[OPE-L:3313] Re: TSS and value added

John Ernst (ernst@usa.pipeline.com)
Mon, 7 Oct 1996 11:29:28 -0700 (PDT)

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Here, I continue the dialog with Duncan.

>In OPE-3207, one of the questions Duncan poses is:
>"What are the strengths and weaknesses of these two concepts of money
>value added in representing Marx's thinking on the relation between the
>LTV, technical change and the path of the money profit rate in capitalist
>John responds:
>Given that we are forced to deal with the path of the money rate
>of profit, we have to consider our hypothetical economy as it
>moves through time. If this is the case, we are stuck at the end
>of the second period no matter which concept of money value added
>we adopt.
>As I have pointed out in previous posts, should Andrew's prices
>prevail at the end of each period, then capitalists would see
>that the declining profit rate gets them nowhere and begin to
>take into account something like "moral depreciation" as they
>invest. With Duncan's absolute disaster can easily occur as
>the loss in capital value can exceed the value added. Thus,
>it would seem impossible to use either concept of the money
>rate of profit beyond 2 periods.

In OPE-3210, Duncan says:

I think this is excessively pessimistic, and puts too much weight on
particular examples. The example you developed had a very high rate of
labor-saving technical change. With more realistic rates of technical
change the money rate of profit, even with a constant monetary expression
of labor-time, can be positive.

John responds:

While I did not mean to even appear pessimistic, I do agree that
my example was extreme. Your correct that the money rate of
profit can be positive in the types of examples with which
we've been working. However, it would be good to work
examples where the capitalists have an incentive to invest based
not only on costing out the new investment using the prevailing
prices but also on their experiences. That is, if we use
Andrew's examples, we see a declining in the rate of profit.
My point is that should capitalists see this as well, it
is unclear how and why such a pattern could continue.

In OPE-3211
In reply to John's OPE-L:3269:

John comments on my observation that macroeconomic data (for example,
plotting the efficiency schedule for real capitalist economies as the line
whose vertical intercept is output per worker (or per labor hour) and whose

horizontal intercept is the ratio of output to capital value) in many cases

shows a "Marx-bias", that is, rising labor productivity and declining
output-capital ratio.

>I have no doubt that there is considerable macroeconomic evidence
>for this pattern. However, there is scant evidence on the micro
>level in the period of large scale industry. Thus, if we are to
>connect with observed pattern of a "current cost" rate of profit
>with a theory of capitalist investment behavior that explains it,
>much work is to be done.

In OPE-3211, Duncan says:

One intermediate level of evidence would be provided by the input-output
tables Paul C. and Allin work with, since over time they show changes in
non-labor inputs per unit of output across fairly disaggregated sectors.

John says:
Ideally, I'd like to look at an individual capitalists making an
investment. I do think examples of capital-using tech change
can be found. For example, the mechanized tomato picker
certainly is a case of dead labor replacing living labor. (ugh,
square tomatoes) But I think this is the exception and not the
rule in the capitalism of today.

John, in OPE-3201, says:

>Duncan says:
>I gather from your previous posts that you have some doubts that real
>capitalist technical change has this "Marx-biased" character. It might be
>fruitful for us to discuss this point further.
>John responds:
>You're right. Indeed, my doubt is considerable. I base it on
>experience and a reading of Marx.

Duncan, in OPE-3211, says:

Of course, Marx can't really tell us anything about the empirical pattern
of technical change after 1883 when he died.

John responds:

Hmmmmmm. I'd better agree that he can't tell us about the data of
today or I'd be going beyond Marxology itself. But, let's consider
what he said in CAPITAL. Here, we are dealing with his theory of
technical change.

a. In the chapter titled "Co-Operation" in Vol I, Ch 13, Marx
essentially maintains that by increasing inputs, outputs are
also increased.

b. In the next chapter concerning the division of labor, we
see labor inputs increasing but outputs increasing at a
greater rate.

c. As machinery or "dead labor" replaces living labor in Ch 15,
we see that that "dead labor" may increase faster than outputs as
there was little "dead labor" functioning as machinery when the
transition to the period of large-scale industry begins.

d. In that same chapter, Marx also mentions machinery working
as a system of machinery that co-operates. If we note that
as living labor grew in the period of manufacture at a rate
less than that of the growth in output, it would seem that
as dead labor replaces dead labor in the period of large-scale
industry that same pattern of growth would prevail. That is,
as the scale of the operation expands, their are economies of
scale. This type of replacement (dead labor for dead labor)
is more the norm in modern day capitalism than the replacement
of dead labor for living labor as the living labor in each
process of production has been declining for some time. But the
continual expansion of dead labor presents the capitalist with
more and more possible ways to expand the scale of operation as
he replaces dead labor with ever-growing amounts of dead labor.


Overall, should we be able to find data to support the proposition
that rate of profit falls today because of capital-using technical
change, we would be refuting notion of accumulation in the period
of large scale industry. This does not make such a project
unworthwhile as it would furnish us with his theory of accumulation
as well as its refutation. In my judgment, the project would
be unique.

Citing me, Duncan says in OPE-3211,

> I work with printers and folks in the mailing industry. I have
>yet to see or hear of anyone selling a machine or a set of machinery
>that does not increase output more than the increase in the

I'm not sure what you mean by this way of putting the situation. Surely
rational capitalists will only introduce investments which increase cash
flow by more than their cost. That still doesn't rule out labor-saving,
capital-using investments.

John says:

No, I am not ruling out labor-saving, capital-using investments on
the basis of my limited experiences. However, as less and less
living labor is involved in a given process, the new machinery
developed is more and more geared to replacing the ever growing
amounts of dead labor with, to be sure, still even more dead
labor. For such investments to pay, the increase in output is
generally greater than the increase in money invested in dead

Again, citing me, Duncan says in OPE-3211,

>Further Thoughts.
>Are we really ready for discussion of the form of technical
>change(s) within the period of large scale industry? As
>I suggested in an early post, both TSS and its critics have
>some explaining to do. In no example, have we clearly explained
>why prices fall.

Actually, I don't have much trouble with this, under the assumption of at
least some competition. The availability of lower-cost productive
facilities forces the price down in each sector.

John responds:

To be sure, prices as we have discussed them would fall; however,
are the prices we consider the ones capitalists actually see?
Further, if one presumes that I'm right when it comes to tech
change in the period of large scale industry, then using non-TSS
prices with a very, very low wage means there is no falling
rate of profit.