# [OPE-L:4307] Problems in Vol. III

john erns (ernst@pipeline.com)
Fri, 7 Mar 1997 09:05:53 -0800 (PST)

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In response to my statement:

> > Note that in Chapter 15, Sec. 4 of Vol. III, Engels seems
> to think funds that were used as variable capital can, in
> the next period, be invested in fixed capital without
> even considering how long that investment in fixed capital
> might be used to produce surplus value. This seems to me
> to be, at best, a gross simplification and, at worst, simply
> stupid. Indeed, given Engels' idea here of substituting
> dead labor for living, it forces one to assert that the
> in comparing rates of profit over time, the ratio of
> fixed to circulating capital makes no difference and that
> the durability --social and technical-- of fixed capital
> is irrelevant to the computation of the rate of profit.
>

Paul responded:

I would have thought that whether the capital was fixed
or circulating is irrelevant. What matters is the stock
of capital relative to the flow of surplus value in determining
the rate of capital. Whether the capital is in the form of
buildings or in the form of stocks of materials makes no
difference, since it is its exchange value not its use value that
is relevant in calculating a rate of profit.

Paul, I do not get it. Let's me pose a question that, hopefully,
can help me gain some clarity. Let's assume one capital that is
composed of a stock of circulating capital of \$1000 that produces
an annual profit of \$100. The capital turnsover once a year.
The rate of profit would be 10%. Let's also assume another
capital of \$2000 of which \$1000 represents investment in a machine
that will last 10 years and the other \$1000 an investment in
a stock of of circulating capital. It produces an profit of
\$200 in the machine's first year of use. In that year, it would
seem that the two rates of profit are the same. Assuming
capitalists wish to maximize their returns, which capitalist would
you want to be?

John