 Good day, this is Professor Resnick again and today I want to talk about something new and I hope interesting to you all, which is capitalist competition and how capitalist competition can result in relative surplus value, which is the next theme of Marx as presented in Capital Volume 1, which is our reading and the other readings that have been assigned to you. So what we're going to discuss here is capitalist competition, the business cycle again and relative surplus value. And what I want to try and show to you is how capitalist competition is going to shape markets and we're going to get again this this tendency for the economy to decline and the economy to expand. So capitalist competition on one hand is going to produce two different tendencies. On one hand for the economy, the capitalist economy to contract and to get a contraction, that is to get a downturn in capitalism. And on the other hand that very process of market competition is going to set in motion forces that will push the economy into expansion. Okay so let's see what we got here. To do capitalist competition, I'm going to assume the following. We have a variety of different industries across the economy and again I'm going to split them into these two broad kinds, the wage good industries and the means of production industries. And in these various industries I'm going to assume that we have different capitalist firms competing with one another, producing a fairly homogeneous commodity in across these different industries. So let me start. I'll start with the automobile industry as a concrete example. So I'm going to start here with the C and the V and the S and the W for these let's say three capitalist enterprises. General Motors say Honda and Ford. I understand there are many many more but it's enough with just three to show this example. So we have three independent capitalist enterprises operating in the same industry. Don't forget now private enterprise. Okay three different boards of directors that are appropriating the surplus produced by these different laborers in General Motors, Honda and Ford in the so-called automobile industry and I'm going to assume for a moment they're producing a feeling homogeneous product called transport, you know the transportation moving people from one location to another. And they all are alike so I'm going to start with in these magics they all by the same quantum of means of production say four dollars to make life easy for us. Let's assume that a dollar is the same as one hour of abstract labor again. Don't lose that. Okay. If you want it takes one hour to produce a dollar in terms of if you recall that gold is the commodity so it takes one hour to produce an ounce of gold. An ounce of gold is deemed by the state to a dollar. If you bother with that just assume the state implicitly sets the value as one dollar that is as one hour equals one dollar or one dollar equals one hour. That's what this is. So we have here two value of labor power is two dollars or two hours surplus is two and hence the total value of cars is eight dollars and I'm going to assume the number of cars produced is one and I'm going to assume here that the rate of profit the calculated rate of profit then would be two over six, two four six that's a third and the composition of capital that's C over C plus V is four over six, four over six what is that two thirds. Okay. And finally the you put over here the price in this world that is the total value over the things being produced here would be eight. Is that correct? This is 24 divided by 3. Let me erase this here and make it more clean and hence 24 divided by 3 would be 8. That's the price in the system so everybody sells for 8. I think we're ready to go. Suppose let's just take it. Honda you know it's an appropriate example. Suppose Honda takes a private action in the in the enterprise Honda automobile company. The board of directors of Honda decide that they are going to purchase additional means of production the Delta C of say four more four dollars more four more hours. Alright. And I'm going to assume that there's a new technology associated with these means additional means of production that Honda board of directors decides to purchase which is robots. So Honda goes out and purchases four dollars more this becomes eight. Okay. Now you can say well where does that four come from? Well partly it's financed by the surplus value of Honda but partly Honda goes out and borrows money from banks and persuades the bankers a subsume class persuades those bankers to lend Honda the additional money so it can expand the sea or maybe Honda is indoor Honda issues new stock and persuades individuals new stockholders to purchase its stock and so the Honda will have then in this IPO initial public offering will have then additional resources to purchase the seas. You know it goes to the bank so you've got the three broad ways to finance this that that is out of surplus value of Honda borrowing on the market or issuing stock to stockholders new stockholders it gets the additional resources for the Delta C. So 8 10 12 this becomes then an expansion of 12 this becomes 28 and next I'm going to assume that the additional means of production that Honda has employed here allows Honda to produce more cars. So this becomes four. Okay. Let me leave these for the moment or let me leave this the same but let me change this here because Honda has increased its its index of mechanization. So it now is 8 over 10 so this has become a bigger number it went from 0.67 to 0.8 and in your reading Mark spends a lot of time discussing this mechanization the the during that this period of time that in which he's writing in which capitalist firms firm after firm across the different capitalist industries are becoming more mechanized and one way to look at that is that their ratio of C to C plus fee is rising very rapidly as they are purchasing more machines and as I said in barring new technologies. Okay the final one I want to put on the board now is this one here it's the average cost of a business so that would be C plus V divided by UV. So initially we have for General Motors that would be six dollars divided by one six for Ford because they're similar and it was six dollars for Honda but now it's a smaller number ten divided by two so Honda has become as a result of purchasing more C and raising its productivity it has become the least cost producer in this industry no matter as we're going to see in a moment so let me summarize what we've got here okay as a result of Honda's private action it's become the least cost producer it's raised its composition of capital okay as in doing that so one message is a capitalist that can become the least cost producer the lowest average cost by raising its composition of capital and I'm assuming here okay that Honda did increase its C so it went out and it raised the C its cost went up but the denominator increased proportionally more so that the ratio the average cost fell and that's the the subsumed class of managers in Honda has to make that calculation and persuade the bankers and our stockholders that they should provide the resources because the average cost will fall allowing Honda to become the least cost and we're going to see what that's going to deliver to Honda in a particular moment next okay as a result of this the price of a car has fallen from 8 to what it was to now 7 okay so the the new price of a car is 28 divided by 4 the price has become 7 let's examine that for a moment okay what's this 28 where does this come from well this is the total value general motors produces one car at 8 Ford produces one car for 468 and Honda now produces two cars at the unit value per car 12 divided by 2 that's 6 okay so if I did this right it's 12 20 28 divided by the number of cars 2 3 4 so this is a weighted average it's an average and the 7 once again is the socially necessary abstract labor time to produce a car and what it averages over as you can see this goes back to several lectures the concrete labor of each of these private capitalist produces GM Honda and Ford in this particular industry this or this is the weighted average that's what a socially necessary abstract labor time is in this this example I'm giving you giving you of the concrete labor's averaged over all the different quantities of produced in this particular industry so for the private time the social clear is 7 7 7 okay so that's the the social in this particular industry but the private time is different the private time here is 8 6 8 so we have a divergence okay in this example which is one of things we want to show a divergence between the private and the social general motors and and the Ford are above the social whereas Honda because of its offense offensive action that is raising its productivity is below the social all the firms come to market I'm assuming a competitive industry that means everybody sells at the same price okay the assumption of competition one market one price they all sell for seven dollars or seven hours okay they have no choice that's what competition means the market dictates the price so everybody sells for this socially necessary abstract labor time of seven dollars or seven hours so let me then put on the board a new table okay let me I'm gonna race this and get a new table going here let me just remind us put this seven here here I have the revenue general motors