[OPE-L:3819] Re: Prices of production=bourgeois socialism

Gerald Lev (glevy@pratt.edu)
Thu, 12 Dec 1996 04:21:46 -0800 (PST)

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Paul C wrote in [OPE-L:3817]:

> This would only be the case in the absence of structural change.
> But such change is continuous.

Over the long-term, technological change may appear to be continuous. In
actuality, within capitalist firms and branches of production, innovation
in constant fixed capital is *discontinuous* in the sense that this
process realizes itself unevenly and there are periods when this change
accelerates rapidly and other periods when it stalls. The statement
"continuous technical change" is thus a simplifying assumption that needs
to be dropped when we consider the pace of technical change during
different "phases" of the business cycle and when examining individual
branches of production.

> Under these circumstances industries
> with high organic compositions in the form of fixed capital may
> systematically find it hard to adapt their production to new
> markets. Thus there will be a constant tendancy for high organic
> compositions to have a depressed profit rate.

(1) The question I posed concerned whether it was reasonable to expect
that capitalists who are about to invest *money capital* will invest that
money capital in branches of production that currently earn higher profit
rates. It is, of course, true that capital also can take the form of
stocks of constant fixed capital and this may damper this tendency of
gravitation of money capital out of branches that experience low rates of
profit into branches that currently experience higher rates of profit.

(2) The above process may also help to explain the process of
*diversification* in capitalist firms. That is, when profits diminish in
one part of a corporation's subsidiaries, that firm can then invest more
money capital in other parts where they anticipate higher rates of

(3) You are assuming that the motivation here is to develop new means of
production for the production of different commodities ("new markets").
While this may be the case in some instances, it appears to me that the
larger incentive in most cases is to increase _labor productivity_ as a
result of technical change. Whether or not a capitalist firm develops
product innovations and moves into new markets, there is an incentive to
increase relative surplus value through technical change.

(4) When capitalist firms _do_ enter new markets, they _may_ find it
"systematically difficult" to adapt the existing stock of constant fixed
capital for other purposes. Yet, this is increasingly _less_ the case
today now that there has been a (incomplete and partial) shift away from
"hard automation" to "flexible automation." For instance, industrial
robots can be easily reprogrammed for many other tasks and it is even a
relatively simple task to ship those used robots to other plant locations
if required. This, btw, increases their resale value and decreases the
rate of "moral depreciation" since it means that these elements of
constant fixed capital can in practice be used longer and for more
purposes than the dedicated types of automation that they frequently

> It is interesting to see which
> industries have a rate of profit that corresponds to that predicted
> by the price of production theory - it is the regulated public
> utilities.

... which of course returns us to the question of *rent*.

What about oligopolies? Doesn't the empirical evidence also suggest that
those firms experience higher rates of profit?

> Prices of production correspond not to
> capitalism but to bourgeois socialism. They demand public regulation
> of investment and prices in order to ensure that all capitals
> are 'fairly' treated.

Classical political economy, which also predicted profit rate
equalization, did not in general promote state regulation. In fact the
"laissez faire" policy of Smith, Ricardo et. al. was at odds with state
regulation of investment and prices except under what they viewed as
highly abnormal situations.

The question here in this thread (at least the way of thought I understood
it) is whether there *is* profit rate equalization (as a historical and
empirical matter) and what the theoretical meaning of these trends are.
Whether "bourgeois socialists" should demand that the state intervene to
promote more "fair" prices is a topic that should be addressed only
_after_ we have explained what is happening in terms of profit rates and
why. If we do get to the topic of what state policy _should_ be, then we
would have to ask *who* would benefit by such policies. Would it, for
instance, only be those capitalists who earn a lower rate of profit or
would the *working class* benefit as well from that regulation? [Note that
I am _not_ implying an answer to that question -- I am simply posing it
for discussion at a later time].

In solidarity, Jerry