OK, John insists that we stick to the assumption of a constant value of money,
at least for the time being, and later consider the implications of dropping
this assumption. That is fine with me. I imagine that this will lead to
some interesting results, that will probably be useful in understanding 19th
and early 20th century capitalism, which is of course is a very important
task.
But I continue to insist that these results will be of little use in
understanding contemporary capitalism, which is characterized by a declining
value of money. This is not a case where dropping an initial assumption
will slightly modify the conclusions. Instead, this is a case where the
conclusions are changed into their opposite. If one assumes historical
costs and a declining value of money, then the rate of profit in general
rises, not falls. There will be no "breakdown" such as John describes in
the case of a constant value of money. We don't have to wait and see what
the effects of changing the assumption will be; we already know what the
effects will be.
If, on the other hand, one assumes that constant capital is valued in
current costs, then dropping the assumption of a constant value of money has
little or no effect on the conclusions. A change in the value of money
leaves the "current cost" rate of profit unchanged. So it is not just a
matter of assuming or not assuming a constant value of money. The effect of
dropping the assumption of a constant value of money depends on whether one
is also assuming that constant capital is valued at current or historical costs.
Comradely,
Fred