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One immediate puzzle is why capitalists invest in capital when it’s going to reduce their profits. There are two main answers. Firstly, even if the RoP falls total profits can rise. If a firm is investing £100 and making £140, they have a 40% rate of profit. If they then double their investment but only make a 30% rate of profit, they will now make £60 in profit. Total profits rising over time therefore does not (as is often thought) falsify Marx’s theory. Despite this, it is reasonable to suggest capitalists care about the rate of profit too – after all, businesses pursue returns as well as overall profit – so why do they bother with labour-saving technology anyway?
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