Employment dynamics, increasing returns and Marx’s falling rate of profit
DOI:
https://doi.org/10.13133/2037-3643/17577Keywords:
rate of profit, increasing returns, employment dynamics, scale economies, market powerAbstract
It is assumed that Marx focuses on profits that are to be realized in larger production that permits some surplus production. This understanding underpins the importance of increasing returns embedded in employment dynamics associated with larger employment bases. This organizational form not only permits increases in profits in production but also supports employment-based learning by doing-led new investment opportunities that maintain and increase such profits. The conception of profits changes from the employment dynamics-based one, to one that relies more on market power-based returns. Accordingly, the present paper argues that empirical analyses should not focus on a falling rate of profits as such: they should rather focus on what factors make clear the behaviour of the rate of profit, and clearly distinguish between the employment dynamics-based profits and the profits that relate more to the returns to higher fixed costs.
JEL codes: B5, E11, O14, P17
References
Arrow K.J. (2000), “Innovations in Large and Small Firms”, in Swedberg R. (ed.), Entrepreneurship: The Social Science View (pp. 229-243), Delhi: Oxford University Press.
Bagchi A.K. (ed.) (1999), Economy and Organization, New Delhi: Sage Publications.
Bain J.S. (1968), Industrial Organization, New York: John Wiley and Sons Inc.
Basu D. and Budhiraja M. (2020), “What to Make of Kaldor-Verdoorn Law”, UMass Amherst Economics Working Papers. no. 286, Amherst: University of Massachussetts, Deparment of Economics.
Basu D. and Manolakos P. (2013), “Is There a Tendency for the Rate of Profit to Fall? Econometric Evidence for the US Economy, 1948-2007”, Review of Radical Political Economy, 45 (1), pp. 76-95.
Basu D. and Vasudevan R. (2013), “Technology, Distribution and the Rate of Profit in the US Economy: Understanding the Current Crisis”, Cambridge Journal of Economics, 37 (1), pp. 57-89.
Bellofiore R. (2014), “The Loneliness of the Long Distance Thinker: Sraffa, Marx and the Critique of Economic Theory,” in Bellofiore R. and Carter S. (eds.), Towards a New Understanding of Sraffa (pp. 198-240), London: Palgrave Macmillan.
Bellofiore R. (2018), “Multiple Meanings of Marx’s Value Theory”, Monthly Review, 69 (11), available at: https://monthlyreview.org/2018/04/01/the-multiple-meanings-of-marxs-value-theory/
Bidard C. (1988), “The Falling Rate of Profit and Joint Production”, Cambridge Journal of Economics, 12 (3), pp. 355-360.
Blecker R.A. (2016), “Wage-led versus Profit-led Demand Regimes: The Long and Short of it”, Review of Keynesian Economics, 4 (4), pp. 373-390.
Clark P.K. (1984), “Productivity and Profits in the 1980s: Are They Really Improving?”, Brookings Papers on Economic Activity, 15 (1), pp. 133-169
Devine J. (1988), “Falling Profit Rates and the Cause of the 1922-33 Collapse: Towards a Synthesis”, Review of Radical Political Economy, 20 (2&3), pp. 87-93.
Edquist C., Hommen L. and McKelvey M. (eds.) (2000), Systems of Innovation: Growth, Competitiveness and Employment, Cheltenham (UK) and Northampton (MA, USA): Edward Elgar Publishing.
Feldstein M. and Summers L. (1977), “Is the Rate of Profit Falling?”, Brookings Papers on Economic Activity, 8 (1), pp. 211-228.
Foley D.K. (1987), “Money in Economic Activity”, in Eatwell J., Milgate M. and Newman P. (eds.), The New Palgrave. A Dictionary of Economics, Vol. 3 (pp. 248-262), London: MacMillan.
Foley D. and Michl T. (1999), Growth and Distribution, Cambridge (MA) and London: Harvard University Press.
Harcourt G.C. and Nolan P.H. (2009), “Price Theory and Multinational Oligopoly: Kurt Rothschild and Stephen Hymer Revisited” in Sanyal M.K., Sanyal M. and Amin S. (eds.), Post-reform Development in Asia: Essays for Amiya Kumar Bagchi (pp. 263-288), Hyderabad: Orient Blackswan.
Hardy J. (2016), “Radical Economics, Marxist Economics and Marx’s Economics”, International Socialism, 149, available at: http://isj.org.uk/radical-economics-marxist-economics-and-marxs-economics/
Heinrich M. (2013), “Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s”, Monthly Review, 64 (11), pp. 15-31.
Hobsbawm E.J. (1974), Industry and Empire, Middlesex, England: Pelican Books.
Libanio G. and Moro S. (2009), “Manufacturing Industry and Economic Growth in Latin America: A Kaldorian Approach’, available at: https://core.ac.uk/download/pdf/6338361.pdf
Kaldor N. (1972), ‘The Irrelevance of Equilibrium Economics”, Economic Journal, 82 (328), pp. 1237-1255.
Kalecki, M. (1954), Theory of Economic Dynamics, London: Unwin; reprinted (1968) New York: Monthly Review Press.
Maddala G.S. and Miller E. (2004), Microeconomics: Theory and Applications. New Delhi: Tata McGraw-Hill.
Martin S. (1989), Industrial Economics, Republic of Singapore: Macmillan.
Marx K. (1887), Capital, Vol. I, Moscow: Progress Publishers.
Marx K. ([1956] 1986), Capital, Vol. II, Moscow: Progress Publishers.
Marx K. (1963), Theories of Surplus Value, Part I, Moscow: Progress Publishers.
Marx K. (1968a), Theories of Surplus Value, Part II, Moscow: Progress Publishers.
Marx K. (1968b), “Wages, Price and Profit”, in Marx K. and Engels. F., Selected Works (in one volume)(pp. 186-229), Moscow: Progress Publishers.
Marx K. (1971), Theories of Surplus Value, Part III, Moscow: Progress Publishers.
McCausland W.D. and Theodossiou, I. (2012), “Is Manufacturing Still the Engine of Growth”, Journal of Post Keynesian Economics, 35 (1), pp. 79-92.
McCombie J.S.L. and Spreafico M.R.M. (2016), “Kaldor’s ‘Technical Progress Function’ and Verdoorn’s Law Revisited” Cambridge Journal of Economics, 40 (4), pp. 1117-1136.
Michl T. (1988), “The Two-Stage Decline in U.S. Nonfinancial Corporate Profitability, 1948-1986”, Review of Radical Political Economics, 20 (4), pp. 1-22.
Morimoto S. (2013), “Okishio Theorem: Japanese discussion and empirical evidence”, paper presented at Association of Heterodox Economics, available at: https://www.hetecon.net/wp-content/uploads/2019/12/Morimoto_AHE2013.pdf
Murphy K., Shleifer A. and Vishny R. (1989), “Industrialization and the Big Push”, Journal of Political Economy, 97 (5), pp. 1003-1026.
Nordhaus W. (1974), “The Falling Share of Profits”, Brookings Papers on Economic Activity, 5 (1), pp. 169-218.
Okishio N. (1961), “Technical Change and the Rate of Profit”, Kobe University Economic Review, 7, pp. 85-99.
Okishio N. (2001), “Competition and Production Prices”, Cambridge Journal of Economics, 25 (4), pp. 493-501.
Patnaik P. (2014), “Capitalism, Inequality and Globalization: Thomas Piketty’s Capital in the Twenty-First Century”, International Journal of Political Economy, 23 (3), pp. 55-69.
Piketty T. (2014), Capital in the Twenty-First Century, Cambridge: The Belknap Press of Harvard University.
Robinson J. (1963), An Essay on Marxian Economics, London: Macmillan.
Roemer J.E. (1979), “Continuing controversy on the falling rate of profit: Fixed capital and other issues”, Cambridge Journal of Economics, 3 (4), pp. 379-398.
Rothschild, K.W. (1947), “Price Theory and Oligopoly”, Economic Journal, 51 (227), pp. 299-320.
Saxenian A. (2000), “The Origins and Dynamics of Production Networks in Silicon Valley”, in Swedberg R. (ed.), Entrepreneurship: The Social Science View (pp. 308-331). Delhi: Oxford University Press.
Schefold B. (2016), “Profits equal surplus value on average and the significance of this result for the Marxian theory of accumulation”, Cambridge Journal of Economics, 40 (1), pp. 165-199.
Scherer F.M. and Ross D. (1990), Industrial Market Structure and Economic Performance. Boston: Houghton Mifflin Company.
Schmookler J. (1966), Invention and Economic Growth, Cambridge (MA): Harvard University Press.
Screpanti E. and Zamagni S. (2006), An Outline of the History of Economic Thought, New Delhi: Oxford University Press.
Shaikh A. (1978), “Political Economy and Capitalism: Notes on Dobbs Theory of Crisis”, Cambridge Journal of Economics, 2 (2), pp. 233-251.
Shaikh A. (1992), “The Falling Rate of Profit as the Cause of Long Waves: Theory and Empirical Evidence”, in Kleinknecht A., Mandel E. and Wallerstein I. (eds.), New Findings in Long Wave Research (pp. 174-202), London: Macmillan.
Semieniuk G. (2017), “Piketty’s Elasticity of Substitution: A Critique”, Review of Political Economy, 29 (1), pp. 64-79.
Solow R.M. (1998), Monopolistic Competition and Macroeconomic Theory, Cambridge (UK): Cambridge University Press.
Solow R.M. (2003), “From Neoclassical Growth Theory to New Classical Macroeconomics”, in Dreze J. (ed.), Advances in Macroeconomic Theory (pp. 19-29), New York: Palgrave Macmillan.
Sraffa P. (1960), Production of Commodities by Means of Commodities, Bombay: Vora, 1963.
Steedman I. (1977), Marx after Sraffa, London: New Left Books.
Sweezy P. (1942), Theory of Capitalist Development, New York: Oxford University Press.
Thirlwall A.P. (1979), “The Balance of Payments Constraint as an Explanation of International Growth Rate Differences”, Banca Nazionale del Lavoro Quarterly Review, 32 (128), pp. 45-53.
Thirlwall A.P. (2011), “Balance of Payments Constrained Growth Models: History and Overview”, PSL Quarterly Review, 64 (259), pp. 307-351.
Trofimov I. (2017), “Profit rates in developed capitalist economies: A time series investigation”, PSL Quarterly Review, 70 (281), pp. 85-128.
Vivarelli M. (2015), “Innovation and employment”, IZA World of Labor, 2015: 154; doi: 10.15185/izawol.154
Waldman D.E. and Jensen E.J. (2005), Industrial Organization: Theory and Practice, Delhi: Pearson Education.
Weisskopf T. (1979), “Marxian Crisis Theory and the Rate of Profit in the Postwar US Economy”, Cambridge Journal of Economics, 3 (4), pp. 341-378.
Wolff E. (1986), “The Productivity Slowdown and the Fall in the U.S. Rate of Profits, 1947-76”, Review of Radical Political Economy, 18 (1&2), pp. 87-109.
Wolff E. (2001), “The Recent Rise of Profits in the United States”, Review of Radical Political Economics, 33 (3), pp. 314-324.
Wolff E. (2003), “What is Behind the Rise in Profitability in the U.S. in the 1980s and 1990s?”, Cambridge Journal of Economics, 27 (4), pp. 479-499.
Young A.A. (1928), “Increasing Returns and Economic Progress”, Economic Journal, 38 (152), pp. 527-542.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Satya Prasad Padhi
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
