[OPE-L:1430] Re: Where does the value go? (1)

Paul_Cockshott (wpc@cs.strath.ac.uk)
Mon, 11 Mar 1996 07:43:56 -0800

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I think the empirical evidence is that the profit rate actually does
fall even when the real wage is also falling, as many studies have
proven. This directly contradicts the mathematically impeccable
theorem of Okishio which adopts minimal (simultaneist) assumptions
which no simultaneist model can deny. Certainly they contradict
nothing Paul has said in the debate.


I beg you to excuse my ignorance on this point, but
what are the sorts of assumptions that Okishio makes?
What does he assume about interest rates, savings
ratios, capitalist consumption, state consumption
growth of the workforce, proportion of unproductive workers etc?
How realistic are his assumptions?

For example, if a capitalist has a stock of $1000, and uses up
$200 of it (in wages, raw materials and [material] depreciation)
to make sales of of $500 then $200 of the sales replaces the used-up
capital and $300 is profit. If of the profit of $300 s/he consumes
$100, the remaining $200 is added to the stock to make it
$1200. It's as simple as that. This 'naive' calculation - which is
what the capitalists actually have to comply with - is rigorously true.

Over the whole of the output and stocks of society, value is
conserved. Therefore, whatever is not used, is added to stock.

Is it really as simple as you describe here?

Can you really extrapolate from the individual firm to the
economy like this. Suppose that having consumed the $100 dollars,
the owner leaves the profit in the bank. It may look to him as
if his capital has increased by $200, but it does not follow
that this is true of society as a whole. The $100 in the bank is
an accounting entity which may or may not correspond to lending
to finance real capital accumulation.

Next, some stocks may simply go to waste, in this case their
value is not conserved but lost.

Then there is the whole question of moral depreciation that
we have been discussing. The firm may have to write down
the book value of their capital stock. In that case the
growth of the capital stock will be less than the investment
that they make. Conversely, they may find that their capital
stock's value has grown due to stock appreciation.


Therefore, from Paul's assumptions, it follows that the profit
rate cannot possibly fall when empirically it most decisively
does. There is a very extensive literature on this, it has been
studied at great length by many people and no flaw in Okishio's
logic has been found.

There is also an extensive empirical literature on the rate of
profit. In particular I think that the evidence Anwar has produced
on the profit rate is very strong indeed. But it is not just the
Marxists: for example the Bank of England in 1974 produced a very
well-informed report on the falling rate of profit which came to
exactly the same conclusions.

I would reverse Paul's question. Show me, on *your* assumptions,
how this fall in the profit rate can be explained. Show me the
error in the Okishio theorem, which shares your assumptions. Or,
please show me that the profit rate doesn't fall under the stated
Yes I know that there have been periods in which the rise in
the organic composition has been a contributory factor to a
fall in the rate of profit. I have published such results
for the UK myself. But I dont see what assumptions you think
I make that would make this impossible.

In the article that Greg, Allin and I had published last year
in Capital and Class, we document the movements in the UK organic
composition going back to the 1850s. We also describe the
mechanism by which we think changes in the organic composition
have been driven. Our basic argument is that the organic composition
rises when the rate of net accumulation is faster than the rate
of growth of the workforce. Which seems a simple enough proposition.
When, and under what circumstances this will take place, is much
more complicated to determine. All one can say for certainty, is
that at certain periods it has occured, and at other periods the
reverse has happened.

On the web page:
I have posted a link to the Capital and Class article under
the title 'testing labour value theory with input output tables'.
That should answer some of your questions. In addition, the
reply I have written to Andrew under the heading "Notes on DYnamic
Value" touches on the matter. I have also placed on line a
specific treatment of the determinants of the long term
movement of the rate of profit under the heading:
'The declining rate of profit and technical change'.

The web server will have been updated to include these
papers after midnight GMT on the 11th March.


Why must the formation of social values extend to stocks?

Not least, I think this the only consistent way to proceed.

Exchange is by definition not a relation between flows but between stocks.

I will allow the above, but this does not show that the
value of stocks of commodities must be conserved. I grant that
they are conserved in exchange, but an exchange is, at least
in principle an instantaneous operation. One moment the bread
belongs to the shop, the next moment it belongs to me. Since the
process is instantaneous we can assume no depreciation goes on
during it. But this does not prove that no depreciation will go
on prior to or immediately after sale. If the bread sits on the
shop shelf all day, it will have depreciated and lost almost all
its value.