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The sources of profitability

Author

Listed:
  • Flaschel, Peter
  • Fröhlich, Nils
  • Veneziani, Roberto

Abstract

This paper is built around a theorem proved analytically and exemplified empirically in Flaschel, Franke and Veneziani (2010) which states that profitable capital-using labor-saving technical change is under mild conditions always reducing the labor content of commodities. This type of technical change therefore increases Marx’s value rate of profit in a systematic way. Against this background the paper studies the relationship between the actual value and price rate of profit and derives expressions that show that the deviation between them may be of a secondary and unsystematic nature. This result is then exemplified empirically using flow as well as stock matrix data for the German economy. The paper argues on this basis that prices of production are in fact of a questionable nature and an unnecessary detour in the input-output oriented analysis of the profitability nexus between total labor costs and the actual prices of the considered commodities.

Suggested Citation

  • Flaschel, Peter & Fröhlich, Nils & Veneziani, Roberto, 2011. "The sources of profitability," MPRA Paper 30861, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:30861
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    File URL: https://mpra.ub.uni-muenchen.de/30861/1/MPRA_paper_30861.pdf
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    References listed on IDEAS

    as
    1. Peter Flaschel & Reiner Franke & Roberto Veneziani, 2012. "The Measurement of Prices of Production: An Alternative Approach," Review of Political Economy, Taylor & Francis Journals, vol. 24(3), pages 417-435, July.
    2. Gérard Duménil & Duncan Foley & Dominique Lévy, 2009. "A Note On The Formal Treatment Of Exploitation In A Model With Heterogenous Labor," Metroeconomica, Wiley Blackwell, vol. 60(3), pages 560-567, July.
    3. Marquetti, Adalmir A., 2003. "Analyzing historical and regional patterns of technical change from a classical-Marxian perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 191-200, October.
    4. Peter Flaschel & Reiner Franke & Roberto Veneziani, 2013. "Labour productivity and the law of decreasing labour content," Cambridge Journal of Economics, Oxford University Press, vol. 37(2), pages 379-402.
    5. Reati, Angelo, 1986. "The Deviation of Prices from Labour Values: An Extension to the Non-competitive Case," Cambridge Journal of Economics, Oxford University Press, vol. 10(1), pages 35-42, March.
    6. Roberto Veneziani, 2004. "The Temporal Single-system Interpretation of Marx's Economics: A Critical Evaluation," Metroeconomica, Wiley Blackwell, vol. 55(1), pages 96-114, February.
    7. Ian Wright, 2011. "Classical macrodynamics and the labor theory of value," Open Discussion Papers in Economics 76, The Open University, Faculty of Social Sciences, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Labor values; profit rates; input-output models;

    JEL classification:

    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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