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What makes the US Profit Rate Fall?

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  • Freeman, Alan

Abstract

Since world war II there have been two quite distinct phases of world growth. In about 1965, a long slowdown set in which has still not ended. Robert Brenner (2002, 2003) has re-ignited the debate about its causes, claiming that nothing in either present or past economic theory explains it. He argues for a ‘third explanation’, alternative both to the profit-share hypothesis which dominates today, and the rising output-capital ratio account associated with Marx and Kalecki. Empirically, the evidence overwhelmingly shows the output-capital ratio is a dominant cause of postwar movements in the US profit rate; thus what Brenner maintains is theoretically impossible, is empirically true. The paper dissects this contradiction which, if economics proceeded scientifically, would lead to a radical critique of its own paradigm, but has instead led it to suppress and ignore the only coherent alternative. The paper shows Brenner’s rejection of the Marx-Kalecki framework arises because his theoretical paradigm, adapted uncritically from his critics, cannot allow for the effect of falling prices on capital stocks. His own ‘third explanation’ is incompatible with this same framework and can be sustained only by understanding it as the mechanism behind, or ultimate cause of, the movement of the output-capital ratio in price terms.

Suggested Citation

  • Freeman, Alan, 2009. "What makes the US Profit Rate Fall?," MPRA Paper 14147, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14147
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    File URL: https://mpra.ub.uni-muenchen.de/14147/1/MPRA_paper_14147.pdf
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    References listed on IDEAS

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    1. Roemer, John E., 1977. "Technical change and the "tendency of the rate of profit to fall"," Journal of Economic Theory, Elsevier, vol. 16(2), pages 403-424, December.
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    Cited by:

    1. Russo, Alberto, 2010. "Elementi di novità, meccanismi noti e cause di fondo della recente crisi
      [Elements of novelty, known mechanisms, and fundamental causes of the recent crisis]
      ," MPRA Paper 21648, University Library of Munich, Germany.
    2. Alberto Russo, 2014. "Elements of Novelty, Known Mechanisms, and the Fundamental Causes of the Recent Crisis," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(3), pages 743-764.
    3. Maito, Esteban Ezequiel, 2013. "La transitoriedad histórica del capital: La tendencia descendente de la tasa de ganancia desde el siglo XIX
      [The historical transience of capital: The downward trend in the rate of profit since XIX
      ," MPRA Paper 59285, University Library of Munich, Germany.
    4. Maito, Esteban Ezequiel, 2014. "The historical transience of capital: the downward trend in the rate of profit since XIX century," MPRA Paper 55894, University Library of Munich, Germany.
    5. Maito, Esteban Ezequiel, 2014. "Income distribution, turnover speed and profit rate in Japan, Chile, Netherlands and United States," MPRA Paper 59283, University Library of Munich, Germany.
    6. Maito, Esteban Ezequiel, 2014. "Auge y estancamiento de Japón (1955-2008). Una explicación marxista
      [Rise and standstill of Japan (1955-2008). A Marxist explanation]
      ," MPRA Paper 53102, University Library of Munich, Germany.

    More about this item

    Keywords

    crisis; inequality; Brenner; Value; profit rate; long waves; world systems; TSSI; temporalism;

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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