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Classical macrodynamics and the labor theory of value

Listed author(s):
  • Ian Wright

    (Department of Economics, Faculty of Social Sciences, The Open University)

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'.

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Paper provided by The Open University, Faculty of Social Sciences, Department of Economics in its series Open Discussion Papers in Economics with number 76.

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Length: 21 pages
Date of creation: Mar 2011
Handle: RePEc:opn:wpaper:76
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