Two Concepts of Value, Two Rates of Profit, Two Laws of Motion

Freeman, Alan and Kliman, Andrew (2000): Two Concepts of Value, Two Rates of Profit, Two Laws of Motion. Published in: Research in Political Economy No. 18 (April 2000): pp. 243-267.

Abstract

Article that appeared as Zarembka, P (ed) Economic Theory of Capitalism and its Crises, Research in Political Economy 18, pp241-48. Stanford, CT: JAI Press.

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Responds to debate initiated in Research in Political Economy 17

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This article formed part of a four-way exchange on the rate of profit which appeared in Research in Political Economy 17 and 18 in 1999 and 2000, between David Laibman, Duncan Foley, Andrew Kliman and Alan Freeman. This piece constituted Freeman and Kliman’s response to the contributions of Foley and Laibman, themselves a response to our reactions to Laibman’s initial critique of the Temporal Single System Interpretation (TSSI) of Marx’s value theory. Our response establishes that both Laibman and Foley concede the fundamental point in the debate: there exist circumstances under which the rate of profit falls under cost-saving technical change, refuting Okishio’s theorem which states that the rate of profit cannot fall on these presuppositions in any circumstances.

Our response assesses the reasons that, although Okishio’s theorem has been disproved, Marxist authors are unable or unwilling to acknowledge this fact. We dissect the faulty mathematical reasoning that lies behind the following notion: ‘the temporal rate of profit may fall, but it may also rise. Since it does not inevitably fall, Okishio’s theorem holds’. In fact, Okishio’s theorem asserts that the rate of profit may never fall. Therefore, mathematically, if a case is exhibited in which, under Okishio’s assumptions, the rate of profit does fall, the theorem is thereby disproved.

Our response then establishes the general conditions under which the rate of profit does, or does not, fall.

Keywords: TSSI, MELT, value, Marx, price, profit rate, Okishio, non-equilibrium, equilibrium, money

• Item Type: MPRA Paper
• Institution: The University of Greenwich
• Language: English
• Keywords: TSSI; MELT; value; Marx; price; profit rate; Okishio; non-equilibrium; equilibrium; money; sraffa
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B51 - Socialist ; Marxian ; Sraffian; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B40 - General; B - History of Economic Thought, Methodology, and Heterodox Approaches > B1 - History of Economic Thought through 1925 > B12 - Classical (includes Adam Smith); B - History of Economic Thought, Methodology, and Heterodox Approaches > B0 - General; B - History of Economic Thought, Methodology, and Heterodox Approaches > B1 - History of Economic Thought through 1925 > B14 - Socialist ; Marxist; A - General Economics and Teaching > A1 - General Economics; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B50 - General; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B24 - Socialist ; Marxist ; Sraffian

References

Foley, D. (1982). ‘Realization and accumulation in a Marxian model of the circuit of capital’. Journal of Economic Theory 28(2): 300-319. Foley, D. (1986). Money, Accumulation and Crisis. New York: Harwood Academic. Foley, D (1997) Review of Freeman, A and Carchedi, G (1995), Eastern Economic Journal 23:4, 493–96. Foley, D. (1999). Response to David Laibman, Research in Political Economy 17, 229–33. JAI Press Foley, D.. (2000). Response to Freeman and Kliman, Research in Political Economy 18, 279–83. JAI Press Freeman, A. (1996) “Price, value and profit – a continuous, general, treatment” in Freeman and Carchedi (1996) (eds) Marx and Non-Equilibrium Economics Freeman, A. (1999). Between Two World Systems: A response to David Laibman, Research in Political Economy 17, 241–48. Freeman, A (1998) “An endogenous profit rate cycle”, presented to the 1998 conference of the International Working Group on Value Theory, New York, February 1998 Freeman, A and Carchedi, G (1995) (eds) Marx and non-equilibrium Economics, Aldershot: Edward Elgar Freeman, Alan and Andrew Kliman. (2000). Two Concepts of Value, Two Rates of Profit, Two Laws of Motion, Research in Political Economy 18, 243–67. Kliman, Andrew and Alan Freeman. 2000. Rejoinder to Duncan Foley and David Laibman, Research in Political Economy 18, 285–93. Marx (1972), Theories of Surplus Value Volume III. London:Lawrence and Wishart Okishio, Nobuo (1961) “Technical Change and the Rate of Profit”, Kobe University Economic Review, 7, 86-89.