Full text: The Problem of Capital Intensity

the functions F and &) by t (time), where t may be conceived as 
operational time.so that it really measures the pace of technical 
progress.We deal now instead of with scale effects and firm size 
with the historical development of technical methods and of 
capital accumulation i.e. with the declining rate of profit as it 
was conceived by Karl Marx. The conditions established in equation 
) fully apply to^ this case, too, _ ^ 
TWe alTe^Tnyw—foFced , however , to elaborate, our simple concepts a 
little further. The ratio of cost to value added is in reality the 
resultant of two very different forces: Product per man, a concept 
pertaining to the "real"sphere,and the wage price ratio, dr "real 
wa'ge" , a concept which belongs to the price sphere. We can ^put 
this in the simplest form if we choose to adjust our definitions 
for\this purpose: Let us exclude depreciation from the valueV 
resultant of two very different forces: Product per man, a concept 
pertaining to the "real"sphere,and the wage price ratio, or "real 
wage", a concept which belongs to the price sphere. We can put 
this in the simplest form if we choose to adjust our definitions 
for this purpose: Let us exclude depreciation from the value 
added,treating it like a raw material, so that value added 
consists only of wages and net profits. We can then define 
c/v = m/z . w/p. (5) 
Here m is the employment so that z/m denotes product per man; w is 
the wage and p the price, w/p may be called the "real wage"; more 
precisely it is the real wage in terms of the products of labour. 
The question is how far these two forces, product per man and real 
wage, are dependent on each other. In the context of our argument 
productivity increases in consequence of an investment activity 
which involves a change in the technique. ( The point of view is 
basically different from the neoclassical theory where real wages 
play an active role in shaping production technique,the real wage 
being in turn determined by the need to get the labour market 
cleared). This productivity increase will change our c/v ratio, 
but how far can the "real wage" modify this effect? 
We have already taken account of the possibility of such an effect 
further above when we discussed the case of the firm which 
outgrows other firms and therefore has to capture a larger share 
of the total market in order to gain the larger size: It has to 
overcome the barrier of imperfect competition by increasing the 
"real wage" and this will partly counteract the effect of 
increased productivity on c/v. 
But what about the other case, the development of technology in 
the course of history,where we ask how capital intensity develops 
in the course of time as a consequence of the introduction of new 
techniques? We have to consider this problem by steps.lt is true 
that over time an increase in the productivity will tend to lead 
to higher real wages.But this can not be considered in the first 
step of the analysis when the investor has to decide whether the 
use of the new technology will yield him a satisfactory rate of
	        

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