[OPE-L:1873] Re: profit rates

Massimo De Angelis (M.DeAngelis@uel.ac.uk)
Mon, 22 Apr 1996 09:47:29 -0700

[ show plain text ]

> In [OPE-L:1737], Massimo wrote,
> the way I read your example below is this:
> whatever is the forecast for next period, capitalist B has paid 100 for c,
so at total market value = 260 the total prate for B is 80/100
(lower than prate for A) . NEXT period prate will be equal
> B buys at 80. To me, BOTH are real profit rate.
Can you tell me why you don't think this is the case??
> in regard to my example,
> > let assume the producer A purchased the input materials at 100 while his competitor did them of the same amount at 80 at a later point of time for the reason that the input materials were devalued
> (the two values, 100 and 80, were assumed to have been prevalent market values). The second producer has not yet come out to the market when the first man put his products on the market. But, when
> his products are on the market, the input materials are already known to have been devalued. Nevertheless, because the second man has not produced the same product with less expensive input materi
> ls, the market value of the products are not yet depreciated in proportion to the value of the input materials.
> Then, how would he compute his profit rate?
> 100(c)+80(v)+80(s)=260 is its current market value. But since 100(c) is already depreciated, 80(c)+80(v)+100(s) =260 will be seen as the prevailing market condition for A. In the first case, the
> rofit rate would be 80/180. But in the second case, it would be 100/160. None of the two can be a proper profit rate in projecting the next production since 80(c)+80(v)+80(s)=240 will rather be a
> roper reference for it. Yet it is not a real profit rate, is it?
> I look forward your reply.
> >
> Chai-on Lee replies:
> In my example, capitalist B has paid
80 (not 100) for c, so at the total market value = 240
(not 260, for the market value is already depreciated
when the second producer puts his products on the market
in asmuch as the prevailing market value of c is 80 then)
the total profit rate for B is 80/160 (not 80/100)
(higher than the profit rate of A notlower than prate for A
since for A, the prate is
> 80/180) .
NEXT period prate will of course be equalised since B and A
both would buy the c at 80. To me, therefore, 80/160 is the
**only** economically relevant profit rate.
Can you tell me why you
> on't think this is the case??

> I look forward your wise reply.

Chai-on sorry for the very long delay. As you know the message got
lost. You are right, I got the numbers of your example wrong, but
still I don't see the problem. The two profit rates are different
and both are real. I don't understand why you are saying that they
are not real. Is that because they are not equal?? or What?