Nobuo Okishio (置塩 信雄, January 2, 1927 – November 13, 2003) was a Japanese Marxian economist and emeritus professor of Kobe University.
Okishio worked to clarify the logic of Karl Marx’s economic system, offering formal and mathematical proofs for many Marxian theorems.
For example, in 1955, he gave the world's first proof of the “Marxian fundamental theorem”, as it was later named by Michio Morishima, which is the theory that the exploitation of surplus labor is the necessary condition for the existence of positive profit.
Concerning Marx’s Falling Rate of Profit, Okishio considered that his famous theorem would not deny it.
[clarification needed] Okishio wrote many papers covering various important fields in modern and Marxian economics, for example value and price, accumulation theory, critical analysis of Keynesian economics, trade cycle theory and on the long run tendency of capitalistic economy.
About thirty of his published papers have been translated in English, and much of these materials are collected in the book (Nobuo Okishio, Michael Kruger and Peter Flaschel, 1993).
The value equation presented by Okishio determines the amount of labor directly and indirectly needed to produce one unit of commodity as follows.
He first got this idea when he was writing “On Exchange Theory” in 1954 in Japanese and a little later in 1955 more clearly wrote in English paper “Monopoly and the Rates of Profits” Kobe University Economic Review.
Okishio's proof has effects to persuade the validity of Marxian propositions to much more non-Marxian economists at present.
[citation needed] Thus at least in the long run values can be said to be playing a gravitating role of prices.
And he warned us that we could make a mistake if we ignore this fact because there exists some discrepancy between prices and values.
Okishio executed the iteration process to the end using mathematical tools and proved that it converges to production price equilibrium with positive profits, i.e. equal to Bortkiewicz equation.
This result was accepted with surprise, because many economists considered that non-basic sectors also have some relations with the equilibrium rate of profit.
By “formal” Okishio meant whether we can deduct two propositions from Marx's presumptions of increasing organic composition of production.
Then he proceeds to examine the validity of this assumption from the viewpoint of capitalistic behavior of technical choice.
In the paper “Technical Change and the Rate of Profit” in 1961 he presented famous Okishio Theorem.
This work stimulated much discussion about its validity and implications for Marxist theory when it was first published, and has been a hotly debated subject to this day.
A falling rate of profit might be realized in the long run due to competitive pressures among capitalists, bargaining power of labor, or other reasons.
Recent New Keynesians or Neo-Keynesians have been neglecting these fundamental characteristics of Keynes's original theory.
Problems examined are (A) to make clear capitalists’ investment decision of Harrod and (B) to investigate the instability postulate taking into consideration other possibilities like substitutive technical changes, changes in saving ratio, and movements in relative prices.
Okishio's theorem is the proposition obtained by comparing the equilibrium rate of profit before and after the introduction of new technology.
Whether the economic disturbances due to technical change will smoothly converge to new stationary state is very problematic.
Marx considered, of course, that in the long run the average positive rate of profit is realized in capitalistic market economy.
Adam Smith considered that competition among capitals effects downward pressures on profits.
Okishio's tentative conclusion on this problem is that competition can drive the economy to zero-profit equilibrium unless there exist no continuous technical innovations or an increase in labor supply or independent capitalist consumption.
The decision making, however, is still grasped exclusively by small part of members in the society and it is executed based on profit maximizing principle.