[OPE-L:4972] RE: Expanded Reproduction

From: Drewk (Andrew_Kliman@msn.com)
Date: Mon Feb 19 2001 - 18:37:09 EST

In reply to OPE-L 4968.

Yes, Paul (Zarembka), my question to you is similar to my question
to Fred "in that you are looking for a criterion outside of two
positions to settle an
issue.  If we get past the above, who decides (a la third thesis
on Feuerbach)?"  I hadn't thought of them as the same or similar
questions until you pointed it out but, of course, you were right.

As for whether Marx's schemes of expanded reproduction provide (in
my view) a proof or the basis of a proof, I think the answer is
"both."  I wasn't referring to the numerical examples per se
(though I could -- see below), but to Marx's demonstration that Ic
doesn't pass through any (extra-departmental) market and is thus
not limited by the extent of demand in those markets.

The output of Dept. II is limited by the demand for consumer
goods.  The portion of Dept. I's output that goes to Dept. II is
limited by the growth of Dept. II, and thus, it is ultimately
limited as well by the demand for consumer goods.  None of this is
true of the portion of Dept. I's output that re-enters that Dept.
It is pure production for production's sake -- mining equipment to
produce coal, coal to produce steel, steel to produce mining
equipment, etc.   It can grow independently of personal
consumption since its demanders are capitals, not persons.

But there is also a numerical example of this phenomenon in Marx's
work -- his First Example of expanded reproduction (_Capital_ II,
pp. 586 ff, Vintage).  You write that

"In Marx's illustration, growth of Dept. I does NOT outstrip the
growth of Dept. II (see last chapter of Vol. 2, end of the
section: Marx's "First" illustration -- the more complicated
illustration in which the organic compositions differ between the
departments -- grows 10% annually for Dept. I, ditto for Dept. II,
and ditto for the total)."

Your interpretation of the example is the traditional one, to be
sure, but it is not exactly right.  Dept. I grows by 10% in
*every* year.  Dept. II grows by 10% in every year *except* the
first.  In the first year, it grows by just 6.66...%.

Now, you may say "big deal," that this is just a disequilibrium
blip or something.  But once the dynamics involved in this
initially-lower-growth-of-Dept.-II-scenario are understood, it is
not hard to extend the disequilibrium blip ad infinitum, so that
Dept. II *continually* grows slower than Dept. I, and has a growth
rate that converges with that of Dept. I only in the limit.

I know it isn't hard because I have done it.  I'm referring to the
proof (in my view) I presented last year on this list.  It is
really just a matter of "stretching out" the what seems to be an
"initial adjustment" in Marx's example.  So it is in this sense
that Marx's schemes provide not only a proof but also the basis
for a different proof (e.g., mine).

Now, as long as technology and real wages are constant, Dept. II
must EVENTUALLY (at t = infinity) grow as fast as Dept. I.  But
not until then.  And not because of the growth of Dept. I being
limited by consumer demand.  Rather, Dept. II must grow fast
enough to feed Dept. I's workers.  If Dept. I's growth rate is
*permanently* higher than Dept. II's, then Dept. I's workers
starve.  Once we consider labor-saving technical change, however,
it is trivial to show that Dept. I's growth rate can permanently
exceed Dept. II's.   (Imagine a fully automated economy.)

One more thing:  Robinson's attempt to discredit the implications
of the schema.  I don't buy it at all.  The short version of why I
don't is that she has to invoke very irrational expectations on
the part of firms.  Imagine they DO expect that demand for the
output produced by their new prospective investments will be
forthcoming.  Then they all invest and, by doing so, they
themselves are bringing forth the additional demand.   The steel
producers buy coal because they expect additional demand for steel
from the mining equipment producers.  The mining equipment
producers buy steel because they expect additional demand for
mining equipment from the coal producers.  And the coal producers
buy mining equipment because they expect additional demand for
coal from the steel producers.

The only way for the Robinson story to work is if the firms think
wrongly that the demand will not be forthcoming.  Then they don't
invest and demand is insufficient as a result of a self-fulfilling
prophecy.  But why should they think like that?  They don't read



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