Re: [OPE-L] Marx on the general rate of profit/rate of interest: a translation error

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Tue Oct 30 2007 - 16:46:28 EDT


But if credit is withdrawn in one branch as a whole, won't it then be
extended to another?


Formulated that way it is wrong. If you said if one sector increases its
lending must not other sectors increase their borrowing to compensate, then
you would be right.
But borrowing is not the same thing as capital accumulation. Borrowing can
be voluntary or involuntary. If sector A increases its lending, it reduces
its expenditure on means of production, this creates an immediate deficit
on current account of those firms supplying sector A, this involuntary borrowing
will balance the increased lending by A.

Note that this first order effect is to reduce the rate of profit
in those sectors that supply A.

One must not confuse credit operations with movements of capital betweeen
sectors. The latter requires a reduction in the stocks of embodied labour
in sector A and a corresponding increase in other sectors. This will not 
necessarily occur. It can occur, but the process is not automatic.


>This effect is much faster acting than the movement
>of capital to branches of higher return.

Aren't they one and the same movement?


The classical theory involved a voluntary re-investment. What I am talking about
is accelerated firm death, which is a much more forcible result.

>Thus the
>mechanism bringing prices into line with values can
>be expected to be correspondingly strong.

That it may be stronger does not mean that it is not in objective contradiction
with the tendency towards an equalized profit rate.

It is. Based on the the stochastic theory one makes predictions which
contradict those made by the deterministic theory. In particular the
classical deterministic theory predicts that the sectoral rate of profit should
be independent of the organic composition of capital. The stochastic
theory predicts that the rate of profit will be negatively correlated
with the organic composition.


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