[OPE-L:2518] Re: theory of surplus and theory of prices

Duncan K Foley (dkf2@columbia.edu)
Thu, 13 Jun 1996 11:35:46 -0700 (PDT)

[ show plain text ]

On Thu, 13 Jun 1996, Allin Cottrell wrote:
(among other things)
> I'm going offline for 10 days or so, but a brief response to Fred
> before doing so.
> My question is: what is the status of the "assumption" that total money
> value added is proportional to total current labour? Presumably the
> idea of "proportionality" must mean that if we compare the economy in
> various different periods, we find a common ratio of money value
> added to labour performed. Now this is obviously empirically false,
> and presumably to save the assumption we need to add in the
> cetris paribus clause, "if there is no change in the value of money".
> But then the assumption becomes, as Duncan puts it, a "stipulation".
> What we have, it seems to me, is not any sort of proof or demonstration
> that surplus labour-time is the source of profit, but rather a
> proposition of the form, "let us consider the consequences of supposing
> that surplus labour-time is the source of profit."

This is pretty close to my position. In favor of it I'd point out that
this is the usual way that "core" propositions in theories come out to
confront empirical evidence. One considers the consequences, and evaluates
their predictive and explanatory value. If this value is high, that tends
to make us believe the theory.

> If I understand
> him right, Duncan may reckon that that is all we are entitled to
> propose. On the other hand, I suspect that Fred (and others) are
> in search of a "stronger" formulation. If relative prices are
> (to a first approximation) proportional to labour-contents, then we
> can justify a stronger formulation -- and I take this to be
> Paul's point.

There are a few other areas besides relative price studies and
competition, such as theories of money and finance, where these issues
also become important.