Subject: [OPE-L:1884] Stock and flow measures of the profit rate
P.J.Wells@open.ac.uk
Date: Fri Dec 10 1999 - 14:17:42 EST
In OPE-L:1690 Paul C wrote (with reference to possible tests of influences
on the profit rate):
> One would have to concentrate on flow rates of profit as these are what
> the
> standard Sraffian model and Marx's standard model deal with.
>
What does Paul understand by "Marx's standard model"? (And whose standard,
by the way?)
Does this imply that M. had some other model using a different rate (a stock
rate, by implication), which he sometimes used?
More importantly, what stands to be gained or lost by using flow rates as
against stock rates?
On the face of it, if one regards Marx's fundamental insight into capital as
being summed up in the formula that it is "self-expanding value" -- and thus
thinks that there is thus a rather basic interest in just how fast this
value might be capable of expanding -- then it is the stock rate which most
important, since this measures surplus value in relation to all capital, not
just circulating capital.
What would using a flow rate advantageously focus our attention on?
For example, I've recently been looking at Gillman's various measures of the
profit rate: one rather interesting feature is that his two flow measures
(with and without depreciation) behave quite differently to the stock
measures during the Depression.
Whereas the latter fall off sharply after peaking in 1929 (e.g. his total
physical capital measure drops from 35% approx to 25% approx in 1931), the
flow-with-depreciation measure only tails off very gently (falling from 35%
in 1929 to about 29% in 1935), and the flow-without-depreciation measure
actually INCREASES between 1929 and its peak in 1931 (up by one percentage
point from a shade over 40%), dips slightly to 1933 (but is still above the
1929 level) and then falls to about 32% in 1935.
In short, a smaller, later fall (and also a smaller, later, upturn).
(Interestingly, Gillman's two measures allowing for unproductive labour (one
a stock rate, the other a flow) both behave similarly to each other and to
the "conventional" stock rates.)
One interpretation might be that the mass of profit first fell sharply due
to a fall in the total volume of activity (captured by the stock rates), but
that what business was being done still had a fairly healthy mark-up. Later,
writing off of capital equipment reduces the denominator of the (stock)
profit rate (and intimidates firms into cutting their mark-ups?)
Comments please.
Julian
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