1. Hey Ian. This talk was great. I’ve had trouble conceptualizing your General Theory of Labor Value but after listening to this I think I’m starting to comprehend your theory a little bit. It became easier to understand because you did an excellent job of explaining “The Transformation Problem”. I haven’t read volume III of Capital and most secondary sources do a poor job of explaining what “the problem” actually is. It seemed to me that there wasn’t really a transformation problem, which is what Paul Cockshott has argued. But now I think I should read Volume III and then I should make another attempt at reading your paper. Unfortunately my understanding of linear algebra is limited so its a challenging read for me.

    Even though I don’t fully understand, I am going to assume that your General Theory is correct. So what implications does this have for political-economy? Does this theory strengthen Marx’s work or does it result in a need for major revision? More specifically, how does this impact the validity of Marx’s Theory of Exploitation?

    Sorry if my questions are vague or naive. I thought I understood Capitalism pretty well but after engaging with your work I feel like I don’t know anything at all.

    Liked by 1 person

    1. Hi Cody, thanks for your feedback and great questions, which are not naive in any way.

      (1) Is there a transformation problem? Yes.

      Paul Cockshott’s point, following Farjoun and Machover, is that, empirically, profit rates don’t fully equalise (true) and also we find a uniquely high correlation between classical labour-values and aggregate input-output prices (also true). Therefore Marx was wrong to propose a transformation because there isn’t a contradiction (between determination of prices by labour-values and a uniform profit-rate) that even needs to be theoretically addressed.

      However, we know, on theoretical grounds alone, that the existence of capitalist profit introduces an additional degree-of-freedom that deforms natural prices away from classical labour-values. In consequence, classical labour-values cannot be their measure, and the value-theoretic claims of the classical labour theory of value are left hanging — a point the classical economists, and Marx, understood very well. The fact that the deformation, in practice, is quantitatively small, does not negate either the logical, or empirical, problem. For instance, the “correctness” of the labour theory of value cannot depend on the empirical “strength” of aggregate correlations. For example, at what level of correlation should we decide to reject the classical labour theory? Below 95%, 90% – or is 85% OK? Also, the correlations vary over time. Should we therefore consider that the classical labour theory was more β€˜correct’ in 2011 compared to 2014? Perhaps the residual lack of correlation, however β€˜small’, is precisely a reward to capitalists for their abstinence and patience?

      So, although I accept the empirical data that Cockshott and other authors present — and in fact I think it’s one of the most robust and important empirical findings of quantitative economics — I reject the argument that this implies there is no transformation problem to solve.

      (2) My general labour theory of value preserves all the insights of Marx’s original theory for the simple reason that (a) it retains the classical definition of labour-value (SNLT if you prefer) for the purpose of understanding changes in technical productivity of labour over time, and exploitation of workers by capitalists, but (b) adds more general definitions of labour-value (e.g. super-integrated labour coefficients) for the purpose of understanding the intimate relationship between labour time and prices. The idea that a single definition of labour-value can be used for both (a) and (b) is what I’ve called the classical category mistake, a mistake that Marx, following Smith and Ricardo, did indeed commit (see https://ianwrightsite.wordpress.com/2017/06/30/a-category-mistake-in-the-classical-labour-theory-of-value/). Both supporters and critics of Marx’s LTV commit the same category mistake, and therefore the majority of the literature on the LTV builds on faulty conceptual foundations. Once we spot the mistake, it’s quite easy to fix. The more general theory, which I argue for, yields a LTV that both continues to explain exploitation but also the structure of prices.

      Hope this is helpful. Best wishes,


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