[OPE-L:8166] Re: Testing Marx or why the law of value holds

From: Michael Eldred (artefact@t-online.de)
Date: Thu Dec 12 2002 - 16:24:58 EST

Cologne 12-Dec-2002

Paul Cockshott clyder@gn.apc.org schrieb  Mon, 9 Dec 2002 16:04:46 +0000:

> Quoting Michael Eldred <artefact@t-online.de>:
> > > PC: Gerry paraphrases this as wages being 'stable', but this
> > > is not quite what I mean. What I am saying is that ratio
> > > of aggregate wages to net national product is very close
> > > to the ratio of necessary labour time to total labour time,
> > > and that this in conjunction with points a) and b) constrains
> > > prices to follow values.
> >
> > ME Is this total necessary labour time determined independently by measuring
> > minutes or through the monetary wage-form?
> PC At this stage I am not proposing empirical techniques to perform measures
> I am discussing underlying causal mechanisms.
> > >PC  Why is the ratio of wages to national product close to
> > > the ratio of necessary to total labour time?
> > >
> > > Basically because of regression to the mean.
> >
> >ME  I.e. a statistical reason?
> PC Yes, there is no reason why we should be shy of proposing statistical
> causal mechanisms, the use of such mechanisms is quite general in
> science.

What sort of science? Here we are dealing with the possibility of a social science
of capitalist society at all. The labour theory of value is a test case because the
concept of value is a concept of sociation through commodity exchange. I.e. the
value concept is the all-decisive first concept of society and needs to be adequate
to its phenomenon.

There is no such thing as "statistical causal mechanisms" -- there are only
correlations obtained in different sets of data for which theoretical
interpretations are sought or conversely, theoretical interpretations are tested by
predicting certain correlations in empirical data. Such theoretical interpretations
must provide persuasive concepts for the phenomena being investigated, in this
case, the production of various sectors of a capitalist economy and the sale of the
product on the market.

The sense of "cause" is also ambiguous. It can mean, at least, causa efficiens or
causa finalis (as in cybernetic feedback loops).

> > > PC Given the net national product in Euro and the total number of
> > > hours worked we can deduce the number of minutes
> > > necessary to produce one Euro of national income, call this M.
> > >
> > > If we multiply the price of any commodity i  by this number
> > > we get its current exchange value E[i] in terms of national labour.
> > > For any given commodity this exchange value will be
> > > either above or below its actual labour content L[i], according
> > > to whether it is selling above or below value. We know that
> > > E[i]/L[i] must have a mean value of 1, since commodities selling
> > > above and below value must cancel out. Let the standard
> > > deviation of E[i]/L[i] be S.
> > >
> > > The necessary labour time is given by the labour content of
> > > the commodities consumed by workers - the labour content
> > > of the wage bundle as the neo-ricardians put it.
> >
> >ME  Isn't this "labour content of the wage bundle" obtained by multiplying total
> > number of minutes worked by the ratio of wages to selling prices?
> PC No, at this stage I am not discussing the techniques used to extract
> the data from published statistics. I am saying that at a given point
> in time there is a particular distribution of labour between branches
> of activity, and that a certain portion of the product is destined for
> workers consumption. Given the assumption of instantaneously linear
> production functions the labour required to produce the bundle of
> goods is well defined - this is standard Sraffa, Morishima stuff.

What is "destined for workers consumption" is only a function of what wages, i.e. a
certain amount of money, can buy. Only through the wage-form of value is the
"bundle of goods" defined, not simply through input-output matrices. I.e. there is
no "certain portion of the product ... destined for
workers consumption." This portion only turns out to be what it is on the market
when workers spend their wages.

> ME > Equivalently,
> > W x M = t(W), where W is money wages paid, M is your "number of minutes
> > necessary to produce one Euro of national income" and t(W) the number of
> > minutes labour time represented by money wages W? Then again, a temporal
> > quantity (labour content of the wage bundle) is obtained by projecting a
> > ratio of two monetary values onto total labour-time worked.
> PC No the two are not identical, WxM is a random variable about whose properties
> I am about to argue below. I will argue that this random variable has
> a mean given by the necessary labour time, and a small standard deviation.

> > >PC  Now if workers
> > > just lived on a single commodity corn, as occurs in some
> > > neo-ricardian models then expected the standard deviation of wages
> > > relative to necessary labour content would also be S, but
> > > in fact the wage bundle contains thousands of different
> > > commodities. Each of these commodities has a selling price
> > > that is either above or below value, but by the law of large
> > > numbers the standard deviation of the wage W times M
> > > from the actual labour content of the wage bundle will
> > > be much smaller than S.
> > >
> > > For instance in a simulation run with the individual commodities
> > > selling up to 20% above or below values I found that
> > > for a wage bundle of 10 commodities I got a 3.5% deviation
> > > of price from value, for 100 commodities a 1.8% deviation,
> > > for 200 commodities a 1% deviation and for 1000 commodities
> > > a 0.3% deviation.
> > >
> > > Thus in a real economy with a big wage bundle we can assume
> > > that the wage bill multiplied by the labour equivalent of money
> > > will be very close to the actual necessary labour time.
> > >
> > > Now consider all industries. Each of these has a selling
> > > price in labour hours made up of a wages component which
> > > is almost exactly equal to the V in labour time used by Marx
> > > in volume I of capital, plus a component C for constant capital,
> > > plus some random profit - determined by market conditions.
> >
> >ME  Interesting that you say that profit is random, determined by market
> > conditions (with which I agree, random meaning 'groundless', sine ratio).
> PC According to Kolgomorov it means that the formula for generating it
> is longer than the random sequence itself.

If profit is random, then so are the selling prices of the commodities. But these
selling prices are supposed to be determined by the LTV. So the LTV, on your
interpretation, is a stochastic theory.

> > ME But according to the LTV and its corollary, the theory of surplus value,
> profit is only the
> > monetary form of surplus labour, a determinate temporal quantity, and
> > therefore by no means random.
> PC No, individual profits are predicted to be random variables with surplus
> value as their attractor.

By "attractor" do you mean the mean of a normal distribution?

> > > PC For most industries C will again be made up of a large
> > > bundle of commodities and as such will, by the same argument
> > > as applied to wages tend to be purchased for a price very
> > > close to its value. The exception will be a few industries that
> > > process a single raw material - these will have a C which in
> > > money terms will deviate more from value than is normal.
> > >
> > > Empirically it is a fact that for most industries labour is the
> > > major cost. We know that the cost of labour WM is very close
> > > to Marx's v or necessary labour time, and also that for
> > > most industries CM will also be close to Marx's c.
> > > That leaves only profit as a random element causing
> > > prices to deviate from values.
> > >
> > > But we have reason to believe that there will be a constraint
> > > on the dispersion of profits.
> >
> >ME  Doesn't this constraint amount to the (realistic) assumption that on the
> > whole
> > capital does indeed manage to get through its cycle without suffering loss?
> > I.e. as long as commodity values realized on the market are sufficient to
> > cover
> > (mainly wage) costs plus some profit, the capital in question survives.
> > Loss-making capitals _are_ not, they do not exist in their concept, and
> > empirically too, on the whole (_katholou_)  they conveniently cease to
> > exist.
> PC Yes this is exactly it.

Then labour content does not causally determine selling prices, but selling prices
determine post factum to what extent performed labour has been recognized as value.

Don't the national data you analyzed come only from capitalist companies that have
managed to survive the year in question? If that is so, then only _their_
labourers' labour will have gained value-form recognition in selling prices.

> > > PC The profit of any individual firm will be influenced by a whole
> > > host of factors - a collection of random un-correlated pressures.
> > > We would therefore expect firms' markups over prime costs
> > > to be normally distributed, as this is characteristic of things
> > > which are the result of a sum of random pressures.
> > > We know the mean of this random distribution - it is
> > > given by the mean markup ratio or rate of profit on turnover.
> > > We would expect this to be of the order of 10 to 20% for typical
> > > economies. We also know that if the mean is say 0.15, that very
> > > little of distribution - say less than 10% of all firms will be
> > > making a loss in an average year - since firms don't survive
> > > long once they start making a loss.
> >
> > ME What happens to the labour embodied in those commodity products of capitals
> > which fail to make a profit? Such labour has not achieved social recognition
> > in the value-form sufficient for the movement of value as capital to continue.
> > Does this portion of total concretely performed labour drop out of
> > consideration altogether?
> PC You can not say in general. Some will represent products that have
> been sold below value to other firms whose profit will rise in compensation.
> Another portion will represent real losses in material - for example
> due to fire damage, storm etc. Another portion will represent losses
> due to over-production relative to current market conditions. One can
> not really discuss the magnitude of this component without looking at
> macro-economic factors relating to the business cycle which are being
> ignored at this level of asbstraction.

But then (apart from material losses due to fire, storm, etc.) it is the market
conditions, i.e. prices attained on the market, which decide post factum what
labour has been given value-form recognition and to what extent.

> > >PC  Thus we have the mean
> > > of the normal distribution say 0.15, and we know that less than
> > > 10% of the distribution falls below 0.0. This is enough to
> > > fully constrain the standard deviation of the distribution
> > > and in practice to make it fairly narrow. This is because
> > > a normal distribution has only two free variables, so two
> > > constraints are enough to characterise it.
> >
> > ME The consideration of profit in the above paragraph seems to be totally
> > independent of any labour theory of value and its corollary, the theory of
> > surplus value. Indeed, it reverts to production cost factor composition of
> > commodity prices plus a profit mark-up -- all in terms of monetary
> > quantities
> > (with which I agree, since the movement of money as capital is tautologous).
> PC Yes, but what I want to show is that as a consequence of making
> these assumptions one can deduce that the labour theory of value
> will hold as a regulator of prices. I do not therefore assume it
> at the outset.

It seems that, on the contrary, it is the realization of profit or not which
decides which performed labour has value.

> > ME The statistical approach intends to test whether there is, on the whole,
> such
> > a causal relation, but, as far as I can see, it is forced to make conceptual
> > assumptions (see above and previous postings) which beg the question of
> > whether performed concrete labour 'creates' monetary value.
> PC I am not saying that labour creates monetary value, what I am saying is
> that labour value regulates prices.

ME That seems to be only a fine point. Why not rather entertain the conception that
selling prices regulate labour value in a kind of feedback loop? (Diane Elson
suggested a "value theory of labour" instead of a labour theory of value many years
ago.) That fits better with the observed phenomenon of the random distribution of
prices and profits. Then monetary value would regulate socially necessary labour
post factum in a feedback loop which continually corrects the production undertaken
by capitalist enterprises. The performed labour is then valued by the selling
price, and the condition of survival of capital is that the value recognition of
performed labour in the selling prices must be at least enough to cover (mainly
wage) costs.

The dogma that labour-time is the efficient causal determinant of labour value
which in turn determines selling price (to a statistically significant level) would
fall by the wayside.

> > >PC  It will of course, be understood by those skilled in the
> > > craft, that the figures 10% and 20% above are rough
> > > indicators for the sake of argument.
> > >
> > > Thus we have a results that
> > > 1.  the standard deviation of the rate of profit on turnover
> > >      has to be small,
> > > 2. the price of each product is made up of three components
> > >     wages, constant capital and this random profit markup
> > > 3. money wages can be expected to be very highly correlated
> > >     with necessary labour
> > > 4. constant capital in money terms will also be strongly
> > >     correlated with constant capital in terms of labour albeit
> > >     not so strongly as wages are to necessary labour
> > > 5. thus prices are made up of two components that
> > >     are very close to labour values, plus a random markup whose
> > >     dispersion is narrow
> > >
> > > It follows that prices are constrained to be close to labour
> > > values.
> >
> >ME  This constraint seems to be a result of i) how necessary labour time is
> > measured (i.e. through the monetary forms)
> PC No the argument does not depend on this - see qualification earlier
> > ME and ii) statistical regularities
> > emerging from large numbers (i.e. masses of data) and iii) that performed
> > concrete labour which does not 'make the grade', i.e. prove itself as
> > socially recognized value sufficient to generate profit, evaporates.
> PC I dont think that one has to make an assumption as strong as your
> point iii.

Then let us say, it either evaporates entirely or is recognized by the value-forms
only to a deficient degree which does not allow the capital concerned to survive.
It is the survival attempt that regulates the sorting process for which labour has
produced how much value.

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