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

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Oct 12 2006 - 09:41:45 EDT

Paolo wrote:

>Rising organic composition and rising rate of exploitation are obviously
>related, Ajit. They are two aspects of increasing productivity. 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.
>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. Besides, L/c is part of
>reality: it is the total new value created as a % of constant capital.
>It is a living concept not an absurd hypothesis. Just as simple
>reproduction, it is there, it is part of the real world.

This is all very well helpfully articulated, and 
it seems to suggest the unimportance of the bee 
in someone's bonnet--the TSS assumption of V=0.

>  The fact that
>some of L is paid as variable capital only shows that the actual rate of
>profit moves underneath a falling trend.

Actual rate of profit may be underneath a falling 
trend, but actual rate of profit even if 
underneath a falling trend may itself rise for 
some time if s/v continues to rise from an 
initial low point, no?

>This was a way out of having
>the same status for tendency (rising c/v) and counter-tendency (rising
>s/v) in the interpretation of the FROP issue. I have never seen a
>critique of this view. If there is one I would be interested in knowing.

Well Andrew Trigg's response is that it's 
possible for the s/v to rise for a very long time 
such that even if the rate of profit falls the 
growing mass of surplus value still suffices to 
meet growing capitalist consumption needs and to 
fund accumulation. Ajit abstracted away from the 
mass of surplus value and capitalist consumption, 
but they are crucial. But one would have to read 
Bauer and Grossman even if politics did not allow 
them to become dons at Austrian and German 

For Andrew (at least in the original Science and 
Society piece on Grossman and Kalecki) the real 
weakness in the capitalist system is not a 
shortage of new value from a rising organic 
composition of capital or a shortage of surplus 
value from rising real wages but a possible 
unwillingness of the financial system to finance 
autonomous increases in capitalist luxury 
spending by which surplus value can be realized 
and a rising s/v effected.

This is not so much a critique of your view but a view orthogonal to it.


>ajit sinha wrote:
>>  --- ajit sinha <sinha_a99@YAHOO.COM> wrote:
>>  > --- Francisco Paulo Cipolla <cipolla@UFPR.BR> wrote:
>>  >
>>  > > I do not think the maximum rate of profit argument
>>  > > is a mathematical
>>  > > tautology since it is grounded on the idea of a
>>  > > rising composition of
>>  > > capital (rising c/L) which is a historical
>>  > tendency
>>  > > of capitalism.
>>  > > Rising rate of exploitation and falling rate of
>>  > > profit go together.
>>  > > Wasn´t this that Ajit said it was difficult to
>>  > show?
>>  > > Paulo
>>  > ____________________________
>>  > Paulo, let me first quote you. You wrote: "Then,the
>>  > argument goes, IF the value composition of
>>  > production
>>  > c/L (as Shaikh(?) calls it) presents a tendency to
>>  > increase, the maximum rate of profit L/c must
>>  > present
>>  > a tendency to fall." (emphasis added). Your
>>  > qualifyer
>>  > "if" makes your statement almost a tautology. Why
>>  > did
>>  > I say almost and not a tautology? Because a pure
>>  > tautology would be a statement such as: 'either it
>>  > is
>>  > raining or not raining'. This statement, though
>>  > gives
>>  > you no information about the weather, is always
>>  > true.
>>  > Your statement is always true but on the condition
>>  > that the elementary methematical law that if the
>>  > value
>>  > of a ratio is rising then its inverse must be
>>  > falling.
>  > > So for all practical purposes it is a tautology, but
>  > > since a philosopher could protest, I took the
>>  > measure
>>  > to protect against such criticism by calling it
>>  > almost
>>  > a tautology.
>>  >
>>  > Now you say, "Rising rate of exploitation and
>>  > falling
>>  > rate of profit go together. Wasn´t this that Ajit
>>  > said
>>  > it was difficult to show?
>>  >
>>  > First of all, since you have put your V = 0, which
>>  > means the rate of exploitation is infinite even if
>>  > the
>>  > working time is one second, the concept of "rising
>>  > rate of exploitation" is meaningless. In any case,
>>  > what the rate of exploitation has got to do with
>>  > rising rate of composition of capital? And why
>>  > cannot
>>  > you understand my proposition which you are making
>>  > me
>>  > repeat time and time again? Let me repeat it for the
>>  > last time. My proposition is: show me how the three
>>  > tendencies exist together: (1) real wages, i.e.
>>  > wages
>>  > in terms of goods and services, is rising; (2) the
>>  > share of wages in net income, which is divided
>>  > between
>>  > capitalists and workers, is declining; and (3) the
>>  > rate of profits on capital investment is declining.
>>  ______________________
>>  This evening in a Paris café I tried to work this out
>>  myself. Of course in a limiting case when rate of
>>  profits tend to zero, the share of profit in the total
>>  net output will also tend to zero. However, if we
>>  start from a high level of rate of profits and assume
>>  that all the surplus value is invested mostly in
>>  increasing the constant capital and very little in
>>  increasing the variable capital with productivity
>>  rising just to the extent that the rate of profits
>>  falls slightly, this trend could be maintained for a
>>  long time. Of course, a time has to come when the rate
>>  of profits become small enough that the share of wages
>>  begin to rise vis-a-vis the profit in the net output.
>>  But the mathematical possibility of the three trends
>>  existing simultaneously for some time cannot be
>>  denied. Cheers, ajit sinha
>>  __________________________________________________
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