If you are wanting to test whether the rate of profit of individual
industries
oscillates around the mean rate of profit that would be true. But that is
not what we want to test. We want to see why labour values consistently
perform as well as production prices in cross sectional studies for
predicting
market prices. One possible reason would be if the basic assumption of
production price theory - that sectoral profit rates are statistically
independent of
organic composition was wrong. We find that it appears to be wrong.
>As for the usefulness of the i/o experiments for the verification of the
>labour theory of value I think they are not affected by the regulating
>conditions of production, since the market prices that we want to
>predict are short of average (market) prices and I think that one can
>use the methods and techniques that have been used (with success) so
>far.
I am satisfied with the methods for testing the labour theory of value using
i/o tables, but these raised the subsequent question that I address above -
why do production prices not predict market prices better than labour
values?
Unless they do, we are forced on grounds of theoretical parsimony to
dispense with production price theory ( it required more information input
to yield a given information output than the LTV).
>
>As for the negative type of a relation between the occ (however
>measured) and the rate of profit (or profit margin?) perhaps is
>justified on identity grounds, for example:
>
> r=s/k=(s/v)/(k/v) or r=(s/y)/(k/y)
>
>r is directly related
>
> to the rate of surplus value and to the profit margin on sales (s/y),
>and
>
>r is inversely related to the
>
> occ and to the capital-output ratio.
>
The relationship you posit is valid subject to the assumption that
prices are proportional to labour values, and thus the ratio (s/y) is
independent of (k/y). However this is just what is denied by
production price theory, which asserts that there will be a sufficient
positive correlation between (s/y) and (k/y) to offset the inverse
relationship in the simple formula.
For the UK, we discover that whilst (s/y) is positively correlated
with (k/y) the positive correlation is insufficient to offset the negative
relationship implied by your formula, and leads to a net negative
relationship between s/k and k/y.
I have not done the relevant tests of this for the USA.
>I would be very curious to see the first type (direct) relation on a
>graph.
>
>
>Lefteris Tsoulfidis
>