May I add something to Jerry's numerical example in #4940?
> Let me put some numbers on that question [I know you and some
> others like numerical illustrations]:
I think they are useful to precise the concepts.
> Suppose that the aggregate value of products *produced* = $100 (100
> products produced with an "exchange value" of $1/unit).
>
> Assume no constant fixed capital [did I say that?] and the MEV is constant.
>
> Now suppose that only 90 of those products are sold on the market and the
> remaining 10 units -- after production -- physically degrade to the
> point where they have no use-value or exchange-value.
>
> What would be the magnitude of the value "in existence"?
>
> Would it = $90?
>
> If so, what would you call the "value" [$10 = exchange value] of the
> "commodities" that have been "lost"?
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(a) Additionally, let us asume that, at the begining of the cycle, the
capitalist ADVANCED $50 to produce Jerrys commodities ("shirts").
These $50 = $30 in "cotton" + $20 in wages. The price per shirt is
still $1/unit but, as Jerry says, 10 shirts are "physically
degradated".
Q: What would be the profit rate?
(b) A variant: Let us suppose that Jerry's shirts dont "physically
degrade". What happened is another thing:
While the shirts are "in process" the price of cotton falls, so that
capitalist's stocks are DEVALORIZATED. Therefore, at the end of the
cycle, his/her stock of cotton (now converted into shirts) is worth
only $20, instead of $30 that s/he ADVANCED at the begining. This
falling in the price of cotton is due to a change in the PRODUCTION
CONDITIONS of cotton. The falling price of cotton implies that the
price per shirt also falls from $1 to $0.9.
Q: How can we calculate the rate of profit in order to take into
account this DEVALORIZATION of the ADVANCED capital?
My answer is:
--> Shirt's price is now $0.9, so that the capitalist only realizes
$90 at the end of the cycle whereas s/he ADVANCED $50 at the begining.
Hence the profit rate is ($90/$50)-1 = 80%.
--> Under "normal conditions" (price of cotton doesnt fall) s/he would
realize ($100/$50)-1 = 100%. So, it is clear that the DEVALORIZATION
of cotton's stock has brought about a LOSS for him/her (80% < 100%).
--> I think that the so-called "replacement cost" vision would
calculate the following profit rate: ($90/$40)-1 = 125%.
The explanation would be that what matter is the "replacement cost"
of the inputs and since cotton price has felt (its "replacement cost"
is now $20) the denominator of profit rate is then $20+$20 = $40, not
$30+$20 = $50 which was the capital advanced at the begining of this
cycle.
I think the problem with this vision is that a DEVALORIZATION
of capital is presented as provoking an opposed result, i.e. a
VALORIZATION of it. In other words, the falling price of cotton would
imply a profit rate greater than than prevailing under "normal
conditions" (125% > 100%). In this sense this calculation is
erroneous because capital has been DEVALORIZATED, not VALORIZATED.
Alejandro R.