Re: [OPE] topics for summer discussion: theories of the crisis

From: Dave Zachariah <>
Date: Sat Jul 24 2010 - 16:29:35 EDT

Thanks for your comment Michael.

> furthermore, the price and value quantities are simultaneously determined (even if estimation goes from one to the
> other), so one does not cause the other. f& m have a very profound
> effect on the manner in which we think about such issues.
I would disagree with this lack of causal mechanism. I think one can
show that the statistical law of value emerges as a consequence of
interconnected firms that operate under the constraint of meeting the
wage bill. This issue would however take us on a separate discussion, so
I'll leave it for now.

> making such a distinction between production and exchange (including
> finance) also enables us to do some work on Arrighi-type arguments
> about shifts in hegemony in a global system.

I agree with this.

> 3 any serious empirical examination of average rates of profit in
> modern economies must accept the fact that they are open. therefore
> Dave's original statement [...] is true only of closed economies (ie, of the world as a whole). in fact, average profitability depends also on the growth rate of net
> exports. in an even better formulation, it would also depend on
> inter-sectoral (which might include international) unequal exchange.
> 4 in a non-equilibrium, dynamic model of an open economy, it is
> possible to demonstrate that in the short run, average profitability
> can move in a variety of directions, depending on the above factors.
> in the longer run, the growth rate of net exports has to be roughly
> zero (otherwise, the areal unit would end up producing everything in
> the world; and there are political objections to this - viz first
> Japan, then S Korea and now China), and then, there is a knife-edge
> solution in which average profitability is constant; otherwise, it
> falls to some level until an adjustment in the underlying parameters
> is made (savings, productivity, labour, etc).
While it is true that the steady-state rate is derived in a closed model
of the economy it never the less works well empirically in real, open
economies as Paul just pointed out. It would be interested to see how
the growth rate of net exports would modify the steady-state rate. (Note
that this does not assume that wages are fixed or that there is full

> 7 in general, i hate approaches in which these are seen as
> theoretically separate approaches to the rate of profit. technical
> change is about reducing labour's share, for example. that's what
> it's for, as a capitalist rule of thumb. likewise underconsumption:
> that's what we want, in a world of internationally competitive firms -
> make our workers consume less and get the others to consume more.

There may still be insights gained by using 'separate approaches' to
break down and compare the hypothesized mechanisms that affect
profitability, so that one does not end up with a fruitless eclectic
theory in which everything is said to affect everything.

I would disagree somewhat with the idea that as a rule of thumb
technical change is about reducing the wage share in a firm. I think
that is a more proximate factor. Technical change is structurally set in
the competitive forces of a capitalist market, inducing the need for
firms to reduce costs and labour costs in particular. But in addition to
this workers, and a militant workforce in particular, can be weakened by
labour-saving technical change.

> 8 and finally, let me make a geographical point. [permit me... it is
> my discipline!] all of the calculations that we have been discussing,
> all of the concepts - they all assume that there is a geographically
> unified territory over which there is a given standard of living - a
> wage - and a given structure of prices. [...] this implies that the value of a
> commodity depends on where in the system it was made. it also means
> that the value of a commodity in a national economy ought, perhaps to
> be thought of as the average of the values of that commodity made at
> different places?

I think your last point can more or less be demonstrated through the
decomposition of prices as F&M do. However, I can't see how the real
wage or the real price structure enters into what I've written above
about profitability.

(Sorry for being seasonally out of sync in the subject line of this thread.)
//Dave Z

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Received on Sat Jul 24 16:31:23 2010

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