[OPE-L:7553] Re: von neuman growth

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Tue Aug 27 2002 - 14:32:40 EDT

Paul C writes in 7550:

>They are both an reflection and a cause of it. Accumulation is
>not regulated by an average rate of profit but by the portion of
>the profitability PDF that is higher than the prevailing rate of
>interest. If this is low enough it will generate higher capital
>composition ratios.

Yes but an increasing capital composition ratio does not necessarily 
imply that the ratio of the physical surplus to the physical stock of 
capital is falling. Brenner suggests that this latter thesis has a 
Malthusian character and that Shaikh's critique of the Okishio 
Theorem also has that character. But I have not read the debate 
between Brenner and Ajit Zacharias in a recent RRPE, though I think I 
have good sense of what they are saying. Interestingly, there has 
also been no discussion of Okishio's own reflections on his theorem 
in the Cambridge Journal of Economics last year.

>von Neumanns concept is that the maximal rate of profit and the
>maximal growth rate are equivalent. Assume some small
>temporary reduction in consumption, and for a period
>accumulate any profit over and above this reduced consumption
>level. The growth rate will accelerate up to the limit set by
>the maximal rate of profit. At any rate less than this the
>capitalist consumption can then be set to grow at this rate.
>For instance allow an initial 5% reduction in capitalist
>consumption. then after a sufficient delay you could set
>capitalist consumption to grow by 95% a year.

wow. I wish my math intuition was good enough to see that.

>  >
>  >
>  >This is in no way contrary to the labour theory of value. If
>  >there is no human labour input, the labour theory of value
>  >simply does not apply to this case.
>  As Pack presents the case, what this 'model' shows is that the
>  elimination of living labor from the process of production need not
>  lead to a collapse in the rate and mass of profit and thus the
>  breakdown of the capitalist system.
>I dont see anything controversial about this other than the
>hypothesis that living labour can be completely eliminated.

What is interesting to me is that if one does not assume that the 
ratio of the physical surplus to the physical stock of capital is 
falling and one uses simultaneous equations, it would be difficult to 
demonsrate a FROP as the economy approaches full automation. But one 
could demonstrate a FROP quite easily on TSS assumptions.

>No, because we are talking about two different modes of
>production. The capitalist mode of production employs
>labour and exploits the labourers to make profits.
>The hypothetical future mode of production involves
>only a class of rentiers who employ robots to make
>profits. Under these circumstances robot activity would
>become the source of profit.

Well because the appropriation of unpaid labor time is the measure of 
wealth in bourgeois society, the approach to full automation could 
reduce the profit rate even if the ratio of the physical surplus to 
the the physical stock of capital was rising.

Marx's point seems to be that as the technical possibilities of 
automation become available, the appropriation of unpaid labor time 
becomes a miserable foundation for the development of wealth and 
these automatistic forces of production. That is, according to Marx's 
theory, the capitalist economy could never achieve full automation 
without erupting into catastropes and crises.

But this still leaves the question which I put to you in my last post:

  Wouldn't Gil say that this Dmitriev/Pack thought experiment shows 
that private profit results fundamentally from the differential 
ownership of scarce assets, not the exploitation of living labor in 
the process of production?

>  >
>  >What price structure could the above economy have that
>  >entailed not profit?
>  Prices could be assigned to goods, but would there be a tendency
>  towards the market's own generation of so called prices of production
>  in a fully automated economy?
>  ------------------------------
>I am skeptical about prices of production even in capitalist
>economies. The issue is not that however, it is whether the
>mean profit ratio, whatever the sectoral distribution of profit
>ratios, could be anything other than positive given the i/o
>matrix you specified.

Yes you are right. The problem may be one of formal resemblance: the 
profit which we we would have in this hypothetical fully automated 
economy seems to be no different in character than the profit we have 
in a labor exploitative economy. But profit is not necessarily 

Thanks for the as always stimulating reply.


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