[OPE-L:1612] Temporality and Okishio

Alan Freeman (100042.617@compuserve.com)
Thu, 28 Mar 1996 11:28:58 -0800

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One last point on Bruce's numbers.

On the numbers he provides, Okishio-behaviour would not lead to a switch to
the new technology, as I previously pointed out.

I personally happen to think that Okishio-behaviour is quite close
to what really happens, but not for Okishio's reasons. In reality, a technical change
is never adopted wholesale by an entire industry but piecemeal and initially by
very small parts of the industry. The reason for this is that no technical change
can be introduced faster than the machinery can be produced to implement it.
Generally speaking a new technology is introduced over decades, not minutes
as the simultaneous paradigm implies.

A marginal change in technology of this nature has an initially small
impact and therefore, for all intents and purposes, the innovating capitalist
can assume that in the short run prices will not be affected by the introduction
of a new technique on a small scale. But the capitalists who make the change
attract high superprofits. This is why innovation generally tends to be
productivity-enhancing. As I pointed out, under the assumption of Okishio-
behaviour, the capitalists would not adopt Bruce's new technology.

This is, I think, the real motor force of technical change; capital moves in
search of the surplus profit resulting from introducing a more productive
marginal technique.

What would be interesting, therefore, is to experiment with numbers that
bring about switching of technologies on Okishio's assumptions and I invite
Bruce to do this.

To bring about Okishio-switching in Bruce's example you would have to raise
the level of output for the new technology to a sufficient level to that the
capitalists projected profits would be higher at existing prices. This could
be accomplished with an output of, for example, 101 units, in which case
the capitalists would estimate their new profits to be $40.50, an increase.

But in this case the new *simultaneous* profit rate is higher, and so even in
the simultaneous calculation, it would be rational for the capitalists to
invest in the new technology.

If you experiment with the size of output (or inputs) you will find that
the point at which the new simultaneous profit rate is higher is precisely
the point at which Okishio-behaviour predicts the capitalists will switch.
This is the great beauty of Okishio's result. It really is very powerful,
within the limits of the paradigm it adopts.

Two final element of realism that would then need to be adopted are
the following:

(1) you have to assume that the capitalists actually do expand
production. That is, the money they invest is in some sense determined
by their disposable surplus. In general, then, you will find that the
capitalists will be driven to capital-intensive improvements because
the labour force cannot be expanded beyond its biological limits.

(2)you have to assume that the new technology is not introduced
instantaneously but that, involving expenditure on fixed capital,
is introduced at a speed limited by the capitalists' ability to produce
the new machines. Superprofits then accrue to those capitals
which have introduced the new technology. They expand faster;
this is how the technology spreads.

I produced a computer model based on these assumptions for the
1992 CSE conference, which exhibits cyclic behaviour whose
periodicity is determined by the speed of turnover of fixed capital,
a result very close to what is seen in reality and anticipated by