DIAGRAMS

THE following diagrams illustrate those parts of the foregoing analysis that can be expressed in two dimensions. It is impossible to illustrate in one plane both relations (such as the ratio of capital to labour) and movements through time (such as the accumulation of capital). Relations can be illustrated in terms of comparisons of static positions. For this purpose we imagine that we are comparing positions in each of which the stock of capital goods is being maintained, item by item, and the flow of output is being consumed. Differences in annual profits are accounted for by differences in the expenditure of rentiers. Output consists of commodities produced in fixed proportions, and is measured in units of a composite commodity consisting of a representative sample of production.


THE TECHNICAL FRONTIER

The basic diagram to illustrate the relations of labour and capital is adapted from that used by Wicksell.1 The vertical axis represents output per annum measured in units of the composite commodity. The horizontal axis represents stocks of capital goods measured in terms of the labour time required to produce them, reckoned at a given notional rate of interest. The amount of labour currently employed is taken to be constant, so that the vertical axis represents output per man-year and the horizontal axis represents the real-capital ratio. In a given static position with a given rate of profit which has long been ruling and is expected to rule in the future, we may represent the spectrum of known techniques in terms of output per head and the real-capital ratio, when the notional rate of interest entering into the cost of capital goods is equal to the rate of profit. OA is the output per man-year produced when all workers are employed with Alpha technique; OB the output with Beta technique, OC the output with Gamma technique and OD with Delta technique. Ob is the cost in terms of labour time, at a notional rate of interest equal to the ruling rate of profit, of an outfit of capital goods which employs a man with Beta technique. Between Oc and Ob lie stocks of capital goods with a rising

____________________
1
Value Capital and Rent, p. 122.

-411-

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