[OPE-L:3381] Re: TSS and Tech Change

Duncan K. Fole (dkf2@columbia.edu)
Sun, 13 Oct 1996 07:40:17 -0700 (PDT)

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In reply to Andrew's [OPE-L:3377]:


>I agree with Duncan that Marx's view of the tendencies of
>capitalist accumulation are a rise in the rate of exploitation, a rise in the
>technical (and organic) composition of capital, and a fall in the rate of
>profit --- except that the last one is periodically overcome by means of
>crisis, and is not a secular trend. But none of this implies that the
>constant capital to output ratio increases, if what is meant by "constant
>capital" is means of production (in physical terms rather than in value
>terms). I think this is the way "Marx-biased" is used.

Well, "in physical terms" is a problem if we think of disaggregating to a
multi-sector production model, since some elements of the constant capital
vector may rise and some fall in relation to output. The macroeconomic data
I'm most familiar with uses indexes of investment good prices to arrive at
an index number for the "real invested capital" to derive the
capital-output ratio (or its inverse, the maximal rate of profit). This
method very frequently (thought not universally) shows a rise in labor
productivity and a fall in the output/capital ratio (which people, abusing
language somewhat, often call the "productivity of capital".) There are
certainly important questions to be answered about this index-number
method, though it appears to almost inevitable if you want to get empirical
results over a large number of cases.

I guess it's understood, but let me repeat my earlier point that the
denominator of the output/capital ratio is the stock of capital invested,
while "constant capital" is the flow of costs of inputs, including
depreciation on fixed capital, so that the output/capital ratio includes
the turnover time of capital. It's become habitual in theoretical
discussions to assume that the turnover time is 1, so that the flow of
constant capital is equal to the stock of capital tied up, but this is not
true for empirical data.


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu