Shane correctly says that K requires measurement. Several problems occur in that regard. The most interesting for me is a point that I have been bringing up for some time -- depreciation. What is the value of a one-year-old capital good? New technology or market conditions may make it worthless in a short time or it may go on working for a long time. I have written about this problem in several venues if anyone is interested.
If anyone wants to read Shane's dissertation, come to Chico. Our library has it. It is quite good. On Tue, Oct 29, 2002 at 12:23:09AM -0500, Shane Mage wrote: > Jim Devine wrote: > > >To be serious, it seems to me that how one measures the degree of > >"capital intensity" of production (the OCC) depends on one's theory > >and the purpose of one's research. > > > >For example, I would measure the OCC in a deliberately "incorrect" > >way. I use K/Y, the ratio of the stock of fixed capital to total > >output. This would measure who was winning in the race between the > >tendency for capital intensity (K/L, where L = labor hired) to rise > >and the tendency for labor productivity (Y/L) to rise. The former > >tendency (that Marx stressed) is only relevant to determining profit > >rates when the latter tendency (which is often an effect of the > >former) is weaker. > > This leaves the problem of units of measure. If K is a quantity > of Marxian labor-time-units, then K/L is just Marx's Organic > Composition of Capital when L is *productive* labor performed; > if L is total labor (productive+unproductive) then "labor > productivity" becomes meaningless; if K is a so-called > "real" quantity then all the measurement problems in > calculating the "real" capital stock--especially the > totally defective price indices for capital goods and the > grossly approximative allowances for depreciation and > obsolescence--deprive the resulting numbers of any > relevance. > > In addition, this approach can never give a theoretical grounding > to the "Law of the Falling Tendency of the Rate of Profit" > because under it there is no necessity for the productivity > of labor to tend to increase less rapidly than capital intensity. > However, when the Marxian units of measure are used > consistently it can be proven that, whatever rate of > increase of labor productivity results on average and over > time from increasing Organic Composition, the rate of > profit *must* tend historically to fall (even though, for > limited periods, this tendency can be denied expression by the > "countervailing factors" discussed by Marx). > > Shane Mage > > "When we read on a printed page the doctrine of Pythagoras that all > things are made of numbers, it seems mystical, mystifying, even > downright silly. > > When we read on a computer screen the doctrine of Pythagoras that all > things are made of numbers, it seems self-evidently true." (N. > Weiner) > -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
