As regards to profits, I think one can add both historical and current prices. I mean capitalists do it all the time, they value their fixed capital at historic prices and their circulating capital at current ones. Thats the beauty of money.

I think one needs both measures of profit. A rate profit with current prices is important to assess current and future investment prospects while a rate profit that takes into account historic prices is useful to assess investments that have already been “sunked in”.

I dont agree with Kilman and Roberts measures of the ROP though since they dont have a good estimate for variable capital.

]]>With regard to Kliman, you have to use replacement cost (really market value) for fixed capital when combining it with fluid or circulating capital because it too is priced at current market value. Otherwise you would be comparing apples to oranges. I am truly allergic to using historical cost in the denominator for the rate of profit. Kliman and Roberts end up with ridiculously high rates of profit. All this kind of inaccuracy is good for, is trends. If you are equally wrong in 1960 and 2010, then clearly the trend will be there. Currently the real rate of profit is about a third of the ones described by Kliman and Roberts which they posit around the 15% mark. At 15% there would be no crisis of investment even if this figure represented a fall from an even higher figure.

]]>I have one more question, I was reading you review of Kilman’s book. I was wondering if it is possible to check the rate of profit using the turnover formula while using both historic and current costs and comparing them both?

Thank you for the detailed answer!

]]>I hope this answers your question.

https://theplanningmotivedotcom.files.wordpress.com/2018/11/turnover-equation-5-simulations-final.pdf

https://theplanningmotivedotcom.files.wordpress.com/2018/11/turnover-equation-part-2-pdf.pdf

I think you forgot to upload the pdf?

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