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Capital Mobility and Unequal Profit Rates: A Classical Theory of Competition by Boundedly Rational Firms

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  • Marc van Wegberg

    (University of Limburg, P.O. Box 616, 6200 MD Maastricht, The Netherlands)

Abstract

A key concept in the classical economic theory is the long-run equilibrium based on a uniform rate of profit with associated prices of production. This equilibrium is the outcome of an adjustment process: differential profit rates induce capital mobility between markets, which continues until profit rates equalize. Nikaido's (1983) critique initiated a series of papers modeling this process. This paper contributes to the debate by employing an evolutionary-type model with (1) bounded rationality in decision-making, (2) imperfect labor mobility, and (3) structural change in the economy. It finds that the latter two conditions impede a tendency for profit rates to equalize.

Suggested Citation

  • Marc van Wegberg, 1990. "Capital Mobility and Unequal Profit Rates: A Classical Theory of Competition by Boundedly Rational Firms," Review of Radical Political Economics, Union for Radical Political Economics, vol. 22(2-3), pages 1-16, June.
    • Handle: RePEc:sae:reorpe:v:22:y:1990:i:2-3:p:1-16
    DOI: 10.1177/048661349002200201
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    References listed on IDEAS

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    1. Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592.
    2. Flaschel, Peter & Semmler, Willi, 1987. "Classical and Neoclassical Competitive Adjustment Processes," The Manchester School of Economic & Social Studies, University of Manchester, vol. 55(1), pages 13-37, March.
    3. Gerald Silverberg & Giovanni Dosi & Luigi Orsenigo, 2000. "Innovation, Diversity and Diffusion: A Self-Organisation Model," Chapters, in: Innovation, Organization and Economic Dynamics, chapter 14, pages 410-432, Edward Elgar Publishing.
    4. Dumenil, Gerard & Levy, Dominique, 1989. "The Competitive Process in a Fixed Capital Environment: A Classical View," The Manchester School of Economic & Social Studies, University of Manchester, vol. 57(1), pages 34-57, March.
    5. Dumenil, Gerard & Levy, Dominique, 1987. "The Dynamics of Competition: A Restoration of the Classical Analysis," Cambridge Journal of Economics, Oxford University Press, vol. 11(2), pages 133-164, June.
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