Summary: | Marx considered his theory of the falling rate of profit to be one of the most important discoveries in the field of political economy. According to Marx’s theory, productivity increases put downward pressure on prices and hence profits. Recurrent crises of capital devaluation are both the consequence and solution to this pressure, aggravating the loss of profits initially, but enabling the pursuit of profits via accumulation to once again ensue. Marx’s argument, however, has been the subject of intense dispute for over a century. His critics charge that Marx’s thesis is not only improbable but impossible.
This study is an attempt at arbitration of this dispute, inspired by recent quantitative reinterpretations of Marx’s critique of political economy. In the interest of providing a detailed review of the theoretical and empirical literature surrounding this issue, I specifically address the debate about the “transformation” of values into prices. Resolving this issue not only removes some a priori objections to Marx’s value theory, it also provides a coherent interpretation of Marx’s falling profit rate thesis. It appears, then, that the alleged refutations of Marx have themselves been refuted.
In addition to investigating the logical validity of Marx’s argument, I attempt to ascertain whether and to what extent his argument is supported empirically. I therefore conduct a multivariate time-series regression analysis of various profit rates in the United States. I test several partially competing hypotheses concerning the most important determinants of the profit rate. Most importantly, I operationalize Marx’s concept of value by calculating an aggregate ratio of total price to total labor hours. I find that accelerating value accumulation correlates with a falling rate of profit, which is entirely consistent with Marx’s thesis.
Sociology, knowingly or not, has always been the study of modern society. Because of this, I suggest that there are certain core processes at work that are necessary for its reconstitution and which therefore retain a spatial and temporal contiguity. My aim in this study is to help reclaim for sociology the investigation of one of modern society’s most fundamental processes: the accumulation of value.
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