The Empirical Relevance of the Okishio Theorem A Study on the USA, UK and Japan
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Published
Apr 20, 2024
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Abstract
In this work we examine the empirical evidence of Okishio’s theorem in three developed countries: the USA, UK and Japan. This theorem has been seen as one of the most important elements of debates on the Marxian law of the tendency of the rate of profit to fall. Following a process that is difficult to criticize from the logical-mathematical point of view, Okishio’s theorem argues that, given some assumptions, the introduction of technical change in a capitalist economy must cause the rate of profit to increase, and this implies a contradiction of the Marxian law. In this study we will observe how the three economies analyzed have surprisingly similar behavior pattern when we model with econometric software the effects of technical change on the path followed by the profit rate. We can verify that this introduction of advances within production is related to a fall in the rate of profit when we take into account in the model other important variables such as real wages, showing that the results of Okishio’s theorem do not resemble reality. In the process, the Marxist position on questions of praxis, truth, universals, human essence, and more, is set forth.
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Keywords
Okishio’s theorem, technical change, rate of profit
References
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Duménil, G. & Lévy, D. 1994. “La aceleración y la desaceleración del progreso Técnico en los Estados Unidos después de la Guerra Civil: La transición entre dos paradigmas”. Análisis Económico. UAM-Azcapotzalco 12 (24/25): 3-33.
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Freeman, Alan 2013. “The profit rate in the presence of financial markets: a necessary correction”. Journal of Australian Political Economy 70: 167-192.
Jordán, J.J. 2014. “VEC model for the estimation of asset price inflation: Empirical evidence in the US markets”. Investigación y Desarrollo 1(4): 66-80.
Kim, H. 2013: “Generalized impulse response analysis: General or Extreme?” Auburn University Department of Economics Working Paper Series.
Kliman, A. 1988. “The Profit Rate Under Continuous Technological Change”. Review of Radical Political Economics 20(2/3).
Kliman, A. 1996. “A value-theoretic critique of the Okishio theorem”. In A. Freeman and Guglielmo, C. (eds.). Marx and non-equilibrium economics. Cheltenham, UK and Brookfield: Edward Elgar Publishing.
Kliman, A. 2007. Reivindicando El Capital de Marx. Una refutación del mito de su incoherencia [Reclaiming Marx’s ‘Capital’. A Refutation of the Myth of Inconsistency]. Barcelona: El viejo topo.
Koop, G., Pesaran, M.H., Potter, S.M. 1996. “Impulse response analysis in nonlinear multivariable models”. Journal of Econometrics 74: 119-147.
Maito, E. 2016. “Distribución del ingreso, rotación del capital y niveles de rentabilidad”. Economía: Teoría y Práctica. Nueva Época 45: 169-206.
Mateo Tomé, J. P. 2012. “La rentabilidad del capital en Venezuela (1957- 2006). Un estudio del ámbito no rentístico por sectores institucionales”. Revista Venezolana de Análisis de Coyuntura 18(1): 53-83.
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Morishima, M. 1974. “The Fundamental Marxian Theorem: A Reply to Samuelson”. Journal of Economic Literature 12(2): 71-74.
Moseley, F. & Roberts, C. 1989. “The Decline of the Rate of Profit in the Postwar U.S. Economy: Regulation and Marxian Explanations”. International Journal of Political Economy 19(1): 48–66.
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Okishio, N. 2000. “Competition and production prices”. Cambridge Journal of economics 25(4): 493-500.
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Roberts, M. 2011. “Measuring the rate of profit. Profit cycles and the next recession”. Paper presented on the 13th Conference of the Association for Heterodox Economics (AHE), July 2011.
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Rotta, T. 2024. “Was Marx right? Development and exploitation in 43 countries, 2000–2014”. Structural Change and Economic Dynamics 69: 213-223.
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Smith, A. (1956). Investigación y causa de la riqueza de las naciones [An Inquiry into the Nature and Causes of the Wealth of Nations]. Madrid: Aguilar.
Stock, J. and Watson, M. 2001. “Vector Autoregressions”. Journal of Economic Perspectives 15(4): 101–115.
Sweezy, P. (1942). The theory of capitalism development. London: Dobso.
Wright, E. (1978). “Alternative Perspectives in Marxist Theory of Accumulation and Crisis”. In Wright, E. Class, Crisis and the State. London: Verso.
Zivot, E. and Wang, J. (2003). “Vector autoregressive models for multivariable time series”. In: Zivot, E. and Wang, J. Modeling financial time series with S-PLUS. New York: Springer.
Cámara, S. 2007. “The Dynamics of the Profit Rate in Spain, 1954-2001”. Review of Radical Political Economics 39 (4): 523-542.
Duménil, G. & Lévy, D. 1994. “La aceleración y la desaceleración del progreso Técnico en los Estados Unidos después de la Guerra Civil: La transición entre dos paradigmas”. Análisis Económico. UAM-Azcapotzalco 12 (24/25): 3-33.
Duménil, G. & Lévy, D. 2003. “Technology and distribution: historical trajectories à la Marx”. Journal of Economic Behavior & Organization 52: 201–233.
Foley, D. & Marquetti, A. 2000. “El crecimiento económico desde una perspectiva clásica”. In: Guerrero, D. (Editor): Macroeconomía y cri sis mundial [Macroeconomics and mundial crisis]. Madrid: Editorial Trotta.
Freeman, A. 1998. “A General Refutation of Okishio’s Theorem and a Proof of the Falling Rate of Profit”. Marxian Economics: A Reappraisal 2 :139-162.
Freeman, Alan 2013. “The profit rate in the presence of financial markets: a necessary correction”. Journal of Australian Political Economy 70: 167-192.
Jordán, J.J. 2014. “VEC model for the estimation of asset price inflation: Empirical evidence in the US markets”. Investigación y Desarrollo 1(4): 66-80.
Kim, H. 2013: “Generalized impulse response analysis: General or Extreme?” Auburn University Department of Economics Working Paper Series.
Kliman, A. 1988. “The Profit Rate Under Continuous Technological Change”. Review of Radical Political Economics 20(2/3).
Kliman, A. 1996. “A value-theoretic critique of the Okishio theorem”. In A. Freeman and Guglielmo, C. (eds.). Marx and non-equilibrium economics. Cheltenham, UK and Brookfield: Edward Elgar Publishing.
Kliman, A. 2007. Reivindicando El Capital de Marx. Una refutación del mito de su incoherencia [Reclaiming Marx’s ‘Capital’. A Refutation of the Myth of Inconsistency]. Barcelona: El viejo topo.
Koop, G., Pesaran, M.H., Potter, S.M. 1996. “Impulse response analysis in nonlinear multivariable models”. Journal of Econometrics 74: 119-147.
Maito, E. 2016. “Distribución del ingreso, rotación del capital y niveles de rentabilidad”. Economía: Teoría y Práctica. Nueva Época 45: 169-206.
Mateo Tomé, J. P. 2012. “La rentabilidad del capital en Venezuela (1957- 2006). Un estudio del ámbito no rentístico por sectores institucionales”. Revista Venezolana de Análisis de Coyuntura 18(1): 53-83.
Marx, K. 1857–1858. Outlines of the Critique of Political Economy (Rough Draft of 1857–58) [Second Installment]. In Marx & Engels Collected Works. London: Lawrence & Wishart.
Marx, K. [Engels, F.] 2017a. El Capital. II [Capital, vol. 2]. Madrid: Siglo XXI.
Marx, K. [Engels, F.] 2017b. El Capital. III [Capital, vol. 3]. Madrid: Siglo XXI.
Morishima, M. 1974. “The Fundamental Marxian Theorem: A Reply to Samuelson”. Journal of Economic Literature 12(2): 71-74.
Moseley, F. & Roberts, C. 1989. “The Decline of the Rate of Profit in the Postwar U.S. Economy: Regulation and Marxian Explanations”. International Journal of Political Economy 19(1): 48–66.
Novales, A. 2017. “Modelos vectoriales autorregresivos (VAR)”. Universidad Complutense. Preliminary version.
Okishio, N. 1961. Technical Change and the Rate of Profit, Kobe University Economic Review, 7, 85–99.
Okishio, N. 1977. “Notes on technical progress and capitalist society”. Cambridge Journal of Economics 1(1): 93-100.
Okishio, N. 2000. “Competition and production prices”. Cambridge Journal of economics 25(4): 493-500.
Ramos, J. & Valle A. (1983). “Una nota sobre la tendencia al descenso de la RATE de PROFIT”. Economía Teoría y Práctica, UAM-Iztapalapa 1: 137-146.
Ricardo, D. 1959. Principios de economía política y tributación [On the Principles of Political Economy and Taxation]. Ciudad de México: Fondo de Cultura Económica.
Roberts, M. 2011. “Measuring the rate of profit. Profit cycles and the next recession”. Paper presented on the 13th Conference of the Association for Heterodox Economics (AHE), July 2011.
Roemer, J. E. 1979. “Continuing controversy of the falling rate of profit: Fixed capital and others issues”. Cambridge Journal of Economics 3(4): 379–398.
Rotta, T. 2024. “Was Marx right? Development and exploitation in 43 countries, 2000–2014”. Structural Change and Economic Dynamics 69: 213-223.
Shaikh, A. 2022. Capitalismo: Competencia, Conflicto y Crisis [Capitalism: Competition, Conflict, Crises]. Ciudad de México: Fondo de Cultura Económica.
Smith, A. (1956). Investigación y causa de la riqueza de las naciones [An Inquiry into the Nature and Causes of the Wealth of Nations]. Madrid: Aguilar.
Stock, J. and Watson, M. 2001. “Vector Autoregressions”. Journal of Economic Perspectives 15(4): 101–115.
Sweezy, P. (1942). The theory of capitalism development. London: Dobso.
Wright, E. (1978). “Alternative Perspectives in Marxist Theory of Accumulation and Crisis”. In Wright, E. Class, Crisis and the State. London: Verso.
Zivot, E. and Wang, J. (2003). “Vector autoregressive models for multivariable time series”. In: Zivot, E. and Wang, J. Modeling financial time series with S-PLUS. New York: Springer.
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How to Cite
The Empirical Relevance of the Okishio Theorem: A Study on the USA, UK and Japan. (2024). World Marxist Review , 1(1), 115-144. https://doi.org/10.62834/ft13j276