From: Dave Zachariah <davez@kth.se>

Date: Thu Jun 17 2010 - 04:48:44 EDT

Date: Thu Jun 17 2010 - 04:48:44 EDT

Hi Michael,

On 17 June 2010 02:14, you wrote:

*> i'm sorry, but i don't understand the 'it should be clear' bit in your
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*> last paragraph.
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*>
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*> 1 ln P_i - ln C_i = ln V_i - ln C_i + e_i
*

*> suppose that
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*> 2 ln C_i = ln V_i + f_i
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*> then
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*> 3 ln P_i - [ ln V_i + f_i] = ln V_i - [ ln V_i + f_i] + e_i
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*> or
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*> 4 ln P_i = ln V_i + f_i + e_i
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*>
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*> If C is constant, then
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*> 5 ln P_i = ln V_i + e_i
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*> otherwise, introducing this third variable reduces (but does not
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*> eliminate) the correlation between P and V. the extent of the
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*> reduction depends on the magnitude of f.
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*>
*

*>
*

It seems eq. (4) is wrong. Re-arranging (3) puts you back in (5) regardless

of the statistical nature of C. Your equation (4) will look like this:

ln P_i - ln V_i - f_i = -f_i + e_i

and Kliman is saying that we must compute the correlation between both sides

of this equation and find a significant correlation or else initial

correlations were spurious in the first place. By your own example this

deduction does not hold because it depends on the statistical properties of

f.

As an illustration, suppose C_i = a*V_i, where a is a constant. Then if

\rho( P, V ) is high it does not follow that

\rho( P/C, V/C ) = \rho( [1+flow profit rate] , 1/a )

is significant. In fact it is zero.

What Kliman legitimately seems to want is to recover the *unit* prices and

labour-values. But his procedure is mistaken and 'deflation by cost' is

completely wrong because it removes the real-cost structure through which

the law of value operates.

//Dave Z

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Received on Thu Jun 17 04:50:22 2010

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