[OPE-L:7265] [OPE-L:793] Re: Tech Change

John R. Ernst (ernst@PIPELINE.COM)
Sun, 28 Mar 1999 20:20:03


Re: OPE-L792

John wrote in [OPE-L:790]:

> Given your quote marks around the word "caused", I'm not sure what
> exactly your issue is.

Jerry responded:

Actually, I placed star (*) marks around caused for emphasis rather than
quotation marks ("...") [see below].


John wrote:
> The falling rate of profit is caused by the
> manner in which the accumulation of capital takes place.

Jerry responded:
Very vague.

Andrew put the issue much more clearly when he said that "the profit rate
falls *because* productivity rises" [Andrew's emphasis, JL].

As I explained previously, I don't disagree that this was Marx's

Yet, you have yet to show that capital-saving technical change will *cause
the productivity of labor to rise*.

John comments: I thought I did what you asked as far back as 1982.
That said, let's have a go at it. First, what do we mean by capital-
saving? When a capitalist changes technique or, say, buys a new and
better machine, then using the prices of the previous period, he
expects less depreciation per unit output. Say he gets the price he
expected. That's capital-saving. The machine would also be labor-
saving if there is less living labor in each unit of output. For the
capitalist this means a higher rate of profit. That rate of profit
is what Duncan referred to as the "commodity" rate of profit that he
finds in the TSS literature.

But here time itself plays a role. Say the new machine costs $1000 and
the machine it replaced cost $100. The capitalist has invested 10
times as much in machinery. Now if the amount of living labor remains
the same and, say, adds a total of $100 in new value both before and
after the introduction of the new machinery, then assuming a wage
of $1 for those hours, we see that before the change

p=99/(100+1) or almost 100%

After the change,

p=99/(1000+1) or about 10%.

The rate of profit fell. Now if the output per worker is increased by
a factor of 15 as this occurs, then there is actually less depreciation
in each unit of output after the change.

I have no doubt that many on the list would disagree with this. Indeed,
they would point out that I forgot to revalue the value of the machine
based upon the new prices. In other words, they would demand that I
simultaneously value inputs and output. If I were to do this, then
there would be no falling rate of profit. Indeed, with a constant
real wage, the rate of profit would rise. Yet, it is this type of
technical change that Marx describes when he speaks of the replacement
of machines by better machines. Nevertheless, Marx claims that the
rate of profit has a tendency to fall.

Nota Bene. Without valuation according to labor time, there is no
falling rate of profit in this case.

Jerry wrote:

Note that to show that the rate of profit *might* fall even where there is
capital-saving technical change is different from saying that the rate of
profit *will* fall *because* of that type of technical change.

John comments. The proposition that the rate of profit will not fall
with capital-saving technical change and a constant real wage is
one that has dominated 20th Century Marxism. To show that this is not true
was the task at hand. That accomplished, one can then begin to look
at technical change in the real world which, in general, is both
capital- and labor- saving.

Jerry wrote:

Until *that* is *demonstrated*, we would simply run the risk of assuming
that since two events can occur at the same time (capital-saving
technical change & fall in rate of profit), one causes the other.

John comments: You've missed the point. One of the major contributions
of TSS was to show that the two events need not contradict each other.
No one is claiming that anything *must* occur; getting out from under
the notion the technical *must* be capital-using was and is no mean
feat. That notion can and does make Marxism incapable of recognizing
how machines are replaced by better machines. If the replacement of
machines by newer machines is seen as capital-using, sooner or later
we are forced to believe in the Rube Goldberg theory of technical change
where a ten-fold increase in the investment in machinery brings
about a less than ten-fold increase in output. It's my hope that
the next generation of Marxists sees through this nonsense more
quickly than I did.