Technical Change the Real Wage and the Rate of Exploitation

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Abstract
The Okishio theorem, according to which rational capitalists can never introduce technical changes which lower the rate of profit if the real wage is constant, is developed in the framework of a two sector circulating capital model. The model is extended to the alternative case of a constant rate of exploitation, in which it appears that rational behavior can lead to a falling rate of profit. The results are re-examined for a simple fixed capital case; a constraint upon possible innovations is introduced, which makes it possible to identify an optimal choice of technique and conditions under which such choice will result in a capital intensifying, falling profit rate path. Wider implications of the falling profit rate debate for the concept of capital and the nature of capitalism's immanent contradictions are considered.

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