but according to the Cambridge UK folks, you can't measure capital stock to begin with . . . To me the interest rate(s) is more meaningful, since at least it is observed and is the object of literal transactions, unlike "capital."
profits are susceptible to what I suspect are flaky inventory valuation and capital consumption adjustments, and even a pristine profit rate can mislead in light of the time profile of investment returns. mbs > >>From Michael Yates > > >In the discussion about profit rates, I am confused. Doug Henwood > >suggests dividing profits by capital stock. Wouldn't this involve > >dividing a flow (profits) by a stock (capital stock) and therefore > >making a not very meaningful calculation? > > Dividing flows by stocks is not always bad voodoo. This calculation would > give a ratio equivalent at the macro level to "Return on Capital > Employed", > which is always a useful thing to know in the context of companies and I > don't see a fallacy-of-composition type argument which would make it not a > useful thing to know about whole economies. Or to put it another > way, it's > a flow divided by a stock in the same way that the rate of interest is a > flow divided by a stock; it's a rate of return.
