Falling Rate of Profit 1 of 2

Why does capitalism go into crisis? In this video I attempt to summarize the basic ideas behind the theory of the falling rate of profit, often considered the corner-stone of crisis theory.

Full Text can be read at: http://kapitalism101.wordpress.com/the-falling-rate-of-profit/

Category:

Education

Tags:

• bail-out
• ca
• Capitalism
• crisis
• depression
• exchange
• falling
• marx
• money
• of
• profit
• rate
• recession
• sub-prime
• value

[pearlsfortheswines]

The profit per unit goes down but with higher productivity and lower prices the overall sale and thus profit should increase, right? Probably introducing a new problem, market saturation.

[brendanmcooney]

@pearlsfortheswines. Unit cost goes down, but the ratio of total cost to total surplus value produced increases: more total cost relative to surplus value produced. While individual capitalists make short term gains by underselling rivals, the aggregate effect is a falling rate of profit in the aggregate over time.

[pearlsfortheswines]

@brendanmcooney Who cares if the total cost to surplus value increases if it allows me to increase sale? If I sell 100 units with 10$ profit I make 1000$, but if I can sell 10,000 units with just 1$ profit I make 10,000$. But I guess you're saying that ones competitors apply the same cheap production techniques the effects of price wars and market saturation will tamper output and profit and ultimately create a worse situation.

[brendanmcooney]

@pearlsfortheswines

If you increase output without increasing labor time (via mechanization) you are not creating more value, just more output for the same value. If this lets you increase sales by outselling competitors this is only because you are appropriating value in exchange, not creating more value (see vid on socially necessary labor time). In the aggregate all firms can't use this strategy to increase profits. End result= long term fall in rate of profit.

[fightingforcrayons]

when are you going to make videos on class conflict and class struggle?

[brendanmcooney]

all my videos are about that.

[Fichte9233]

I love your videos.  Keep'em coming.

[hep48]

@pearlsfortheswines Just as physics ended and was replaced by 'theoretical physics' - which is just mathematics drenched in reification - the labor theory of value developed in all classical economics by people like Locke, Smith, Ricardo et al. was absolutely leading to Marx's inevitable conclusion - and so the 'theory of the margins' or 'subjective theory of value' was introduced in its stead. So yes, it is that self interest stops them from being objective.

[hep48]

The more machines make things instead of people, the more costs ultimately go down. Unemployment goes up at the inverse rate that costs go down. So people should be entirely out of work at about the same time that all things are free. That is the gift economy. It doesn't arise out of good will alone. It needs a material basis to support it.

[badnewswade]

Thanks for this - Marx always totally blows my mind and you've presented his ideas accessibly and well.

[pearlsfortheswines]

@brendanmcooney And so the opportunist manufacturer, (cheered on by ignorant consumers who just seek best value for money), forces competitors to comply to this opportunistic strategy as well. Perhaps the most interesting question is why there is a lack of consensus in the scientific community discussing economic theory, is the causality so complex and ambiguous that everything is disputable? Or is it that self interest stops us from being objective?