~300 words, ~2 min reading time
This short chapter summarizes some of what came before, and also makes clearer the main purpose: Marx was trying to show that the rate of profit is typically not independent of the size of the capital involved. This view (which Marx attributes to the German socialist Rodbertus) claims that capital and profit levels move in lock-step – so a 20% increase in capital and 20% increase in profit would go together, so that the rate of profit would be unaffected. Marx claims that this is true in only two cases: First, if there’s a change in the value of the monetary commodity. In that case, it’s not really that capital and profit are both increasing by 20%, it’s that gold (or the dollar or whatever) is decreasing in value by 20%. So, here, there is actually no “real” (inflation adjusted) change in either capital or profit – only in its nominal (money) value. Second, if variable and constant capital move in lock-step, so that the ratio between the two does not change. (In modern terms, economists would say that the enterprise is changing by “replication”, a simple repeating of the same process an extra time, half a time or whatever.)
Why It Matters
Marx’s view of distribution and cycles are closely tied with the fact that there is a connection between capital accumulation and the rate of profit, I suspect. So, this is going to play a bigger role when we reach that point.
Where Marx Goes Wrong
Here, Marx’s comments are few enough, and mostly in the form of a recap and application against Rodbertus that I don’t have any specific objections that wouldn’t show up elsewhere.