Sekerka - Kyn - Hejl:  Price Calculations

9. Analysis of Results
On the basis of statistical data of 1962 experimental computations of price indices was undertaken according to all the above mentioned formulae and in some alternatives (depending on the (n + 1)st condition and on the choice of either purchase price or residual value of production funds). The results of these experimental computations were useful; in the first place, for the theoretical analysis of the situation in the Czechoslovak economy. Simultaneously, they have become the basis for the choice of the most appropriate type of prices in the preparation of the reform of wholesale prices that is part of the New System of Planned Management.
It is impossible to report all the findings from the experimental price calculations in this article. We shall limit ourselves to the comparison of relative prices  in  the four basic price types: labor value-, cost-, production- and income price types.
In Table 1 price indices for 48 branches and the four basic types are given. The numbers indicate — as has already been explained above — the change of average price levels in individual branches necessary for obtaining prices of the postulated type. Simultaneously, in order to have a better insight, the computed price indices for some of the most important branches are presented in a graph. In this graph the points representing the magnitude of price indices of different price types are connected for each branch. The system of broken lines of the graph then shows, how the relative prices change when moving from one price type to the other.

There are two interesting aspects of the table or graph. In the first place, it is the position of the price indices in relation to the level of 100%, which expresses (in reversed relation) the deviation of actual wholesale prices in 1962 from individual price types. We can see that, with some small exceptions, the existing wholesale prices are rather deeply below the computed price level. This is the result of the dual-price system and of the turnover tax. The abolition of the dual-price system and the introduction of the single-level price system (to be done by increasing the wholesale prices up to the retail price level) would therefore result in a considerable increase of the wholesale prices, especially in some branches.


The deviations of the computed prices from the prices existing in 1962 are very different in individual branches. Because the relative prices change when moving from one type to the other, it is difficult to judge  the difference between existing and computed prices, without expressly mentioning the price type in question.



List of Industries


Computed Indices of Four Types of Prices





Labor Value






In spite of that we can approximately divide all the branches into three groups according to the difference between the computed and actual prices.

1.  In the first group there are the branches showing the greatest difference between the actual and computed prices (at least for three types the computed prices are more than 50% higher than the existing prices) These are the following branches: 2) Coal, 4) Coke, 6) Iron and Manganese ore, 7) Non-iron ores, 8) Ferrous metallurgy, 9) Non-ferrous metallurgy, 30) Milk, 31) Meat, 33) Sugar, 36) Bakeries, 37) Confectionery and durable pastry, 44) Agriculture.

2. In the second group there are branches with a relatively small deviation (at least for three out of the four types the computed prices are not more than 20% above the prices existing in 1962). These are the following branches: 13) Pharmaceutics, 14) Engineering, 15) Electromechanical industry, 16) Means of transportation, 17) Metal consumer goods, 18) Precision mecha­nics, 20) Clothing, 25) Furniture, 26) Wood consumer goods, 27) Polygraphy, 32) Oils, fats, and soap, 41) Construction.

3. The third group consists of other branches, i.e.. e. of those, in which the price indices either oscillate mostly between 120 and 150% or in which two price indices are very low and two high (as for example in the electrical energy and heat production).

The other outstanding aspect is the character of relative prices changes according to the price types. It is clearly to be seen from the shape of broken lines in the graph. Differences of individual price types are remarkable, especially if we move from the labor value over the production price to the income price. Difference between labor value- and cost price are much less pronounced.

The slope of the lines connecting the labor value-, production- and income-prices depends obviously on the specific relation between the full wage-costs and the full funds-intensity in respective branches. Broadly speaking, four categories can be discerned(8).Where the full wage-costs are relatively low and the full funds-intensity high, then the connecting line rises steeply from the labor value price to the income price . It is so in all branches of the heavy industry, in transport, provision, and in material and technical supply.

In the chemical industry and in some branches of consumer and food manufacturing the line rises much less. There is almost no difference in the labor value , production-, and income-price in cases of milk, meat, bakeries, confectionery, textiles, electro-technical industry, agriculture, coal, building material and commerce.

Lastly, there are the branches with a relatively high labor input and low funds-intensity; here the labor value price is higher than the production and income price. These branches are: footwear, ready-made clothes, polygraphy, metal consumer goods, precision mechanics, construction, glass industry, forestry, and the wood industry.

The above data represent partial results of the first stage of price computation experiments. In the further stages, the price computations will be continued using the more accurate statistical data. It is expected that some new price problems will be solved. Introduction of a dynamic  model will be one of the most important tasks. The method of price calculations presented here, is also being used in the process of a general reform of wholesale prices.











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