[OPE-L:3469] Re: Zero rate of profit

Duncan K. Fole (dkf2@columbia.edu)
Fri, 18 Oct 1996 06:49:01 -0700 (PDT)

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>>Does the rate of profit decline to zero?
>>Duncan has raised this as a criticism of dynamic theory. I
>>don't know about other dynamic theorists but for my part I
>>don't think it declines for all time. I think it oscillates
>>with the business cycle.

Note: I don't see this as a criticism of "dynamic theory", but as raising a
question about the theory of prices implicit in the examples we are
discussing. I'm completely in agreement with Alan's methodological point
that in principle you want to consider the real dynamical paths of the
system you are looking at, and not confine yourself to stationary states.

>The question I'm asking is hypothetical. Suppose we confronted a 1 sector
>circulating capital economy undergoing a constant rate of labor-augmenting
>technical progress (or a close approximation thereto), would we expect to
>see the money rate of profit on historical costs go to zero? I wouldn't.
>I like hypothetical questions. My response is that I think
>I would but I'm not sure. It would be useful to discuss this.
>Just to check: by 'labour-augmenting' you mean that the
>quantity of living labour involved in producing a unit of
>output, declines secularly?
>So, if X(t) is the total output in use values and L(t) is
>total living labour, then L/X declines monotonically? Or if
>this decline is constant, could we say L/X=l(0)b^t where b<1
>and l(0) = L(0)/X(0)?

That's what I mean by steady labor-augmenting technical progress.


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu