An Essay on Marxian Economics

By Joan Robinson | Go to book overview

CHAPTER V
THE FALLING RATE OF PROFIT

IT was a generally accepted tenet in the orthodox economics of Marx's day that there is a long-run tendency for the rate of profit on capital to fall. Marx accepted this view and set himself to account for the phenomenon of falling profits. His explanation does not turn upon the difficulty of realising surplus value -- the problem, as we now say, of a deficiency of effective demand -- but is intended to be valid even when that problem does not arise.

He based his explanation upon the rising organic composition of capital.1 Capital accumulation and technical progress do not necessarily involve an increase in capital per man employed. Inventions may, on balance, reduce capital cost per unit of output as much as labour cost, for they may improve the efficiency of labour in making machines as much as in working machines. This possibility Marx allows for. He shows how "cheapening the elements of constant capital" offsets the tendency of the organic composition of capital to rise.2 Technical progress may also reduce the period of turnover of capital goods. Chemical processes such as bleaching are speeded up, and the development of transport economises the stocks which it is necessary to hold at each stage of production and marketing.3 This tends to reduce capital per man employed. Nevertheless, Marx takes the view that there is

____________________
1
See above, p. 7.
2
Vol. III, p. 276(79).
3
Engels makes these points in a chapter which he supplied to fill a gap in the manuscript for Volume III (chap. 4, "The Effect of the Turnover on the Rate of Profit").

-35-

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An Essay on Marxian Economics
Table of contents

Table of contents

  • Books by Joan Robinson ii
  • Title Page iii
  • Foreword v
  • Contents ix
  • Chapter I - Introduction 1
  • Chapter II - Definitions 6
  • Chapter III - The Labour Theory of Value 10
  • Appendix - Value in a Socialist Economy 23
  • Chapter IV - The Long-Period Theory Of Employment 29
  • Chapter V - The Falling Rate of Profit 35
  • Chapter VI - Effective Demand 43
  • Chapter VII - The Orthodox Theory of Profit 52
  • Chapter VIII - The General Theory Of Employment 63
  • Chapter IX - Imperfect Competition 73
  • Chapter X - Real and Money Wages 82
  • Chapter XI - Dynamic Analysis 92
  • References to "Capital" 96
  • Index 103
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