[OPE-L:8099] re: marx and labour theory of value

From: Paul Cockshott (wpc@dcs.gla.ac.uk)
Date: Tue Dec 03 2002 - 09:05:20 EST

Michael wrote

I presume that "labour values" are something resembling a monetary price? If so,
then it is hard to see what such an empirical study has to do with the so-called
labour theory of value. It is stuck in the vicious circularity which Marx
discusses in the first chapter of Kapital (?value [of a commodity product of the
most complicated labour] equalizes it [the commodity] with the product of simple
labour? (Eine Ware mag das Produkt der kompliziertesten Arbeit sein, ihr Wert
setzt sie dem Produkt einfacher Arbeit gleich und stellt daher selbst nur ein
bestimmtes Quantum einfacher Arbeit dar. MEW23:59).

Marx asserts that _time_ (under a certain qualification) measures the magnitude of
value. What is being done here is measuring labour _through_ the value-form.
Not necessarily so there are two methods one can use to work back to
labour values from the i/o tables.
One is to invert the table to objtain vertically integrated labour coefficients,
this then expresses sectoral outputs in terms of the direct and indirect
wages that went into their production eliminating profit and rent. This
can be criticised for taking wages as a surrogate for labour itself.

An alternative procedure converts the wage bill of each industry to
a quantity of hours by dividing through by the average hourly wage
in that industry. One then obtains a row in the i/o matrix that is
in terms of hours. One can then apply the recursive adding up
method that Marx uses in Capital to get the labour content in hours
of the outputs of all industries, this gives us a value vector in hours which
you can compare with the vector of final selling prices.

The R^2 that one obtains from the latter method for the UK is about 0.95 as against
about 0.97 for the former method. The former method is equivalent to
making an implicit assumption that the ratio between different wage
rates is the same as the ratio between their value creating powers -
i.e., with complex labour having both a higher value creating power
and a higher wage rate.

> I think this is unfair on the empirical researchers. Until Shaik did his
> investigations I don't think anyone expected to get such a close fit
> between values and prices. His results certainly did not fit in with
> anyones initial preconceptions. They are so counter to the preconceptions
> of economists that their implications are only gradually being realised.
> It took considerable courage on his part to question the preconceptions
> that abounded about the labour theory of value being empirically
> invalid and ask : lets see if it really is invalid?
Michael asks

How does one compare "values and prices"?
Paul replies
There are a number of different metrics used by researchers, one can
correlate the two vectors, one can measure the angle between them,
one can compute their normalised inner product.

The important thing to recognise is that one has a vector of prices
and a vector of values for the same set of commodities, one can then
apply any of a number of well known techniques to compare the similiarity
of these vectors.

To take just a minor point: How does one
take into account factors such as fertility of the soil (for agricultural
products) or the differences between monetary currencies in different economies?

This is a good question. Remember that we are dealing with
the aggregate national product of whole industries.
Differences of fertility thus do not affect the figures directly
but there is an indirect effect insofar as the profits of some
industries incorporate a significant portion of rent. In the UK
case this is most significant for the crude oil industry. One finds
that its market price is significantly higher than would be expected
on the basis of its embodied labour content. The same applies
to the petroleum refining industry. In these cases the deviation
of prices from embodied labour content is in line with what
one would expect from the Ricardian theory of differential rent.

The differences in currencies between different economies are
dealt with as follows.

There is a row vector in the table indicating the exports of each
industry, and a column vector indicating the imports. Were trade
in balance one could simply take the total domestic labour content of the
exports and divide it pro rata among the imports used by each
industry - since according to Smith, domestic labour is the real
cost of imports to a country. Since trade is not typically in balance
one evaluates the mean domestic labour content per Pound
Sterling exported in the UK case for British exports, and then
imputes this to each Pound Sterling spent by each industry
on its imports.

> It is my experience of doing empirical investigations that they almost
> always teach you something new that would not have occured to you had
> you not gone to the trouble of doing them.

My objection is that the preconceptions (i.e. one's concepts) determine in advance
what is to be empirically measured.
This is obviously the case, in that if one had no concepts one would not
know what one wants to measure. But ones preconceptions do not
determine the results of what you measure.
In the 70s I did a long term study of the organic composition of
capital in the UK. My marxian preconceptions were what
made me chose to measure it, but they did not determine the
results which revealed some periods when organic composition
was rising and other long periods when it was falling.

When one gets a result like that which one has not expected
you are prompted to ask new questions about what has
happened and is currently happening.
> > The phenomenon and experience of exchange -- and thus also its concept -- is
> > richer than you think.
> I am sure that this is true, but unless you investigate actual price data
> you are left speculating about the properties of prices.

That is assuming already that the value theory is a theory of prices. The LTV
asserts some sort of proportionality between quantities of labour measured in time
and money prices of commodities produced by that labour. These quanitities of
labour are said to be "socially necessary" and it is admitted (see Marx-quote
above) that there are differences between simple and complicated labour with
regard to their value-creating potential.

What is the empirical access to a phenomenon such as "socially necessary"? How
does one distinguish between simple and complicated labour without passing through
the monetary dimension?
In principle and given access to the reasearch resources one can
compute labour budgets like Strumlin in the USSR, but for
western economies today one has to use the I/O tables to compute
what is necessary - this accurately reflects what is necessary on
average for an industry. One is not here trying to assess the
necessity of an individuals labour and whether one individual
is spending more time than necessary on a task. To judge that
one must have recourse to work study methods.

This is what I meant by the reference to Galileo and his preconceptions. Galileo
writes in his Discorsi of 1638:

"Mobile super planum horizontale projectum mente concipio omni seculso
impedimento, jam constat ex his, quae fusius alibi dicat sunt, illius motum
aequabilem et perpetuum super ipso plano futurum esse, si planum in infinitum

"I conceive in my mind a body thrown onto a horizontal plane and every impediment
excluded; it follows from what is said elsewhere cumbersomely that the motion of
the body over this plane would be uniform and perpetual if the plane extended into

This is what I mean by Galileo's "preconceptions" -- he conceives his experiment
of balls rolling down an inclined plane and up another plane on the basis of what
he conceives roughly as Newton's first law of motion. The preconception dictates
the experiment. The experiment works only within the preconceptions of what a
physical body is and how motion is to be conceived. This preconception can be
called the mathematical casting of the physical world, a metaphysical casting of
beings in their being prior to any possible experiment.

With regard to the so-called labour theory of value, which asserts a
proportionality between quantities of "socially necessary labour time" and
quantitative prices, the great difficulty lies in determining the _social_
dimension. For, the only _sociation_ of labours (i.e. their social being) in a
commodity-producing economy takes place through the market, i.e. through the
monetary dimension itself. This results in the circularity which you yourself seem
to confirm.
I dont agree with this. The I/O table was an invention deriving from the
method of material balances adopted by Gosplan. This in turn derived from
the real need that any socialist economy has to determine the socially necessary
labour time required for projects. The i/o tables prepared by western
states are deficient in that they contain limited data on disagregated labour
types used, but they already encapsulate the aspect of social necessity by
considering the labour of the entire society at once, much as Engels hypothesised
would be done in a socialist economy.


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