Does the rate of profit tend to fall? - Moshe Machover
Why is it false? He has examples of technology that does not diminish the need for labor but instead lowers the cost of capital, and that is certainly a possibility, technology is not ALWAYS about increasing labor productivity, but overtime as he correctly points out, i generally does, its a tendancy, not a fast rule.
The second argument is connecting industries, like when the cost of making machines goes down the cost of the machines go down thus the constant capital cost of the industries that use the machine goes down as well.
Heres the problem with that, That new technology in the industry making machines will lead to a tendancy for their profit to fall, having cheaper machines in the industry using the machine does not increase productivity, but it allows for lowered cost and thus lowering prices.
Lets take an example, a lumber jack company sells wood to a chair making company.
A lumber jack company spends $100 on labor and $100 on capital a day and sells to the chair making company for $300.
The Chari making company buys wood for $300 buys machines for $100 labor for $100 and sells for $600.
Lets say Lumber jacks get a machine raising their constant capital cost to $150 their labor cost is now $50, and competition drove down the price to $250, (I explaian this more in my thread about the falling rate of profits in the learning part of the OI).
Now the chair company has a lowerd cost, raw materials cost $250, machines $100 and labor $100, BUT your missing the fact that everyone else is getting the raw materials cheaper, so prices will adjust, your productivity won't go up, so you don't have the falling rate of profits in the second industry, but you will have a price adjustment.
So all he proved is that technological advances don't neccessarily ALWAYS lead to the rate of profit to fall and labor saving advances don't necessarily affect all stages of production, he tried to show that infact it sometimes leads to a tendancy to lower the organic composition of capital, which is somewhat true, (lowering costs of resrouces does that), but that does not neccessarily turn into a raise in profits.
Now obviously his theory can have some merit, given the fact that lowering costs without raising productivity may not lower prices, thats a definate possibility, but lets look industry wide.
The loss in profit from the lumberjack company will most likely offset the gain in profit (if there is any) by the chair company, due to the fact that capital consumption is less competitive than consumer consumption.
Theres also the GLARING missed fact that resources are limited.
Remember this is a tendancy that must be used within the bigger picture.
