The Labour Theory of Value as an Operational Proposition

Abstract

In his Comment on my article The Empirical Assumptions of Ricardo's 93 per cent. Labour Theory of Value1I Professor Konius makes two points, one substantive the other technical. His technical comment refers to my way of presenting Ricardo's formulation of the various aspects of the labour theory of value. He suggests accordingly that instead of dealing, as I did, one at a time with each of the two casesdifferences in the time-intensities of production and differences in the ratios of fixed to circulating capital-it is possible to treat these two well-known facets of the problem simultaneously. His argument on the substantive issue, whether, in a multi-factor economy, the labour theory of value provides a sound basis for the empirical prediction of relative prices, is more difficult to follow. Koniis suggests, if I understand him correctly, that the two features which he identifies as specific to labour and to labour only ensure that costs are in practice proportional to labour inputs. He therefore maintains that figures on relative labour inputs offer reasonable approximations to corresponding relative prices. I have no dispute with Konuls on the technical issues. His formulation which deals simultaneously with time-intensity of production (turnover of capital) and the ratio of fixed to circulating capital (organic composition) is sound as far as it goes.2 This more general formulation yields, inevitably, a more complicated condition than the two conditions specified in my article (equal time-intensities or equal ratios of fixed to circulating capital), which must hold if the labour theory of value is to be valid. Though not elaborated in so many words, the Konuis condition means that prices would be proportional to labour inputs if and only if higher time-intensities, if they existed, were exactly compensated by lower ratios of fixed to circulating capital. And this requires that, in spite of the infinite heterogeneity of production processes in a multi-factor economy, either time-intensities and capital ratios are identical, or, if (say) time-intensities differ, the differences are exactly (or at least approximately) compensated by corresponding differences in the ratios of fixed to circulating capital.