[OPE-L:2952] RE: Continuous technical change?

andrew kliman (Andrew_Kliman@msn.com)
Tue, 3 Sep 1996 12:40:50 -0700 (PDT)

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In ope-l 2930, Rakesh writes: "A question for Andrew and Alan ... Is
technical change continuous as the flow of a river?"

Andrew: No.

Rakesh: "Why not continuous in the form of waves or successive swarms?"

Andrew: This is more realistic. I suspect, however, that the "ebbs and
flows" are not endogenous to the pace of invention or the timing of
innovation, for the most part, but depend a lot on the ups and downs in
investment demand.

Rakesh: Stolper has recently [... argued] that as the innovations, financed
through inflation-inducing credit,
finally pour onto the market, this necessarily engenders "an
Einordnungsprozess*--a pause-- that provides a natural negative feedback to
push the system back towards equilibrium."

Stolper asserts that this "pause" is what prevents the system from becoming

And indeed if it can be shown that new innovations will not be financed
during the *Einordnungsprozess* (presumably due to the deflation,
bankruptcies and general uncertainty associated with it), would this
"pause" not then provide the system with an ability to winnow out in a sort
of systematic destruction only those firms rendered uncompetitive by the
new techniques assimilation of which could well raise the average profit
rate? In short, could not this "pause" function as the system's
self-defense against such continuous revolutions in value that would indeed
blow the system up sky-high?

And...since we know that for the most part, the system has indeed been able
to reproduce itself, despite the value revolutions characteristic of this
mode of production, is it not plausible that Schumpeter may have discovered
an important mechanism by which capital protects itself from

Andrew: Why is the credit expansion inflationary? Why does the inflation lead
to a "pause"? It seems to me that the whole account requires the quantity
theory of money. Moreover, no one has argued that continuous revolutions in
value make the system blow shy-high. In Marx's theory (Vol. III, Ch. 15), the
devaluation of capital leads to "pauses" - disruption of reproduction, crises
- that periodically overcome the FRP.

Andrew Kliman