Jim, The simplest way to show the conditions under which the profit rate falls is by taking its total differential, assuming as parameters the class balance of forces, the ratio of productivity between departments, and the technical composition of capital. The results are straightforward.
This is a short and old piece I typed for myself. Beware: I haven't had a chance to revise it properly. FWIW: https://docs.google.com/open?id=0Bz8r3wEf4Lk_UU9XaEpqSnUwNm8 Regarding the Maddison data sets. If you don't want to start immediately after the American revolution, then start in 1870 with the Reconstruction. Remove the Great Recession years (2007, 2008), if you wish. Same overall conclusion. As for interpretation, the growth rate of GDP is a pretty good proxy for the (ceiling of the) profit rate over the long run, as GDP (value added) = s + v. If you assume that the surplus value rate (class balance of forces) stays put and reduce the "Cambridge equation" to g = a r (all a = 1 or, if you prefer, a constant portion of the surplus value gets capitalized), then the growth rate of GDP tells you what happened to that upper bound of the profit rate. It's been falling steadily. You are not going to have any precise measures of the profit rate, no matter how much you massage the data. Then don't massage it too much, make minimal assumptions, and use theory and intuition to interpret. You don't really need precise profit rate measures to ascertain that, in all likelihood, the secular profit rate over the history of capitalism tends to start high and then declines. The best data available (postwar U.S.) paints the picture that has been termed the "productivity slowdown," which -- under the assumptions above -- is another name for the decline in the (upper bound of the) profit rate. Again, this is built-in in all bourgeois growth models. They deem it uncontroversial, because if the capital-labor ratio (in physical units) goes up, then the marginal return of additional capital can only decline. The pace of technological change required to offset this trend must accelerate, with the effect of increasing the physical capital-labor ratio and so on and so forth. J PS: For the UK, secular time series show flat growth rates of GDP. There are various time series for the UK, with capital stock figures, and when you use them, you see dramatic drops in profit rates, especially after WW2. Google "three centuries of data". On Sun, May 6, 2012 at 7:18 PM, Jim Devine <[email protected]> wrote: > Julio Huato wrote: >> Okay. Would you give any credence to Angus Maddison's data sets? > > they're pretty good. Do his data sets show a long-term downward trend > in the rate of profit? how does he measure it? > >> Assume that the observed is the golden-rule growth rate (ceiling for >> the profit rate, cf. Duncan Foley or Ed Phelps or whichever growth >> economics textbook you like). Take the U.S. from its inception after >> the American Revolution. What do you get? > > I don't know. However, I don't think it's good to go that far back. > Capitalism wasn't the dominant mode of production at the time of the > Revolution. Slavery and small-peasant production dominated. > >> Preponderance of evidence and prima-facie theoretical grounds are all >> in support of the FRP. It is not airtight, and it is a testimonial to >> Marx's power of intuition that he stated it as a "tendency." And the >> evidence I'm alluding is under the implicit assumption that the wage >> share is constant. If you add working people progressively getting a >> bigger piece of the value-added pie, as a secular trend, then the FRP >> must obtain. > > My investigations suggest that (with a constant rate of surplus-value) > the rate of profit suffers from an unambiguous fall only when sector 1 > hasn't been mechanized, so that labor productivity there lags behind > the growth of the technical composition of capital.[*] With the two > sectors developing evenly (equal growth of labor productivity), on the > other hand, it depends on whether or not the technical composition of > capital is growing faster than aggregate average labor productivity. > But we should assume that labor productivity is growing faster than > the technical composition, since there are other reasons besides > mechanization that raise productivity. > > To my mind, the "rational core" of Marx's sketchy and totally > unfinished theory in volume III of CAPITAL is that there's a > distinction between what's good for the individual capitalist and > what's good for the capitalist class as a whole. This can cause the > rate of profit to fall, though it doesn't have to be due to a rising > technical composition of capital. It can appear as a general crisis of > realization -- or a drive to over-use raw materials. > -- > Jim Devine / "When truth is nothing but the truth, it's unnatural, > it's an abstraction that resembles nothing in the real world. In > nature there are always so many other irrelevant things mixed up with > the essential truth." -- Aldous Huxley > > [*] I assume that the technical composition can be measured. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
