Classical Macrodynamics and the Labor Theory of Value
The Open University Economic Discussion Paper No. 76
29 Pages Posted: 24 May 2011
Date Written: March 1, 2011
This paper outlines a multisector dynamic model of the convergence of market prices to natural prices in conditions of fixed technology and composition of demand. Prices and quantities adjust in real-time in response to excess supplies and differential profit-rates. Finance capitalists earn interest income by supplying money-capital to fund production. Industrial capitalists, as the owners of firms, are liable for profits and losses. Market prices stabilize to profit-equalizing prices of production proportional to the total coexisting labor required to reproduce commodities. This result resolves the classical problem of the incommensurability between money and labor-value accounts in conditions of ‘profits on stock’, i.e. Marx’s ‘transformation problem’.
Keywords: theory of economic value, macrodynamics, classical process of gravitation, transformation problem
JEL Classification: E11, B14, B51, B16
Suggested Citation: Suggested Citation