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

[michael <michael@xxxxxxxxxxxxxxxxx>]

My take on profit rates is a bit different from the thrust of this conversation
so far.  I suspect that the measurement of profit rates is a very, very inexact
exercise, because the denominator cannot be measured.  Invested capital
requires some means of calculating depreciation rates.  The government does
this calculation by means of rules of thumb based on the permanent inventory
method.

Over a short period of time, problems with this method of calculation will not
cause too much difficulty as long as the business cycle does not move too
rapidly, but measurement over decades is exceedingly questionable.

The data can give you a rough idea about what's happening, but not with the
exactitude that we pretend in journal articles.

Jim's mention of Reich's article is interesting.  I suspect that a rising
amount of unproductive labor can be an effect as well as a cause of a falling
rate of profit.  I'm thinking of periods when capital cannot make much profit
from direct production, and thus reverts to more financial manipulation in lieu
of production.

--

Michael Perelman
Economics Department
California State University
michael at ecst.csuchico.edu
Chico, CA 95929
530-898-5321
fax 530-898-5901