Every child knows a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs required different and quantitatively determined masses of the total labor of society. That this necessity of the distribution of social labor in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance , is self-evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products. -- Karl Marx to Dr. Kugelmann, 11 July 1868
The above quotation is a pithy statement of a pre-analytical vision. The ideas underlying this vision are interesting, independently of what you may think about the details of Marx's theory of value.
One can start to explicate these ideas with a one-commodity model. Accordingly, consider an economy in which one commodity, corn, is produced. Suppose production takes one year. Let a0 be person-years of labor needed to produce a bushel corn. Let a be the bushels of seed corn needed to produce a bushel corn. Assume labor is necessary to produce corn:
a0 > 0
Assume that a surplus product is produced, in that more than a bushel corn is produced for every bushel of seed that is planted:
0 < a < 1
The table below shows how each person-year of workers hired by the capitalists are allocated.
| Labor Time | Purpose |
| 1 - a | To produce (1 - a)/a0 commodities to consume at the end of the current year. |
| a (1 - a) | To produce capital-goods to be used to produce (1 - a)/a0 commodities to consume at the end of the next year. |
| a2 (1 - a) | To produce capital-goods to be used to produce capital goods to produce (1 - a)/a0 commodities to consume at the end of two years hence. |
| a3 (1 - a) | To produce ... (1 - a)/a0 commodities to consume at the end of three years hence. |
| . . . | . . . |
Recall the sum of a geometric series:
1 + a + a2 + a3 + . . . = 1/(1 - a)
So some algebra shows that the labor expended at a moment of time for the purposes shown in the table is indeed one person-year.
This is very simple, of course. The heterogenous nature of capital goods is not shown, even though such heterogeneity is essential for the full articulation of these ideas. In a capitalist economy, nobody is in charge of ensuring that the labor force is allocated so as to produce commodities for consuming now and in the future. The social division of labor comes about through participants responding to prices, orders, contracts, and so on, as they perceive them. A structure of production exist at any moment of time, refracting (not necessarily consistent) plans and expectations about what can be sold in the future.
Even in this simple example, variations can be introduced. Suppose the economy is expected to grow. And suppose that one expects technical progress to reduce one or both coefficients of production at some rate. Then the allocation of labor would not be as in the table. Pasinetti's vertically hyper-integrated sectors help in the analysis here.
Another question is if the plans implicit in the allocation of labor at a moment in time will be realized in the years to come. This realization depends on the mix of decisions to consume and save, now and in time to come. But those decisions are constrained by income, which depends on the decisions to hire workers for wages today. An independent equilibrium does not exist that is just being followed by agents in the economy. Instead, possible and actual future paths are being laid down, tile by tile, plank by plank. Thus, as Paul Davidson has argued, Post Keynesians have an appreciation of the distinction between uncertainty and risk that economists of the Austrian school lack.
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You may be interested in this recollection by Branko Milanovic of a neoricardian/sraffian conventicle in Yugoslavia and in particular of Anwar Shaikh.
«“And the form in which this proportional distribution of labor asserts itself [...] is precisely the exchange value of these products” [...]
The above quotation is a pithy statement of a pre-analytical vision. The ideas underlying this vision are interesting, independently of what you may think about the details of Marx's theory of value.»
My usual comments: that is cost accounting, and it uses "arbitrarily" as metric of cost "socially necessary labor" *by definition*. It is not a theory, it is a definition. Then there is the labor *hypothesis* of value, that eventually *prices* do converge to exchange values for "economic" commodities, but it is not a theory, it is an unproven hypothesis, regardless of the "transformation problem".
I will finally come out and say it: I think that the labor value hypothesis of prices as it is commonly stated of prices is too strongly worded, because I think that labor values are just in the long run the *lower bound* of prices (and that excludes cases of significant consumer surplus, which are very important). Proper cost accounting, never mind price determination, is a difficult problem, so that lower bound is also difficult to estimate.
«An independent equilibrium does not exist that is just being followed by agents in the economy. Instead, possible and actual future paths are being laid down, tile by tile, plank by plank.»
Path dependency is a "communist" idea because it makes a mockery of JB Clark's three "fables". :-) In particular if there is path dependency then the distribution of income is not solely determined by productivity (and of course nobody should mention "initial endowments", which under path dependency become not just "initial").
«Thus, as Paul Davidson has argued, Post Keynesians have an appreciation of the distinction between uncertainty and risk that economists of the Austrian school lack.»
The essence of right-wing economics is a denial of time, because if time is considered and capital across time that introduces path dependency unless "capital" is like "leets" or JB Clark's metaphysical "capitalness".
Thanks. I put that Branko Milanovic link in a new elsewhere post. You will be amused by McCloskey's arrogance.
I increasingly lean toward thinking of prices of production as a matter of accounting.
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