This action might not be possible to undo. Are you sure you want to continue?
The Rate of Surplus Value, the Organic Composition, and the General Rate of Profit in the U.S. Economy, 1947-67: A Critique and Update of Wolff's Estimates Author(s): Fred Moseley Reviewed work(s): Source: The American Economic Review, Vol. 78, No. 1 (Mar., 1988), pp. 298-303 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/1814727 . Accessed: 27/11/2011 11:54
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact email@example.com.
American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to The American Economic Review.
Ahmed Tonak. however.S. if not conclusively proved. the rate of profit varies directly with the rate of surplus value and inversely with the composition of capital. Economy. Pts. A recent example of a similar controversy within this Review related to the neoclassical theory of monopoly is whether the accounting rate of profit is a reliable proxy for the economic rate of profit.2 I argue that Wolffs estimates. James Crotty. Pt. According to Wolff's estimates.S. as predicted by Marx's theory. I have also benefited from comments by Tom Weisskopf. although clearly an important contribution to Marxian empirical research.S. This paper does not enter into this long and continuing debate. contrary to Marx's prediction. and anonymous referees of this journal. which according to neoclassical theory is the appropriate indicator of monopoly profits within an industry. The controversy was initiated by Franklin Fisher and John McGowan. 'There has been much theoretical controversy over whether Marx conclusively proved that the rate of profit must fall as a result of technological change. and for penetrating comments on an earlier draft of this paper. 298 *Department of Economics. Kariena Zarcharski. and William Ralph for their very capable research assistance and Colby College for financial assistance. which comes to essentially the same conclusion as Wolff: The rate of profit declined (25 percent) because the rate of surplus value declined (28 percent). this paper is concerned solely with the empirical question of whether the actual trends of the three Marxian variables were in the directions which Marx at least expected and asserted. (Marx. thus having offsetting effects on the rate of profit. . 340). so that the net effect would be a decline in the rate of profit. I also thank Randy Mitchell. and the General Rate of Profit in the U.The Rate of Surplus Value. Wolff concluded that " there is no empirical support for it (Marx's law of the tendency of the rate of profit to fall) during my period of investigation" (p. for answering many detailed and time-consuming questions. 4 and 7. economy is Thomas Weisskopf. the Organic Composition. but this decline was due to a decline in the rate of surplus value rather than to an increase in the composition of capital. According to his estimates for the entire 1947-76 period. However. the rate of profit declined. so that the rate of profit increased. See Jens Christiansen for a concise review of these controversies.3 The most 2Another important study which also presents estimates of the three key Marxian variables for the postwar U. do not provide a reliable empirical test of Marx's theory because these estimates are derived from data categories which differ in significant respects from the basic concepts in Marx's theory. 3). contrary to Marx's prediction. 1947-67: A Critique and Update of Wolff's Estimates By FRED MOSELEY* The most important prediction of Karl Marx's theory of capitalism is that the rate of profit would tend to decline over time as a result of technological change. Instead. Colby College. both the composition of capital and the rate of surplus value increased. 3The problem of the relation between theoretical concepts and the data used to estimate these concepts is of course not unique to Marxian empirical research. 1982. Waterville ME 04901. Mark Glick. Edward Wolff (1979) presented estimates of these three key variables in Marx's theory for the U. In a more recent paper. Marx argued further that the composition of capital would increase at a faster rate than the rate of surplus value. with essentially no trend in the composition of capital. the rate of surplus value increased at a faster rate than the composition of capital. and Marx. 1977.1 In an important paper in Marxian empirical research in this Review. Wolff (1986) revised and updated these estimates to 1976 and came to somewhat different conclusions. Marx argued that both the composition of capital and the rate of surplus value would increase as a result of technological change. I wish to express a special thanks to Ed Wolff for providing me with his data. economy from 1947 to 1967. as predicted by Marx's theory. According to Marx's theory.
6. etc. etc. and surplus value. 78 NO. RP = S/C. and 3) the taxes on wages are a part of variable capital. 1. accounting. legal counsel. debt-credit relations. Section III compares these estimates with Wolff's estimates of the Marxian variables. which provides the analytical framework for Marx's theory of the rate of profit. 5Other conceptual issues involved in the precise definition of these Marxian concepts and thus in the estimation of the Marxian ratios include: 1) whether the Marxian concepts should be estimated in terms of labor-hours or in terms of prices. supervision. The composition of capital (CC) is defined as the ratio of the accumulated stock of constant capital (C) to the annual flow of variable capital (V). (1) = = ~~RP C/V =~CC S/V RS fundamental concepts and thus in the estimation of the three Marxian ratios is whether the concepts of constant capital and variable capital include all the capital invested in capitalist enterprises. The rate of surplus value (RS) is defined as the ratio of the annual flow of surplus value (S) to the annual flow of variable capital. variable capital. we obtain the following accounting relationship. or activities related to the control of the labor of production workers. but are not created in nonproduction activities (Marx. Productive Capital andUnproductive Capital4 The three Marxian variables discussed above are ratios defined in terms of three fundamental concepts: constant capital. This distinction between production and nonproduction activities is based on Marx's theory of value and surplus value.5 I argue that Marx's concepts of constant capital and variable capital include only the capital invested in production activities. but specifically does not include the following two types of activities within capitalist enterprises: 1) Circulationactivities. Thus Marx referred to capital invested in production activities as "productive capital" and capital invested in nonproduction activities as "unproductive capital. or activities related to the buying and selling of commodities. 1982. The most important conceptual issue involved in the precise definition of these 4This section is a brief summary of a longer discussion in Moseley (1986b). 7. the rate of profit varies directly with the rate of surplus value and inversely with the composition of capital. RS = S/V. including such activities as sales. ch. Finally. record keeping.) If both terms of the rate of profit are divided by the flow of variable capital. and 13. ch. (I make here the convenient simplification that the stock of variable capital is zero. I argue that 1) the Marxian concepts should be estimated in terms of prices. but also household and institutional production). and Marx. and 3) whether the taxes on wages are a part of variable capital or surplus value. or only the capital invested in production activities. Marx. that is. where "production" is defined fairly broadly to include such activities as transportation and storage. Briefly stated. Wolff adopts the opposite interpretation of all these issues. I MOSELEY: SURPLUS VALUE 299 important discrepancy between the Marxian concepts and Wolff's estimates is that the latter do not take into account Marx's distinction between productive capital and unproductive capital." I argue that constant capital and variable capital were defined by Marx as components Thus it is clear that. These issues are discussed in Fred Moseley (1986b). according to which value and surplus value are created in production activities.VOL. purchasing. Section II presents estimates of the Marxian variables which take this distinction into account. 1981. 1977. advertising. 2) the concepts of constant capital and variable capital refer only to capitalist production. including such activities as management. the rate of profit is defined as the ratio of the annual flow of surplus value to the sum of the accumulated stock of constant capital. that is CC= C/V. chs. and 2) Supervision activities. that is. Section I below briefly discusses this important distinction in Marx's theory. according to this framework. since it is in actuality negligibly small. 17). 2) whether the concepts of constant capital and variable capital refer only to capitalist production or also refer to various forms of noncapitalist production (mainly government production. as stated above. I.. .
his 1979 paper is explicitly presented as an empirical test of Marx's theory. The estimates of the rate of surplus value increased 19 percent over this period.34 Annual estimates of the Marxian variables of constant capital.08 4.39 0. to be an empirical test of Marx's theory.73 1.75 3.62 1.63 in 1972-76.68 1. 7Wolff states in a footnote in his 1986 paper that he ignores the distinction between productive labor and unproductive labor because his primary aim is to explain trends in the "capitalist" rate of profit.37 0. again as predicted by Marx's theory.44 1.00 3.44 1.46 1.42 0.73 1. it does not include the capital invested in labor power employed in circulation and supervision activities.11 4.19 4. 6Important references on Marx's concepts of productive capital and unproductive capital include I.37 0. 1974.38 0.72 1. it does not include the capital invested in the means of circulation or in the means of supervision. 1985. 1972.66 3. In terms of five-year averages.83 3.42 0. including the labor employed in circulation and supervision.35 1.44 0. that in itself is no reason to ignore Marx's distinction between productive labor and unproductive labor.74 3.45 0. from 3.86 3. These estimates are presented in Table 1.300 THE AMERICAN ECONOMIC REVIEW MARCH 1988 of "productive capital.40 1. From these estimates of the basic magnitudes. Thus the reader is certainly left with the impression that the 1986 paper is intended. and materials utilized within capitalist enterprises.48 3.59 1. Ian Gough. not the Marxian rate of profit.38 0. even if Wolffs primary aim in the 1986 paper is to explain the trends in the "capitalist" rate of profit.50 1.39 0.71 1.40 0. Measured in terms of five-year averages. at least in part. Rubin.40 0.38 0.45 0.88 4.62 in 1947-51 to an average of 4. the composition of capital increased 28 percent. as predicted by Marx's theory. estimates of the three key Marxian ratios were calculated.67 1.88 in 1976.84 3.58 3. variable capital.27 4.40 0.71 1.69 1.81 3.72 1.95 4.86 5.71 1. These estimates show the following trends: The estimates of the composition of capital increased 41 percent over this period.51 1. from 1. the rate of surplus value increased .7 II. and surplus value were derived for the U.03 3. 1972.39 0. and his 1986 paper is essentially an update of his 1979 paper using the same Marxian variables and the same estimation procedures.46 3.33 0.40 0.44 0.41 0. However.68 3.42 1. including those utilized in the functions of circulation and supervision.35 1." Constant capital is the capital invested in the means of production.39 0. from an average of 3.41 1.40 0.66 in 1976.61 1. Instead.46 3. The data sources and methods used to derive these estimates are described briefly in the Sources: See the Appendix.66 Rate of Profit 0. based on the definitions given in Section I. he defines variable capital as the wages of all labor within capitalist enterprises.46 0.46 0.74 3.73 3.41 0. Beyond this question. Estimates of the Marxian Variables TABLE 1-ESTIMATES OF THE MARXIANVARIABLES Composition of Capital 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 3. equipment. Wolff defines constant capital as the current value of all structures.71 1.46 0. and David Leadbeater.6 Wolff does not take into account Marx's distinction between productive capital and unproductive capital in his estimates of the Marxian variables.62 1.13 4.61 1.40 0.15 4.97 4.59 1. Harry Braverman. economy over Wolffs period of 1947-76.50 1. Appendix and more fully in the references cited therein. Similarly.46 in 1947 to 4. variable capital is the capital invested in labor power utilized in production.40 in 1947 to 1.S.32 0.91 3.55 1. Similarly.88 Rate of Surplus Value 1.84 3.39 0.76 3. in which this distinction plays a crucial role. Moseley (1986b) presents an analysis of the "capitalist" rate of profit.
8 Similarly.9 8Wolffs estimation methodology. contrary to Marx's predictions._ / X . from 1.75 in 1976). which are available for the postwar U.35 in 1972-76. unlike my methodology. . my estimates suggest that the decline in the rate of profit was caused by a greater increase in the composition of capital than in the rate of profit.l. 78 NO._ e o Wolff's s f e f t estimatessuggeste--------Wolff M iaY S0-\ 1960 1966 1960 1966 1970 1976 OF THE RATE OF SURPLUSVALUE FIGURiE2. so that both estimates of the rate of profit show a declining trend (Wolff's estimates declined 20 percent compared to the 10-15 percent decline in my estimates). while my estimates of the composition of capital increased 41 percent.39 in 1947-51 to 0. III. since the increase in the composition of capital was proportionally greater than the increase in the rate of surplus value. while my estimates of the rate of surplus value increased 19 percent. The estimates of the rate of profit declined 15 percent. By contrast._ 120 _/ 116* 110.34 in 1976. from 0.e As noted in the introduction. Comparison with Wolff's Estimates 186-1 1801126 1 120 F 110 105---- X / - . ESTIMATES OF THE COMPOSITION OF CAPITAL The estimates of the Marxian ratios presented in Section II will now be compared with Wolff's estimates of these ratios. 126. 9These divergent trends in the composition of capital and the rate of surplus value had roughly offsetting effects on the trend in the rate of profit. economy. Wolff's estimates of the composition of capital declined 8 percent over his period (from 5.40 in 1947 to 0.Y -Wolf -6- 90-- _ -- so. - 106tion. involves the use of input-output tables.VOL. the rate of profit fell significantly during this period. so Wolff's time-series for each variable consists of only 6 estimates. An analysis of the underlying determinants of the composition of capital and the rate of surplus value is beyond the scope of this discussion. as Marx predicted. 1 MOSELEY: SURPLUS VALUE cc 301 15 percent. as we have just seen. from 0. Wolffs estimates suggest that the decline in the rate of profit was caused by a decline in the rate of surplus value. 1960 ~ ~ 1966 ~ 1960 ~ 1966 .S. 1976 FIGURE 1. Wolff's estimates of the rate of surplus value declined 27 percent over this period (from 0.42 in 1947-51 to 1. Finally. ESTIMATES These two setstes proitwsof the Marxian ratios suggest entirely different causes of the decline in the rate of profit in the postwar U. economy only at irregular intervals of 5-10 years.16 in 1976).. These two estimates of the rate of surplus value are shown in Figure 2 (converted as above). 1970 . the rate of profit declined 10 percent. 96.62 in 1947 to 5.. This decline in the rate of profit is of course consistent with the prediction of Marx's theory. The main differences between these two sets of estimates is that the estimates of the composition of capital and the rate of surplus value have essentially opposite trends.64 in 1972-76. In terms of five-year averages. l0" Cause" is used here in the sense of a proximate cause. Both estimates are shown graphically in Figure 1 (my estimates are shown in terms of five-year moving averages and both estimates are converted into index numbers to emphasize the secular trends).96 in 1947 to 0.S.
furniture and fixtures. The other two conceptual issues discussed in fn. Estimates are derived from the Bureau of Economic Analysis (BEA) data for "net private nonresidential fixed capital" (current cost). APPENDIX: DATA SOURCES AND METHODS l l Most of the remainder of the difference in the trends of the two estimates of the composition of capital is accounted for by the different treatments of noncapitalist production (see fn. and construction industries and for the number of "nonsupervisory employees" in the other industries. which provides data for the wages of "production workers. Department of Labor. etc. computing. which reconciles Denison's estimates of inputs and output in the U. economy was caused by an increase in the composi- tion of capital. (Establishment Survey). Estimates are derived from NIPA data for "business inventories. office. Mining. The percentage of total employee compensation within each of the eight major industry classifications that was paid to production workers is estimated using data from various sources. 4 had very little effect on the trends of the Marxian ratios in the postwar U. Constant capital (stock): the sum of fixed capital and circulating capital. primarily the Censuses of Manufacturing. and accounting machines. excluding "imputations" which do not correspond to goods and services actually sold on the market (80 percent of which is the value of . as I have argued it should be in an empirical test of Marx's theory.12 If the distinction is taken into account. 2. 1. This conceptual difference accounts for 68 percent of the difference in the two trends of the composition of capital and for 65 percent of the difference in the two trends at the rate of surplus value. economy (1950-62) with Jorgenson and Griliches' estimates of these variable.S. Employment and Earnings. then the decline in the rate of profit in the postwar U. 3. Fixed capital: the current value of buildings and equipment used for production activities.S. excluding various types of buildings and equipment used for circulation and supervision activities (for example.S. Estimates of new value (or "value added") are derived from NIPA data for the "net product" of the business sector.S. which provides data for the numbers of "production workers" in the manufacturing." Detailed description in Moseley (1985b). It was noted above (fn. The method used to estimate the contribution of each of these conceptual issues to the difference in the trends of my estimates and Wolff's estimates is adopted from Edward Denison (1960). This conceptual difference accounts for 44 percent of the difference in the trends of the two estimates of the composition of capital and for 85 percent of the difference in the trends of the two estimates of the rate of surplus value. For a critique of Weisskopf's estimates of the rate of surplus value. Estimates are derived from NIPA data for "total employee compensation" in the business sector of the economy. 2) that the trends in Weisskopf's estimates are very close to the trends in Wolff's estimates. see Moseley (1985a). The differences between the trends of my estimates and Weisskopf's estimates are also due primarily to the fact that Weisskopf does not take into account Marx's distinction between productive capital and unproductive capital.). commercial buildings. 12Essentially the same conclusion is reached by a similar comparison of my estimates and Weisskopf's estimates of the Marxian ratios. Circulating capital: the current value of inventories. economy depends almost entirely on one's interpretation of Marx's distinction between productive capital and unproductive capital. Variable capital (annualflow): the total compensation (including supplements and benefits) of production workers. and Construction. 4)." Thus the conclusion one reaches concerning the trends of the composition of capital and the rate of surplus value and hence concerning the cause of the decline in the Marxian rate of profit in the postwar U." and the U. mining. Bureau of Labor Statistics (BLS). Surplus Value (annual flow): the difference between new value and variable capital.S. not by a decline in the rate of surplus value. Detailed description in Moseley (1985a). excluding the compensation of nonproduction workers.302 THE AMERICAN ECONOMIC RE VIEW MARCII 1988 These divergent trends in the composition of capital and the rate of surplus value are almost entirely explained by the different treatments given to Marx's distinction between productive capital and unproductive capital by Wolff and myself. economy.
" Marx's Theory of Productive and Unproductive Labor. Categories of Productive Labor and Unproductive Labor. David. March 1983. EdwardF. 66. andMcGowan.. ital. Economy. "Marxian Crisis Theory and the Rate of Profit in the Postwar U. 3. 168-89. of Profit.S." Cambridge Journal of Economics." New Left Review. 1. . the Organic Composition." presented at the 1986 Allied Social Sciences Association Annual Convention. Labor and Monopoly CapBraverman. 1968. New York: Random House. 1974. 341-78.S." Review of Radical Political Economy. John J. 73. Rubin.S.S. 1947-76. (1986a) "Estimates of the Rate of Surplus Value in the Postwar U. 57-79..S. . . 49. Spring and Summer 1986. Detailed description in Moseley (1985a). 591-619." Cambridge Journal of Economics. Essays in Marx's Theoryof Value. Winter 1985.Franklin the Misuse of Accounting Rates of Return to Infer Monopoly Profits.S. " Marx and the Falling Rate Christiansen. 47-72. Jens. 87-109. Economy. December 1979. Vol."The Consistency of Marx's Leadbeater. Capital. (1986b) "Marxian Empirical Research and the Postwar U. May 1976.I. Ian. Economy: A Critique of Wolffs Estimates. Detroit: Black and Red Press. 1-27. June 1979.." History of Political Economy. New York: Monthly Review Press. 18. Edward. Economy: A Critique of Weisskopfs Estimates.(1985b) "Estimates of the Composition of Capital in the Postwar U. Economy. Moseley. REFERENCES Harry. 1977. 82-97." Survey of Current Business. 329-41. Gough. 78 NO. 1 MOSELEY: SURPLUS VALUE 303 the " housing services" of owner-occupied homes). 1947-67. May 1969. and the General Rate of Profit in the U. March 1985. Fisher. Marx. Wolff. Vol. 2. Capital." American Economic Review. 69. New York: Random House. Spring-Summer 1986. 1972. . 3. 1981. 20-26. . Karl. Theories of Surplus Value. " The Productivity Slowdown and the Fall in the Rate of Profit. Economy." presented at the 1985 Allied Social Sciences Association Annual Convention..Capital. Denison. 1982." American Economic Review. 18."The Rate of Surplus Value." American Economic Review. "Some Major Issues in Productivity Analysis: An Examination of Estimates by Jorgenson and Griliches. Pt. Weisskopf. November-December 1972. 17. Thomas E. . Vol. (1985a) "The Rate of Surplus Value in the Postwar U.VOL. Fred. Moscow: Progress Publishers. I. II. New York: Random House. " On M. ." Review of Radical Political Economics. 9.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.