>I may sound like a broken record but I don't see how we can ignore the
>age-stratification of fixed capital when looking at profitability. If
>capitalists are investing on the basis of an anticipated rate of
>return rather than a simple expected profit rate, then the profit
>rates earned using newer plant and equipment may well be less than
>those earned using older, less productive techniques. Further, the
>drive for immediate increases in profits would seem to be less in
>industries that are dominated by relatively few firms. These firms
>can give less attention to immediate profitablitly and make investment
>decisions that give a higher priority to the rate of return over several
>years.
1. Agreed, age stratification of fixed capital shouldn't be ignored. Newer
firms are more likely to be using the best generally available means of
production and therefore are more likely to have lower unit costs.
2. Agreed, capitalists invest on the basis of anticipated rate of return
rather than current average.
3. It does not follow from point 2 that, "the profit rates earned using
newer plant and equipment may well be less than those earned using older,
less productive techniques." Newer firms have lower unit cost and greater
capacity, they will be the price setters. Higher cost older firms will lose
market share, have lower profit margins, and lower profit rate - relative
to the regulating capitals in their industry.
4. I don't know if the drive for immediate profitability is greater or less
among industries dominated by relatively few firms. I regard this as an
unnecessary psychological assumption. What is different and what is
empirically verifiable is that firms that operate in highly concentrated
industries have greater barriers to entry and greater barriers to exit. So,
when
they are earning about average profits it is more difficult for new firms
to enter and compete
them away. When they are earning below average profits it is more different
for these firms
to exit.
5. Agreed, larger and more capital intensive firms the financial reserves
to operate with a longer planning horizon than less capital intensive
firms. Indeed, the huge capital investment and the greater barriers to
entry and exit forces these firms to engage in long term planning.
6. Willi Semmler covered both the empirical and theoretical literature on
these issues in his 1984 book,
"Competition, monopoly, and differential profit rates: on the relevance of
the classical and
Marxian theories of production prices for modern industrial and corporate
pricing."
I haven't followed the literature forward from Semmler's book, but newer
work should not summarily overlook the the excellent theoretical and
empirical work of that text.
Peace, patrick l mason