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A dual theory of price and value in a meso-scale economic model with stochastic profit rate

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  • Greenblatt, R.E.

Abstract

The problem of commodity price determination in a market-based, capitalist economy has a long and contentious history. Neoclassical microeconomic theories are based typically on marginal utility assumptions, while classical macroeconomic theories tend to be value-based. In the current work, I study a simplified meso-scale model of a commodity capitalist economy. The production/exchange model is represented by a network whose nodes are firms, workers, capitalists, and markets, and whose directed edges represent physical or monetary flows. A pair of multivariate linear equations with stochastic input parameters represent physical (supply/demand) and monetary (income/expense) balance. The input parameters yield a non-degenerate profit rate distribution across firms. Labor time and price are found to be eigenvector solutions to the respective balance equations. A simple relation is derived relating the expected value of commodity price to commodity labor content. Results of Monte Carlo simulations are consistent with the stochastic price/labor content relation.

Suggested Citation

  • Greenblatt, R.E., 2014. "A dual theory of price and value in a meso-scale economic model with stochastic profit rate," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 416(C), pages 518-531.
    • Handle: RePEc:eee:phsmap:v:416:y:2014:i:c:p:518-531
    DOI: 10.1016/j.physa.2014.08.061
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    References listed on IDEAS

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    1. Ochoa, Eduardo M, 1989. "Values, Prices, and Wage-Profit Curves in the U.S. Economy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 13(3), pages 413-429, September.
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    4. Julian Wells, Julian, 2007. "The rate of profit as a random variable," MPRA Paper 98235, University Library of Munich, Germany.
    5. Greenblatt, R.E., 2013. "Rates of profit as correlated sums of random variables," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(20), pages 5006-5018.
    6. Anwar M. Shaikh, 1998. "The Empirical Strength of the Labour Theory of Value," Palgrave Macmillan Books, in: Riccardo Bellofiore (ed.), Marxian Economics: A Reappraisal, chapter 15, pages 225-251, Palgrave Macmillan.
    7. Frederic Lee & Steve Keen, 2004. "The Incoherent Emperor: A Heterodox Critique of Neoclassical Microeconomic Theory," Review of Social Economy, Taylor & Francis Journals, vol. 62(2), pages 169-199.
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    Cited by:

    1. Jonathan F. Cogliano & Roberto Veneziani & Naoki Yoshihara, 2022. "Computational methods and classical‐Marxian economics," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 310-349, April.

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