Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

Karl Marx’s Dual Concept of the Rate of Profit in Post-Capital Manuscripts in 1868: An Evaluation in Terms of Input-Output Model.

Mori Kenji, Tohoku University

In 1868, Marx explicitly introduced two different types of profit rate, i.e. the “rate of profit on advanced capital“ (also called “annual rate of profit”) and the “rate of profit on cost price”, and, by doing this, he examined the influence of the “turnover” of capital, viz. renewal times of various inputs including fixed capital. Based on a given “turnover”-time, he derived from the “rate of profit on cost price” the “rate of profit on advanced capital” and the production prices. In this manner, Marx, after publishing of Capital Volume I and making of those manuscripts which were later used for Volume III by Engels, still eagerly continued to elaborate the quantitative determination of the rate of profit and production prices. This took place especially in two large manuscripts which were made in 1867-68 and published in 2012 in MEGA II/4.3 for the first time. They are titled by MEGA editors respectively “On rate of surplus value, rate of profit, laws of rate of profit, cost price and turnover of capital” (IISG, Marx/Engels Papers, A76 and A64 with 79 pages) and “Rate of profit, cost price and turnover of capital” (A78 with 40 pages). Given the fact that Marx left blank Chapter 4 of Capital Volume III, “The effect of turnover on the rate of profit”, (which was instead written by Engels), those never-before published documents shed the first light on Marx’s own thought on the topic and so enable the readers to analytically reconstruct it in the light of modern economic models. The paper attempts, after summarizing Marx’s analysis on the dual concept of profit rate in those manuscripts, to make sense of Marx’s arguments by using the (closed) Leontief Dynamic Model as one of the representative models which have a suitable framework to explicitly deal with the distinction between current inputs (matrix A) and capital stocks (matrix B). It is obvious that Marx’s analysis on profit rate and prices in those manuscripts was still based on the labor theory of value and his notorious “transformation” procedure. Given this limitation, however, it will be shown that his results there could be meaningfully interpreted even without the value theory if the average lifetime of inputs is defined by taking appropriate weights.

Area: Eshet Conference

Keywords: Marx, rate of profit, lifetime, Input-Output analysis, MEGA

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