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CapitalismCompetition, Conflict, Crises$
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Anwar Shaikh

Print publication date: 2016

Print ISBN-13: 9780199390632

Published to Oxford Scholarship Online: March 2016

DOI: 10.1093/acprof:oso/9780199390632.001.0001

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Competition and Inter-Industrial Relative Prices

Competition and Inter-Industrial Relative Prices

(p.380) 9 Competition and Inter-Industrial Relative Prices

Anwar Shaikh

Oxford University Press

The subject of this chapter is the classical theory of relative prices and supporting evidence. It is shown that production price‒labor time deviations do not arise per se from competition, private property in the means of production, equalization of labor incomes, capitalist relations, positive profits, or even from the equalization of profit rates: they arise solely from differences among vertically integrated (direct and indirect) capital‒labor ratios whose dispersions tend to be small. Various distance measures are considered, and empirical evidence is presented to the effect that the distances between market prices, direct prices (prices proportional to integrated labor times), and prices of production are in the range of 13% to 15%. Temporal changes in normalized market, production, and direct prices are shown to be similarly close. Indeed, at an empirical level even individual Sraffa standard prices are essentially linear. The overall results provide strong support for the classical theory of relative prices.

Keywords:   relative prices, labor time, capital–labor ratios, Sraffa, vertical integration

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