I do not see the problem of emphasizing expected profits as a choice between Keynes and Marx. The reliance on expected profits represents a serious problem for conventional economics, which pretends that business has the capacity to allocate capital efficiently, despite an obvious incapacity to foresee the future.
Expected profits are important because business investment is directed toward a future. Current profits are nonetheless important for investment decisions for two reasons. First, current profits are an important indicator of future profits. Second, profits affect both the need for and the availability of credit for financing investments. Nonetheless, the profitability of fixed investment today will only come in the future. Suppose a company makes a healthy profit today, but management realizes that something in the future -- a developing technology or a new trade agreement -- will undercut the potential profitability of that investment. Would it rely solely on current profits or would it take this new information into account? -- Michael Perelman Economics Department California State University Chico, CA 95929 530 898 5321 fax 530 898 5901 http://michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
