[OPE-L:5327] Re: Ernst on RRI

John Ernst (ernst@pop.pipeline.com)
Sun, 6 Jul 1997 20:40:18 -0700 (PDT)

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In reply to Duncan's [OPE-L:5312]:


John continues:

>We might find also consider observing stratification within
>the sectors where surplus value is actually produced as opposed
>to all the sectors that Dumenil and Levy include prior to
>concluding that the problem "in practice" is of little consequence.
>I realize this may open the entire productive/unproductive labor
>issue. But given we are considering the US economy with the
>relatively recent shift from manufacturing to services, such an
>effort might be of interest.


In my mind the problem of stratification and the time profile of the RRI
and the rate of profit are separate from the productive/unproductive labor
issue. Of course, how one resolves the productive labor question will
change one's estimate of the whole profit to be allocated across
investments, so the numbers will change, but the conceptual issues
involving the RRI don't seem to me to be either resolved or worsened by
considering the productive labor question.

By including only productive labor in the observations, we would
also include only "productive" constant capital as well. In this
way, we could see if the technical change taking place in this
sector of the economy is actually constant capital using.

>Data aside, the question remains about the extent to which
>Marx did or did not take into account stratification effects
>in formulating his idea of the falling rate of profit. In
>Ch 13 of V3 Marx's illustrations show enormous increases in
>constant capital relative to the sum of v+s. This would seem
>to indicate that at times Marx might have ignored the vintage
>effects as capitalism moved from the period of manufacture to
>that of modern industry. On the other hand, he may have taken
>them into account without mention since the effects would tend
>to strengthen the tendency of the rate of profit to fall during
>periods of rapid accumulation and to weaken the tendency during
>periods of disinvestment and devaluation.


I think that in some of his writing Marx, like most other economic
analysts, ignores the stratification (or vintage) issue, especially when he
is talking about large sweeps of time over which vintage effects tend to
wash out. He does take it specifically into account, as I recall, in two
other places: one is in the Volume II discussion of the circuits of
capital, where the turnover of capital concept inherently keeps track of
vintages; the other is in one of his theories of the business cycle, where
he toys with the idea that a wave of investment can set off echoes (an idea
that a lot of other people have spent time on before and after Marx,
including Leontief, Schumpeter, Samuelson, and Goodwin.) The problem is
that in a growing economy these echo effects will become relatively smaller
and smaller over time.

John (now):

1. I'd be interested in those who spent time on the idea of waves of
investment before Marx.

2. For me, it is unclear why the "echo effects will become relatively
smaller and smaller over time" if investment as a proportion of capital
remains constant or increases over time. My crude examination of the
data in the back of Dumenil and Levy tells me that the proportion is
more or less constant over time.


>Given that the FRP is often used as the basis of a crisis theory
>in Marx, perhaps we should consider the ratio of
>(profits+depreciation)/total capital
>as we examine the movement from year to year or period to period
>while bearing in mind that the amount of depreciation does not
>necessarily equal that needed for replacement of discarded fixed

Duncan comments:

Well, yes. Dumenil and Levy consider this type of "gross" profit rate
including depreciation. It's a much more solid empirical measure of what's
going on, because it doesn't include any dubious and arbitrary assumptions
about depreciation, which is an inherently unobservable concept that has
not market manifestation.

John (now):

But if we simply do this, we face the problem of determining the
magnitude of the net product produced in any given period. Just
how much value is newly created in a given period could only be
observed after the fixed capital is completely used up over several
periods. Perhaps, we could then separate the net product and
depreciation in each of the prior periods. Relating the living
labor to the net product produced in each period would produce
some strange results from the dualist, SSS or TSS perspectives.