities of labor time these commodities
> contain.
>
> I don't know enough about the statistical measures to weigh in on
>
> Allin's critique of Andrew's proposal for eliminating the scale
> effect. I
> would only note that *if* Allin's critique is correct, that would only
> mean
> that some other way of removing that spurious source of correlation
> between
> "values" and "prices" would have to be found.
>
> Finally, a question for Andrew. I do not want to go over the
> whole TSS
> terrain again, but the question of empirical measurement of values
> (even if
> only hypothetical) raises one issue I can't resolve. You may identify
> *value
> added* in any period of time with the current labor performed in that
> period
> (leave the heterogeneity problem to one side). But to estimate
> *indirect
> labor time* and gross value, *some* unit value must be applied to
> consumed
> means of production. Even if we are time-sensitive and want to make
> this
> *yesterday's* unit value, the same problem arises when we try to
> calculate
> *that* one, and so on in infinite regress. We can't use observed
> money
> prices of inputs; this would compromise the whole project, since the
> idea is
> to compare values with precisely the observed price magitudes (and, if
> Andrew
> is correct, find them essentially uncorrelated). Since the TSS
> approach
> insists on different market values at different dates, it is not clear
> how
> one could calculate unit values at a moment of time on these
> assumptions,
> even in principle.
>
> Cheers,
>
> david
>
> David Laibman
>
>
>
>
>
>