Two Concepts of Value, Two Rates of Profit, Two Laws of Motion

Article that appeared as Zarembka, P (ed) Economic Theory of Capitalism and its Crises, Research in Political Economy 18, pp241-48. Stanford, CT: JAI Press. (http://www.elsevier.com/wps/find/bookdescription.cws_home/621298/description#description) Responds to debate initiated in Research in Political Economy 17 (http://www.elsevier.com/wps/find/bookdescription.cws_home/621907/description#description) This article formed part of a four-way exchange on the rate of profit which appeared in Research in Political Economy 17 and 18 in 1999 and 2000, between David Laibman, Duncan Foley, Andrew Kliman and Alan Freeman. This piece constituted Freeman and Kliman’s response to the contributions of Foley and Laibman, themselves a response to our reactions to Laibman’s initial critique of the Temporal Single System Interpretation (TSSI) of Marx’s value theory. Our response establishes that both Laibman and Foley concede the fundamental point in the debate: there exist circumstances under which the rate of profit falls under cost-saving technical change, refuting Okishio’s theorem which states that the rate of profit cannot fall on these presuppositions in any circumstances. Our response assesses the reasons that, although Okishio’s theorem has been disproved, Marxist authors are unable or unwilling to acknowledge this fact. We dissect the faulty mathematical reasoning that lies behind the following notion: ‘the temporal rate of profit may fall, but it may also rise. Since it does not inevitably fall, Okishio’s theorem holds’. In fact, Okishio’s theorem asserts that the rate of profit may never fall. Therefore, mathematically, if a case is exhibited in which, under Okishio’s assumptions, the rate of profit does fall, the theorem is thereby disproved. Our response then establishes the general conditions under which the rate of profit does, or does not, fall.