[OPE-L:2252] Re: A Great Leap Forward

Duncan K Foley (dkf2@columbia.edu)
Thu, 16 May 1996 11:30:50 -0700

[ show plain text ]

On Wed, 15 May 1996 ernst@pipeline.com wrote:
(among other things):
> John now says:
> First, let me be clear. I attempted to point out that with "capital
> saving" technical change, the rate of profit in the TSS can fall.
> That is, in your terms, if we use the historic costs of constant
> capital in computing the rate of profit, the rate of profit can fall
> even as capitalists introduce techniques that are normally considered
> "capital saving." Given such a fall, I think it would be "relevant"
> to those making investments and seeing a decrease in their rates of
> return or profit rate. To be sure, I make no attempt here to argue
> that this does occur but merely point out that it can. If we
> ignore the "historic costs" and go with simultaneous pricing, this
> possibility is simply ignored. Thus, defenses of Marx's falling
> rate of profit focus primarily on "capital using" technical change.
> The "Great Leap Forward" is that this focus is needless with TSS.
> Further, since outputs can grow faster than inputs in TSS, it
> forces Marxists, using TSS as a defense of Marx, to take seriously
> the issue of effective demand. In other defenses, there is little
> need to consider effective demand.

The main issue here, as I understand it from discussions with Andrew, is
which profit rate, in two senses: 1) which one was Marx thinking about and
2) which one is relevant for understanding the evolution of capitalist
production? I don't agree that the TSS interpretation of value theory is
at the root of these results about the FRP, which depend instead on a
particular definition of the profit rate that falls.

> I do not think that Dumenil and Levy are wrong but I am curious
> about their explanation of the how's and why's of the fall in
> the output-capital ratio.

They have a very interesting article in a recent issue of Metroeconomica
suggesting an evolutionary mechanism to explain the history of U.S. labor
and capital productivities and the profit rate.