Dispersion of profit rates
wpc at clyder.gn.apc.org
Wed Nov 2 09:17:28 MST 1994
>problems of logical consistency remain. I note further, or again, that
>even if labor content predicts price that doesn't mean it determines
This is correct, it is always possible with a correlation of this
sort that both variables are correlated to some third factor which
is the underlying cause. However the Labour Theory of Value in Marx
is non-causal, it merely says that exchange values are proportional
to values, it does not explain why this occurs. This is a genuine
question for science, but it science always advances by posing new
questions. It discovers empirically valid laws and then has to
explain why they operate. But for questions to be scientifically
usefull, they have to be based on actual observation. The empirical
observation is that there is an extraordinary high correlation between
market prices and labour values. The LTV does not yet explain this
in capitalist society ( Smith gave a reasonable explanation for
pre-capitalist society ), but it recognises it as a fact.
Farjoun and Machover produce some very convincing statistical arguments to
the effect that this correlation between values and prices is an
effect of the narrow dispersion of rates of surplus value in different
industries. I think that this is the most promising theoretical line
>Moreover: your result here looks like at best an empirical puzzle
>for the general exploitation theorem, that you can plug anything (corn,
>iron, etc.) in as a value numaire.
It is certainly possible, provided that one takes an actual system of
market prices to express values in any commodity as a numeraire, and to
get an expression for the rate of exploitation in terms of this commodity.
But this is a different question from the one that I was addressing.
I was concerned to show that that a price system computed in terms of
labour values is much closer to the actual price system than one computed
in terms of energy values, and that one can thus rule out oil or electricity
as the substance of value.
> Two further questions: did you test
>your LTV against utility theory rather than value theory, i.e. against the
>idea that price is determined in the conventional manner by supply and
I do not consider that a utility theory of prices can meet the normal
standards of scientific testing. If we take Poppers criterion, a theory
must be falsifiable to be meaningful. The marginal utility theory of
prices is unfalsifiable. All that is says is that consumers will adjust
their level of purchases to ensure that the amount that they buy of each
commodity will equalise marginal utilities. There is no set of prices that
would be inconsisten with this assertion, so it is both untestable and
vacuous as a theory of price.
>A related question but more theoretical question: how is it that a
>quantity no one but Marxists are aware of and no one but a handful of
>Marxists even think they know how to calculate enters into the
>determination of price, insofar as this is the (unintended) result of
>intentional behavior? No doubt capitalists have to cover their labor
>costs and want to reduce these as much as possible, so there will be some
>correlation with price. But they think about these in terms of the wage
>bill, i.e., the price of labor. Value looks epiphenomenal.
I agree that to capitalists the labour content of commodities is only
represented indirectly in the form of wages. If one makes the additional
assumption that the economic class struggle imposes a constraint on the
variation of the rates of surplus value then that may well be the
mechanism by which the law of value operates.
>Earlier you disputed the truth of the proposition that the rate of profit
>tends to equalize across "departments" or branches of industry. If capital
>is mobile I do not see how this can fail to be true. If it is not true
>>either capital is not mobile, which is false, or capitalists do not seek
>the highest rate of profit, which is both false and inconsistent with
>Marx. So the tendency is not an a priori truth but it is very robust. But
>if the tendency exists then, as Marx noted, we have to deal with prices of
>production, not the law of value (prices as proportional to values).
Your method of argument above is entirely a-priori. You simply assert that
capital is mobile and that they seek the highest rate of profit. These are
hypothesis that have to be tested. Even on a-priori grounds they are far
from evident. Consider capital employed in newspaper production and capital
employed in biscuit production. In what sense is there mobility between them?
Clearly printing presses can not be used to bake biscuits even if biscuit
baking offers a higher rate of return. A news paper proprietor can only take
his capital out of the press over a lengthy depreciation period, perhaps
30 years or more. The only proportion of the capital that is mobile is
the depreciation fund. In the meantime, he minimises his capital losses
by keeping going even if he is making less than the maximum rate of profit.
I am not denying that there is some mobility of capital, merely that it
is enough to produce an equalisation of the rate of profit in the face
of the chaotic fluctuations that competition and the trade cycle give
rise to. For 1984 in the UK we found that taking a sample of 98 industries
the coefficent of variation (std deviation/ mean ) of the rate of profit
was 0.608, which was wide compared to the coefficient of variation of
prices from values ( 0.104) or the coefficient of variation of
rates of surplus value ( 0.423 ). This indicates that the tendancy to
equalise the rate of profit is weaker than the tendancy to equalise the
rate of surplus value.
Paul Cockshott ,
Phone: 041 637 2927 wpc at clyder.gn.apc.org
wpc at cs.strath.ac.uk
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