Marx’s Capital Volume III – Chapter 2 – “The Rate of Profit”

~300 words, ~2 min reading time

Chapter summary

In this chapter, Marx distinguishes between the rate of profit and the rate of surplus value. In money terms, surplus value and profit are the same. But, they are different as rates. The rate of profit in Marx is the profit divided by the capital expended (including both constant and variable capital, that is non-wage expenses and wages). The rate of surplus value is the profit divided by the variable capital (the wage bill). Marx says that capitalists really only care about the rate of profit, as they don’t care what their expenditures are, exactly – they just care about the total expended. As a result, changes in the degree of exploitation (the rate of surplus value) are difficult to discern.

Why It Matters

I’m not quite sure where Marx is going with this at this point, but a point he emphasizes is that the same rate of profit may obscure significant differences in the rate of surplus value. So, for example, a firm that is capital-intensive may the same rate of profit as a labor-intensive firm. However, the rate of surplus value is higher for the capital intensive firm since it generated the same profit with a lower wage bill – so, more “surplus labor”.

Where Marx Goes Wrong

This chapter lacked theoretical substance, for the most part, so there wasn’t much wrong with it. The key problem of the labor theory of value runs through Marx, and that is no different here. If we start from the assumption of derived demand/value imputation, however, then everything turns on its head. What Marx calls “profit” is what Bohm-Bawerk identifies as “interest”. “Profit” then, is the result of capitalists delaying consumption for the money that they’ve tied up in the capitalist production process. It has nothing to do with the exploitation of labor.

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