Economics Dictionary of ArgumentsHome
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| Rate of profit: The rate of profit in economics measures the return on investment, calculated as profit relative to the total capital employed. It indicates the efficiency of capital use, influenced by factors like production costs, pricing, and market demand. Higher profit rates suggest better economic performance and investment opportunities._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Piero Sraffa on Rate of Profit - Dictionary of Arguments
Kurz I 144 Rate of Profit/Sraffa/Ricardo/Marx/Kurz: (…) [there were] more difficult analytical and interpretive problems he faced in the course of reconstructing the surplus approach to the theory of value and distribution. These concerned, first, the impossibility of reducing commodities to finite series of dated quantities of labor in a circular flow framework. However far back one traces the process of production (in logical time), one will never arrive at a stage where labor is employed without being assisted by produced means of production. This fact has farreaching implications and was at the center of some of Sraffa’s criticisms of Bortkiewicz and his admiration for Marx. Problem: One of the implications is that the maximum rate of profits of a given system of production (corresponding to zero wages) is finite, not infinite. This fact has an immediate bearing on the second issue we are concerned with: the impact of the accumulation of capital on the general rate of profits. This issue occupied center stage both in Ricardo’s and in Marx’s alternative explanations of a falling tendency of the rate of profits, and it recurred in a somewhat different form in the concept of the marginal productivity of capital advocated by neoclassical authors. Hence Sraffa was not only confronted with an intricate analytical problem but also with intricate problems of interpretation: How did Ricardo formulate his theory, and on the basis of which assumptions did he reach which conclusions, and was his reasoning sound? Was Marx’s discussion of the falling tendency of the rate of profits premised in the same way as Ricardo’s, and if not, could the differences in results be fully explained in terms of differences in assumptions? How did the marginalist authors frame their problem and how does their formulation relate to those of Ricardo and Marx? Kurz, Heinz D. „Keynes, Sraffa, and the latter’s “secret skepticism“. In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge. - - - Kurz I 166 Rate of profit/Sraffa/Kurz: It is important to stress that in Sraffa's interpretation, Marx in his theory of the long-run trend of the rate of profits had not assumed a constant real wage rate in terms of commodities. Marx is rather taken to have held that real wages in terms of commodities could rise but that due to a lack of organization and strength on the part of workers in the conflict over the distribution of income, workers would typically not obtain a proportionate share of the additional quantities of commodities that are made available by the increase in labor productivity associated with the introduction of machinery. Hence the rate of surplus value would tend to rise and proportional wages fall - and yet, Marx ([1861-63] 1989, 73-74)(1) had maintained, the general rate of profits was bound to fall: The rate of profit falls, although the rate of surplus value remains the same or rises, because the proportion of variable capital to constant capital decreases with the development of the productive power of labour. The rate of profit thus falls, not because labour becomes less productive, but because it becomes more productive. What is remarkable is that in interpreting the analyses of Ricardo and Marx, Sraffa distinguished carefully between the case of capital accumulation without any technical progress, on the one hand, and the case with "inventions" or technical progress, on the other. And he related Marx's law of the tendency of the rate of profits to fall exclusively to the former case. Ricardo/Brokievicz: This contradicts a widespread interpretation according to which Marx in volume 3 of Capital tried to establish a falling tendency of the rate of profits for an economic system in which capital accumulates and there is technical progress more specifically, Sraffa read Bortkiewicz's argument With that part of Ricardo's analysis of the machinery question in mind, in which Ricardo had argued that improved machines can frequently not be employed immediately after they have been invented, because it would not be profitable to do so: they can only be introduced once nominal wages have risen in the course of accumulation. 1. K. Marx. 1867. The Capital.The Process of Production of Capital. https://www.marxists.org/archive/marx/works/1867-c1/ (21.11.2024) Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Sraffa I Piero Sraffa Production of Commodities by Means of Commodities. Prelude to a Critique of Economic Theory (Cambridge: Cambridge University Press). Cambridge 1960 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 |
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