Michael Roberts — US rate of profit measures for 2018

Every year, I look at measuring the US rate of profit a la Marx. Official data are now available in order to update the measurement for 2018 (not 2019 yet!). As usual, if you wish to replicate my results, I again refer you to the excellent manual for doing so, kindly compiled by Anders Axelsson from Sweden.

There are many ways to measure the rate of profit a la Marx (for the various ways, see http://pinguet.free.fr/basu2012.pdf). As previously, I start with an update of the measure used by Andrew Kliman (AK) in his book, The failure of capitalist production. AK measures the US rate of profit based on corporate sector profits only for the numerator and uses the historic cost measure of net fixed assets as the denominator (ie s/C). AK considers this measure as the closest to Marx’s formula, namely that the rate of profit should be based on the advanced capital already bought (thus historic costs) and not on the current cost of replacing that capital.

Marx approaches value theory temporally so the value of the denominator in the rate of profit formula is at t1 and should not be changed to the value at t2. To do the latter is ‘simultaneism’, leading to a distortion of Marx’s value theory. For more on this, see AK’s book, Reclaiming Marx’s Capital. This seems correct to me. But the debate on this issue of measurement continues and can be found in the appendix in my book, The Long Depression, on measuring the rate of profit. 

What are the results of the AK version for the US rate of profit up to 2018?...

The post is instructive if you are interested in the Marxian methods of measuring the rate of profit, but it's a bit wonkish, so here is the conclusion, if you don't want to wade through the math.

In contrast, the profitability of capital (a la Marx), profit margins (the gap between costs and revenues per unit of production) and the mass of corporate profits are all falling. From 2006, the fall in profits in productive investment eventually led the economy down into recession despite record fictitious profits. That situation beckons again.

Michael Roberts Blog — blogging from a marxist economist
US rate of profit measures for 2018
Michael Roberts

Michael Roberts — US rate of profit update

The latest data for net fixed assets in the US have been released, enabling me to update the calculations for the US rate of profit a la Marx up to 2016.

Last year, I did the calculations with the help of Anders Axelsson from Sweden, who not only replicated the results to ensure their accuracy (and found mistakes!), but also produced a manual for carrying out the calculations that anybody could use.

As I did last year and in previous years, I have also updated the rate of profit using the method of calculation by Andrew Kliman (AK) that he first carried out in his book, The failure of capitalist production. AK measures the US rate of profit based on corporate sector profits only and using the BEA’s historic cost of net fixed assets as the denominator.

I also calculate the US rate of profit with a slight variation from AK’s approach, in that I depreciate gross profits by current depreciation rather than historic depreciation as AK does, but I still use historic costs for net fixed assets. The theoretical and methodological reasons for doing this can be found here and in the appendix in my book, The Long Depression, on measuring the rate of profit.…

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US rate of profit update
Michael Roberts