The Economic Ideas of Marx's Capital by Cuyvers Ludo;

Author:Cuyvers, Ludo;
Language: eng
Format: epub
Publisher: Routledge
Published: 2016-08-24T16:00:00+00:00

6.2 The rate of profits in the linear production model

We will now “translate” the rate of profits into the language of the linear production model. As before, it is assumed that there is no fixed capital, in that all capital is circulating. In addition, we assume that capital circulates once during a particular production period. In other words, in all sectors capital is earned back during that period.

It appears from the linear production model that the general rate of profits, irrespective of what the prices of production or the labour values are, is a number that is determined by the necessary physical inputs of the means of production and the necessary consumer goods of the workers involved. This implies that the rate of profits is not based on the prices of production but, conversely, that the prices of production depend on the rate of profits.

This is an obvious deduction if we consider an economy in which only one good is produced, e.g. wheat. If 10 kg of wheat are needed as seed for sowing, which will be combined with 100 hours of labour time to cultivate 100 kg of wheat, and if we take as given that 0.5 kg of wheat is required as necessary consumption, or 50 kg of wheat for 100 working hours, then the price of production p2 of 1 kg of wheat should obey the following equality:

(10 p2 + 50 p2) (1 + r) = 60 p2 (1 + r) = 100 p2

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