[OPE-L:2284] assumptions, assumptions, assumptions

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Sat, 18 May 1996 17:44:11 -0700

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Andrew wrote in [OPE-L:2273]

> For simplicity, I'll assume a one-sector capitalist economy, in which
> output (X) is produced with fixed capital (F) that lasts forever--this
> simplifies IRR computations immensely--and living labor (N).

(1) I'm sure that a one sector model -- "for simplicity" -- is easier to
model. Yet, there are a number of problems with such models (e.g. the
well-known knife-edge). Can your results be maintained with a two (or
more) sector model?

(2) I am very uncomfortable about this assumption of non-depreciating
constant fixed capital except as a prelude to a consideration of
depreciating fixed capital.

> Workers
> will be assumed to live on air, so the real wage is 0, a constant. No
> material inputs are used in production.

You made the same assumption in [OPE-L:2259]. Now, how the hell, can we
assume that workers live on air and that the real wage is zero???!!! How
could one, in fact, even imagine the reproduction of capitalism under such
a severe assumption? [BTW, I don't recall Marx ever making such a
stringent assumption. Am I mistaken?].

I also assume the above to mean that there is no constant circulating
capital either. Why can't we make models with both (morally and
physically) depreciating constant fixed capital and constant
circulating capital?

> Because the fixed capital lasts forever, the stream of returns on the
> new investment lasts forever.

That's one of the results that one can obtain with this assumption of
"fixed capital". In what sense can we speak of this category as
actually representing fixed capital? By saying that fixed capital lasts
forever, aren't you assuming away fixed capital?

In OPE-L Solidarity,