[OPE-L:4590] Re: Part of My Confusion on the Transformation

From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Fri Dec 01 2000 - 16:37:07 EST

I think Marx just didn't get that far. He seems to have been 
following the Smithian theory of competition, which envisions capital 
as moving from low profit rate sectors to high profit rate sectors. 
As you've pointed out, when capital goods have long lifetimes, 
there's always a major expectational or prospective element in 
estimating the profit rate, so presumably the relevant profit rate 
for this competitive movement of capitals would be a prospective, not 
necessarily a realized profit rate. And technical change could make 
the expectations very wrong. Perhaps this is one of the factors that 
led the Classical political economists to view competition as a 
gradual, imperfect tendency, that manifested itself in a 
"gravitation" of prices around natural prices (or prices of 
production) rather than as an attained equilibrium.


>One of the things I don't get is how the usual way of correcting
>Marx's transformation procedure applies when we assume that
>fixed capital  is *really* present.   Here are a couple of things
>I don't get.
>1.  Is the rate of profit or the RRI equal in all sectors after the
>2.  How do you compute the values that are to be transformed from a given
>     set of physical quantities? 
>I suppose the underlying confusion is my lack of understanding how much of
>is said about the transformation problem can be extended to an economy in
>which fixed capital is *really* present.   I'll skip any thoughts about moral
>depreciation for now as that brings in still more issues.

Duncan K. Foley
Leo Model Professor
Department of Economics
Graduate Faculty
New School University
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e-mail: foleyd@cepa.newschool.edu
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