From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Sat Oct 06 2007 - 10:31:59 EDT
Quoting glevy@PRATT.EDU: > Hi Fred: > > What is the basis for your claim that the convention/assumption of an > annual rate of profit is any more lor less plausible than that of a weekly > rate of profit? > > It is true that modern capitalist corporations tend, in their accounting > practices, to use the convention of a year. This is done because of tax > reporting requirements and to prepare annual reports for shareholders in > preparation for annual meetings (also to comply with legal requirements). > I think this is a very weak basis for insisting on keeping the convention > of a year since: > > a) it is contingent upon *state* requirements. Yet, the analysis of the > turnover of constant capital should begin before the state is introduced > into the analysis, don't you think? > > b) corporate accounting practices concerning about how often they issue > reports are similarly contingent and often specific to individual > capitalist social formations (and often mandated by law). > > It is true that Marx's theory uses the convention of an annual period of > production. Yet, this is not a *reason* by itself for accepting that > convention. > > In agriculture, it might make more sense to think in terms of a year than > a week (hence the Physiocratic basis for the convention). I don't see why > we should accept this remnant of Physiocratic thought. (btw, I wish to > thank Paul C for making me see this point.) > > To insist on the assumption of an annual rate of profit, given the above, > seems to me to be fetishizing a 'year' as a time period. Hi Jerry, The annual rate of profit has been the standard reference rate of profit for capitalist enterprises for as long as capitalism has existed, including before state requirements. The annual rate of profit is the rate of profit that capitalists use to compare rates of profit across industries in their investment allocation decisions, and thus is the rate of profit that is equalized across industries by competition and the transfer of capitals. So the annual rate of profit is the rate of profit that theory should explain. So how is the annual rate of profit determined? We have two theories: MARX: the annual rate of profit is determined by the ratio of the total surplus-value produced in the economy as a whole during a year to the total capital invested in that year. The total annual surplus-value is determined by the total annual surplus labor and the total capital invested is taken as given. SRAFFA: the annual rate of profit is not determined directly by the Sraffian system of equations. Instead, the rate of profit that is determined by the Sraffian system of equations is for a very short period of time – the shortest turnover period in all industries in the economy as a whole (e.g. a “week”). This theory assumes that this “weekly” rate of profit that is equalized across industries by competition and the transfer of capitals. But I think that is ludicrous. Ian H. has suggested that the annual rate of profit could be derived from the “weekly” rate of profit by compounding. But there is no real “weekly” rate of profit, and no real compounding of these fictitious “weekly” profits. Real compounding takes place by reinvesting profit received. But in most actual turnover periods, no profit is actually received in a “week”, and no profit can be reinvested and compounded each week until the end of the actual turnover period. Finally, even if the standard reference rate of profit were changed to a different period, to say a half-year, or a quarter, or perhaps more than a year, Marx’s theory would have no problem explaining this that particular rate of profit. The numerator would just become the total profit produced over that different period, rather than over a year. But the new standard reference rate of profit would not likely be the Sraffian “week” (the shortest turnover period in the economy), and thus Sraffian theory would still not be able to explain this new standard rate of profit, but only its “weekly” rate of profit. Comradely, Fred ---------------------------------------------------------------- This message was sent using IMP, the Internet Messaging Program.
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