[OPE-L:5187] Re: capacity utilization and the transfer and depreciation of the value of means of production

From: Steve Keen (s.keen@uws.edu.au)
Date: Fri Mar 16 2001 - 13:06:05 EST


(a) Jerry has noted an important issue here--both for economic analysis in 
general and the LTV in particular. Capacity utilisation *is* normally well 
below 100%, and in fact during America's recent boom the level has fallen 
rather than risen.

The Post Keynesian economist Kornai has developed convincing arguments as 
to why capacity utilisation should be less than 100% in capitalism, even 
during extreme booms like the Internet Bubble.

However, for the LTV--which argues that machines simply transfer the value 
they contain to the output, this raises a dilemma which Jerry identifies:

   Indeed, one could easily show
>that, assuming a fixed "lifetime" for constant fixed
>capital, if there is severe underutilization of capacity
>then the value transferred by the means of production
>will be *less than* the value of the means of
>production. Thus, value can be "lost" if the means
>of production are underutilized to the extent that the
>fixed capital "dies" (of old age) before the full value of
>that fixed capital has been transferred to output.
>In the aggregate, this would suggest a systematic
>loss of value.

This is quite valid. The LTV has a form of conservation built in to it, but 
that sets a maximum transfer of value by machinery; if capacity utilisation 
fluctuates, and there is some level of "socially necessary capital time" in 
LTV analysis, then machinery will on average transfer *less than* its value 
to output.

I see this as an error in the analysis, of course--because I reject the 
argument that the depreciation of a machine sets the limit for its value 
creating abilities. But LTVers might see this as yet another argument for 
the long term tendency for the rate of profit to fall.

(b) On Jerry's reply to my query:
PS: In reply to Steve K's [5183-4] -- I view use-value
>as quality, exchange-value as quantity, and value
>as a unity of quality and quantity (this is why I
>suggested at one point that use-value stands in
>opposition to exchange-value -- a point Chris A
>and I discussed last year).
>Thus, my perspective is that use-value is not
>quantitative, BUT I am willing to listen to your
>arguments as to why:
>a) you think this is a logical extension of Marx's
>philosophy; and
>b) why you think it is a superior way of
>conceptualizing use-value.
>I.e. I want to hear the arguments themselves rather
>than the assertions.

Fine; I'll try to put something together on this later on today; I'm 
meeting a publisher this morning so that's likely to dominate what I do 
before then.


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