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Henryk Grossmann’s Falling Rate of Profit theory of crisis: a presentation and a reply to old and new critics

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  • Mavroudeas, Stavros
  • Ioannides, Alexis

Abstract

Henryk Grossmann was the first Marxist economist that proposed a theory of crisis based on the Marxian law of the falling rate of profit due to the increasing organic composition of capital. This view, while initially disappointingly minotirarian, has become very popular nowadays within Marxist Political Economy. At the same time Grossmann’s theory has been severely criticised by many economists (e.g. P.Sweezy, Howard & King etc.). In this essay, first, Grossmannn’s theory is presented. Then it is reformulated so as to be comparable to the Harrod-Domar tradition of growth models. Third, older and newer critiques are being reviewed critically. Finally, it concludes by arguing that Grossmann’s theory – despite certain deficiencies to a large extent justified by its pioneering character- has a valid methodological and analytical basis. As such it is a true founder of modern theories of the falling rate of profit theory of crisis.

Suggested Citation

  • Mavroudeas, Stavros & Ioannides, Alexis, 2006. "Henryk Grossmann’s Falling Rate of Profit theory of crisis: a presentation and a reply to old and new critics," MPRA Paper 19733, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19733
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    File URL: https://mpra.ub.uni-muenchen.de/19733/1/MPRA_paper_19733.pdf
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    References listed on IDEAS

    as
    1. Shaikh, Anwar, 1978. "Political Economy and Capitalism: Notes on Dobb's Theory of Crisis," Cambridge Journal of Economics, Oxford University Press, vol. 2(2), pages 233-251, June.
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    Keywords

    economic crisis; growth; Marxism; Grossman;

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • B24 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Socialist; Marxist; Scraffian

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