Jim, I think the problem we're having is definitional.
I think you are calling any decline in the cost of some input, per unit of output, a decline in the "input price." E.g. last year and this year, a firm lays out the same amounts of money for the same amount of iron and the same number of workers, but more output is produced this year than last year. I think you are calling this a fall in the price of iron and the price of labor, a fall in 2 input prices. Yes? In the terminology I've learned, the input price is the amount of money laid out per unit of *input*. Hence I would say that neither input price changes in this example. There is a fall in the cost of iron per unit of output and the cost of labor per-unit of output (aka "unit iron cost" and "unit labor cost"), but the fall is not due to a change in the *price* of iron or labor. In any case, I *think* we agree that in a case like this -- one in which technological progress does not cause a change in prices-in-my-sense -- the profit rate will rise. I think this is what you've been saying. Yes? But if technological progress *does* cause a fall in prices-in-my-sense, then my argument is that it must first cause a fall in output prices-in-my-sense (the amount of money laid out by buyers per unit of output) before it can cause a fall in input prices-in-my-sense. So it must first lower the average profit rate, and continuous technological change that causes a continuous fall in prices-in-my-sense can cause the profit rate continually to be depressed. What say you? One more thing: I do not see how it is possible for technological progress to lead to a fall in wages, a fall in the price-in-my-sense of labor, unless it is by means of a fall in the price-in-my-sense of wage goods. If the latter do fall, then what I'm saying is that the capitalists who sell these wage goods suffer a decline in their profit rate before the capitalists who benefit from the lower wages experience a boost to their profit rates. Rakesh Bhandari has written privately about a relat4ed matter that I'd like to discuss on-list, but I first want to try to clear up the confusion that exists between Jim and me. Andrew Kliman -----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of Devine, James Sent: Saturday, June 14, 2003 5:58 PM To: [EMAIL PROTECTED] Subject: Re: Falsifiability and the law of value [I'm sorry. By mistake, I sent this before I had finished. What follows is the finished version.] I wrote: "I agree that price falls _can_ cause falls in profitability." Drewk: >Good. < I continued: "But I don't see why "Output prices must fall BEFORE input prices fall." [quoting Drewk]" Drewk: >Because the input prices that are relevant to profit and profit rate computations are prices of earlier times than the output prices. E.g., investments are made at time t; sales of output occur at time t+1. Profits and the profit rate are computed for the time span between t and t+1. If prices fall between t and t+1, the fall affects the sales revenue of this period, but not the input prices of *this* period. It affects input prices of the period t+1 to t+2. < ------------------------ me: we're talking past each other. Not only was I discussing operating costs rather than capital costs, but have different "models" at play. I was talking about the common sense of business: it's possible to cut operating costs (prime labor costs and raw material costs) per unit while keeping prices from falling, boosting profits per unit (for awhile). You are talking about capital costs -- and are assuming some sort of model in which the fall in output prices (the subject of this thread) is linked by some sort of general (dis)equilibrium model to the later fall in input prices. That makes sense for the production of raw materials and intermediate goods: the capitalists who produce iron _lose_ from falling iron prices before the capitalists who produce steel _gain_, so that the average profit rate for both groups would fall (at least in the initial period). However, it doesn't make sense for the commodity labor-power: the initial loss due to fall in wages (or the speeding up of the labor process) would be taken by the workers -- and would thus not be part of the calculation of the average profit rate and so would not depress that rate. Instead, from the capitalist point of view, it's a total gain (unless wage declines cause social disorder and the like) until later, if and when competition drives prices down in line with the decline of wages. ----------------------- I wrote: "A counter-example: it happens all the time that production is sped up -- raising output per unit of labor-power hired and thus lowers cost per unit of output (given the wage rate) -- which has the immediate effect of raising profits." Drewk:> This isn't a counter-example. That is, it is not an example of input prices falling before output prices. It is an example of a fall in per-unit costs that is not accompanied by a fall in prices. Again, the impact of technological changes that do not trigger price reductions is obvious, and not at issue. < _________________________ I don't get this. You said that "Output prices must fall BEFORE input prices fall." The use of the word "must" suggests that there's some sort of rule that says that input prices NEVER fall before output prices. So I provided you with an example where input prices actually fell before output prices. That's a counter-example, an example which shows the falsity of a general proposition. Also, as I said before (in a part that you elided), as speed-up becomes general, in competitive markets prices _do_ fall, so that this is a case of falling input prices that IS "accompanied by a fall in prices." It's just that output prices fall after input prices fall, so that there's a transitory _gain_ in profit. I wouldn't call speed-up an example of "technological change." Rather, it's a "managerial change." Jim
