This is a response to Alan's (3187), in particular that to part where he
discusses the rate of profit in the case of a declining value of money.
Andrew presents the following equation for the rate of profit the case of a
declining value of money (or an increasing monetary expression of value):
R = r + m'/m
R is called the "money rate of profit". It is in fact the rate of profit in
HISTORICAL costs.
r is called the "real rate of profit". It is in fact the rate of profit
in CURRENT costs.
Therefore, in the case of a constant value of money, Alan wishes to focus on
the rate of profit in historical costs, but in the case of a declining value
of money, he wishes to dismiss the historical cost rate of profit and focus
instead on the rate of profit in current costs (the "real" rate of profit).
But, Alan, you can't have it both ways. Either constant capital and the
rate of profit in Marx's theory are defined in terms of historical costs or
they are defined in terms of current costs. The determination of constant
capital and the rate of profit does not change depending on one's assumption
regarding the value of money. The arguments you and Andrew have presented
for the historical cost interpretation ("profit is an excess over the
money-capital actually advanced to production," "the rate of profit is the
rate of self-expansion of a pre-existing value," "historical cost valuation
must be used to determine the actual movement of profitability over time,"
etc.) apply equally as well to the case of a declining value of money as to
a constant value of money. They just lead to a rising rate of profit rather
than a falling rate of profit.
Comradely,
Fred