[OPE-L:638] Re: Forms of Tech Change(Digress)

Michael Perelman (michael@ecst.csuchico.edu)
Sun, 3 Dec 1995 11:32:06 -0800

[ show plain text ]

Jerry asked me:
> (1) Why would "in the end" *all* of the firms in that branch of production
> go bankrupt?

There is no necessity that all firms will go under, but during the late
19th century, it was a common assumption that that would be the case --
possibly because each firm worried that it might be among the losers.
> (2) If the above scenario was played out in all branches of production,
> wouldn't *all* capitalist firms go out of business and the system
> "breakdown"?

Yes, of course.

> (3) *In practice*, doesn't the diffusion of new technologies take some
> time and isn't there resistance frequently to new process technologies
> from management and labor alike?
Yes, they do take time, but this new technology effect is coupled with
pressure to drive prices down toward marginal cost -- if I might use the
neo-classical imagery. As a result, firms cannot cover fixed costs. This
effect was more important in the railroads. The new technology effect was
more important in industry.

As a result, firms took cover in the rush to trusts, cartels and monopolies.
By the way, the American Economic Association was founded to justify this
trend. John Bates Clark was among the strongest advocates of anticompetitive

These writers read Marx and thought that he was far closer to the mark than
the laissez faire economists.

I can go on but I do not want to overload the list. I do think though that
it is relevent to the vision underlying Capital.

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 916-898-5321 E-Mail michael@ecst.csuchico.edu