Re: [OPE-L] Okishio Theorem

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Sat Nov 03 2007 - 17:11:42 EDT


Review of Radical Political Economics, Vol. 12, No. 1, 1-16 (1980)
DOI: 10.1177/048661348001200101
 1980 Union for Radical Political Economics
Obituary

The Falling-Rate-of Profit Theory of Crisis: A Rational Reconstruction by
Way of Obituary

Philippe Van Parijs
Centre de Philosophie des Sciences Louvain-la-Neuve Belgium

This paper traces the development of the falling-rate-of profit theory of
crisis from its original and traditional version to its modern variant and
finally to A. Shaikh's recent defense based on the distinction between
circulating and fixed capital. At each stage the major arguments in favor
of and against the falling-rate-of-profit thesis are reviewed and
criticized. On balance, the conclu sions are almost universally negative:
It cannot be shown in general that a rise in the organic composition of
capital leads to a fall in the rate of profit; neither can it be shown
that a fall in the general rate of profit necessarily induces a crisis of
overproduction. Finally, Okishio's theorem is employed to show that
profit- maximizing capitalists, under competitive conditions, would never
adopt a tech mque which would lower the general rate of profit at a given
level of wages. Thus, a fallmg-rate-of-profit crisis is not a theoretical
necessity; indeed, it is not even a possibility under conditions of
competitive capitalism. Shaikh's thesis is then dis cussed and it is seen
that a falling rate of profit is a possibility when the assump tions of
perfect competition are relaxed. The paper is concluded with a comment
regarding the conflict between "scientific" and "extrascientific"
considerations in the course of the discussions of the falling rate of
profit.


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