~300 words, ~2 min reading time
Summary
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.
Professor Engelhardt,
I am a little surprised by your summary, since Marx seems to be emphasizing the role of the entrepreneur very clearly here:
“…the rate of profit may differ considerably, depending on the low or high prices of raw materials and the experience of the buyer, on the relative productivity, efficiency and cheapness of the machinery, on the greater or lesser efficiency of the aggregate arrangement in the various stages of the productive process, elimination of waste, the simplicity and efficiency of management and supervision, etc.
***In short, given the surplus-value for a certain variable capital, it still depends very much on the *individual business acumen of the capitalist*, or of his managers and salesmen, whether this same surplus-value is expressed in a greater or smaller rate of profit, and accordingly yields a greater or smaller amount of profit.**** ”
– Meaning, Marx is absolutely giving space for the role of an entrepreneur. It might not be the question of the entrepreneur as a dynamic, innovative force in the economy that the Austrian school might emphasize (such as Per Bylund’s article on Smith today on Mises.org) but in fact, Marx is giving room for entrepreneurial ability, making things more productive, more efficient combination of factors of production, etc.
This entrepreneurial ability, in fact, Marx would call a “force of production.” The crisis is of Capitalism, for Marx, was the contradiction between relations and forces of production.
In terms capital and the rate of profit, it is going to be an expression of a contradiction in time, between present and past, a non-linear, contradictory form of time. It is how capital becomes a barrier to its own potential. The ratio between variable and constant capital, are economic forms of time.