From: Michael Webber <michaeljwebber@gmail.com>

Date: Wed Jun 16 2010 - 20:14:34 EDT

Date: Wed Jun 16 2010 - 20:14:34 EDT

dave:

i'm sorry, but i don't understand the 'it should be clear' bit in your

last paragraph.

1 ln P_i - ln C_i = ln V_i - ln C_i + e_i

suppose that

2 ln C_i = ln V_i + f_i

then

3 ln P_i - [ ln V_i + f_i] = ln V_i - [ ln V_i + f_i] + e_i

or

4 ln P_i = ln V_i + f_i + e_i

If C is constant, then

5 ln P_i = ln V_i + e_i

otherwise, introducing this third variable reduces (but does not

eliminate) the correlation between P and V. the extent of the

reduction depends on the magnitude of f.

michael

On 17 June 2010 05:29, Dave Zachariah <davez@kth.se> wrote:

*> I was recently prompted by Andrew Kliman about subjecting the labour
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*> theory of value to statistical tests. Kliman objects to measuring the
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*> correlation between industry sector outputs in terms of price P and
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*> labour-value V. Instead he suggest one must 'deflate' the outputs in
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*> some way.
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*>
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*> He seems to miss the fundamental point that given the constraints on the
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*> available data the specific test is precisely trying to quantify *how
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*> well* size in terms of price correlates with size in terms of
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*> labour-value. If they correlate weakly the labour theory of value would
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*> be a relatively weak theory of market exchange. Hence, deflating the
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*> output price and output labour-value with a third output size variable
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*> would make little sense for this test.
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*>
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*>
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*> Nevertheless Kliman insists that one must deflate price P and
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*> labour-value V with output costs C. In his paper in Cambridge Journal of
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*> Economics from 2005, he reports that when doing this the strong
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*> correlations between P and V reported in the literature is destroyed,
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*> indicating that they are all spurious. He shows this by means of a
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*> computer simulation but motivates this by a 'deductive proof'.
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*>
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*> "For some reason, C[ockshott] &C[ottrell] simply ignore this proof.
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*> I am at a loss to explain why they fail to discuss (or even mention)
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*> it and why they seem not to recognize its validity. The proof is
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*> straightforward and mathematically trivial." (p.318)
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*>
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*> His reasoning is as follows: If
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*>
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*> ln P_i = ln V_i + e_i
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*>
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*> holds then it also holds that
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*>
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*> ln P_i - ln C_i = ln V_i - ln C_i + e_i
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*>
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*> and hence correlations would be preserved. But since he finds that the
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*> latter does not hold he concludes must be that the first relationship
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*> does not hold in reality and "[a]s long as it remains unrefuted---and I
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*> do not see how it could possibly be refuted---my regression results stand."
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*>
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*> Well, it seems like the reviewers failed to notify him that P, V and C
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*> are *statistical* quantities. Effectively he is saying that if rho(P,V)
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*> is high then rho(P/C,V/C) is necessarily high or else the correlation
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*> between P and V is spurious. But is should be clear that if C is
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*> correlated with P and V this does not hold. And this is precisely the
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*> case if one lets C be output costs.
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*>
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*> This is the basis of what the author has labeled "the uncontested proof".
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*>
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*> //Dave Z
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*> _______________________________________________
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*> ope mailing list
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*> ope@lists.csuchico.edu
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*> https://lists.csuchico.edu/mailman/listinfo/ope
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*>
*

-- Michael Webber Professorial Fellow Department of Resource Management and Geography The University of Melbourne Mail address: 221 Bouverie Street, Carlton, VIC 3010 Phone: 0402 421 283 Email: mjwebber@unimelb.edu.au _______________________________________________ ope mailing list ope@lists.csuchico.edu https://lists.csuchico.edu/mailman/listinfo/opeReceived on Wed Jun 16 20:16:09 2010

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