"It seems to me that a context of rising profits (unless you believe it is over) will have strategic importance to our assessments of the medium term directions of the US economy - and the types of challenges we will face."
As I explained before on PEN-L, Karl Marx believed "equilbrium" was established not by supply-demand factors as in bourgeois Harry Potter economics stories, but by the social relations of production; but production relations here do not just refer to class relations or private property relations, but to all kinds of proportionalities in the sphere of production. The critical variables shaping production relations in Marx's analysis are S/V, C/V, S/C+V, Cf/Cc, the rotation speed of capital (how fast you can recoup your investment), the rate of reinvestment of realised surplus value, the relative accumulation rates in different branches of production, and so on. Within a stable framework of production relations, market fluctuations can occur, but those fluctuations do not threaten the foundations of bourgeois society, and these fluctuations are contained and limited by production relations. However, Karl Marx also insisted that capitalist production was the "unity of the production process and the circulation process". Therefore an analysis of the creation of wealth and the distribution of that wealth cannot be separated from each other as in Sraffa, and if you do, you still don't understand anything at all. If you abstract what happens in production from what happens in circulation, as the Marxist fundamentalists do, you also go wrong. In other words, you have to look both at the total cost structure of production (interest rates, credit facilities, debts, currency values, labour markets, and so on), you have to look as the labour process itself, and you have to look at the distribution of the new income generated by the new value product (taxation, income transfers, unequal exchange, expenditure patterns, the competitive process for the share-out of profits). When you do so, you realise that if profits rise, this doesn't really mean much on its own anyway, because then you still do not know the specific mode of private accumulation of that capital, i.e. how exactly is this new additional capital invested given current perceptions of risk ? And here a specific quantitative analysis is essential, especially because in our time the capitalist crisis is a crisis of "excess capital", i.e. the underutilisation of capital such that the opportunities for making a lot of money in "ordinary" production stagnate, there is excess installed productive capacity, and so on, you face both stagnating profits and stagnating demand, and the new growth areas are luxury spending, military production, privatisation/rationalisation, and so on, because that reflects who has the buying power. "Wolff also concurs with D & L that one major cause of the profit rise was a shift in shares away from labor and to profit." This argument is deceptive, precisely because (1) real income of capital could just rise faster than real income of labour, but what can you deduce from this ? Not very much at all, because S/V must be related to the distribution of real income, and (2) Wolff mixes up bourgeois and Marxian concepts of "productivity". Basically Wolff's analysis is just economics, it has nothing to do with workingclass strategy or with thje transition to socialism. "Wolff does not find a significant change in the organic composition of capital for the economy as a whole over the last 50 years (i.e. no rising rate of OCC; tendency for a falling rate of profit)". This analysis he does has great merit, because it at least begins to acknowledge the DYNAMIC relationships which Marx intended to reveal with the concept of the OCC rather than some inevitable law as the fake Marxists argue. But Wolff is just wrong about the rising rate of the OCC, because what we need to study is the secular trend in the magnitude of real labour costs as a proportion of total input costs (intermediate consumption, fixed capital, levies and payments) and the secular trend in the magnitude of real labour costs as a proportion of unit output values. Most Marxist and non-Marxist economists do not understand this at all, because they haven't got a clue about how a commercial business works. "Wolf has tended more towards finding "profit squeeze" effects (now "capital squeeze" ?) and has tended to discount any tendency towards rising OCC's\falling rates of profit (that then meet their offsetting tendencies)." If Capital can squeeze Labour, Labour also can squeeze Capital, and therefore a "profit squeeze" can empirically occur and there is empirical evidence for profit squeezes in various West European countries at different times. But a profit squeeze is extremely rare, because it assumes a balance of forces very favourable to the working class, and a mode of organisation which doesn't take away income gains as soon as they are conquered. "I have trouble understanding how a rise in the rate of increase in the rate of exploitation can account for much of the stated recovery in the rate of profit." That is because Marxists usually conclude their analysis where they should begin it. They think the rate of exploitation is determined by what happens in production, but this is not the case, because as Marx says, capitalist production is the unity of the production process and the circulation process. S/V is affected by a very great number of factors which affect the volume of profits and the value of labour power. "Do we have anything like a partial coefficient for the rise in the rate of increase in s/v in accounting for profit rate recovery?" I think you can fit a coefficient, but this misunderstands what Marx intends. "So just how much of recovered profitability can be accounted for by the rise in the rate of increase of s/v and specifically how exactly was the rise in the rate of s/v accomplished?" As regards the first question, I think a large part, but I cannot give a definite answer, this requires much more analysis. Your second question is better, because that is what it is really about, the first question is just an empiricist question. And if the rate of profit did recover as much as reported, then shouldn't have the rate of accumulation picked up more than it did? Or did the rate of profit not fall and the OCC not rise exactly because the rate of accumulation remained weak? This is where your analysis is bad, because a higher rate of profit does not automatically mean a higher rate of investment, and even if it does, this does not mean automatically an investment in specific productive assets. I have tried to explain this very simply by referring to the formula "net output growth does not automatically equate with capital accumulation". "Another question: can the available data be reworked to construct measures of the Marxian rate of profit and the value composition of capital?" Not really, at best you can create indicators. Most Marxists measure the Marxian rate of profit basically as net output less net wages of productive workers divided by fixed capital. But this isn't really very satisfactory. But you can show that usually it doesn't matter what indicator you use, the trend is always the same no matter what indicator you have. A better short term indicator of profit rates is profits on assets or equities, pre-tax and post-tax, in comparison to the rate of interest for deposits, investment capital, bonds and securities. The valuation of fixed capital, depreciation and inventories is always problematic for macro-economic profitability studies. 99% of Marxist discussions about the ""rate of profit" are meaningless because they do not refer to the volume (mass) of profit, they do not distinguish between net and gross, unit costs and total costs, and so on. Jurriaan
