# [OPE-L:3608] Laibman on the output ratio and the occ

Gerald Lev (glevy@pratt.edu)
Wed, 6 Nov 1996 21:44:12 -0800 (PST)

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There has been much discussion on this list concerning the capital-output
ratio. What is the formal relation between that ratio and the organic
composition of capital (occ)?

David Laibman discusses this topic (and many other interesting and
relevant subjects!) in his _Value, technical change, and crisis:
explorations in Marxist economic theory_ (Armonk, NY, M.E. Sharpe, Inc.,
1992).

Basically, David L holds that the capital-output ratio (which he calls
the output ratio) *is* the occ (or, more precisely, it is the
*reciprocal* of the occ).

The defines the output ratio as "the ratio of output to fixed capital, or
output per unit of fixed capital" (p. 93).

He goes on to explain in a footnote on the same page that:

"I will note that the output ratio = Y/K, where Y is output and K the
capital stock. This, in turn, is equal to L/[(L/Y)K]. L/Y may be
thought of as the value of a unit of output, where value is measured
in terms of labor time. (L/Y)K is therefore the value (in labor
time) of the capital stock. The output ratio Y/K, then, is formally
identical to (v+s)/C, where v+s is the flow of current labor time,
in standard Marxian notation, and C is the stock of constant capital
(also in terms of labor time). [...] I believe that Marx's 'organic
composition of capital' is best represented by the formula C/(v+s).
The 'output ratio' of this chapter, then, is the reciprocal of
Marx's organic composition of capital, and a *falling* output ratio
is equivalent to a *rising* organic composition of capital -
the concept that grounds Marx's discussion of technical-change
trends" (emphasis in original, JL).

He goes on to write the output ratio in a "slightly fuller form":

"output output/labor
------ = -------------
capital capital/labor

In this form we can see that the output ratio is a ratio of ratios,
with output per unit of labor, or *labor productivity*, in the
numerator, and fixed capital per unit of labor in the denominator.
Clearly, the output ratio will rise if, and only if, productivity
(which is clearly rising) rises *more slowly* than the physical
capital/labor ratio (which is also clearly rising). The
capital/labor ratio is an index of the degree of mechanization, and
Marx's arguments concerning the use of mechanization as a weapon
against workers certainly supports the view that it rises
overtime, as does the causal evidence referred to above. The
question, however, is whether the capital/labor ratio rises more
rapidly than productivity, in general. Productivity is also
stimulated by the capitalists' search for higher profits and for
weapons to fight each other with, as well as for use as a
'battering ram' breaking down barriers to capitalist penetration
around the world. There seems to be no reason why the denominator
should necessarily rise more rapidly than the numerator; the whole
trend is therefore called into question" (Ibid, pp. 94-95,
emphasis in original).
--------------

So ... (a) do you agree with David L's explanation of the relation
between the capital/output ratio and the occ? Why or why not?;

(b) How would you evaluate David's position in the last sentence
above ("There seems to be no reason ....")?

(c) what do you think about the rest of the above?

In solidarity,

Jerry