# Re: [OPE-L] SV: [OPE-L] what is irrational in the functioning of capitalism?

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Nov 30 2006 - 12:09:18 EST

```Ajit and others may be interested in this post I sent four years ago to OPE-L

http://ricardo.ecn.wfu.edu/~cottrell/OPE/archive/0208/0056.html

A model of total automation; Spencer Pack gives a simple example.

28      56      0       0
16      0       48      0
12      0       0       8
56      56      48      8

What we have in the first column is inputs of computers (28,16,12, 56
total) needed to make 56 computers, 48 units of gold, and 8 units of
wheat.

That is, 28 computers => 56 computers
16 computers => 48 units of gold
12 computers => 8 units of wheat
56 computers => 56 computers, 48 units of gold, 8 units of wheat

The economy is in simple reproduction because it produces only 56 new
computers, and 56 computers are needed to produce computers, gold and
wheat at the same scale again.

There is no direct labor in this economy; there is not even indirect
labor as computers, gold and wheat are themselves the products of
commodities--the literal production of commodities by commodities.

According to Pack this economy can be solved for relative prices and
a uniform profit and absolute prices as well if we assume by
definition that the price of one unit of gold equals \$1.

(1 + r)  (28pc) = 56 pc
(1 + r)  (16pc) = 48
(1 + r)  (12pc) = 8pw

r is the profit rate while pc and pw are the unit prices of computers
and wheat.

From the first equation we know the profit rate has to be 100%; price
of one computer is \$1.50 and price of one unit of wheat is \$4.50.

So contrary to the LTV, there can be a positive rate of profit and
relative prices in a totally automated economy.
```

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