A reply to Duncan's ope-l 3541, which I found very thoughtful and interesting.
Duncan: "why should we expect the accumulation process always to increase
employment, or the capitalist economy to be in some kind of trouble when
employment is falling or constant due to very rapid technical change?"
I don't think anyone expects accumulation always to increase employment. The
expected consequences of nonincreasing employment with accumulation depend on
one's value theory, specifically whether one holds that value is determined by
labor-time. Marx's theory clearly implies, and Marx himself clearly stated,
that all profit comes from only surplus-labor and that profit is thus limited
by employment.
This is the key to the law of the FRP, for instance. Assuming constant length
and intensity of the workday and constant rate of surplus-value, Marx says
"the aggregate labour of these two million [workers], and their surplus-labour
expressed in surplus-value, always produces the same magnitude of value. But
with the growth of the mass of the constant (fixed and circulating) capital
set in motion by this labour, this produced quantity of value declines in
relation to the value of this capital .... This ratio, and consequently the
rate of profit, shrinks ...." (Vol. III, Ch. 13, p. 217, Progress).
He also writes, in a now controversial passage: "Two labourers, each working
12 hours daily, cannot produce the same mass of surplus-value as 24 who work
only 2 hours, even if they could live on air and hence did not have to work
for themselves at all. In this respect, then, the compensation for the
reduced number of labourers by intensifying the degree of exploitation has
certain insurmountable limits. It may, for this reason, well check the fall
in the rate of profit, but cannot prevent it altogether" (p. 356).
In another now controversial passage, he writes similarly: "To produce te
same rate of profit after the constant capital set in motion by one labourer
increases ten-fold, the surplus labour-time would have to increase ten-fold,
and soon the total labour-time, and finally the entire 24 hours of a day,
would not suffice, even if wholly appropriated by capital" (p. 398).
At the root of all this is the simple value-theoretic proposition that "Two
coats will clothe two men, one coat will only clothe one man, etc.
Nevertheless, an increase in the amount of material wealth may correspond to a
simultaneous fall in the magnitude of its value. This contradictory movement
arises out of the twofold character of labour. ... variations in productivity
have no impact whatever on the labour itself represented in value. ... The
same labour, therefore, performed for the same length of time, always yields
the same amount of value, independently of any variations in productivity"
(Vol. I, Vintage, p. 137).
Thus, when he gets to the FRP, he cautions that he is concerned strictly with
a ratio of values, not with how productive the labor that produces them is:
"We shall entirely ignore here that with the advance of capitalist production
and the attendant development of the productiveness of social labour and
multiplication of production branches, hence products, the same amount of
value represents a progressively increasing mass of use-values and enjoyments"
(Vol. III, Progress, p. 219).
In my example, as Duncan writes, "corn is accumulating ... [and there is] a
positive (say 250er period) rate of profit measured in the corn numeraire."
I think the above passages make clear that Marx wasn't concerned with this.
He didn't think the progressively increasing mass of use-value (corn) produced
by a given amount of labor had any *direct* bearing on the profit rate.
Indirectly, he argued, it does have an impact, but an impact opposite to the
one Ricardo thought it had: "The rate of profit does not fall because labour
becomes less productive, but because it becomes more productive." I note that
this concept was highlighted by Duncan in his discussion in _Understanding
Capital_.
On the other hand, if one denies that value is determined by labor-time, then
one would not expect falling or stagnant employment to impact negatively on
the capitalist system (unless one were an underconsumptionist, but wages are
another matter anyway).
In a very illuminating passage, Duncan then writes:
"Second, the puzzle of the zero rate of profit in money numeraire could be
resolved, I think, very much in the spirit of Marx's own analysis, in two
ways. In a commodity-money (gold standard) economy like that of the 19th
century, the monetary expression of value would be determined by the relative
speed of cost declines in the gold mining and other commodity producing
sectors. If, for example, gold mining experienced on average the same rate of
labor-saving technical progress, then the monetary expression of value would
be falling at this rate, and the money rate of profit would be positive. If
for some reason gold production were immune to technical progress, then the
reasoning Marx uses in his discussion of the transformation of values into
prices of production would suggest that the price of corn would have to be
above its value so that the rate of profit in the corn sector could tend
toward equality with the rate of profit in the gold-mining sector. When we put
the example in this larger context, I don't think it appears so paradoxical or
problematic."
I think this passage is *very* important. It shows clearly that whether we
have commodity money or pure accounting money does not matter; the problem is
the same. In the first case (BTW, the value of money falls; the MEV rises),
money prices of the "average" commodity would remain constant and, ceteris
paribus, the money rate of profit would remain not only positive, but
constant, given data similar to those of my example. In the second case, the
equalization of the profit rate, if accomplished, would also make for a
constant money rate of profit. Both cases thus give the same result as one
would get by measuring the profit rate in any commodity numeraire, or by
measuring it in inflation-adjusted money prices. In *all* these cases, we
have a rise in the MEV, which seems to cover over the fall in the profit rate
as measured in labor-time.
Just like a unit of every other commodity, in other words, a unit of commodity
money fails to represent a constant amount of value. It is therefore NOT an
adequate measure of value. Only a unit of labor-time represents an invariable
amount of value. This is discussed in _Capital_ I, Ch. 1, section 3 (a) (2)
(ii), "The quantitative determinacy of the relative form of value." Marx
notes that if the values of all commodities change proportionately , their
relative values remain constant, and the same is true of Duncan's second case,
in which the price of all non-money commodities and the exchange-values of
money remain constant. With respect to such cases, Marx indicates that
"The change in their real values would be manifested by an increase or
decrease in the quantity of commodities produced within the same labour-time.
...
"... real changes in the magnitude of value are neither unequivocally nor
exhaustively reflected in their relative expression, or, in other words, in
the magnitude of the relative value. ... Its relative value may remain
constant, although its value varies ... (Vintage, p. 146)."
In a footnote here, he notes that vulgar economists exploit this problem in
order to argue against the determination of value by labor-time. He quotes
Broadhurst, and comments that
"Mr Broadhurst might just as well say: consider the fractions 10/20, 10/50,
10/100 etc. The number 10 remains unchanged, and yet its proportional
magnitude ... continually diminishes. Therefore, the great principle that the
magnitude of a whole number, such as 10, is 'regulated' by the number of times
the number 1 is contained in it falls to the ground."
(The labor-time value of the commodity is represented here by 10, and the
denominators are various labor-time values of other commodities with which it
exchanges. The number 1 represents one unit of labor-time.)
It seems clear to me from the above that Marx would deny that the rate of
profit measured in commodity money is an adequate measure of the profit rate,
because price changes do not unequivocally or exhaustively reflect changes in
commodities' "real values," "real changes in the magnitude of [their] value."
>From this, and from all his reasoning with respect to the FRP couched in
labor-time terms, it seems clear that he thought the "real" profit rate is
measured in labor-time, or, what amounts to the same thing, a constant MEV.
(It was perhaps in this context that Alan was suggesting that the usual notion
of "real" variables is neoclassical.)
When there is no fixed capital or relative price changes, the following hold,
where RL is the labor-time rate of profit, RM is the money rate of profit (in
current prices), RR is the replacement cost or inflation-adjusted rate of
profit, i is the rate of inflation, and 0m is the percentage change in the
MEV:
1+RM = (1+RR)(1+i)
1+RM = (1+RL)(1+0m)
and thus
1+RR = (1+RL)[(1+0m)/(1+i)]
See footnote for derivations. It should be noted that all of these rates are
mere *definitions*. RM and RL do, however, measure profit relative to the
capital actually advanced, not the amount of capital which would have been
advanced had the money prices reigning at the end of the period also reigned
at the start.
If labor productivity is rising, then [(1+0m)/(1+i)] of the last definition
is also rising. In fact, this expression basically reduces to (1 +
productivity growth rate), if total labor and not just living labor is used to
measure productivity. Thus, in my example, in which, in the limit, RL = 0
and productivity growth is 250er period, we have
1+RR = (1+RL)[(1+0m)/(1+i)] = (1+0)(1+.25) = 1.25, so that RR = 25%.
Thus we see that RR implies that productivity growth *raises* the rate of
profit. This does not conform to Marx's concept of value or to his theory of
the determination of the profit rate.
Now, one may argue that Marx never measured the profit rate on the basis of
capital actually advanced, but used end-of-period prices/values, so that 0m =
i = 0, and therefore RL = RR. Nonetheless, it remains true that RR will
always overestimate the ratio of profit to capital advanced as compared with
the labor-time measure, if productivity is rising. Moreover, I think the
above passages from Marx create a big problem for simultaneism - if Marx
always computed the profit rate using end-of-period prices/values, then it is
*true by definition* that rising productivity cannot affect the profit rate,
because there is no productivity growth at a single point in time. WHY THEN
DID HE SAY THAT THE PROFIT RATE FALLS *BECAUSE* PRODUCTIVITY RISES??
Certainly not because the ratio of output to inputs rises. And certainly not
because the real wage rises; this has nothing to do with the matter at hand
and in any case Marx strongly repudiated the idea that the profit rate falls
because real wages rise.
The simplest answer is this. I've shown above that
1+RM = (1+RL)(1+0m),
which implies that
1+RL = (1+RM)/(1+0m),
so that a rise in the MEV, ceteris paribus, reduces the real (labor-time)
profit rate. This is the same as a rise in productivity growth if we abstract
from inflation. There is a very interesting new paper by Alejandro Ramos
that explores the FRP in some detail from this vantage-point, and I must
credit him for this insight.
There's one thing about which I'm not sure I agree with Duncan. He seems to
indicate that the discrepancy between the money and labor-time profit rates
*solves* a problem: "the puzzle of the zero rate of profit in money numeraire
could be resolved .... When we put the example in this larger context, I
don't think it appears so paradoxical or problematic."
It seems to me that this is where the problems *begin*. Since there is good
reason to believe that there can be a systematic discrepancy between
labor-time and money measures of profitability - the good reason is
productivity growth, something about which Marx was extremely aware - how, if
at all, does the determination of value by labor-time manifest itself? How,
if at all, does the FRP manifest itself? All this arises from the
exceedingly elemental contradiction between value and use-value, which in turn
"arises out of the two-fold character of labour" under capitalism. It seems
to me that this problematic is only now being recognized, because the
simultaneist tradition has for so long tried to reconcile the contradiction
between value and use-value by collapsing the former into the latter. Among
those doing TSS research, this problematic has increasingly come to the
forefront. I think it may take a critical mass of people many years to answer
the above questions satisfactorily, but at least we have the start of several
attempts to tackle different aspects of it.
Andrew Kliman
==============================================
Footnote: P(t) and P(t+1) are vectors of unit money prices, e(t) and e(t+1)
are monetary expressions of value, X is a vector of outputs, and K a vector of
means of production and subsistence.
By definition, 1+RM = P(t+1)X/P(t)K.
And by definition, 1+RR = P(t+1)X/P(t+1)K.
But, by definition, P(t) = P(t+1)/(1+i),
so that, by definition, 1+RM = (1+RR)(1+i).
By definition,
[1/e(t+1)]P(t+1)X
1+RL = ----------------------
[1/e(t)]P(t)K
(money prices of time t and t+1 are deflated by their respective MEVs to get
the labor-time expressions for gross sales revenue and capital advanced),
or
1+RL = [e(t)/e(t+1)]{P(t+1)X/P(t)K} = [1/(1+0m)]{1+RM}.