[OPE-L:1558] Re: Temporality and Simultaneity

Duncan K Foley (dkf2@columbia.edu)
Tue, 26 Mar 1996 12:09:58 -0800

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On Mon, 25 Mar 1996, John R. Ernst wrote:

> Chai-on, Michael and Duncan
> Duncan's post on this as well as Michael's enable me to be
> more direct in asking about Chai-on's comment on Andrew's
> determination of the rate of profit. Here are a few of
> my questions:
> 1. Does that "ex ante" rate of profit which differs from Andrew's
> use Andrew's output values in determining the input values
> for evaluating the new investment?
Presumably a capitalist looking forward is trying to predict the costs of
investment in a certain technology and the profit stream from it. Most
predictions are based on existing experience, but they may deviate from
it for all kinds of reasons.

> 2. Assuming no tranformation problem, how does the "ex ante"
> rate of profit relate to the equilibrium rate of profit? Is it a
> matter of being a few iterations away?
One way of defining equilibrium in expectational terms is as a situation
where ex-ante and ex-post agree.

But if the economy is not in this kind of equilibrium, I would argue that
it is the ex ante profit rate that governs investment plans, even when
they deviate from ex post realized profit rates.
> 3. When we speak of the falling rate of profit, about what rate of profit
> are we talking? The equilibrium rate? Andrew's? The "ex ante" one?
I think Marx was speaking of the realized historical rate of profit, but
also making the (perhaps informal) assumption that the ex ante rate of
profit would gravitate around the realized historical rate, so that it
would also fall from the same historical forces.

> That we are asking these questions in 1996 is scary.
I guess I'd think it were scarier if no one were asking these question in
1996. Actually, quite a bit has been found out about the complex of
issues involved in the evolution of the rate of profit, and some
theoretical issues have been clarified, if not resolved. I'd suggest
reading Okishio, Roemer, and van Pariijs for the skeptical side of the
debate, and my own Understanding Capital, and Dumenil and Levy's
Economics of the Profit Rate for a modern defense of the relevance of
Marx's conception.


> In Solidarity,
> John