[OPE-L:4584] RE: Re: Rate of profit or the RRI?

From: P.J.Wells@open.ac.uk
Date: Wed Nov 29 2000 - 15:21:41 EST


Thanks for this speedy reply [OPE-L:4583] -- comments interpolated below. 

2. Given fixed capital,  no one decides to invest or not to invest on the 
   basis of a simple rate of profit.  That is,  if two capitalists told
   you what their rates of proft are for a given year, you wouldn't  
   be able to say which of the two has made the better investment.  More
   important, another capitalist would not be able to decide whether or
   not to make the same investment as either of the two had made.  

Here I'd like to ask whether you have in mind managers of enterprises, or
owners of capital. I'd agree the latter can't (easily) tell whether
individual firms have made good investments in particular projects -- but
all they need to do is check the overall rate of return (i.e. the "rate of
profit") and see how it compares with the return on the market portfolio. As
to managers, I would say that their decisions about proposed projects
probably get made on the basis of reading the trade press, asking their
mates, etc.

3. Sraffa and others do construct simple models with fixed capital in which 
   the RRI's are equal but the rates of profit as usually defined are not.

No doubt I'm displaying my ignorance here, but what is the objective of such

4. My questions were a result of my confusion concerning how one makes the
   correction of Marx on transfaormation given fixed capital.

Here, I think I shall blame the lateness of the hour (8.20 p.m. here) for
the fact that I don't right now see why fixed capital makes a difference.


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