On 8/31/2010 8:15 PM, Julio Huato wrote:
> The profit rate is the
> rate at which capital expands itself. If a capitalist is (or we are)
> trying to determine how effective an individual particle of capital
> is, we need to look at its profit rate. If we are trying to determine
> how effective it may be in the future, we try to estimate its future
> profitability.
Sure, but it's not clear that the effectiveness of a particle of capital is necessarily the most important thing either to "us" or to a "capitalist."
> My point is *not* that individual profit rates don't matter. They do,
> What I'm saying
> is that, if we want the bigger picture (if you wish, the viewpoint of
> a sensible economist, rather than the viewpoint of an accountant), we
> should also look at how the entire stock of capital in the economy is
> expanding or contracting. Not just a biased sample of capitals, but
> capital in the aggregate. Or, to put it another but equivalent way,
> we should look at how effective an *average* particle of capital is in
> the economy -- the central tendency of a random sample, rather than
> the central tendency of a biased sample.
Okay, fair enough. I didn't quite realize that you were making a point about the non-representativeness of the S&P 500. It's a valid point.
> If we don't, we get a biased or -- as Marx would put it -- superficial
> appreciation of the phenomena involved. We'd see things as they
> appear to a group of individual capitalists, rather than the way they
> appear to capital in general, let alone the way they appear to us, the
> victims of capital. So I think Marxists are exactly right in
> regarding the profit rate as the stethoscope or manometer or whatever
> that gauges the pulse of capital, individual and overall.
Well, I'd say this. If the PepsiCo corporation (parent of Pizza Hut, I think) is raking in profits but driving Joe's Pizza out of business, I'm not sure it's useful to say that PepsiCo's higher profits are canceled out by Joe's bankruptcy so it all averages out to bad news for "capital in general." (Even if it does actually average out mathematically.) You can say that Joe's Pizza is part of "capital in general" but only in the same sense that the CEO of PepsiCo, who earns a salary for his labor, is part of "labor in general." It seems like a very formalistic way of putting things. What real-world question could this sort of aggregation possibly provide answers to?
There are at least two ways to judge the economy. One is to judge it from the point of view of human well-being. The other way is to judge it from the point of view of "capitalism." The right metrics for human well-being, in my view, are things like the unemployment rate, inequality, work conditions, the social wage, etc. But what does it mean to judge the economy from the point of view of "capitalism"?
It could mean - to what extent are economic conditions actually threatening capitalism's continuation? The right metric for this is purely political: how strong are the actual political challenges to capitalism? Or it could mean - what effect are economic conditions having on the economic life of capitalists? But the right metric for this is *not* the rate of profit.
In 2010, capitalists - however you define the word - earn most of their income through "labor." We can look at this historically or mathematically. Historically: In the capitalism-triumphant years of the 80's and early 90's, outside of manufacturing (i.e., in most of the economy) the profit rate was basically the same as it had been in the terrible 70's. Yet "capitalists" were clearly becoming much richer and much more euphoric.
Mathematically: Let's say the wage/profit split is 80/20. If the profit share goes down so it's now 85/15 then profits have fallen by 25%. That's bad for "capitalists." But on the other hand, let's say the "capitalists" are the top 1% of labor-income earners. All they have to do is increase the top 1% share of total labor earnings from, say, 10% to 12.5% and they've made a 25% increase in their labor income. Since their labor income is significantly greater than their capital income, they're better off with lower profits and higher inequality than they would be with higher profits and lower inequality. So in that case what they "should" care about is inequality, not profits.
So yes, the profit rate is the health of "an average particle of capital." But why should anyone care about the health of an average particle of capital? I've never even met one.
SA