The Rate of Profit is Falling...

[ComradeRed]

I am reading through The Empirical Strength of the Labor Theory of Value (http://homepage.newschool.edu/~AShaikh/labthvalue.pdf), and on page 237 table 15.3 there is an interesting pattern:

Year : Adjusted Maximum Rate of profit
1947 : 92.1%
1958 : 84.2%
1963 : 74.3%
1967 : 66.3%
1972 : 61.6%

The maximum rate of profit is falling with respect to time.

Using Newton's interpolation method for polynomials, one finds:

R(t) = 92.1 - (t-1947)(0.87777777) - (t-1947)(t-1958)(0.068888889) + (t-1947)(t-1958)(t-1963) (0.0003391285) - (t-1947)(t-1958)(t-1963)(t-1967)(0.000113618)

We note that dR(t)/dt < 0 for t > 0. What is really fascinating is that this method predicts the market crash of 1929, because 1929.78 is one of the roots (this prediction is off by 48.2 days). Interestingly enough, 1979.88 is another root...which is another "downturn" in the American economy.

Just thought I would share this empirical evidence with y&#39;all...

Edit: Just an apropos, more recent data is needed to update the plot. This is accurate until about 1980, 8 years after the data ended. Afterwards, its predictability powers is not very good. So this formula R(t) is of course an approximation based on observed values.

[Die Neue Zeit]

^^^ What about the stock market crash of 1987? [It&#39;s only seven years off.]

[ComradeRed]

Originally posted by [email protected] 25, 2007 07:26 pm
^^^ What about the stock market crash of 1987? [It&#39;s only seven years off.]
Very plausible, but as I stated there is still more data needed.

Frankly, the predictive powers of the single variable equation for the great depression is impressive enough alone, much less predicting 1987 or any other "problem" in the markets.

But I am too busy at the moment to go and do research to find the most accurate equation for R(t) possible...

[Entrails Konfetti]

Whats wrong with just using statistics in determining this? Particularly looking at the median of profits over the decades since WW2?

From what I know about the falling rate of profit is that its been going on since 1914. Ever since markets changed hands, the economy got back on its feet after the great wars by reconstruction. But now we now are in proxy wars, and quagmire-- reconstruction as of right now isn&#39;t really viable, not to mention since ww1 the saturation of markets, now we just keep producing the same products but "the up-dated versions" while at the same time workers (in the first world anyhow) are being kicked from industrial production, and end up doing service work which pays a third of what labour union work did. So we see how capitaliasts are trying to make profit by just paying the workforce less.

However another problem arises by paying the workers less and kicking them from production jobs--money circulation. Yes theres still production, but its highly mechanized. So with production as it is-- whose going to buy all the 2nd rate products? Not the rich capitalists&#33; They won&#39;t buy so much 2nd rates products at a service work place&#33; If they were smart they&#39;d look at where they spend their money, but they don&#39;t want to buy a styrophome couch, a Chevy Cobalt, or a pressed cardboard dresser. They want luxury goods, and the finest.
But they direct all this production, and fewer working-people are going to be able to buy the commodities.

Then theres the problem of communication technology, and production technology--with the age we live in everytime you turn around theres a machine that can do something so much better than the one you just saw. This makes it harder for the capitalist to compete, they just can&#39;t make a good investment in constant capital. And they have to resort to updating more and more and taking losses in profit.

[Die Neue Zeit]

Originally posted by EL [email protected] 25, 2007 08:36 pm
From what I know about the falling rate of profit is that its been going on since 1914.

...

Then theres the problem of communication technology, and production technology--with the age we live in everytime you turn around theres a machine that can do something so much better than the one you just saw. This makes it harder for the capitalist to compete, they just can&#39;t make a good investment in constant capital. And they have to resort to updating more and more and taking losses in profit.
On your first comment, is that knowledge alone to pronounce definitely that the left-communist theory of decadence started to apply in 1914? I&#39;m linking the raw economics to politics, because of the national-liberation question and "popular" anti-imperialism in general.

Because, from what I&#39;ve garnered, related political movements didn&#39;t become structurally bankrupt until the 1980s and 1990s (because of the rise of Islamism).

On your last comment, you forgot information technology, too. The "harder to compete" part is something I can translate on this board into business-speak for you, if you like. :)

[ComradeRed]

Originally posted by EL [email protected] 25, 2007 07:36 pm
Whats wrong with just using statistics in determining this? Particularly looking at the median of profits over the decades since WW2?
You could use statistics, I suppose, but it is specifically taught in numerical analysis that when interpolating data you should use Newton&#39;s method...when adding data points, there is minimal extra work that is required.

But there is insufficient data to do statistics here, you would need quite a bit more data. That is one of the problems.


From what I know about the falling rate of profit is that its been going on since 1914. Ever since markets changed hands, the economy got back on its feet after the great wars by reconstruction. Markets changed hands? From whom to whom?


But now we now are in proxy wars, and quagmire-- reconstruction as of right now isn&#39;t really viable, not to mention since ww1 the saturation of markets, now we just keep producing the same products but "the up-dated versions" while at the same time workers (in the first world anyhow) are being kicked from industrial production, and end up doing service work which pays a third of what labour union work did. So we see how capitaliasts are trying to make profit by just paying the workforce less. Yes, an increase in the relative surplus value.

Did you miss the part where I said more research is needed?


However another problem arises by paying the workers less and kicking them from production jobs--money circulation. Yes theres still production, but its highly mechanized. So with production as it is-- whose going to buy all the 2nd rate products? Not the rich capitalists&#33; Money circulation has nothing to do with this secondary non-sequitur point you are making...


Then theres the problem of communication technology, and production technology--with the age we live in everytime you turn around theres a machine that can do something so much better than the one you just saw. This makes it harder for the capitalist to compete, they just can&#39;t make a good investment in constant capital. And they have to resort to updating more and more and taking losses in profit. Obviously the additional profit outweighs this loss, otherwise they would resort back to where they were more profitable.

[Entrails Konfetti]

Originally posted by Hammer+--> (Hammer)On your first comment, is that knowledge alone to pronounce definitely that the left-communist theory of decadence started to apply in 1914?[/b]
I&#39;m using the outbreak of WW1 as a period marker of the beginning of decadence, if my date is incorrect, my appologys, as I&#39;m not so good at remembering dates, but I know what happened during events. Perhaps you have something to add about the pronoucation of decadence? That is if you even think its viable.


I&#39;m linking the raw economics to politics, because of the national-liberation question and "popular" anti-imperialism in general.

Because, from what I&#39;ve garnered, related political movements didn&#39;t become structurally bankrupt until the 1980s and 1990s (because of the rise of Islamism).


I don&#39;t understand what your getting at. If your talking about Left-Communist movements decline during that period, that could be attributed to the suppression by both the East and the West. As for the rise of Militant Islam, its pretty much always been around and those movements were used depending on the context for either the East or the Wests motives. Now these movements are prominent because of the crumbling of Eastern Block, and its demise.


On your last comment, you forgot information technology, too. The "harder to compete" part is something I can translate on this board into business-speak for you, if you like.
Okay


Comrade Red
You could use statistics, I suppose, but it is specifically taught in numerical analysis that when interpolating data you should use Newton&#39;s method...when adding data points, there is minimal extra work that is required.

But there is insufficient data to do statistics here, you would need quite a bit more data. That is one of the problems.

I don&#39;t understand Newtons method, and why its better than the generalities of statistics. Sure statistics is general, and you certainly have to observe the environments, and then you make your inferences. But you don&#39;t feel by using these complex laws your making it more difficult for yourself?


Markets changed hands? From whom to whom?
World War 1 started because of the saturation of the capitalist markets, there were no more different types of ecomomic structures capitalism could compete with and introduce itself to. Germany was late in grabing the markets, and they wanted to carve themselves a piece, if not take to whole turkey.

World war one, the great depression, again saturation of markets, and its result of over production, and Germany wanted its piece, again. I could go more in detail about the state intervention to stabalize the markets... but thats not really relevant right now.

After both world wars, the USA was the benefactor because it could trade with the markets all the other war damaged countries couldn&#39;t, and it financed the reconstructions of these other countries, thereby having a greater stake in their economies and politics.


Did you miss the part where I said more research is needed?
Why, is it not obvious enough?


Money circulation has nothing to do with this secondary non-sequitur point you are making...
The inflation of the economy, and the workers being payed 2/3rds less-- money wont circulate as far as it used to. This collides with the aspect of the production of the increasingly up-dated versions of commodities past. Fewer people are buying then expected.


Obviously the additional profit outweighs this loss, otherwise they would resort back to where they were more profitable.
But its all short-term; yeah, the new ultra-matic robotic car making arms are good for now, but 4 months down the road they are obsolete. Meanwhile during those four months a car manufacturing competitor has bought a newer edition. How can any capitalist ensure top rankings in competition? They have to update before its too late, a week could be too late.

In the past when production technology wasn&#39;t so expansive, and there were more wage-labourers the manufacturer could determine how much cut they&#39;d get from every workers wage, given that they produce for immediate demand. Now they have to spend increasingly on constant capital, and they don&#39;t know what cut is theirs, and how much they can advance.

[Die Neue Zeit]

Originally posted by EL KABLAMO+October 25, 2007 10:04 pm--> (EL KABLAMO &#064; October 25, 2007 10:04 pm)
Hammer
On your first comment, is that knowledge alone to pronounce definitely that the left-communist theory of decadence started to apply in 1914?
I&#39;m using the outbreak of WW1 as a period marker of the beginning of decadence, if my date is incorrect, my apologies, as I&#39;m not so good at remembering dates, but I know what happened during events. Perhaps you have something to add about the pronunciation of decadence? That is if you even think its viable. [/b]
While I agree with the basic principles behind the theory as a "Leninist" outside the Trot and "tank" streams, I do think that their "belief" that the decadence began in 1914 was too premature. Capitalism may have had pervasive influence globally, but I have a few problems.

1) Industrialization: As you know, neither Russia nor China were industrialized at that time, and neither were South America or India. Also, the US still had lots of room to grow industrially.

2) Economic growth: That, and in particular infrastructural growth within the overall growth, is self-explanatory.



I&#39;m linking the raw economics to politics, because of the national-liberation question and "popular" anti-imperialism in general.

Because, from what I&#39;ve garnered, related political movements didn&#39;t become structurally bankrupt until the 1980s and 1990s (because of the rise of Islamism).


I don&#39;t understand what your getting at. If your talking about Left-Communist movements decline during that period, that could be attributed to the suppression by both the East and the West. As for the rise of Militant Islam, its pretty much always been around and those movements were used depending on the context for either the East or the Wests motives. Now these movements are prominent because of the crumbling of Eastern Block, and its demise.

I wasn&#39;t talking about left-communist movements, but about the viability of national-liberation movements and other anti-imperialist movements during most of the 20th century. Of course, they peaked just after WWII.



On your last comment, you forgot information technology, too. The "harder to compete" part is something I can translate on this board into business-speak for you, if you like.
Okay

Since I&#39;m in a rush, I&#39;ll edit this post later for the jargon (just so that you won&#39;t be scratching your head when you read this stuff in the papers or hear it being discussed out of the blue).



As promised:

1) Product lives (and product life cycles) (http://en.wikipedia.org/wiki/Product_life_cycle_management) are shortened;
2) A greater emphasis towards just-in-time production (http://en.wikipedia.org/wiki/Just_In_Time_%28business%29);
3) The trend towards mass customization (http://en.wikipedia.org/wiki/Mass_customization).

[ComradeRed]

Originally posted by EL KABLAMO+October 25, 2007 09:04 pm--> (EL KABLAMO @ October 25, 2007 09:04 pm)
Comrade Red
You could use statistics, I suppose, but it is specifically taught in numerical analysis that when interpolating data you should use Newton&#39;s method...when adding data points, there is minimal extra work that is required.

But there is insufficient data to do statistics here, you would need quite a bit more data. That is one of the problems.

I don&#39;t understand Newtons method, and why its better than the generalities of statistics. Sure statistics is general, and you certainly have to observe the environments, and then you make your inferences. But you don&#39;t feel by using these complex laws your making it more difficult for yourself? [/b]
Let me give an example of Newton&#39;s method in use. Suppose we had three data points (0,2), (2,5), (3,6).

I will define the following:
x[0] = 0
x[1] = 2
x[2] = 3

What we do is we have coefficients:
f[0] = 2
f[1] = 5
f[2] = 6
Which are the y values for our points.

Then we define new coefficients based off of these, and the x points:
f[0,1] = (f[1] - f[0])/(x[1] - x[0])
f[1,2] = (f[2] - f[1])/(x[2] - x[1])

And we define another group of coefficients from the last set:
f[0,1,2] = (f[1,2] - f[0,1])/(x[2]-x[0])

We then write a polynomial using these coefficients:

P(x) = f[0] + (x-x[0])(f[0,1] + (x-x[1])(f[0,1,2))

As an approximation to the data points. We can continue this for N data points, and come up with a polynomial of degree N.

The advantage with this is that it&#39;s easier to program, it&#39;s more reliable, and plugging in the values of x[0],...,x[2] into P(x) results in the correct values f[0],...,f[2] respectively.

[bloody_capitalist_sham]

Is it falling because there is an ever increasing amount dead capital?

Is it possible to work out the maximum limit of dead capital can have before it is no longer able to create enough profit to continue developing the productive forces?