1. In an economy with long-lived fixed capital, labor-saving technical
change will lower the value of existing capital by reducing the prices of
commodities, and also possibly by reducing the cost of replacement capital.
Marx clearly recognizes this, and I don't think there would be much
disagreement about this point. This "devaluation" of existing capital
reduces the wealth of capitalists, and, if they have financed their
investments by borrowing, can threaten them with insolvency, thus creating
disruptions in the circuits of credit and the financing of production.
2. Labor-saving technical change, given a constant real wage, raises the
profit rate on new investments. I don't think there's actually any
disagreement on this point, either. In the TSS literature this point is
acknowledged through the analysis of the "commodity" profit rate rate.
3. In real history, real wages aren't constant, but rise at about the same
rate as labor productivity, giving rise to a roughly constant value of
labor-power. Marx analyzes the falling rate of profit on the basis of the
hypothesis of a constant value of labor-power, not a constant real wage.
When the value of labor power is constant, technical change that is
labor-saving and capital-using will lower the rate of profit on new
investment.
4. Maybe our job as Marxist theorists is to devise a vocabulary and a set
of simple accounting conventions (simple enough to teach students, for
example) that make these effects and their analysis transparent. I think it
would help if the vocabulary and the accounting conventions explicitly
separated these different effects, at least to begin with, and then showed
how they combined to affect the income statements and the balance sheets of
capitalist firms.
Duncan
Duncan K. Foley
Department of Economics
Graduate Faculty
New School University
65 Fifth Avenue
New York, NY 10003
(212)-229-5906
messages: (212)-229-5717
fax: (212)-229-5724
e-mail: foleyd@newschool.edu