Does the Labour Theory of Value Explain Economic Growth? A Modern Classical View

The labour theory of value (LTV) is the cornerstone of the classical and Marxian political economy. In this respect macroscopic phenomena, which include many distinct production processes evolving over long gestation periods, conceal the transformation of labour values into their monetary expression (prices). Consequently, the use of the LTV on a grand and dynamic scale is usually considered inapplicable in the construction of macroeconomic models. However, many studies have corroborated the dynamic aspects of the LTV and probed for a reduction in the dimensionality of macroeconomic models. In this paper, we restate the dynamic aspects of the LTV over time and ascertain its utility as a long-run macroeconomic tool. The way to proceed is to model the divergence of actual prices and quantities from their equilibria and establish that the long-run behaviour of the system mirrors the long-run movement of the labour values