[OPE-L:2542] Re: FRP Models

Duncan K Foley (dkf2@columbia.edu)
Wed, 19 Jun 1996 09:22:47 -0700 (PDT)

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On Wed, 19 Jun 1996, John Ernst wrote:
(among other things)

> 3. Many posts ago, I asked Duncan to cite specific examples of
> capital-using technical change for cases involving the replacement
> of machines and labor by machines. That he had none proves
> nothing.

If we consider individual firms or industries, so that we can legitimately
assume the prices of capital goods are constant, then I think there would
be numerous examples: late nineteenth century mechanization of production,
the substitution of the production line for individual work in the
automobile industry, the displacement of handloom weavers by mechanized
looms, and so on. Certainly indices such as the average capital invested
per worker keep rising in most advanced industrial capitalist countries.

If we look at the question from a general equilibrium point of view, the
problems of price changes, Wicksell effects, and the Cambridge critique
arise, and make it harder to say definitely what counts as capital using.
It is true, however, that in many countries and many time periods the
productivity of capital (output per value of capital) falls, at the same
time that productivity of labor rises.

> However, does anyone? Indeed, let's assume that we
> have studies showing a falling rate of profit.

Gerard Dumenil and Dominique Levy have published a lot of very good
empirical analysis on this recently.

> Given Okishio,
> do we not also have to have examples of individual capitalists
> choosing techniques that bring about the fall? As we sift through
> the examples, should we not find some that fall into the category
> of capital-using replacement of machines and labor by machines?
> Clearly, if we find none, it proves nothing but, I think, suggests
> that something is wrong.
> 4. Within a given industry, as techniques become more mechanized, the
> reduction of the cost price with capital-using techniques becomes
> more difficult as labor costs become smaller and smaller per unit
> of production. Why would capitalists not try to reduce the
> capital costs as well?

Of course, they would and do. It's only from the point of view of the LTV
that there is a strong distinction between labor and non-labor costs. (In
my view, one of the strengths of the LTV is that it immediately
distinguishes these types of technical change, and therefore comes to
grips with the real patterns of economic growth in a way that neoclassical
growth theory can't.) The question of the link between the bias in
technical change and the social relations of production is very important:
it's what lies behind the questions I asked several months ago about why
real wages have tended to rise with capitalist development, and whether or
not the rising real wages are behind the observed bias in technical