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"Is There a Tendency for the Rate of Profit to Fall?"

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Soviet cogitations: 676
Defected to the U.S.S.R.: 11 Sep 2009, 07:33
Ideology: Left Communism
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Post 28 Oct 2012, 08:12
Working paper from Deepankar Basu (of the Department of Economics at the University of Massachusetts at Amherst) and Panayiotis T. Manolakos suggests, using econometric analysis, that there is "evidence of a long-run downward trend in the general profit rate for the US economy for the period 1948-2007"

Abstract:
Quote:
The law of the tendential fall in the rate of profit has been at the center of theoretical
and empirical debates within Marxian political economy ever since the publication
of Volume III of Capital. An important limitation of this literature is the absence
of a comprehensive econometric analysis of the behaviour of the rate of profit. In
this paper, we attempt to fill this lacuna in two ways. First, we investigate the time
series properties of the profit rate series. The evidence suggests that the rate of profit
behaves like a random walk and exhibits “long waves” interestingly correlated with
major epochs of U.S. economic history. In the second part, we test Marx’s law of
the tendential fall in the rate of profit with a novel econometric model that explicitly
accounts for the counter-tendencies. We find evidence of a long-run downward trend
in the general profit rate for the US economy for the period 1948-2007.


I haven't finished it all yet, and I'm no economist, so it isn't amazingly clear to me exactly what's going on, but it is quite interesting. As the authors state, there doesn't seem to be a lot of evidence as such that the rate of profit does indeed fall (as far as I'm aware), so it's interesting to note at the least.

You can find the working paper here (links you to download/view the paper): http://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1098&context=econ_workingpaper
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