[OPE-L:2323] Re: Profit Rate

Paul Cockshott (wpc@cs.strath.ac.uk)
Wed, 22 May 1996 09:09:14 -0700

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>John E
>I have no doubt that Paul is quite capable of envisioning decreases
>in the valuation of constant capital due to technical change. To do
>so, he is quite right when he points out that he need not accept TSS
>at all.
>Yet, as I am sure he will admit, these losses are not taken into
>account by models that simultaneously assign unit prices to inputs
>and outputs with NO reference to the unit prices assigned in the prior
>period. Indeed, how could they be? There need be no prior period for
>the determination of the amount invested in the present period. Hence,
>there is nothing to lose.
Paul C
If one rejects TSS one sees values as distinct from prices. Values
can be defined simultaneously without reference to past period
prices, since values are seen as distinct from prices.

>Now, should Paul want to simultaneously assign unit prices in each
>period, he could determine the losses involved. But if the losses
>are to be seen as deductions from profit, would not the unit
>prices and the rate of profit change as well? Thus, how does one
>compute the rate of profit and unit prices in such a model, given
>these losses are deductions from profits?

I think it is mistaken to attempt a deterministic model for individual
prices. One should treat prices as random variables. To a first approximation
one treats the expected value of the prices PDF to be the labour value.
Whether, in cases of technical change the expected value of the price PDF is
above or below the labour value is difficult to say.

On the one hand, there may be lags in passing on the reduction in value,
on the other, it may be the case that the firm with the lowest labour
content for their product - i.e., one below the value, acts as the
price regulator. In the first case the expected value of price might
be to the right of its labour value, in the second case, it
would be to the left.

One computes the value rate of profit by summing the value of
goods consumed by capitalists per second + the increase in the value of
the capital stock per second divided by the total value of capital stock.
I say per second rather than per-annum to emphasise that in
principle one treats it as a continuous process. One then assumes
that the value rate of profit will be closely reflected in the mean
money rate of profit. One justifies this on the basis that the
individual commodities making up the broad aggregates under discussion
are uncorrelated random variables, thus the expected value of the
price of such a collection will be given by the labour value of the

Paul Cockshott