I mean that what the empirical studies in most cases have really tested
is wheather or not there is convergence of interindustry profit rates to
the average rate of profit. In these studies generally an autoregressive
scheme of first order is tested:
x(t)=a+bx(t-1)+u(t) where x=difference of an industy's rate of profit
from avg.
and they usually find that the coefficient a is statistically
insignificant and the coefficient b statistically significant and less
than 1 in absolute value. From that they are led to the conclusion that
the term that the interindustry profit rates converge is:
a/(1-b)
since coefficient a is found to be not different from zero these studies
conclude that necesserily the whole term will be equal to zero and
therefore there is convergence of interindustry profit rates to the
average. On close examination, however,
we know (see Kmenta 1991, pp. 485-491) that since we have a fraction
(a/1-b)where the numerator and denominator are estimated parameters it
follows that the standard error of the above term should be estimated
from the matrix of convariances of the coefficients. When one does that
then the estimated term can be greater or smaller than zero and that
means that the convergence takes place above or below the economy's long
run (average) rate of profit. In some studies there have been efforts
(by including risk or impediments to competition) to justify the above
difference, however these efforts really cover up the fact that what it
should be tested is the rate of profit in regulating capital(s) in each
industry and not the average rate of profit of all firms that comprise
the industry.
> > interindustry profit rates around the general rate of profit. This
> > appears to contradict the tendential equalization of profit rates
> > argument.
> >
> > The trouble, however, with these studies is that they do not
> > really test Marx's idea. In Marx the equalization of profit
> > rates takes place only for the regulating capitals (see also
> > Botwinick 1993), which in general differ from the average.
> > An example could be in agriculture where the regulating
> > capital is the marginal capital which of course differs
> > substantially from the average.
>
> This sounds a bit like special pleading. Surely agriculture is
> a special case, with its naturally-ordained distinction between
> the margin and the average.
Agriculture is a special case only in the sense that all the time the
least fertile land (the marginal land) forms the regulating conditions
of production. In industry expansion or contraction of accumulation can
take place in any kind of capital and one cannot exclude the average.
Note that, not all capitalists can immediately adopt the regulating
conditions of production for a variety of reasons (risk involved with
the newest type of capital, capitalist already have invested in capital
that will last for a considerable period of time and they cannot move to
other methods of production, diffrences of expectations etc.).
Lefteris Tsoulfidis