globalisation/Landauer/Grossmann

John R. Ernst ernst at pipeline.com
Thu Aug 24 23:10:03 MDT 1995


Rakesh,

I have reproduced your post below my comments.

1. We are all waiting for Michael's book.

2. I think you are right that Grossmann did use the Bauer schemes as a
heuristic device.  The problem is he had no other devices and hence we are
then forced to figure out how fixed capital, depreciation, etc. fit into
the heuristic device.

3.  The Sismondi cititation is interesting.  But is it true.  "... all
fixed capital is rendered useless."  Why?  Why would not that part still
functioning be of use?  Is the uselessness temporary or permanent?

4.  Since we have no idea what prices are doing in Grossmann's heuristic
device, it is unclear how depreciation moral or other is to be treated.
Further, we have no idea of what
use values are doing as accumulation takes place, so we are really in the
dark and thus able to read into the picture what we want to see.   Note
well,  if we say that values and prices are the same in the device, it
becomes silly and wide open to an Okishio criticism.

5. I simply do not see Landauer's point.  Capitalist drive themselves into
behaving irrationally through the quest for surplus value?   Perhaps?  But
how can we observe this irrational behavior?  Do they invest in techniques
that they know will fetch a lower rate of profit as they seek greater
masses of profit?  If so, I know this bridge in Brooklyn I'm sure they will
gladly buy.

6. I am a bit leary of reading Marx into Minisky as I'm still unsure of how
technical change is treated in the Goodwin models to which Steve refers.

>

>Your Post follows
>
>
>John asks about the role of fixed capital and in particular its
depreciation in
>Grossmann's model (and I do agree that Michael Perelman's work here as
well as
>elsewhere is very useful; by the way, he has a new book on fixed capital,
which
>I find very illuminating as it is both theoretical and historical).
>
>Using the extended Bauer model as a heuristic device, Grossmann is able to

>reach some interesting conclusions about the relations between
technological
>change, fixed capital and the amplitude of cyclical movements.
>
>Before I note these conclusions, I wanted to call attention to Grossmann's
very
>exciting citation of Sismondi who seems to have  pioneered Schumpeter's
>innovation-induced theory of business cycles:
>
>"It has been remarked that the violent shocks by which manufacturing
industry
>is convulsed nowadays are related to the rapidity with which scientific
>discoveries are following one another...Not only are the values of
existing
>commodities thereby diminished, but the entire fixed capital and all the
>machinery...is rendered useless." (Sismondi quote in Grossmann, p. 108)
>
>Now  Grossmann notes a dual effect from technological revolutions: on the
one
>hand, they can consolidate the physical durability of constant capital
which
>then allows  a fixed component of that that constant capital to operate
over
>several cycles (instead of being renewed annually as in the model) and
thus
>helps to prolong the duration of the phase of expansion; but on the other
hand,
>the moral depreciation of fixed capital shortens the time during which it

>functions, makes the valorization the given capital worse and cuts short
the
>period of accumulation (see esp pp. 108-109).
>
>In his "Marx, The Classical Economists and The Problem of Dynamics"
Grossmann
>would extend these insights about fixed capital-- in particular about its

>non-annual renewability given its use-value characteristics and the
problem of
>moral depreciation--to advance a theory of dynamics, perpetual
disequilibrium,
>crisis and proletarian misery as inherent in the nature of capital itself.

>
>I hope these comments show that Grossmann did not try to prove anything
from
>the model itself; in this case it does seem to have served his purpose of

>illuminating the contradictory effects of technological change on the life
of
>fixed capital and the accumulation process. What Grossmann did not
complete, as
>he himself underlined, was analysis of the credit system in the expanded
>reproduction of the capitalist system.  So I appreciated greatly Steve
Keen's
>outline for study of the Minsky-Marx connection.
>
>John raises two other points, that Grossmann does not advance any
convincing
>arguments for the rising c/ (v+s) ratio and that it may be helpful to redo

>Grossmann's model in prices, instead of values.  As for the former point,
this
>is what Landauer is trying to explain: that upward pressure on the the
value
>composition of capital is the unintended effect of each capital's search
for
>extra surplus value.  I do not know what to say about the latter point.
>
>Rakesh
>
>Henryk Grossmann, 1992 [1929]. The Law of Accumulation and The Breakdown
of the
>Capitalist System. London: Pluto Press.
>
>Grossmann's essay was translated into English in the Autumn and Winter
1977
>issue of Capital and Class.  I think that the Summer 1995 issue of Capital
and
>Class, with contributions by Fred Moseley and Alan Freeman, continues the

>theoretical assault on bourgeois economics at the level which Grossmann
>established.  I would be quite happy to discuss these essays if anyone
else on
>the line is interested.
>
>
> >1.   Grossmann in using the Bauer schemes never introduces fixed
capital.
>>Instead, we have a circulating capital model in which capitalism "breaks
>>down" in 30 or so years.
>>2.  Nowhere are we given convincing arguments for the falling rate of
>>profit or the ever-increasing c/(v+s) ratio.  Indeed, as you know,
debates
>>about the falling rate of profit continue and many, seeing no resolution
at
>>hand, insist that the questions can only be resolved empirically.  I
would
>>mantain that even if the falling rate of profit could be shown from data,

>>we would still be faced with explaining why it happens.
>>3. Given all the questions surrounding the concept of value, it would be
>>helpful if a Grossmann model could be developed using prices.  In this
way,
>>we could observe something a bit closer to reality as the system moves
from
>>period to period.  (I tried to do this in 1982 but only in a
one-commodity
>>circulating capital model.  Kliman and Freeman, at least, use more
complex
>>models to show a falling rate of profit, but as far as I know do not
relate
>>it to the growth of constant capital in the way Grossmann does to show a
>>"breakdown.")
>>4. By ignoring fixed capital, the manner in which fixed capital
depreciates
>>is also not part of the picture.  I think that Michael Perelman in his
>>papers and book on Marx's theory of crisis makes a decent case that this
>>simply should not be done.
>>
>
>
>

As always,


John








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