Non-Produced Inputs, Differential Profit Rates and the Okishio Theorem

The foundation of the most recent critique of the Marxian falling profit-rate theory, the Okishio theorem, is inapplicable as a statement about the potential rate of accumulation of an economy with commoditized non-produced inputs, i.e., "land" and natural resources. Even in a perfectly competitive economy with no complications such as "pure joint products," etc. the theorem, while valid in its conclusion that the rate of return on investment rises with capitalist technical change, nonetheless yields no definite conclusions about the potential rate of economic growth unless extremely dubious assumptions are made about the rate of saving/reinvestment out of the surplus by "capitalists vs. rentiers." Using a fairly general multi-sector model of pricing and accumulation to elaborate that point, this article clarifies also the relevance of the issue of "perfect vs. imperfect competition" in the recent controversy, by focusing on the role of land in the profit-rate equalization process. The conclusion that the Okishio theorem is inapplicable to the concerns of accumulation theory holds whether perfect or imperfect competition is assumed; but while in the former case the theorem is at least valid as a statement about the rate of return on investment, in the latter case it is not. This is true, furthermore, even when adequate account is taken of the role of the "stock market" in determining the selection of capitalist technologies for adoption on the basis of their market profitabilities.