[OPE-L:5045] Re: RRI and The Rate of Profit

andrew kliman (Andrew_Kliman@msn.com)
Fri, 16 May 1997 10:15:58 -0700 (PDT)

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A comment on John's ope-l 4953 and Duncan's ope-l 4959.

John wrote:

"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 machines.

"1. We could use the idea that constant capital is valued with historic
values (TSS)."

I consider myself an adherent of the TSS interpretation, but I do not think,
and have never thought, that Marx held that the value transferred to the
product from the constant capital is determined by the historical cost of the
means of production. Rather, I think, and have always thought, that the value
transferred is determined by the cost of reproducing the means of production
when they enter production, i.e., when their use-value is destroyed. In other
words, the value transferred is determined neither by historical cost, nor by
post-production replacement cost, but by the current pre-production cost of
the means of production.

On the other hand, when measuring a rate of profit understood as a rate of
expansion of value, or a rate of return on investment, profit must necessarily
be measured against the actual sum of value advanced or invested. Both the
present-value-type calculation and Marx's s/C do this.

I consider this clarification important in light of Duncan's response to John:

"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."

This formulation is unclear, since it fails to disentangle the determination
of value (value transferred from constant capital) from the measurement of the
profit rate.

If Marx revalued the stock of assets when measuring the profit rate, why then
does he refer to C as capital "advanced," an amount of value "spent"?

The important theoretical question, however, concerns the determination of
value. Duncan seems to endorse the "replacement cost" interpretation of value
transferred. Yet to sustain that interpretation, one needs to defend it on
textual grounds, which Duncan has not yet done. During the history of this
list, I and others have put forth a good deal of evidence that disconfirms
that interpretation, which has not been responded to adequately, and not at
all by Duncan. Let me just indicate a few pieces of the evidence, and ask for
Duncan's response.

(1) Assume that workers harvest some wild corn, having no value, plant it,
and harvest new corn. The new corn has value, due to the value added by the
living labor. According to the replacement cost interpretation, then, a
positive amount of value is "preserved" and "transferred" from the wild corn
to the new corn. How do you reconcile this with the following from Capital
I, p. 314 of the Vintage ed. (emphasis added):

"Its value is determined not by the labour process into which it [a means of
production] enters as a means of production, but by that out of which it has
issued as a product. In the labour process it serves only as a use-value, a
thing with useful properties, and cannot therefore transfer any value to the
product unless it posessed value BEFORE its entry into the process"?

(2) The replacement cost interpretation implies that the rate of profit (in
production) obtained in production of luxury goods has no influence on the
general rate of profit, as Bortkiewicz demonstrated. Yet Marx held that the
opposite. How do you reconcile his conclusion with the replacement cost

(3) Torrens had written: "The farmer ... expends one hundred quarters of
corn in cultivating his fields, and obtains in return one hundred and twenty
quarters. In this case, twenty quarters, being the excess of produce above
expenditure, constitutes the farmer's profit ..." Marx objected that
"*profit* ... is applicable solely to exchange-value," and that "As far as
exchange-value is concerned, there is no need to explain further that the
value of 90 quarters of corn can be equal to (or greater than) the value of
100 quarters, that the value of 100 quarters can be greater than that of 120
quarters, and that of 100 quarters greater than that of 500" TSV, 3, p. 77,
pp. 78-79. How do you reconcile Marx's response with the replacement cost

Andrew Kliman