THE DISEQUILIBRIUM EFFECTS OF TECHNOLOGICAL CHANGE ON PRICES AND THE RATE OF PROFIT (MARX, VALUE, SIMULATION, TRANSFORMATION)

Marx's writings do not support the common characterization of his political economy as a model of economic equilibrium under capitalism. This is clear when it is demonstrated that his theories of the transformation of value into price (transformation) and the tendency of the rate of profit to fall (TRPF) may be reconciled with his basic writings on value theory, if the notion of a disequilibrium analysis is entertained. In this paper such a disequilibrium framework is developed, and computer simulation is used to test relevant hypotheses. First, the methodological consistency of Marx's transformation with his analysis of the forms of value is established. This leads to the rejection of the position that input value and output price must be equated for there to be a solution to the transformation "problem." Removal of the common conception of equilibrium also affords a clearer picture of how Marx views the regulation of price by underlying value relations. Second, it is demonstrated that a link between TRPF and transformation exists. TRPF is shown to be the application of Marx's transformation methodology to value analysis under the assumption of continuous technological change. Numeric simulations which depict such processes then demonstrate the possibility of temporary and permanent declines in the average rate of profit. It is important that these declines are shown to occur under the very conditions of technological change suggested by Marx. Finally, it is concluded that transformation and TRPF are part of a larger, unified conception of economic processes held by Marx. As such they must be viewed as a unity within a disequilibrium framework of analysis if Marx's methodology is to be retained.