[OPE-L:7180] [OPE-L:698] transformation with fixed capital & RRI?

Gerald Levy (glevy@pratt.edu)
Thu, 18 Mar 1999 09:06:11 -0500 (EST)

In [OPE-L:692], John begins:

> Lest we travel too quickly into a dispute over method, let me
> be more clear on the problems I see when we deal with the matter
> at hand. If assume that fixed capital is present, then
> 1. There is no tendency for the rate of profit measured in
> the usual fashion to equalize.
> 2. Even in an equilibrium situation the rates of profit would
> generally not be equal but the rates of return would be.
> 3. Prices of production should be computed using rates of return
> not rates of profit.
> 4. Capitalists do not use the usual rate of profit to guide
> their investment decisions rather they would consider the rate of
> return on the investment.
> 5. The falling rate of profit can occur as the rate of return on
> investment is increasing.

Then, John suggests:

> Hence, when we look at the transformation procedure in Marx or in
> those who attempt to correct him or to defend him, it is unclear to
> me how and why we arrive at equal rates of profit. Surplus value
> is not redistributed among capitals according to the rate of profit.
> I do not know how by abstracting from a system in which the rates of
> return are used one arrives at one in which the rates of profit are
> equal.

Your question, then -- if I understand you correctly -- asks how it is
possible to "arrive at equal rates of profit" once one includes constant
fixed capital and substitutes RRI for (individual) rates of profit when
one is computing POP.

Why begin, though, with the tacit assumption that we will "arrive at equal
rates of profit"? For instance, just because profit equalization is
posited as a theoretical *possibility* without fixed capital et. al., why
is it important to show that profit rate equalization remains anything
more than an abstract possibility once one includes those variables?

By analogy, if one were to show "equilibrium conditions" exist at one
level of the analysis (say in the reproduction schemes in Volume II),
does this suggest that equilibrium is anything more than an abstract
possibility once we move to another level (such as "capitalist production
as a whole")? I think not.

btw, if what you are saying is correct, doesn't that mean that *all*
solutions to the "transformation problem" and *all* presentations of the
FRP following Marx are fundamentally flawed?

In solidarity, Jerry