# [OPE-L:1904] Re: profit rates

Massimo De Angelis (M.DeAngelis@uel.ac.uk)
Tue, 23 Apr 1996 05:53:11 -0700

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Chai -on wrote.

> Dear Massimo
> prate calculation, 80/180, 100/160 and 80/160. Among the three,
I said the first two are realistic for the producers A and B respectively.
But the third is not real and yet is more economically re
> evant.
> the three distinct prates, and why I said the last one is not real.
I say the last one is the most relevant, however.

"the most relevant profit rate". In your previous posting qouted
below you refer to it in this way: " 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 proper reference for it. Yet it is not a real profit rate, is
it? " So you are saying the third profit rate it is not real because
nobody is actually getting it, but it is the economic relevant
because it comes pout in "projecting the next production". Well, if
this is your definition of "economic relevant" I disagree with it. As I
said in an earlier post I can say that it is a economic relevant
argument saying that GIVEN A and B prates, A and B will take some
deciion which will change again A abd B prates. Chiai-on, I think
wqe are talking two different things.

Yours

Massimo

Chai on wrote.

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 devaluete d
(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 mater ia 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 profit 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 proper
reference for it. Yet it is not a real profit rate, is it?

Massimo. So the third profit rate you are taliking rate

> > 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??
>