Re: Estimating the surplus\Doug's question\Fred's comments

[Paul <paul_@xxxxxxx>]

Fred,
Very glad you could make it - you were missed!  I want to think more about
your post but have one small and one larger reflection.

> 1.  I think we can all agree on the "big focus of profit rates", as Paul
> put it - that the rate of profit is the most important variable in
> analyzing capitalism.  And I agree with Paul that this emphasis on profit
> and the rate of profit is what distinguishes classical-Marxian theories
> from neo-classical theories.

In addition to Doug's main point ('show me the benefit of all this'), Doug
does make me wonder whether my description of the Classical/Marxian
approach should have been more specific (although the change might prove
more narrow-minded). As you know well, historically, the Classical
tradition focused on profits/profit rate but broke this down into the
changes that emerge from the labor\capital shares AND the changes that
emerge from what I was calling the 'capital side' (with lots of differences
and inconsistencies among Classical authors).  Of course, since Sraffa
there has been an intelligent and articulate revival of interest in
Classical presentations of the first issue (wage/profit frontiers, etc)
WITHOUT the capital side.  The discussion with Doug illustrates a point:
without the 'capital side' just how useful is such a presentation?  Doug
gave good examples of how similar arguments could be made sticking to a
Keyensian\Kaleckian tradition that is more accessible to most.  (Of course
Doug is also skeptical of the value of this approach even with the capital
side, but that is a different discussion.)


> ...............
> 6.  I have suggested another explanation of these important trends, one
> based on Marx's distinction between productive labor and unproductive
> labor - that an important cause of the declines in the share and the rate
> of profit was a very significant increase in the ratio of unproductive
> labor to productive labor.  I am not sure that this is the correct
> explanation of these trends, but I think it may be, and I think that it
> worthwhile to at least consider what Marx's theory implies about the
> causes of these trends and the likely prospects for the future.
>
> And one important advantage that this theory has over the profit squeeze
> explanation is that it provides a consistent explanation of why the share
> and rate of profit have only partially recovered in recent decades, in
> spite of the loss of workers' power and stagnant real wages - because the
> ratio of unproductive to productive labor has continued to increase.
>
> This theory also provides an important prediction about the future - that
> if the ratio of unproductive to productive labor continues to increase (as
> I expect), then the recovery of the share and rate of profit will continue
> to be slow and partial, thus leading to more wage cuts, speed-up,
> etc.  According to this theory, the US economy is definitely NOT at the
> beginning of another "long-wave" period of growth and prosperity, similar
> to the early postwar period (with steady real wage increases).  The only
> partial recovery of the share and rate of profit makes such a return to
> more prosperous conditions very unlikely.

You have made me think about what is the nature of a long wave
upturn.  Here are some quick thoughts and concerns.

1.      a. Of course these are waves, not cycles (as in Kondratieff,
investment-accelerator, etc).  It is not even as if a simple mechanism such
as the falling of the price of capital in a downturn will, in
itself,  produce an upturn.

        b. The up and the down of these waves are not symmetrical. While
there are forces common and inherent in the accumulation process to
downturns (tendencies to a rising OCC, etc), the upturns require
exceptional events that are not inherently produced by the downturn
process.  Mostly these require some combination of major technological
change AND socio-political conditions that allow capital to overcome
resistance to the labor processes and social organization needed to
introduce the technological change.  Each upturn is sui generus in its
causes (although some may want to argue for inherent links to the
innovation and political change process, these are links with more lengthy
chains).

        c. There are no inherent 'rules' about the strength or duration of
a wave.  Definitions are hard to make; mostly we have relied on historical
observations to generalize about size and length.

        d. History gives little guidance as to the possible economic
processes in today's world that would produce an upturn and how would one
look.  The last upturn involved WWII.  The one before (1890's?) had our
great-great-grandfathers at work.

2.      It is fairly obvious that a large part of the upswing in profit
rates has been from a shift in shares from labor to capital.  Not (by
itself) the stuff to inspire thoughts of a long upswing.  But my eye was
caught by this smaller (but steady) increase in capital productivity in
Dumenil's RRPE paper.   We would need to know more of the source of this
uptick, but doesn't it seem like something that needs to be investigated
more and watched closely?

        [Lots of modifiers:  It is a modest uptick, probably sensitive to
changes in the way the data is calculated, etc and we know little about its
source.  As I recall, your 1997 RRPE article was focusing on the
productive\unproductive issue and so did not get into the question of
productivity of capital.  Wolffe gives a different view but has a different
philosophy.  Has anyone else done recent empirical work on this?]

3.      IF, IF there were a long-ish by very modest upturn in profit rates
partly fueled by some serious capital productivity\technical change would
it not still be consistent with your points on productive\unproductive
labor?  (The improvements in capital productivity were cut in half by the
drain in unproductive labor.)  Of course this was my reason for going
through points #1 a-d; maybe this 'long wave' upturn won't look at all like
the previous ones.

        And if we do face such a period, it would not put capitalism "out
of the woods" politically.  I could well imagine that it could be a
flourishing period for the left - IF approached properly.  The rising
profits may well be put to selfish and self-consolidating purposes (judging
from the hubris shown so far) that finally engender a reaction to an
"over-reach" (it will come on top of the massively growing inequality and
the pain required to introduce the new techniques/organization).

4)      But don't you think we need to be a bit cautious about predicting a
poor economy (as distinct from a poor time for most of those in the
economy), in view of the *possible* 'productivity of capital' data?  Maybe
just a watching brief?

Paul