IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwedp/200952.html
   My bibliography  Save this paper

The paradox of monetary profits: an obstacle to understanding financial and economic Crisis?

Author

Listed:
  • Bruun, Charlotte
  • Heyn-Johnsen, Carsten

Abstract

The paradox of monetary profits has been a recurrent theme in macroeconomics since the problem was first formulated by Marx. Capitalists as a whole can at most get from workers, what they already paid out in wages. Marx did not solve this problem, and neither did Keynes, who had to face the problem in “The General Theory”. A consequential logical conclusion to Keynes’ treatment of the problem, leaves his concept of aggregate income indeterminate—based on imaginary magnitudes. Both Marx and Keynes tried to solve the problem by addressing current transaction flows, which is also the approach taken by more recent contributors. Another solution to the problem is to regard monetary profits as a flow arising from changes in stock magnitudes—more specifically the monetary valuation of real capital performed at financial markets. Besides solving the paradox of monetary profits, this solution also provides us with a very strong connection between the real and the financial spheres. The monetary profit inducing capitalist production, emanates from the sphere of finance. In a world of fundamental uncertainty this gives us an explanation of, not only what may drive financial booms and busts, but also how these movements on financial markets are related to the real sphere of production.

Suggested Citation

  • Bruun, Charlotte & Heyn-Johnsen, Carsten, 2009. "The paradox of monetary profits: an obstacle to understanding financial and economic Crisis?," Economics Discussion Papers 2009-52, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:200952
    as

    Download full text from publisher

    File URL: http://www.economics-ejournal.org/economics/discussionpapers/2009-52
    Download Restriction: no

    File URL: https://www.econstor.eu/bitstream/10419/28952/1/614394147.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Claudio H. Dos Santos, 2006. "Keynesian theorising during hard times: stock-flow consistent models as an unexplored 'frontier' of Keynesian macroeconomics," Cambridge Journal of Economics, Oxford University Press, vol. 30(4), pages 541-565, July.
    2. Patterson, K D, 1990. "Stock Flow Consistent Income for Industrial and Commercial Companies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(3), pages 289-308, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Seppecher, Pascal, 2014. "Pour une macroéconomie monétaire dynamique et complexe," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 16.
    2. Cornelia Metzig & Mirta Gordon, 2012. "Heterogeneous Enterprises in a Macroeconomic Agent-Based Model," Papers 1211.5575, arXiv.org.
    3. 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.
    4. Kakarot-Handtke, Egmont, 2011. "What is wrong with heterodox economics? Kalecki’s profit theory as an example," MPRA Paper 31177, University Library of Munich, Germany.
    5. 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.

    More about this item

    Keywords

    Monetary production theory; stock-flow consistency; finance; national income accounting;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • G01 - Financial Economics - - General - - - Financial Crises
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwedp:200952. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/iwkiede.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.