Re: Falsifiability and the law of value

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

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

 I agree that price falls _can_ cause falls in profitability. But I don't see why "Output prices must fall BEFORE input prices fall." A counter-example: it happens all the time that production is sped up -- raising output per unit of labor-power hired and thus lowers cost per unit of output (given the wage rate) -- which has the immediate effect of raising profits. After all, businesses do not simply cancel out their profit-seeking actions by cutting prices in step (or more)! Over time, however, as the speed-up becomes general in the industry, prices will likely fall, counteracting the initial profit boost. This example doesn't suggest that prices should fall enough to actually hurt profits in the end.

I don't see why we should assume that "continual technological change" exists. Sometimes it does, sometimes it doesn't.

Jim

-----Original Message-----
From: Drewk
To: PEN-L@xxxxxxxxxxxxxxxx
Sent: 6/14/2003 10:05 AM
Subject: Re: [PEN-L] Falsifiability and the law of value

I realize you made no reference to machines, Jim.  I was providing
an example.

And the effect of productivity increases that are not accompanied
by falling prices is not at issue.  The issue is: what is the
effect of productivity increases that *are* accompanied by falling
prices?  I had written:

"If increases in productivity imply falling prices, ceteris
paribus, and if falling prices imply falling profit rates, ceteris
paribus (which they do), then ...."

In opposition to this, you replied "If input prices (per unit of
output) fall and output prices stay constant, profits rise."

My example was a way of illustrating what was wrong with your
reply.  Output prices must fall BEFORE input prices fall.  Hence,
declining prices (or even a decline in their growth rate),
including declines caused by technological advances, *must always*
lower the average profit rate, cet. par.  The decline in output
prices causes a subsequent decline in input prices, which tends to
negate the fall, but a subsequent new fall in prices (or their
growth rate) tends to negate the negation.  Thus continual
technological change that leads to continual declines in prices
(or their growth rate) can permanently depress profitability.

The preceding paragraph says what the machine example said.  But
the example also demonstrated *why* output prices must fall before
input prices fall.

Andrew Kliman

-----Original Message-----
From: PEN-L list [mailto:PEN-L@xxxxxxxxxxxxxxxx]On Behalf Of
Devine, James
Sent: Saturday, June 14, 2003 9:45 AM
To: PEN-L@xxxxxxxxxxxxxxxx
Subject: Re: Falsifiability and the law of value

I wrote:
>>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.<<
Drewk writes:
>Right, Jim.  But if *output* prices (per unit of output) fall and
*input* prices stay constant ....
>And the latter must always be the case *before* the former can be
the case.  That's important.
>E.g., the price of machines falls during period t. ...<
but I made no reference to machines. I had written:
>> "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