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What Does Determine the Profit Rate? The Neoclassical Theories Presented in Introductory Textbooks

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  • Naples, Michele I
  • Aslanbeigui, Nahid

Abstract

The theory of the profit rate varies across introductory texts. Economic profits are caused by entrepreneurship or not. Entrepreneurship is a kind of human capital or not. Normal profits are determined in the money market, the market for loanable funds, or a hybrid market involving demand or supply of physical capital. The downward-sloping demand for capital reflects diminishing marginal productivity (the Cambridge controversy is forgotten) or rank-ordered investment projects. The supply is a physical capital stock, accumulated or current saving(s) (or wealth), or desired accumulation. The authors conclude that the inconsistencies and confusions in the textbooks reflect the state of high theory. (c) 1996 Academic Press Limited Copyright 1996 by Oxford University Press.

Suggested Citation

  • Naples, Michele I & Aslanbeigui, Nahid, 1996. "What Does Determine the Profit Rate? The Neoclassical Theories Presented in Introductory Textbooks," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 20(1), pages 53-71, January.
    • Handle: RePEc:oup:cambje:v:20:y:1996:i:1:p:53-71
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    Cited by:

    1. Roni Hirsch, 2021. "Risk and Trouble: Adam Smith on Profit and the Protagonists of Capitalism," American Journal of Political Science, John Wiley & Sons, vol. 65(1), pages 166-179, January.
    2. Fabian Lindner, 2015. "Does Saving Increase the Supply of Credit? A Critique of Loanable Funds Theory," World Economic Review, World Economics Association, vol. 2015(4), pages 1-1, February.
    3. Cohn, Steve, 2000. "Telling Other Stories: Heterodox Critiques of Neoclassical Micro Principles Texts," Working Papers 15586, Tufts University, Global Development and Environment Institute.
    4. Mundt, Philipp & Förster, Niels & Alfarano, Simone & Milaković, Mishael, 2014. "The real versus the financial economy: A global tale of stability versus volatility," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-26.
    5. Kehrwald, Bernie, 2014. "The Excess Demand Theory of Money," MPRA Paper 57603, University Library of Munich, Germany.

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