Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

The Dynamics of the Labour Theory of Value

Chatzarakis Nikolaos, Trinity College, Dublin & Aristotle University of Thessaloniki
Tsaliki Persefoni , Aristotle University of Thessaloniki
Tsoulfidis Lefteris, University of Macedonia

The labour theory of value (LTV) is the cornerstone of the classical and Marxian political economy for it explains the creation and valuation of wealth in capitalist economies and it remains the chief analytical tool in investigating economic phenomena. In this respect macroscopic phenomena, which include many distinct production processes evolving over long gestation periods, conceal the transformation of labour values into their monetary expression {prices}. Consequently, the use of the LTV on a dynamic scale is usually considered inapplicable in the construction of macroeconomic models and the analysis is usually conducted through multi-dimensional multi-sectoral models. However, many studies have corroborated the dynamic aspects of the LTV and probed for a reduction in the dimensionality of macroeconomic models. In this paper, on the one hand, we restate the dynamic aspects of the LTV over time and, on the other hand, ascertain its utility as a long-run macroeconomic tool. The way to proceed is to model the divergence of actual prices and quantities of commodities from their equilibria in a multi-sectoral economy and establish that the long-run behaviour of the system mirrors the long-run movement of the labour values.

Area: Eshet Conference

Keywords: labour theory of value, heterodox microeconomics, micro-founding of economic growth, dynamic input-output analysis

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