Capacity Utilization, Mobility of Capital and the Classical Process of Gravitation 1

In some works aimed at deepening the relationship between market prices and natural prices within the classical approach, one can find the assumption, either explicit or implicit, that outputs change through variations in the rates of utilization of sectoral productive capacity. ² At the same time, most of these works consider variations in capacity utilization as a mechanism for the adjustment of outputs differing in basic respects from that envisaged by the classical economists. It is maintained that in the latter’s analyses outputs correspond in any case to full (or normal) rates of capacity utilization, while market prices are supposed to vary relative to natural prices to whatever extent needed to warrant the absorption of outputs by the market. ³ Capital investment and disinvestment induced by profitability differentials would then modify the relative sizes of productive capacities and the associated levels of capacity outputs, thus pushing market prices and profit rates towards their natural values. Allowing the deviation of outputs from normal rates of capacity utilization is then viewed in these works as a departure from the way in which, according to the classical authors, markets and firms would work in general. ⁴