[was: RE: [PEN-L] Falsifiability and the law of value]
Drewk writes:
>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? <
I may have been sloppy. I'll consistently use the phrase "input price" in your sense below, e.g., the number of pesos needed to buy a ton of iron.
From the point of view of an individual steel-producing capitalist firm, however, a fall in this kind of input price would have the equivalent effect on unit input costs as a rise in the (private) efficiency of iron use (steel output/unit of iron input) -- except that origins may differ. The latter may involve a cost (i.e., may require an investment) to effectuate, whereas a fall in the input price likely happens due to changes in market conditions or similar.
(BTW, a rise in the efficiency of iron use would not only lower the cost faced by the individual steel-producing capitalist (cet. par.) but would lower the demand for iron and thus the price of the iron (cet. par., unless the supply of steel is totally elastic). All else constant, this
combination of events would _raise_ the individual steel-producing capitalist's profits -- until later, when the improvement in the efficiency of iron use became general and competition drove the price down.)
>... 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 your example above, you are right: the input price didn't change.
>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? <
I guess we agree that if input prices don't change, then technological change will boost profits.
But that doesn't say that falling input prices automatically cause falling profits, which seems to be what you're arguing. This is the issue I'll address: if input prices fall, do profits automatically fall?
If the input price we're talking about is the wage (the price of labor-power), then a fall in that input price causes a rise in profits (all else constant) until the wage-cut is generalized so that capitalist competition drives down the output price.
If our unit of analysis is a nation-state such as the US, a fall in the price of a generally imported raw material (such as oil) will have the immediate effect of raising the profits of businesses that use oil as an input (and, cet. par., the profits of all domestic companies) -- until competition drives down the price of the output. (My feeling is that this can be quite awhile. The price of gasoline seems to rise immediately after oil prices rise, but there's a delayed fall in gasoline prices when oil prices fall. So the temporary surge in profits can be long-lasting. Of course, this is due to imperfect competition.)
>But if technological progress *does* cause a fall in [input]
prices..., then my argument is that it must first cause a
fall in output prices... before it can cause a fall in input
prices... So it must first lower the average profit
rate, and continuous technological change that causes a continuous
fall in prices... can cause the profit rate continually
to be depressed. What say you? <
Empirically, aggregate profit rates in the US rose from the 1950s to the late 1960s, despite or because of rapid technological improvement (as measured by labor productivity growth) compared to eras since then. But let's stick with the safer world of theory for awhile.
Technological change in the iron mines would likely hurt the prices of the iron companies. But does that hurt the profits of the iron companies? doesn't it depend on the elasticity of the demand for iron? Even if demand is inelastic for the iron market as a whole (as seems likely), such technological change would help the profits of the innovator that introduced the new technique -- as long as that innovator doesn't represent a big fraction of the market. The innovator would gain temporary technological rents, until the new technique became generalized
and competition drove down the iron price.
(This process encourages the centralization of capital, just as a similar process encouraged the fall of the family farm and the rise of agribiz, but I'll ignore that.)
The immediate effect of the fall of the price of iron on the steel producers would be to lower unit costs (without requiring a technical change in the steel industry). The price of steel wouldn't change immediately, so there would be a increase the profits of the steel companies. Again assuming competition, this increase in profits would of course be temporary.
Assume that the net effect on steel profits is zero (after competition in the steel industry translates the fall in input prices into a fall in output prices) as in the theory of mark-up pricing (which is roughly accurate over time in manufacturing) and that the demand for iron is inelastic (so at iron-industry profits are hurt by the fall in the price of iron). In that case, the average profit rate for the iron+steel industries would fall, as you suggest. If the profit rates in other sectors stayed the same, the aggregate profit rate would fall.
However, increases in labor productivity relative to wages across the board could easily counteract this trend. More importantly, exit from the iron-producing sector would reduce supply there are restore profitability there. So this would be a temporary effect.
>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 [input]
price..., unless it is by means of a fall in the
price... 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. <
I didn't posit technological change as the cause of the fall in wages. Wages could fall due to class struggle instead. (In fact, I wasn't talking about technological change alone. You said that input price falls had to follow output price falls, so that profits were hurt. I said that it was possible for input prices to fall first, so that profits were boosted (temporarily). Since the laws of motion of capitalism involve more than simple technological change and market adjustment, I don't see why I should restrict my view to these.)
More importantly, there's no reason to assume that the real wage (money wage/wage goods price) is constant. So a fall in the price of wage goods does not automatically translate into a fall in the money wage (the cost of hiring labor-power from the individual capitalist perspective); the real wage could increase instead. Thus we need not equate a fall in the money wage with a fall in the price of wage goods.
(BTW, I think that we should reject the Bortkewicz tradition, in which labor-power is a produced input as part of a general equilibrium system or an input-output matrix. The production process for labor-power is qualitatively different from that of other commodities. Households do not produce labor-power to make a profit! We should also avoid treating Marx's simplifying assumption in volume I of CAPITAL that the real wage is constant as a general rule, some sort of Lasallean iron law of wages.)
If we do assume that real wages are constant, that means that (cet. par.) the profit rate for capitalism as a whole should rise due to labor-saving technological change or speed-ups (rising output per hours of labor-power hired). In simple terms, the benefits of productivity gains are entirely captured by the capitalist class.
The rate of profit (R/K, where R is total surplus-value and K is the value of fixed capital) equals (R/Y)/(K/Y) where Y is the total value produced. If real wages are constant, an increase in labor productivity would raise the rate of surplus-value (measured here as R/Y). Unless there's a reason to assume that K/Y rises _more quickly than_ R/Y rises, then r rises.
Technological progress -- as measured by increases in labor productivity -- lowers the value of both Y and K. But there's no reason why the value of K should fall more slowly than that of Y. In fact, there's been a lot of technological improvement in the production of fixed capital goods since the period when Marx wrote. So despite rises in "capital intensity" (the technical composition of capital), the value composition of capital (here measured by K/Y) seems to have been roughly constant, empirically speaking. There's thus no reason to expect K to rise relative to Y enough to more than counteract the rise in R/Y that results from the constant-real wage assumption and rising labor roductivity. So there's no reason to expect the rate of profit to fall given the constant real-wage assumption. Instead, it should rise.
All of the above ignores the role of increasing unproductive labor-power being used. But Drewk wasn't blaming the (theoretical) fall of the rate of profit on the rising role of unproductive labor-power.
Jim
