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

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Nov 01 2007 - 11:04:11 EDT

I don't see how you are providing an explanation for what is frustrating
the tendency towards
an intersectoral equalization of the profit rate. Occam's Razor aside,
it's easy to see why there
would be such a tendency but you are not making it easy to see why such a
tendency has effectively no kind of existence. Which is what you seem to
be implying.

> You have to realise that there will not be a single rate of profit
> within a sector. The rate of profit within sectors will itself be
> normally distributed. A sector where the mean rate is low, has two
> possibilities:
> 1) Either a significant fraction falls into the loss making state, in
> which case the sector will contract.
> 2) The sectoral coefficient of variation of the profit rate may be
> narrower than the economy wide dispersion which may be enough to keep
> only a small proportion of the firms loss making. This second
> alternative seems less likely unless one can produce specific reasons
> for it.
> Note that I am not disputing that an almost equal rate of return can be
> achieved on equities -- this is what 'shareholder value' achieves, but
> the means by which this occurs is the writing up or down of the
> valuation of the companies share capital. This rate of return on
> equities is quite distinct from the rate of return discussed by Marx and
> the Classicals.
> You are right in saying that random fluctuations around prices of
> production are just as likely as random fluctuations around values. If
> the random fluctuations of market around prices of production are just
> as great as the random fluctuations of market prices around values, then
> prices of production have no additional explanatory power as compared to
> values, and by Occams razor, we should prefer the simpler theory - that
> labour values determine prices.
> The only justification for the additional complexity of price of
> production theory would be if it significantly improves our predictive
> ability with respect to real prices. If it does not, then it is not even
> an epi-cycle, it becomes in Gould's terms a Spandrel.
> -----Original Message-----
> From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On Behalf Of Rakesh Bhandari
> Sent: 30 October 2007 22:50
> Subject: Re: [OPE-L] Marx on the general rate of profit/rate of
> interest: a translation error
> Paul,
> I must say that I am not following your explanation of what is
> frustrating
> even in this day age of unleashed capital flows and shareholder value
> the
> tendency towards an equal profit rate.
> I don't get the point about firm death either. Wouldn't there be some
> tendency for all firms which within a branch are not achieving average
> profitability to die? Why would that disrupt the tendency to the equal
> profit rate?
> I am distracted, and I am asking you to start the argument from scratch.
> I
> apologize. I know for years you have said that Marx had no need to
> transform (just as for years Gil assailed Marx's assumption of price
> value
> equivalence, these two points have been defining criticisms for OPE-L,
> so
> I want to understand what you are saying because I just don't get the
> logic of these defining criticisms). So if possible I would just like a
> post which explains why. Random fluctuations around value are no less
> likely than random fluctuations around price of production?
> Sorry to take the discussion back so far.
> Rakesh

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