Shane writes: > But profits are a monetary, not "real" phenomenon and the "real" interest > rate is a statistical aggregate knowable only ex post.<
Profits are a real phenomenon: Marx, for example, defines them (surplus-value) in terms of hours of labor done. Even rejecting that idea, “real profits” can be calculated by dividing monetary profits by some price index. There are two "real" interest rates: Shane mentions the _ex post_ version, but there are also _ex ante_ estimates of that number. Since the former isn’t known until after the fact, it is the latter that influences behavior. Michael Nuwer writes: >… For the Marshall branch of neo-classicism, normal profit is an opportunity >cost. In Marshall's words: "the supply price of average business ability and >energy." This does not tend to zero for reasons similar to why wages don't >tend to zero. … < What keeps that supply price above zero in Marshall's view? I would say that it’s because of the existence of barriers to entry into the capitalist class (the normal existence of a reserve army of labor, the accumulation and inheritance of wealth, etc.) But that’s a Marxian explanation. > The problem with the Marshallian idea of normal profit is that it cannot > enter a production function like other "factor" inputs -- it is not a > quantity, and therefore is not divisible, and it is not homogeneous. Thus, it > does not have a marginal product and the product exhaustion theorem fails.< Shouldn’t it be “business ability and energy” that enters into the production function and not “normal profits”? As such, it would be a kind of labor income and the product exhaustion theorem stands. > The Walras branch of neo-classicism evades this problem altogether: "in a > state of equilibrium in production, entrepreneurs make neither profit nor > loss. They make their living not as entrepreneurs, but as land-owners, > laborers or capitalists in their own or other businesses."… Most of the > current undergraduate textbooks that I've looked at follow the Walras path: > the return to the entrepreneur's "ability and energy" is a wage payment. < This fits with what I’ve read. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list pen-l@lists.csuchico.edu https://lists.csuchico.edu/mailman/listinfo/pen-l
