I think Marx just didn't get that far. He seems to have been following the Smithian theory of competition, which envisions capital as moving from low profit rate sectors to high profit rate sectors. As you've pointed out, when capital goods have long lifetimes, there's always a major expectational or prospective element in estimating the profit rate, so presumably the relevant profit rate for this competitive movement of capitals would be a prospective, not necessarily a realized profit rate. And technical change could make the expectations very wrong. Perhaps this is one of the factors that led the Classical political economists to view competition as a gradual, imperfect tendency, that manifested itself in a "gravitation" of prices around natural prices (or prices of production) rather than as an attained equilibrium. Duncan >One of the things I don't get is how the usual way of correcting >Marx's transformation procedure applies when we assume that >fixed capital is *really* present. Here are a couple of things >I don't get. > > >1. Is the rate of profit or the RRI equal in all sectors after the >transformation? > >2. How do you compute the values that are to be transformed from a given > set of physical quantities? > > > >I suppose the underlying confusion is my lack of understanding how much of >what >is said about the transformation problem can be extended to an economy in >which fixed capital is *really* present. I'll skip any thoughts about moral >depreciation for now as that brings in still more issues. > > >John -- Duncan K. Foley Leo Model Professor Department of Economics Graduate Faculty New School University 65 Fifth Avenue New York, NY 10003 (212)-229-5906 messages: (212)-229-5717 fax: (212)-229-5724 e-mail: foleyd@cepa.newschool.edu alternate: foleyd@newschool.edu webpage: http://cepa.newschool.edu/~foleyd
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