A reply to Duncan's ope-l 1589.
Duncan suggests that our discussion on the FRP relate to existing ideas
in the literature. Fine, as long as temporalist ideas is included as
part of the existing ideas, since indeed the Okishio theorem has been
thrice refuted by temporalists. The first refutation was John Ernst's
in the 1982 Value Theory special issue of the RRPE--the same issue in
which David Laibman's rising real wage view of the FRP was included,
as well as Duncan's piece on the value of labor-power and the
"transformation problem." The second was my "The Profit Rate Under
Continuous Technological Change," published in RRPE 16:2-3 (1988).
The third is Alan Freeman's, published in _Marx and Non-equilibrium
Economics_, Elgar, 1996. This book also includes a revised and much
expanded critique/refutation of the Okishio theorem by me.
So I'm all for referring to the existing literature. Indeed, were folks
on the list to study our work before critiquing it, the discussion
would be much improved, because the learning process would be systematic
instead of achieved through piecemeal explanations and corrections of
misconceptions over the Net.
Duncan writes:
Okishio, Roemer, et al. show that the universal adoption of a viable
technique WILL LEAD to new steady-state prices at which the profit
rate is no lower ...."
This is not actually the case, as I explained in ope-l 1533 (22 Mar 1996
16:51:12.22). They do NOT show that anything will happen after the
adoption of the new technique. Rather, on the basis of the new input
coefficients and two *assumptions*--uniform profitability AND stationary
prices--they *compute* an imaginary post-innovation profit rate. I
would accept the following rephrasing of what Duncan wrote: " ... show
that an imaginary profit rate no lower than the pre-innovation rate is
associated with the new input-output data, when the new, imaginary profit
rate is computed by assuming stationary prices as well as uniform
profitability.
Duncan asks that the discussion relate to the viability conditions.
Both versions of my refutation of the Okishio theorem show that
technical changes that are viable according to Okishio's and Roemer's
own criteria can lead to a falling profit rate, given a constant real
wage, when value is determined by labor-time, as in Marx, and mechani-
zation is continuous. BTW, this is *not* a "disequilibrium" profit
rate in any normal sense, necessarily. In my examples, I assume a
one-commodity economy, so this sector's profit rate *is* the general,
average, economy-wide, "equilibrium," profit rate. Of course, this is
not an "equilibrium" profit rate in the rather peculiar sense of much
simultaneist literature--i.e., not a profit rate corresponding to
stationary prices. But if mechanization is continuous (which the Okishio
assumptions do not preclude), why should prices be stationary? And it
seems to me that most everyone involved in this discussion over the
last several days agrees that the ex post, realized, i.e., actual,
profit rate cannot be calculated on the basis of retroactively revalued
capital (capital revalued according to this period's output prices).
Although I show that according to the Okishio/Roemer viability conditions,
the new mechanized techniques will be adopted, and can lead to a falling
Marxian profit rate even with constant real wages, I am not wedded to
the Okishio/Roemer adoption criteria. Indeed, Okishio/Roemer assume
that the capitalists cost-up different techniques at *current* prices,
which is equivalent to saying they use the internal rate of return
formula given the assumption that current prices will prevail throughout
the lifetime of the investment. Any firm which did so would be
extremely, extremely, myopic--and, I think, foolish.
Thus, my work proposes *additional* reasons why capitalists would adopt
techniques that lead to an FRP. One key one is Marx's own--the more
productive firm gets superprofit that raises its own profit rate while
lowering the general rate. Note that such estimates of super-profitability
need not assume stationary prices. Again, Okishio seemed to destroy this
argument of Marx's, but ONLY because he (Okishio) seemed to show that
if a capitalist adopts a technique that raises his/her "transitional"
rate of profit, the general rate cannot fall. Since the Okishio theorem
has been shown to be false, however, Marx's micro argument is vindicated.
Andrew Kliman