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

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Tue Nov 07 2006 - 08:25:20 EST

I have now made Dave Zachariah's new 18 country study of
profit rates and labour values available on the web.

This is his conclusion
We have found that market prices and labour value of industry outputs are
highly correlated for a fairly broad sample of economies covering different sizes,
levels of development and institutional structures. The results are in line with
similar studies done for the US, Britain, Greece, Italy, former Yugoslavia and
Mexico. (See Tsoul»dis and Maniatis [18].) The distribution of price-value ratios
remains narrow in relation to the distribution of profit rates and alternative
value bases and is broadly consistent with the prediction Farjoun and Machover
made some twenty years ago. The results for the alternatives indicate that the
empirical strength of labour is not a statistical artefact.

Production price is not found to be a superior predictor of market price
and indeed deviates little from labour values. The equalisation of profit rates
does not appear to operate in the way assumed by the theory of production
prices: The distributions of profit rates were wide and showed no consistent
sign of narrowing over time. Whatever forces pushing profit rates closer, they
are always checked by counter-forces so profit rates should instead be thought
to conform to some statistical distribution when the economy is in a stable
condition. The profitability mechanism that pushes firms to move from low to
high return industry sectors is likely to operate on a longer time-scale than the
more immediate constraints imposed by the need to pay the wage-bill and by
technical conditions represented by the production matrix. Reducing the scale
of production in one sector while building up capital stocks in another is by
its nature a relatively slow process. These constraints explain why the simple
labour theory of value is better in accounts with empirical data than the theory
of production prices.

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