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

From: Ian Wright <>
Date: Tue Dec 07 2010 - 18:02:42 EST

Hi Dave, Alejandro

> I share some of Alejandro's skepticism, but a more fruitful question
> about Ian's model is: What are we to make of the attractor point of the
> system? This attractor point arises when one reduces the degrees of
> freedom of the system significantly, by fixing (a) the technical
> structure of the economy and (b) the consumption patterns of the
> working-class and capitalist class.

The attractor has significance outside of this special case.

For example, consider that we introduce technical change and changing
consumption patterns to this model (which is quite easy to do,
although quite difficult to analyze). The attractor remains causally
efficacious. In fact, if the rates of technical change and consumption
patterns are relatively slow then the attractor will in fact manifest;
in other words, the economy has time to gravitate to its "long-period"
position before that long-period position undergoes significant
change. But in general the attractor, in these more realistic
circumstances, is subject to change (i.e., it's now a dynamic
attractor that is driven by the new set of "laws" that integrate
technical change and changes in consumption).

If we started with the "full" model, in which everything changes, the
analytical challenges would be very high. But by starting with
"simplified" models, the analytical challenges are lower, which
provides the opportunity to identify sub-parts of the system and
understand them in isolation. Once we attain that understanding we can
incrementally introduce complexity and hopefully gain a complete
understanding of the dynamics of the complex system as a whole. The
knowledge gained from studying the simpler models is normally highly
relevant to studying the more complex cases.

Of course, in the history of scientific modeling this is "bread and
butter" stuff, which is why I don't understand Alejandro's objection
to "counterfactual" dynamic models, even though I share his impatience
toward static economic models.

> I'm not sure Ian's conclusion
>> "What labor times do production prices represent?" is
>> nonstandard, not standard, labor-values. Prices of production
>> represent total labor costs [i.e. including capitalist consumption].
> can be taken to a real capitalist economy. The attractor point is not
> simply never reached, it is in reality an unstable point: The very
> processes inherent to the capitalist mode of production (competition on,
> production for, and consumption through the market by a large number of
> uncoordinated agents) would immediately push the system away from the
> above attractor point even if it were forcibly brought there. That is to
> say, the equalizing mechanism --- what you suggest in your analogy is
> gravity --- is matched by other disequilibrating mechanisms.

By definition "prices of production" are ideal, special-case
equilibrium prices. I agree that they never empirically manifest. But
they are theoretically important for at least the reasons given above.

Of course, out-of-equilibrium and therefore in general, market prices
do not match labor-values. And (at least Marx's version) of the labor
theory of value requires that they do not match, because this mismatch
is the mechanism through which social labor time is allocated to

Traditionally there are two sources of divergence between labor-values
and market prices: imbalances between supply and demand, and the
presence of "profits on stock", which distorts the price system away
from labor-values. In the nonstandard approach there is only a single
source of divergence: those due to imbalances between supply and

> One result from your model is that if the equilibrating mechanism
> operates alone, the capitalist economy heads towards a state of
> parasitism. Not only do the flow rates of profit become equal but the
> consumption of the rentier class becomes a permanent pattern that etches
> itself onto the production system. This is the matrix C. This reminds me
> of Paul C's remark that the divergence between between the equilibrium
> prices and (standard) labour values could be the result of class
> struggle.

The presence of non-wage income (e.g., interest on money-capital
advanced) distorts the nominal cost structure away from
proportionality to standard labor-values. In that sense it is the
"result of class struggle". But other structural costs -- such as
government taxation -- could do the same.

Hypothetically, if the interest rate were zero in long-period
equilibrium then prices would be proportional to standard

> However, if one allows for the rentier consumption mix to vary
> itself then the establishment of C in the production system is far from
> obvious. The one-to-one mapping between the money lent by a rentier to a
> firm and his ex post consumption vector ceases to exist.

I look at it this way: at any time a part of the division of labor is
devoted to producing capitalist consumption goods. In the nonstandard
scheme we must count this labor-time as a cost of production. That's a
requirement for computing current "total labor costs".

I don't think the "ex post" conception helps here. Both standard and
nonstandard labor-values, at least outside of the context of national
accounts and the idealization of the "year", are instantaneous or
current properties of an economy that link actual work done in
different parts of the economy into vertically integrated sectors. At
all times this link exists, whether in the standard or nonstandard
accounting schemes.

Best wishes,
ope mailing list
Received on Tue Dec 7 18:04:13 2010

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