First, at Grossmann's yr 35, the demand for additional constant capital is fully met (on this we agree); moreover, the system does NOT 'objectively' break down just because there is too little surplus value to hire all additional workers. Andrew is not right however broadly we define investment goods. Unemployment in itself cannot be the cause of an objective breakdown; that capitalists can't absorb all the unemployed is no reason for their ceasing to accumulate (they could just intensify the labor of those whom they do hire to ensure amortization of additional constant capital). That there is nothing left for capitalist consumption *is* what breaks the system down, not that the demand for investment goods is not met.
Second, Grossmann is not vague about this (you are wrong about this as well; it does matter that you didn't include a capitalist consumption variable); indeed as the capitalist consumption fund diminishes absolutely in yr 21 or 22 or whatever (I don't have the book with me at this terminal), Grossmann predicts severe crises--if not breakdown!-- even though there is plenty of surplus value for both accumulation and even a high, albeit reduced, level of capitalist consumption. At the very least, there is reason to expect that there will be attempts to reorganize the capital structure and raise the rate of exploitation in order to bolster capitalist consumption; and this 'rationalization' will be accomplished in and through the 'breakdown' that disaccumulation, following upon an absolute fall in capitalist consumption, brings about at yr 21 or 22.
Third, Andrew simply ignores my point that to say the scheme breaks down to a shortage of physical goods completely obscures the efficient cause of that shortage. The shortage could be for Malthusian reasons (simple natural inability to produce more goods) where Grossmann is trying to explain why excess capacity and surplus capital develop at a late stage of accumulation (yr 36 in his scheme). The system has greater technical potential which it cannot utilize. Production does not idle for physical reasons. It breaks down due to the disequilibrium in the relation between the ratio of surplus/necessary labor to the requirements of accumulation.
This is obscured as well by Andrew's summary description, distortion and dismissal of Grossmann's argument. The reason for surplus capital or the non-utilization of physical capacity is the shortage of surplus value due to an insufficient rate of exploitation as the OCC rises on ever larger investments.
Fourth and parenthetically, there all kinds of reasons to doubt capital accumulation can be represented by the scheme (I would only insist that Grossmann himself was quite aware of most of them; his book should be studied just for the elaboration of the theory of countertendencies which he developed from JS Mill and Marx and which a a decade later was studied by Schumpeter under the rubric of "Innovation"): the Okishio Theorem; capital saving along with capital deepening technical change; a rising rate of exploitation; the continuous introduction of low OCC branches which stabilizes the OCC on total capital...It is a simplified model which indeed proves nothing about the actual course of capital accumulation.
Fifth, this is how Andrew responded to my argument that the scheme represents that an insufficient rate of exploitation is the efficient cause of breakdown. I read the following by Andrew as an attempt to refute my claim that a higher rate of exploitation would enable resumption of accumulation without excess capacity. Andrew wrote:
> This is incorrect. You're suggesting raising S and thereby
> lowering V. But if V is lowered, so is investment demand in
> physical terms. So you're suggesting that breakdown can be
> postponed or negated by lower demand for investment goods
> relative to their supply!!
Now the following reply Andrew dismissed as specious without saying why. And he still hasn't told me why it is not technically correct. At any rate, I replied:
Not lowering V in absolute terms! One unit of v represents one worker; if it represents two workers (say a night shift is added and wages halved), surplus value is doubled while the demand for the product of dept 2 is not thereby reduced: v has NOT been reduced in absolute terms so there is no lowering in physical terms of demand. S/V has however doubled,and breakdown has been deferred!!
If S is raised by the production of more surplus value by the same number of workers (the prolongation or the intensification of the working day, those things that produce working class misery in the abode of production), then V is not lowered as S/V is raised. I am not talking about a more favorable distribution of surplus value deferring breakdown but a greater production of surplus value and higher rate of exploitation.
Also note the passage from Mattick Jr where the actual argument about the insufficiency of surplus value as the root cause of world market crises which are manifested as overproduction or excess capacity.
Sixth, Andrew has not clarified what his argument against Grossmann is. Is Grossmann's crisis theory reducible to the extended Bauer scheme, regardless of what Grossmann thought? What are the exact problems of such a model that Andrew thinks he has uncovered? Does it reduce technical change only to capital deepening? Was Grossmann wrong to use the artifice of a constant rate of exploitation? On what grounds is Andrew dismissing the scheme? Didn't Grossman himself insist that it was only provisional--for example that it did not capture periods of capital widening or the introduciton of new low OCC branches or the effects of devaluation?Was Grossmann wrong to abstract from possible disproportionalities between departments or crises of realization (which are central to Pasinetti for example)? What do we make of Sweezy's important critique? What significance does Andrew attach to his discovery that investment demand outstrips production of investment goods?
best, rakesh