RE: [OPE] webpage computing dynamic rate of profit

From: Paul Cockshott <>
Date: Wed May 20 2009 - 04:08:19 EDT

These are hardly new issues. When I started doing national accounts into marxian categories in the 1970s this was one of the first things that I noticed. For a while I tended to compute both the flow and the stock forms of the rate of profit. Each tells us a different thing s/(c+v) tells us the ratio of the population producing surplus goods to those producing non surplus goods. It is a simple dimensionless number. s/K on the other hand gives us the rate of growth of the value of invested capital stock. From the point of view of the analysis of industrial profit as compared to rate of interest this is the appropriate figure.

Then there is the issue raised by Jurrian, which is I think the most serious objection, that fixed capital stock as computed in the Penn World Tables does not adequately calculate stock of work in progress and inventories. I think this is a serious objection if, and it is a big if, the Penn World tables data for gross capital formation does not include formation of work in progress. In the UK national accounts there is an entry for growth of stocks ( either due to inflaton or buildup ), I dont know other national accounts well enough. It is thus possiblee for the compilers of the Penn WOrld Tables to include increments or decrements to work in progress in their capital formation.

A separate issue is the valuation of the stock of fixed or other capital by the Permanent Inventory Method.
The EPWT use a depreciation horizon of 14 years. The UK tables seem to use a depreciation horizon of just under 20 years. I am not sure what other estimates use. It is clear to me that the single biggest cause of divergence in estimating the rate of profit will be the time horizon used for deprciation.
I f one wants to compare this to practice, one needs to know the horizon typically used in company accounts.

From: [] On Behalf Of Cipolla []
Sent: Tuesday, May 19, 2009 9:17 PM
To: Outline on Political Economy mailing list
Subject: Re: [OPE] webpage computing dynamic rate of profit

Sorry to be junping into this thread a little late. The highest two graphs
in Figure 5.16 (page 128 of Shaikh and Tonak: Measuring the Wealth of
Nations) for aggregate rates of profit use K as the stock of fixed capital.
Therefore it is not "all of the capital invested in means of production". It
is a rate of return on the stock fixed capital. It is a different measure
from Marx´s rate of profit.
Also, their measure of the value composition of capital is not really Marx's
value composition. Their C*/V* has in the numerator only the flow of
constant capital used up in production, that is, material inputs plus
depreciation. You can check for this on page 95 and then see the
corresponding graph 5.15.
The road of conversion of National Accounts into Marxian Accounts is not
that smooth.
----- Original Message -----
From: "Dave Zachariah" <>
To: "Outline on Political Economy mailing list" <>
Sent: Sunday, May 17, 2009 11:57 AM
Subject: Re: [OPE] webpage computing dynamic rate of profit

> GERALD LEVY wrote:
>> Let's contract the list instead. Let's just look at the formula employed
>> by two of those you mention above - Shaikh and Tonak. Is it P/K where
>> K is all of the capital invested (K) is means of production?
> Yes, see chapter 5.5.
>> As you know, for
>> S&T the division between productive and unproductive labor is a an
>> important variable in Marxian macro empirical studies. How can this
>> variable show up if the denominator in the rate of profit is simply K?
> This division does not show up in the stock variable of the denominator
> but is directly related to the flow variable in the numerator since
> surplus value is decomposed as: S = P + U, where P is profit-type income
> and U is unproductive expenditure. Thus R* = S/K an upper-bound to R =
> P/K.
> See chapter 7.1.
> //Dave Z
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