From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Sat Nov 09 2002 - 09:19:14 EST
I have not had the time to read carefully the flurry of posts on the TCC,
OCC, and VCC, but I would like to add a quick comment.
I agree mostly with Rakesh. The OCC is the VCC in a restricted sense - in
the sense that the VCC is affected only by technological change. The VCC
is also affected by other factors besides technological change, like
wages, the distribution of labor and capital across industries, the
turnover time of capital, etc. But the OCC abstracts from all these other
factors and serves to focus the analysis solely on the effects of
technological change on the VCC, and ultimately on the rate of
profit. The OCC is like a general ceteris paribus assumption: holding all
other factors constant, how does technological change affect the VCC? The
OCC is not a constant price (i.e. physical) ratio, but rather a ratio in
current prices, the VCC, in the restricted sense just described.
Below are excerpts from what I wrote about the OCC, including about Fine's
interpretation of the OCC, in my 1992 book *The Falling Rate of Profit in
the Postwar US Economy* (pp. 3-6).
Comradely,
Fred
EXCERPT
Finally, the third ratio is the organic composition of capital
(OCC). Marx defined the OCC as follows:
"There is a close correlation between the two [the technical composition
and the value composition; FM]. I call the value composition of capital,
in so far as it is determined by its technical composition and mirrors the
changes in the latter, the organic composition of capital." (C.I. 762)
[Notice that the OCC *IS* the VCC, in so far as it is determined by
changes in the TCC, i.e. by technological change.]
I interpret Marx's concept of the organic composition of capital in
the following way: the organic composition of capital is equal to the
value composition of capital insofar as the latter is affected only by
technological change. (C.III. 244-46; TSV.II. 379-84; TSV.III. 382-86).
There are numerous other factors besides technological change which also
affect the value composition of capital. The most important of these
"other factors" are: the average real wage, the distribution of labor and
capital across industries, the turnover time of capital, and the incidence
of multiple shifts in the utilization of production facilities. Marx
wished to ignore all these other factors in order to focus his analysis of
the trend in the value composition of capital specifically and solely on
the effects of technological change. The concept of the organic
composition serves the purpose of focusing Marx's analysis in this way. In
effect, the concept of the organic composition serves as an abbreviation
for a set of ceteris paribus assumptions, i.e. that the other factors
listed above remain constant.
This interpretation follows Mage (1963, pp. 68-74) and Cogoy (1973,
pp. 56-58), although the only "other factor" discussed by Mage and Cogoy
is a change in the average real wage, which changes variable capital in
the denominator of the value composition of capital and hence changes the
value composition itself in the opposite direction. In order to make the
organic composition of capital invariant to changes in the real wage, Mage
and Cogoy both suggest that the mathematical formulation which is most
appropriate for the organic composition of capital is to replace variable
capital in the denominator of the ratio with the sum of variable capital
and surplus value, i.e. with the total new-value (N) produced during a
given year; i.e.
(1.3) OCC = C / (V + S) = C / N
Since this ratio is not affected by changes in the average real wage, one
can relax the ceteris paribus assumption of a constant average real wage
in the analysis of the trend of the organic composition of capital.
Fine and Harris (1979, Chapter 4) have presented different
definitions of the technical and the organic compositions of capital than
the ones presented here. Fine and Harris define the technical composition
of capital as the ratio of the quantity of the means of production (MP) to
the quantity of wage goods (MS) (rather than to the quantity of productive
labor employed, as in the definition presented above). Algebraically:
TCC' = MP / MS
Since MS is equal to the product of the quantity of productive labor and
the average real wage (WR), the relation between Fine and Harris'
definition of the technical composition of capital (TCC') and the
definition (TCC) presented above is:
TCC' / TCC = [MP / MS] / [MP / L] = L / MS
or TCC' = TCC / WR
>From this last equation, we can see that Fine and Harris' definition of
the technical composition of capital (TCC') depends not only on the level
of technology, which determines the ratio MP/PL (or the TCC), but also on
the average real wage. This definition seems clearly contrary to Marx's
intentions.
Further, Fine and Harris argue that the difference between the
organic composition and the value composition is that for the organic
composition the means of production and wage goods are evaluated in terms
of the "old values" at the beginning of a period of technological change,
and for the value composition the means of production and wage goods are
evaluated in terms of the "new values" at the end of this period.
According to Fine and Harris, the purpose of the concept of the
organic composition of capital is to focus the analysis on the "direct
effect" of technological change on the ratio of the means or production to
the means of subsistence (their technical composition of capital) and to
abstract from the "indirect effects" of technological change on the
relative values of the means of production and the means of subsistence.
I argue, contrary to Fine and Harris, that the purpose of Marx's
concept of the organic composition of capital is not to distinguish
between the "direct" and "indirect" effects of technological change on the
value composition of capital (the distinction between the technical and
the organic compositions serve that purpose), but is instead to
distinguish between the total (net) effect of technological change, on the
one hand, and the effects of all other factors on the value composition of
capital, on the other hand. According to my interpretation, the organic
composition of capital serves to analyze both the "direct" and the
"indirect" effects of technological change on the value composition of
capital, and to explicitly exclude from the analysis all other factors
which also influence the value composition besides technological change.
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