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At 19:44 30/06/00 -0400, you wrote:
>Paul, I am very glad that you seem to agree that Marx determined prices of
>production in terms of money-capital as the initial givens. Does this
>mean for you, as it does for me, that, since the inputs are already in
>terms of prices of production, Marx did NOT "fail to transform the inputs
>of constant capital and variable capital from values to prices of
>production"? Do you agree that this long-standing and widely accepted
>criticism of Marx, from Bortkiewitz on, is wrong. I hope so!
My take on this is that the problem is partly anachronistic.
The way in which Marx poses the problem was not in terms of reproduction
relations but in terms of 5 different industries, without the input/output
relations between these being specified.
In this context, the difference between values and price of production
of the inputs is not pertinent. Within this theoretical framework it simply
can not be examined. For one to be able to pose the problem one needs
a model in which the means of production used are split into the products
of different industries, and possibly, to have an accounting of wage and
profit expenditure in terms of the industries on which this was spent.
But this was not the theoretical apparatus that Marx was deploying to address
the issue. He was just trying to look at how the prices of outputs would
be modified by the assumption of uniform profit rates, and how this would
effect the distribution of surplus value between the industries.
For the purpose of the question he was addressing the conceptual apparatus
that he used was quite adequate.
If we take labour content to be the principle determinant of price, he was now
addressing a secondary determinant - the extent to which prices are modified
by a uniform rate of profit.
What he produced was a series of illustrations that provide a reasonable
to an answer to this.
What critics like Steadman focus on are third order effects, those produced by
deviations in the price/value content of the means of production. In my
is a legitimate theoretical problem, ( though its practical implications
are more doubtful).
In order to address this question it is necessary to use the full formalism
analysis. In this context, Sraffa's work is obviously quite a brilliant
provides, in my opinion, a good formal method to address the problem.
The fact that Marx was not concerned with third order errors does not make
the attempt to develop procedures to correct for such errors by Sraffa invalid.
However, in discussing second and third order correction terms to the theory
of value, it is important to have some feel for what the nature of the
data is. If one does not, one can, as Steadman does, construct sets of
whose parameters are such that third order terms dominate and outweigh the
first order terms.
Whether Marx's 2nd order correction to the theory of value is empirically
to deal with the real world depends upon what the interactions between sectors
typically are like in a real capitalist economy.
In this context one has to ask:
a) are the second order corrections actually required to account for the
structure of industrial prices,
b) is Marx's second order correction sufficient to address the issue, or are
third order effects of the sort highlighted by Steadman actually pertinent
in real economies.
To answer part (b) first, I believe that there is now strong evidence, in
of Shaik, Ochoa, Petrovic etc, that third order effects are empirically
This is only to be expected as the standard deviation of production
a collection of commodity inputs used in a production process will, since it
is a mean of random variables, be smaller than the standard deviation of
price/value for the economy as a whole.
To turn to question (a), are second order corrections required?
In my opinion, whilst the evidence is not yet decisive, I believe that it
the need for such second order corrections has been greatly over-estimated.
This is born out by the fact that all the empirical studies in the
I know of, appart from Steadmans paper in the Cambridge journal on production
prices in Victoria and Ireland, indicate that the improvement in accuracy
obtains in predicting price vector by using production prices rather than
values is small to non-existent.
I believe that a possible explanation for this is the negative correlation
have observed between organic compositions and industrial profit rates. This
has so far only been observed for the UK an US economies so one can place
less reliance on it than for the conclusion above. If the result were
in other economies, it would throw into question the whole pertinence of
even using second order correction terms.
The only empirical data that I am aware of that conflicts with this Steadmans
study, but this is for much smaller economies than those in other studies, and
also economies in which primary production is more important. One would
therefore expect rent effects to be higher. One would also expect higher
price/value deviations because of the smaller sample size represented by a
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