# [OPE-L:7540] Sraffa/von neumann and falling rate of profit

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Sat Aug 24 2002 - 19:11:58 EDT

```Paul,
the FROP which seemingly could be derived on on von Neumann lines
would have what Brenner has called a Malthusian character since it
would seem that total labor productivity--that is, the productivity
of indirect and direct labor combined--would have to be falling for
the ratio of physical surplus to the physical stock of capital to
fall.

But I don't want to pursue this point.

I don't think it's von Neumann who is important here but Dmitriev of
whose model of total automation Spencer Pack gives a simple example.

28	56	0	0
16	0	48	0
12	0	0	8
56	56	48	8

What we have in the first column is inputs of computers (28,16,12, 56
total) needed to make 56 computers, 48 units of gold, and 8 units of
wheat.

That is, 28 computers => 56 computers
16 computers => 48 units of gold
12 computers => 8 units of wheat
56 computers => 56 computers, 48 units of gold, 8 units of wheat

The economy is in simple reproduction because it produces only 56 new
computers, and 56 computers are needed to produce computers, gold and
wheat at the same scale again.

There is no direct labor in this economy; there is not even indirect
labor as computers, gold and wheat are themselves the products of
commodities--the literal production of commodities by commodities.

According to Pack this economy can be solved for relative prices and
a uniform profit and absolute prices as well if we assume by
definition that the price of one unit of gold equals \$1.

(1 + r)  (28pc) = 56 pc
(1 + r)  (16pc) = 48
(1 + r)  (12pc) = 8pw

r is the profit rate while pc and pw are the unit prices of computers
and wheat.

From the first equation we know the profit rate has to be 100%; price
of one computer is \$1.50 and price of one unit of wheat is \$4.50.

So contrary to the LTV, there can be a positive rate of profit and
relative prices in a totally automated economy.

But this assumes the method of determination which Moseley (monetary
macro), Shaikh (fixed point iteration) and TSS have all criticized in
their respective ways. For each of these three respectives there
would in fact be no profit in a fully automated economy.