Gil (1615 of 28/03) writes
"I don't see how this result can be labelled "absurd" without further
specification". This re my 1610 of 28/3 where I wrote:
"The simultaneous paradigm produces the absurd result that [the
capitalists] can accumulate with a rising rate of profit. "
The word 'absurd' might be a bit intemperate or dismissive, but what I
meant was that it is completely contrary to natural common sense.
Every capitalist, every merchant, every banker, every accountant, and
everyone who can do arithmetic knows that if your total profits are
constant and your advanced capital is rising, then your rate of return
falls. And by any normal definition of 'accumulate', your advanced
capital is rising if you are accumulating. What else does the word mean?
We can always redefine 'grow' to mean 'shrink' and 'shrink' to mean
'grow' but then we have a bit of explaining to do.
I admit that some truths contradict natural common sense - this is
what fetishism is all about - but in such cases an extremely careful
argument has to be constructed to show where the error arises. No such
careful argument has been forthcoming. That is what I think absurd.
In particular a very large number of very respectable authors have
for the last fifty years, proclaimed that 'obviously' the rate of profit
must rise because 'obviously' capital stock gets cheaper, and chastise Marx
vociferously for failing to recognise this 'obvious' fact. This, I
think, has to be challenged frontally. It is not at all obvious.
On the contrary, 'obviously' if you add one sum of money to another
sum of money, the new sum of money is bigger. 'Obviously' if you invest,
your capital stock grows. It is the contrary result, the result of the
simultaneist paradigm, which is not obvious. We have to put the correct
end of the telescope to our eyes to see what is clearly before us.
The simultaneist paradigm redefines the meaning of 'accumulate'. It
identifies the accumulation of commodities with the accumulation
collection of 'physical goods', whatever that might mean, and then
explains that the rate of profit cannot move as Marx suggests, because
the stupid Marx failed to understand that a collection of physical
goods can get cheaper even though there are more goods.
I think this is a tortuous, roundabout, upside-down and ultimately
wrong way of getting at what is going on. I think we should cut the
Gordian knot. Accumulation is not the accumulation of use-values but
of exchange-value, that is, money prices. This is what determines the
physical behaviour, not the other way around. Let us start by studying
the money, and then try to understand how the use-value aspect of
production is thus constrained and ultimately determined. This, I
think, is 'Marx's method'.
I think that, in common with every banker, every accountant, and
everyone who can do arithmetic, Marx understood accumulation to mean
the accumulation of exchange value, that is, accumulation in money
terms, with the only proviso that money as the expression of value
must be corrected for inflation (hence the importance of the much-
maligned 'value of money'). In money terms, if the capitalists invest,
then their advanced capital must grow. If you put money in the bank,
your bank balance grows, no? If you use this same money to buy assets,
this raises your gross worth, no? And if you exhaust these assets
slower than you add to them, your gross worth will rise over time, no?
This is what is 'obvious'.
What is not 'obvious' is why the simultaneous analysis comes up with a
completely different result to this very straightforward fact. Yet
simultaneist authors have until now proclaimed as 'obvious' that their
analysis is correct and the facts are wrong. That is why I use the
word 'absurd'. When you come up with a theory that contradicts the
most plain everyday fact, then you should at least contemplate that
something might be wrong with your theory. At least, this is what I
understand by the scientific method.
Gil goes on to say:
"In particular, the notion that a rising rate of profit may coincide
with capital accumulation is neither necessary nor unique to the
simultaneous approach to value determination. Nor can it possibly be,
since profit dynamics occur in the world of prices, and the
simultaneous approach only establishes an algorithm for determining
values, understood quite independently of prices."
That is, there is a different, secret and hidden profit rate - the
'value' rate of profit - which really is different from the observed,
capitalist rate and has nothing to do with capitalist prices.
In other words, after spending a not inconsiderable number of bytes
establishing that 'Marx's value analysis' is fundamentally erroneous,
Gil now applies this same erroneous value theory to establish that
things do not 'really' happen as they appear to happen. This strikes
me as a slightly selective use of value theory. If we can throw it out
of the window while discussing merchants and usurers, it is a bit cheeky
to bring it in through the back door in order to 'prove' that these
same usurers and merchants cannot work with the profit rate which
simple arithmetic imposes upon them.
My argument is a teensy bit more consistent. I think the value theory
which Gil deploys to produce his argument above, which he attributes to
Marx, is not Marx's theory. I think Marx has a different value theory,
which is not logically inconsistent.
But I don't use my version of Marx's value theory only when it suits
me. I use it all the time.
Because this *same* value theory produces an analysis of accumulation which
accords with the known facts: it says that the rate of profit will fall
when in fact it does fall. Gil's version of Marx's value theory
produces an analysis of accumulation which contradicts the known facts.
It says that the rate of profit will not fall when in fact it does fall.
For Marx (and, I would argue, the nondualist approach if applied consistently)
the observed rate of profit really is the value rate of profit. There are
not 'two' rates of profit, an observed and a secret rate. There is one
single rate of profit, and it *is* the price rate of profit. That is the
lesson which, it seems to me, the non-dualists have taught us.
It is true that the accounts can be done wrong. For example, as Fred,
Anu and myself have shown, the capitalists misreport things like
expenditure on unproductive labour, interest payments and the like,
and to arrive at the correct money rate of profit these expenditures
have to be accounted for what they really are, namely components of
profit. It is also true that Marx, like the more sensible capitalists,
has to correct for inflation. But these are corrections in price terms,
not the substitution of a completely different rate of profit that has
nothing to do with prices. Once these correction are done, the resultant
money profits are subject to the same simple law: if you invest, your
advanced capital grows.
Thus when Gil writes
"For example, if the rate of profit is below the "steady state" level
Marx speaks of in section 1 of Ch. 25, the rate of profit will rise
in an accumulating economy as long as the rate of capital
accumulation is below the (exogenously given) rate of labor force
growth, net of the rate of capital depreciation. Nothing absurd about
that. Indeed, if the temporal approach doesn't deliver the same
result under such conditions, I'd say it's a defect rather than a
virtue of that approach. Conversely, if the rate of profit is above
this "steady state" level, the rate of profit will fall."
he takes it for granted (or cites as an unquestionable result) that
capital depreciation is large enough to offset the very large sums of
gross investment with which the capitalists augment their stock each
year.
This amounts to saying that depreciation is utterly misreported by the
capitalists, whose accounts in fact show that net investment is
positive at all times except for at most a year of crisis every seven
to ten years, and that the capital stock of most of the nations I
know, rises secularly. From where does this gross error on the
capitalists' part arise? Why haven't the simultaneists reported this
gross error and chastised the capitalists for it? Shouldn't the vast
outpouring of work on the errors of poor Marx, who in the last
analysis only confirms the capitalists' own estimates of depreciation,
be directed at the foolish capitalists and their equally foolish
accountants? Isn't this an equally great 'defect' in capitalist
accounting?
Alan