Jim Devine wrote: "My assertion wasn't based on Okishio or anything like that. It was based on accounting. If input prices (per unit of output) fall and output prices stay constant, profits rise."
Right, Jim. But if *output* prices (per unit of output) fall and *input* prices stay constant .... And the latter must always be the case *before* the former can be the case. That's important. E.g., the price of machines falls during period t. At the end of period t, the revenue received by machine producers falls. Input prices of period t -- prices of inputs acquired at the start of period t, or before -- cannot change because they are a thing of the past. So there is a fall in the machine producers' profit rate, and therefore the general rate, of period t. In period t+1, the input price of machines falls (since it is the output price of period t). This *tends* to raise the profit rate of period t+1. But if there's another fall in the price of machines, or of anything else, during period t+1, it will partially, fully, or more-than-fully offset the benefit of cheaper machines. Thus it is possible for the general profit rate of period t+1 to be lower than the "starting" rate, and possible lower than that of period t as well. And the same goes for periods t+2, t+3, etc. So continuous productivity increases can cause profitability to be permanently depressed. Marx was right about this. Andrew Kliman ------------------------ Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine > -----Original Message----- > From: Drewk [mailto:[EMAIL PROTECTED] > Sent: Friday, June 13, 2003 2:33 PM > To: [EMAIL PROTECTED] > Subject: Re: [PEN-L] Falsifiability and the law of value > > > Jim Devine wrote: > > "But if labor productivity rises (or wages fall) before prices > fall, the first thing to happen would be a rise in the rate of > profit (likely temporary)." > > I don't think so. Greenspan, Brenner, and others tell this story, > but it is based either on a fallacy of composition (the > innovator's profit rate rises, therefore the general rate rises) > or on the Okishio theorem, which is false. If you do not > retroactively revalue inputs, as the theorem does, then the > decline in price will tend to offset the increase in physical > productivity, and it can more than offset it. > > The profit rate can't tell "good deflation" from "bad deflation." > Whatever the cause of falling prices is, the fall itself reduces > profitability, cet. par. > > Andrew Kliman > > -----Original Message----- > From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of > Devine, James > Sent: Friday, June 13, 2003 5:16 PM > To: [EMAIL PROTECTED] > Subject: Re: Falsifiability and the law of value > > > Drewk writes: > > If > > increases in productivity imply falling prices, ceteris paribus, > > and if falling prices imply falling profit rates, ceteris > paribus > > (which they do), then .... > doesn't it matter what comes first? if prices fall (say, due to > rising international competition due to a high US$ exchange rate), > that would squeeze profit rates. But if labor productivity rises > (or wages fall) before prices fall, the first thing to happen > would be a rise in the rate of profit (likely temporary). > Jim >
