Let me offer a vague theory of profit. Over the postwar period, the normalized rate of profit has been falling. Two factors have covered up this phenomenon. First, the regulatory scheme, including the undermining of protections for labor and the environment, increased the profit opportunities. Second, capital compensates for the diminished rate of profit by taking on more risk. In effect, the expected rate of profit [in a statistical sense] may be declining, even though the measured rate of profit is increasing.
In this environment, capital seems much healthier than it really is. I've been looking at hedge funds moving into more and more risky real estate areas. Once this vulnerability is revealed, the potential for panic increases. Are we there yet? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
