was marx wrong about falling rate of profit?

Bradford DeLong jbdelong at uclink.berkeley.edu
Fri Dec 6 20:50:10 PST 2002



>This article suggests that Marx was wrong about the falling rate of
>profit, particularly as applied to the U.S. Refutation, anyone? mjs
>
>(
><http://64.4.22.250/cgi-bin/linkrd?_lang=EN&lah=ec0b54b83d283dafeabfe1037978a21c&lat=1039106211&hm___action=http%3a%2f%2fwww%2eblonnet%2ecom%2fbusinessline%2f2001%2f07%2f07%2fstories%2f040720ma%2ehtm>http://www.blonnet.com/businessline/2001/07/07/stories/040720ma.htm
>)
>
> "Marx was interested in projecting the stage where capital
>accumulation would cease. But he did not believe in diminishing
>returns. He introduced a different hypothesis. Given broadly, a rate
>of accumulation higher than the population growth rate would lead to
>an increasing ratio of fixed capital to circulating capital. This is
>because of the progressive substitution of machinery in place of
>labour. Both the capital-output ratio and the capital-labour
>ratio would keep moving up.

Not if the price of machinery relative to the price of labor is going down--as it has for the past two hundred years. With a falling price over time of machinery, the rate of accumulation has to be higher than the labor force growth rate plus the rate at which the labor-time price of machinery is changing in order for Marx's predictions to have even a chance of coming true.

And, in fact, it hasn't. The physical capital-labor ratio keeps rising, apparently without bound. The value capital-labor ratio looks pretty constant...

Brad DeLong



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