The Falling Rate of Profit: Recasting the Marxian Debate

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The longstanding and hotly contested debate over the tendency of the rate of profit to fall has been a major source of controversy within Marxian political economy since the 19th century. The Falling Rate of Profit offers a lucid critique of the arguments, a fresh reading of the debate itself, and an alternative model of the contradictory movement of the rate of profit, in a cogent and compelling new study.

Marx's theory of the falling rate of profit has long been one of cornerstones of Marxian economic theory. It is still one of the most hotly debated topics in Marxian economics. For some, Marx's theory imparts the dynamic development of capitalism with a dialectic that will eventually lead to capitalism's downfall. For others, it is an imprecise or false theory, which together with the metaphysics of Marxian value theory, should be cast aside for more modern and correct theories.

At the core of this debate are different conceptions of technical change or accumulation, different theories of value, alternative conceptions of the economy, and even different views on the meaning and significance of the rate of profit which is purported to fall or not. At the same time, not far below the surface of the debate, are different views on the political significance of the falling rate of profit, which give this debate a particular urgency and vitality. Roughly, these political positions are of two types: (a) if the rate of profit must necessarily fall that provides the basis for a revolutionary transformation to socialism, or, alternatively, (b) if it doesn't fall, then political action will necessarily be reformist and capitalism can only be slowly transcended, if ever. It is little wonder, then, that this longstanding debate continues to this day.

Thus, the debate over Marx's theory of the tendency for the rate of profit to fall (TRPF) is not simply a debate over the technicalities of value theory, as a cursory reading of the debate might imply, but it also concerns at its very foundation issues concerning the ontological structure of social totalities, different senses of value and profit, opposed theories of causality, and profoundly different political visions. Indeed, as I argue throughout this book, the debate over the TRPF which has occurred now during the better part of the twentieth century, has taken place within the context of two fundamentally different Marxian paradigms, which can be identified by their different understandings of the structure of the social totality. On the one hand, the 'traditional' approach to the debate over the TRPF employs a Hegelian approach to the social totality (discussed in detail in Chapter 2), while the more recent debate over the Okishio theorem employs a Cartesian approach to the social totality (discussed in detail in Chapter 3). The debate over the TRPF, then, is not simply a debate over the movement in the rate of profit, but is also at heart a debate over the very philosophical foundations of social theory. In this way, the debate over the TRPF is part of the larger debate taking place in many fields of social theory over whether micro- or macrofoundations are the correct way to construct a theory of society.

The failure to recognize the presence and consequence of these contending Marxian paradigms at work in the larger debate over the TRPF is, as I argue, critical for understanding why after nearly 100 years this debate still remains such an enormously tangled web. The protagonists of various positions in the debate all too often fail to see or appreciate the now widely accepted position that the meaning and significance of concepts are context-dependent, and therefore the meaning of concepts, words, or sentences do not stand alone, independent of their particular usage. The Hegelian and Cartesian approaches to social totality impart irreducibly different meanings and significance to the key concepts of debate such as profit, technical change, enterprise, and economy. As a result, the issues of contention in one debate become non-issues or literally nonsensical ones in the other, and failure to reach a resolution on what often seems simply to be technical points of logic or mathematics become the frustrating, and then, too often, polemical result.

Despite the fundamental differences in Hegelian and Cartesian approaches, they share in common a commitment to reductionist social theory. For the Hegelian approach, the individual agents (capitalists, workers) are understood to carry out the laws of motion of the capitalist economy, conceived as a structured totality. For the Cartesian approach, the capitalist economy is nothing more than the pattern which emerges from the interaction of independently constituted rational agents. For both approaches, therefore, these is no dialectical interaction between part and whole. One of the purposes of this book is to move the debate over the TRPF beyond what I consider to be the now sterile oscillation between theories based on a microfoundational (Cartesian) or a macrofoundational (Hegelian) approach to social theory. In Chapter 4, I develop a "decentered" approach to the social totality, where neither the part is reduced to the logic of the whole, or the whole is simply an aggregation of preconstituted parts. Given this concept of a decentered totality, Chapter 4 then develops an alternative model of the contradictory movement of the rate of profit, with the hope that this alternative formulation can begin to move the debate over the TRPF in new and more fruitful directions.

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