[OPE-L:1585] Re: Temporality vs simultaneity

akliman@acl.nyit.edu (akliman@acl.nyit.edu)
Wed, 27 Mar 1996 10:07:00 -0800

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To Chai-on Lee (ope-l 1575), a question? Is the rate of profit which Marx
claims has a tendency to fall "my" "customary, usual" profit rate or
your "theoretically relevant" one?

A second question: why is profitability calculation on the basis of
replacement costs theoretically relevant? Don't firms base their
decisions on EXPECTED future (output) prices and today's costs. Isn't
using the same price vector for future returns and current investment
costs tantamount to assuming completely myopic capitalists?

For the record: I do not reject replacement cost valuation of the
profit rate. No measure is "right" or "wrong"; they just measure
different things. To discuss the actual ("ex post") rate of return on
investment--and its tendency--one must abandon simultaneism. But
the expected ex ante rate (not generally = to the replacement cost rate,
EVEN IF profit rates are uniform--uniform profitability does NOT require
stationary prices) is the basis of investment decisions.

Chai-on's position entails that we saw Marx's law of the tendency of the
rate of profit to fall (whether correct or not) is not "theoretically
relevant" merely because it isn't the basis for *decisionmaking*!!!
Theory is reduced to planning and prediction!!!

If this be theory, I'll gladly embrace "crude empiricism."

Andrew Kliman