Jim, skill*-*biased technical change has been the current orthodoxy, and Krugman is arguing for a shift to capital-biased technical change, but my point is that both of these orthodox versions are based on marginal productivity theory.
On Thu, Jan 3, 2013 at 9:36 AM, Jim Devine <[email protected]> wrote: > I thought that the current orthodoxy -- including PK -- embraced > *skill-*biased > technical change. > > Jim Devine > > Fred Moseley <[email protected]> wrote: > > Krugman is “transitioning to the left” only so far as to recognize the > obvious stagnant real wages and declining wage share of income in the US in > recent years and to worry about the “uncomfortable” implications of these > facts. But his *explanation* of these facts is in terms of the widely > criticized marginal productivity theory of distribution, according to which > profit is determined by the “marginal product of capital” (as opposed to > the surplus labor of workers). His explanation of stagnant real wages is > “capital-biased technological change”, which is defined as technological > change which increases the “marginal product of capital” in relation to the > “marginal product of labor” (i.e. ↑MPK/MPL). This is such BS! Marginal > products do not exist and can’t explain anything. > > > > Below is a response of mine to another recent post by Krugman on the same > subject. It also refers to a prior post by Krugman and a prior criticism > by me which was posted on the Economist’s View blog. > > > > I would appreciate comments. > > > > Fred > > > > > > *Krugman’s explanation of stagnant real wages* > > > This is a brief response to a recent post by Paul Krugman on his blog > about “capital-biased technological change” as an explanation of stagnant > real wages and the declining wage share of income: ( > http://krugman.blogs.nytimes.com/2012/12/26/capital-biased-technological-progress-an-example-wonkish/ > ). > This is a follow-up to a previous comment of mine on Economists’ View: > > http://economistsview.typepad.com/economistsview/2012/12/krugmans-explanation-of-stagnant-real-wages.html > > which was a response to a previous post on this subject by Krugman: > > > http://krugman.blogs.nytimes.com/2012/12/10/technology-and-wages-the-analytics-wonkish > ) > > > > Krugman still has not clearly defined what he means by “capital-biased > technological change”, but he says that he is following Hicks (1932), and > Hicks definition is technological change which increases the marginal > product of capital (MPK) more than the marginal production of labor (MPL); > i.e. ↑MPK > ↑MPL (at a given K/L ratio). Thus, Krugman’s definition of > “capital-biased technological change” is in terms of the *marginal > products *of the marginal productivity theory of distribution. > > > > Krugman presents an example of office work with two inputs (capital and > labor) and two possible techniques, one capital-intensive and one > labor-intensive. However, this example does not include raw materials > (and other intermediate inputs), and thus does not address the criticism > that *raw materials render the concept of the MPL (or the MPK) impossible > *(a criticism which I made in my earlier post and which goes back to > Hobson and Pareto in the early 20th century). Raw materials cannot be > held constant (as the concept of marginal product of labor or capital > requires) while increasing labor (or capital) and output. In order to > produce another car, one must have additional wheels, brakes, etc. And > between labor and raw materials, there is *only one factor proportion > possible *(i.e. only one “technique”), so Krugman’s example of two > techniques and extrapolation to a “bunch” of techniques (the usual > hand-waving to approach a “smooth isoquant”) does not apply. There is *no > isoquant *(kinked or smooth) between labor and raw materials. One cannot > increase labor and reduce raw materials and produce the same quantity of > output. A car still needs four wheels. > > > > In order to reassure readers with doubts about marginal productivity > theory (“if you’re worried”), Krugman just asserts that “labor and machines > are paid their marginal products”. I argue that this conclusion is > invalid in cases that include raw materials, since marginal products *do > not exist *in these cases. > > > > I agree with Krugman that technological change is replacing labor, not > just low-skilled labor, but also medium-skilled labor, and even > increasingly high-skilled labor (as he has been writing about: > http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robots/) > > But this important phenomenon cannot be analyzed in terms of MPK and MPL > because these marginal products do not exist. > > > > There are a number of other major (and probably insoluble) problems with > marginal productivity theory that are fairly well known and have been known > for a long time: the “aggregation” problem, the “adding-up” problem, the > “reswitching” problem, the “multi-causality” problem (which is similar to > the “raw materials” problem in that it renders marginal products > impossible), the precise definition of the “price of capital”, the lack of > adequate theories of the supply of either labor or capital, etc.. But > the impossibility of marginal products in production processes that include > raw materials is the most obvious insoluble problem. > > > > Marx’s theory predicted in the early days of capitalism that technological > change would tend to be labor-saving (in the usual sense of using less > labor to produce the same quantity of output, not in Hicks’ and Krugman’s > sense of a ratio of marginal products), and this labor-saving technological > change would cause increasing unemployment (the “reserve army of the > unemployed”) which in turn would put downward pressure on wages and the > wage share of income (*Capital*, Volume 1, Chapter 25). He called this > important conclusion “The General Law of Capital Accumulation” (the title > of Chapter 25). One does not have to use the very dubious marginal > productivity theory to explain these important phenomena. Marx’s theory > provides a perfectly adequate explanation without the extremely problematic > concepts of marginal products of labor and capital. > > > > To his credit, Krugman acknowledges in another recent post > http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robots/ > > that the current capital-labor dimension of inequality “has echoes of > old-fashioned Marxism – which shouldn’t be reason to ignore the facts, but > too often it is.” But Krugman still wants to explain these > “uncomfortable” facts in terms of marginal products and marginal > productivity theory, in spite of the many well-known deficiencies of this > theory. I suggest that he should not ignore, not only these facts, but > also Marx’s robust *theoretical explanation *of these facts and the > capital-labor dimension of inequality. > > > > Fred Moseley > > > > On Wed, Jan 2, 2013 at 10:07 AM, c b <[email protected]> wrote: > >> Re: [Pen-l] >> Ann Davis(nib) >> >> Now maybe the left can pay some attention to technological >> change....which has been out of style among Marxists since the >> 1970s....alas. >> >> >> > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > >
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