[OPE-L:5153] [JOHN] Re: RRI and The Rate of Profit

Gerald Levy (glevy@pratt.edu)
Sun, 1 Jun 1997 03:44:23 -0700 (PDT)

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RE: OPE-L 5125


What follows are some questions I had raised, followed by
your answers (OPE-L 5125) and my comments on your response.

John wrote:

"How does the "law of the tendency of the rate of profit to fall" or "the
law of motion of modern society" relate to Marx's idea that the periodicty of
crises should be linked to the turnover of fixed capital? Indeed, for how
long did Marx have this hypothesis concerning the periodicity of crises?"

Andrew responded:

I don't know the answer to the last question. With respect to the former, I
think the *tendency* is ever-present. But Marx clearly holds that the
tendency is periodically overcome by means of crises (I have no idea where the
interpretation of the law as a secular trend comes from. Does anyone?).
Capital is devalued, which then raises the profit rate and leads to an upturn.
So to relate turnover to the FRP, one needs an explanation of the link
between devaluation and turnover. Rather than the bunching of investment
being cause and the FRP being effect, it seems more plausible that the reverse
is the case. Even if most machinery tends to last 5 years, or 10 years, etc.,
nothing except general economic conditions would suggest that firms tend to
invest in it at the same time.

John comments:

I am a bit unclear on some of what you say.

In my scenario, investment in techniques that bring about
an increasing difference between the social value and
the individual value would lead to an increasing RRI as well
as increasing depreciation funds which could be used for
more investment. It is this "accelerated accumulation"
that brings about the falling rate of profit albeit with
an increasing RRI. The resulting "bunching" of investment
seems to the cause. I'm not sure how the FRP per se
leads to a bunching of investment.

I do agree that the idea that FRP should be viewed as a secular
trend is at least problematic.