FALLING TENDENCY OF PROFIT RATE 59 is,, costs which are involved in realizing value, expenditure for the maintenance of a state machinery and so forth. These costs, since they are not part of the process of material production, do not add to the value of the product, and constitute an expenditure out of surplus value. But on the surface, that is, in the official national account or other statistics that we have to rely on, they appear as costs. This leads to an overestimation of the value of constant and variable capital and to an underestimation of surplus value. 4 In order to calculate the organic composition of capital, the rate of exploitation or the rate of profit for certain branches of the economy, as Chattopadhyay does, we have to keep some further modifications in mind. As we learn from part II of Capital, vol III, due to the existence of different organic compositions of capital in different branches, there is in reality a transformation of values of commodities into prices of production. An equal rate of profit in all branches assumed, the ^transformation problem" would not affect the calculation of the rate of profit itself, but the prices of the elements of the constant and variable capital do not reflect their values. 5 Chattopadhyay points out correctly that the Indian economy is characterized by a monopolized structure. But a different degree of monopolization can be observed, not only across different strata within a particular branch, but also across branches itself, that is, a part of the surplus value generated in branches with a comparatively lower degree of monopolization is appropriated by branches characterized by a higher degree of monopolization. Under these circumstances the changes in the rate of profit in a certain branch, the manufacturing industries for example, do not necessarily reflect changes in the general rate of profit. Considering the modifications mentioned above, the prices obtained for the output as well as the prices paid for the elements of a constant and variable capital by no means reflect their values. But the data used by Chattopadhyay is based on these prices. Hence his data cannot provide estimates of the rates Marx had in mind. As far as the discussion on the ^law" is concerned, Chattopadhyay's empirical exercise has no significance whatsoever. Mos^kowska's Contribution Unfortunately, w^en discussing the objections against the law, Chattopadhyay failed to mention a very important contribution by Natalie Moszkowska.4 Her basic idea was that the rate of cheapening of the elements of constant capital is determined by the value of the organic composition of capital already reached. As we know, the fall in the general rate of profit is caused by the following mechanism: The objective of every capitalist is a never-ending increase in his profits, which forces him to constantly introduce innovations to reduce his costs.