Munich Personal RePEc Archive

Rising Prices after the Introduction of a New Technique

Melendez-Plumed, Vicenc (2012): Rising Prices after the Introduction of a New Technique.

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Abstract

We support labour contents as an absolute and reliable measurement unit and as an accounting procedure that expresses the real costs and profits of the economic system.

As far as this measurement capacity of labour is concerned, we try to demonstrate, that, from a theoretical point of view, the introduction of more efficient production techniques of goods and services produces an increase in the “prices divided by their corresponding values” ratio, when the wage is fixed, and, in addition, allows, a lower set of prices at the previous – lower - rate of profit.

Current measures of inflation do not detect such price increases and normally interpret price changes – often bundled together with more product features -, as a price decrease. Furthermore, when two economies with different innovation levels, interchange products and services, the one with more intense innovation gives less labour time per unit of price to the other and receives a quantity of labour time proportionally higher than before.

These results are obtained in a model under the following assumptions: Simple – not joint - production is considered where only circulating capital exists. Every good or service considered, is a basic commodity; there is only one quality of labour.

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