The TSSI is an attempt to vindicate Marx by claiming previous orthodox interpretations of Marx’s theory are wrong (Nitzan and Bichler 2009: 106). But the essence of this is to simply re-intepret or redefine the meaning of labour value (Nitzan and Bichler 2009: 106).
Another crucial aspect of the TSSI is that it treats factor input prices in a temporal and not simultaneous manner (Nitzan and Bichler 2009: 106). The orthodox “simultaneous” treatment of the prices of factor inputs holds that they should be measured by current prices at the time of final production of the output commodity and not at their prices when purchased. The TSSI instead holds that prices and labour value of factor inputs should be measured at the time at which they were purchased (Nitzan and Bichler 2009: 107).
But, crucially, how does the TSSI relate labour value to price?
Nitzan and Bichler argue as follows:
“…[sc. the] TSSI really is more of an accounting device than a scientific proposition. The definitional nature of the TSSI is evident from its second assumption. According to this assumption, Marx had in mind not two systems, but one. Recall that, in the standard dual-system view as formalized by Bortkiewicz, labour values and prices of production are determined separately, each in their own distinct system, and that the question is whether or not the former can be mathematically ‘transformed’ into the latter. This question does not even arise in the TSSI. Here, there is only one system for both prices and values and therefore nothing to transform in the first place.Surplus value is then defined merely by subtracting the money value of constant and variable capital from total current money revenues (Nitzan and Bichler 2009: 108). Labour is by definition, in the TSSI, assumed to create the surplus value (Nitzan and Bichler 2009: 108). The whole system, Nitzan and Bichler rightly argue, is utterly circular.
The language of the last sentence is a bit deceptive. In fact, the single system articulated by the TSSI does not have prices and values. It has prices as values. The distinction is crucial. The conventional Marxist approach argues that labour values are the cause of prices. This causal link is meaningful because the definitions of the two magnitudes are different. Prices are counted in money, whereas values are counted in labour time. The two magnitudes could be used interchangeably – but only if the theory is correct.
The setup of the TSSI is completely different. Here, there is no point in asking whether or not prices are equal to values, simply because values are defined by market prices.” (Nitzan and Bichler 2009: 107–108).
Nitzan and Bichler point out how empirically worthless the TSSI is:
“… since value is made proportionate to both price and labour time, it follows that prices are proportionate to labour time and that the labour theory of value is true before we even begin. Kliman and McGlone (1999: 44) claim that this is a ‘circular, Hegelian type’ of explanation, although it isn’t clear how this supposedly dialectical technique differs from the positive neoclassical habit of defining the quantity of capital by its price or the marginal product of labour by the wage rate. Given these considerations, it is perhaps little wonder that, while the definition of force enabled Newton to accurately describe, explain and predict the movement of actual bodies, the concepts of utils and labour values enable their theorists to say pretty much nothing about the actual movement of prices.If the TSSI simply defines labour values as equal to price by definition then it has reduced Marxist theory to an empirically empty tautology. It has no explanatory power and adds nothing of any importance to economic science.
Proponents of the TSSI argue that this is what Marx had in mind. And maybe they are right. But if that was Marx’s intention, it seems unclear why he would bother to call the result a theory of value, let alone a labour theory of value. The TSSI says nothing about labour, save for asserting that labour creates all values. And it is not a scientific theory in the sense of cause X (value) explaining consequence Y (price). It merely states the truism that current money prices are the sum of past money prices, plus a deviation.
Writers who advocate this approach emphasize that they do not claim Marx’s value theory to be empirically valid. Their only purpose is to show that his framework is logically consistent and fully in agreement with his analytical claims. But in the process of achieving this purpose, they seem to have shifted into reverse. Whereas Marx’s labour theory of value claims to reason phenomena according to their ‘essence’, the TSSI advocates move in the very opposite direction. Not only have they turned his theory into an irrefutable tautology, but by defining labour values in price terms, they have made it practically impossible to transcend the very appearance they wish to explain. They have ended up with a dogma.” (Nitzan and Bichler 2009: 109).
By the same sleight of hand, we could claim that all money prices are all equal to the amount of socially necessary energy needed to produce them and that therefore all commodity prices are really just explained by quantities of energy. You could just as easily construct, in a manner similar to the TSSI Marxists, a set of tautologous propositions that prove that the sum of prices equals the sum of energy values by reducing this to an idiosyncratic and empirically empty pure mathematical identity (in other words, by an analytic mathematical proposition merely true by definition). But few intelligent people would be fooled by this rubbish, and I suspect not many are fooled by the TSSI.
Nitzan, Jonathan and Shimshon Bichler. 2009. Capital as Power: A Study or Order and Creorder. Routledge, Abingdon, UK and New York.