Sekerka - Kyn - Hejl:   Price Calculations



2. Formulating the Problem


The problem of price structure can be roughly divided into two parts:

a)  relation between the levels of wholesale and retail prices,

b)  relative prices of different products.

First of all, the existing price structure is characterized by a double level of prices, i.e. by a substantial gap between the levels of wholesale and retail prices. The formation of the double level price system was due to specific conditions of the past period, although the economic theory undoubtedly contributed to it as well(1). There is no uniform view on the usefulness of the double level price system, but it seems that most economists in socialist countries do reject it and argue in favor of the uniform one.

The problem of relative prices is much more complicated. There is much broader variety of opinions without any clear consensus. What most economists do agree with, is that the rational price system should be based on some uniform rule for distribution of the social surplus into prices. What specific rule it should be is, however, subject to controversy. The choice of the uniform rule determines the so-called price-base, sometimes also called normal or normative price. The following types of price bases have been proposed:


Labor Value price

 Relative prices are proportional to the ”socially necessary costs of abstract human labor”. This means in practice that the social surplus is distributed to prices in proportion to wages. In other words the uniform “rate of surplus” is assumed.

Cost price

Instead of  Cost Price(2) sometimes the term "Averaged Value" is being used.  Relative prices are proportional to the cost of production, which also means that the Social Surplus is distributed in such a way that the profits have an equal share in all the prices.

Production price

The term production price is used here in the sense close(3) to the Marx's 3rd volume of Capital. This price assures an equal rate of profit (that is equal profit to production funds ratio) in all branches of the economy.

Two-channel price

This is the combination of the value and production price. One part of the surplus product is distributed in proportion to wages and the other part in proportion to production funds.

Income price

Income price makes no distinction between wages and surplus and allocates the whole gross income into the prices according to the principle of the uniform rate of gross income (gross income to production funds ratio).

In addition to the above-mentioned types of prices some authors have proposed other types of prices. These proposals were mostly just modifications of the types mentioned above. For example it was the production price with some differentiation of  the rate of profit across the branches of the economy.


Very special case are the so-called dual or shadow prices, based on the linear programming solution of the optimal plan problem. The dual prices are frequently discussed today. They are proposed either in the pure form (Kantorovich) or combined with some of the above mentioned types of prices (Novozhilov, Niemchinov).

Dual prices are of great importance for economic planning and they could become, as Novozhilov(4) shows, an apt instrument for the coordination of decentralized decisions. However, there still exist some unsolved theoretical problems, the appropriate data for linear programming task have not been collected and it would also requires much more complicated computer programs. Another problem with shadow prices is also in the fact that until now no social optimization criterion has been formulated.

Although we firmly believe that shadow prices will be in some way applicable in the future, we have not been able to include them today in our price calculations. While data for calculation of dual prices are not available, the existing data that were gathered for Input-Output analysis complemented with easily obtainable data on stocks of production funds are sufficient for calculation of value, cost, production and other similar types of prices.


Only very few economist today argue in favor of the cost price type, which is to a certain degree similar to the present method of price formation.(5) Some economists prefer the labor value price type (e. g. Strumilin in the USSR., Mateev in Bulgaria) and many stand for the production price (Bielkin in the USSR, Sik and Ferianc in Czechoslovakia). The two-channel price has been proposed in Hungary by Csikos-Nagy. In Yugoslavia Korac came with the idea of the income price, however some other Yugoslav economists are rather in favor of the production price (Maksimovic, Pjanic).

All these theories of different types of prices began to appear in the early sixties when it became acceptable to use mathematics in the Marxian economics. This is understandable, because without mathematics would be any discussion about diverse price types of little value. The idea that under socialism prices should be based on labor value was already voiced a long time ago. Yet such postulates had no practical sense, so long as we have not had at out disposal the means and methods which could be used to calculate the labor value or some other type of price basis.


Several different  price types have been already mathematically formulated, and in some countries (e.g. the USSR and Hungary) were even experimentally calculated. In 1964, these calculations were undertaken also in Czechoslovakia. The whole procedure consisted of several phases:

1)Formulation of the problem and clarification of some economic questions,

2) choice of price types and their mathematical formulation,

3) preparation of statistical data,

4) development of computer programs,

5) Computation, and

6) final evaluation of results.

A detailed description of all working phases and the analysis of the results will be published in the Materials of the Econometric Labo­ratory of the Czechoslovak Academy of Sciences. The present article is limited to the description of some basic problems and main results.









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