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

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Fri Oct 13 2006 - 16:44:54 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

No for Paolo new value includes what would be surplus value and
variable capital, so you can't say new value and surplus value.

He seems to be defining  the maximum rate of profit as  v+s/c, and
measuring it at the end of each period, t1 rather than t0, t3 rather
than t2, etc. At the end of each period there is so much new value
(surplus value and variable capital, not new value and surplus
value), and Paolo says that we should me measure that in relation
only to the constant capital costs of production.

It seems to me that the question you should raise is whether the
rate of profit should ever be defined as v+s/c rather than as s/c+v.

One could say that Paolo's measure seems to imply a kind of capital
fetishism in that it measures new value in relation to constant
capital only rather than surplus value in relation to variable
capital. In putting only dead labor in focus in the denominator, one
could say that the maximum rate of profit is anything but a living
concept as Paolo has claimed. Of course the point of the measure may
well be to show that even if workers lived on air, the rate of profit
would still fall. But that does not imply that they do. Plus, this is
what Marx himself says.

In  measuring new value in relation to constant capital Paolo is not
saying that v=0; he is granting that v is some percentage of new
value. Which in turn ensures that the actual rate of profit is below
the maximum rate of profit.

So I think your criticism while interesting has misfired.

The fundamental critical issue with all economics (sraffian and
neoclassical) is implicit and explicit fetishism, the ontological
equivalence given to all the factors of production in determination
of value.


>is created even where there is no
>wage-labor is most certainly _not_ a hypothesis which is "part of the real

>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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