Heinrich Contra Law of Falling Rate of Profit

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Angelus Novus
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Apr 10 2013 09:24
Heinrich Contra Law of Falling Rate of Profit

I'm a bit late posting this, some of you will have already seen this.

In Marx’s work, no final presentation of his theory of crisis can be found. Instead, there are various approaches to explain crises. In the twentieth century, the starting point for Marxist debates on crisis theory was the third volume of Capital, the manuscript of which was written in 1864–1865. Later, attention was directed towards the theoretical considerations on crisis in the Theories of Surplus-Value, written in the period between 1861 and 1863. Finally, the Grundrisse of 1857–1858 also came into view, which today plays a central role in the understanding of Marx’s crisis theory for numerous authors. Thus, starting with Capital, the debate gradually shifted its attention to earlier texts. With the Marx Engels Gesamtausgabe (MEGA), all of the economic texts written by Marx between the late 1860s and the late 1870s are now available. Along with his letters, these texts allow for an insight into the development of Marx’s theoretical considerations on crisis after 1865.

B_Reasonable
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Apr 10 2013 15:03

Referring to the article, the ratio s/v can only increase if the labour becomes more "complicated" (Capitial Vol1 Ch1), i.e. each hour expended represents a higher multiple of "simple labour" . Marx doesn't suggest an independent measure of this complexity beyond observed differences in exchange values and seems to discount it as a general factor in increasing productivity when, for instance, he also says in Ch1: "In general, the greater the productivity of labour, the less the labour-time required to produce an article, the less the mass of labour crystallized in that article, and the less its value."

Working within the labour theory of value (LTV), for there not to be a tendency for the rate of profit to fall, Heinrich has to establish that any general increase in the "intensity" of labour is outstripping the increase in value composition (c/v) -- contrary to what Marx says indirectly -- which he doesn't attempt to do. Overall, when viewed in the light of this 'complex labour' fudge-factor, Heinrich's argument simply highlights the general un-disprovability of the LTV and the pointlessness of these kinds of argument.

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Khawaga
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Apr 10 2013 16:25

In this context "complex" shouldn't be read as referring to a job being complex. From what I can gather complex is a "code word" for concrete or particular. Simple refers to abstract (perhaps even universal). This is typically how Marx uses these words in Vol 1. though I must admit that the specific case you are referring to did muddle it for me. Perhaps an issue of translation?

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jura
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Apr 10 2013 18:12

B_Reasonable, I don't understand what you say at all. The ratio s/v, i.e., the rate of surplus-value, can increase for all sorts of reasons, including the simple lengthening of the working day, or changes in productivity outside of the enterprise in question.

RedHughs
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Apr 10 2013 20:32

Wow,

I've been having a long Facebook discussion on this. I think this is a very illuminating article.

Heinrich is saying, among other things, that the contradictions of the value versus prices-of-production are real. He "solves" this problem for himself by jettisoning the parts of Marx's approach which depend on "the processes of production as a whole" - including the long term falling rate of profit. This is fair enough in my mind but I think followers of Andrew Kliman would be correct to say that Heinrich, through agreeing that there is contradiction in Capital III, is indeed coming down on the side of Böhm-Bawerk and Bortkiewicz in the late 19th century debates on "the transformation problem".

I don't think that Marx's failed efforts to prove his law really mean you couldn't find something, just that Marx didn't really have strong enough mathematical tools for analyzing production as a unified whole. Basically, Heinrich might reject the later neo-Ricardian/Sraffian investigations that academics like Sweezy later engaged in. But he does show why this approach is pretty much the only way forward if one wants to engage in this quantitative analysis of capitalist production as a whole. Certainly, Heinrich curtly dismisses Kliman in a footnote so he doesn't seem to be a "TSSI" fan.

Also I think Heinrich is correct in highlighting the expression (s/v)/(c/v + 1). This shows the importance of the rise of the society-wide rate of surplus value. That question is more complicated than the note that the "production of relative surplus value" results in an increase in this rate - the society-wide rate of surplus value does not arise as the sum of the individual surplus values rates of the various industries; if relative surplus value is produce in only some industries, the productivity of only some industries goes up, then the relative demand for the products of those industries where whose productivity hasn't increased will itself increase. That is, low productivity industries which produce necessities will impose a lower-limit on the society-wide rate of surplus value but there isn't any inherent limit on the increases in the organic composition of capital.

S. Artesian
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Apr 10 2013 20:42

Channeling Galileo: And still it falls.

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Malva
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Apr 10 2013 20:51

If what Heinrich says is true, does this challenge the whole "critique of value" argument about an internal limit to capital due to technological development? I'm really struggling to get my head around this.

RedHughs
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Apr 10 2013 21:25

I believe Heinrich separates Marx' value theory into two parts, a monetary and a quantity theory.

I would still suspect that Marx himself imagined the two aspects forming a "dialectical unity" but I definitely done trying to myself push "dialectics" as a framework for unifying this stuff (OK, Angelus?).

Anyway, I think Heinrich demonstrates that whatever quantity theory people might take purely and entirely from Marx's works really doesn't fit together by itself as a mathematically consistent theory. And indeed, Heinrich is pretty much echoing earlier arguments to this effect. (Edit: I should note that what Heinrich adds here is an argument that Marx himself was abandoning the quantity theory over time).

How shocking people find this depends, to my mind, on how much people relate to Marx's writings as a fixed text offering enlightenment from on-high. Oddly, it seems like the whole "turn to Marx" perspective, post-Stalinism, post 1970 or whatever, has taken this "Marx and Marx alone" position even more than the various sclerotic Leninist sects and it seems like this is because it has been cut-off from the historical socialist movement that Marx was a part of (ya'll are like protestants returning to a biblical literalism). Correcting Marx here seems to be as shocking as correcting Stalin without authorization would be for the CP USA.

But anyway, if you want to try and recapture your orthodox, you can argue that Marx never published Capital III. One could argue that Engels shoe-horned Marx's approach into his cruder technological determinist theory through publishing Capital III as a finished work.

I myself feel like one can pick the most useful parts of post-Marx quantitative theories and integrate them as a better quantity theory having useful relation to the more qualitative "value-form" or "monetary" or whatever theories. But I understand now how unorthodox, unacceptable, and even offensive people here will find this.

andy g
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Apr 10 2013 21:49
Quote:
Certainly, Heinrich curtly dismisses Kliman in a footnote so he doesn't seem to be a "TSSI" fan

The footnote in question relates to Kliman's defence of LTRPF which is logically distinct from TSSI as such

Quote:
The many “proofs” of the law that can be found in the literature, either rest upon logical errors, similar to those just demonstrated in the case of Marx, or upon absurd assumptions, such as the precondition that v = 0, as in the work of Andrew Kliman, Reclaiming Marx’s ‘Capital’: A Refutation of the Myth of Inconsistency.

I regret to say that I am some way from getting my head round Heinrich - this may have to wait until [someone] finishes translating "The Science of Value", hint, hint - but it seems clear there is clear water between Heinrich's version of a "monetary theory of value" and Kliman

admin: deleted reference that could identify the real name of a libcom user.

andy g
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Apr 11 2013 08:18

I think Heinrich argues that Marx formulated a monetary theory of value and this was his distinctive contribution. He argues Marx retreated from this finding and that monetary and embodied labour theories of value co-exist in Capital volume 3. They are mutually contradictory and this helps explain the knots Marxists have tied themselves into when discussing the "contradiction" between LTV and the existence of a uniform rate of profit.

Heinrich seems a long way from lining up with Bohm Bawerk or Bortkiewicz though. He argues value can only be quantified through money hence to try and measure the distance between the two (edit: that is between value and price) is to commit a category error as they exist at different levels of abstraction and are hence incommensurable.

This from John Milios is good in clarifying the argument - chapter 5 in particular

http://users.ntua.gr/jmilios/Milios-Marx-and-the-classics.pdf

fuck knows where I stand on this TBH - my head starts to ache whenever I devote serious thought to value-form analysis eek

B_Reasonable
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Apr 10 2013 22:27

@Khawaga, In Capital 1 Ch1, I think Marx is quite clear that hours worked at different tasks result in different quantities of value so he applies a "multiplier" so that all values can be measured off the same base of "simple average labour". So going forward, one has to assume that whenever he mentions a quantity of simple labour time, it should multiplied that by that task's multiplier to get back to the actual hours works. The alternative is to simply ignore what he said and assume that simple labour time refers directly to the hours worked in any given job (at the average level etc.). So, I agree, 'complexity' doesn't refer to actual complexity (but he is alluding the relative levels of skill) but neither is it a 'code word'. It's a number that allows one to directly compare the values produced per hours in different tasks.

@Jura, I take your point but I don't think Heinrich is looking at individual enterprises or overall lengthening of the working day but whether one can assume that any economy-side increases in s/v should be more than increases in (c/v)+1, i.e. as automation increases. Marx clearly didn't think so but not to Heinrich's satisfaction. My point being, all this just serves to highlight that the labour theory of value doesn't serve any practical purpose.

S. Artesian
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Apr 10 2013 22:35

All Heinrich says would be great if he could offer an explanation for what has taken place since 1970-1973 period to today, and why it has taken place, and what the purpose of those actions were; what triggered the structural changes, the emergence of the asset-stripping, deconstructionist bourgeoisie, the attacks on living standards. This is the area of greatest strength for those who do hold to the FROP.

Doesn't mean they get the details right; doesn't mean they don't miss points, but what they do get is that a) the "laws of value" are nothing but the relations between classes b) class struggle has a specific, measurable source in profitability c) there is indeed a conflict, here latent, over there manifest, now more or less everywhere in the open, between the labor process and the value process, and that Marx's immanent critique of capital, is just that, based on the very determination of capital, of itself, by itself, for itself..

The point being: the task is not what Marx wrote when, nor his doubts, revisions, alterations to what he wrote, but the actual analysis of capitalism. Does capitalism itself demonstrate the propulsive conflicts that define and encumber it?

RedHughs
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Apr 10 2013 22:38
Quote:
He argues Marx retreated from this finding and that monetary and embodied labour theories of value co-exist in Capital volume 3. They are mutually contradictory and this helps explain the knots Marxists have tied themselves into when discussing the "contradiction" between LTV and the existence of a uniform rate of profit.

Heinrich seems a long way from lining up with Bohm Bawerk or Bortkiewicz though.

As far as I know, Bohm Bawerk's primary relation to Marxian theory was to argue for Volume III's quantity theory being in contradiction with volume I's positions. Heinrich seems to be agreeing with this point and so I can't see the two as terribly far apart here. Obviously, Heinrich has a different solution to problem but he agrees there is a problem. Bortkiewicz also articulated a corrected quantity theory and Heinrich indeed has no interest in this.

Also, I believe the Heinrich article describes an opposite chronology. When Marx wrote Capital III, he was working with both theories but he later (in the 1870's) saw the problems with that and didn't publish Capital III - it was put together by Engels after Marx's death. Oddly enough, Heinrich's narrative goes pretty well with the video you kindly posted a link to, Andy, about why Marx didn't finish Capital.

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Khawaga
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Apr 10 2013 22:41
B_Reasonable wrote:
@Khawaga, In Capital 1 Ch1, I think Marx is quite clear that hours worked at different tasks result in different quantities of value so he applies a "multiplier" so that all values can be measured off the same base of "simple average labour". So going forward, one has to assume that whenever he mentions a quantity of simple labour time, it should multiplied that by that task's multiplier to get back to the actual hours works. The alternative is to simply ignore what he said and assume that simple labour time refers directly to the hours worked in any given job (at the average level etc.). So, I agree, 'complexity' doesn't refer to actual complexity (but he is alluding the relative levels of skill) but neither is it a 'code word'. It's a number that allows one to directly compare the values produced per hours in different tasks.

I agree with your analysis there, but the problem is that Marx at different places does use simple and complex as code words for abstract and concrete (unless I've been getting that completely wrong, which is very likely). Hence, why I suspect it could be an issue of translation (Angelus or Jura, care to enlighten us?).

RedHughs
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Apr 10 2013 22:42
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All Heinrich says would be great if he could offer an explanation for what has taken place since 1970-1973 period to today, and why it has taken place, and what the purpose of those actions were; what triggered the structural changes, the emergence of the asset-stripping, deconstructionist bourgeoisie, the attacks on living standards. This is the area of greatest strength for those who do hold to the FROP.

Heinrich makes a good (and fairly standard) argument that Marx's formulation of the theory of the FROP contains contradictions.

There's nothing there that proves that the rate of profit doesn't fall.

The theory might just be true but still something can only be correctly formulated once you correct the contradictions that existed because of the limitations of Marx's mathematical ability.

See my earlier posts.

RedHughs
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Apr 10 2013 22:56
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The point being: the task is not what Marx wrote when, nor his doubts, revisions, alterations to what he wrote, but the actual analysis of capitalism. Does capitalism itself demonstrate the propulsive conflicts that define and encumber it?

Absolutely.

But the analysis of capitalism does require consistent analytic tools. The tendency of people here to go apoplectic whenever the phrase "transformation problem" appears speaks to me of an unwillingness to do this focusing on "actual analysis of capitalism".

I think Heinrich does very well to focus on the equation p= (s/v)/((c/v)+1). On analytical level, one just can't wiggle out of the point that if s/v is unconstrained, the profit rate is unconstrained but I think a bit of thought or analysis should show society wide s/v is not something can easily be constrained. It is pretty much inherent to technological progress that it occurs more quickly in some industries than others and the rate of exploitation is going to be constrained by the necessity good industries where progress happens most slowly - ie, the cost of survival will be constrained by those necessity good industries with low or no productivity growth (whether that's agriculture, health care or what-not).

Moreover, of course capital constantly works to reduce this value and these efforts are naturally "analytically instructive".

S. Artesian
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Apr 10 2013 23:00

I think you're being too modest in what Heinrich is claiming-- and what he is claiming is that the FROP not only cannot be proven, but was in the process of being abandoned by Marx, if not totally abandoned by Marx in the period after the publication of volume 1. Stop me if I'm wrong, but unless I read a different article than you did, I think we should explicitly identify the content of Heinrich's argument.

Now I think Heinrich is right about the different drafts for different projects, but I do not think there is a separation, a "rupture," in Marx's analysis between the Grundrisse and Capital or Capital and post-capital.

Nor do I think there is a rupture between Marx's analysis of the FROP and......overproduction, world trade crises; no more than I think there is a conflict between financial and industrial capital. Which is to say, the apparent conflict between FROP and overproduction, between circulation and production, or between financial and industrial capital are just that apparent, and can be shown as derived from a single source-- the organization of labor as wage-labor, and its expulsion, relatively, from the process of production to enhance the appropriation of surplus value.

I'm not big on "crisis theory"-- especially the "permanent crisis" theory that gets flogged around, but there are certainly long-term structural changes to capital and those changes are driven by the search for profit; the changing relation between the means of production as capital and labor as wage labor; or to put the same thing even more fundamentally, the changing relation between necessary and surplus labor-times, on which everything, as Marx said, depends.

Now if the relative expulsion of wage-labor from the value process does not encumber profitability, that's fine, but as Marxists, then we better go back and explain why what has happened has happened since 1973. We need to explain recoveries in the rate of profit after 1992; we need to explain what happened in 2001-2003 and what the bourgeoisie did to recover from that recession and why that recovery came up short in 2007. And we have to be able to do that based on the change in relations between living and dead labor.

Analyzing Marx is the abstract; analyzing capitalism is the concrete.

Short version: and still it falls.

RedHughs
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Apr 10 2013 23:12
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I think you're being too modest in what Heinrich is claiming-- and what he is claiming is that the FROP not only cannot be proven, but was in the process of being abandoned by Marx, if not totally abandoned by Marx in the period after the publication of volume 1. Stop me if I'm wrong, but unless I read a different article than you did, I think we should explicitly identify the content of Heinrich's argument.

As far as I can tell, you're characterizing Heinrich's argument correctly.

The thing is, I'm not a Heinrich-ist. I have no idea whether his chronology is correct or not. I'm not saying that I agree with everything he says.

I'm simply happy that he brings up these issue because I think the issues are important. My point is as I wrote - any quantity theory needs correcting to be consistent. I think such a corrected quantity can be formulated reasonably easily - I'm basically sympathetic to what became the standard model with Paul Sweezy and was developed by a whole slew of academic marxists, sometimes in useful, sometimes in less than useful directions but at least in a self-consistent fashion.

And I think looking at society s/v is useful analytic place to start.

Angelus Novus
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Apr 10 2013 23:47
S. Artesian wrote:
All Heinrich says would be great if he could offer an explanation for what has taken place since 1970-1973 period to today

I think you're making a fundamental error in confusing an argument against a law of the rate of profit to fall at the categorical level articulated by Marx, and the assertion that the rate of profit never-ever-ever falls in reality. Heinrich does not assert the latter. In fact, quite the opposite: he acknowledges that the rate of profit can fall. Then again, it can also rise. If you're talking about "long-term" trends, the question becomes: how long-term? What kind of time-scales are we talking about? And if the trend reverses, how meaningful is it to refer to any trend as confirmation of a "law"?

Also, since "rate of profit" in the Marxian sense really isn't a category of economic statistics, the various attempts by Marxist economists to calculate the "rate of profit" is going to depend exactly upon what factors they are actually using as the basis for their calculations. For example, Doug Henwood in this article divides profits of nonfinancial corporations according to the National Income and Product Accounts from the Department of Commerce by the value of capital stock from the Fed's flow of funds accounts. Surprise: he comes to different conclusions then those who assert FROP.

Malva wrote:
If what Heinrich says is true, does this challenge the whole "critique of value" argument about an internal limit to capital due to technological development? I'm really struggling to get my head around this.

The Nuremberger certainly think so. They don't like what he has to say about this one bit. Unlike S. Artesian and other defenders of the "law" of FROP, the Nuremberger literally defend the notion of a final collapse on the basis of their belief that any possibility renewed expansion of capital is definitely foreclosed. Any empirical evidence to the contrary they explain away in terms of it not being "real" capital accumulation, often arguing that, for example, China's growth isn't real because it's debt-financed (as if the American railroads weren't!).

Malva, since you're closer to the French discussions, does Anselm Jappe still defend this perspective? My impression from the final days of Principia Dialectica was that the other Nuremberger have excommunicated him because they regard his conception of abstract labor to be too close to Heinrich, Rubin, et al.

Angelus Novus
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Apr 11 2013 00:01
andy g wrote:
I think Heinrich argues that Marx formulated a monetary theory of value and this was his distinctive contribution. He argues Marx retreated from this finding and that monetary and embodied labour theories of value co-exist in Capital volume 3. [...] He argues value can only be quantified through money hence to try and measure the distance between the two is to commit a category error as they exist at different levels of abstraction and are hence incommensurable.

I think this is pretty much a perfect summary of Heinrich's argument.

Quote:
my head starts to ache whenever I devote serious thought to value-form analysis eek

Haha, well, you seem to have a solid grasp in any case.

Edit: no wait, you did get something wrong: Heinrich definitely does *not* argue that Marx "retreated" from the monetary theory of value. Quite the opposite: the newer the manuscript, the more the monetary theory of value achieves prominence (for example, the official French edition of Capital with the passages that explicitly state it). Remember: the manuscript that became Vol. III is the "oldest" of all the manuscripts that became "Capital" (Vol. II was the most recent, Vol. I was constantly revised by Marx, including the French edition, the last one overseen personally by Marx.)

andy g
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Apr 11 2013 00:05

I stand corrected. This is why I need to MEGA up!

S. Artesian
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Apr 11 2013 03:29

If the rate of profit does fall, and is then restored, we certainly need to examine what precedes and causes the fall, and what counteracts the fall.

Does the rate of profit fall by the necessity of capital's own requirements for accumulation? Is the fall of the rate of profit inherent, immanent I guess is the word, to the expropriation of surplus value? That is Marx's contention. Now I think if we sort through the formation of the average rate of profit, the distributive impact of the prices of production, and the impacts of that distribution on smaller capitals with higher rates of profit, we can certainly see the basis for the trend of the rate of profit to decline. Takes some work, which I haven't sorted out yet.. but along with this is.. as fixed assets accumulate the turnover time for the total capital lengthens and that too reduces the rate of profit. More work required, I know, but as I said, I don't have it sorted yet.

I've read Henwood's piece and it hardly refutes the notion of the long-term trend of the ROP to fall. Henwood, like almost everyone else, shows a post-WW2 peak around 1968-1970, a decline, then various recoveries with no recovery however exceeding the original peak. Seems to me to be an object lesson in the law and the attempts of offset the law.

B_Reasonable
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Apr 11 2013 06:08

Marx believed in the tendency for the rate of profit to fall, so assuming he's right, that means Heinrich is in effect arguing that the Labour Theory of Value (LTV) does not provide a sufficiently good explanation of Capitalism to predict this tendency. And Heinrich's proof of this is showing that Marx can't derive it from LTV. In order to disprove the tendency with LTV one has to first demonstrate that LTV has sufficient explanatory powers of Capitalist relations to do this. If anything, Heinrich's argument serves to further undermine any possible utility for LTV.

On the other hand, if Marx was wrong, and there isn't a tendency for the rate of profit to fall, then (i) this doesn't strengthen the argument for LTV, (ii) it doesn't mean that there isn't currently a long term trend of a falling rate of profit that may lead to a crisis. Basing these arguments on the disputed supposition of the LTV is a waste of time. If one is happy to discard Marx's tendency for the rate of profit to fall -- something he could have observed over time -- why not discard LTV if it doesn't provide an adequate model of Capitalist relations?

andy g
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Apr 11 2013 08:11

non-sequitur alert! non-sequitur alert!

Heinrich is arguing on the basis of his interpretation of LTV that Marx didn't provide a water-tight logical proof of LTRPF. The fact that he doesn't deny that over any given period profit rates may fall does not mean this empirical tendency can't be explained in ways consistent with LTV.

people have been arguing the LTV is unnecessary to the understanding of capitalism since forever. Doesn't seem right to hang that argument on Heinrich given he so manifestly opposes it

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Apr 11 2013 19:31

Exactly, andy.

Heinrich points out that the law of the tendency of the rate of profit to fall isn't a necessary consequence of a certain system of propositions known as Marx's theory of value, even though Marx apparently went to great pains to derive it as a such a consequence.

However, that doesn't at all mean that the law of the tendency of the rate of profit to fall cannot be true.

Nor does this mean that this law cannot be explained, when conjoined with other statements describing what has been going on in a certain period of time ("since 1973"), by Marx's theory of value.

I don't see how any of this affects the explanatory power/empirical validity of the rest of Marx's theory.

S. Artesian
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Apr 11 2013 20:14

The issue is a bit more than that. At issue is whether or not the rate of profit must exhibit a tendency to decline as the means of production organized as capital accumulate?

That, I think, is what Marx intended by "immanent critique." At least, Marx is not just providing a critique of capital, but also the augmentation of the labor process by capital that pushes forward the prospects for capital's abolition.

If the answer to that question in the first paragraph is "yes, the accumulation of the means of production as capital exerts a downward pressure on the rate of profit," then we need to establish if it has such an effect precisely because it changes the relationship between wage-labor and capital, because it changes the relationship between necessary and surplus labor-time.

If the answer to either "no"-- the accumulation of the means of production as capital exerts no such downward influence-- or-- there is a downward influence that is NOT a result of the changing relationship between wage-labor and capital, the change in the ratio of necessary to surplus labor time; if the very organization of capital as capital, that is to say labor as wage-labor that provides value and value's expression as profit, does not transform capital's expansion into its contraction, then IMO we have lost the immanent critique and we better review what in fact is that determines capital; what makes capital historically specific and not a natural condition.

RedHughs
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Apr 11 2013 21:10

This thread raises fascinating questions. On Facebook, someone pointed to this:
[Edit: Where Andrew Kliman attempts to deal with same equation Heinrich makes the center of his investigation. That's the relevance of this link]

Andrew Kliman on OPE-L wrote:
As is well known, the profit rate can be written as

r = s/(c+v) = (s/v)/(c/v + 1).

Because of this, Sweezy, Robinson, Okishio, and many others have claimed that a sufficient rise in the rate of exploitation (s/v) can counteract any rise in the organic composition of capital (c/v), so that there's no "necessity" for the rate of profit to fall. According to this formula, if the percentage increase in the rate of exploitation exceeds that of the organic composition, then r rises. Yet what Marx points out is that the mass of surplus-value is limited by the number of workers employed, even if the rate of surplus-value goes sky-high. We can rewrite the profit rate as

s/v
r = ------------------
(c/L)*(L/v) + 1

where L is living labor. But since L = v+s,

s/v
r = ------------------
(c/L)(1+[s/v]) + 1

as s/v approaches infinity (or v approaches 0), r approaches L/c.

What this shows is a clear maximum limit to the profit rate, even with an
infinite rate of exploitation.

[Note the formatting of the large fraction expressions are screwed by text format, sorry]

Here, Kliman is apparently following what Heinrich describes as Marx's multiple attempts to prove the TLTFRP. However, a bit of math should show this attempt is flawed. One can easily show that despite Kliman's transformations and limit-takings, there are conditions in the abstract, where the rate profit can go to infinity as the organic composition of capital also goes to infinity. This is true even under the assumption that L is constant.

A proof; let t=time. Now suppose v = 1/(t^2), s = 1-1/(t^2) and c = 1/t. Then L=1 and L/c = 1/(1/t) = t, (c/v) = (1/t)/(1/(t^2))= t. So as t goes to infinity, L/c and c/v naturally also do so, since they are exactly equal. Of course, this involves v and c both decreases but that's exactly what would happen if you had constant output and increasing productivity. Anyway, this is just one of many counter-examples one can easily construction to the assertion that there is a limit to p based on the structure of the equations themselves. And remember, a single counter example is sufficient to disprove any general statement when one is talking maths.

Of course, you could make assumptions about the productive processes and get a situation where the rate of profit does decrease. Indeed, I think this is the way one should go but this involves not following Marx with complete exactitude.

And in reply to Artesian's continuing objections; As AN said, this doesn't prove the rate profit can't go down. It doesn't even prove the rate of profit won't tend to always go down. It doesn't even show there is no strong argument that the rate of profit tends to decline. It just shows this equation with no assumptions beyond the assumption that c increases over time, is insufficient to prove the assertion. (and repeating, assuming s/v increases at a lower rate than c/v is clearly sufficient. But that not something that falls out of Marx even though I'd claim you can argue it's a property capitalist production. However, that claim is "original research").

S. Artesian
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Apr 11 2013 22:27

However, as is clear from Heinrich's text, and various other comments, this is not about proving an equation. From Marx's work it should be clear that this is about the inherent tendency of capital to reduce "v," replacing it with fixed assets, transforming the increased "fc" (fixed capital) into increased circulating capital in order to (1) reduce its cost of production and (2) appropriate a larger share of the total socially available surplus value to achieve an average rate of profit.

Now I think that is what will, must, drive the average rate of profit down; I think this can establish a link between overproduction and the growth of the means of production as capital (linking overproduction to declining profitability in exchange as opposed to insufficient consumption or lack of "effective demand"), and declining profitability to slowing turnover time of the capital invested in production.

My objection is not that the Heinrich is denying the possibility that the rate of profit will fall, is likely to fall, is even very likely to fall; but rather that he asserts the decline is NOT inherent in the growth of the means of production as capital. That's what "immanence" is all about. And immanence does not mean "permanent." There is no "permanent" decline in the rate of profit as capital is quite capable of incinerating productive capacity and living labor in the millions (of whatever units you want-- people, dollars, labor hours); and there is no permanent crisis. But there is the inherent tendency of the means of production to outgrow their organization of capital, the relation of production which is wage-labor, and that "overgrowth" is pretty well identified by a declining profitability.

Momentary digression:

Back in the day, and I'm sure many have heard this story or versions of it before, (but maybe not my explanation for it)... anyway Henry Ford had a section of the Rouge Plant (IIRC) given over to R&D, with the purpose of creating a completely automated assembly line. He took Walther Reuther on a tour of the facility and supposedly said: "When this becomes reality, Walter, who are you going to organize?"

Supposedly, Reuther, always the empiricist and the wannabe social democrat said, "When this becomes reality, Henry, who's going to buy your cars?"

Well the answer is-- "everybody else" and the lower price of the Ford cars will in theory serve to transfer the profits from the other auto manufacturers, so that Ford will achieve the average rate of profit, which it has thus driven down.

Now imagine that all production in capitalism is automated-- in all sectors. Where then is the surplus value? Nowhere. There is no necessary labor-time that can only be satisfied through the alienation of surplus labor time. . Surplus value cannot be transferred, or allocated when its basis for existence-- necessary labor-time-- has disappeared. While Heinrich may laugh or refer to the absurdity of those who, as a matter of fact, do tease out the conflict between necessary and surplus labor-time by reducing wage-labor zero, such a conflict, revolving around a zero-point, or approaching it even asymptotically, is made explicit by Marx in some of his manuscripts, and is implicit throughout some others, including IMO, The Poverty of Philosophy. "Time is everything; man is nothing. At most, he is time's carcass."

I just want to add, I think Heinrich is historically wrong when he refers to the "crisis theory" of the 20th century as being concentrated this issue of the rate of profit. Much has centered on overproduction vs. underconsumption. Pavel Maksakovsky in his The Capitalist Cycle contends that Marx did indeed provide us with a crisis theory, and Maksakovsky says it's in volume 2. Today we know it as disproportion. I truly recommend Maksakovsky's book-- it is brilliantly written and brilliant, so brilliant it almost makes me want to agree with him. But I don't because, I think at core, disproportion theories become underconsumption theories.

Somewhere along the line we have to come to grips with the necessity for the emergence in the reproduction of capital declining profitability, overproduction, and disruptions in circulation. I don't think the answers for each, or any, can be achieved without integrating them as a whole.

RedHughs
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Apr 11 2013 23:58
Quote:
My objection is not that the Heinrich is denying the possibility that the rate of profit will fall, is likely to fall, is even very likely to fall; but rather that he asserts the decline is NOT inherent in the growth of the means of production as capital. That's what "immanence" is all about.

Hey, I am not defending Heinrich's final conclusion. I am simply describing the problem that Heinrich sets out for a crisis theorist. You don't like the hole Heinrich pokes in Marx's logic? Good. Figure out a way of actually solving them.

kingzog
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Apr 12 2013 00:04

S. Artesian, good post.

I just want to express my agreement with the last part of your post, especially.

The LTFRP was hardly ever an orthodox position in the Marxist movement, overall. Underconsumptionism and disproportionality were always the far closer contenders for the 'orthodox position.'

It always strikes me as odd- and perhaps ironic- whenever people who disagree with the LTFRP theory cry "ORTHODOXY, MARXIST FUNDAMENTALISM!" against those who are proponents of the LTFRP.

S. Artesian
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Apr 12 2013 00:20
RedHughs wrote:
Hey, I am not defending Heinrich's final conclusion. I am simply describing the problem that Heinrich sets out for a crisis theorist. You don't like the hole Heinrich pokes in Marx's logic? Good. Figure out a way of actually solving them.

I'm trying, believe me comrade, I'm trying. And for the record, I don't think Heinrich pokes a hole in Marx's logic. He points out that Marx's mathematical proof is not quite. That's different from Marx's logic, or rather, the logic of capital.

But.... good thread, no? Thanks to Heinrich, and AN, for pushing the issue.