Dimensional analysis of price-value correspondence: a spurious case of spurious correlation
In labor theory of value there are empirical studies showing strong association between labor values and market prices. Some critics (Kliman 2002; Diaz and Osuna 2007, 2009) have questioned such empirical findings because: a) there is a problem of spurious correlation involved, and b) measures of association vary with changes in the physical units of the analyzed merchandises. We shall see that there is a difficulty stemming from the definition of the problem as well as the question of the dimension of the mathematical models used. Our main conclusions state that critics are wrong, and empirical studies are solid enough. These conclusions will be supported by two reasons: a) the existence of a spurious correlation does not apply to this problem according to the dimensional analysis; and b) dimensional analysis is essential to adequately pose the problem of price-value association and thus to obtain measures that do not change with variations of units of measurement.
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| Format: | Digital revista |
| Language: | English |
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Universidad Nacional Autónoma de México, Facultad de Economía
2010
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| Online Access: | http://www.scielo.org.mx/scielo.php?script=sci_arttext&pid=S0185-16672010000400006 |
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| Summary: | In labor theory of value there are empirical studies showing strong association between labor values and market prices. Some critics (Kliman 2002; Diaz and Osuna 2007, 2009) have questioned such empirical findings because: a) there is a problem of spurious correlation involved, and b) measures of association vary with changes in the physical units of the analyzed merchandises. We shall see that there is a difficulty stemming from the definition of the problem as well as the question of the dimension of the mathematical models used. Our main conclusions state that critics are wrong, and empirical studies are solid enough. These conclusions will be supported by two reasons: a) the existence of a spurious correlation does not apply to this problem according to the dimensional analysis; and b) dimensional analysis is essential to adequately pose the problem of price-value association and thus to obtain measures that do not change with variations of units of measurement. |
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