[OPE-L:1913] Re: Stock and flow measures of the profit rate

clyder (wpc@dcs.gla.ac.uk)
Mon, 13 Dec 1999 09:48:37 -0000

> In OPE-L:1690 Paul C wrote (with reference to possible tests of influences
> on the profit rate):
> > One would have to concentrate on flow rates of profit as these are what
> > the
> > standard Sraffian model and Marx's standard model deal with.
> >
> What does Paul understand by "Marx's standard model"? (And whose standard,
> by the way?)

The examples M gives in KIII on the transformation of values to production
prices use flow profit rates.

> Does this imply that M. had some other model using a different rate (a
> rate, by implication), which he sometimes used?
> More importantly, what stands to be gained or lost by using flow rates as
> against stock rates?

I think that it is pretty clear that the gist of M's argument imply that
rates of profit are what is ultimately important.

Flow rates of the organic composition on the other hand still tell you
usefull. They give the synchronic division of labour between producting
means of production and final consumption goods.

> Whereas the latter fall off sharply after peaking in 1929 (e.g. his total
> physical capital measure drops from 35% approx to 25% approx in 1931), the
> flow-with-depreciation measure only tails off very gently (falling from
> in 1929 to about 29% in 1935), and the flow-without-depreciation measure
> actually INCREASES between 1929 and its peak in 1931 (up by one percentage
> point from a shade over 40%), dips slightly to 1933 (but is still above
> 1929 level) and then falls to about 32% in 1935.
> In short, a smaller, later fall (and also a smaller, later, upturn).
> (Interestingly, Gillman's two measures allowing for unproductive labour
> a stock rate, the other a flow) both behave similarly to each other and to
> the "conventional" stock rates.)
> One interpretation might be that the mass of profit first fell sharply due
> to a fall in the total volume of activity (captured by the stock rates),
> that what business was being done still had a fairly healthy mark-up.
> writing off of capital equipment reduces the denominator of the (stock)
> profit rate (and intimidates firms into cutting their mark-ups?)

That seems plausible.

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