# [OPE-L:3617] Re: Laibman on the output ratio and the occ

Allin Cottrell (cottrell@wfu.edu)
Thu, 7 Nov 1996 08:20:49 -0800 (PST)

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On Wed, 6 Nov 1996, Gerald Levy wrote:

> Basically, David L holds that the capital-output ratio (which he calls
> the output ratio) *is* the occ (or, more precisely, it is the
> *reciprocal* of the occ).

OK.

> "I will note that the output ratio = Y/K, where Y is output and K the
> capital stock. This, in turn, is equal to L/[(L/Y)K]. L/Y may be
> thought of as the value of a unit of output, where value is measured
> in terms of labor time. (L/Y)K is therefore the value (in labor
> time) of the capital stock. The output ratio Y/K, then, is formally
> identical to (v+s)/C, where v+s is the flow of current labor time,
> in standard Marxian notation, and C is the stock of constant capital
> (also in terms of labor time).

Again, OK.

> He goes on to write the output ratio in a "slightly fuller form":
>
> "output output/labor
> ------ = -------------
> capital capital/labor
>
> In this form we can see that the output ratio is a ratio of ratios,
> with output per unit of labor, or *labor productivity*, in the
> numerator, and fixed capital per unit of labor in the denominator.
> Clearly, the output ratio will rise if, and only if, productivity
> (which is clearly rising) rises *more slowly* than the physical
> capital/labor ratio (which is also clearly rising).

But this seems to me a bit problematic. What is meant by
the "physical capital/labor ratio"? For consistency with
the earlier citation, we should be focusing on the ratio of
the *labour-time embodied in the capital stock* to current
labour-time. And I'm not sure that the latter is "clearly
rising".

Allin Cottrell.