Interestingly, in 1977, Larry Summers published a paper together with Martin Feldstein "Is the rate of profit falling?" (Brookings Papers on Economic Activity, 1:1977). Replying to the papers by Nordhaus and Okun, they concluded that:
"Nothing suggests that the recent low rate of return represents a permanent fall. (.) Our analysis of these rates of return provides no support for the view that there has been a gradual decline in the rate of return over the postwar period. The evidence does suggest that the average rate of return since 1970 has been some 1 to 2 percent lower than would be predicted on the basis of the low recent capacity utilization alone. But the shortfalls that remain after adjusting for capacity utilization are not inconsistent with the type of random year-to-year fluctuations in profitability that have been observed previously. In any case, the factors that contributed to the fall in the return during the early 1970s are likely to be transitory so that the fall in the return is itself likely to be temporary." Summers seems to have very little notion of epochal trends, it is all medium-term stuff. A recovery would mean that employment returned to its former level, productive investment would increase, and output values would increase significantly. The problem for economists is, that although profits have increased, there is no recovery in real employment, real investment, and real output. That is largely explicable in terms of the new financial regime operating in the US, which is based on maximum short-term profit for the least effort. J.
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