Re: Falsifiability and the law of value

["Devine, James" <jdevine@xxxxxxx>]

Title: RE: [PEN-L] Falsifiability and the law of value

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.

------------------------
Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

> -----Original Message-----
> From: Drewk [mailto:Andrew_Kliman@xxxxxxx]
> Sent: Friday, June 13, 2003 2:33 PM
> To: PEN-L@xxxxxxxxxxxxxxxx
> 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:PEN-L@xxxxxxxxxxxxxxxx]On Behalf Of
> Devine, James
> Sent: Friday, June 13, 2003 5:16 PM
> To: PEN-L@xxxxxxxxxxxxxxxx
> 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
>