My reply to Brad?s question: Marx argued that crises are caused by a falling rate of profit during periods of expansion. The falling rate of profit is caused in turn by labor-saving technological change which increases the composition of capital (i.e. the ratio of constant capital to variable capital.) The rate of profit varies inversely with the composition of capital because labor (purchased with variable capital) is the source of surplus-value.
Therefore, a lasting recovery from a crisis requires restoring the rate of profit back up to its previous levels. According to Marx's theory, the "Keynesian cure" does not address this fundamental problem of a falling rate of profit. Expansionary policies can result in a positive "utilization effect" on the rate of profit, but that only reverses the prior negative utilization effect as a result of the crisis and the downturn. Expansionary policies do not affect the too low "full employment rate of profit" (FERP), whose fall caused the crisis in the first place. According to Marx's theory, the FERP depends on the rate of surplus-value (positively) and the composition of capital (negatively). Therefore, in order to increase the FERP, either the rate of surplus-value must be increased (by means of wage-cuts, speed-ups, increased productivity) or/and the composition of capital must be reduced (through bankruptcies, acquisition of bankrupt firms at e.g. 20c on the $). Keynesian expansionary policies do not increase the rate of surplus-value or reduce the composition of capital. If anything, expansionary policies inhibit wage cuts to increase the rate of surplus-value and bankruptcies to reduce the composition of capital. Which is of course a good thing in the short run, but it does not fix the long-run problem. Therefore, Keynesian expansionary policies may boost the economy temporarily, but they do not solve the fundamental problem of a too low FERP. This has nothing to do with gold. It has everything to do with the rate of profit, which is the crucial variable in Marx's theory, and which Brad does not mention at all. This is to be expected I guess, because the rate of profit is not a variable in mainstream macroeconomics. Can you imagine? A theory of capitalism without a theory of profit! It is like physics without a theory of energy. This is a point of clear superiority of Marx's theory over mainstream macroeconomics. This paragraph comes from an entry on Brad's blog about Chapter 17 of Theories of Surplus-Value, which Brad read in order to assess Marx's theory of crisis. This is a strange choice since Chapter 17 is about RICARDO's theory of crisis, not Marx's (as the title of the chapter indicates). Of course, Marx also makes some points that would be part of his own theory of crisis, but his full theory of crisis is certainly NOT presented in this chapter. Chapter 17 says nothing about technological change causing the composition of capital to rise and the rate of profit to fall. (Although, if Brad had read further into the third volume of TSV, he would have encountered a rough sketch of some details of this theory in Chapters 22 and 23 on Ramsay and Cherbuliez, respectively.) As Marx emphasizes in Chapter 17, his focus there is the POSSIBILITY of crises (hence the critique of Say's Law, which Ricardo accepted), not the actual causes of crises. The most complete presentation of Marx's theory of the falling rate of profit is of course in Part 3 of Volume 3 of Capital. Brad is to be commended for at least being interested in Marx?s theory of crisis. 99% of mainstream economists are not interested at all, to their detriment. The main source on a Marxian theory of Keynesian policies is Paul Mattick, Marx and Keynes: The Limits of the Mixed Economy, as Jim mentioned. Fred Quoting Brad DeLong <[email protected]>: > The question remains. Given the absence of commercial crises and depressions > in the AMP and the FMP, why wouldn't replicating the building of cathedrals, > the building of aqueducts, or the conquest of Gaul stave off the crisis and > so allow capitalism to engage in stable, balanced growth? > > Lenin writes that the conquest of Gaul does--but eventually you run out of > Gauls. But that doesn't explain why the public sector can't stabilize things > via non-military Keynesianism. To my knowledge Marx never provided an > answer--but he was damned sure it wouldn't... > > Yours, > > Brad DeLong ---------------------------------------------------------------- This message was sent using IMP, the Internet Messaging Program. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
