Bruce,
Obviously, you've identified what you consider a soft spot
in the TSS framework when you state:
"I continue to think that there's something wrong here: either capitalists
are incredibly stupid, persisting in the sort of "downsizing" behavior that
Massimo and Andrew say lowers r but failing to consider the possibilities
for raising it as in my example, or else the TSS rate of profit is an
accounting artefact that's not really relevant to the selfishly sensible
behavior that capitalists seem quite capable of persisting in."
The context into which I put Massimo's example is that of the Okishio
Theorem. That is, it is a simple way of saying that as capitalists
invest in techniques that they think will bring a larger rate of profit,
the rate of profit falls. The argument is based on how one defines
value itself and takes into account both time and money. But we
are agreed that without that price drop there is no fall in the rate of
profit. Many moons ago, I questioned Alan on this fall in price.
He correctly responded that the fall was based on the "law of value."
Fine. He's right. But let's see if we can push this a bit. For me,
in the second period, there would be two rates of profit -- the visible
rate of profit and the value rate of profit. For the two to differ,
I would assume that the social value of the commodity produced in the
second period had not fallen to its individual value. This would mean
that capitalists may not see a fall in their rates of return but WE
DO.
Now I can hear you up there in Maine saying -- "So what?" We observe
something -- a falling rate of profit -- that is not apparent to the
actors in this drama. Why not just go with the rate of profit as it
appears and forget all this nonsense about value? With Marx, the TSS
school contends that what I here call the value rate of profit is the
more relevant of the two rate, for the following reasons:
1. If one assumes that competition brings about a fall in the social
value to the individual value, then the two rates are the same. We
are aware of this prior to its occurrence. The capitalists, acting
solely in the realm of appearance, only see it when it happens.
2. TSS needs to introduce a crisis mechanism into its framework that
can spur the price drops necessary to bring the two rates of
profit together. All that we have done so far in the TSS
framework is respond to Okishio and the notion of simultaneous
valuation.
3. In my own work, I have shown that the visible rate of profit need
never fall prior to the crisis. Unfortunately, I, too, choose
a one-commodity model which made the fall impossible to imagine.
By assigning prices to that one commodity, I think this problem
can be overcome. To be sure, those prices would not remain the same
from period to period. Further, the rate of profit would still
be based on capital invested as opposed to capital revalued after
the investment.
What then has TSS done? By insisting that as capitalists invest, say,
$1000, the denominator in the rate of profit on the investment is
$1000, TSS has placed real time in the analysis of capitalism. We
can no longer traverse from one period of production to another
without connecting the investment in period 2 with the output of
period 1 both in terms of materials and, more important, in terms
of value or money. To compute equilbrium prices and values soley
on the basis of conditions within a given period makes it impossible
to see production and reproduction in real time as technical change
takes place. With equilbrium prices and values, each period becomes
its own timeless world without technical change and without changes
in valuation.
For now, all TSS claims is that the rate of profit CAN fall and that
this fall is brought about by competition in much the same way as
Marx himself describes the fall in social value to individual value
in Vol. I. Again, this is the response to Okishio and not a
full-fledged theory of accumulation.
Well, I have not referred to the numerical example but I think you
made your point with it and, hopefully, whether you agree or disagree
I've been clear.
John