Re: [OPE] classical macrodynamics and the labor theory of value

From: Ian Wright <>
Date: Mon Jan 31 2011 - 03:13:48 EST

Hi Jurriaan

Thanks for your thoughts. Here are some responses.

You point out that Marx has various uses and meanings for "prices of
production". I am writing within a post-Marx tradition in which an
interpretation of the concept of "prices of production", particularly
since Sraffa, is relatively well-defined and generally understood. The
aim of my paper is not to interpret Marx's text.

> 3) If Marxian production prices were really "natural prices", it would
> effectively mean that production prices equal commodity values, in other
> words they would be "standard supply prices" which accurately express
> commodity values. But Marx's argument is precisely that production prices
> deviate from commodity values and are not equal to the latter, it is merely
> that commodity values constrain the amount of fluctuation of production
> prices, and that production prices constrain the amount of fluctuation of
> actual market prices.

This is semantic. I take "natural prices" to refer to those prices
that obtain when there is no profit incentive to reallocate capital in
circumstances of constant technique and final demand. This definition
does not require that natural prices are proportional to "commodity
values". For example, Smith used the concept, but understood very well
that natural prices are not proportional to labor-values (what you
call "commodity values"); and of course Ricardo and Marx also
understood that prices of production deviate from labor-values.

> 4) If by definition there are always deviations between commodity values,
> their production prices and actual market prices, then a market equilibrium
> never exists other than in theory. At best we could say that the evidence
> for equilibrium is that markets do clear, even if commodities are sold above
> or below their values, or above andbelow their production prices. But if
> there are incessant price fluctuations, in what sense can we say there is
> real evidence for any equilibrium at all? This question rapidly transforms
> into the question of what is being "equilibrated" anyway - if not the
> supply-demand relationship, then the "production system" or the "economic
> system". But this eliding from one notion of equilibrium to another
> conflates the concept of equilibrium with the capacity for the economic
> system to reproduce itself on a larger and larger scale. Logically, however,
> enlarged reproduction does not require equilibrium, it might just be that
> this enlarged reproduction occurs haphazardly through continual adjustments
> and with incessant price fluctuations.

I think you are mixing up lots of issues here. It's important to
understand that an attractor of a dynamical system (an "equilibrium")
can exist and have real effects without the system ever converging to
it. So it's a mistake to collapse what is real to what empirically

For example, consider a lecture hall with a
thermostatically-controlled heater and cooler. Someone sets the
thermostat to 60 degrees. The air-conditioning kicks in. The room
warms up. People enter and leave. Doors open and shut. A window is
left open, and it's midwinter.

We measure the time-series of the temperature of the room over the
course of the day. The data shows that the temperature never
stabilizes to 60 degrees but fluctuates erratically about a much lower
temperature. Should we conclude from this empirical data that no
mechanism is working to drive the system to 60 degrees? Or that, if
the doors and windows were shut, we can confidently assert that the
temperature will continue to fluctuate?

Your "real evidence for equilibrium" simply will not be found in the
empirical data unless one has the theoretical keys to interpret the

I have to say that the classical authors had a better grasp of the
relationship of theory to data than you exhibit in the above

> 5) If the notion of equilibrium is only a purely theoretical idealisation
> for which there is no empirical evidence other than the imperfect
> adjustments of supply and demand to each other (under the conditions that
> more or less could technically be supplied but isn't, and human needs are
> greater or lesser than the actual "monetarily effective" demand for
> commodities that would satisfy needs), the question is raised whether the
> counter-factual idealisation of equilibrium is at all useful for
> understanding the dynamics of enlarged capitalist reproduction. If the
> production system is said to move towards equilibrium, as the foundation for
> a theory of capitalist dynamics, but there is no empirical evidence whatever
> for it, what justifies the use of the concept of equilibrium at all?

I think my example of the air conditioning system also replies to this.

You might also consider what instability means. Unstable systems are
transient -- they blow up or fall apart. Yet market economies have
reproduced themselves for many hundreds of years.

Having said that, I do think there are important sources of
instability in capitalist economies. But a complex system consists of
multiple interacting mechanisms -- to make progress in theoretical
analysis you must "hold some things still". That is the rationale for
counterfactual reasoning. But you'll be disappointed if you expect to
make immediate contact with empirical reality. Is it even possible to
understand or read Marx's Volume 1 without this understanding?

At some point of course there must be "crucial experiments", but a
great deal of scientific work is required to get to that point.

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Received on Mon Jan 31 03:16:58 2011

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