[OPE-L:2946] Re: The Falling Equilibrium Rate of Profit

Gil Skillman (gskillman@wesleyan.edu)
Tue, 3 Sep 1996 07:55:19 -0700 (PDT)

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John writes:

>As Alan, Andrew, Duncan and Gil deal with
>what Roemer and Okishio said or did not say,
>we should not lose sight of Alan's point that
>Marx himself was not an adherent of "The
>Falling Equilibrium Rate of Profit." Yet, the
>Okishio Theorem is often used as an answer
>to Marx's falling rate of profit. The textual
>support for that position has yet to be seen.
>Rather it seems that given economists are
>comfortable with the idea of equilibrium, the
>notion of a falling rate of profit as the economy
>traverses (somehow) from one equilibrium point
>to another is simply imputed to Marx.

I agree that it is inappropriate to recast Marx as an equilibrium theorist,
subject to an important caveat to be noted below. But nor should we lose
sight of the fact that, whatever its limitations, the Okishio theorem serves
to highlight an important problem in Marx's statement of the "tendency of
the rate of profit to fall." The "tendency" is contingent: *if* the rate of
surplus value is constant, *then* a rising organic composition of capital
implies a fall in the value rate of profit.

[Marx allows that the *level* of exploitation may rise, but this is at best
unclear: if this means s can increase, then v must increase as well to
maintain constant s/v. More on this in a second.]

However, as I discussed recently with Paul Z., there is necessarily a glitch
in the thought experiment which allows c/v to rise while holding s/v
constant, since the engine which Marx understands to drive rising organic
composition--progressive real subsumption of labor under capital--is also
explicitly understood to increase the rate of surplus value by both
*increasing s* and *reducing* v, necessarily implying a rising rate of
exploitation. Thus a logically complete statement of the "tendency" must
establish the *net* effect of these offsetting changes, rather than
artificially---and spuriously--holding one of the consequences of capitalist
technical change constant.

As for the possible relevance of the Okishio theorem to Marx, I don't see
anything in Marx's statement of the "law"---other than spuriously holding
s/v constant---which *necessarily rules out* the conditions Okishio assumes.
By holding s/v constant, Marx in effect introduces a new, and unstated,
condition with respect to the political economic logic of profit rate
determination. Modern analysis suggests that this condition can be supported
under some conditions, but they are not obviously general.

Finally, concerning the extent to which Marx did or did not rely on
"equilibrium" analysis, I note that Marx is evidently willing to take
price-value equivalence as a relevant "base case" in describing capitalist
outcomes, and Marx understands such a condition to result when supply and
demand "coincide, [and therefore] cease to have any effect, they cancel each
other out..." [III, p. 478, Penguin ed.] Thus assuming the proportionality
of commodity prices and values is, for Marx, *formally* equivalent to
assuming that all commodity markets clear, which sounds like an equilibrium
condition, even if that's not what Marx intended. Consequently, it's not
totally clear to me what *substantive* violence Okishio-style arguments do
to Marx's analysis.

In solidarity, Gil