ILRLE 3440 Lecture Notes - Lecture 17: Root Mean Square, Corn Laws, Business Cycle
8 May 2018
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29 March 2018
ECON 3300 - Lecture 17
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Marx!
C + V + S = total value of a commodity!•
S = surplus value!•
S’ = S / V = rate of exploitation (only divided by what is spent on labor)!•
Profit rate = S’ / (q + 1)!•
Rate of profit and surplus value tends to be the same across firms.!•
Marx says that all investment comes out of profit and profit comes from exploiting labor.!•
Capitalists exist to accumulate and produce.!•
Capitalism is a system of constant mechanisation. Marx is not a fan of the wages fund, but he •
does believe that some portion of capital goes to labor!
Believes that equilibrium wage is subsistence, but does not believe in Malthus’ theory of •
population. He says that Malthus is an apologist for capitalists, low wages are not the workers
fault.!
Industrial Reserve Army of Labor is Marx’s explanation for why wages are subsistence) •
The Industrial Reserve Army of Labor is a mass of unemployed labor who are ◦
unemployed because machines have taken their place (technologically unemployed).!
The unemployed people are nearly the same as the people who are working. So if ◦
employees demand wage increases, the capitalists can replace them with lookalikes.
Workers have no bargaining power because of the Industrial Reserve Army of Labor!
What happens during a boom? If the boom is big enough, the reserve army can be ◦
depleted and wages can rise, but capitalists still substitute machines for workers → higher
wages incentivise capitalists to replace workers with machines during booms.!
Workers cannot bid their wages above subsistence.!◦
Reserve army → surplus → profit → investment!◦
If all surplus value comes from labor and in growth you substitute machines for labor, aren’t •
capitalists decreasing their surplus?!
Falling rate of profit P = S’ / (q + 1), q = C / V!◦
q will increase if capitalists replace labor with machines because of competition. ◦
Capitalists need to adopt the latest techniques which use more capital to remain
competitive.!
Causes profit rates to fall!•
Problem with Marx’s idea: But machines make labor more efficient which decreases ◦
necessary labor and increases labor surplus. S’ increases. So S’ and q are both increasing
so change in profit is indeterminate$
!
Marx just assumes that q goes up faster than S’ but he cannot prove it!•
If profit rate is falling what can capitalists do? •
Exploit labor by lengthening working days or forcing workers to work faster!◦
Push wages down further (might be hard if wages are already at subsistence)!◦
Foreign trade allows a nation to bring in cheaper raw materials and cheaper food. With ◦
cheaper food you can lower wages.!
Marx says that capitalists support the repeal of the Corn Laws to cut worker’s wages!•
Also, you can take over other countries to stop falling profit?!•
!
What happens in the long run according to Marx?!
End in inevitable and violent collapse of capitalism$•
Document Summary
C + v + s = total value of a commodity. S" = s / v = rate of exploitation (only divided by what is spent on labor) Rate of pro t and surplus value tends to be the same across rms. Marx says that all investment comes out of pro t and pro t comes from exploiting labor. Marx is not a fan of the wages fund, but he does believe that some portion of capital goes to labor. Believes that equilibrium wage is subsistence, but does not believe in malthus" theory of population. He says that malthus is an apologist for capitalists, low wages are not the workers fault. Industrial reserve army of labor is marx"s explanation for why wages are subsistence) The industrial reserve army of labor is a mass of unemployed labor who are unemployed because machines have taken their place (technologically unemployed). The unemployed people are nearly the same as the people who are working.
