On Jun 7, 2012, at 8:56 PM, Jim Devine wrote:
yeah, I know. But there have been some efforts. For example, Baumol once said that "normal" profits were set by the interest rate, since the alternative to being engaged in real production was to buy bonds. The problem, of course, is that there's no NC reason -- except hand-waving -- for the real interest rate to be positive.
But profits are a monetary, not "real" phenomenon and the "real" interest rate is a statistical aggregate knowable only ex post.
Anyway, I thought that the neo-classical (Marshallian) theory of profit says that the normal profit rate tends to zero because price tends to equal long-run average cost (for any non-borrowed capital the accounting profit is exactly offset by the [virtual] interest on that capital). So a positive normal profit rate implies an uncompetitive market structure that provides monopoly rents.
Shane Mage This cosmos did none of gods or men make, but it always was and is and shall be: an everlasting fire, kindling in measures and going out in measures. Herakleitos of Ephesos
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