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What is the Source of Profit and Interest? A Classical Conundrum Reconsidered

Author

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  • Tomasson, Gunnar
  • Bezemer, Dirk J

Abstract

Classical political economy was underpinned by a shared view of the economy as a circular flow. This begged the question of how the value of produce can exceed the value of factor inputs: the ‘Profit Puzzle’. In this paper we advocate an understanding of the Profit Puzzle as a monetary paradox arising from Say’s Law. We trace how Classical, Keynesian and Neoclassical economists addressed the Puzzle. We suggest a solution based on the work of Bentham.

Suggested Citation

  • Tomasson, Gunnar & Bezemer, Dirk J, 2010. "What is the Source of Profit and Interest? A Classical Conundrum Reconsidered," MPRA Paper 20320, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20320
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    References listed on IDEAS

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    1. Hicks, John R [Sir], 1973. "Recollections and Documents," Economica, London School of Economics and Political Science, vol. 40(157), pages 2-11, February.
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    Cited by:

    1. Kakarot-Handtke, Egmont, 2012. "The rhetoric of failure: a hyper-dialog about method in economics and how to get things going," MPRA Paper 43276, University Library of Munich, Germany.
    2. Kakarot-Handtke, Egmont, 2012. "General formal foundations of the virtuous deficit–profit symmetry and the vicious debt deflation," MPRA Paper 42912, University Library of Munich, Germany.
    3. Kakarot-Handtke, Egmont, 2011. "Trade, productivity, income, and profit: the comparative advantage of structural axiomatic analysis," MPRA Paper 43872, University Library of Munich, Germany, revised 18 Jan 2012.
    4. Kakarot-Handtke, Egmont, 2014. "Towards Full Employment Through Applied Algebra and Counter-Intuitive Behavior," MPRA Paper 56749, University Library of Munich, Germany.
    5. Kakarot-Handtke, Egmont, 2013. "Redemption and Depression," MPRA Paper 50924, University Library of Munich, Germany.
    6. Kakarot-Handtke, Egmont, 2014. "Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It," MPRA Paper 53608, University Library of Munich, Germany.
    7. Kakarot-Handtke, Egmont, 2012. "Geometrical exposition of structural axiomatic economics (I): Fundamentals," MPRA Paper 43269, University Library of Munich, Germany.
    8. Kakarot-Handtke, Egmont, 2012. "The common error of common sense: an essential rectification of the accounting approach," MPRA Paper 43196, University Library of Munich, Germany.
    9. Egmont Kakarot-Handtke, 2013. "The Emergence of Profit and Interest in the Monetary Circuit," World Economic Review, World Economics Association, vol. 2013(2), pages 106-106, February.
    10. Kakarot-Handtke, Egmont, 2012. "Income distribution, profit, and real shares," MPRA Paper 43291, University Library of Munich, Germany.
    11. Kakarot-Handtke, Egmont, 2012. "Why Post Keynesianism is not yet a science," MPRA Paper 43171, University Library of Munich, Germany.
    12. de la Fonteijne, Marcel, 2013. "The Monetary Profit Paradox and a Sustainable Economy - A Fundamental Approach," MPRA Paper 55235, University Library of Munich, Germany, revised 10 Apr 2014.
    13. Kakarot-Handtke, Egmont, 2014. "Onblog Economics Muddle Busting," MPRA Paper 60543, University Library of Munich, Germany.
    14. Kakarot-Handtke, Egmont, 2015. "Essentials of Constructive Heterodoxy: Profit," MPRA Paper 62694, University Library of Munich, Germany.
    15. Kakarot-Handtke, Egmont, 2014. "The Truly General Theory of Employment: How Keynes Could Have Succeeded," MPRA Paper 54367, University Library of Munich, Germany.
    16. Kakarot-Handtke, Egmont, 2013. "Understanding Profit and the Markets: The Canonical Model," MPRA Paper 48691, University Library of Munich, Germany.
    17. Kakarot-Handtke, Egmont, 2014. "The Synthesis of Economic Law, Evolution, and History," MPRA Paper 58842, University Library of Munich, Germany.
    18. Kakarot-Handtke, Egmont, 2012. "Crisis and methodology: some heterodox misunderstandings," MPRA Paper 43260, University Library of Munich, Germany.
    19. Kakarot-Handtke, Egmont, 2012. "Taxes, profits, and employment: a structural axiomatic analysis," MPRA Paper 43581, University Library of Munich, Germany.
    20. de la Fonteijne, Marcel R., 2014. "An inconsistency in using stock flow consistency in modelling the monetary profit paradox," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 8, pages 1-7.
    21. Kakarot-Handtke, Egmont, 2012. "Intertwined real and monetary stochastic business cycles," MPRA Paper 42793, University Library of Munich, Germany.

    More about this item

    Keywords

    Circular Flow; Say's Law; Profit; Credit; Marx; Schumpeter; Keynes;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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