Re: [OPE] Linear transformation between equilibrium prices and labour values

From: Ian Wright <>
Date: Fri Dec 03 2010 - 16:49:48 EST

Dave, that's a perfectly correct way of looking at the issue, although
I would emphasize a more general point.

Standard labor-values are "technical" not "total" labor costs. In the
special case of a model of simple reproduction, for example, technical
and total labor costs diverge due to the presence of capitalist
consumption. Technical labor costs don't measure the cost of
reproduction of capitalist consumption goods; while in contrast total
labor costs (the nonstandard formula) do measure those costs. The
price system measures total monetary costs. So an accounting mismatch
necessarily arises when technical labor costs are compared to total
monetary costs, simply because total monetary costs count capitalist
consumption as a part of the nominal cost structure, but standard
labor-values do not count capitalist consumption as a part of the real
cost structure. This is the root cause of the transformation problem.

So the history of the transformation problem is the inverted
appearance of an underlying "labor cost accounting error" that
conflates technical and total labor costs. It just so happens that in
the special-case of a "worker only" economy (e.g., Smith's early and
rude state) technical and total labor costs coincide. The answer to
the question, "What labor times do production prices represent?" is
nonstandard, not standard, labor-values. Prices of production
represent total labor costs. They don't represent technical labor

And we shouldn't expect them to. Anwar Shaikh in his 1984 paper, "The
transformation from Marx to Sraffa", points out that the
transformation problem is due to the transfer of labor-value out of
the "circuit of capital" and into the "circuit of revenue" where
capitalists spend their profits on consumption goods. The transform T
that you highlight does correctly express the divergence between
technical and total labor costs due to capitalist consumption.
Pasinetti in an appendix on Marx in a chapter of his "Lectures on the
Theory of Production" (1979) also provides a linear transform from
standard labor-values to production prices, although -- from memory --
formulated in terms of a rate of profit, and he does not explore the
labor costs that hide beneath that term. Pasinetti's work on
hyper-integrated labor coefficients demonstrates, among other things,
that even in "worker only" economies there can be divergence between
technical and total labor costs. In other words, the presence of
"profits on stock" is not a necessary condition for a divergence
between standard labor-values and long-period prices. This kind of
divergence is to be expected and is ubiquitous.

The traditional critiques -- while formally correct in their own terms
-- are all based on this labor cost accounting error, which generates
the quantitative mismatch between standard labor-values and production
prices. But it is easy to show -- and mathematically incontrovertible
-- that production prices measure total labor costs.

Goodbye transformation problem.

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Received on Fri Dec 3 16:51:15 2010

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