[OPE-L:1589] Re: Temporality vs simultaneity

Duncan K Foley (dkf2@columbia.edu)
Wed, 27 Mar 1996 12:28:38 -0800

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Perhaps it would help the discussion about the FRP to relate the examples
to some of the existing ideas in the literature. Everyone seems to agree
that Marx was on the right track in viewing the engine of technical
progress under capitalist social relations as the competitive pressures
on individual capitalists to adopt cost-cutting innovative techniques. In
order to decide whether a technique is going to cut costs, the individual
capitalist has to cost it out using some prices of inputs (in the
simplest case, a wage and a profit rate). The classical approach to this
problem in the literature is to suppose that the economy is in a
steady-state at which there are stable levels of the wage and profit
rate, and that capitalists use these levels to cost out prospective
techniques. Those that are cost-cutting in this story are called
"viable"; those that are not cost-cutting at these prices are called
"non-viable", and the presumption, in this context, is that the
individual capitalist will adopt only viable techniques. Then Okishio,
Roemer, et al show that the universal adoption of a viable technique will
lead to new steady-state prices at which the profit rate is no lower,
assuming that the real wage in the sense of the workers' basket of
consumption goods stays constant. Gerard Dumenil and I have argued that
it may be more relevant to real capitalist economies to hold the value of
labor-power in the sense of the wage share of value added constant than
to hold the real wage constant: some viable techniques will lead to a
lower profit rate if the value of labor-power in this sense is constant.
The main argument for this way of looking at the problem seems to me to
be historical, since this is roughly what tends to happen in the course
of capitalist economic development over a long horizon.

It's not clear to me exactly what wage and profit rate would be
appropriate to cost out candidate techniques if capitalists were aware
that they were operating in a non-steady-state environment. In principle
they should try to predict the wage and profit rate that will rule during
the period when the new technique will be in operation, which might be
quite different from the wage and profit rate ruling at the time the
decision to innovate is made. It might help the discussion if examples
and scenarios were quite explicit about what expectational assumptions
are supposed to be operating, since without this type of assumption you
can draw almost any conclusion you like.