[OPE-L:3142] Clarity on IVA

John Ernst (ernst@nyc.pipeline.com)
Thu, 26 Sep 1996 07:15:02 -0700 (PDT)

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Thanks for the explanation of IVA and of the
way you use it. (OPE-3100) Here are a few
thoughts on the discussion.

1. Given we are discussing matters concerning
Marx's CAPITAL, we are assuming that the value
of money is constant. Thus, as productivity
increases, prices fall.

2. In the example we discussed the historic rate
of profit fell. Indeed, given the price level
we had no differences concerning the determination
of that rate of profit in either period.

3. I am not surprised that the rate of profit you
compute rises as the TSS (aka historic) rate of
profit falls. Indeed, as I have said in other posts,
in the period of large scale industry, finding
examples of the type of technical change needed for
"your" rate of profit to fall are few and far between.
Obviously, this does not make your definition of
the rate of profit wrong but to me, at least, a
bit suspect.

4. It's unclear what role, if any, the IVA plays in the
capitalists' decision making processes. That is, if
the historic rate of profit falls as "your" rate of
profit rises, what is to be said? Do the capitalists
continue to invest as this occurs? Do any incorporate
IVA into their thinking? I think these are difficult
questions given we are assuming a constant value of money,
increasing productivity and falling prices. I will admit
that by using an IVA to explain things you are not
simply tossing value out as devaluation occurs. But placing
this lost value in the category of an IVA seems to me to
be only the first step. The next would be to show the
role it plays in the accumulation process itself.

5. I note that you need the concept of money to compute
the IVA, but the rate of profit itself seems independent of
concept of money. Again, without a clear picture of the
role of IVA, one wonders if the concept of money has not
perhaps been rendered meaningless.