[OPE-L:6983] [OPE-L:475] RE: Value-price correlations

Mon, 22 Feb 1999 10:34:18 -0000

David Laibman mentions heteregeneous labour in relation to value-price
correlations. This is a potentially serious problem, since Ochoa,
Cockshott et al etc, all assume that the wage bill in each industrial
sector provides a measure of direct labour since variations in wages
capture variations in labour quality. Now, built into this approach is
an implicit assumption that there is no deviation of prices from values.
To argue this requires the following line of reasoning: (1) If
capitalists pay higher wages for more skilled labour then this is
because the skilled labour produces more output for the capitalist
relative to simple labour (2) The capitalist compares the money wage
with the money value of output. (3) Therefore, if Ochoa uses money wages
to identify the extra output produced by skilled labour then this
implicitly assumes that money output is idential to the (labour) value
of that output. Built into the Ochoa/Shaikh test for price-value
deviations is an implicit assumption, in relation to heterogeneous
labour, that price=value.

Any comments on this line of reasoning would be gratefully received.
I've just been pouring over the labour reduction literature -
Himmelweit, Rosdolsky, Rubin, Chai-on Lee etc. - where I think it can be
justified if wages are to provide the basis for analysis.


Andrew Trigg

> -----Original Message-----
> From: David Laibman [SMTP:DLaibman@brooklyn.cuny.edu]
> Sent: 21 February 1999 21:05
> To: OPE list
> Subject: [OPE-L:458] Value-price correlations
> (Sorry! I have forgotten the thread name.)
> Dear OPEople,
> I have been reading the discussion between Andrew, Allin, and
> Alejandro
> on Andrew's new work showing absence of correlation between labor
> values and
> observed money prices. I am technologically challenged; the only way
> I
> could study these posts carefully would be to print them all, but then
> after
> a few weeks I would not have a working printer left, and I can't
> afford to
> replace toner/drum, etc., at the moment. So I must work entirely from
> memory. I also have not personally done this sort of empirical study,
> so my
> contribution to the discussion (in the spirit of Jerry's encouragement
> of
> participation) is truly more questions than answers.
> Surprise! For once, I find myself agreeing with Andrew and Alan!
> I
> have always been suspicious of the labor values derived from I-O data,
> and of
> the high correlation coefficients between them and observed prices.
> With
> Andrew, I see no reason in theory why we should expect to find a high
> correlation. Alan's point, further studied by Andrew, that a high
> correlation would emerge simply from the fact that absolute (rather
> than
> unit) values and prices are both highly correlated with the size of
> industries seems on the mark. Alejandro's point about the general
> reliability of the data is also quite important. The Shaikh-Ochoa
> matrix
> inversion procedure produces *not* unit values (direct plus indirect
> labor
> time per unit of output), but rather: direct plus indirect labor time
> per
> dollar (or other money unit) value of sales. Without obtaining a
> separate
> series proxying physical output by sector, the coefficients themselves
> are
> distorted (I suspect), except along the principal diagonal. This
> alone, and
> independently of the scale effect, may explain the high correlations
> found in
> those studies and related ones. There is also the matter of
> heterogeneous
> labor, and I doubt if there is an agreed-upon method of dealing with
> this
> complication.
> Even 80-sector I-O data are highly aggregated. Full
> disaggregation,
> were it achievable, would most likely reveal wider dispersion in
> compositions
> of capital. If it were possible to measure unit labor values, unit
> production prices and market prices at a moment in time, one would
> want to
> know the extent of deviation among all three measures, and I would
> expect
> each deviation (production price from value; market price from
> production
> price) to be significant. Even here, however, there is the question:
> how
> large is significant? If labor values turned out to "explain" 93% of
> observed prices, is that a lot or a little? I think we can have
> significant
> difference among the measures, and still retain Allin's insight that
> the
> price difference between a peanut and a computer (or, as Joan Robinson
> once
> put it, between an automobile and a packet of pins) is most centrally
> explained by the different quantities of labor time these commodities
> contain.
> I don't know enough about the statistical measures to weigh in on
> Allin's critique of Andrew's proposal for eliminating the scale
> effect. I
> would only note that *if* Allin's critique is correct, that would only
> mean
> that some other way of removing that spurious source of correlation
> between
> "values" and "prices" would have to be found.
> Finally, a question for Andrew. I do not want to go over the
> whole TSS
> terrain again, but the question of empirical measurement of values
> (even if
> only hypothetical) raises one issue I can't resolve. You may identify
> *value
> added* in any period of time with the current labor performed in that
> period
> (leave the heterogeneity problem to one side). But to estimate
> *indirect
> labor time* and gross value, *some* unit value must be applied to
> consumed
> means of production. Even if we are time-sensitive and want to make
> this
> *yesterday's* unit value, the same problem arises when we try to
> calculate
> *that* one, and so on in infinite regress. We can't use observed
> money
> prices of inputs; this would compromise the whole project, since the
> idea is
> to compare values with precisely the observed price magitudes (and, if
> Andrew
> is correct, find them essentially uncorrelated). Since the TSS
> approach
> insists on different market values at different dates, it is not clear
> how
> one could calculate unit values at a moment of time on these
> assumptions,
> even in principle.
> Cheers,
> david
> David Laibman