But what is the question that these technical issues are trying to answer? Whether capital is productive? Whether neo-classical value theory is wrong? If it is, wouldn't that leave the door open to exploitation? And where did the debate end on those questions?
> -----Original Message-----
> From: bhandari at phoenix.Princeton.EDU [SMTP:bhandari at phoenix.Princeton.EDU]
> Sent: Wednesday, June 30, 1999 2:57 AM
> To: lbo-talk at lists.panix.com
> Subject: RE: Marx and Productivity
>
>
> >>
> > Is this about the Cambridge controversy? Could someone summarize
> >this for me? Basically as I understand it, there was a debate between
> some
> >Cambridge Keynesians/Marxians and some Harvard/MIT economists, right?
> Didn't
> >their debate have to do with whether capital is productive? Who was right
> >and who won the debate? And what significance does it have?
> >
> > Seth
>
> Hah, the blind leading the blind. Well, take Samuelson's final surrender:
>
>
>
> Years Total Inputs
> of Labor
> Technique t-2 t-1 t
> _________
>
> A 0 7 0 7
> B 2 0 6 8
>
>
> Now what this comparison of techniques is supposed to show is the
> possibility of reswitching; the whole debate has the air of scholaticism
> to
> it because no real empirical evidence is offered for reswitching and it
> has
> that stink of comparative static exercises that neo classical economists
> love.
>
> Now...
> at zero or neglible interest rates, only labor costs would matter and
> technique A has a lower total input costs (seven as opposed to eight for
> tech B). Indeed tech A remains profitable as long as interest rates stay
> under fifty percent because the interest of carrying labor costs is
> relatively low for A compared to B. Yet if the interest rate exceed 50
> percent, tech B now has lower overall costs because most of the labor is
> done in the third and final year and thus the interest carrying charges
> for
> the project are relatively less for technique B. Now here's the surprise:
> once the rate of interest climbs over 100%, tech A again becomes more
> profitable because now the difference in interest carrying costs having
> become relatively even, the principal difference is one of labor costs,
> giving the A the advantage.
>
> Samuelson then concluded:
> The phenomenon of switching...shows that the simple tale told by Jevons,
> Boehm Bawerk, Wicksell and other neoclassical writers--alleging that as
> the
> interest rate falls in consequence of abstention from present consumption
> in favor of future, technology must become in some sense more
> 'roundabout',
> more 'mechanized', and more 'productive'--cannot be universally true."
>
> What was thrown into question here is whether it could now reasonably
> expected that 'changes in the relative costs of labor and capital--real
> wages and interest or profit rates--will work to induce *rational*
> substitutions of capital for labor and labor for capital--that lack the
> consistency and ordered coherence postulated by neoclassical capital and
> production theory", as Richard X Chase puts it in A Guide to Post
> Keynesian
> Economics.
>
> I hope this helps to get the discussion started, and experts such as
> Andrew
> K and Jason will get to the fundamentals.
>
> Yours, Rakesh
>