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2017 | OriginalPaper | Chapter

The Relation Between Value and Demand in the New Theory of International Values

Author : Tosihiro Oka

Published in: A New Construction of Ricardian Theory of International Values

Publisher: Springer Singapore

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Abstract

The principal theorem of the new theory of international values for a Ricardo-Sraffa trade economy is presented and then illustrated using a two-country, two-commodity model and a two-country, three-commodity model. It is shown that the classical vision of values as independent of demand is preserved, even when international trade takes place. In other words, values are mainly determined by costs of production or, ultimately, by technology. The values are, however, not determined uniquely, and demand plays a role in selecting a set of values from among those that are admissible under present technology and mark-up rates. Three different production possibility frontiers are introduced: R-efficient locus, physical maximal frontier and capitalistically feasible frontier. It is argued that distinguishing among these three frontiers is necessary in order to comprehend the role of demand in determining international value. Lastly, the similarity of this relation of value and demand to that of rent theory is pointed out.

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Footnotes
1
Here, \(\boldsymbol{z} \geq \boldsymbol{ y}\) means \(\boldsymbol{z} \geqq \boldsymbol{ y}\) and z i  > y i for at least one component i.
 
2
See Definition 3.3 in Chap. 1 of this volume.
 
3
When the actual rate of growth for the technique τ is different from its rate of profit, the actual production possibility set will be different from \(\mathcal{P}\). This difference matters when we deal with the role of demand in determining the international value. We will return to this question later.
 
4
\(\langle \boldsymbol{y},\boldsymbol{p}\rangle\) and \(\langle \boldsymbol{q},\boldsymbol{w}\rangle\) represent the scalar products of \(\boldsymbol{y}\) and \(\boldsymbol{p}\) and \(\boldsymbol{q}\) and \(\boldsymbol{w}\) , respectively.
 
5
This theorem is equivalent to Theorem 3.4 in Chap. 1, the proof of which is presented in Appendix to Section 3 of Chap. 1.
 
6
See Definition 3.7 in Chap. 1. Shiozawa (2014) gave different definitions; an international value that satisfies \(J\boldsymbol{w} \geqq A\boldsymbol{p}\) is called ‘admissible’, and an admissible international value that satisfies \(\langle \boldsymbol{y},\boldsymbol{p}\rangle =\langle \boldsymbol{ q},\boldsymbol{w}\rangle\) is called ‘regular’ (Shiozawa 2014, p. 351).
 
7
In Fig. 4, PQR is the RFF, TWV is the PMF, and TUV is the CFF.
 
Literature
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go back to reference Ricardo, D. (1951). On the principles of political economy and taxation. In P. Sraffa (Ed.), The works and correspondence of David Ricardo (Vol. I). Cambridge: Cambridge University Press. Ricardo, D. (1951). On the principles of political economy and taxation. In P. Sraffa (Ed.), The works and correspondence of David Ricardo (Vol. I). Cambridge: Cambridge University Press.
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Metadata
Title
The Relation Between Value and Demand in the New Theory of International Values
Author
Tosihiro Oka
Copyright Year
2017
Publisher
Springer Singapore
DOI
https://doi.org/10.1007/978-981-10-0191-8_3