Declining trend of profit rate and technical progress

ABSTRACT

Given a stable rate of surplus value and an increasing organic composition of capital, Marx asserted that the rate of profit would tend to decline. The increase of the organic composition of capital depends, however, on the type of technical progress. It can be labor-saving - and then the organic composition of capital will rise - but can also be neutral or capital-saving. On the hand, only in a very special case firms will adopt new techniques that increase their costs and lower their profits. The recent debate on the Okishio theorem about this problem and Shaikh’s attempt to reestablish the Marxian orthodoxy are discussed. The author concludes that the law of the declining tendency of the rate of profit is an essential instrument to understand the long-run dynamics of the process of capital accumulation, but does not mean that the rate of profit will actually decline.

KEYWORDS:
Profit; capital accumulation; Marxism