[OPE-L:2406] Re: response to Andrew, Part II

akliman@acl.nyit.edu (akliman@acl.nyit.edu)
Wed, 29 May 1996 08:50:05 -0700

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As a co-author, let me jump in and respond to Paul C's response to Ted in
ope-l 2402.

(1) Ch. 9 of vol. III is about the *formation* of a general rate of profit.
Ch. 10 is about, in the author's words, the "equalization of the general
rate of profit." What this indicates to me, especially given the
absence of a behavioral account in Ch. 9, is that Marx's conclusions are
*independent* of particular behavioral assumptions (in Ch. 9). How can
this be, given that he's talking about a particular set of prices and
a uniform profit rate? Answer: nothing in the chapter really depends
on these prices being the actual sale prices. They are the hypothetical
prices that *would* obtain were profitability uniform. Likewise, nothing
in the chapter's results requires that the profit rate actually be

The general rate is the same whether it is uniform or not. That indeed
is one of the key points Marx tries to make in Ch. 9. E.g., in one
place he assumes that the five investments "belong to one and the same
person" (Stalin, Inc.?), and argues that it wouldn't matter how s/he
kept his books. S/he could record profit where it arose, or divvy it
out in proportion to the size of the investments, etc. Whatever s/he
would do, total value would remain unchanged and the (weighted) average
profit rate and total profit would also remain unchanged. So you see
a "conservation principle" that is independent of particular behaviors.
And Marx immediately argues that the same is true for a capitalist
system with multiple owners.

This story of course doesn't hold up under the standard interpretation
of the transformation,. But it does under ours and, in a different
sense, also under Bruce's, Fred's, Chai-on's, etc.

Thus I don't agree that one must accept the hypothesis of an equalized
rate of profit, much less attempt to tell a behavioral story to
support it, to accept and/or defend Marx's transformation. Marx's
Ch. 9 account in no way contradicts Paul C's and Allin's view that the
rate of profit doesn't equalize.

Finally, there are perhaps plausible stories about how the rate of profit
tends to equalize. I know of none that leads to the conclusion that
input and output prices tend to become equal, particularly when one
is discussing an economy in which technical change and changes in real
wages are allowed to occur. One can of course postulate simple reproduction
or something similar, and look at the tendency of prices, but this seems
to me irrelevant in trying to understand both actual capitalism and
Marx's value theory.

Andrew Kliman