--- Michael Dawson -PSU <mdawson at pdx.edu> wrote:
> Productive (leading to increased
> goods/services output)
> capitalist investments are made based on the
> existence or non-existence of
> promising pools of effective demand, not on the
> basis of some general
> profit-rate calculation: "I have x-million dollars.
> If I invest it in
> Project A, how much more money am I likely to get
> back? Are there enough
> potential buyers of the goods/services we'll make to
> make this bet? What
> returns have other recent investors been getting
> from this firm?"
Well, Marx and FROP defenders know that the rate of profit experienced by individual capitals vary from the average rate of profit. And capitalists obviously base their decision on what they think will happen to them, not to the average capitalist.
But if the average rate of profit is low, then the expected rates of profit of individual capitalist may tend to be low too, so capitalists will invest less when the average rate of profit is low. Everyone wants to be above average, and a disproportionate share think they can be, but expectations should move with the average anyway.
And if capitalists tend to think that effective demand is what leads to profits, then they might well tend to expect effective demand in proportion as the potential for profit is there.
I'm not writing this as a defender of the FROP. I just want to focus on where I think the real difference of opinion lies.
Marx was trying to make a case that the rate of profit was the center of a complex dynamic system with countervailing tendencies and all that jazz, which explains things like the expectation of effective demand and puts them properly in context.
If you don't agree, please say so, so I can read the responses of the FROP defenders!
(By the way, didn't Marx also think that, countervailing tendencies notwithstanding, the FROP was an apparent phenomenon in his time -- not a secret lurking behind more opimistic looking ideological distortions?)
Tom
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