In nlr 86, Geoff Hodgson discussed the ‘tendency of the rate of profit to fall’. Though I agree with his general conclusions, I feel it is necessary to add some further arguments in order to make his refutation of the ‘law’ more convincing. footnote1

As early as 1929 Natalie Moszkowska published a highly important book on Marx’s economic system. footnote2 Besides making an original contribution to the theory of economic crisis, she put forward some strong arguments against the so-called law of the tendency of the rate of profit to fall, while proceeding strictly on Marx’s own assumptions. Apparently her contribution is hardly known in the English-speaking world, so I think it will be useful to present her basic theses to nlr readers. footnote3

As Geoff Hodgson points out correctly, the movement of the organic composition of capital is the crucial determinant governing the rate of profit. The way it changes in the course of technical progress is the first thing that has to be examined. Moszkowska’s basic idea is that for a given degree of exploitation, a given value composition of capital and a given rate of extension of the means of production in physical terms, the increase in productivity—i.e. the degree of ‘cheapening the elements of constant capital’—is determinate. She gives the following classification of technical progress.

1. Labour-saving technical progress.

Type I: the rate of growth of the productivity of labour is lower than the rate of growth of the means of production (in physical terms).