Acta Oeconomica 9. (1972)

1972 / 3-4. szám - Révész Gábor: Capital-Labour Substitution

288 G. RÉVÉSZ: CAPITAL-LABOUR SUBSTITUTION Delimitation and line of reasoning We make five preliminary remarks concerning the framework and the line of our analysis. First: the potential scope of activity given to the enterprises as determined by the economic regulators is only one element (one dimension) of the macro­world that surrounds the enterprises and which is usually referred to as the economic environment. This latter includes, among others, the institutional system of economic control and management with the open and hidden hierarchy prevailing in it. Thus, from this aspect we set a limit to our subject: it is the influence on the enterprise management and on their decision of the regulators — and not that of the whole economic environment — that will be discussed here. Second: the influence of the regulators is indeed very concrete. Regulations concerning wages, profits, prices, foreign exchange coefficients and customs duties determine the boundaries which determine the sets of feasible activ­ities, favourable and unfavourable for the enterprises. (Obviously, activities which are unfavourable under the present regulations for a given enterprise may become favourable in case of other regulators or those different from the present regulator values and vice versa.) In fact, our aim basically is to analyse and evaluate the position of these boundaries with a view to mechanization activities aimed at saving labour. Third: in order to make our investigation specific, the assumption is intro­duced that in the course of activities implied here manual labour is substituted by machines and the result of the mechanization is exclusively a decrease in labour requirements. In this sense capital is substituted for labour also by the replacement of less developed technology by a more developed one (or when the level of technology is increased through reconstruction or additions). Such investment opportunities may be included here where a variant with smaller labour requirements in the process of operation is set against another one with smaller capital requirements. As it is known activities involving exclusively in uni-directional effects are rather rare (they may not even exist); and almost in every case the cumulating effects should also be taken into account. Thus for example, the mechanization of manual interplant trans­port which does not affect the given production technology may also be ac­companied by a change in the stock of liquid capital engaged, by an improve­ment of material supply and consequently with an increase in capacity utiliza­tion. Obviously, in the case of concrete decisions it would be a great mistake to ignore such side effects. However, investigations aiming at abstract, “sterile” activities are justified if general connections are analysed, for example (as in our case) the substitution rates between capital and labour in the economic activity of the enterprises. Acta Oeconomica 9, 1972

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