2. As Chris knows well, I disagree with these points
completely. I argue that the general rate of profit and the
average rate of profit are essentially the same concept (that is
why Marx treated them as synonyms in the title of Chapter 9
of Volume 3 and many other places) and that BOTH ARE
DETERMINED PRIOR TO PRICES OF PRODUCTION.
I have argued in two papers (that Chris has read) that Marx's
theory is based on the methodological principle that the total
amount of surplus-value is determined prior to its distribution
or division into individual parts. Marx stated and emphasized
this methodological principle in many passages, with increasing
clarity and emphasis, which I document in detail in these
papers. Volume 1 is about the determination of the total
amount of surplus-value and Volume 3 is about the
distribution of surplus-value into individual component parts
(equal rates of industrial profit, merchant profit, interest, and
rent). I think that the textual evidence is very strong that
Marx assumed that the total amount of surplus-value is
determined prior to its division into individual parts.
The prior determination of the total amount of surplus-value
imples that the general rate of profit for the total social capital
is also determined prior to the determination of prices of
production, and is determined as the ratio of the total amount
of surplus-value to the total social capital invested in the
capitalist economy as a whole. The total amount of capital (the
denominator in the rate of profit) is taken as given in Marx's
aggregate theory of the surplus-value in Volume 1 and the
total amount of surplus-value (the numerator) is determined
by this Volume 1 analysis. The general rate of profit,
determined in this way, is then taken as a given magnitude in
the determination of prices of production in Volume 3. This
point is also extensively documented in my papers.
3. The general rate of profit determined by aggregate
magnitudes in this way can also be considered as an average
rate of profit, as a weighted average of the diverse rates of
profit that would result ON THE ASSUMPTION that the prices of
production of individual commodities were equal to their
values. In this way, individual capitals are treated as "aliquot
parts" of the total social capital (because individual prices are
assumed to be equal to their values), not as real individual
capitals as distinct from one another and in competition with
one another. The average rate of profit determined in this is is
EXACTLY THE SAME as the general rate of profit determined by
aggregate magnitudes, as can be seen from any of Marx's
numerical examples or from simple algebraic proof, and as
Chris acknowledges.
Furthermore, and this is the main point that directly
contradicts Chris' interpretation, the average rate of profit,
determined in this way, is determined PRIOR to the
determination of prices of production, just like the general rate
of profit, and is NOT DETERMINED SIMULTANEOUSLY with
prices of production. See for example Marx's discussions of the
prior determination of the average rate of profit in: C.III. 257;
TSV.II. 67-69; MECW. 33. 97-99; SC. 120-22. The average rate
of profit is first determined as the weighted average of
individual rates of profit under the assumption that prices are
equal to values, and then this average rate of profit is
SUBSEQUENTLY APPLIED to the determination of prices of
production. Marx's concept of the average rate of profit does
not imply that the rate of profit is determined simultaneously
with prices of production. I know of textual evidence to
support Chris' interpretation. Is Chris has such evidence, then
please present it.
I think that the main reason why Marx discussed the general
rate of profit as an average of individual rates of profit was to
emphasize that the general rate of profit DEPENDS IN PART ON
THE DISTRIBUTION OF CAPITAL across industries. The average
rate of profit is not a simple average, but is instead a
WEIGHTED average, where the weight given to the rate of
profit in each industry depends on the percentage of the total
social capital invested in that industry. If more capital is
invested in an industry with a low composition of capital, then
the higher rate of profit in that industry will be given a higher
weight, so that the weighted average rate of profit would be
higher. And vice versa. This is not a fundamentally different
method of determination. Rather, looking at the general rate of
profit as a weighted average rate of profit simply clarifies the
dependence of the general rate of profit on the distribution of
capital. See for example C.III. 262-63 and 269 where Marx
emphasized this point.
I think that another reason why Marx considered the general
rate of profit as the average rate of profit was to sharpen his
critique of Ricardo. Ricardo had assumed, without examination
or justification, that commodities would sell at prices which
approximated their values and which would at the same time
yield equal rates of profit. Ricardo never explained
theoretically how individual prices that yield equal rates of
profit are different from their values. Marx's concept of the
average rate of profit highlights Ricardo's mistake: if
individual prices were equal to their values, then individual
rates of profit would be very different; they would not be
equal. And the actual prevailing rate of profit would have to
be a sort of average of these different individual rates of profit.
The average rate of profit could not the the rate of profit that
capitalists receive when prices are equal to their values.
4. A question for Chris: if the average rate of profit is
determined simultaneously with prices of production, EXACTLY
HOW is the average rate of profit determined? What is the
equation (or set of equations) for the determination of the
general rate of profit (and prices of production)? The neo-
Ricardian interpretation of Marx's theory of course also argues
that the rate of profit is determined simultaneously with prices
of production, and argues further that both are derived from
given physical quantities of inputs and outputs. Is this what
you are suggesting? (I don't think so.) If not, then what?
How is the average rate of profit determined?
Chris seems to suggest that the average rate of profit is
determined somehow by COMPETITION. However, Marx
emphasized many times that competition ONLY EQUALIZES the
individual rates of profit to the general or average rate of
profit, which is determined in other ways; competition does
NOT DETERMINE the general or average rate of profit. More
precisely, competition does not determine the level of the rate
of profit. Competition only equalizes all the individual rates of
profit to the level determined by the analysis of capital in
general. A very clear statement of this point is in C.III. 1004-
05. And there are many others.
This clarifies the meaning of the passage from the beginning of
Chapter 10 of Volume 3 that Chris interprets to mean that the
general rate of profit is determined by competition. But Chris
is confusing the THEORETICAL DETERMINATION of the general
rate of profit with the ACTUAL EQUALIZATION of profit rates
through competition and the mobility of capital. In the quoted
passage, Marx is not talking about the determination of the
general rate of profit, but rather about the actual process of
equalization of profit rates to the otherwise determined general
rate of profit. Therefore, there is no contradiction between the
beginning and the end of Chapter 10, as Chris suggests. Marx is
consistent throughout that the rate of profit is not determined
by competition, but competition only equalizes the individual
rates of profit to the predetermined rate of profit.. Chris¹ last
"approach" is clearly Marx's own consistent approach.
I look forward to further discussion of this important issue.
Comradely,
Fred
P.S. The titles of my two papers referred to above are:
³The Development of Marx¹s Theory of the Distribution of
Surplus-value²
³Hostile Brothers: Marx¹s Theory of the Distribution of
Surplus-value in
Volume 3 of Capital²
I would be happy to send anyone a copy by email or regular
mail.