Re: [OPE] review of Dumenil & Levy's Capital Resurgent

From: michael perelman (
Date: Sat May 31 2008 - 13:45:18 EDT

Also, monopolistic forces, such as intellectual property right, increase 
measured productivity.

Jurriaan Bendien wrote:
> That's a useful review. My own take on this which I aim to write up some 
> time is that Dumenil & Levy's empirical measurements of productivity, 
> based on a relationship between official data on inputs and outputs, can 
> be questioned conceptually. Once this is done, their notion of 
> productivity is undermined.
> Among other things, Marxist and non-Marxist economists often assume that 
> data on net output (or, roughly, the sum of factor incomes) measure the 
> value of new products produced, whereas net output only intends to 
> measure the new gross value added by production.
> It may be that if we deduct total intermediate consumption from total 
> gross output of production (the total turnover or total gross sales 
> revenue) defined in some suitable way, that we obtain an approximate 
> measure of the value of all the new products created together within an 
> accounting interval.
> But, if let's say a factory produces a car which sells at the factory 
> gate for $20,000, that $20,000 unit price does not simply represent the 
> value added or the factor incomes generated by the factory - it also 
> includes intermediate operating costs in building it. When you buy the 
> car, in other words, you do not just pay for the wage costs and gross 
> pretax profit income of the manufacturer implied in building the car, 
> but also the intermediate operating costs, including for all the 
> componentry purchased to make the car. In Marxist phraseology, the unit 
> price of the car is not V+S, but C+V+S.
> In the NIPAs, unlike UNSNA, intermediate consumption is not tabulated in 
> the derivation of gross output (as is the practice in UNSNA), but it is 
> shown in the input-output tables. Taking the (rounded) data for the year 
> 2004 as example,
> Gross output = $21,346 billion
> less intermediate consumption (= $9,612 billion)
> equals net output (or GDP) = $11,734 billion
> So in the NIPA's, total intermediate consumption (value of purchased 
> goods and services inputs used up in production) is about 45% of total 
> gross output (roughly, the total turnover). About half of total 
> intermediate consumption in the US consists of services. The largest 
> intermediate items by value are manufactured goods and 
> financial/business/professional services.
> Why is all this significant? For a number of reasons, of which I will 
> mention a few obvious ones.
> As said, the new value added by a sector does not equal to the sum of 
> unit prices of products actually sold by that sector; inputs and outputs 
> are valued at producer's prices.
> Secondly, the magnitude of intermediate consumption can fluctuate 
> semi-independently from the magnitude of net output. This can be easily 
> verified in the NIPAs since the statisticians in fact calculate how much 
> total inputs it takes to produce one dollar of output by sector.
> Thirdly, if the nature of throughput and output changes a lot, 
> qualitatively, across a couple decades, then it becomes difficult to 
> compare earlier and later financial data because it may refer to 
> completely different objects. If for example in 1980 the output of 
> phones was (say) $10 billion, and in 2008 the output of phones is $20 
> million, how do we evaluate the increase in productivity since mobile 
> phones were only a niche market in 1980 and produced very differently?
> Fourthly, economic accounts provide no measures of physical productivity 
> - the market value of products produced may go up or down even although 
> the physical output keeps increasing strongly.
> Fifthly, as regards modern companies, the total revenue of the 
> enterprise may bear no relationship to the total unit prices of outputs 
> sold, because the enterprise has significant costs and revenues 
> completely unrelated to those outputs.
> The accounts are built up on the principles that for every selected 
> purchase there is a sale, for every selected expenditure there is an 
> income, for every selected asset there is a liability and so on. But as 
> regards capitalist production, more value comes out of it than goes into 
> it (otherwise there is little point in producing), and nearly half the 
> outputs of some enterprises are the inputs of other enterprises. The 
> account then tries to straddle the difference between capital 
> accumulated and total new product values with a bunch of distinctions 
> which aim to define and measure the net addition to wealth. This results 
> in the notion of value added, but this notion in reality does justice 
> neither to accumulated capital nor to the actual value of products 
> produced and sold, except that we can then estimate that for total 
> production, valued in some suitable way, there is an aggregate 
> standard price (=GDP) equal to the value of the total new products 
> produced and circulated in an accounting interval.
> In summary, I think the "fetish" people often fall victim to is that the 
> sectoral "net output" values cited in economic statistics represent the 
> sums of the "unit prices of products and services produced". On that 
> basis, we can of course devise all sorts of ways to measure productivity 
> by relating sectoral inputs and outputs, but, if in reality those inputs 
> and outputs merely describe a predefined subset of total costs and total 
> sales, we ought to be more skeptical of the productivity indicators 
> provided.
> I think that properly considered, Dumenil & Levy's conclusion ought to 
> be that although physical productivity increased strongly, the actual 
> income generated by that additional physical productivity was in no 
> proportion to the increase in physical output. That would be a more 
> Marxian conclusion: more and more commodities are produced, and more are 
> produced per worker, but their unit-values declined in real terms and 
> therefore the real incomes generated by them was not proportional to the 
> increase in physical output. But this is obviously difficult to test, if 
> we lack data on outputs of physical product units. This conclusion means 
> that productivity growth did not stagnate in labour terms or physical 
> terms, but that the longterm tendency was for output to be devalued in 
> real terms.
> Jurriaan
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Michael Perelman
Economics Department
California State University
Chico, CA

530 898 5321
fax 530 898 5901
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