[OPE-L:1716] Re: Temporality vs. Simultaneity

John R. Ernst (ernst@pipeline.com)
Fri, 5 Apr 1996 22:37:18 -0800

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Thanks for the response. It was good to meet you in person the
other night. No salvos here. I'll wait for that answer
to the 2nd point.

Here, let me comment on your responses to points 1 and 3 and
then explore the source of some of our differences.

John said:
> In OPE 1492, you make a number of statements with which I
> probably disagree. However, before firing devastating salvos
> your way, I thought I'd simply ask for a bit of clarification.
> 1. Gil writes in reference to Andrew's post.
> "What's really at stake, it seems to me, is the legitimacy of the
> assumptions. These have been challenged on a number of grounds.
> However, it strikes me, after reading Andrew's RRPE article on the
> subject, that the TSS approach *of itself* is neither necessary nor
> sufficient for rehabilitating Marx's theory of the falling rate of
> profit. Indeed, *value theory* of itself is neither necessary nor
> sufficient for the rehabilitation of Marx's theory."
> When you refer to the "rehabilitation of Marx's theory are you still
> speaking of the falling rate of profit?

Gil responded:

Yes, absolutely. I think that Marx fails to establish any
economically meaningful sense in which there is a "tendency" for the
rate of profit to fall, for reasons suggested in response to your
point #3 below.

John now says:

OK. It seems to me that what some of us have done, including Andrew,
is respond to Okishio and not attempted to show the necessity of
a falling rate of profit. If Okishio is accepted as a valid
interpretation of Marx, then the crucial variable in any attempt to
show a falling rate of profit is the wage. As van Parijs says, the
Okishio critique is "devastating" to Marx's notion of the falling
rate of profit.

Let's move to point 3.

Gil said:

> "Finally, I don't think it's been emphasized before that Marx's theory
> of the falling rate of profit is at odds with his story in section
> 1 of Volume I, Ch 25, on the general law of capitalist accumulation.
> If the profit rate falls due to the mechanism suggested in Volume
> III, the rate of accumulation will slow down, driving the rate of
> profit right back up."

John said:

> I'd like to be clear on what you see as the mechanism in Vol. III.

Gil responded:

All right, I'll address that below.

John said:

> Here, I'll note that in Chapter 25 of Vol. I, Sect. 1, Marx assumes
> that the techniques of production are unchanging.

Gil responded:

Yes, I know that. But Marx does not conclude Section 1 (or 2, for
that matter) with the caveat that his section 1 argument *only* works
given that the techniques of production are unchanging.

And indeed, it is not true in general that Marx's section 1 argument
fails if one allows changes in technique. I've demonstrated this for
two different models, one with Cobb-Douglas technology and the other
with Leontief technology and a Foley-Laibman "constant wage share"
condition. In both cases I can derive that the steady-state rate of
profit is equal to (d + g)/s, where d is the capital depreciation
rate, g is the labor force growth rate, and s is the savings rate out
of profit income (all of which are taken to be exogenously given).

Note that this expression does not depend on production coefficients,
so changes in technique do not affect the steady state profit rate.
Thus for at least two important cases that Marx does not rule out
(and I'm sure there are more), I can prove that Marx's section 1
argument continues to apply even if one includes technical change of
the sort Marx considers in Chs 13-15 of Volume I.

Paul Cockshott has established a similar point with a paper he's
posted to his Web site.

Thus I conclude as before: as a general thing Marx's Vol. III
conclusion re the "tendentially falling rate of profit" is
demonstrably at odds with his argument of Vol I, Ch. 25, Section 1.

Now as for the mechanism underlying Marx's argument in Volume III:
as I read Ch. 13 the mechanism is simply the progressive effects of
the real subsumption of labor, which implies steadily increasing
organic composition of capital c/v. Rising c/v, for given rate of
surplus value s/v, translates into a falling value rate of profit.

In saying this I simply follow Marx. Although I'm sure we all know
the chapter I'll spell out my interpretation of Marx so that the
source of my (putative?) error is clear.

Marx begins with what is in effect an algebraic exercise, showing
that rising c/v given constant s/v translates into a falling value
rate of profit: "The same rate of surplus-value, therefore, and an
unchanges level of exploitation of labour, is expressed in a falling
rate of profit, as the value of the constant capital and hence the
total capital grows with the constant capital's material volume. If
we further assume now that this gradual change in the composition of
capital....occurs in more or less all spheres, ...then this gradual
growth in the constant capital, in relation to the variable, must
necessarily result in a *gradual fall in the general rate of profit*,
given that the rate of surplus-value....remains the same."

Marx then notes that he has shown the process of capitalist
accumulation to guarantee just this tendency to increase c/v:

"Moreover, it has been shown to be a law of the capitalist mode of
production that its development does in fact involve a relative
decline in the relation of variable capital to constant...This
progressive decline in the variable capital in relation to the
constant capital....is identical with the progressively rising
organic composition, on average, of the social capital as a whole."

Thus, the process of capital accumulation translates into a tendency
for the rate of profit to fall:

"With the progressive decline in the variable capital in relation to
the constant capital, this tendency leads to a rising organic
composition of the total capital, and the direct result of this is
that the rate of surplus-value, with the level of exploitation of
labour remaining the same or even rising, is expressed in a steadily
falling general rate of profit. The progressive tendency for the
general rate of profit to fall is thus simply the *expression,
peculiar to the capitalist mode of production*, of the progressive
development of the social productivity of labour."

Now, the reason I don't think that Marx has established a "tendency"
for the rate of profit to fall in any meaningful sense is because he
has not ruled out the possibility that the process which raises c/v
also by its nature raises s/v by a greater proportion. In this case
it is not *economically* logical to hold s/v constant. Thus this
portion of the theory must be rehabilitated.

The Okishio theorem is just one illustration of the problem.
Scenario: suppose the "general law of capital accumulation" is in
force, in the sense that wages have been driven to the subsistence
level, and suppose that changing production technique does not change
the length of the working day per worker. Then dw = 0. Now suppose
we require that capitalists adopt only cost-reducing innovations.
Then---well, you know, the Okishio result.

The general point is that one must say *something* about the likely
response of s/v to a given pattern of technical change, or one cannot
establish a "tendency" for the profit rate to do anything.

Then add to this the point I made above concerning the inconsistency
of Marx's Vol. III story with his account in Vol. I, Ch. 25, sec. 1.

OK, John, fire away! In solidarity, Gil

John says:

Wait a minute. You simply assume that your definitions of
terms like depreciation, constant capital, technical change,
and, most important, the rate of profit are consistent with
those of Marx.

Let's look at this.

1. Depreciation.

How do we define depreciation to take into account both physical and
moral depreciation? What is the life time of fixed capital? How is
it determined?

2. Constant Capital.

Do we compute the value of constant capital on the basis of its
historic value? Its reproduction value as of the immediately prior
period? Or, is it valued simultaneously with the output of the
period in which it is used?

3. Technical Change

To get a falling rate of profit, using the standard definitions, one
is forced to assume not only that the real wage rises but also that
the ratio of constant capital to output, when simultaneously valued,
rises. Yet, Marx makes no assumption. Indeed, in Chapter 15, Sec.4
of Vol III, he, by way of example, states that that ratio will fall.
Generally, this is treated as one of those "rough" spots that does not
fit the standard interpretation and, hence, is ignored.

4. The Rate of Profit

On this list, we've seen at least three definitions of the rate of
profit, all of which depend upon how one values constant capital
and how one treats fixed capital. Hence, like Okishio, you seem to
busy showing the errors in Marx's arguments using definitions
that have been, to say the least, questioned. For example, note
that, for Marx, if prices uniformly fall because of increases in
productivity, the rate of profit will not fall. Within the standard
treatment of Marx, this is not true. Yet, that treatment continues
as the "standard."


Gil, this is by no means a salvo. What Andrew and I have said is
simple. If Marx is notion of the value of constant capital is
understood differently, then Marx is not necessarily wrong. Fred
has called into question our idea of historic valuation as a
correct way of interpretating Marx. In my judgment, Fred has yet
to answer questions concerning "moral depreciation." No one has
presented a way of incorporating depreciating fixed capital into
the accumulation process as we look at the rate of profit. Hence,
it would premature for me to pound away at your views given our
lack of agreement at the level of definition. Rather, it seems
to me that as you begin to examine those "sunk costs" in my 2nd
point, you will join with me in an effort to develop a way of
talking about fixed capital so that we no longer have to take
seriously interpretations of Marx which include ideas like
non-depreciating fixed capital. For now, the point is to
understand CAPITAL, not to change it.

Awaiting your logical refutations, I remain

In Solidarity,