Re: [OPE-L] Koopmans versus Kantorovich

From: Alejandro Agafonow (alejandro_agafonow@YAHOO.ES)
Date: Wed May 23 2007 - 07:08:45 EDT

> I can’t say anything about simplex method, but I should warn you about the
> efficiency losses in case of maximum utilization of equipment when there are
> other lines of production highly valued from consumers’ point of view.
> Kantorovich was right when observing that the majority of firms under
> Capitalism work at half capacity, but he was wrong when thinking that
> efficiency is mostly a thing of reaching the full capacity of production.

Cockshott: I know the argument you are making above from Kornai.

Could you indicate the reference where Kornai exposes this argument? I just have read some Kornai’s papers. Those ones where he builds the argument of the “soft budget constraint”.

> As Ludwig von Mises wrote:
> “As long as there is a more profitable employment available for the capital
> required for the expansion of production, it is reasonable for the
> entrepreneur to abstain from such a further expansion. It is at the same time
> reasonable from the viewpoint of the consumer […] If the additional capital
> required for this full capacity production can yield a higher return when
> used for another kind of production, it would be wasteful –both from he
> viewpoint of the entrepreneur and from that of the consumer as a totality– to
> use the plant’s full capacity. This would withdraw capital and labour from
> other lines of production for the products of which the demand is more
> intense […] It is the consumer who orders him not to use the “full capacity”
> of one design up to the limit at which the profit must disappear […]
> Standardization of products can go as far as the public is ready to buy the
> cheaper article rather than a more expensive article of another pattern.”
> Monopoly Prices, The
>  Quarterly Journal of Austrian Economics, vol. 1, nº 2, 1998, pp. 14-15.

Cockshott: Mises here is confusing the rate of interest with the rate of return on
real capital as many non Keynesian economists do.

Why do you think Mises confuses the rate of interest with the rate of return? Maybe, because my Austrian influence, I’m not able to understand it.

Best regards,
Alejandro Agafonow

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