From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Tue Nov 13 2007 - 09:27:23 EST
>On Tue, 30 Oct 2007, Rakesh Bhandari asked, of Paul C: > >> I must say that I am not following your explanation of what is >> frustrating even in this day age of unleashed capital flows and >> shareholder value the tendency towards an equal profit rate. > >> I don't get the point about firm death either. Wouldn't there be >> some tendency for all firms which within a branch are not >> achieving average profitability to die? Why would that disrupt >> the tendency to the equal profit rate? > >> I am distracted, and I am asking you to start the argument from >> scratch. > >The point that Paul is making is based on empirical work done by >Paul and myself, subsequently backed up by independent work by >Dave Zachariah. That is, it seems to be a fairly robust empirical >finding that the rate of profit tends to be lower in sectors with >above-average organic composition of capital. > >It is not obvious how this can be rationalized. It seems >implausible that capitalists willingly undertake investment in >sectors where they _expect_ to receive below-average profit. > >I presume, though, that you will see it's very much a hard-nosed >neoclassical argument to say, "Thus can't really be happening >because it implies irrationality on the part of capitalists". Yes the reason I dropped the challenge to Paul C is that I don't think it would be ethical to continue it without challenging your empirical findings to see for example whether the result depends only on a few outlier industries. But it seems not to. So I dropped the challenge. > >I think the mechanism behind this empirical finding needs further >research. Why might it be that -- even though the ex ante >expectation might be for at least average profit -- high organic >composition sectors ending up realizing a lesser rate? I can >imagine various possible mechanisms but I don't have definite >evidence for any. > >I will say this, however: "unleashed capital flows and shareholder >value" are not to the point. For equalization of the sectoral >rate of profit (as opposed to equalization of the expected rate of >return on financial assets, given the current prices of such paper >assets), we require inherently slow "flows" (in fact, real >accumulation and decumulation) of _real_ capital -- flows that >have in no way been speeded up by the hyper-development of paper >asset-trading in the last couple of decades. Here I think you are missing one possible point. Shareholder value means disgorging of cash from mature industries; this should slow their growth and possibly allow price adjustments to achieve equal profitability. Rakesh > >Hyperactive stock markets -- plus options, derivatives, futures, >and so on -- make it no easier to transform, say, railway lines >into chip-fab plants, or power stations into pizza ovens. > >Allin Cottrell
This archive was generated by hypermail 2.1.5 : Fri Nov 30 2007 - 00:00:03 EST