Re: [OPE-L] simple reproduction

[Allin Cottrell <cottrell@xxxxxxx>]

On Fri, 30 Mar 2007, Rakesh Bhandari wrote:

> I should have appended this quote to my post:
>
> This example of fixed capital--and in the context of reprouction
> on a constant scale--is a striking one. A disproportionate
> production of fixed and circulating capital is a factor much
> favoured by the economists in their explanation of crises. It is
> something new to them that a disproportion of this can and must
> arise from the mere *maintainence* of the fixed capital; that it
> can and msut arise on the assumption of an ideal normal
> functioning, whith simple reproduction of the social capital
> already functioning."  [from Capital, II]

Looking at Capital II, I think I see what the issue is.  Marx
explicitly assumes a constant scale of production and constant
productivity of labour, but there's one other issue that can cause
problems, namely, an uneven demand over time for replacement of
the means of production corresponding to the fixed capital.

Suppose each capitalist uses a machine that costs $100,000 and
lasts 4 years before it becomes useless.

> From the micro perspective there's no problem: the capitalist sets
aside $25,000 per year by way of depreciation allowance
(abstracting from interest paid on such funds) and buys a new
machine every 4 years.

> From the macro perspective there's no problem if the vintages of
the machines are conveniently staggered such that an equal number
come up for replacement each year.  (In a sense this is the
"natural" assumption for a tidy-minded economist contemplating
simple reproduction.)

But Marx raises the possibility that this convenient staggering
does not obtain: that is, "a greater part of IIc expires [this
year] than did the year before".

If there's a temporal lumpiness to the replacement of fixed
capital, it's easy enough to see how this could create problems
for simple reproduction.  "All of a sudden" there's a greater
demand for machines than in the previous year.  The price of
machines rises.  Resources are diverted into machine production.
There's a corresponding shortage of the goods figuring as
circulating capital.  Simple reproduction is screwed.

Allin.