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

From: Ian Wright <>
Date: Fri Dec 10 2010 - 16:40:34 EST

Hi Phil

Good to hear from you.

> It seems that non-standard labour values are defined as:
> p = l ( I - (A+C) )^-1  w
> where standard ones are:
> v = l ( I - A )^-1
> In the second definition labour value added is l, labour time. In the
> first it is lw. This seems to me to be saying that workers only add the
> value of their wages and that, consequently, the value of capitalists'
> consumption is created ex nihilo.

A technical point: nonstandard labor-values are not defined in terms
of the wage rate, w. (That's a small defect of Dave's post at the
beginning of this thread).

Your reaction is understandable because nonstandard labor-values will
not support the interpretation normally given to standard
labor-values, simply because nonstandard labor-values measure
something different: they measure total not technical labor costs.
Nonstandard labor-values don't behave like standard labor-values (and
vice-versa). The measures perform different theoretical roles.

For simplicity, assume simple reproduction in a self-replacing state
of equilibrium. And I'll omit the mathematical details.

In the standard scheme the labor-value of the real wage, vw, is less
than the labor supplied to production, L; hence the working day splits
into two parts: necessary labor to produce worker consumption and
surplus labor to produce capitalist consumption. In terms of *purely
technical* costs, vw<L labor is the labor-cost of reproducing the
working class.

However, only if capitalists were not consuming would workers be able
to reproduce the real wage by supplying vw labor. In the actual
circumstances of production they supply L labor to receive the real
wage because they simultaneously perform additional "tributary" labor
for the capitalist class. In terms of *total costs* the labor expended
to reproduce capitalist consumption is a cost. So in this scheme v'w=L
is the total labor-cost of reproducing the working class.

The point is this: standard labor-values are counterfactual technical
costs of production; they are not the actual total costs of
production. Both labor-cost accounting schemes apply to the same
economic reality. One scheme is asking questions about technical costs
of production; the other scheme is asking questions about total costs
of production.

Standard labor-values track changes in labor productivity and split
the working day according to the criterion of the technical
reproduction of the working class. Nonstandard labor-values don't do
this. Instead, they tell us the total coexisting labor required to
reproduce commodities taking into account the full social
circumstances in which production takes place (they are a property of
the "social accounting matrix", not the "technique").

This kind of distinction also appears in the Leontief-inspired
input/output literature where the standard formula for labor-values is
interpreted as an employment multiplier, measuring the additional
employment generated in the economy as a whole due to the addition of
1 extra unit of a commodity in final demand, all other things being
equal. Input-output theorists distinguish this multiplier from the
"total employment multiplier", which again measures the additional
employment generated, but also includes consumption effects due to the
extra income the increased employment generates for households.
Input-output theorists measure total employment effects by augmenting
the technical matrix by a matrix of consumption coefficients.

Real confusions arise when technical, not total, labor costs are
compared to a price structure that measures total, not technical,
nominal costs. Again, that's the source of the TP.

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Received on Fri Dec 10 16:42:03 2010

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