[OPE-L:5140] Re: valuation of constant capital

Michael Perelman (michael@ecst.csuchico.edu)
Wed, 28 May 1997 14:42:39 -0700 (PDT)

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fred moseley wrote:

> Michael added in a later response to Duncan:
> I suspect that these capital losses were a key part of Marx's falling rate
> of profit.
> I disagree with this. I think that for Marx the (current cost) rate of
> profit falls because of an increase in the composition of capital, i.e.
> because less living labor is employed in production, which means that less
> surplus-value is produced, in relation to the total capital invested,
> valued at current costs. NOT because technical change results in a
> devaluation of capital and hence a loss of capital. Otherwise, the
> "cheapening of the elements of constant capital" would not be a
> COUNTERTENDENCY to the decline of the rate of profit, but would itself be
> the CAUSE of this decline.

Fred, I read Capital as an unfinished project containing server theories
of the falling rate of profit.

I am struck by the frequency with which Marx's examples of the greater
expense on constant capital happen to be cotton -- not surprising given
the importance of the Cotton Famine of his day.

Marx also noted that technical change first occurs in consumer goods --
say textiles; and later in the manufacture of the capital goods used to
produce the textile machines. So, if we ignore the raw material element
of constant capital, the organic composition might rise and then fall.

> Something like what Michael describes may have happened in a few industries
> in late 19th century capitalism, but I do not think that this is what
> Marx's theory of the falling rate of profit was about. If it were, then
> Marx's theory would no longer be valid, because in late 20th century
> capitalism, with a declining value of money and inflation, we have "capital
> gains" rather than "capital losses".

Or we might say "fictitious capital gains"

> Michael, have I understood you correctly?


> Have I clarified my interpretation?
> Further thoughts?

Definitely. Thanks for your response.

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 916-898-5321 E-Mail michael@ecst.csuchico.edu