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Marx after Okishio: Falling Rate of Profit with Constant Rate of Exploitation

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  • Deepankar Basu
  • Oscar Orellana

Abstract

Can cost-reducing technical change lead to a fall in the long run rate of profit if class struggle manages to keep the rate of exploitation constant? In a general circulating capital model, we derive sufficient conditions for cost-reducing technical change to both keep the rate of exploitation constant and lead to a fall in the equilibrium rate of profit. Further, if the real wage bundle is such that the maximum price-value ratio is larger than 1 plus the rate of exploitation, then starting from any configuration of technology and real wage, we can always find a viable, CU-LS technical change that satisfies the sufficient conditions for the previous result. Taken together, these results vindicate Marx's claim in Volume III of Capital, that if the rate of exploitation remains unchanged then viable, CU-LS technical change in capitalist economies can lead to a fall in the long run rate of profit.

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  • Deepankar Basu & Oscar Orellana, 2022. "Marx after Okishio: Falling Rate of Profit with Constant Rate of Exploitation," Papers 2205.08956, arXiv.org, revised May 2022.
    • Handle: RePEc:arx:papers:2205.08956
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    References listed on IDEAS

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    3. Junshang Liang, 2021. "The Falling Rate of Profit under Constant Rate of Exploitation: A Generalization," Review of Radical Political Economics, Union for Radical Political Economics, vol. 53(3), pages 501-510, September.
    4. Roemer, John E., 1977. "Technical change and the "tendency of the rate of profit to fall"," Journal of Economic Theory, Elsevier, vol. 16(2), pages 403-424, December.
    5. Bowles, Samuel, 1981. "Technical Change and the Profit Rate: A Simple Proof of the Okishio Theorem: Note [Technical Change and the Rate of Profit]," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 5(2), pages 183-186, June.
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