Jim,
I cannot go on about this at length now, but here are a few points to consider. Most of the people who currently claim consistency with Marx - the TSSI crowd, the far-left Grossman devotees, the International Socialists and HM devotees, and various wellknown academics such as Anwar Shaikh, Paul Mattick, Fred Moseley, Michael Roberts, David McNally etc. - argue for a falling rate of profit theory. The most orthodox position is, that as the organic composition rises, the profit rate falls and that this is the root cause of the crisis. No doubt though, we can draw subtle distinctions between their respective academic positions, as I am sure you would want to do. It might be, in the Aristotelian best presentation of the argument, that you can prove, despite inaccurate data and despite the problems with the concepts underlying the data, that the industrial average rate of profit does indeed have a general tendency to fall, at least in the long term. However, if in reality, out of the total social capital, only a smallish minor part is invested in means of production, then a percentage drop in the industrial rate of profit across some years just doesn't explain a great deal. You have to look at the profitability of the total social capital in the context of world trade. Anwar Shaikh said once in a polemic against Robert Brenner: "Central to Brenner's thesis is the claim that the fortunes of U.S. manufacturing in the period from 1965 to 1973 determined the subsequent economic health of the whole advanced world. But in those times US manufacturing accounted for about 25% of US Gross Domestic Product (GDP), and a mere 12% of the advanced world's GDP. Yet, according to Brenner, this one sector was the lever which moved the world. The central theoretical question, of course, is how this could possibly be so?" - Anwar Shaikh, "Explaining the Global Economic Crisis: A Critique of Brenner" in Historical Materialism, No. 5, 1999, p. 104. Similarly, we could ask ourselves, how could it possibly be the case, that a drop of a few percent in the industrial profit rate across several years, can cause a huge slump, when the actual total capital invested in industrial means of production is only a smallish minor part of the total social capital? Personally, I just don't believe very much anymore about the economic data, because I used to work as research statistician together with other people who produce this data. At the best, the data can provide a rough indication of whether the trend is up or down, during a few years. Long time series are suspect, because so much changes qualitatively, even within the space of a decade. Moreover national accounts are prone to repeated retrospective revisions which introduce new data distortions. On OPE-L, I have sketched out how NIPA profit data are actually constructed. http://ricardo.ecn.wfu.edu/~cottrell/OPE/archive/0510/0281.html (there was not much response, but then most of those people never grapple with base data, they just theorize or make a model). There are at least four levels of official data distortion in the estimation of value added. The first consists of the NIPA concepts and estimation procedures themselves (for example - it would take me pages and pages to itemize it all - : depreciation is not actual depreciation but "economic" depreciation; value added does not include certain types of net interest, land rents and property income unrelated to production; profit income by corporate officers is stuck into "compensation of employees"). The second is the technique of profit reporting itself by companies, which often involves creative accounting. The third is the difference between annual internal or external business reports and tax reports. And then there is the whole business of tax evasion and avoidance (including tax havens). The official measurement of fixed capital, operating expenses and inventory is notoriously inaccurate due to valuation and boundary problems in estimating the figures. There has been very little research which checks the mathematical credibility or plausibility of capital return estimates. As regards the Marxist reworking of the data, the distinction between productive and unproductive labour has to my knowledge never been convincingly defended. What the FROPists actually do, when they are confronted with empirical and logical objections, is that they just change their storyline a bit. They still believe the FROP is true, but then "at a different level of abstraction". For example, they say that the FROP doesn't "immediately" cause the crisis, but only "in the long term". But they provide no testable relationships of cause and effect. Oskar Morgenstern recommended once that all official statistics should be published together with an indication of their margin of error. It sounds nice, but it has rarely been done. Why? I think because, particularly if it is not even possible to verify what the margin of error is likely to be, stating a margin of error would undermine the credibility of the whole statistical enterprise. J.
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