I looked at Anwar's dissertation, the section of his so-called "proof" of the LFTRP, and -- besides the portions that Mathew reproduced here -- there's this claim (that Anwar, correctly, traces back to Marx) playing the role of punchline of his "proof":
"[S]ince increasing labor productivity over time is expressed in a falling L/C, the width of the profit-rate band must be continually decreasing!" (p. 158) However, with all due respect to Anwar and Marx, an increasing labor productivity over time *need not* express itself in a falling L/C. Why? Because, C is not machines, buildings, inventories, etc. (use values), but the *value* of machines, buildings, inventories, etc. And higher productivity means ability to produce more machines, buildings, etc. in same labor time. I'm not saying that Anwar was not aware of this. He was, but I think that he slipped a little. Marx himself was, of course, well aware of this. In ch. 25 (vol. 1, Capital), he distinguished between the "technical" or *physical* composition of capital (the ratio of an physical index of MP to a physical index of LP) and the *value* composition of capital (the ratio of a value index of MP to a value index of LP). There's no doubt that the technical composition of capital increases over time as labor productivity increases. Since the physical mass of MP tends to increase, one would be inclined to think that its value does as well. I mean, is there any a-priori reason to expect productivity in the production of MP to grow faster than the productivity in the production of everything else? So Marx's belief that, as a rule, the value composition increases over time is consistent with the sensible assumption that, in the long run at least, productivity across all branches of production tends to grow at a similar pace. We must say, however, that this is just a sensible expectation. Not an established empirical fact in the history of capitalism. Marx was so aware of this that he made this key note: "I call the value-composition of capital, in so far as it is determined by its technical composition and mirrors the changes of the latter, the organic composition of capital. Wherever I refer to the composition of capital, without further qualification, its organic composition is always understood." (ch. 25) "In so far as it is determined by the technical composition," the value composition is Marx's "organic" composition. Clever. Because, in actual practice, it may or may not be determined by it. In support of his "proof," Anwar alludes in passing to what -- since Kuznets -- economists consider a well-established empirical "stylized fact" in growth economics, namely that the "capital-labor" (K/L) ratio increases with the development of an economy. At any point in time, richer economies have higher K/L ratios. However, we have to be careful with this. Although, apparently, the K/L ratio that empirical economists estimate is (and can only be) computed from observed value (price times quantity) data, the concept is in fact deliberately designed to remove the influence of prices and isolate the ratio of *physical* MP to physical LP. So, at least as intended by most empirical economists, the K/L ratio is supposed to be an operational measure of the *technical* composition of capital. So, the stylized fact that the capital-labor ratio increases as an economy develops is only a measure (imperfect as all empirical measures are in measuring whatever the correlative concept intends to designate) of the *technical* composition, not of the *value* composition. Moreover, the fact that, at any given point in time, richer countries have a higher average K/L ratio than poor countries is to be expected. Obviously, for a given existing average labor productivity in the production of MP, countries (or industries or businesses) with bigger physical masses of MP (K) per hour of labor or worker (L) will have higher K/L ratios. But this does *not* imply that, over time, the value of a given physical mass of K will increase vis-a-vis some measure of LP. As far as I know, measures of the evolution of *value* composition are not very conclusive in validating Marx's (and Anwar's) belief that over time the value composition reflects the increase in the technical composition of capital. A final note: As Anwar himself notices, his "proof" refers to the *range* of possible variation of the profit rate (under some assumptions). the *actual* profit rate can be anywhere within that band. So, even though the ceiling of the profit rate may decline as L/C decreases (say that it does), the actual profit rate may go up or down or stay flat depending on where within the range it is at a point in time. Again, I doubt this is what Grossman had in mind when he referred to the "breakdown" of capitalism. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
