Justin and the LTV

Justin Schwartz jschwart at freenet.columbus.oh.us
Thu Oct 27 22:39:17 MDT 1994


On 27 Oct 1994, Paul Cockshott wrote:

> Justin suggests that Marx did not believe in the labour theory of
> value and that vols 2 and 3 of capital are a critique of it.
> Opinions can obviously differ on this, but the question for science
> is not what Marx thought of it, but whether it actually holds in
> reality.

Right enough.

>
> There is now a growing body of empirical work by Shaik, Petrovic,
> Ochoa, Valle, Cottrell et al to indicate that the simple form
> of the labour theory of value as given by Ricardo in the Principles
> and by Marx in Vol 1 of capital or in Wages Prices and Profits

Aaak. Marx's theory in C1 is not the same as Ricardo's. So which is it? To
refer to the Moseley stuff about holism in this list, Marx's theory is an
aggregate theory or a theory of aggregate price, insofar as it's price
theory, and Ricardo's an individualistic theory. They're not only not the
same, they're mutually inconsistent.

> is what actually governs prices in capitalist economies.

This cannot be true.

> The empirical data on which this has been confirmed covers the
> economies of the US, Jugoslavia, Italy, Mexico and the UK.
> All researchers find that the simple labour theory of value
> provides as good if not a better predictor of market prices
> than does the theory of prices of production.

Well, being a predictor is one thing. It's a big leap to saying that the
LTV in some version actually governs prices.

The reason it cannot be the case that it does is that the theory in Marx
at any rate is logically inconsistent, given a handful of additional true
premises about the economy. So if the Shaikh, etc. results are right and
some simple LTV is a good predictor, we have the interesting case of a
theory we know a priori is false doing useful prognostication. Of course
that is not unusual in economics. The same holds for neoclassical
economics.  We know it is false, but it is a powerful predictor. I wonder
if Shaikh, et al. compared their LTV model with NCE models as well as PP
models.

Incidentally if I am being cryptic about the logical problem, and I am,
it's wilful. If Paul can pronounce ex cathedra that some sort of
ill-defined LTV theory has been confirmed by data we can't examine arrived
at by means which require close attention, why should I explain myself
either? But in fact the problem is obvious, evident, right there on the
surface in Marx, and well known. It's not the only one either.

> In particular the theory of prices of production predicts that
> the rate of profit in an industry will be uncorellated with
> its organic composition. In practice it is found that the
> rate of profit is negatively correlated as predicted by the
> simple labour theory of value.

Before we can even begin to assess this claim--quite apart from deciding
whether it supports an incoherent theory--we have to know how the rate of
profit is calculated. This is EXCEEDINGLY difficult, vexed beyond reason.
Personally I think that if the method is that used by Shaikh in his
falling rate of profit stuff, it is unsound.

 The theory of prices of production
> whether Marx's version or the modified versions put forward by
> Marx's critics is certainly unsustainable in the light of recent
> research. It appears that a simple Ricardian theory of value is
> at least as good if not better.

So it's a Ricardan theory and not a Marxist one. And a simple Ricardan
theory at that: forget your Sraffan sophistications, let's go back to the
labor value embodied in each individual commodity--not each kind, but each
particular one. Pardon me if I remain skeptical.

 What remains an open scientific
> question is why the law of value holds.

Note on this account that it is not Marx's LV which is alleged to hold.
>
> The most promising theoretical work in this area is that of
> Farjoun and Machover who were the only theoreticians to have
> anticipated these empirical findings.
>
> --------------------------------------------------------------------
> Paul Cockshott , 		
> Phone: 041 637 2927		wpc at clyder.gn.apc.org
> 				wpc at cs.strath.ac.uk





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