Rising ‘Material’ vs. Falling ‘Value’ Rates of Profit: Trial by Simulation

Abstract

The ‘temporalist’ or ‘temporal single system’ (TSS) school of Marxist economic theory insists that, when capital stocks are valued at historical cost, capital accumulation as such must cause the ‘value’ rate of profit to fall, even while the ‘material’ rate rises. This claim fatally ignores the depreciation and scrapping of fixed capital. Simulation modeling reveals that once early vintages of capital goods and their associated labor forces and output are scrapped, the average productivities of labour and capital follow their latest-vintage equivalents upward, and the ‘value’ rate of profit follows the same course as the ‘material’ rate. ‘Temporalism’ thus fails to serve as an adequate foundation for the theory of capitalist accumulation and crisis.