Paul W. Cockshott cockshpw at
Fri Sep 23 06:54:22 MDT 1994

On Fri, 23 Sep 1994, Fred B. Moseley wrote:

> My book on the falling rate of profit derives rigorous estimates of
> the key Marxian variables (the rate of surplus-value, the composition
> of capital, and the rate of profit) for the postwar U.S. economy.
> The results suggest mild support for Marx's theory:  the rate of
> profit declined (approximately 20%) because the composition of capital
> increased faster (40%) than the rate of surplus-value (15%).  These
> results are contrary to earlier estimates of the Marxian variables
> presented by Tom Weisskoff (Cambridge Journal of Economics 1979) and
> Ed Wolff (American Economic Review 1979), whose estimates showed
> that
> the rate of profit declined because the rate of surplus-value
> declined, not because the compostion of capital increased.  The main
> reason for these different results is that Weisskopf and Wolff ignore
> Marx's distinction between productive labor and unproductive labor.
> Thus I think my book would make a contribution to the recent
> discussion on this network of the empirical relevance of Marx's
> theory of the falling rate of profit.
Moseleys results for the US mirror almost exactly those that I obtained
for the UK for the post war period and presented to the Conference
of Socialist Economists in 1977. There had been papers in the UK
corresponting to the Weisskoff one, (Glyn and Sutccliffes book),
that made the same mistake of ignoring the effect of productive
versus unproductive labour.

> My book also presents a Marxian analysis of the "conventional" rate of
> profit (as distinct from the Marxian rate of profit) (essentially the
> rate of profit on the total capital, rather than the rate of profit on
> the productive capital only) which declined much more than the Marxian
> rate of profit (approximately twice as much).  The main conclusion is
> that the main cause of the decline of the conventional rate of profit
> was a dramatic increase in the ratio of unproductive labor to produc-
> tive labor in the postwar U.S. economy (an increase of approximately
> 75%).  The relative increase of unproductive labor meant that a larger
> share of the surplus-value produced by productive labor had to be used
> to pay the wages of unproductive labor and thus a smaller share was
> left over as the profit of capitalists.  This relative increase of
> unproductive labor had a greater negative effect on the conventional
> rate of profit than the increase in the composition of capital.
I find that whils this was true of the UK up until the mid 70's
since then the rate of profit has risen, because the rate of
surplus value has risen faster than the rise in the organic
composition. Largely, I think, because of the very unfavourable
legislation against the working classes.
The response of the bourgeoisie to this higher rate of profit has
not been to accumulate capital faster, on the contrary they have
had negative accumulation over much of the 80's. The advantages
to the working class in showing restraint in demanding wage increases,
because according to steve this will encourage more investment,
seem to me pretty dubious.

> My paper in the edited book is about the infamous
> "transformationproblem" ("Marx's Logical Method and the Transformation
> Problem").
> As the title suggests, the paper attempts to give more attention
> to Marx's logical method and to place the discussion of the
> "transformation problem" within this context.  I argue that the
> prevailing interpretation of the "transformation problem" is based
> on the logic of linear production theory (i.e. of Sraffa's theory),
> which is fundamentally different from Marx's theory.  The two main
> differences which I emphasize are:  (1) the order of determination
> between aggregate economic magnitudes and individual magnitudes,
> especially the magnitude of profit (for Marx, the prior determination
> of the total amount of surplus-value prior to and independent of its
> division into individual parts); and (2) the determination of the
> quantities of capital (constant capital and variable capital) which
> are inputs to capitalist production.  I argue that these components of
> capital are taken as given in terms of money, as the initial sums of
> money which initiate the circulation of capital (i.e. the M in M-C-M'), and
> are not derived from given physical quantities of the technical
> coefficients of production and the real wage, as in linear production
> theory.  The question of Volume 1 is then how this given sum of money
> increases its magnitude, i.e. is transformed into capital.  I conclude
> that, if the logic of Marx's theory is correctly interpreted, then
> there is no "logical error" in Marx's determination of prices of
> production in Volume 3.  Therefore, the long line of criticism of
> Marx's theory, from Bortkeiwicz to Steedman, does not in fact apply to
> Marx's theory, but instead applies only to the misguided attempt to
> interpret Marx's theory in terms linear production theory.
Alan Freeman strongly argued this point at this years CSE.
He pointed out that people now read Marx through linear i/o models
which had no part in his analysis.
Mirowski(1989) has recently had a good deal of innocent fun
with the propensity of economists to emulate the
queen of the sciences.
His satire is directed mainly against the utility
theorists, but he does devote some attention to
Marx, accusing him of oscillating between a field
and a substance theory of value, and in the transformation
problem of having `one conservation principle too

We think the last accusation is valid, but  contrary
to the Sraffians, we think that on both empirical and
theoretical[Farjoun and Machover,  1983]
grounds it is the equalisation of the rate
of profit that must go.
The distinction between
field and substance theories is more subtle than Mirowski presents,
and that the emprical tests in the literature are not invalidated
by this distinction.

By the field version of value theory, Mirowski means
the definition of value as socially necessary, as opposed
to embodied, labour.
He takes as his formal model what has
become the standard mathematical account of the determination
of labour values by athors like Morishima (1973) or Steadman (1977).
But it is a little unfair to project back these 20th century formulations
based upon the mathematics of input/output tables, onto Marx.
Marx gave no precise mathematical formulation to socially
necessary labour.
The standard formulation of the I/O table method is only
one of possible definitions of socially necessary labour,
and involves some very unrealistic assumptions.
If these assumptions are dropped and the model made more
realistic the distinction between field and substance theories

The standard method of deriving labour values from solving
the linear I/O equations is based upon the unrealistic
assumption that production takes no time to occur. Marx
did not assume this, and devoted much of Capital II to analysing
the turnover times of capital. Any process of determination of
prices must operate in time through actual production processes.
It is `socially necessary' that the steel used in
the keel a ship completed today
was produced a year or two earlier. The socially necessary labour
in steel produced today may differ from that which went into the
steel a year ago, but only the former can affect the value of the

No real process allows instantaneous information transfer and
market economies are no exception to this rule.
If one were to look for a physical analogy, applying
the Morishima equations under technological change would
be to try to solve an electrodynamic problem with electrostatics.

> linear production theory mentioned above.  I will save for another
> occasion more specific comments, but I just wanted to call attention
> to this important manuscript, and ask if anyone else has been working
> on it.
I do not yet have all the volumes, but the ones that I do have
seem to echo pretty much the arguments in theories of surplus


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