[OPE-L:3778] Predicting market prices

aramos@aramos.b (aramos@aramos.bo)
Wed, 4 Dec 1996 14:51:00 -0800 (PST)

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I would wish to "mix"/"contaminate" two threads:
"Predicting market prices" and "Generators and attractors"

1. I dont want to discuss on Paul's project "externally" as
done by Jerry and Andrew, that is, invoking information
problems: "lack of information" or the fact, as Andrew
says, that the "vertically integrated labor coefficients
[VILC]" (Tugan's "values") actually depend on prices. All
this, of course, is true but cannot prevent us to consider
the problem in theoretical terms.

2. Paul's theoretical project is to predict market prices.
How could be set this in terms of the theory presented in

First of all, when "market prices" are analized it is
obvious that in a lot of cases we have "rents". This factor
should be not explained as a simple "random" factor,
because involves "structural" conditions of the economy. So
there is a fraction of the economy in which "market prices"
are not competitive at all.

Secondly, let us look at the remaining "competitive"
fraction. In this case the "centre of gravity" (or
"attractor") CANNOT be "value". A couple of quotations from
Vol III, Ch. 10:

The ASSUMPTION that commodities from different
spheres of production are sold at their values
naturally means no more than that this value is
the CENTRE OF GRAVITY around which price turns
and at which its constant rise and fall is balanced
out. (Penguin, p. 279; capitalization added)

After "explaining" the categories of "market value",
"individual value", etc., Marx says:

What we have said here of market value holds also
for the PRICE OF PRODUCTION, as soon as this TAKES
THE PLACE OF MARKET VALUE. The price of production is
regulated in each sphere, and regulated too according
to particular circumstances. But it is again the
REVOLVE, and at which they are balanced out in
definite periods. (Penguin, p. 280;
capitalization added.)

3. So that, when the "prediction of market prices" is
attempted IN AN ECONOMY LESS ABSTRACT than that considered
in Vol. I, what is relevant as "attractor" IS NOT value but
production price. Certainly, VILC are no longer relevant
because they are only a particular calculation of prices
corresponding to a economy with uniform composition of

In OPE-L 3764 Paul says:

One certainly can view production prices as an attractor
for market prices. Such statistical work as has been
done for real economies indicates that both values and
production prices are attractors of roughly equal
strength. [...]

In practice there is little to chose from on a purely
statistical basis if one has to chose a predictor of
market prices. There appears to be little or no
statistically significant difference between the
predictive power of the two generators.

So that, in terms of purely statistical "strength" there is
not a clear criterion to choose. According to Paul, in order
to "predict market prices" one could use production prices
as "attractors", and need no "Tugan's values".

In terms of Marx's statements in V.III, Ch. 10, there is
INDEED a criterion to choose. If we are considering the
"competitive" fraction of the economy, the "attractor"
must be production price. Marx says clearly that "as soon
as [production price] TAKES THE PLACE" of value, prices are
"revolve" around it, not around value (of course, not
around value as it is calculated in Vol. I).

4. Certainly, Paul invokes his theoretical preference to
choose VILC as "attractors":

I prefer to consider values as the principle attractor
and production prices as a correction factor. I feel
that production price theory rests upon what are, in a
sense, derived categories - profits and equal profit
rates. These are logically deducible from value
relations, whereas the reverse deduction of value
relations from profit and equal profit rates is much
harder to do.

However, IMO the "derivation" or "deduction" Paul is
looking for is invalidated insofar as he uses "Tugan's
values". This "deduction" is "logically" sound only if we
can re-establish that all the labor that is distributed
according to prices was the same objectified in production.
In this sense is that the law of value regulate prices:
total labor objectified establishes the LIMIT of that that
can be appropriated.

Regarding the specific "oscillations" of prices (i.e.
regarding "market prices"), now they have as "center of
gravity" production prices, not values. So, the "law of
value" does not mean that "market prices" "revolve" around
values. From V.III, Ch. 10 on, "market prices" "revolve"
around production prices.

It is important to stress that by means of the VILC it
is impossible to establish that the total value
appropriated through prices is the same amount objectified
in production. This is the reason why Marx's "critics" say,
precisely, that the "derivation" Paul is looking for is
"illogical", "erroneous".
Of course, the problem is to use Tugan's definition of
value, and not consider that, at the stage of Vol III, Part
2, the "definition" of value is more concrete and thus is
"modified" to take into account that capitals have a
different composition.

Alejandro Ramos M.