Wednesday, August 7, 2013


If the rate of profit is a function of variable capital (labor or wages) and constant capital (non-labor or machines, raw materials, etc.) then this chart depicts that relationship: variable capital divided by constant capital or (V/C) V representing labor and C representing non-labor. The data for the chart is from Table 1.15 of the National Income and Products Tables of the Bureau of Economic Analysis. The table purports to set forth the costs, profit and price of each unit of value added production in the U.S. The table shows the factors of value-added non-finance business production as: Labor Costs + Non-Labor Costs + Profit = Price. This analysis of the factors of price is interesting in that it shows that profit is a factor which is determined in the production or input phase of the economy rather than in the market or output phase, exactly as Marxist economics describes.

In other words, profit does not originate in the market, it is only realized  there in the price of the product.

As can be seen in the chart there is an unmistakable decline in the rate of profit (V/C) from 1929 to 2012. The only dramatic exceptions are the Great Depression and the war-profiteering of WWII.Rate of Profit

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