 Good day again, it's Professor Resnick. Today we want to discuss what are some consequences of capitalist expansion. And what I want to try and show you is how Marx explains that capitalist expansion in and of itself carries within it the seeds of a contraction. And then the contraction carries within it the possibility of expansion. So what we have is the business cycle. So in addition to class exploitation, that's Marx's critique of capitalism, he provides another critique, which is the ups and downs of capitalism, this kind of anarchy of production in the words of Engels. So let me begin. If you recall from last time we discussed how capitalist expansion can be characterized by an expansion of capital accumulation, that was K-star, plus all the other expansions that capitalist enterprises engage in. That was that lambda. Let me put that on the whiteboard so we have it in front of us. So the rate of profit is equal to K-star plus lambda. And in your notes you recall that K-star is, let me put it here again, K-star is capital expansion, that's the subsumed class for delta C plus delta V divided by C plus V. And lambda is everything else. So I'll just summon all the rest of them. So what that is again is the capitalists get their surplus and they distribute it to accumulate more managers and credit from banks and research and development and rents on the land and so forth etc. So they're expanding both their machines, their means of production, their labor power and everything else. Then the question is, as I said before, what might be some consequences of this? So the first thing I want to examine here is the market impact. Okay, remember now, one of the conditions of existence of surplus value in capitalism are markets. So we want to ask now the impact of both of these on markets. So the first market I'm going to take is the labor power market, the so-called labor market. The other one will be the means of production market. So let me draw these two markets here. You standard economic analysis. So what I have here is the graph of a market. First one will be the labor power market. So let me write that labor market, means of production, means of production market. Okay, means of production. You can read my writing, I hope. Labor power market. If it's a market, we're concerned with prices. So here I'm going to put the price of labor power, the price of means of production and of course supply and demand over here and supply and demand over here. Supply of labor power, demand for labor power, supply of means of production, demand. So the supply and demand for these two inputs into capitalist production. And Marx spends some time actually in volume three, if I remember correctly, examining supplies and demands of a variety of different markets. He's well aware of the supply and demand analysis that we have on the whiteboard. Okay, so let's, what do we have here? We have K-star expanding, that means the demand for labor power shifts to the right. Okay, that's an expansion. Let me see, in the example that I gave you, if I remember correctly, this was 20 workers, this was 30 workers. So employment has expanded. Another way of doing that geometrically is the demand for labor power shifts to the right. All right, that's one result in the labor power market. There's more employment for workers. The other result is that the price of labor power goes up. Now I want to take a moment and do this very, very carefully. We start here at the first equilibrium and we have the price of labor power equal to the, remember what V is? V is the, the little V, sorry, V is the total value of labor power divided by the number of workers and the hours that each works. So this is the value wage per labor hour. The value wage per, per is this dividing line, per labor hour. Okay, there's two worlds here. There is the market world, the supply and demand world. There is the value world. Okay, two different worlds here. Now, as I've taught you, these two worlds over-determine one another because everything over-determines everything else. So the two worlds complexly shape one another, but analytically, I want just for the moment, keep them distinct so I can discuss each of them separately and then how they shape one another. But first analytically, we have a increase in the price of labor power because, and I'll make that new, so this is the old, we have an increase in the price of labor power because of a change in the labor market caused in turn by, what, a change in capital accumulation and lambda. Okay, so capitalists want to hire more workers, and I can add to that also because of lambda they want to hire not just more productive laborers, but more unproductive laborers as well. So there's a change in the labor market for both productive and unproductive. To make it dramatic, I've just focused on the productive. But let's not forget that there's a demand for both more productive laborers and demand for more managers and so forth, etc. Okay, more clerks I should say. The managers should be another different kind of labor market, so more unproductive labor in terms of more clerks and salespeople and so forth as well as more productive laborers. So over here, to go back to this, we have a change in the price of labor power, but unless I say something else, there's no change in the value per labor hour. This one, by assumption, is unchanged. Why? Let's examine this very carefully. The little v, I'll rewrite it over here, value of labor power divided by LH. Okay, in the numerator, this value of labor power, okay? This is the bundle of consumer goods necessary to reproduce the workers. So in the numerator over here is the value of the means, I'll use Marx's language, means of subsistence, consumer goods, to reproduce labor power. So the work can come the next day and sell his or a labor power. Well, by assumption, this has not changed. What is this? What causes this? What's the source of this? The socially necessary abstract labor time to produce the consumer goods, to reproduce the labor power, and I'm assuming that it's not changing. It could change, it probably should change, but just for the sake of this analysis, if the socially necessary abstract labor time, that is, if the productivity of abstract labor does not change, then the quantum of social labor required to produce the consumer goods is unchanged, and hence, the value per labor hour is unchanged, while there at the same time, there's a change in the price of labor power. So if the little v doesn't change, there is a deviation of the price from the value. So what we have here is this interesting deviation. This amount, the price has deviated from the assumed unchanged value of labor power. By the same logic, the demand for means of production has shifted to the right.