[OPE-L:4959] Re: RRI and The Rate of Profit

Duncan K. Foley (dkf2@columbia.edu)
Fri, 9 May 1997 10:41:28 -0700 (PDT)

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Some comments on John's OPE-L:4953:

>John comments:
>I am not surprised that my remark is puzzling to you. Your reading
>of Marx's Vol. 1 and 3 was, at one point, mine. Hence, I am somewhat
>sympathetic to your reading. However, as I stated above when Marx
>directly discusses the replacement of machines by machines, it
>is clear that such changes of technique are capital saving. This
>by no means renders your reading invalid as the transition from
>handicraft or manufacture to large scale industry and the capital
>using techniques involved could overwhelm the capital saving
>techniques to which I refer.

I certainly don't rule out the possibility of capital-saving technical
change, or even its dominance in certain periods of capital accumulation.

>However, there are, at least, three
>ways we can arrive at a falling rate of profit while preserving
>Marx's notion of capital saving innovation as machines replace
>1. We could use the idea that constant capital is valued with
> historic values (TSS).

I find Fred Moseley's case that Marx revalued the stocks of assets held in
production to reproduction cost convincing, and that rules out this as a
general strategy. In my accompanying post, I propose distinguishing between
profits on production per se and gains and losses on stocks of assets held
in production due to price changes. At best the rate of profit on
historical cost is lower than the rate of profit on reproduction cost, but
cannot fall secularly (pace Andrew's examples) while the rate of profit on
reproduction cost is steady or rising.

>2. We could note that the idea that social values of raw and
> auxiliary materials do not fall as fast as the values of
> other commodities as productivity increases and arrive at
> a falling rate of profit in the same way Rosdolsky does.
> (In the piece Ajit and I referred to recently, Schefold
> mistakenly thinks this is somehow Marx's retreat to Ricardo
> but it isn't.)

But inventories of raw materials are part of the capital invested and
contribute to the value composition of capital (and to what I call the
"productivity of capital", that is, the ratio of the value of output to the
value of the capital invested.

>3. Since our nominal topic is "RRI and the Rate of Profit", it
> seems appropriate that we acknowledge that an increasing
> RRI, the basis on which capitalists' investment decisions are
> made, is completely compatible with a falling rate of profit.
> Indeed, with a rapidly increasing RRI and with the scrapping
> of older, completely depreciated machines, the rate of profit
> could fall given the "accelerated accumulation" Marx mentions in
> Chapter 25 of Vol. I occurs.

Only temporarily unless the productivity of capital were rising at an
accelerating rate, because eventually the old capital would disappear from
the books.

>Note that in all three of these ways of looking at the economy, we
>would obtain a falling rate and be consistent with Marx's text.

I don't think so, for the reasons just given.


>Duncan remarked:
>I don't understand how "simple cooperation", which applies to an immediate
>division of labor among workers at a particular point of production can be
>applied to machines.
>John responds:
>Here I think we differ a bit. The "Co-Operation" chapter in CAPITAL
>is prior to that of "The Division of Labour and Manufacture" and
>that of "Machinery and Modern Industry." Indeed, "co-operation is
>the fundamental form of the capitalist mode of production." In
>reading the chapter, I think we are to find the ways in which
>productivity can be increased. The question is how this fundamental
>form applies in the period of large-scale industry where we find
>Marx discussing machines working in "co-operation" with one another.
>In citing an example of the production of envelopes by machinery
>Marx notes that
>"Here, the whole process, which, when carried on as Manufacture,
>was split up into, and carried out by, a series of operations, is
>completed by a single machine, working a combination of various tools.
>Now, whether such a machine be merely a reproduction of a complicated
>manual implement, or a combination of various simple implements
>specialized by Manufacture, in either case, in the factory,
>i.e., in the workshop in which machinery alone is used, we meet
>again with simple co-operation; and, leaving the workman out of
>consideration for the moment, this co-operation presents itself to us,
>in the first instance, as the conglomeration in one place of similar
>and simultaneously acting machines." (Ch. 15,Sec. 1, paragraph 12,
>p 379 Int. Edition)
>Marx goes on to discuss how this simple co-operation of machines develops
>into an automated system of production in which machines are seen to
>be "co-operating" with each other.

I accept that Marx used this (to me rather metaphorical) concept of
cooperation of machines.



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