[Regrets for my long, forced, absence from postings (medical issues, family
tragedies, etc). Now I plan on gradually returning. I have been following
the list closely and have appreciated the succor all of you have provided].
Lakshmi:
I think you are looking for "testing" something like the proposition that
the *long run* rate of growth is driven by the rate of profit (as opposed to
being driven by supply/demand or by aggregate demand, etc). Right?
This tests a core proposition of various schools of classical political
economy. A capitalist invests to make profits for himself alone - not 'to
meet your demand' (nor for the profit of capitalists as a whole, never mind
society as a whole). While this breaks with neoclassical economics, this
proposition is not *necessarily* just Marx (Shane's post is relevant to
why). Personally I would go further: this proposition, for better and for
worse, is not *necessarily* progressive - it depends on the rest that
follows. In the past I have come across a good number of policy makers
from centrist and right wing governments who drew on classical political
economy for their policy design. You don't hear of this right now, but it
will come back and shouldn't confuse progressives.
As per Jim D. I think everyone starts with NIPA corporate profits and
capital stock estimates (I recall that the NIPA people also make adjustments
based on tax data and corporate reporting albeit in a shifting and
subjective way, ugh).
BUT the hard part comes next. You have to think about why you are building
a rate of profit indicator since there is no prepacked NIPA-like statistical
authority for classical political economists (yet). It will be important to
remember you are trying to measure capitalists' *anticipated* rate of profit
(obviously it can only be anticipated since at the time of their investment
decision the actual rate is unknowable). This is measuring Keynes' "animal
instincts".
To illustrate I will take 4 important elements that should be included (too
often aren't) and when they are can greatly affect your conclusions for the
data of the last few decades.
1) The financial dimension has to be netted out from the rate of profit
relevant to capitalists' real sector investment decisions. First of all
capitalists don't count the profits that they will have to turn over to
their bankers. But second of all, they mentally deduct the
interest/dividends that they could have made by holding on to their money
and not making a "real sector" investment. In NIPA the category "Corporate
Profits Net" do exclude interest paid on 'outside money' (borrowed) , so
that part is covered. But, as Doug H. has pointed out, in the US most
investment is 'inside money' (self-financed) and for this case the
capitalist must also calculate the opportunity cost (he could earn
interest/dividends rather than make the investment). Of course NIPA does
not do this second part so you must make estimates (there are some
disagreements over which interest rate to use and not much empirical
research on that point).
As we all know interest rates have dropped enormously and so making this
calculation will greatly increase the rate of profit as seen by the
individual capitalist - after all that is why U.S. interest rates were
brought down! (Marx used this perspective in his rate of 'profit on
enterprise' as Shane usefully points out)
2) The denominator is capital. Naturally, NIPA uses the entire capital
stock but a very big part of this has to be excluded for your purpose. Much
of the existing capital stock is no longer for sale -- it is obsolete
because of changes in technological or economic conditions. Think of the
"vintages" point made by Cambridge capital theory. You want to measure
capitalists' anticipated rate of profit on the capital investment choices
they actually *do* have. Of course NIPA wasn't constructed with this in
mind so you will need to use proxy measures. Shaikh uses investment from
the last 2 years as a simple proxy for what is on the market today.
3) For interpreting the data it will help to smooth out the business cycle.
Naturally low capacity utilization lowers the rate of profit (and the
reverse). The rate of profit is about long run effects (slow adjustment
variables). Short run processes (quick adjustment variables) are important
and a separate matter, although both processes are happening at the same
time and can interact. (btw, I think that a discussion of Jim D.'s
"consumption undertow" point should use data that makes this adjustment).
4) Taxes aren't the biggest empirical category but they play an important
role when it comes to politics and policy conclusions. Direct business
taxes on production (a small category) lower the rate of profit for
investment decisions and everyone deducts them. Some analysts (e.g. Dumenil
& Levy) also deduct indirect business taxes (e.g. taxes on corporate
profits). Right wingers may argue for deducting all taxes on capitalists'
personal income from capital. More empirical research needed here, imo.
Just some basic examples, You get the drift. See Shaikh for methods;
Dumenil recent paper criticizing methods. Hope this helps.
Paul
On Nov 4, 2011, at 2:22 PM, Lakshmi Rhone wrote:
> For purposes of testing Marxist theory, which measure of profits
should be used--shareholder reported profits, NIPA profits, profits reported
for tax purposes or some other measure?
_______________________________________________
pen-l mailing list
[email protected]
https://lists.csuchico.edu/mailman/listinfo/pen-l
