Off the Pequod

John R. Ernst ernst at
Fri Oct 6 23:11:25 MDT 1995

In a recent post (10/7) Steve Keen again presents us with a clear, concise
summary of  
the falling rate of profit (FRP) argument as it is generally understood.
Now we are faced with the possibility of a falling rate of profit in
socialism!  Something is wrong here, seriously wrong.   Let's see if we can
get off this track by noting the following: 
1. For Marx, if improvements in productivity uniformly reduce the prices of
all commodities, the rate of profit does not fall.  (p226, Vol III, Int.
Ed.) This is not the case in Steve's "models."  
2. For Marx, the raito of constant capital to output, given no changes in
the social values of commodities, falls as productivity increases. (See pp
108-109, Vol. III, Int. Ed.) The fall in the rate of profit occurs as the
social values of SOME commodities approach their individual values.  Here,
I disagree with Steve that Marx can put into the 19th century of economic
thought which does, indeed, contain the concept of an increasing
capital-output ratio -- both in terms of material and in terms of value. 
It is this correspondence between the two which leads many to see the
concept of value as redundant.  This criticism does not apply to Marx.    
Put another way, there are two sides to the accumulation process -- a value
side and 
a material side.   If we look at the material side, we see the outputs
increasing faster than inputs.  If we look at the value side, we MIGHT, at
times, see the appearance of the opposite which could lead to a falling
rate of profit.  Given the dialectical nature of the accumulation process,
it's hard to imagine a falling rate of profit in socialism as we would be
able to see the material side of the accumulation process without the veil
of value.  That is, it is impossible to imagine the notion of social value
and individual value in socialism.  Why would we need such concepts given
we would see the individual as social without the need for explaining how
the latter becomes the former via market forces? The real question in Marx
is what causes individual values to become the social values.  What are the
market forces involved? I would argue that means developing the notion of

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