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Comment by kingraoul | Hacker News Reader

I think commentators here are missing what is really exciting about this. Back in the 70s it was impossible to calculate all the labour inputs to product, so socialist economies had to refer to capitalist economy pricing. This doomed Cybersyn and any other attempt to use the LTV to work backwards.

That problem is now solved.

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Are you claiming the pricing problem is solved? That you can set prices without the information gained from market?

Yes, if you can fully track labor input, you can use LTV (Labor Theory of Value) to determine how much work went into a product and price it accordingly - that's what the poster above was referring to.

https://en.wikipedia.org/wiki/Labor_theory_of_value

But why would you base anything on an incorrect theory? If you value things by LTV, you're not going to like the results.

How would you know if there's no empiric evidence? Let me tell you, I'm not loving the results of the current pricing system, fwiw.

Well first let's agree on terms. What do you think the purpose of a price is? What should it represent?

I tend to agree with the LTV definition:

> The labor theory of value (LTV) posits that the economic value of a good or service is determined by the socially necessary labor time required to produce it under prevailing conditions

Ok, so the purpose of prices to you is not to convey information about what's needed?

That is correct! I would also posit that if that is the main point of a market pricing mechanism, I'm also not fully sold it works as intended?

As a follow-up: If we have full labor input as baseline, we have other ways to adjust the price to steer behavior. For example, we could properly price in environmental cost and steer consumption towards a socioeconomic system that can survive the environmental crisis.

I see the framing of "optimal" pricing as inherently ideological. "Optimal" for achieving which socioeconomic goal?

Pricing externalities is not a feature unique to LTV.

Is your position that your pricing is not more "optimal" than market based pricing? Just because you're using moral terms doesn't mean you're not making a value judgement.

So the purpose of prices is to comply with LTV? Prices carry information from individual needs and desires in markets. And incentive production to meet that demand. What do they do in your system? My understanding from this thread and the other is basically their purpose is to comply with LTV. And also at the same time they're right because they correlate with market prices? I'm legitimately confused.

>How would you know if there's no empiric evidence?

If theres no empiric evidence, how can you claim that you can simply use LTV to price market inputs?

We can't make a claim either way without empiric evidence.

We do, however, have plenty of empiric evidence for how the current pricing mechanism works and based on that I figure it might be time to try something new?

Current pricing (as a system) is honestly pretty good, its largely the limitation of corporate liability that permits the scale to be out of balance.

Did you forget about the all of the evidence from other systems? No economic system will satisfy everyone. In the meantime I prefer one that is (more) determined by individual preference and motive vs one relying on experts who swear it will be different this time while also claiming "actually it's never been tried" and that they know better than you what you want.

You are empirically incorrect

https://www.jstor.org/stable/23602188

Are you saying the validity of the LTV is a 60 citation comment paper who's metric of correctness is correlation with market prices? And we just ignore everything else?

Prices track labor inputs extremely closely, using the LTV yields a 0.90+ correlation coefficient to real world prices.

Mainstream economics doesn’t even have a non-tautological theory of equilibrium price.

So what “everything else” are you referring to?

Well I have a lot to say but I don't see much use. Just to restare 1) LTV is correct because it correlates with the system you disagree with and that it's superior to? 2) The best evidence overturning all of the consensus and evidence against LTV is a 60 citation comment on a paper? My shittiest paper has more citations than that and it's 5 years old. Something confirming LTV would be a nobel memorial for sure.

You are arguing with a communist. The ideology / theory is just window dressing, it doesn’t matter at all, they still want to take your stuff and kill those who oppose them. There is no marketplace of ideas, just a trap.

Ad Hominem.

The problem isn't that it's impossible to calculate all the labor inputs, it's that labor inputs alone don't fully represent the price of a good. To be fair neither does supply & demand, although that seems more accurate in practice.

No, they do, with a 0.90+ correlation coefficient.

That coefficient does not apply to individual prices. It's possible literally every single good is priced incorrectly by the LTV and still get high correlation in the sector. Because (unsurprisingly), the size of an industry and the size of it's labor force is highly correlated.

https://unlearnecon.medium.com/astonishingly-poor-empirics-c...

It’s the equilibrium price.

What is your preferred alternative theory of equilibrium price?

The equilibrium price is based on both the supply and demand of a good. Demand is not really determined by the cost of labor of a good, and since demand is a component of the equilibrium price, the "value" described by the LTV cannot be the same as the equilibrium price.

Also consider that unemployment exists, thus the quantity demanded of labor is lower than the quantity supplied, meaning the price of labor is above equilibrium. If you claim equilibrium price == value, you imply that workers are paid more than the value of their labor. Heh.

No that is circular reasoning. What is the price of a good when supply and demand are in equilibrium?

The value described in the LTV is the equilibrium price, it’s not exact to real world prices because supply and demand are not exactly equal.

Sorry, what is circular reasoning? You don't mean my definition of equilibrium price surely. Because that's well established.

https://www.investopedia.com/terms/e/equilibrium.asp

https://en.wikipedia.org/wiki/Economic_equilibrium

https://dictionary.cambridge.org/dictionary/english/equilibr...

It's not a circular definition, unless you also think "freezing point" is a circular definition because it refers to the freezing point of a substance. Supply and demand are both functions dependant on price, equilibrium is the intersection point Qd(P)=Qs(P).

If supply and demand set the equilibrium price, and "value" is just defined as that equilibrium price, labor does zero explanatory work. You must explain how socially necessary labor time independently calculates the price before looking at supply and demand. The moment you say "value is just whatever price supply and demand balance out at," you have abandoned the LTV and adopted neoclassical market theory while keeping the word "labor" as an empty label.

If you don't use "equilibrium price" to mean the equilibrium of supply and demand, you're just using it as a synonym for "value" as defined in the LTV. Which is meaningless.

Btw Marx himself said that "value" is NOT equal to equilibrium price. If price equaled LTV value at equilibrium capital intensive industries with few workers would have abysmal profit rates compared to labor heavy ones. Since market competition equalizes profit rates across industries, equilibrium prices permanently diverge from labor values. LTV describes a theoretical cost-anchor, not the equilibrium price.

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