Re: [OPE-L] Marx on the 'maximum rate of profit'

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Oct 12 2006 - 09:35:37 EDT

>--- Francisco Paulo Cipolla <cipolla@UFPR.BR> wrote:
>>  Rising organic composition and rising rate of
>>  exploitation are obviously
>>  related, Ajit. They are two aspects of increasing
>>  productivity.
>No, they are not. You can have increasing productivity
>with falling organic composition of capital and you
>can have decreasing productivity with rising
>composition of capital. There is no law in economics
>that I know of that says that productivity of labor
>cannot rise if he value of constant element of capital
>falls faster than the value of variable capital
>needed. Secondly, imagine you are involved in mining.
>As you produce more and more you find that it is
>becoming more and more difficult to produce the same
>amount of minerals as before, so you bring in heavy
>machinery, your organic composition would rise but
>your labor productivity may remain the same.
>Generalize this case to agriculture as a whole, as
>Ricardo did. You can have a rising organic composition
>of capital with either fall or no increase in labor

This is just silly.

In the Ricardian case unit values are not 
falling! More labor, indirect and direct 
combined, is being used to produce each unit.

Unit values can fall and indeed are most likely 
to fall (in Marx's estimation) with a rising OCC

  Why did Marx think this?

Because Marx asserts that the most powerful way 
to reduce unit values is to replace direct labor 
with less indirect labor. Again this is so basic 
to Marx's argument I don't know why we are 
questioning it or how anyone who has read Marx 
could not understand that this is what Marx is 
claiming (though perhaps incorrectly)

  Of course indirect labor may also be replaced 
with less indirect labor, so that the organic 
composition of capital could fall as unit values 
fall. That is of course a possibility especially 
as Marx himself underlines for a single industry.

But in terms of your original proposition there is no trouble at all.

Rate of profit can fall, s/v and occ can rise, 
real wage can still rise as unit values fall. 
This has been understood for eight decades. But 
you would have to read Marxists, not Sraffians.

Of course there may be no plausible 
microfoundations for the capitalist economy to 
ever get on such a path, but that was not your 

If you want to voice Okishio's criticism, then 1. 
respond to his own qualification of his argument, 
2. explain why we should leave the real wage 
fixed, and 3. why we should analyze technical 
change in a comparative static framework.

>  As
>>  productivity rises and values fall workers can have
>>  a higher real wage
>>  (amount of goods), be more exploited, all this
>>  together with a reduction
>>  in the rate of profit. As you say the three trends
>>  can go together.
>Actually, I was a little hasty, and I shouldn’t have
>trusted my little mathematics done on the margin of a
>newspaper. As a matter of fact by relative
>immiseration, one could only mean the relative share
>of wages and profits PER UNIT OF NET OUTPUT. And I
>don't think under any circumstance the relative share
>of wages could fall along with the rate of profits per
>unit of net output. Thus the relative immiseration
>thesis does not even get a start if it is defined

Why do you think this?

>>  The maximum rate of profit is a concept that allows
>>  us to see that the
>>  fall of the profit rate is independent of the rate
>>  of exploitation. For
>>  this to be true it is enough to show that the new
>>  value created (L)
>>  shrinks as a percentage of constant capital.
>I don't think that a rise in C/L must imply a fall in
>the maximum rate of profits to begin with, since you
>are allowing labor productivity to rise.

Are you dealing with C in value or material 
terms? Your formulations are very vague.


>You should
>note that it is well accepted that the formula for the
>rate of profits as S/(C+V) is wrong, so you need to
>check Sraffa to see whether the proposition you think
>is obvious is all that obvious or not. Cheers, ajit
>Do You Yahoo!?
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