[OPE-L:2565] Re: FRP models

John Ernst (ernst@nyc.pipeline.com)
Mon, 24 Jun 1996 20:27:32 -0700 (PDT)

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Paul, lest we merely repeat ourselves, I've reproduced the more
recent portions of our exchange and follow that with an attempt
to describe what is at issue.


>Relevant factor is the product of the number of passengers carried
>times the value of their tickets. Value of tickets fell following
>introduction of jumbo jets.
>I agree that if we wanted to directly look at the rate of profit
>the value of the tickets would be relevant. I am not taking things
>that far at this point. I am simply looking at which increases
>faster as technical change takes place -- constant capital or
>output. Obviously, the next step would be to look at the manner
>in which the value of the tickets changes. Your example would seem
>to fall into the category of capital-saving technical change as the
>growth of constant capital is less than that of output.
Paul commented:
I am doubtfull. The output that is relevant is always the value
output. The value of the aircraft industry's output did rise,
but more slowly than the number of passengers carried. I would
strongly suspect that the capital stock increase represented by 747s
replacing 707 was greater than the increase in the value of tickets
sold. One would have to do some practical investigation into the accounts
of Pan Am etc over the period 1965 - 1975 to check this.


Let's recall that this discussion began with a comment I
made regarding one of Duncan's posts concerning Andrew's FRP
model. My contention is that generally when one replaces
the machinery in a mechanized production process the
growth in constant capital inputs measured in fixed prices
grows slower than output. Why is this of any import?

First, let's assume that my hypothesis is correct. It would
make any argument for a falling rate of profit with a rising
organic composition of capital all but impossible if one used
the notion of simultaneous valuation.

Second, given that one answers the Okishio theorem in the
manner of Dobb or, more recently, Laibman, then one should
be able to provide an example of technical change in which
constant capital in fixed prices grows faster than output.
To be sure, this is the case when a process first undergoes
mechanization. But, again, what happens within the phase
of large-scale industry itself?

Third, assuming that one has done a study on the macro level
that shows a falling rate of profit, my quest for an example
of how individual capitalists invested such that the fall
took place becomes exceedingly relevant. That is, it would
help describe the same phenomenon on a more concrete level.
To be sure, the lack of any example would not refute the
results of such a study; but some explanation of how constant
capital grows one way on the macro level relative to output and
another on the micro level is surely necessary.

Fourth, note that nothing I have said calls into question your
supposition that the growth in value of the tickets sold was
less than the growth in constant capital. I am simply asking that
prior to the drop in the value of a ticket what how would
the rates of growth of each appear.