[OPE-L:6415] Prices, technical choice and values

From: Gil Skillman (gskillman@MAIL.WESLEYAN.EDU)
Date: Tue Jan 22 2002 - 12:34:50 EST

Hello, Paul.  You write in 6410:

>Condition for prices to influence values independently of technologies
>is for the i/o matrix to be such that reverse reswitching will occur.
>Shaik and co workers have shown that empirically this does not occur.

First, I'm not talking about a scenario in which "prices influence values
independently of technologies."  I'm referring to a scenario in which
commodity price variations affect labor values *because* they influence
technical choices.  

Example:  production of a constant capital good that requires A< 1 units of
that same capital good and L units of direct labor for each unit of output.
 Let there be two techniques (A1, L1) and (A2, L2) with A1 > A2 and L2 > L1
such that L1/(1-A1) does not equal L2/(1-A2).  Let the opportunity cost of
constant capital be given by the interest rate r and the wage rate be given
by w.  Then cost-minimizing capitalists will choose technique 1 so long as
r/w < (L2-L1)/(A1-A2) and choose technique 2 if the inequality is reversed.
 Note that there is no basis for reswitching and that realized labor values
of the constant capital good are determined by relative input prices.

But second, suppose that your point was apropos.  Shaik et al's empirical
result in no way guarantees that the indicated result would *always* hold;
we might therefore be a set of technical innovations away from the reverse
outcome, and my analytical point would still be relevant.    

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