Labour values and energy values

In the history of economic thought various thinkers have been attracted by the problematic idea of a single cause of economic value. Today such ideas appear mostly in studies on the labour theory of value of Karl Marx. In 1867 his “Das Kapital” tried to explain the values of all commodities by a special common substance, the quantity of abstract labour embodied in them, i.e., the direct and indirect labour time necessary to produce them. Several well-known mainstream economists (for example, Wicksteed, Böhm-Bawerk, Wicksell and Pareto) quickly pointed out that labour was not the only common substance in commodities. Another problem was Marx’s deficient mathematics. In Marx’s system the same commodities can appear on the side of the inputs and on the side of the outputs. Today it is well-known that many analytical problems in such circular systems can be solved by means of simultaneous equations of the input-output type. Here the most original contributions were not made by leading economists mentioned above, but by rather unknown outsiders (Mühlpfordt, Dmitriev, Charasoff, Potron), whose pioneering works were neglected for decades. In December 1927, both Sraffa and Leontief, independently of each other, argued that the reduction of all commodities to labour values was not a unique process; from a formal point of view, it was possible to compute not only labour values, but also wheat values, coal values, etc. For various reasons, their insights of 1927 remained rather unnoticed for several decades. A few decades ago the high impact journal Science published some papers advocating the use of energy values, corresponding to the direct and indirect quantity of energy necessary to produce a commodity. The most conspicuous text of this type is the often cited paper “Embodied Energy and Economic Valuation” by Robert Costanza (published in Science in 1980), claiming that both theory and empiry suggest a close connection between prices and energy values. The energy theory of value is usually discussed outside the networks of orthodox or marxian economics, but the empirical and theoretical studies on energy values and labour values show several remarkable cases of analogous arguments and imperfections, both trying to support the use of a single substance of economic value. My paper considers both theoretical and empirical aspects of such discussions on labour values and energy values. I also use a simple numerical example, to illustrate the computation of both labour values and energy values via two methods: via a system of simultaneous input-output equations and via subsystems (vertically integrated systems that produce only one net output). The two computation methods are well-known from the rich literature on labour values, but comparing energy values and labour values forces me to a generalisation of the notion of a subsystem: in order to define this notion unambiguously, I need to specify not only the net output of the subsystem, but also its net input. If the only net input of the subsystem is energy, I use the expression “energy subsystem”. This concept is needed to establish a percentage formula for the deviation of prices from energy values, analogous to my formula for the deviation of prices from labour values. By generalising Sraffa’s notion of subsystems it is possible to explain why supporters of labour values and energy values both present misleadingly “good” empirical results for their favourite theory. Both groups should be more aware of the non-uniqueness of their exaggerated claims for their one sided theories of value.