[OPE-L:2265] Re: Modal Quiz

Duncan K Foley (dkf2@columbia.edu)
Fri, 17 May 1996 14:07:28 -0700

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OK, I'll bite, but I don't know how Alan will "code" my response.

On Thu, 16 May 1996, Alan Freeman wrote:

> A new quiz:
> (1) does the profit rate equalise?

Competition enforces a tendency for profit rates to equalize. But we
shouldn't expect to see this tendency fulfill itself concretely for
several reasons: 1) the market and technological situations are always
changing, and thus upsetting the apple cart and creating new deviations of
profit rates from the average in various sectors; 2) competition itself
takes several forms, including monopoly, protection, and barriers to entry
which frustrate (or modify) the tendency for the rate of profit to be
equalized by the movement of capital from lower to higher profit rate

Even if concrete profit rates don't equalize, it still might be very
helpful for theoretical clarity to analyze models on the assumption that
they do (that is, of situating the discussion at that level of

> (2) does Marx say the profit rate equalises?

I think Marx understood Smith's and Ricardo's abstract argument to the
effect that competition tends to equalize profit rates, and understood
equally well (as Smith and Ricardo also did) that the full equalization of
profit rates was an abstraction, not a direct empirical hypothesis. There
have been some interesting discussions (for example, by Willi Semmler) of
the exact relation between Marx's theory of competition and Ricardo's on
the one hand, and modern Marshallian and neoclassical economics on the
other. In general, though, I don't see Marx disagreeing with Smith and
Ricardo on the tendency for competition to equalize profit rates and the
relevance of considering equal profit rate situations at the appropriate
level of abstraction.