Dynamic value and natural price

From: Phil Dunn (pscumnud@DIRCON.CO.UK)
Date: Thu Oct 30 2003 - 13:49:28 EST

In my joining post I mentioned a project I was pursuing to liberate
the concept of natural price from the grip of price of production
theory.  What follows is a very compact account of work-in-progress.

The theoretical background involves a rejection of I. I. Rubin's
catena of labor-value-price.  The second link, value-price was
challenged long ago in Eldred and Hanlon's 1981 article
'Reconstructing Value-Form Analysis' (Capital and Class 13).  Rubin
argued that in the process of exchange sometimes very unequal
quantities of labor are socially equalized (Rubin Essays p. 154)".
Eldred and Hanlon argue that "fluctuations in price are to be
regarded as fluctuations in the commodity's magnitude of value" (p.
39).  This paper has been a thorn in my side for many years.
Belatedly, I have realized it is more than half right.  Of course,
the fluctuation in nominal money price might be due to a fluctuation
in the value of money and not a fluctuation in the value of the
produced commodity but, in the context, this is a minor point.
However, having capitulated,  I am going to mount a resistance and
defend the idea that, in some sense, value is immune from market
fluctuation.  As Aristotle often said: in one way it is and in
another way it isn't.

Rubin's first link must also be rejected.  Rubin denies the identity
of labor and value.  Here it is asserted.  I speak of embodied labor
value, labor-power value,  money labor value and even value creating
labor activity.  The philosophical idea behind this is Aristotle's
focal meaning, _pros hen legomena_.  Metaphysics GAMMA 2 1003a33:
_To de on legetai men pollarchos, alla pros hen kai mian tina phusin
kai ouch homonymos_   (that which _is_ may be so called in several
ways, but with reference to one thing, i.e. one particular nature,
not homonymously)  Labor is said to be in many ways but with
_reference_ to one thing, the focal meaning of labor as activity.

Background reading: 'Unity, Identity, and Explanation in Aristotle's
Metaphysics' (Scaltsas, Charles and Gill eds)
OUP 1994.  Especially the four articles on the potential and the actual.

The big danger in talking about a potential something-or-other is
blundering into having potential potentials.  Then it is but a short
step to potential potential potentials and infinite regress.  I am
going to sail very close to the wind on this.

Aristotle holds that actuality is prior to potentiality  in formula
(_logos_) and substance (_ousia_) (Metaphysics THETA 8 1049b10).  For
the present purpose this means we define a potential in terms of its
actuality.  The actualities I shall be concerned with are (1) the
activity (_energeia_) of value creation and (2) the recognition
(_entelecheia_) of value by money.  The potential for value creation
is labour-power.  This is a potential for activity, an A-potential.
The potential for recognition or R-potential applies to both
labor-power (potential labor-power value) and its activity, value
creating labor (potential value creating labor).

Thus recognized labor-power value is an A-potential and has a
R-potential.  Recognized value creating labor activity has both an
A-potential and an R-potential.

I associate these R-potentials with natural wages and natural prices
(or, more accurately, natural price markups).  These natural wages
and prices are not sums of money.  In a simple reproduction model
money prices and wages would be equal to natural prices and wages but
natural prices and wages come under intrinsic value.  A natural price
markup is a property of an individual valorization process.  A
natural wage is a property of an individual producer commodity (an
producer commodity is individuated by skill -- so all plumbers would
come under one individual producer commodity).

Adam Smith distinguishes between natural and market prices and wages.
I am dropping his ideas of natural rates of profit and rent.  Market
prices fluctuate and at any one time are dispersed about natural
prices.  To measure the natural price markup we use wage data.  We
use real wages -- the average hourly wage is equal to 1. Then we
recalculate each firm's wage bill using not the actual wage paid to
each worker, but the economy-wide average wage paid for each type of
skill.  Since these economy-wide averages will be statistically
independent, the recalculated real wage bill will be immunized
against market noise.  The greater the number of different skills
used by the firm the better this works.  This recalculated real wage
bill is an estimate of the natural price markup, the R-potential for
value creating labor activity.

The natural wage is a bit more complicated.  We use price data.  We
need to do a least squares fit:

minimize with respect to x the square of  (y - Mx)

where x is a vector of hourly natural real wage rates, y is a vector
of recognized labor activity, measured by money, expressed in hours
and M is a matrix.  The element M(f,t) gives the hours worked in firm
f  by workers of skill type t.  We need to have the number of firms
much greater than the number of skill types to get good immunization.

The potential price markups should be equal to wage bills
recalculated at natural wage rates.

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