[OPE-L:3354] Re: TSS and Tech Chnage

John Ernst (ernst@usa.pipeline.com)
Fri, 11 Oct 1996 07:51:22 -0700 (PDT)

[ show plain text ]

Here, I have reproduced the responses of Paul and Jerry to my posts
and added my comments.

>When the constant capital to output ratio decreases, we have "capital
>augmenting" technical change. As far as I know and, clearly, within the

>context of the one-commodity model we've been discussing, this translates

>into an FRP under the TSS of valuation. If one equates input prices and

>output prices and then computes a rate of profit using those prices, that
>of profit does not fall given capital augmenting technical change.

If this is what you mean by capital augmenting technical change, then I
would agree that a recursive definition of values would predict that it
be accompanied by a rising rate of profit.


If you think that it would be accompanied by a declining rate of profit,
why not look through the historical records and see if you can find
periods for which your hypothesis can be tested and see which way the rate
of profit moved?


I'd like to completely formulate my hypothesis prior to going for the
data. Duncan has suggested that the Annual Survey of Manufacturers
may be one data source. Is that type of data peculiar to the U.S.
or do you have something like that over there?

Here is Jerry's comment and my response.

Jerry writes:

Re: John's [OPE-L:3349]:

It seems to me that this whole "dialog" is unnecessarily complicated.

Let's look at the micro level first (since the macro level is more
complicated in many ways, e.g. in terms of the changing quantity of
branches of production):

o assume constant wages from one period to the next.

o consider the case of what John many moons ago called "BETTER"

o if "BETTER' machinery (more advanced forms of constant fixed
capital: process innovations) are introduced, this can have one of
three consequences:

a) if the labor input and v remain the same, then better machines
mean that the same work force can create additional output;

b) if the output level remains the same, then the increase in labor
productivity made possible by the better machinery means that
less workers and v are required to produce that output.

[*both* a) and b) are instances of labor-saving technological
change. In both cases the labor required per unit of output goes
down and capitalists, thereby, have either reduced v (absolutely)
or reduced v/unit of output].

c) Some forms of better machinery may mean that the constant
circulating capital required per unit of output goes down. If v
and output stay the same, then advances in this type of constant
fixed capital (e.g. new machinery that requires less electricity)
will mean decreases in c since the firm sees savings in terms of
constant circulating c.

In practice, it is easier enough to identify examples of each of the above
in different branches of production during different periods of time.

Does incorporating any of the above cause problems for different
interpretations of Marx re technical change?


I think most would agree that productivity increases mean that
the amount spent on wages per unit output will decrease over
time. Hence, of your cases, a and b, b seems more "reasonable.

With respect to case c, which is the issue, matters are a bit
more complicated than we may like. Agreeing with Marx, I
think that with increased investments in constant capital, fixed
and circulating, output grows. Indeed, output grows faster
than the inputs. Thus, following your example, in some process
of production the amount of electricity consumed in that process
grows. Hence, the costs of electricity increase. But output
increases at a greater rate. Seems simple enough, doesn't it?
However, if the same type of innovation takes place in the
production of electricity and if we use simultaneous valuation,
the FRP clearly has no tendency to fall. Further, even if no
such change takes place in the production of electricity and
given that we calculate all prices and/or values at a given
point in time, the FRP has no tendency to fall.