[OPE-L:6533] Re: Competition and equalization of profit rates

Gerald Levy (glevy@pratt.edu)
Sat, 2 May 1998 09:41:13 -0400 (EDT)

Responding to Eduardo's posts on 4/18 and 4/21:

> , market structure is a concept
> which foreign to marxian (and classical) framework of analysis. The
> revelant concept for marxian analysis is the concrete conditions of
> production and circulation of commodities.

As I indicated previously, even if the concept of "market structure" (and
related concepts, e.g. barriers to entry [and exit], oligopoly, product
differentiation) were not used by Marx, this does not mean that we should
not use them. This does not mean that we simply take these neo-classical
concepts "as is". Rather, we need to critically appropriate aspects of
those concepts that relate to the changing character of capitalist markets
and competition and integrate those concepts with our prior analysis. I.e.
we should neither accept nor reject these concepts in an uncritical way.
Instead we need to develop a critique which *incorporates* those aspects
of that theory that help us understand the changing reality of capitalist

E.g. Marx didn't talk about product differentiation as a competitive
strategy by capitalist firms, did he? Yet, it *is* a real enough strategy
for many capitalist firms in what I will call oligopolistic markets. So
where do we go from here? Do we remain at the level of what Marx said or
do we attempt to interrogate how capitalist competition has changed since
Marx's time?

> These conditions (largely)
> determines the degree of mobility of capital. It is clear also that
> governamental regulations, the degree of efficiency of the financial
> markets and the mobility of labor power across industies and regions are
> also important determinant of capital mobility.

Yes, those are all worthy topics of investigation as well. I think that
the "mobility of capital" and "financial markets" are discussed in
_Capital_. [NB: the mobility of capital also relates to the question of
constant fixed capital existing as a stock and is therefore relevant to
some other threads]. "Government regulations", and to a lesser extent the
"mobility of labour power across industries and regions" are related to
the role of the *state* in the process of capitalist accumulation. If we
are to look at specific markets today, we should indeed look at these
other variables today. Moreover, on a theoretical level, we should
inquire *how* and *where* these topics are (or should be) addressed.

> <snip, JL> in relation to the question you posed (after the above
> caveat) my answer is as follows: the laws of accumulation (as derived by
> Marx) are not
> in contradiction with the laws of competition. That is to say, the fact
> that accumulation and centralization has led to the formation of
> "oligopolies"
> (i.e., industries where big firms predominate) does not imply a decline of
> the competitive process, on the contrary. But that does not mean that
> "oligopolies" represent a significant in the form of competition.

Well ... I think that the concept of oligopolies (rightly!) implies more
than "industries where big firms predominate". It also refers to the
*form* in which competition has changed in those markets. I think that
product differentiation (and marketing and advertising) as a major
strategy of capitalist firms in many (most) contemporary capitalist
markets is a very significant change. Does this mean that it in any way
*contradicts* Marx's theory? Not necessarily. That remains to be seen.

> Do you
> think that industrial pricing is incompatible with the concept of price of
> production? I do not think so.

I don't think so either, but I don't think that the the tendency for the
formation of a general rate of profit and prices of production are
ordinarily realized.

btw, I think that the book written by Willi Semmler and published by
Columbia University spoke to the question of industrial pricing and
production prices.

> Thus, if it is found that the
> so-called "oligopolies" obtain, presistently, above-average profit rates,
> then this result is clearly incompatible with the predictions of Marx's
> theory.

I don't agree that this is a necessary consequence. It does suggest,
though, something about the mobility of capital (as a flow) in terms of
the movement of money capital to and from these markets.

It also suggests that we should look at another matter that was excluded
in the formation of a general rate of profit: monopolies (and monopoly
rents). I.e. with product differentiation, part of the additional
[individual] profit can be viewed as "rent" obtained from other capitalist
firms [and possibly consumers!].

> BTW, one of
> the important aspects of the competitive process that he intented to deal
> with in the book on competition were related with the phenomena of
> appreciation, depreciation, release and tying up of capital.

Yes, I agree! [see Vol 3, Penguin ed., p. 205].

As Fred is fond of saying: I look forward to further discussion.

In solidarity, Jerry