Really it should be expected future profits, but the current profit rate is as good an indicator of expectations as we have. Robert Chirinko has probably done the most on investment as a function of profit.
On Mon, Jan 28, 2002 at 01:33:48PM -0500, Doug Henwood wrote: > Well, empirically speaking - which I know is embarrassingly vulgar - > the best explanation for changes in investment is the change in > profits. Marx's argument in this excerpt just doesn't sound right. > > Doug > > Rakesh Bhandari wrote: > > >>Rakesh Bhandari wrote: > >> > >>>Why should capitalism be more vulnerable to recessions and > >>>stagnation simply because the profit rate is falling or low? > >> > >>Low profits mean low investment, which means a slower rate of > >>growth and reduced technical innovation. Profits are the main > >>source of investment funds, and with profits expectations low, > >>there's no reason to invest. And animal spirits wither. But surely > >>everyone knows this? > >> > >>Doug > > > >Well Marx himself says the opposite. > > > >"'All other things being equal, the power of a nation to save from > >its profits varies with the rate of profits, is great when they are > >high, less, when low; but as the rate of profit declines, al other > >do not remain equal...A low rate of profit is ordinarily accompanied > >by a rapid rate of accumulation, relatively to the numbers of the > >people, as in England [note this is what my post was suggesting]...a > >high rate of profit by a lower rate of accumulation, relatively to > >the numbers of people.' Examples: Poland, Russia, India, etc. > >(Richard Jones, An Introductory Lecture on Political Economy) > >"Jones is right to stres that , despite the falling rate of profit, > >the 'inducements and faculties to accumulate' increase. Firstly, on > >the account of the growing relative surplus population. Secondly, > >because as the productivity of labour gros, dos do the mass of use > >values represented by teh same exchange value, i.e., the material > >elements of capital. Thirdly, because of the increasing diversity of > >branches of production. Fourthly, through the development of the > >credit system, etc. and the ease with which the possessor of money > >can now transform it into capital without having to become an > >industrial capitalsits. Fifthly, the growth in needs and desire for > >enrichment. Sixthly, the growing mass of fixed capital, etc." > > > >(Capital vol 3, p. 374-5. Vintage.) > > > >rb > -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
