profit rate falling!

[Rakesh Bhandari]

Michael, if investments are concentrated in the most highly transient forms
of fixed capital, viz. info technology, then this quicker turnover of fixed
capital in itself should depress the profit rate (and why have investments
been concentrated there?) Of course a more advanced telecommunications
structure may shorten circulation time and allow just in time ordering that
prevents the lock up of value in inventories. It seems to me that no one
has yet studied the opposite effects of quicker turnover of fixed and
circulating capital on the profit rate. The computer revolution depresses
the profit rate by speeding up the depreciation of information technology
(Blecker has argued that the shortage of savings is traceable to the quick
turnover of computers?) while improving profitability on the other hand by
decreasing circulation time and freeing capital from its idle
materialisation in inventories. At any rate, the computer revolution does
not have a clear cut beneficial effect on the profit rate.

Yours, r


>> This strikes me as dubious since output growth rates should have been
>> higher if turnover was increasing so sharply?
>>
>
>Not really.  In the US, turnover increases, because the U.S. investment in
>structures (probably associated with deindustrialization and outsourcing; Doug
>knows more about the data than I do) has been declining while there is more
>investment in quickly depreciating computers and the like.  However, this stuff
>depreciates rapidly and so, by definition, requires more investment to maintain
>it.  As a result, the capital stock does not increase as much as if the same
>investment had gone into long-lived durable capital.--
>
>Michael Perelman
>Economics Department
>California State University
>michael at ecst.csuchico.edu
>Chico, CA 95929
>530-898-5321
>fax 530-898-5901