[OPE-L:6530] Re: Obsolesence

John R. Ernst (ernst@PIPELINE.COM)
Fri, 1 May 1998 15:46:23 -0400 (EDT)

On Tue, 28 Apr 1998, John R. Ernst wrote:

> I'd like to hear a bit more about the data you and
> Paul are comparing to the givens in my example. A
> circulating constant capital to variable capital ratio
> of 6:1 still does not strike me as odd.

Allin responded:

The (UK, 101 sectors, 1984) data were presented in "Does Marx
Need to Transform?" (in Marxian Economics, A Reappraisal,
Ricardo Bellofiore, ed., Macmillan/St. Martin's, 1998). We
measured the flow organic composition as C/(S+V). This
magnitude had a mean of 0.846 and a standard deviation of 0.636.
Above a ratio of 2.5 there were just a few outliers.

John comments:
I do not have that book here but will attempt to find it. In order
to understand your results, let me see if the following can be used
to clarify matters.

1. Does the "flow organic composition of capital" contain any
depreciation charges?

2. Assuming away depreciation charges, your results seem to say
that if a capitalist spends $84 on raw and auxiliary materials,
wages and profit will be about $100. Fixed capital aside, this
suggests that quantity of living labor exceeds that of dead labor
in the process of production. Over time, is the ratio, c/(v+s),
rising or falling?

3. I think Marx would hold to the idea that ccc/v ratio would increase
over time where ccc is the constant circulating capital. If we
hold the real wage and prices constant, then with productivity
increases ccc would rise as v remains constant since increases
in productivity require more raw and auxiliary materials and since
I have assumed a constant real wage. That "s", relative to v,
would grow under these assumptions is clear.

4. I assume that we are dealing only with industrial capital in those
101 sectors. That is, we have captured "s" before it is divided
up by merchants capital, money capital, rent, etc. Hence, a
max rate of profit, (s+v)/ccc, would be 1/.84 or about 1.2. Again
I assume no depreciation charges are included in ccc. These
numbers seem unrealistic only if we fail to recognize it is
a rate of profit computed only on the basis of ccc and we have
abstracted from other claims on surplus value. By itself, the rate
seems unusually high.

5. In my example, I looked at the movement from a rate of return of
1/6 to 1/5. What your data tells me is that the assumed rates in
my example were too low. I should have been looking at a movements
from 1.2 to 1.3, for example. This means, of course, a rather large
increase in productivity since the depreciation charges must be
covered as we look at the new technique. But note that we are
comparing a relatively old technique with a new one and that fixed
capital does not increase as fast as ccc in the period of large
scale industry.