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Negative labour values and the production possibility frontier

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Abstract

Steedman's theoretical finding of negative labour values associated with positive equilibrium prices has been criticised on the grounds that this situation obtains only in inefficient economies. A recent paper by Hosoda claims that this criticism is valid only in two-dimensional joint-product systems. It is argued here that the dimensionality of the system is of no relevance to the “inefficiency critique” of Steedman. Rather, the validity of the critique turns on matters relating to the growth rate and the rate of profit. The argument that processes inefficient in a static context may be viable in the context of von Neumann growth is considered, and the implications for the labour theory of value are assessed. Marx's critique of capitalist economic calculation is supported by reference to the divergence of Sraffian prices and Samuelsonian values when the rate of profit is in excess of the rate of growth.

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... This has been disputed by authors basing themselves on Sraffa (Steedman 1975; Hosoda 1993), but we consider that their arguments are unconvincing. It has been shown (Wolfstetter, 1976; Farjoun, 1984; Cottrell, 1993) that the examples purporting to demonstrate profit and surplus value to be anti-correlated rest on highly artificial assumptions. In particular, negative labour 'values' can arise only in systems that are inefficient in the sense that they are not on the production possibility frontier. ...
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