A Tale of Three Theorems.

In combination the Okishio theorem (1961) and a theorem due to John Roemer (1981) imply that a capital-saving technical change could simultaneously (1) reduce production costs and therefore be adopted by profit-maximizing capitalists, (2) make the economy less productive because it is retrogressive, yet (3) raise the rate of profit even while the real wage remains constant. But how can a technical change which makes the economy less productive make capitalists better off if workers are no worse off? This article resolves this conundrum, and goes on to prove a third theorem which provides a way in the Sraffian framework to calculate precisely how much any individual technical change, introduced in any particular industry, increases labor productivity in the economy as a whole. [ABSTRACT FROM AUTHOR]