[3. Cherbuliez’s Inkling that the Organic Composition of Capital Is Decisive for the Rate of Profit. His Confusion on This Question. Cherbuliez on the “Law of Appropriation” in Capitalist Economy]
Cherbuliez takes the common definitions of profit and presents them as mathematical formulae. His definitions of profit are, in many cases, wrong. He does not set out any laws in relation to this profit or rate of profit. Nevertheless, Marx says,
“... he has an inkling of the matter, approaches close to it.” (p 369)
Cherbuliez' statement,
““… commercial profit is determined by the value of the products compared with the value of the different elements of productive capital”[op. cit., p. 70].” (p 369)
is not clear. If he means that the amount of profit is equal to the value of output, compared to the value of the sum of the elements of productive-capital consumed in its production that is correct. But, he does not distinguish, here, between the value of the fixed capital, which must be present for production to occur, and the value of the wear and tear of that fixed capital, which is transferred to production. In terms of calculating the cost of production, and, thereby, the mass of profit, it is only the wear and tear that is relevant.
If Cherbuliez means not the mass, but the rate of profit, then his statement is wrong on several counts. Firstly, the rate of profit is calculated not on the basis of the value of output to cost of production, but on the basis of profit to cost of production. As Marx points out, his formulation can be read as following on from Ricardo, as being really a measure of the rate of surplus value.
“In point of fact, profit is the relationship of the surplus-value of the product to the value of the total capital outlay regardless of the differences in its elements. But the surplus-value is itself determined by the size of the variable capital and the rate at which it produces surplus-value, and the ratio of this surplus-value to the total capital is again determined by the ratio of the variable to the constant capital and also by changes in the value of constant capital.” (p 369)
Moreover, as Marx and Engels describe, in Capital III, just as there is a difference between the rate of surplus value and the annual rate of surplus value, so there is a difference between the rate of profit/profit margin and the annual rate of profit. The latter is the real measure of the rate of profit, and of the average rate of profit. It determines the extent to which capital can be accumulated, and is the basis for the formation of prices of production, and allocation of capital.
For the rate of profit/profit margin, p/k = s/(d + c + v), it is the cost of production that is significant. It measures the amount of profit produced, in the year, against the cost of production, which is equal to the capital laid out for the year. But, the annual rate of profit is the relation of profit produced in the year, to the capital advanced. The two rates are only the same if the advanced capital turns over just once in the year.
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