[OPE-L:5187] Re: capacity utilization and the transfer and depreciation of the value of means of production

[Steve Keen <s.keen@xxxxxxxxxx>]

Quickly,

(a) Jerry has noted an important issue here--both for economic analysis
in general and the LTV in particular. Capacity utilisation *is* normally
well below 100%, and in fact during America's recent boom the level has
fallen rather than risen.

The Post Keynesian economist Kornai has developed convincing arguments as
to why capacity utilisation should be less than 100% in capitalism, even
during extreme booms like the Internet Bubble.

However, for the LTV--which argues that machines simply transfer the
value they contain to the output, this raises a dilemma which Jerry
identifies:

  Indeed, one could easily show
> that, assuming a fixed
> "lifetime" for constant fixed
> capital, if there is severe underutilization of
> capacity
> then the value transferred by the means of
> production
> will be *less than* the value of the means of
> production. Thus, value can be "lost"
> if the means
> of production are underutilized to the extent
> that the
> fixed capital "dies" (of old age)
> before the full value of
> that fixed capital has been transferred to
> output.
> In the aggregate, this would suggest a
> systematic 
> loss of value.

This is quite valid. The LTV has a form of conservation built in to it,
but that sets a maximum transfer of value by machinery; if capacity
utilisation fluctuates, and there is some level of "socially
necessary capital time" in LTV analysis, then machinery will on
average transfer *less than* its value to output.

I see this as an error in the analysis, of course--because I reject the
argument that the depreciation of a machine sets the limit for its value
creating abilities. But LTVers might see this as yet another argument for
the long term tendency for the rate of profit to fall.

(b) On Jerry's reply to my query:
PS: In reply to Steve K's [5183-4] -- I view
use-value
> as quality, exchange-value as
> quantity, and value
> as a unity of quality and quantity (this is why
> I
> suggested at one point that use-value stands
> in
> opposition to exchange-value -- a point Chris
> A
> and I discussed last year). 
>  
> Thus, my perspective is that use-value is
> not
> quantitative, BUT I am willing to listen to
> your
> arguments as to why:
>  
> a) you think this is a logical extension of
> Marx's
> philosophy; and
>  
> b) why you think it is a superior way of
> conceptualizing use-value.
>  
> I.e. I want to hear the arguments themselves
> rather
> than the assertions.

Fine; I'll try to put something together on this later on today; I'm
meeting a publisher this morning so that's likely to dominate what I do
before then.

Cheers,
Steve