Is There a Tendency of the Rate of Profit to Fall? Theory, Evidence and an Adequate Model

The Law of the Tendency of the Rate of Profit to Fall, put forward by Marx in Capital Vol.3, is a theoretical summary of the social reality of capitalist society. However, this law is still controversial and some scholars have criticized Marx for it, including Japanese scholar Okishio Nobuo in his Okishio Theorem, although these criticisms are theoretically untenable. In this article, after commenting on the relevant arguments, we show that the rate of profit inevitably falls and develop a model to illustrate this. We find Marx's claim that the falling rate of profit, followed by the higher organic composition of capital, is justified even under the circumstance that the rate of surplus value rises and new fixed capital reduces.