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notes on Rate of Profit

In economics and finance, the profit rate is the relative profitability of an investment project, a capitalist enterprise or a whole capitalist economy. It is similar to the concept of rate of return on investment.

To compute the rate of profit, replacement cost of capital assets must be used to define the capital cost. Assets such as machinery cannot be replaced at their historical cost but must be purchased at the current market value. When inflation occurs, historical cost would not take account of rising prices of equipment. The rate of profit would be overestimated using lower historical cost for computing the value of capital invested.

On the other side, due to technical progress, products tend to become cheaper. This in itself should, theoretically, raise rates of profit, because replacement cost declines.

If, however, firms achieve higher sales per worker the more they invest per worker, they will try to increase investments per worker as long as this raises their rate of profit. If some capitalists do this, all capitalists must do it, because those who do not will fall behind in competition.

This “new” rate of profit (r’), which tends to fall, would be measured as

The profit percentage formula calculates the financial benefits left with the entity after it has paid all the expenses and is expressed as a percentage of cost price or selling price. Profit percentage is of two types: –

a) Markup expressed as a percentage of cost price.

b) Profit margin which is the percentage calculated using the selling price.

There are four levels of profit or profit margins:

How to work out the different types of profit

Income minus all expenses. Example: Sam’s Bakery received $900 yesterday, but expenses such as wages, food and electricity came to $650. So the Profit was $900 − $650 = $250.

So if you sell a product for $100. And it cost you $40 to make and sell then you’ve made a $60 profit. And as long as your revenue is greater than your expenses. Then you’re making a profit if….

When the selling price and the cost price of a product is given, the profit can be calculated using the formula, Profit = Selling Price — Cost Price. After this, the profit percentage formula that is used is, Profit percentage = (Profit/Cost Price) × 100.

“Rate of profit” is a term introduced by Marx in Volume III of Capital for the ratio of profit to total capital invested in a given cycle of reproduction, or the proportion of value in any given commodity which constitutes profit for the capitalist.

ROP = profit/output × output/capital stock .

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You may be asking yourself, “what is a good profit margin?” A good margin will vary considerably by industry, but as a general rule of thumb, a 10% net profit margin is considered average, a 20% margin is considered high (or “good”), and a 5% margin is low.

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A retail farm market manager knows that their business needs to make a certain gross profit percentage, in this case, let’s say 30%. What do they do? The manager takes the cost of the item and adds 30%. Does adding 30% markup to that item really mean you are making a 30% profit? Well, no. To determine the profit you made on an item, you need to take the markup amount and divide that by the sale price of the item and that will give you your profit margin.

If we go back to $1.00 product cost, that product would need to sell for $1.44 to make a 30% profit on it. Again, take .44 (the profit made from the item) and divide it by the sale price of $1.44 and you get a 30% profit margin.

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Diminishing marginal returns are an effect of increasing input in the short-run, while at least one production variable is kept constant, such as labor or capital.

The law of diminishing marginal productivity states that when an advantage is gained in a factor of production, the productivity gained from each subsequent unit produced will only increase marginally from one unit to the next.

The exceptions to the law of diminishing marginal utility DMU, where this law doesn’t apply: This law is valid only for uniform units of a commodity, which are same in shape, size, length, etc. The law applies only in cases when the consumer doesn’t change his taste and fashion of the commodity remains same, which hardly is the case.

[noting that online sales of dairy products tends not to be the means by which one normally obtains such consumer goods]

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This is a draft of an essay to be published in 2015 in: The Great Meltdown of 2008: Systemic, Conjunctural or Policy-created? Editors: Turan Subasat (Izmir University of Economics) and John Weeks (SOAS, University of London); Publisher: Edward Elgar Publishing Limited.

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The Grundrisse, a collection of rough notebooks, were only published after Marx’s death. They contain only the “first cut” of his ideas, so to speak. These ideas were as yet not fully worked out and were written only as notes for self-clarification. Because of this, Marx apparently contradicts himself on the tendency of the rate of profit to fall. Only a few pages after referring to it as “the most important” law, he then describes it as “the second great law”, among the “two immediate laws”.

While the Grundrisse contains very valuable thoughts on many questions, they cannot be considered to represent the final expression of Marx’s economic theories. These are contained in Capital, especially in the third volume, where the theory of the falling rate of profit is explained at some length and in great detail. To tear out of context one isolated remark made in Marx’s notebooks and attempt to elevate it above the finished version of the theory in Capital volume three is neither scientifically rigorous nor particularly honest.

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Marx derived the law under certain assumptions. He confined his theorizing throughout much of Capital, I have shown elsewhere, to what he called the sphere of law-like generality. He excluded any consideration of universal conditions (the vagaries of the relation to nature), particularities (distributional arrangements, class and other struggles over surplus value appropriation and the state of competition) and singularities (such as the whims of consumer fashion and the effects of state policies) from his 3 reasonings. He examined how capital functioned in what he considered a “pure” state. 4

The fact that Marx excluded so much in his magnum opus should not be taken to mean that he thought the relation to nature, the particularities of distributional and market arrangements and the singularities of human choice were irrelevant or in any way minor features of any social system. His more historical and political writings suggest the exact opposite. But the theoretical landscape he chose to explore in Capital, and which encloses his theory of the falling rate of profit, is far more restricted.5 Marx spelled out even more specific assumptions in constructing his “general law of capital accumulation” in Volume 1 of Capital.

First, capitalists have no problem selling their goods at their value in the market or re-circulating the surplus-value they gain back into production. All commodities trade at their value (with the exception of labour power); there is no problem in finding a market and no lack of effective demand.

Secondly, the way in which the surplus value is “split up into various parts….such as profit, interest, gains made through trade, ground rent, etc” 6 is excluded from consideration.

Thirdly, Marx states: “in order to examine the object of our investigation in its integrity, free from all disturbing subsidiary circumstances, we must treat the whole world of trade as one nation, and assume that capitalist production is established everywhere and has taken possession of every branch of industry.” 7

All these assumptions carry over to Marx’s derivation of the falling rate of profit in Volume 3. In both volumes Marx constructs highly simplified models of the dynamics of capital accumulation derived from the theory of absolute and relative surplus-value operating in a closed system characterized by perfect competition and no difficulties of realization or distribution of the surplus value.

While the two models reveal important features of capital’s dynamics, they cannot be accorded the status of anything close to the absolute truth of those dynamics when capital is viewed as a whole. Both models are only as good as their common assumptions allow.

The contradictory unity of production and realization is repressed as are the 4 contradictions between production and distribution, between monopoly and competition and much else besides.

This severely restricts the applicability of the laws derived. I am not criticizing Marx for dealing in such abstractions. He was a brilliant pioneer in teaching us how to come to grips with the complexities of capital accumulation by formulating abstractions and engaging in what we would now call modeling of economic systems.

While Marx scrupulously lays out his assumptions in Volume 1 he does not do so in the case of the falling rate of profit theory. This is understandable given the preparatory nature of the materials that have come down to us. Some proponents of the law of falling profits have, however, given a different and in my view unfortunate reading to Marx’s exclusions.

If Marx could ignore questions of distribution (in particular the role of finance, credit and interest-bearing capital) in his statement of the law of falling profits then this implies, they suggest, that financialization had nothing to do with the crash of 2007–8. This assertion looks ridiculous in the face of the actual course of events. It also lets the bankers and financiers off the hook with respect to their role in creating the crisis. 8

The draconian nature of Marx’s assumptions should make us cautious about pressing his theoretical conclusions too far. The production of an increasingly impoverished industrial reserve army in Volume 1 and the tendency of the profit rate to fall in Volume 3 are contingent propositions. Both tendencies are driven exclusively by the dynamics of technological change.

A reading of his original notebooks suggests that Marx increasingly viewed crises not as a sign of the impending dissolution of capitalism but as phases of capitalist reconstruction and renewal. Thus, he writes: “Crises are never more than momentary, violent solutions for the existing contradictions, violent eruptions that re-establish the disturbed balance for the time being.”`9 Crises that flowed from rising labour productivity did not disappear from his thinking, but they could and should be supplemented or 5 related to other contradictions, such as the periodic “plethora of capital” and the chronic tendency towards overaccumulation. 10

Marx made no mention of any tendency of the rate of profit to fall in his political writings such as The Civil War in France. Even in Volume Three of Capital, where he did consider the two crises of 1848 and 1857, these crises were depicted as “commercial and financial crises” and were analysed in the chapters on banking, credit and finance. Only passing reference is made to the falling rate of profit in these analyses.13

“At the end of the 1870s,” Heinrich observes, “Marx was confronted with a new type of crisis: a stagnation lasting for years, which is distinguished sharply from the rapid, conjunctural up and down movement which he had hitherto known.” The idea of crises as “momentary” disruptions must have no longer seemed adequate.

“In this context, Marx’s attention is drawn to the now internationally important role of the national banks, which have a considerable influence upon the course of the crisis. The observations reported by Marx make clear that a systematic treatment of crisis theory is not possible on the immediate basis of the law of the tendential fall in the 6 rate of profit (as suggested by Engels’s edition of the third volume of Capital), but rather only after a presentation of interest-bearing capital and credit.”

This would explain why the crises of 1848 and 1857 are called “commercial and financial crises” and examined in the chapters on banking and finance. If, however, “the national banks play such an important role,” says Heinrich, “then it is very doubtful whether the credit system can be categorically presented while excluding an analysis of the state. The same holds for the world market.”15

Marx evidently found it necessary to abandon the formal assumptions within which he had earlier confined his derivation of the law of falling profits in order, presumably, to make it relevant to the dynamics of accumulation actually occurring. He also left the level of generality behind and incorporated the particularities of distribution (the credit system in particular) and market competition into his theorizing. 16

Heinrich concludes that “a systematic treatment of crisis theory cannot….follow immediately from the ‘law of the tendency of the rate of profit to fall,’ but only after the categories of interest-bearing capital and credit have been developed.” 17

How seriously we should take Marx’s apparent vacillation and ambivalence depends not only upon what we make of his draconian assumptions but also on the strength and generality of the counteracting tendencies he identified. Proponents of the law typically downplay the counteracting tendencies. Marx lists six of them in Capital but “two of these (foreign trade and an increase of stock capital) fail to conform to his initial assumptions (a closed economy and a concept of surplus value that precludes the facts of distribution).”18 But under real crisis conditions we cannot afford, as his commentaries on the crises of 1848 and 1857 show in Volume 3, to exclude questions of finance and stock capital since they play such an important part in the form of appearance if not the underlying causes of crises.

Nor can we afford, on the evidence offered in the chapters on money and finance to ignore the vacillating influences of foreign trade imbalances (bullion drains as they were then referred to). Marx emphasizes of course the two counteracting 7 influences given by Roberts, but adds “depression of wages below the value of labour power; and an increase in the industrial reserve army” which protects certain sectors from the ravages of technological progress by lessening the incentive to replace labour power by machines (technologies invented in Britain were not deployed there, he points out in volume 1 of Capital, because of surpluses of labour power but were used in the United States where labour power was scarce). 19

In the Grundrisse, Marx lists a variety of other factors that can stabilize the rate of profit “other than by crises.” If the profit rate is to be resuscitated then one way a crisis can do so is to produce a massive devaluation of the existing constant capital (the fixed capital in particular). But Marx also mentions, ‘the constant devaluation of a part of the existing capital (by which I presume he means premature obsolescence and devaluations particularly of fixed capital equipment as a result of technical change), the transformation of a great part of capital into fixed capital which does not serve as agency of direct production (investment in public works and urbanization, for example, all of which could circulate in return for interest only without any regard for profit of enterprise) and unproductive waste (such as military expenditures, which Marx considered equivalent to making commodities to be ditched in the ocean).

He also importantly notes that the fall in the rate of profit can be “delayed by creation of new branches of production in which more direct labour in relation to capital is needed, or where the productive power of labour is not yet developed.” And finally, monopolization is treated as an antidote to the falling rate of profit presumably because of the reduced competitive pressure to innovate.20

This is “a somewhat motley array of factors” to be taken into account. 21 Some of them (such as monopolization and the opening up of new production lines) could be of overwhelming significance. Others, such as investment in fixed capital on the land and urbanization more generally are, as I have also tried to show elsewhere, crucially connected to crisis formation and resolution to the point where they are now playing a critical role (as was 8 most obviously the case in 2007–8).

The state-monopoly capitalism theorists of the French Communist Party towards the end of the 1960s considered the circulation of collective fixed capital in return for interest only as one of the major means for offsetting the falling rate of profit (it meant elements of collective constant capital could circulate at a discount as it were). 22

The history of getting out of crises by “building houses and filling them with things” in the United States is well-known (and was crucial in the 1960s) and is now being replicated in China where a quarter of the recent growth in GDP has been attributed to housing construction alone. Conversely, property market crashes are a familiar trigger for more general crises (with 2007–8 the most obvious recent example but 1928 in the USA being a critical and overlooked historical example).23

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The ideas of contested exchange, as well as other developments in modern economic theory, including those associated with the “economics of information,” have necessitated major changes in economists’ view of the economy: as Bowles and Gintis correctly point out, post-Walrasian economics is markedly different from Walrasian economics.

But it remains more problematic whether the theory of contested exchange, or the other information-based theories, necessitate a more radical alteration of economic structures. The critique of information economics can also be interpreted in more conservative terms — that while markets are imperfect, the appropriate response is a limited reliance on a relatively small number of well-designed government interventions, taking into account the limitations of government, including its limited information, with each intervention carefully aimed at a particular market failure. At the very least, the case for radical alteration of the economy or the views of mainstream economists remains unproven.

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In practice, observations have not matched Walras’s theory in many cases. Even if “all other markets” were in equilibrium, an excess of supply or demand in an observed market meant that it was not in equilibrium. Walras’s law looks at markets as a whole rather than individually.

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Leinfellner, Werner, “Foundations Of Microeconomics Including A Model Of Marx’s Microeconomics” (1976). Transactions of the Nebraska Academy of Sciences and Affiliated Societies. 406.

ES2: The protomodel of value creation consists of the following presuppositions: All economic actions are defined as purposeful individual evaluative behavior which may serve for decision making under risk and uncertainty and are based on production, exchange and distribution of values if the following conditions are fulfilled:

2.1 Actions require an image of a desired state (end), a technological plan and/or procedure to arrive at this end.

2.2 Desired ends presuppose that the future state is more satisfactory for the individual as well as for his society.

2.3 More satisfactory states can only be achieved by value creating means. Means are the created manufactured goods or factors of production (artificially produced by man’s labor or available from nature).

2.4 The means to achieve the desired ends are always scarce.

2.5 The ranking of final ends as well as the means to achieve desired ends change according to the changing efforts, time and technical (technological) procedures constantly developed.

The whole paradigm 2 boils down to the primitive model that things which are momentarily scarce have to be created, realized. The realization, creation of an end product or good gives the final end product a value, i.e. creates values.

It seems that man in and within his/her society is not primarily striving for maximization of his utility or satisfaction, but tends to produce, create new goods which are scarce. 2.3 and 2.4 replace therefore the utilitarian maximization of utility. 2.4 introduces at the same time a minimal Pareto condition.

Marx’s version can easily be obtained from ES2.

ES3: If in a protomodel described in ES2 values can only be created by labor, then it is called a Marxian protomodel of economics. Marx’s version is therefore a restriction since it does not take into account that, e.g., exchange distribution of values has to be considered at least as value changing, i.e. increasing or decreasing the labor value. In a next step the neo-utilitarian version of the protomodel ES2 will be described.

ES4: A neo-utilitarian protomodel of microeconomics is obtained if we add the following conditions to the primitive model described in ES2:

4.1 Evaluations and decisions can only be done by individuals (agents) which decide rationally, i.e. by using a well formed conventionally established decision or value theory prescribing how to evaluate and to decide in a formal sense.

4.2 More satisfactory decisions are obtained only by maximization of the agents’ expected utility, or simply of his utility. 4.1 demands that interpersonal utility has to be established between decision makers partaking in a common decision procedure. From 2.2 it follows that any compromises (e.g. minimax strategies) are permitted. It should depend completely on the reader and economist which one she regards — ES2, ES3 or [S4 -’ as her protomodel, paradigm in the sense of Kuhn or simply as background knowledge on which the economic theories are founded.

Finally, to conclude the foundations by laying bare the methodological presuppositions of microeconomics, a model M will be discussed by means of an axiomatization published in extended form by the author elsewhere. From this axiomatized model both the neo-utilitarian version and the Marxistic version of microeconomics can be obtained.

[…]

With respect to C9 the Marxian interpretation and the neo-utilitarian differ. ES4 regards the profit as the motor of all business and economy since it satisfies in an ideal way the maximization of individual utility (See ES4). In Marx’s interpretation (ES3) the profit is regarded as a surplus value not created by labor (therefore called dead labor value). Marx has to applicate his socio-political protomodel of classes together with his dialectic proto- model of development to explain C9. Consequently the neo-utilitarian (e.g. Keynes) regards economy as self regulating, because of the law of supply and demand (C9), but Marx has to impose planning control, which he deliberately takes from its socio-political model, since he abandoned the supply and demand structure of the market, (see ES3)

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The rate of profit has a tendency to fall, as the accumulation of capital goes on.

Total Value = c + v + s

Where, c means constant capital which “does not in the process of production undergo any quantitative alterations of value”. Constant capital remains constant as machine transfers its value to the product but does not increase in value.

v stands for ‘variable capital’ meaning thereby that the value of such capital increase in the process of production. Value of labour power “reproduces the equivalent of its own value, and also produces an excess, a surplus value which may itself vary, may be more or less, according to circumstances”.

Therefore, V is the value paid to labour, S is the surplus value — excess of the value produced over value paid to labour. Value paid to labour stands for subsistence wage. S is the value appropriated by capitalists and is called profit. The rate of profit would be equal to P. S/C+V, where P is the rate of profit, C+V stands for the value invested by the capitalists.

Now S/V is the rate of exploitation or rate of surplus value appropriated. This may be denoted by

P. C/C + Vis the organic composition of capital, i.e., the ratio of constant capital to total capital. It may be represented by q.

P = P (2 — e).

As the accumulation of capital takes place, constant capital increases in relation to capital or q increases. With e remaining the same as q increases, p must fall. This follows from our equation. Hence, in the process of capitalist development, the rate of profit must decline. This is the falling tendency of the rate of profit. With a decline in the rate of profit, the capitalists struggle to regain their old rates of profit, and hence class conflict emerges.

Therefore, crises follow in the presence of this tendency of profit rate to fall. Marx has described that crises arising out of this tendency in Capital Volume III, in the chapter entitled “Unraveling die Internal Contradictions of the Law,” in the following words: “It (a fall in the rate of profit) protnotes overproduction, speculation, crises, surplus capital along with surplus population”.

Again he writes, “The barrier of the capitalist mode of production becomes apparent…. in the fact that the development of the productive power of labour creates in the falling rate of profit a law which turns into an antagonism of this mode of production at a certain point and requires for its defeat of periodical crises. Maurice Dobb in his book ‘Political Economy and Capitalism’ regards this law to be the sole cause of crises to the complete exclusion of other theories.

But before we lay the blame on this law we must note the following:

(a) First, there is a contradiction in this law. Marx assumes that the rate of surplus value (p’) remains constants or, in other words, the extra productivity due to capital accumulation is proportionately divided between labourers and capitalists. There is an increase in the wages (or value) paid to workers, according to this assumption, which contradicts with his other theory of subsistence wage to labour. If subsistence wage is to be paid to the labour, the whole extra output will go to capitalists and change the ratio to S/V.

The rate of surplus value would increase, if subsistence wage is paid, and the rate of profit may not decline as the Organic Composition of Capital rises. This can be seen in the equation

P = P’ (1 — q).

If q increases, p will decline provided p’ remains constant.

If q increases, p’ increases, p may or may not decline.

There is an inconsistency in Marxian law of falling rate of profits. Therefore, we cannot rely upon this law as a cause of crises.

(b) Secondly, with a fall in the rate of profits, the investment does not decline, as in Marxian system; the inducement to invest is the maintenance of capitalist position by each capitalist. If a capitalist diminishes his investment, he is driven out of the class of capitalists by sheer competitive forces. The higher or lower rate of profit has no impact on the rate of investment.

Therefore, the law of falling rate of profit cannot cause crises. The true significance of this law lies in aggravating the class conflict present in capitalist society. The Capitalists on finding that the rate of profit is declining attempt to increase exploitation and thus impinge severe measures on the workers. This law is just another contradiction in a capitalist society, which works for the doom of capitalism.

[c] Thirdly, rise in organic composition of capital is slow and hence the tendency of falling rate of profits is perceptible though inherent, only in the long run. The rate of profit falls over a very long period and this periodicity may not coincide with periodic crises (trade cycle) with which we are familiar today. But Marx had given the theory of capitalist development embedded with the periodic crises.

He believed that the capitalist development takes place in cyclical waves. Those cycles were caused due to exhaustion of reserve army of labour and re-creation of reserve army by technological changes. This type of cyclical revolutions resembles the trade cycles of today. As soon as the unemployed labour force is exhausted and they tend to get higher wages, the capitalists shift to more capital intensive methods, thus creating unemployment once more.

Therefore, the Law of Falling Rate of Profit cannot be the cause of crises. The above law assumed that all commodities sell at equilibrium values, but the decline in profit may be due to the fact that commodities do not sell at their values. The essential difficulty is that of realising the value, which is already in a physical sense embodied in finished commodities. The crises can arise for lack of realisation of values.

The under-consumption and disproportionality theories are theories of “realisation crises”. Paul M. Sweezy states the difference between realisation crises and crises arising out of the tendency of falling rate of profit, in the following words: “The practical capitalist is unlikely to see any difference; for him the trouble is always insufficient profitability from whatever source it may arise. But from the point of view of causal analysis, the two types of crises present divergent problems.

In the one case, we have to do with movements in the rate of surplus value and composition of capital, with the value system remaining intact. In the other case, we have to do with as yet unspecified forces tending to create a general shortage in effective demand for commodities, not indeed in the sense that it is insufficient to buy all the commodities offered, but that it is insufficient to buy them all at a satisfactory rate of profit.

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Profit for Marx is the source of accumulation. As a class, capitalists can only reinvest what they appropriate in profit; so if the rate of profit tends to fall, so must the maximum rate at which capital can accumulate. Now, according to Marx, and here we come to the first theory, this downward tendency is built into the very logic of capitalism.

If we denote constant capital by c, variable capital by v and surplus value by s, we can express the following three relationships.

The organic composition of capital θ is the ratio of c/v;

the rate of surplus value ξ is the ratio of s/v;

and the rate of profit π is the ratio of s/(c+v).

This framework, says Marx, enables us to understand one of the key built-in limitations of capitalism. Competition compels profit-maximizing capitalists to constantly mechanize their production, and this relentless process causes the organic composition to rise over time. Capitalists are also driven to raise the rate of surplus value (although it is not entirely clear why, under competitive conditions, they should succeed in doing so).

The second problem is that mechanization per se can tell us nothing about labour values. Even if we accept Marx’s value scheme, it is entirely possible for technical change to devalue constant capital faster than the rate at which capitalists augment their ‘physical machinery’ (however measured). If that happens, the organic composition will fall rather than rise.

Now, on the face of it, the current crisis seems consistent with Marx’s theory. We can see that, since the early 2000s, the organic composition has risen and the rate of profit has dropped. Moreover, this inverse relationship seems to hold — at least cyclically — for the entire period since the 1930s.

Technically, this inverse cyclicality is not entirely surprising. Since fixed assets appear in the numerator of one ratio (the organic composition) and the denominator of the other (the rate of profit), their variations will cause the two ratios to move inversely, by definition.

In Marxist terms, this relationship means that there are counter-tendencies that more than offset the long-term impact of the rising organic composition. Proponents of this theory may again contest that our particular choice of productive and unproductive sectors is inappropriate, and maybe they are right.

Unfortunately, though, there is no way to objectively delineate the two sectors, and this inability creates the temptation to choose the particular bifurcation whose results happen to be consistent with the theory. Finally, we should reiterate that (1) we are using neoclassical price data rather than (unavailable) Marxist labour values, so what we see in these charts might have nothing do with Marx’s theory to begin with; and (2) since labour values remain unknown, there is no way to know whether our findings support or undermine Marx’s theory.

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Moseley (2016) Marx’s 1864–5 manuscripts

Because M — C — M’ is the form peculiar to merchant’s capital, industrial capital and in the abridged form M — M’, to interest-bearing capital, Marx concludes that M — C — M’ is the general formula for capital in the sphere of circulation.

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The difference between the two approaches lies in the reasons they give for the crisis and whether or not it can be averted. Mainstream economists root crises in imperfections, distortions and misguided intervention that can be solved or counteracted by adequate policy (primarily deregulatory), whereas Marxists claim that crises are built into the conflictual class logic of capitalism and therefore are difficult to fix and impossible to eliminate. But both agree on what constitutes a crisis in the first place: a sharp decline in real economic activity and income.

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Chapter IX

The general rate of profit is, therefore, determined by two factors:

1) The organic composition of the capitals in the different spheres of production, and thus, the different rates of profit in the individual spheres.

2) The distribution of the total social capital in these different spheres, and thus, the relative magnitude of the capital invested in each particular sphere at the specific rate of profit prevailing in it; i. e., the relative share of the total social capital absorbed by each individual sphere of production.

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Moseley p.200

Moseley p.249:

In all these cases, therefore, a change in the magnitude of the
capital applied must be accompanied by a simultaneous change in the rate of profit, as long as other things remain equal.
An increase in the rate of profit always stems from a relative or absolute
increase in the surplus-value in relation to its costs of production, i.e., it is
increased in relation to the capital advanced, or there is a reduction in the
difference between the rate of profit and the rate of surplus-value.
Fluctuations in the rate of profit that are independent of organic changes in
the components of capital or independent of the absolute magnitude of the
capital are possible if the value of the capital advanced, whatever might be
the form — fixed or circulating — in which it exists, rises or falls as a result of
an increase or decrease in the labour-time necessary for its reproduction, an increase or decrease that is independent of the capital already in existence, since the value of any commodity — thus also of the commodities of which capital consists — is determined not by the necessary labour-time it itself contains, but by the socially necessary labour-time required for its reproduction.
This reproduction may differ from the conditions of its original production by taking place under easier or more difficult circumstances. If the changed circumstances mean that twice as much time, or, conversely, half as much time, is required for the reproduction of the same capital, then, given an unchanged value of money, this capital, if it was previously worth 100 thalers, would now be worth 200, or if 250 originally, now 125. If this increase or decrease in value affects all parts of the capital equally, the profit is also expressed accordingly in twice or only half the number of thalers. If it is only the monetary value of the capital advanced that rises or falls (as a result of an alteration in the value of gold) the monetary expression of the surplus-value will rise and fall in the
same proportion. The rate of profit will remain unchanged.>

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