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

From: Francisco Paulo Cipolla (cipolla@UFPR.BR)
Date: Mon Oct 16 2006 - 17:20:50 EDT

Thanks Rakesh for your very good message. You clarify points that I did not

Rakesh Bhandari wrote:

> >  > 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.
> >
> >Paolo:
> >
> >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.
> magnitudes.
> Rakesh
> >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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