profit rate falling!

Michael Perelman michael at ecst.csuchico.edu
Fri Mar 26 09:23:36 PST 1999


You said what I meant much better than I did.

Rakesh Bhandari wrote:


> 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

--

Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901



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