Optimality of profit-including prices under ideal planning.
Although prices calculated by a constant percentage markup on all costs (nonlabor as well as direct-labor) are usually admitted to be more realistic for a competitive capitalistic model, the view is often expressed that, for optimal planning purposes, the "values" model of Marx's Capital, Volume I, is to be preferred. It is shown here that an optimal-control model that maximizes discounted social utility of consumption per capita and that ultimately approaches a steady state must ultimately have optimal pricing that involves equal rates of steady-state profit in all industries; and such optimal pricing will necessarily deviate from Marx's model of equal rates of surplus value (markups on direct-labor only) in all industries.
Samuelson
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Department of Economics, Massachusetts Institute of Technology, Cambridge, Mass. 02139.