[OPE-L:3356] Re: Forms of Technical Chnage

Gerald Lev (glevy@pratt.edu)
Fri, 11 Oct 1996 09:55:29 -0700 (PDT)

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[John: please include OPE-L #s in your posts].

I wrote in [OPE-L:3353]:

> 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.

John answered in [OPE-L:3354]:

> 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.

Wages per unit of output decrease in *both* a and b.

As a long-term process, *a* is more "reasonable" since total output
increases over the long-term rather than remaining constant. During a
recessionary period or in branches of production where demand and output
price are constant, a would more typically be the case.

In practice, of course, it is possible for both output and v to grow with
labor-saving technical change. Consider one of the best historic examples
of labor-saving technical change -- Henry Ford's introduction of the
assembly line. That advance in process technology caused a dramatic
increase in labor productivity and thereby both the labor cost per unit of
output and the average cost per unit of output decreased sharply. Ford
then was able to sell his cars -- Model Ts -- at a much lower price in the
marketplace. This increased Ford's profitabilty and market share and also
led to increased concentration and decreased firms in that market. Because
of the expansion of demand, due to the much lower price of the Model T,
Ford demand for labour-power and v *increased* sharply and workers flooded
into Detroit in search of a job (and $5/day).

In the auto industry today, demand is relatively stagnant and automakers
are not attempting to increase output levels significantly. Under these
changing conditions, labor-saving technologies can result in b -- job
displacement on the micro level. Of course, whether these workers can find
jobs in other branches of production depends fundamentally on the stage
that the macroeconomy is in in terms of the business cycle.

> 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.

You misunderstood my example -- in the case of c), the electricity
consumed and price of electricity could not be expected to grow, In fact,
one would anticipate that the electricity consumed would *decrease*,
ceteris paribus ...

Again: let's consider the question of technical change on the micro level
first. Consider the case of a new process technology which reduces
circulating capital requirements. For instance, energy-saving computer
monitors. [here we will only consider this commodity to the extent that it
can be an element of constant fixed capital and will ignore its dual
function as a consumer good]. As firms substitute new better monitors for
older ones, they reduce their circulating capital requirements to produce
a given level of output. This form of technical change would leave the
labor requirements per unit of output *in the firm* unchanged. However,
one could also see this type of technical change as labor-saving since it
means that the requirements for labour-power would decrease in the
*electricity-generating branch of production*, ceteris paribus.

To see how this all plays out, one has to consider the inter-connectedness
and inter-reledness of different branches of production.

In practice, there are also other complicating factors as well -- such as
market structure and rent.

In Solidarity,