# [OPE-L:2976] Re: Maximum Rate of Profit

Patrick Maso (Patrick.L.Mason.20@nd.edu)
Fri, 6 Sep 1996 08:21:44 -0700 (PDT)

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Thus spake Andrew:

>Unfortunately, by continuing to discuss the falling tendency of the maximum
>profit rate as if it were something significant, long into the next decade,
>writers such as Mario Cogoy and Anwar Shaikh may have helped create the
>impression that if Okishio's theorem is right, Marx's law of the FRP may still
>be right, that the theorem doesn't "knock the bottom out of Marx's FRP."
>Because the maximum rate falls with capital-using/labor-saving technical
>change, and because it sets an upper bound on the actual rate, it is indeed
>very tempting to conclude that a continuing series of such technical changes
>must eventually reduce the actual rate as well.
>
>Very tempting, but false. Any and every Okishio-viable technical change that
>lowers the maximum rate of profit *must* nevertheless raise what Okishio
>claims is the actual equilibrium rate of profit. Thus, if we imagine a
>continuing series of such changes, and we plot the associated maximum and
>actual profit rates against time, we have two curves that converge toward one
>another; one is always falling (maximum rate) and one is always rising
>("actual" rate). Roemer discusses this thoroughly, in his _Analytical
>Foundations_ I believe.

1. At what profit rate does the convergence between the maximum and actual
rate of profit occur? Presumably, convergence occurs before r(max) =
r(actual) <= 0? Is there any proof that this is the case?

2. Maximum rate of profit FROP discussions usually contain an argument which
pinpoints the onset of a crisis. Specifically, the argument is that even
with a falling r(max) it is possible for the mass of profits to rise.
However, when the growth in capital is equal to the percentage decline in
r(max) the mass of profits stagnant. Thereafter, further reductions in
r(max) lead to a lower mass of profits and declining investment. The crisis
is on. Define r(stagnant) = the rate of profit where the mass of profits
stagnants. Does the supposed convergence between the actual and maximum
profit rate occur before r(max) = r(actual) <= r(stagnant)?

3. How does one reconcile the Okisho/Roemer/Samuelson/Kliman view with the
actually existing empirical evidence which supports FROP theory? Regardless
of theoretical perspective, isn't there a basic requirement to evaluate
one's model in light of the empirical evidence?

>The maximum profit rate argument is the kind of thing that has led
>people like Samuelson and Steedman and Roemer to issue charges of
>obscurantism. I was initially very unsympathetic to these charges, but over
>the years I have gradually become convinced that they are justified in almost
>every case.

4. Polemicist restrain thyself.

peace, pat mason