Talk:Okishio's theorem

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[edit] coefficients of production

Can someone add an article about "production coefficient"? I reached this article when i was wondering what "production coefficient" is. And also explain "factor intensity" too. It seems that they are the same stuff. Jackzhp 23:54, 21 March 2007 (UTC)

Alan XAX Freeman told Production function seems to be the right article. coefficients might be the case when the function is linear. Jackzhp 12:36, 14 May 2007 (UTC)

[edit] suggested edit RFC

I'd like to suggest the following edit

Instead of "Okishio's theorem states that, if a firm raises its rate of profit by introducing a new technique of production, in which less labour is needed on one side, but more means of production on the other side, that this also for the economy as a whole leads to a higher rate of profit, if this new technique of production has spread through the whole branch - under the assumption, that real wages or the commodity basket workers get for their labour power has not been enlarged but remained constant."

Put "Okishio's theorem states, in essence, that cost-saving innovation necessarily raises the general rate of profit in the economy. More precisely, it states that the general rate of profit in the economy as a whole will be higher if a new technique of production is introduced in which, at the prices prevailing at the time that the change is introduced, the unit cost of output in one industry is less than the pre-change unit cost. Okishio (1962) establishes this theorem under the assumption that the real wage - the price of the commodity basket which workers consume - remains constant."

I think this corresponds more accurately to the formulation in Okishio (1962) itself which distinguishes the 'cost criterion' from the 'productivity criterion' (p26). Also the formulation proposed adds some links to other articles.

Regards

Alan XAX Freeman 23:56, 22 May 2007 (UTC)

I'm pretty sure it is Okishio (1961). Also, although the suggested change isn't bad IMO, there are terms that would need to be unpacked later on. Lots of folks don't know what "cost-saving innovation" means (e.g., it isn't clear to them that this doesn't preclude a rise in total cost due to new investment in a more productive technology), or "general rate of profit" or "unit cost." The word "establishes" makes it sound like the theorem is correct, but that's been challenged. Also, in addition to the real wage assumption, there's the unstated assumption that the per-unit price of inputs equal the per-unit prices of outputs both before and after the technical change.

This is not a criticism, really. It is almost impossible to state the thing in plain English. Believe me, I know. I've tried. Maybe try to give an intuitive feel for the theorem, as in the 1st sentence, and then give a less compact, perhaps step-by-step explanation?

andrew-the-k 07:08, 24 May 2007 (UTC)