[OPE-L:826] Re: Valuation Of Inputs

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Sun, 21 Jan 1996 14:08:13 -0800

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>From Duncan [825]:

> In his reply to Jerry, John says:
> >
> > With all this, I hope we do not lose sight of what we dealing
> > with here. That is, the issue is the "revaluation of inputs."
> > The basic idea is that capitalists attempt to recover the value
> > invested and not the value that it takes to reproduce the means
> > of production at any given point in time.
> >
> The phrase "attempt to recover the value invested" seems to me to need
> explanation. The competitive capitalist (the usual assumption in general
> equilibrium type models, and also apparently in a lot of Marx) cannot do
> anything to recover more value, since he has to sell at a market
> determined price. If the issue has to do with the behavior of a
> monopolist, being explicit about that will avoid a lot of misunderstanding.

OK, let's assume competitive conditions in a particular branch of
production. When a new element of constant fixed capital which has the
consequence of increasing the social productivity of labor in that
branch is introduced by one capitalist firm, what do the other firms do?

They can either:

a) purchase new constant fixed capital which allows them to, at least,
produce commodities at the new average productivity of labor in that
(I am leaving aside the case of where they can purchase _more
advanced_ elements of constant fixed capital than are being used by any
of the firms in that branch of production).

b) delay the purchase of new constant fixed capital until they have
re-gained some of the value invested in existing constant fixed capital.

Which do they do?

In a competitive market, this is (as Duncan suggests) not entirely the
decision of the individual capitalist. Sure, every capitalist would want
to recover the value invested _if they were at liberty to do so_.

I think the answer depends, in part, on *how much* the new technology has
raised the standard for productivity in that branch *in relation to* the
value invested in (what is now) morally-depreciated fixed capital.

If the gain in productivity is marginal, then capitalists could (even
under competitive conditions) delay the decision to purchase new constant
fixed capital.

If the gain in productivity is significant enough, then individual
capitalists *must* purchase new elements of constant fixed capital even
if it means that they have to take a huge loss on capital invested in
older technologies. "Older", in theory, could mean yesterday if they
purchased new means of production yesterday which have been
morally-depreciated by a huge margin between yesterday and today. Of
course, this would be a highly exceptional circumstance.

One might also reasonably anticipate a time lag under competitive
conditions as non-innovating capitalists wait to see the effect on their
firm's price competitiveness after another firm has introduced a new
productivity-increasing technology. In any event, I think the element of
_time_ has to be introduced to comprehend the possible ways in which this
process will play itself out.

In OPE-L Solidarity,