Social Fairness and Economics by Lance Taylor Armon Rezai & Thomas Michl

Author:Lance Taylor, Armon Rezai & Thomas Michl
Language: eng
Format: epub
ISBN: 978-1-136-27087-1
Publisher: Routledge

Aggregate labor value ratios: the systematic components in their price expressions

As mentioned above, we view labor values as a theoretical skeleton behind the surface of price-quantity dynamics, i.e. as part of an SNA — such as the UN’s (United Nations, 1968) — which is designed to define measurable categories to understand the capitalist process of economic and social reproduction.6 From this viewpoint, there is nothing to “transform”. Rather, one should show how labor values can be used to detect the laws of motion of capitalism. From a Marxian perspective, the first and most important step is to understand the determinants of the average (not a uniform) price rate of profit or — put differently — to what extent the generation of absolute and relative surplus value (measured in labor values), and technical progress drive profitability.

Let w be the value of labor power as in Foley (1982). The average value rate of profit can be defined as follows:

(7)

The average value rate of profit depends on three fundamental magnitudes: the wage share w in national income py = lx, the amount of hours worked, and the labor value of the total capital stock.7 The wage share relates the Marxian theory of exploitation to Goodwin’s (1967) distributive cycle, and thus to the reserve army mechanism, and is related to what Marx called the generation of relative surplus value. The hours actually worked by the workforce have to do with the generationof absolute surplus value, and can be increased ifmonthly hours worked are increased, if absenteeism is forced down, if holidays are reduced and if (not covered by the model) work intensity is increased.

The labor value of the total capital stock is affected by accumulation and technical change. As formally proved by Flaschel et al. (2011) in a general n-sectoralIOmodel, under mild assumptions any profitable(cost reducing) capitalusing labor-saving technical change yields a decrease in labor values v. Noting that capital-using labor-saving (i.e. Marxian) technical progress has characterized most phases of capitalist development (see Marquetti, 2003), this underpins the LDLC originally formulated by Farjoun and Machover (1983).8 If the LDLC is sufficiently strong,itcan outweigh the physical increasesinthe capital stock matrix K and leadtoanincreaseinthe value rateofprofit. The tension between increases in the capital stock and decreases in labor values may be considered as a fundamental contradiction in the capitalist process of technical change, and is related to Marx’s discussion of changes in the technical composition of capital (vKx/lx). Whether the LDLC is sufficiently strong to reduce the technical composition of capital is an empirical issue, which we consider in the section Three sources of profitability, below.

To summarize: basic forces driving an increase in the value rate of profit would be a decrease in the wage share and an increase in the hours performed by workers. Further, Marxian technical change might increase the value rate of profit, provided it leads to a significant change in the labor content of commodities that outweighs the increase in K.

Having identified the determinants of the value rate of profit, the question is whether this can help us to understand movements in the actual price rate of profit.

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