FIXED CAPITAL AND THE LABOR THEORY OF VALUE (TECHNICAL CHANGE)

In recent years, it has been claimed that fixed capital plays a key role in Marxian crisis theory. Some have argued that when fixed capital is brought into the analysis of Marx's law of the tendency of the rate of profit to fall, that law is no longer subject to refutation by the Okishio theorem. Others have maintained that it is the obsolescence of used equipment, caused by technical progress, which precipitates economic crisis. Still others have pointed to the paradoxes associated with the relation of values to prices in fixed capital systems, arguing that, when fixed capital is considered, the labor theory of value becomes meaningless. It is the task of this dissertation to evaluate these claims. To this end, the Sraffian static choice of technique analysis is generalized to include fixed capital. The question of the effect of the introduction of a superior technique on the rate of profit is pursued in different systems, each defined by the assumptions made about the distribution of the aggregate surplus. It emerges that investment criteria are tied logically to such assumptions. Further, while the rate of profit can fall, as a result of technical progress, in systems in which the surplus is distributed according to capital consumed (not advanced), such a result is obtained only by rendering the rate of profit irrelevant to the determination of prices. Consequently, the falling rate of profit theory receives no support from the analysis of fixed capital. However, when the choice of technique analysis is extended to cover the case where obsolete machines make up a part of the capital stock, it is shown that the static effect of the introduction of new equipment can be the scrapping of old machines, causing some firm owners to suffer windfall losses. This result suggests a new direction for the theory of crisis. Finally, the claim that the labor theory of value is rendered meaningless by the analysis of fixed capital is rejected, since value imputations can be formulated which give vectors of strictly positive values.