# [OPE-L:6427] Re: Prices, technical choice and values

From: Paul Cockshott (paul@cockshott.com)
Date: Wed Jan 23 2002 - 04:28:22 EST

```On Tue, 22 Jan 2002, you wrote:
> Hello, Paul.  You write in 6410:
>
> Example:  production of a constant capital good that requires A< 1 units of
> that same capital good and L units of direct labor for each unit of output.
>  Let there be two techniques (A1, L1) and (A2, L2) with A1 > A2 and L2 > L1
> such that L1/(1-A1) does not equal L2/(1-A2).  Let the opportunity cost of
> constant capital be given by the interest rate r and the wage rate be given
> by w.  Then cost-minimizing capitalists will choose technique 1 so long as
> r/w < (L2-L1)/(A1-A2) and choose technique 2 if the inequality is reversed.
>  Note that there is no basis for reswitching and that realized labor values
> of the constant capital good are determined by relative input prices.
>
This is an initial reply without having worked out the maths in detail but
it strikes me that your example may not hold if one carries out a full i/o
analysis. In those circumstances there will be only one choice ot technique
which maximises the overall output of the economy. One or other of your
two techniques will be dominated. The technique which is the dominant
one will be the technique which uses the minimum labour overall,
taking intersectoral feedback into account and as
such, defines the amount of  socially necessary labour to produce the
product, and is thus the defining technology for determining value.

It is quite possible, and Marx makes this clear at a number of places,
that where the rate of exploitation is high, capitalist production will use
more labour than is socially necessary, chosing to waste labour rather
than use machinery. But this is not relevant for determining whether
this amount of labour is socially necessary, it only indicates that
capitalist production is inefficient by the criterion of socially necessary
labour. The value of a product by the definition of socially necessary labour
does not depend upon which technology the capitalists actually use, since
the high rate of exploitation may cause them to find it cheaper to produce
the product at a labour expenditure above its value.
The extent to which this occurs is a measure of the social product
lost due to the accounting system imposed by capitalism.

I dont dispute that in practice the interest rate and the wage rate are
relevant for the choice of techniques actually used. What I dispute is
that these are relevant for the definition of value.

> But second, suppose that your point was apropos.  Shaik et al's empirical
> result in no way guarantees that the indicated result would *always* hold;
> we might therefore be a set of technical innovations away from the reverse
> outcome, and my analytical point would still be relevant.

It is possible, but my suspicion is that the existence a real i.o table
with hundreds of products in which reverse reswitching occured
is vanishingly improbable.

--
Paul Cockshott, University of Glasgow, Glasgow, Scotland
0141 330 3125  mobile:07946 476966
paul@cockshott.com
http://www.dcs.gla.ac.uk/people/personal/wpc/
http://www.dcs.gla.ac.uk/~wpc/reports/index.html
```

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