Heinrich examines the history of Marx’s ideas on the tendency of the profit rate to fall in capitalism here:
Michael Heinrich, 2013. “Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s,” Monthly Review 64.11 (April).Heinrich notes that there is not even any coherent, well-developed theory in Marx’s published writings of capitalist crises, or what would now be called business cycle theory.
Heinrich, Michael. 2013. “Heinrich Answers Critics,” Monthly Review (December 1)
What Marxists call Marx’s theory of capitalist crises is cobbled together from not always consistent fragments in Marx’s Grundrisse der Kritik der Politischen Ökonomie (published in 1939 but written from 1857–1858), Theories of Surplus-Value (published from 1905–1910 but composed from 1861 to 1863), and volume 3 of Capital (published in 1894 but written in a first draft with the two other volumes of Capital from 1864–1865).
It is very interesting that there were actually three drafts of the 3 volume work Capital. We can set out these drafts as follows:
First Draft:Now Heinrich argues that Marx’s law of the tendency of the profit rate to fall in the long run is both logically flawed and empirically suspect, and he is right.
Manuscript of 1863–1865
Manuscripts for Books II and III (1867–1871)
Manuscripts for Book III (1874–1878).
Michael Heinrich, 2013. “Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s,” Monthly Review 64.11 (April).
The die-hard Marxists, Heinrich notes, will the defend the law of the tendency of the profit rate to fall at all costs because they think this is the foundation of Marx’s theory of crises.
But the idea that Marx’s mature view on capitalist crises is based on the tendency of the profit rate to fall is, argues Heinrich, the result of Friedrich Engels’ dubious editing of volume 3 of Capital.
What Heinrich calls the “Manuscript of 1863–1865” was a first draft of Capital and the foundation of Engels’ edition of volume 3 of Capital. But since Engels condensed Marx’s notes and gave Chapter 15 the title “Development of the Law’s Internal Contradictions,” which mistakenly suggested to readers that Marx thought that all capitalist crises were the result of the tendency of the profit rate to fall, this has caused a gross misunderstanding of Marx’s views.
Marx’s actual unpublished, raw notes do not support this. Marx seems to have seen investment, credit and money as indispensable factors in capitalist crises.
Even worse, as Heinrich shows, Marx’s views continued to develop long after 1865 and he had a research program in the 1870s.
In the third draft of Capital (1871–1881), we find a manuscript called “Mathematical Treatment of the Rate of Surplus-Value and Profit Rate” in which Marx comes to the view that the profit rate can move in any direction, views which never made it into volume 3 of Capital. We can add to this letters of Marx in the 1870s casting doubt on whether he had any coherent theory of capitalist crises and showing he wanted to engage in more empirical study, and also demonstrating that he saw a new role for credit and banking in crises. Moreover, in the 1870s in his discussions of crises in letters and manuscripts Marx does not ascribe the cause of crises to the tendency of the rate of profit to fall (Heinrich 2013a).
Marx admitted that he needed to revise previous manuscripts to publish volume 3 of Capital, and that he even needed to thoroughly revise volume 1 too, but died before doing so.
All in all, Heinrich concludes, what was published by Engels as volume 3 of Capital in 1894 did not reflect Marx’s mature views, which continued to develop.
Finally, Heinrich speaks on this subject in the video below. And it is clear that, if Heinrich is right, Marx’s mature crisis theory starts to look very much like a Keynesian explanation, with the emphasis on aggregate demand, banking, money and credit cycles.
Heinrich, Michael. 2012. An Introduction to the Three Volumes of Karl Marx’s Capital (trans. Alexander Locascio). Monthly Review Press, New York.
Heinrich, Michael. 2013a. “Heinrich Answers Critics,” Monthly Review (December 1)
Heinrich, Michael. 2013b. “Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s,” Monthly Review 64.11 (April)