[OPE-L:4824] business cycles

Gerald Levy (glevy@pratt.edu)
Sun, 20 Apr 1997 08:01:59 -0700 (PDT)

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Duncan wrote in [OPE-L:4823]:

> In principle the "stratification" of fixed investment could lead to
> waves in real output, but in fact these waves seem to be highly damped and
> not much related to the main business cycle movements. Most evidence points
> to circulating capital fluctuations as the main component of most business
> cycles.

Well ... this raises some interesting questions.

To begin with, I have some questions about the empirical "evidence" here.

a) fluctuations in "circulating" and "fixed" capital are measured using
the neoclassical conception of those two terms. Yet, the Marxian
definition(s) of those concepts are quite different. What empirical studies
of trade cycle variations have there been using Marxian concepts of
constant fixed capital, constant circulating capital, and variable

b) In these empirical studies what accounts fort changes in labor
productivity over the course of the business cycle? (Marxian and
neoclassical definitions of labor productivity are also different).

Other questions include:

a) How do we observe and measure changes in constant fixed capital over
the course of the business cycle? E.g. if we only look at the price of
elements of constant fixed capital and aggregate investment in constant c,
then how do we observe changes in the *quality* of constant c during the
trade cycle? Wouldn't we have to have some measure of how changes in
constant c affect the production of relative s and the productivity of
labor to account for its impact on the business cycle? (I think this ties
into the question of "stratification" of constant fixed capital that John

b) In looking at the evidence on "circulating" capital, we should break
the neoclassical concept down into both constant circulating capital and
variable capital. With regard to the latter, we would have to look at how
the demand for labour-power and wages change during the course of the
trade cycle. With regard to variations in circulating constant capital, we
would have to look at changes in the price and quality of those elements
of constant circulating capital. This would mean, in part, that we would
have to consider how technical change in constant *fixed* capital by
the firms producing output that becomes constant circulating capital
for other firms can affect the price and value-transferring ability of
that constant circulating capital. We should also consider how changes in
the turnover time of constant circulating capital and rent can affect this
process. If we look at variations in both the demand for labour-power and
constant circulating capital over the course of the business cycle, don't
we also (especially, if as you say, waves of investment in constant fixed
capital are highly "damped"), have to look at changes in *capacity
utilization*? I.e. *if* investment in constant c is held constant *and*
the social productivity of labor remains the same, then firms can expand
or contract output by expanding or contracting the rate of capacity
utilization _if_ there is excess capacity. In that case, firms could
using the existing constant fixed capital to produce more output with
more labour-power and more constant circulating capital _rather than_
expanding investment in constant fixed capital. We would also, I
think, have to look at how changes in the availability of credit, changes
in interest rates, and aggregate demand affect the demand by firms for
labour-power and constant circulating capital during the cycle.

Any thoughts? Anyone?

In solidarity, Jerry