[OPE-L:2861] Re: Value of LP // Real Wages

John Ernst (ernst@nyc.pipeline.com)
Mon, 26 Aug 1996 15:17:42 -0700 (PDT)

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Here are my reactions to Michael Perelman's recent posts.

Michael said:

John Ernst wrote:

> 2. Can we come up with examples of any "mechanized"
> capitalist investing so that the new technique has a
> higher constant capital to output ratio? (Duncan
> and Paul C. responded to this question earlier, but,
> other than Duncan's guess about the auto industry, we
> have little to go on here.)

The chemical industry is an example. In fact, we will see this
ratio generally rise with an increase in the durability of the
capital stock.

In contrast, computers, with a short lifetime, often drop the

John responds:

I'm not sure I understand. How is the chemical industry an
example? Are you saying that the new machinery they introduce
to replace the old is more physically durable than the older

Michael said:

> On Mon, 26 Aug 1996, John Ernst wrote:
> (in part)
> >
> > 1. If rising real wages cause capitalists to introduce
> > labor-saving and capital-using technologies, will
> > falling real wages give them cause to switch back
> > to the old techniques? Are there examples of this?

No. Rising wages make old techniques less profitable, but the increase
has to be enough to make scrapping profitable. Real wages are not falling
enough to throw away tractors and go back to animal traction. It will
slow down the impetus for technical change.

John responds:

Ok. If wages were $1 a day, would we see those tractors disappear?
Somehow, I doubt it. My point is that the unit depreciation charges
seem to actually drop as one machine replaces another. Counter
examples seem to be hard to find. That is, capital-using technologies
are not the norm.