Average and Marginal Labour Values Are: On Log (N)-A Reply to Hagendorf

1. introductionThis article addresses a debate in Political Economy that has its origins in the 1870s with, on the one hand, the publication of Stanley Jevons' Theory of Political Economy in 1871 and, on the other, Karl Marx's Critique of the Gotha Programme in 1875. It is well known that in his article Marx advocated a communist system of economy in which workers were to be paid in labour tokens and could use these to acquire goods containing the same quantity of labour. Jevons became famous for his role in founding the marginalist school of economics, which, in the West, became the main alternative to the tradition of Classical Political Economy represented by Marx.What has not, until recently, been noticed was that there are actually linkages between the ideas in these two publications, linkages that surfaced in debates in the USSR in the 1960s.The issues addressed here are the feasibility of Marx's idea of an economic calculus based on labour time and on whether such a calculus can best be done using Marx's own definition of labour value, or whether that developed by Jevons should be used instead. We will review Klaus Hagendorf's (2014) advocacy of Jevons style of interpretation of labour value published in this issue, and then go on to present an empirical investigation into the feasibility of calculating labour values. This empirical investigation publishes for the first time an important property: the network structure of an industrial economy. This property means that proposals like those of the Soviet economist Novozhilov to use labour values directly as a tool of economic calculation may be more feasible than has hitherto been thought.Klaus Hagendorf has done political economy a service by pointing out the degree to which Jevons, the founder of marginalism, can still be described as a follower of the labour theory of value. Klaus Hagendorf points out that for Jevons the prices of commodities should be proportional to their relative marginal labour contents and argues that this marginalist interpretation of the labour theory of value is the most scientific one to adopt.1. 1. Is Klaus Hagendorf's Claim Justified? Readers will be aware that the conventional interpretation of the labour theory of value emphasises Marx's definition of the value of a commodity being the average amount of labour that society has to devote to its production.The average amount of labour required to make something is not necessarily the same as the marginal amount of labour. The average labour required can in principle be above or below the marginal labour, so the issue of whether to use marginal or average labour content as the definition of value is not theoretically vacuous.Klaus Hagendorf goes on to argue that the Soviet economist Novozhilov was right to redefine the labour theory of value in terms of marginal labour content because this is the appropriate definition for socialist planning. Marginalist economics, Klaus Hagendorf argues, while it is not an appropriate theory for capitalist economy, it is the right theory to use for resource allocation in a socialist economy. In a capitalist economy, he says, monopolistic restrictions mean that marginalist theory is not appropriate, but it does potentially allow a way of computing the optimal allocation of resources in a socialist economy.This thesis of Hagendorf obviously has quite a long and respectable pedigree. Lange (1938), one of the most forceful Western theoretical advocates of socialism in the 1930s, argued from basically the same position as did Dickinson (1933). As economists trained in the marginalist tradition, they used this paradigm to structure their arguments for socialism. But they did not mix this with the labour theory of value. By the time Novozhilov was expressing his ideas in the 1950s, Lange was working for the socialist government in Poland and went on to hold high government office there. If it seems to us now to have been a genuine innovation for Novozhilov to combine marginal arguments with the labour theory of value in a planning context, it is perhaps worth recalling that this is not so far from what Lange was working on in the 1950s and 1960s (Lange 1969) so these sorts of approaches seem to have been part of the spirit of the age among Com-econ economists of the period. …