Rate of profit

The concept of profit is an economic category, which plays a central role in Karl Marx ( 1818-1883 ). It expresses the degree of recovery of the invested capital. This is a loan translation from English "rate of profit", even "profit rate". In German, the word " rate of profit " pre-embossed Marxist. Instead, " bourgeois" terms such as " profitability ", " return on investment " return or return on investment will be used.

• 6.1 Example
• 6.2 Special
• 6.3 Moral wear

Differences to " bourgeois " definitions

There are no fundamental differences between bourgeois and Marxist rate of profit. The differences between Marxian and bourgeois economic science have some impact. Thus Marx's economic theory of value is based according to the Marxian labor theory of value. Companies and the bourgeois economic science, however, go out of the prices and wages. A company must, for example, make a correction statement if inflation or inflation is present, this does not apply to Marx, because he considered the same values ​​.

In referring to the reference variable capital is the quotients of the equation

Sometimes simplistic only the capital stock ( buildings, production equipment and machinery or bookkeeping assets) used. The Marxian rate of profit usually has - in principle no different in business administration - a broader concept of capital, in addition to fixed assets and current assets (constant circulating capital in Marx ) and the sum of values ​​for the amounts paid wages and salaries, the variable capital, received.

The general rate of profit

For each individual profit rates can be calculated weighted capital mass an average rate of profit. In addition, there is a tendency for equalization of profit rates, so that a general, social average rate of profit, a uniform rate of profit out forms.

Mathematical representation

Basic formula

The rate of profit (in terms of capital analysis of Karl Marx) expresses the ratio of between the generated added value m and the necessary for this generation use of capital C. The capital C is made up of the constant capital c (ie capital for machinery, buildings, raw and auxiliary materials, semi-finished products ) and the variable capital v, the total wage bill for the employed labor force: C = c v

Formally, the rate of profit p expresses as:

Turnover rate of capital

In the formula above can not simply the value of a mill building, which holds ninety years, the value of the grain, which is milled on the same day into flour, are summed to " constant capital ", but the different lifetimes of the components of the constant capital must be observed be in other words, the different turnover rates of capital.

See detailed numerical example below.

Current size or population size

The added value in a given time period, is therefore a current size. The use of capital, however, can be both as consumption per period (flow ) as well as inventory at beginning of period required to carry out the production process in the following period can be construed.

See detailed numerical example below, arrives in the capital as a stock at beginning of period in the formula.

Cost or replacement cost

To determine the profit, the surplus value of production c v m above the cost must be c v determined. The costs can be measured at cost. However, Will the capitalist determine to what extent the substance of said company maintained, it must calculate the cost to replacement cost. It does not matter what the means of production have once tasted, but what it will cost you a replacement if they are exhausted. There is inflation, increase these costs. On the other hand, the means of production are made ​​more cost -effective in the course of technical progress. From this perspective, it is expected that the replacement costs are lower than the acquisition cost.

Finally comes into play, that the companies they wish to compete in the competition, having to purchase the latest technical means of production. One can assume that the more expensive are the new means of production, the greater initially the rate of profit that can be achieved with them. However, this leads to a paradox. Tend the companies will invest from the capital to invest an increasing share as constant capital to buy as profitable as possible means of production. But if this do all capitalists, so rise the most technologically specific replacement costs, the costs that are necessary, the company will continue to compete in the competition. As a result, the rate of profit falls calculates the most technologically specific replacement costs. This is the law of the tendential fall in the profit rate.

Profit

The profit is the innermost driving force of the capitalist mode of production, ie it is only the only produced when the production yields a higher value than was needed to make them to values. This ' more ' of values ​​is the added value (which turns into the different parts of surplus-value, namely entrepreneurial profit (profit ), interest, ground rent ), which results from the unpaid overtime.

Law of the tendential fall in the profit rate

See main article law of the tendential fall in the profit rate

This law expresses the following: the accumulation of capital, ie the permanent extension of the material as in value based on the production, takes place in a stronger expansion of constant capital relative to variable capital. ( The value composition of capital, the ratio of c to v, growing, see above formula ).

Thus, the rate of profit does not fall thereby, must compensate m: v, the rate of surplus value, the ratio of value-added m v greatly expanded according to payroll or variable capital (see above formula ). Since this can not or only insufficiently be achieved, according to Marx, it is the falling tendency of the rate of profit.

It is essential that the value transfer ( of constant capital ) and the creation of new value ( the variable capital and surplus, overall, the new value m v) free according to the labor theory of value solely by the " living labor ", specifically, through the work of the " " wage-workers, takes place within the work process.

The permanent forced to expand the capital ( engineering improvements to succeed in the competition with other individual capitals ) a continuation of this macroeconomic trend.

A well-known criticism of the law is the Okishio theorem.

Definition of profit and rate of profit in detail

Example

At the beginning of the "Year" (it could be a different period length are selected, other numerical values ​​depend on ) the capitalist must invest a certain amount of capital.

He needs to invest, for example:

Suppose now continue to be that manufactures and sells the value of 300 € during the year goods.

From this revenue but the cost must be deducted incurred during the year. These are for circulating capital, so expenditure on means of production and labor-power, which are still used again during the year:

Overall, the cost per year thus amounted to € 275.

If we take the turnover of 300 € from these costs, a profit of 25 € will remain ( here equal to the surplus value of m). € 25 in relation to a capital investment of € 500 give an annual profit rate of 5 %.

Special

In this example it was assumed that the wages in advance, for that is paid at the beginning. If they are in arrears, paid until the end of the year, they are still deducted from revenue as a cost, but they are not counted into the use of capital at the beginning of a. The rate of profit then another higher value.

In the example, it was assumed that the turnover period of the production material is one year. 100 EUR must therefore be held earlier this year. Can the other hand, the production materials are constantly bought later during the year ( capital turnover period is smaller for production material than a year), then less capital needs to be held for them. The rate of profit is higher. The same applies to wages. If these constantly paid as a monthly, daily or hourly wage, the capitalist for wages must hold less capital.

Moral wear

In the example, the service life of fixed capital through the physical wear and tear, by the physical wear and tear in the production process specific. Karl Marx calls in addition also the moral wear and tear, depreciation of fixed capital because newer means of production with higher profit rate spread and the old means of production devalue. In the example above, the value of physically forever holding facilities for example, could fall after four years because of technological advances to zero. Then the plants would have to be depreciated annually at 25 €. The gain of 25 € without moral wear would fall to 0 € with moral wear. In capitalism, so there is a case of rationality in the sense that the acquisition of new equipment with higher rate of profit to the capitalist gives a competitive advantage, however, these new plants spread to the whole economy, they specify the standard and devalue old existing means of production. This devaluation is one of the costs and reduces profits.