[OPE-L:1533] "General", "average" and accounting rates of profit

Fri, 22 Oct 1999 16:48:42 +0100

(1) My thanks to John Ernst for his reference for Ladelle on depreciation.

(2) I've started reviewing the series of posts of two years back from John,
Duncan and others on the use of accounting rates of return (ARR) versus
other measures.

My overall view is that the use of ARR is entirely rational and that
Marxists ought to view the IRR and other notions derived from subjectivist
economics with grave suspicion (a slightly self-serving position, since my
ongoing PhD depends on using company accounts data...).

Essentially my view is taken from Rob Bryer (c.f. the new issue of "Critical
Perspectives on Accounting" mentioned in a previous post, but if anything
more fully put in his 1994 CPA article "Why Marx's labour theory of value is
superior to the marginalist theory of value: the case from modern financial
reporting": CPA 1994:5, pp 313-340).

Bryer's position, brutally summarised, is that the accounting rate of return
allows collective capital (the rational investor holding the market
portfolio -- and therefore receiving returns equal to a weighted average of
individual returns) to check and compare the work of the managers of
individual units of capital.

This is explicitly presented (Bryer (1994), p. 320) as answering Steedman's
claim that capitalists are unaware of the value rate of profit and that
there is no force acting to make it equal as between industries.

When I've looked though the archive a bit more I plan to come back with some
detailed comments of my own, but in the meantime I'd be very glad if any
participants on this list have the chance to look through the Bryer articles
mentioned and comment on them -- especially if they can come up with some
more cogent objections than those presented by the discussants in the latest

(3) The above plea is also specifically directed to Chris Arthur -- Bryer's
1994 piece has material directly related to the questions you raised in
OPE-L:6337 (23/3/98) about the relationship between the general and the
average rate of profit.

In particular he cites Marx as saying that the general rate of profit is not
a simple average, but one which takes into account "the relative weight
which these different rates of profit assume in formation of the average"
(vol. 3, p. 262, cited at Bryer (1994) p. 316)

He also cites M. to the effect that although this weighted average (i.e.
"general" rate) is a result of competition (vol. 3, p. 297), in time it
comes to be a pre-supposition of the capitalist mode of production (vol. 3,
p. 275) -- Bryer, p. 317.

(I also note here that the Grundrisse has a passage -- pp. 434-435 -- on the
possibility of a general rate of profit and its *dependence* on the
existence of different individual rates of profit).

Finally, Chris's post was billed as an extract from an article in progress:
what was it's fate?


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