A number of list members have recently suggested that simultaneists do
not use the internal rate of return (rate of return on investment)
because it fails to ignore sunk costs, because it isn't the rate that
tends to equilibrate, because it is not what capitalists seek to
maximize, etc. Some have even seemed to imply that it is wrong to
consider the IRR as the relevant profit rate for assessing the tendency
of the profit rate.
If these statements are intended to imply that I and other temporalists
have played a trick and substituted a different profit rate than the
one that Okishio and Roemer were referring to, these statements are
revisionist history.
I quote from Roemer, _Analytical Foundations of Marxian Economic Theory_,
Ch. 5, p. 123:
"Saying that capitalists seek to maximize the INTERNAL RATE OF
RETURN is *not* tautologically the same as saying the general
rate of profit increases in the economy. A theorem is required
to prove this (Theorem 5.1 [Roemer's extension of the Okishio
theorem to the fixed capital case]). Maximizing the INTERNAL
RATE OF RETURN is the relevant notion of cutting costs in the
fixed capital model [my caps--AJK]."
There's no similar statement from Okishio, because he didn't consider
fixed capital. In any case, my refutation is specifically a refutation
of Roemer's generalization of the theorem to include the possibility of
fixed capital.
Andrew Kliman