In a previous post, I briefly introduced Marx’s value theory. Values and prices were considered at the aggregate level without breaking the economy down into different sectors. This enabled a focus on basic macro relationships. In this post, the economy is disaggregated into several sectors. Following the ‘temporal single-system interpretation’ (TSSI), aggregate surplus value is taken to determine the average rate of profit in the economy, prior to the determination of individual prices. If free capital mobility is assumed, there is a tendency for rates of profit to equalize across sectors. This causes a divergence of prices from values in individual sectors. Nevertheless, key aggregate equalities continue to hold, and the divergence of prices from values occurs in a systematic way, according to the composition of capital in each sector. The exposition closely follows a 1999 paper by Andrew Kliman and Ted McGlone entitled, ‘A Temporal Single-system Interpretation of Marx’s Value Theory’, published in the Review of Political Economy.

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