[OPE-L:5606] Re: Re: explanatory power and need for price theory

From: Paul Cockshott (paul@cockshott.com)
Date: Thu May 17 2001 - 05:36:24 EDT

On Wed, 16 May 2001, you wrote:
> >Re: Fred Moseley [5569], Jerry Levy [5582] and Geert Reuten [5583]:
> Jerry: 
> >>Fred argues [[5569]] that his perspective is preferable to
> >>VFT  "because it has greater explanatory power."
> >>How are we to judge, though, which theory has
> >>greater explanatory power?
> Fred set's out this argument more fully in a 1997 piece (on his website).
> In my view, the sort of axiomatic logic that Moseley advocates there misses
> the role of the price system in allocating labour to different
> technical-material labour processes, as it misses the co-constitution of
> value and price that makes the form-determined (capitalist) economy what it
> *essentially* is.  Further, his claim to greater explanatory power for LET
> seems to be based on a misunderstanding of the methodology underlying the
> value-form argument.  As is usual in these debates, methodological and
> substantive issues interact.

These are valid points, and there was an extensive debate on 
this in the 60s under the rubric of reverse re-switching, where
Sraffians showed that under certain conditions the optimal
technology to chose depended upon prices determined by
the rate of profit rather than soley upon labour contents and
physical productivity. However for this to occur rather special
conditions are required of the input/output matrix. A relevant
question is whether such conditions are in practice met by
real economies. The work of Shaik and his collaborators indicates
very strongly that this is not the case, that reverse re-switching
does not occur in real economies. 

Shaik's work indicates that choices of technology based on
market prices and choices based on embodied labour would
be essentially the same.

> The crux of Moseley's argument (circa 1997) is that an 'adequate' theory of
> the magnitude of value added must meet certain logical requirements for
> independent determination of variables within an equation.  The assumption
> is that theories (eg R&W's VFT) that do not meet the axiomatic requirements
> of analytical determination are incapable of determining the magnitude of
> surplus value.  He then follows up this criticism by saying that Marx's LET
> is a 'plausible hypothesis, the validity of which should be evaluated on
> the basis of the extent to which it can explain the important phenomena of
> capitalism' (p.1).  The reduction coefficients (required by Fred's own
> theory, and criticised by Reuten and Williams) can he says be assumed -
> 'taken as given' - since a 'scientific theory may involve the postualtion
> of unobservable entities' (p.3).

On reduction coefficients one should distinguish two types:

1. The reduction of individual labour productivities to the mean within
    a given trade. This can be precisely determined by work/study
    methods and is not thus an unobservable.

2. The comparision of labours in different trades. It is questionable whether
    from the standpoint of the LTV one has to perform any reduction here,
    other than the degenerate unitary reduction. One should in principle
    distinguish between the abstract labour content of a product and
    the wage content of the product. Factors relating to gender, class and
    custom cause wage rates to vary independently of the abstract labour

> In taking the stand he does, Fred passes up the opportunity to develop any
> understanding of VFT.  For VFT, any attempt to establish a relationship
> between independent and dependent variables is misplaced since what is
> fundamental about capitalism is that the variables of interest to Fred are
> inextricably interconnected - it is their unity that makes capitalism what
> it essentially is.  i.e. in capitalism value and price are mutually
> constituted by exchange, the only process whereby the private,
> concrete-labour of individuals becomes validated as social, abstract
> labour.  Hence there is no sense in which abstract-labour and value are
> independent of their monetary expression. On the contrary, abstract-labour
> is labour-time measured in money, where the money productivity of labour is
> the dominant operator.

Again I will reiterate the point I made in a previous article, that this
standpoint not only prevents one from carrying out an analysis of 
socialist and mixed economies - it is positively counter revolutionary
since it implies that rational economic calculation requires money and
the market. This is the economics of Hayek not Owen, Marx or Engels.

> >From this perspective, an axiomatic logic is wholly inappropriate and lacks
> explanatory power as a theory of social value.  Given the unity of value
> and price, Moseley's (1997) question must be rephrased: can any theory
> predict prices on the basis of labour-time?  By itself labour - as measured
> in time - is not homogenous (i.e. a reductive abstraction) and can be made
> so only by assuming away a real problem, by definition (as Marx, in fact,
> did).  Moreover, labour-time is not constant since labour-productivity
> changes over time.  Since there is no adequate measure of physical
> productivity of labour, there is also no adequate measure of socially
> necessary labour time.  How then does LET theory explain prices and profits
> as Moseley demands?  Only by assuming them away - taking them as 'given'.

No, it computes the labour embodied in the products and then correlates
these with the market prices. The hypothesis is that variations in labour
embodied will explain most of the variations in market prices. This turns
out to be the case. LTV most certainly does not take prices as givens,
it predicts that they will vary in line with embodied labour.

Paul Cockshott, University of Glasgow, Glasgow, Scotland
0141 330 3125  mobile:07946 476966

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