[OPE-L:3540] Monetary expression of value

Duncan K. Fole (dkf2@columbia.edu)
Sun, 27 Oct 1996 14:51:43 -0800 (PST)

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A comment on Andrew's [OPE-L:3413]:

Andrew writes:

> Whether for one-sector (YES!) or many, I
>[1/e(t+1)]p(t+1)Q(t) = [1/e(t)]p(t)*A(t) + N(t) (total price)
>[1/e(t+1)]v(t+1)Q(t) = [1/e(t)]p(t)*A(t) + N(t) (total value)
>e(t) and e(t+1), both scalars, are the monetary expressions of value at the
>start and end of period t. p(t) and p(t+1) are the vectors of unit input and
>output *money* prices of period t. v(t+1) is the vector of unit *money*
>output values of period t. Q is output (a vector), A is circulating means of
>production plus physical depreciation of fixed capital (a vector). N is
>living labor (a vector). (A and N are absolute, not per-unit, amounts here.)
>These equations deflate money magnitudes by the appropriate MEV to get
>labor-time sums. One can multiply by e(t+1) to get the money prices and
>values of output.

I understand how Andrew uses these equations to develop examples where the
path of the mev (e(t) in the equations above) is given. But it isn't so
clear to me how one could use these equations to estimate the mev given
data on labor time, inputs, outputs, and prices. The problem is that in
order to figure out e(t+1) you seem to have to know e(t). In the examples
this is easily dealt with by assumption, but with real data what would you
do to calculate the first e(0) for period 0?

Actually, it seems logical that this problem should arise from viewing the
mev as a ratio of the "total value produced" to labor time, because the
"total value produced" includes constant capital that represents production
from many past vintages, and the labor time in the denominator would also
have to weight past labor inputs in some way or other. I think this is what
the difference equations above are telling us.


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu