Summary Record of the Discussion — Session V

Professor Fauvel found five principles of price formation in the system described by Dr. Kyn. The first was that prices were fixed by a central agency (as occasionally in the West during periods of scarcity), and secondly were stable for several years. The third feature was the dual level of prices, viz. those of production (determined by labour value) and retail prices. Fourthly, it had been the practice to deflate retail prices gradually. Finally, the system of prices in agriculture differed significantly from that in the rest of the economy, but for reasons that seemed of expediency rather than deliberation. Generally, price changes tended to be ex post adjustments rather than ex ante decisions to influence economic activity. Dr. Kyn believed that price formation on the basis of labour value inherently induced a waste of capital and proposed a unitary price system in which, first, an ad valorem tax on wages would create the accumulation fund and, secondly, prices would be adjusted to the conditions of demand as well as to those of supply. Professor Fauvel could not accept that this was the only solution because a labour-content price could serve as guide to the general interest in decentralized decision-making, as the Dmitriev and Morishima-Seton formulae had demonstrated.1