On Mar 5, 2011, at 11:14 PM, Peter Fay wrote:
> Chris Harman, 2010 - http://www.isj.org.uk/?id=613 :
> "aggregating the different investments made at different times in a
> particular period is a necessarily complicated procedure, and most
> attempts
> to measure national rates of profit use a different procedure—that of
> current cost accounting. The profit made in a given year is measured
> against
> the market value (ie the replacement cost) of the structures and
> equipment
> used. This necessarily leads to a distortion in the figures since any
> increase in productivity since the investment was made will mean
> that its
> current market value is less than what was laid out on it: the rate of
> profit will appear higher than it actually was.
There are striking errors here. The "market value of the structures and equipment" is not their "replacement cost" but their *depreciated* replacement cost (original cost times inflation rate since purchase divided by depreciation rate) and that depreciation rate is in part a function precisely of "increase in productivity" since that increase in productivity is a cause of the obsolescense of the fixed capital stock (what Marx called "moral wear and tear.") And Harman is precisely wrong that his notion of "market value" will understate the value embodied in the fixed-capital stock--because depreciation is excluded it will overstate that value just as the flow of reported profits will also be overstated for the same reason, leaving the effect on realized profitability calculations indeterminate. But it has no significance anyway, because the decisive variable in Marxian theory is not the average rate of profit--it is the *incremental* rate of profit, the rate of profit on *new* investment (what Keynes called the Marginal Efficiency of Capital).
Shane Mage
"All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods."
Herakleitos of Ephesos, fr, 90