[OPE-L:5544] Re: Humbug Aggregate Price-Value Correlations

Allin Cottrell (cottrell@wfu.edu)
Sun, 28 Sep 1997 08:54:42 -0700 (PDT)

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On Sat, 27 Sep 1997, andrew kliman wrote:

> In ope-l 5529, Duncan writes: "I'm intrigued by the idea of measuring the
> price/value deviation by the amount of surplus value actually redistributed
> across sectors. This is on the trail of an economically meaningful measure of
> the dispersion, which, as I said in an earlier post, seems very desirable in
> this debate."
> I think this is a very important point of agreement, both with respect to
> measurement and with respect to hypothesis testing <etc.>

I think this discussion is interesting, and the "shift-share
index" that Andrew goes on to describe merits careful
consideration. But...

> A correlation or a MAD is reported, and the number is
> judged, arbitrarily, to be small enough to permit the
> conclusion that values are "close" to prices. Again, the
> question is: "close COMPARED TO WHAT?"
> The implicit alternative hypothesis in some work seems to
> be that prices are purely random. Thus *any* positive
> relationship between values and prices seems to be a mark
> in favor of the hypothesis that relative values "explain"
> relative prices.
> Let's get real.

Yes, let's. What work is Andrew talking about here? The
work that Paul Cockshott and I have done together -- much of
which has been presented at conferences that Andrew also
attended -- has always made a point of comparing values as
predictors of prices with various well-defined alternatives.
In all cases we have compared values with prices of
production; we have considered different alternatives
(including TSS magnitudes) in various studies.

Critical discussion of empirical work is welcome. The
demolition of straw men is not.