Bill Burgess writes: >I wondered about Jim D. not including circulating constant capital (basically materials) in explaining the change in the ROP, especially since this is an area there have been productivity gains.<
I wrote: >>shouldn't an improvement in inventory management techniques help labor productivity and profits (all else constant) and thus raise the rate of profit? So it wouldn't be ignored altogether.<< >It is partly included, and (probably) raised the ROP. But as I understand it, in 'explaining' the ROP, you are assuming that K/Y moves with the OCC (and that S/Y moves with the RSV?).< S/Y moves with the rate of surplus-value (as I measure the latter), but the K/Y _does not_ move with the OCC. The K/Y reflects both changes in mechanization (K/L, where L is labor) and the productivity of labor (Y/L). That is, it reflects both changes in the OCC _and_ changes in one of the crucial counter-tendencies to the rising mechanization/falling profit rate theory. This is a countertendency that typically comes as a _result_ of mechanization. >Isn't it worth getting some indication of the role of circulating (M) as well as fixed (K) capital, roughly, that (change in) ROP = (change in) K/Y+M/Y+S/Y?< fine, do it. But I think that the rate of profit on fixed capital is more important in determining the ratio of net investment to fixed capital, which in turn is crucial to determining the fluctuations in aggregate demand. In other words, I accept Keynes' emphasis on fixed investment. >I cited a series that breaks down US industrial output into three 'stages' of production (materials, intermediate goods and final goods), noting that the first two make up half of total industrial output.< I wrote: >>I don't get how half of "value-added is accounted for by materials and intermediate goods" since the cost of materials and purchased intermediate goods is subtracted from total revenues when calculating a company's value-added (since they are part of another company's total revenues and we don't want to double-count). If you look at retail, intermediate goods would swamp value-added altogether.<< >I wasn't very clear. I cited the breakdown by stage of production to note that, to the degree that the materials and intermediate goods are inputs to the final goods, M is large. It is typically? larger than one year's K, i.e., there is lots of quantitative room here for 'non-K, non-S' changes to affect the ROP.< maybe, but materials and intermediate goods are not a big chunk of fixed costs and thus don't represent something that capitalists are "stuck with." They are imbalances that are gotten rid rather quickly. A capitalist cuts back on the demand for the raw materials or intermediate goods, but is stuck with the fixed capital that was installed in years previous. Bill had written: >>> Subcontracted inputs have become more important. While I suppose that in principle the accounting in separate business units should not affect the aggregate shares of fixed capital, profits, etc., I wonder if this is really is true. For example, is subcontracting an important vehicle for transferring profit from subcontracters to their oligopolistic customers. Even if the overal capital-output ratio does not change, who gets the profits does change, through unequal exchange. Also, is it prossible that more subconstractors means that more profit is taken in the form of profits rather than big salaries for managers?<<< I wrote: >>I interpret these changes in terms of changing relations of production -- including intracapitalist relations -- which has an effect on the aggregate level.<< >Do you mean, *no* effect on the aggregate level?< no, I meant it as I wrote it. Jim Devine
