In [OPE-L:3427] and other posts, Andrew discusses the problem of an economy
undergoing rapid labor-saving technical change with a constant ratio of
circulating constant capital to output. In the examples he puts forward the
labor value of the single output (corn) is falling due to constant
technical change at exactly the rate output (of corn) is increasing. In
this economy, corn is accumulating, but the quantity of labor employed is
constant. Furthermore, under the assumption of a "constant monetary
expression of value", the rate of profit in the labor numeraire or in money
is zero, despite a positive (say 250er period) rate of profit measured in
the corn numeraire. Andrew proposes this as a model of Marx's conception of
the falling rate of profit, and as a situation in which capitalist
accumulation is stagnant.
First, we might observe along with Marx that the impact of capital
accumulation on employment is always the result of two contradictory
tendencies: capital accumulation with unchanging technology tends to
increase employment because it expands the demand for labor-power, while
the process of capital accumulation revolutionizes the technique of
production and this tends to reduce the demand for labor-power. Andrew's
example is a case where the two tendencies exactly counterbalance each
other, so that employment is constant. But why should we expect the
accumulation process always to increase employment, or the capitalist
economy to be in some kind of trouble when employment is falling or
constant due to very rapid technical change? There are plenty of historical
periods which seem to approximate this pattern.
Second, the puzzle of the zero rate of profit in money numeraire could be
resolved, I think, very much in the spirit of Marx's own analysis, in two
ways. In a commodity-money (gold standard) economy like that of the 19th
century, the monetary expression of value would be determined by the
relative speed of cost declines in the gold mining and other commodity
producing sectors. If, for example, gold mining experienced on average the
same rate of labor-saving technical progress, then the monetary expression
of value would be falling at this rate, and the money rate of profit would
be positive. If for some reason gold production were immune to technical
progress, then the reasoning Marx uses in his discussion of the
transformation of values into prices of production would suggest that the
price of corn would have to be above its value so that the rate of profit
in the corn sector could tend toward equality with the rate of profit in
the gold-mining sector. When we put the example in this larger context, I
don't think it appears so paradoxical or problematic.
Duncan
Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
(212)-854-3790
fax: (212)-854-8947
e-mail: dkf2@columbia.edu