I am now back in Mexico and getting settled back in (and very happy to be here).
I would like to comment on Duncan's (3074) which was a response to Andrew
and Alan's recent posts on the TSS (or "historical cost") interpretation of
the falling rate of profit. I agree in general with Duncan's post. I agree
that the TSS interpretation assumes that the amount of profit or
surplus-value is affected by a mere change in the price of raw materials
(i.e. by an "inventory evaluation adjustment") that is independent of the
expenditure of living labor, and that this interpretation is contrary to
Marx's theory that profit or surplus-value depends on living labor alone.
If the TSS were extended to include fixed capital, the same point would
apply to a change in the price of machinery, etc. (i.e. to a "capital
consumption adjustment").
The term "inventory evaluation adjustment" (IVA) brings to mind a point that
I have been wanting to make for some time - about changes in the prices of
raw materials and machinery, etc. that are due to a DECLINE IN THE VALUE OF
MONEY. The TSS interpretation so far (that I have seen) assumes that the
value of money remains constant. Under this assumption, technological
change reduces the prices of raw materials and machinery, etc., so that the
IVA and the capital consumption adjustment (CCA) are negative. Therefore,
the TSS profit net of the IVA and the CCA will be less that the profit
independent of these adjustments, and from this the TSS interpretation
deduces a falling rate of profit.
However, in today's inflationary world, with a continuing decline in the
value of money, the current prices of raw materials and machinery, etc. are
in general greater than their historical prices (in spite of
productivity-enhancing technological change), so that the IVA and the CCA
are positive. In this case, the TSS profit including the IVA and the CCA
will be GREATER that the profit independent of these adjustments.
Therefore, the trend in the TSS rate of profit under the assumption of a
declining value of money will be more positive than the rate of profit
independent of these adjustments. If the "independent" rate of profit
remains constant, then the TSS rate of profit will rise. If the
"independent" rate of profit falls, then the TSS rate of profit may not.
Therefore, the TSS argument concerning a falling rate of profit is true only
for the special case of a constant value of money. If the value of money
declines, as it in general does in contemporary capitalism, then the TSS
"historical cost" interpretation leads to the opposite conclusion. I do not
think that Marx's theory of a falling rate of profit applies only to the
case of a constant value of money.
In at least one passage, Marx stated explicitly that a change in the value
of money does not affect the rate of profit. In commenting on Section 7 of
Chapter 1 of Ricardo's Principles (where Ricardo made the same point), Marx
said:
... this section contains nothing but the theory that a fall or rise in the
value of money accompanied by a corresponding rise or fall in wages, etc.
does not alter the relations, but only their monetary expression. If the
same commodity is expressed in double the number of pounds sterling, so
also is that part of it which resolves into profit, wages or rent. But the
ratio of these three to one another and the real values they represent,
remain the same. The same applies when the profit is expressed in double
the number of pounds, $100 is then however represented by $200, *so that
the relation between profit and capital, the rate of profit, remains
unchanged.* *The changes in the monetary expression affect profit and
capital simultaneously,* ditto profit, wages, and rent. (TSV. II 203;
my emphasis)
This passage is incompatible with the TSS "historical cost" interpretation
of the price of inputs.
There are also a number of passages, most of which were discussed last Fall
on ope-l, that make it clear that, in the case of technological change,
constant capital is not evaluated at historical costs, but I will save a
review of these passages for another post.
In solidarity,
Fred