What Does Determine the Profit Rate? The Neoclassical Theories Presented in Introductory Textbooks
Author(s)
Naples, Michele I.; Aslanbeigui, Nahid
Abstract
The internal inconsistencies in textbook presentations of neoclassical theories of profit rate lies in the controversy over capital. The non-monotonic relationship between capital, interest rate, and problems of circularity in aggregating capital are generally ignored in the theories, causing inconsistencies. The neoclassical theory holds that the interest rate and normal profit rate are real phenomena, which are determined in the market for real wealth. The neoclassical school has failed to develop a coherent theory of profit rate.
