Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Wed Dec 16 07:55:33 PST 1998


mr boddhisatva,

1. taking the capital output ratio as a proxy for the organic composition of capital, one can turn to Kuznet's or Gillman's data and demonstrate that technical change has remained on a Harrod neutral path--I think that's what the economists call it. Even if this were so, one could argue that circulation and R&D costs, privately and state financed, have risen as well and thus rising unproductive expenditures deducted from surplus value have enforced the falling rate of profit despite on going capital saving innovation. Prabhat Patnaik suggests this in Accumulation and Stability Under Capitalism which draws from Jim O Connor's classic Fiscal Crisis of the State to understand the social investments, e.g., R and D, undertaken by the state as a dedudction from total surplus value.

2. while capital saving innovations may seem to do away with scarcity of surplus value vis a vis accumulation requirements, this would actually only be so if these improvements are only being introduced entirely in the conjunctural course of replacement of plant and equipment carried out to make up for normal wear. But in the heat of competitive battle, the "premature" assimilation of such innovations by first movers may visit severe moral depreciation upon competitors and therwith reduce the average rate of profit or even the rate of profit of the innovator, taking a loss on the old plant, in absolute terms while increasing his profit rate relative to his beaten down competitors and thereby increasing his chances for long term survival. To understand situations like this we probably need to leave behind the quaint maximization problems and the apparatus of the calculus in basic economics or the organized world of matrix algebra for the investigation of predatory behavior in game theory. From Samuelson and Sraffa to Oskar Morgenstern! How the capitalist class as a whole can get stuck with destructive unproductive expenditures, e.g., circulation and R and D costs, could be examined within this framework.

3. does state of the art technology reduce steps or parts in the industrial process and thus the capital required? There seem to be several examples of this in MIT prof James Utterback's Dynamics of Industrial Innovation; Taussig had raised this objection to Bohm Bawerk's idea that methods become more roundabout. But again even if capital or indirect labor per unit is falling, the upfront costs for state of the art of technology can be ever higher (a stable capital output ratio does not mean that minimum capital requirements are not rising); thus if labor saving technical change is progressing as well or if capital is tied up in expensive equipment for longer periods, there remains the looming threat of a shortage of surplus value for futher accumulation at the point the competitive battle may require it.

4. capital does not automatically introduce state of the art technology. Everything is still governed by value relations. You may remember the following which I submitted to PEN-L some time ago:

Ricardo reasoned that a machine, to be introduced, must cost less than the workers it is designed to replace. But Marx had different system of calculation: A machine replaces labor power power but labor power is than than value it creates. The machine's money value represents all the labor in its production, in no matter what proportion it represented wages and surplus value. Hence the real economy of a machine is the difference between its value and only the labor-power it replaces, not the total value added by labor. Dead labor is less, then, than the living labor it replaces. Since the difference is computed as between the cost of the machinery and merely of the labor power it replaces, it follows that where labor power costs little it may not pay to buy any machinery.

Thus, only if surplus value or the wage form is abolished can the labor basis for replacing machinery be greatly augmented and the advances in mechanization correspond fully to the full technical knowledge of humankind: the proletarian revolution would be the greatest of productive forces by destroying capitalist relations of production.

happy holidays, rakesh

> C. Rakesh,
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> I've become increasingly less convinced that the OCC has anything
>at all to do with profits. After all, any society, no matter how it's
>organized, will have an ever-increasing stock of capital goods. Besides
>that, capitalism does not require more capital to be more profitable but a
>higher state of technological art. After all, many technologies are
>designed specifically to *reduce* the amount of capital required for a
>given industrial process.
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> Any thoughts?
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> peace
>p.s.- Bringing the idea of labor value into the thing simply begs the
>question. We can't assume that less value is being put out if that is
>what we are trying to prove.

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