The tendency of the rate of profit to fall will soon mean that an industry will stop producing said commodity. It can’t anymore if it’s unprofitable. This is where the state has to step in and start subsidizing that industry or buying the commodity themself in order to articially inflate demand in order to keep that industry afloat. See e.g. the “butter mountains” of the EU.
ahem i just so happen to be very familiar with the whole concept of the tendency of rate of profit to fall (TRPF) and you’re misunderstanding it here. it turns to be unprofitable in the sense that the profit rate approaches zero (for example, exponentially), it does not go negative! companies continue to produce stuff as long as the profit is larger than zero, which it always stays. so they continue to produce stuff indefinitely, according to the model. even though they make less and less profit with it. no state subsidizing involved here.
this is maybe a subtlety here. something can converge towards zero while also always staying positive. check out this function:
ahem I know about e-x and convergence thanks, I had some math in high school too.
I don’t know what it means for the tendency of the rate of profit to be negative (or positive, or 0 for that matter). It’s not a number. If you’re talking about the rate of profit of course that can go negative. I think what you mean is that it will be balanced out, but not as high as it was before. Here is how its explained in Wage labour and capital, emphasis mine
We have just seen how the fluctuation of supply and demand always bring the price of a commodity back to its cost of production. The actual price of a commodity, indeed, stands always above or below the cost of production; but the rise and fall reciprocally balance each other, so that, within a certain period of time, if the ebbs and flows of the industry are reckoned up together, the commodities will be exchanged for one another in accordance with their cost of production. Their price is thus determined by their cost of production.
If you want to illustrate this movement a function like cos(x)/x would be more prudent. Here is 10*cos(x)/x to make it “pop” more:
Remember that convergence doesn’t necessarily mean monotone convergence, and you’ll be hard pressed to find a monotone graph in economics 😄 Here is a more illustrive graph for TRPF
You also say that “companies continue to produce stuff as long as the profit is larger than zero, which it always stays” which is absolutely false! A companies profit absolutely can be zero, or even negative! Remember profit = m - m’, where m’ is the money you have after selling the commodity. Or in more plain words, if you have less money after selling than before producing you made negative profit. If you didn’t get your investment back, you didn’t make profit.
ahem i just so happen to be very familiar with the whole concept of the tendency of rate of profit to fall (TRPF) and you’re misunderstanding it here. it turns to be unprofitable in the sense that the profit rate approaches zero (for example, exponentially), it does not go negative! companies continue to produce stuff as long as the profit is larger than zero, which it always stays. so they continue to produce stuff indefinitely, according to the model. even though they make less and less profit with it. no state subsidizing involved here.
this is maybe a subtlety here. something can converge towards zero while also always staying positive. check out this function:
ahem I know about e-x and convergence thanks, I had some math in high school too.
I don’t know what it means for the tendency of the rate of profit to be negative (or positive, or 0 for that matter). It’s not a number. If you’re talking about the rate of profit of course that can go negative. I think what you mean is that it will be balanced out, but not as high as it was before. Here is how its explained in Wage labour and capital, emphasis mine
If you want to illustrate this movement a function like cos(x)/x would be more prudent. Here is 10*cos(x)/x to make it “pop” more:
Remember that convergence doesn’t necessarily mean monotone convergence, and you’ll be hard pressed to find a monotone graph in economics 😄 Here is a more illustrive graph for TRPF
You also say that “companies continue to produce stuff as long as the profit is larger than zero, which it always stays” which is absolutely false! A companies profit absolutely can be zero, or even negative! Remember profit = m - m’, where m’ is the money you have after selling the commodity. Or in more plain words, if you have less money after selling than before producing you made negative profit. If you didn’t get your investment back, you didn’t make profit.