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

From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Fri Oct 13 2006 - 10:05:16 EDT

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


I think you illustrate well the dangers of  making extreme assumptions --
the purpose of which was merely mathematical convenience.  The
idea that new value and surplus value is created even where there is no
wage-labor is most certainly _not_ a hypothesis which is "part of the real
world".  Even in the abstract scheme of simple reproduction, there is
surplus value, variable capital, and wage-labor.  The _fact_ is that the
rate of profit is _not_ independent of the rate of surplus value.  The
dangers in linear formalizations include over-simplification,
mis-specification, and the development of theory which is trans-
historical and incapable of  saying anything meaningful about capitalist
realities.  Mathematical imperatives should never be allowed to by
themselves drive the development of  a theory of modern society:
GI = GO  is a slogan which has relevance for more than just
computer engineers.*  Marxists would do well to take some of the criticisms
made by the French economics students, which led to the creation
of the _Post-Autistic Economics Review_, to heart.

"Existing economics is a theoretical [meaning mathematical] system
which floats in the air and which bears little relation to what
happens in the real world" -- Ronald Coase

"Economists have converted the subject into a sort of social
mathematics in which analytical vigor is everything and practical
relevance is nothing" -- Mark Blaug

(above, and other noteworthy, quotes, from )

In solidarity, Jerry

* GIGO is an aphorism meaning 'Garbage In, Garbage Out'.  A
variant -- especially noteworthy for Marxians -- is 'Garbage In,
Gospel Out'.

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