10. Garegnani’s Surplus Equation and Marx’s Falling Rate of Profits

See Mohun and Veneziani (2017) for a critical discussion of the standard interpretation, and a survey of alternative views.

Here and everywhere else in the paper, including in quotes from Garegnani (1984) and Martins (2019), we shall use the notation laid out in section 2 for consistency.

And over time. It is not entirely clear to us, in fact, why the term \( \frac{L_B{x}_B}{2} \) is replaced by \( \frac{L_B{x}_B}{t} \). According to Martins (2019: 20), “Since labour is distributed equally over the ‘[t]’ periods, the wages paid in the wage-goods sector, ‘[L_Bx_B]’, are divided equally by ‘[t]’ periods (rather than 2 periods as in Garegnani’s example).” However, in Garegnani’s example, the term \( \frac{L_B{x}_B}{2} \) has nothing to do with the idea of labour being equally divided across production periods: it derives from the structure of production, and in particular from the assumption that, during every production period, half of direct labour employed in the integrated wage goods sector is used to produce corn, whereas the other half is used to produce ploughs, an assumption that Martins does not explicitly drop. Yet, as none of our main arguments depend on this, we will not press the issue here.

A thorough analysis of the distributive effect of innovations along the lines described here is developed in Yoshihara and Veneziani (2019).