Saturday, August 14, 2021

Bibliography on Marx’s Law of the Falling Rate of Profit

I present below a bibliography on Marx’s Law of the Falling Rate of Profit. The list is not meant to be exhaustive, but includes the most important or interesting discussions.

In essence, the text of volume 3 of Capital was taken from the manuscripts of volume 3 from 1864–1865 which were in a draft and fragmentary form (Vollgraf and Jungnickel 2002: 68). Engels began editing volume 3 for publication around 1885 but it took him nearly 10 years before that volume was published in 1894 (Vollgraf and Jungnickel 2002: 40). In 1993, Marx’s main 1864–1865 manuscript for volume 3 of Capital which Engels used was published and allowed scholars to compare this with what Engels published in 1894 (Vollgraf and Jungnickel 2002: 36).

Engels’ changes to Marx’s material on the Law of the Falling Rate of Profit, including his three chapters and subdivisions, suggested that this work was much more structured and complete than it in fact was (Vollgraf and Jungnickel 2002: 47, 62). Michael Heinrich argues that Engels’ editing obscured Marx’s views on the falling rate of profit. For Heinrich, the idea that Marx’s theory of crisis was based on the Law of the Falling Rate of Profit is a misinterpretation of Marx’s thought that has arisen from Engels’ editing of the third volume of Capital. Whether this is true or not, the Law of the Falling Rate of Profit has been vehemently defended by many generations of Marxists.

However, the Law of the Falling Rate of Profit did not actually play a fundamental role in Marxist crisis theory until the work of E. Preiser (1924) and Henryk Grossmann’s book The Law of Accumulation and Breakdown of the Capitalist System (1929).

Okishio’s Theorem (Okishio 1961), which was partly based on earlier work like Shibata (1939), is often cited as a refutation of Marx’s Law of the Falling Rate of Profit, but even Okishio’s Theorem is a highly theoretical refutation which itself makes unrealistic assumptions in its model, such as constant real wages, equalised profit rates and equilibrium convergence to new prices of production. Okishio himself later admitted that his original theorem required these “questionable assumptions” (Okishio 2001: 501). Moreover, it is not difficult for Marxists to respond to Okishio’s Theorem, as Paul Cockshott does below in this video:

A much better refutation of Marx’s Law of the Falling Rate of Profit should start with the fundamental objection that, firstly, the very concept of “surplus value” is irrelevant for real-world capitalist economies, since it is based on the incoherent, undefinable notion of homogenous units of “socially-necessary labour time” that can aggregate all different forms of heterogeneous human labour. Imaginary “surplus value” does not determine the rate of profit in any sense in modern capitalist economies.

Secondly, even if one, for the sake of argument, grants that the concept of “surplus value” has validity, the “organic composition of capital” (c/v) would itself still be a flawed and often poor measure of productivity. Recall that Marx postulated that there is a rising organic composition of capital as a necessary effect of capital accumulation and productivity growth. But, as Blaug (1960) argued, rising technical innovation and productivity in capitalism involves both labour-saving innovations and capital-saving innovations. This means that capital-saving innovations can lower prices of machines and non-labour factors (see also Hodgson 1991: 34–40). So the technical composition of capital may rise, but the value composition of capital c/v, as Marx defines it, may fall as (1) both money wages and real wages rise, and (2) prices of capital goods fall. Thus it is theoretically possible for productivity growth and technological advancement in firms to occur along with a decline in the organic composition of capital, if the prices of non-labour factor inputs fall fast enough.

Attempts to empirically measure Marx’s long-run rising organic composition of capital via proxies have found that the UK – the greatest capitalist economy in the relevant period – had a falling organic composition from 1855 to 1895! (Cockshott, Cottrell, Michaelson 1995). Secondly, Gillman (1958) found a falling/stable organic composition of capital in the US from 1919 to 1952, despite a brief spike in the Great Depression.

Clearly, there is something rotten about the very concept of the organic composition of capital. One can only agree with Ian Steedman that “neither the value composition nor the organic composition is a significant concept for the analysis of capitalist economies” (Steedman 1977: 136).

It follows that, even within the terms of Marx’s own theory, the Law of the Falling Rate of Profit is fundamentally flawed if the prices of constant capital goods themselves fall to a sufficient extent.

But, from a Post Keynesian perspective, a straightforward empirical refutation of the Law of the Falling Rate of Profit is simply that most profits are attained as a mark-up on total average unit costs, and many capitalists will charge whatever profit mark-up they can get away with, sometimes very large mark-ups indeed. Moreover, there is no strong evidence that the rate of profit has a tendency to equalise throughout a capitalist economy (Glick and Ehrbar 1990; Zacharias 2001; Gschwandtner 2005; Cable and Jackson: 2008; Zachariah 2006: 18), and even if one granted hypothetically that surplus value existed, it would not govern the rate of profit given the use of persistent, divergent profit mark-ups on costs by capitalists.

In the long-run, we should expect the average rate of profit to rise or fall randomly. The profit rate would be mainly reduced by money wage rises in many industries. Any long-run falling trend – even if it could be demonstrated – would not even vindicate Marxism, but would have to have another explanation, because Marx’s theory of profit is profoundly and inescapably both theoretically and empirically flawed.

The bibliography below is presented in chronological order, not alphabetical order, since I think a chronological order from the earliest discussion to most recent is more useful. I include occasional comments about the significance of certain articles or books.

Croce, Benedetto. 1899. “Una obiezione alla legge marxistica della caduta del saggio di profitton,” Atti dell’Accademia Pontaniana 29 (May 1899).
Remarkably, Croce already in this 1899 paper pointed out that, as technical progress and productivity increase under capitalist production, this is likely to decrease the value/price of constant capital, which effectively refutes Marx’s law of the falling rate of profit. See the English translation in Croce (1914).

Baranovsky, Michael Tugan. 1901. Studien zur Theorie und Geschichte der Handelskrisen in England. G. Fischer, Jena. pp. 230–231.

Baranovsky, Michael Tugan. 1905. Theoretische Grundlagen des Marxismus. Duncker & Humblot, Leipzig. Chapter 9.
Tugan-Baranovsky concluded that the falling rate of profit law was questionable in the face of capital-saving innovation.

Bortkiewicz, L. von. 1907a. “Wertrechnung und Preisrechnung im Marxschen System II,” Archiv für Sozialwissenschaft und Sozialpolitik 25: 10–51.

Bortkiewicz, L. von. 1907b. “Wertrechnung und Preisrechnung im Marxschen System III,” Archiv für Sozialwissenschaft und Sozialpolitik 25: 445–488.
In this paper, Bortkiewicz agreed with the argument of Tugan-Baranovsky and questioned why capitalists would introduce labour-saving machines if the profit rate fell.

Charasoff, Georg von. 1909. Karl Marx über die menschliche und kapitalistische Wirtschaft: eine neue Darstellung seiner Lehre. H. Bondy, Berlin.

Charasoff, Georg von. 1910. Das System des Marxismus: Darstellung und Kritik. Hans Bondy Verlag, Berlin.
Charasoff rejected the law of the falling profit rate in this book as erroneous, for reasons similar to those of Tugan-Baranovsky and Bortkiewicz.

Croce, Benedetto. 1914. “A Critique of the Marxian Law of the Fall in the Rate of Profit,” in Benedetto Croce, Historical Materialism and the Economics of Karl Marx (trans. C. M. Meredith). The Macmillan Company, New York. [article first published in 1899].

Preiser, E. 1924. “Das Wesen der Marxschen Krisentheorie,” in R. Wilbrandt, A. Löwe, G. Salomon (eds.), Wirtschaft und Gesellschaft. Beiträge zur Ökonomik und Soziologie der Gegenwart. Frankfurter Societäts-Druckerei, Frankfurt am Main. 47–76.
Preiser appears to have been one of the first early Marxists who emphasised the falling rate of profit as the fundamental cause of capitalist crisis.

Grossmann, Henryk. 1929. Das Akkumulations- und Zusammenbruchsgesetz des kapitalistischen Systems: Zugleich eine Krisentheorie. C. L. Hirschfield, Leipzig.

Moszkowska, Natalie. 1929. Das Marxsche System: Ein Beitrag zu dessen Aufbau. Verlag Hans Robert Engelmann, Berlin.

Shibata, K. 1934. “On the Law of Decline in the Rate of Profit,” Kyoto University Economic Review 9.1 (17): 61–75.
Along with Shibata 1939, this was an important theoretical discussion of the falling rate of profit.

Bauer, Otto. 1936. Zwischen zwei Weltkriegen?. E. Prager, Bratislava. In this book, Bauer discussed the relationship he postulated between the business cycle and the falling rate of profit.

Shibata, Kei. 1939. “On the General Profit Rate,” Kyoto University Economic Review14.1 (27): 40–66.
This paper was an important theoretical discussion of the falling rate of profit. Shibata concluded that innovations that are capital-saving (that is, that reduce the price of constant capital) can lead to a rising profit rate, as long as real wages are constant. His work was developed by Okishio 1961.

Dobb, Maurice Herbert. 1940. Political Economy and Capitalism: Some Essays in Economic Tradition (rev. 2nd ed.). Routledge & Kegan Paul, London. pp. 94–99, 108–114.

Robinson, Joan. 1941. “Marx on Unemployment,” The Economic Journal 51.202–203: 234–248.

Sweezy, Paul M. 1942. The Theory of Capitalist Development. Principles of Marxian Political Economy. Oxford University Press, New York.
In this book, Paul Sweezy dismissed the law of the falling rate of profit theory as a general law.

Robinson, Joan. 1942. Essay on Marxian Economics. Macmillan, London.
See the 2nd edition of Robinson 1966.

Bortkiewicz, L. von. 1952. “Value and Price in the Marxian System,” International Economic Papers 2: 5–60.

Rosdolsky, Roman. 1956. “Zur neueren Kritik des Marxschen Gesetzes der fallenden Profitrate,” Kyklos 9.2: 208–226.

Dickinson, H. D. 1957. “The Falling Rate of Profit In Marxian Economics,” The Review of Economic Studies 24.2: 120–130.
In this article, Dickinson adopted Neoclassical theory to analyse the falling rate of profit law.

Samuelson, P. A. 1957. “Wages and Interest: A Modern Dissection of Marxian Economic Models,” The American Economic Review 47.6: 884–912.
Along with Shibata 1934 and Okishio 1961, this paper was very important in technical discussions of the falling rate of profit law.

Gillman, Joseph M. 1958. The Falling Rate of Profit: Marx’s Law and its Significance to Twentieth Century Capitalism. Dobson, London.
In this book, Gillman found empirical evidence that his proxy for the US organic composition of capital had increased from 1849 to 1919, but – contrary to Marxist theory – had been stable or fallen from 1919 to 1939 (despite a rise during the Great Depression).

Robinson, Joan. 1959. “‘The Falling Rate of Profit’: A Comment,” Science & Society 23.2: 104–106.

Blaug, M. 1960. “Technical Change and Marxian Economics,” Kyklos 13.4: 495–451.

Okishio, Nobuo. 1961. “Technical Changes and the Rate of Profit,” Kobe University Economic Review 7: 85–99.
Okishio’s paper is the classic statement of Okishio’s Theorem.

Okishio, Nobuo. 1963. “A Mathematical Note on Marxian Theorems,” Weltwirtschaftliches Archiv 91: 287–299.

Robinson, Joan. 1966. An Essay on Marxian Economics (2nd edn.). Macmillan, London. pp. 35–42.

Meek, Ronald L. 1967. “The Falling Rate of Profit,” in Ronald L. Meek, Economics and Ideology and Other Essays: Studies in the Development of Economic Thought. Chapman & Hall, London. 129–142.

Steedman, Ian. 1971. “Marx on the Falling Rate of Profit,” Australian Economic Papers 10: 61–66.

Heertje, A. 1972. “An Essay on Marxian Economics,” Schweizerische Zeitschrift für Volkswirtschaft und Statistik 108.1: 33–45.

Yaffe, David S. 1973. “The Marxian Theory of Crisis, Capital and the State,” Economy and Society 2.2: 186–232.

Heertje, A. 1976. “An Essay on Marxian Economics,” in M. C. Howard and J. E. King (eds), The Economics of Marx. Penguin, Harmondsworth. pp. 219–232.

Mandel, Ernest. 1973. Der Spätkapitalismus: Versuch einer marxistischen Erklärung. Suhrkamp Verlag, Frankfurt am Main.
See Mandel 1976 for an English translation.

Hodgson, Geoff. 1974. “The Theory of the Falling Rate of Profit,” New Left Review 84: 55–82.

Mandel, Ernest. 1976. Late Capitalism (trans. Joris De Bres). NLB, London.
In this book, Mandel argued that the falling rate of profit was important in the Marxist explanation of the post-WWII boom and its breakdown.

Steedman, Ian. 1977. Marx after Sraffa. NLB, London. pp. 116–136.

Rowthorn, Bob. 1976. “Late Capitalism,” New Left Review 98: 59–83.

Croce, Benedetto. 1981. Historical Materialism and the Economics of Karl Marx. Transaction Books, New Brunswick, N.J. [reprint of the 1914 edn].

Groll, Shalom and Ze’ev B Orzech. 1989. “From Marx to the Okishio Theorem: A Genealogy,” History of Political Economy 21.2: 253–272.

Dietzenbacher, Erik. 1989. “The Implications of Technical Change in a Marxian Framework,” Journal of Economics 50.1: 35–46.

Catephores, George. 1989. An Introduction to Marxist Economics. Macmillan, Basingstoke. pp. 166–189.

Glick, Mark and Ehrbar, Hans. 1990. “Long-Run Equilibrium in the Empirical Study of Monopoly and Competition,” Economic Inquiry 28.1: 151– 162.

Moseley, Fred. 1991. The Falling Rate of Profit in the Postwar United States Economy. Macmillan, Basingstoke.

Hodgson, Geoffrey M. 1991. After Marx and Sraffa: Essays in Political Economy. Macmillan, London. pp. 28–55

Grossmann, Henryk. 1992. The Law of Accumulation and Breakdown of the Capitalist System: Being also a Theory of Crises (trans. Jairus Banaji). Pluto Press, London.

Howard, Michael Charles and John Edward. 1992. A History of Marxian Economics: Volume II: 1929–1990. Macmillan, London. Chapter 7 (pp. 128–148).

Cockshott, Paul, Cottrell, Allin and Greg Michaelson. 1995. “Testing Marx: Some New Results from UK Data,” Capital & Class 19.1: 103–130.

Zacharias, Ajit. 2001. “Testing Profit Rate Equalization in the US Manufacturing Sector 1947–1998,” Working Paper No. 321

Okishio, Nobuo. 2001. “Competition and Production Prices,” Cambridge Journal of Economics 25.4: 493–501.

Vollgraf, Carl-Erich and Jürgen Jungnickel. 2002. “‘Marx in Marx’s Words’? On Engels’s Edition of the Main Manuscript of Book 3 of ‘Capital,’” International Journal of Political Economy 32.1: 35–78.

Gschwandtner, Adelina. 2005. “Profit Persistence in the ‘very’ Long Run: Evidence from Survivors and Exiters,” Applied Economics 37.7: 793–806.

Kliman, Andrew. 2006. Reclaiming Marx’s ‘Capital’: A Refutation of the Myth of Inconsistency. Lexington Books, Lanham. pp.113–138.

Zachariah, Dave. 2006. “Labour Value and Equalisation of Profit Rates: A Multi-Country Study,” Indian Development Review 4: 1–20.

Cable, John R. and Richard H. G. Jackson. 2008. “The Persistence of Profits in the Long Run: A New Approach,” International Journal of the Economics of Business 15.2: 229–244.

Heinrich, Michael. 2012. An Introduction to the Three Volumes of Karl Marx’s Capital (trans. Alexander Locascio). Monthly Review Press, New York. pp. 149–154.


  1. Hi LK,
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  2. Hi,

    I wanted to see if you could clarify your "positive" beliefs on feminism and postmodernism. I see your articles attacking them, but I want to know what you believe in a positive sense.

    I am mixed on feminism, I see many feminists have horrendous beliefs about men, fathers, job equality, justice, double standards, etc. and I am first in line against them, but I also see much good in some of what feminists support.

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  3. This comment has been removed by the author.

  4. Are you still going to create posts on your blog?

  5. Do you still respond to comments?

  6. Steve Keen recently stated his admiration for Marx as one of the greatest economic thinker ever and said "I'd put him above Keynes."


    Learn from people smarter than yourself ;-)

    1. If Steve Keen said that, then he's wrong.


  7. Lk, this is a isaac, the lachmannian, hope you are doing well

    1. Nice to see you after so long! I am doing well. But I don't blog often these days