# Re: zero average profit

From: Ian Wright (ian_paul_wright@HOTMAIL.COM)
Date: Sun Jun 01 2003 - 19:15:36 EDT

```Hello Fred, Michael & Allin,

Thank you all for taking time to reply to my question.

I'm imagining a highly simplified economy in which there is
a fixed amount of paper money, which is the only form of money,
and no hoarding.

My question is about monetary profits, rather than what
those profits represent in value terms. The existence
of surplus-value production, or primitive accumulation,
are statements about value transfers in the economy.
They do not alter the fact that total monetary transfers
must sum to zero.

Allin wrote:
>But if we want to introduce an ongoing M-C-M', with the capitalists
>accumulating and income expanding, money has to flex.  If money
>remains constant in value (and so does velocity of circulation), we'll
>need a larger money stock.

Yes I agree, and for me at least, I find this a subtle
point. I am trying to understand however what can be deduced
if money does not flex. This implies that the value of
money must change if new surplus-value production or primitive
accumulation occurs. But I wish to ignore the value of money.

Allin wrote:
>Here's a simple example.  Each period the capitalists lay out 50 on
>labour power.  The workers produce goods to the value of 100.  50 of
>this is necessities, purchased by the workers, and 50 is luxuries,
>purchased by the capitalists.  Aggregate profit = capitalist
>consumption = 50.  Total income = 100, period after period.

When I first asked the question I was not clearly
distinguishing between absolute profits and profit rates,
which I will now try to do.

In this example let's assume that the total money in
the economy is M=100. The net transfer of money between
workers and capitalists is 0. The situation reproduces
period after period. The capitalist class does not increase
its money holdings, and its total absolute profit is 0, and
its total profit rate is 1 (i.e., they're not making a profit).

Allin wrote:
>The "fixed money" situation is compatible with positive profit.

In your example, in which there is no net money
transfer between workers and capitalists, only invididual
capitals can have non-zero absolute profit, and profit
rates in excess of 1. This is due to internal transfers
of money between members of the capitalist class when
they purchase luxuries. (This may have been what you meant).

The example is very helpful, so let me now try and relate
it back to my original question.

Either:
(a) The profit rate, r, for the capitalist class equals
r=1 and the system reproduces (as in the example), or
(b) The profit rate for the capitalist class is not
equal to 1, in which case there is net flow of
money to capitalists (r>1) or a net flow to workers
(with a new monetary value of labour power and produced
goods), or break down when all M is owned by one class.

It seems to me that, given the assumptions, profit rates
must tend to 1 or oscillate around 1 if the system is to
reproduce, i.e. a situation of no profits on average
(zero average absolute profits).

But there may still be a flaw as I could be
confusing:
>... the difference
>between (a) a condition of zero profit and (b) a condition in which
>the capitalists' aggregate money holdings do not grow over time.
as I didn't understand this.

I would also like to relate back to Marx's original argument,
and may try to do so later.

-Ian.

P.S. For clarity, I'm defining absolute profits as m'-m,
and relative profits as m'/m.

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