I agree with the substance of the points made
by John on the way that profit rates may vary
over the lifetime of assets,in ope4359
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> From: john ernst <ernst@pipeline.com>
> To: Multiple recipients of list <ope-l@anthrax.ecst.csuchico.edu>
> Subject: [OPE-L:4359] Re: Problems in Vol. III
> Date: 11 March 1997 18:37
>
> Allin (OPE 4355) and I (OPE 4347) seem to have
> come to an agreement about computing the rate of
> profit given depreciating fixed capital. Noting
> that rates of profit fluctuate, Paul C. (OPE 4352)
> asks "Where is the problem?" as he looks at "my
> method" of reaching 12.2% Here are a couple of
> them.
>
>
> 1. In my table the rate of profit was not fluctuating
> but increasing as more funds were withdrawn from the
> investment in the form of depreciation. This would mean
> that if we look at the average rate of profit of all
> capitals in an economy in a given year, capitalists may
> well introduce investments which seem to lower rate. In
> terms of our example, let's say that as our capitalist
> with fixed capital considered purchasing that machine the
> average rate of profit was 11%. He is considering making
> an investment which in the first year would yield a return
> of 10%. This would, of course, lower the average rate
> of profit. But he sees that his investment will actually
> bring him a return of 12.2% Thus, his investment lowers
> the average rate in the first year while allowing him to
> garner a return over time which is greater than the average
> for that year. This type of thing should play some role
> in our investigations of the "Okishio Theorem."
>
> 2. From this, it would seem that in examining the rate
> of profit in an economy in various years, the ages of
> the fixed capital as well as the amounts of depreciation
> charges should be carefully considered. That is, if the
> capital structure is "stratified" in such a way that much
> of it is new, the rate of profit may appear lower than
> it is from the point of view of the various capitalists.
> Indeed, as investment in new fixed capital increases, the
> rate of profit measured on a simple annual basis may
> appear to falling as capitalists invest in techniques that
> will eventually bring them ever increasing returns. The
> shorter the period over which fixed capital is depreciated,
> the more likely this may occur.
>
>
> John
>