Organic composition of capital
The organic composition of capital is a concept from Marxian political economy. It can be seen as the form the capitalist epoch gives to the transhistorical relationship between means of production and labor power, or M:L, determining productivity and the creation of surplus. Marx took the growth of this underlying ratio to be the material dynamo driving human progress.
The organic composition of capital is expressed as a ratio of constant capital to variable capital, or c:v. For example, the plant- and machinery-intensive oil industry would have a high organic composition of capital, while labor-intensive businesses such as catering would tend to have a low organic composition of capital.
The organic composition of capital varies according to differences in production technology, between sectors of an economy, or changes in technology over time. Its exact proportion is of crucial importance to Marxist crisis theory, as one of the four variables determining the business cycle, as explained in Henryk Grossmann's mathematical presentation of the Marxist argument.
The different organic compositions of different branches of industry raised a problem for the classical economic schema of Ricardo and others, who could not reconcile a Labor theory of value with the appearance that different profit rates would have to apply in different industries. Marx either solved this problem, or failed to solve it, according to which side of the debate over the transformation problem one finds convincing.
