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Testing Marx with Input Output Tables

Testing Marx with Input Output Tables

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Published by Paul Cockshott
Evaluation of the long term predictions of marxian economics applied to the UK from 1855 to 1985
Evaluation of the long term predictions of marxian economics applied to the UK from 1855 to 1985

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Published by: Paul Cockshott on Dec 04, 2012
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economic data overan extendedhistorical timespan,from the mid-nineteenth to thelate twentiethcenturies, theauthors use‘quantitative’ or‘empirical’ Marxisttechniques to testkey Marxian thesesand categories.They argue thatMarxian economicshas nothing to fearfrom a confronta-tion with empiricaldata.
Paul Cockshott, Allin Cottrell& Greg Michaelson
Testing Marx:Some new results from UK data
Quantitative or empirical Marxism has passed through threemain phases in the postwar West.
In the first phase, statisticalmeasurement of the economic indices of Marxist politicaleconomy was pioneered by Joseph Gillman (1957) who usedNational Income figures to obtain estimates of the rate of surplusvalue, organic composition of capital and rate of profit for the USeconomy. The measurements presented in this paper draw on hismethodology. In his Ph.D. dissertation, Mage (1963) also tackledthe rate of profit in the US using methods broadly similar toGillman’s.This work was not immediately followed up, but in the 1970sa second phase opened as the empirical reality of a falling rate of profit in Britain drew attention from orthodox economists (e.g.Panic and Close, 1973) as well as Marxists. Among the latter themost notable contribution came from Glyn and Sutcliffe (1972).But instead of the ‘classical’ Marxian measures, Glyn and Sutcliffeused surrogates such as the Wage Ratio and the Share of Profits incompany product. These measures seemed to show the rate of exploitation to be declining, perhaps in consequence of tradeunion power. Whereas Gillman had distinguished in his estimatesof the rate of surplus value between productive and unproductive103
Capital & Class 
labour, following Marx, the categories used by Glyn and Sutcliffeaggregated all wage incomes.
This could mask an actual increasein the exploitation of productive workers behind a change fromproductive to unproductive labour. This objection was raised by Bullock and Yaffe (1975) who used a comparison of the rates of change of take home pay and of productivity to indicate that therate of relative surplus value had risen over the same period. Thesame conclusion was arrived at on different grounds by Bacon andEltis (1976), whose analyses of the share of purchases by thenon-industrial sector, led them to conclude that the main problemof the British economy was the shift from productive tounproductive employment. This, they said was the primary causeof the decline in profitability.The third phase of empirical Marxism (roughly, from themid-1980s to the present) is exemplified by the work of Shaikh(1984), Moseley (1991) and that collected in Dunne (1991). Oneof the themes here is a revitalisation of the classical Marxianlabour theory of value, along with a reassertion of the relevanceof the distinction between productive and unproductive labour.This paper is conceived as a contribution to this ‘third phase’.
 Weoffer a set of time series for the classical Marxian indices, covering a longer run of history than most other contributions (cf.Freeman, 1991, whose data are drawn from 1950–1986). We alsooffer some arguments, complementary to those in the existing literature, for the relevance and validity of data of this sort. And we show how the data may be used for the testing of Marxiantheses, taking for illustration those concerning the ‘immiserisationof the proletariat and the tendency for the rate of profit to fall.
 Justifying empirical Marxism
It is noteworthy that Marx himself did not hesitate to useempirical data to measure the rate of surplus value. He estimated,using the prevailing wage rates, costs of constant capital andfinal selling price for No.32 yarn, that the rate of surplus value inthe Manchester cotton industry in 1871 was 154 per cent, andthat the rate in wheat farming in 1815 was just over 100 per cent(Marx, 1970: 219–220). Throughout the first volume of 
,Marx constantly uses official statistics and factory inspectors’reports to justify his theoretical claims. When dealing with theproduction of absolute surplus value he produces statistics
Testing Marx 
105comparing the production of absolute surplus labour in industrialEngland with feudal Romania: when dealing with theconcentration of capital he uses Income Tax statistics to documentthe concentration of wealth.Given the limitations of the then existing official statistics,however, it was not possible to estimate the average rate of surplus value for the whole economy. Only with the publicationof National Income statistics in the twentieth century did thisbecome practicable.It may be objected that the National Income statistics are givenin price terms not value terms, and that their use for calculating Marxian categories could be invalid. We believe such fears to beunfounded. We argue this on the grounds of dimensionalanalysis, the artificiality of the objection, and empirical validationof the concepts we use.
Dimensional analysis 
In what follows we will use the standard notation with the set of symbols
standing respectively for constant capital,variable capital and surplus value.If one had National Income figures in value terms, thesevariables would be measured in millions of person hours perannum. This would give them the dimension
stands for time and
for humans. Cancelling the time terms,the resulting dimension is
, or so many million people. Thismay seem unexpected, but it means that
s, c 
measure thenumber of full-time person-equivalents employed on theproduction of consumer goods
, the reproduction of constantcapital
and on the production of luxuries, new capital goods,etc.
. The value variables
measure the size andactivity distribution of the workforce.The main ratios of interest —
s'= s/v
rate of surplus value,
p' = s/(c+v)
rate of profit on a flow basis, and
o' = c/v
organic composition of capital — are all dimensionless numbers.For example
is of dimension
 which cancels out.In the case of actual National Income figures, by appropriatechoice of categories we can arrive at a monetary estimate of 
interms of £ million per annum or dimension £
. Similararguments apply to
, but computing the ratios
s’, o’ 
 will again yield dimensionless numbers. Hence on purely dimensional grounds there is no contradiction in estimating these ratios from monetary magnitudes.

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