On Fri, 26 Oct 2001, Gerald_A_Levy wrote: > Re Fred's [6091]: > > > In mainstream macroeconomics (in all its versions), profit is not even a > > variable in the theory! Similarly, in mainstream macro analyses of > > recessions, profit is almost never mentioned, certainly not in academic > > journals. > > I guess it depends on how you define 'mainstream'. > > Two arguably 'mainstream' schools which include a role for profits > as a major variable are: > > 1) the Austrian strand of marginalism: didn't Bohm-Bawerk, Menger, > von Mises, etc. all incorporate profit into their basic macro theory? I don't know about von Mises, but Menger had no macro theory at all. Menger's theory is a micro theory of relative prices. Profit is not a variable in the theory. Bohn Bawerk also had no macro theory. He has a theory of "interest", but it is part of a micro theory of distribution and it is entirely static. > 2) 'Supply-side' economic theory: isn't the level of corporate profits > a crucial variable in that theory that leads to changes in the level of > investment and then aggregate supply? I have never seen a supply-side theory in which profit is a variable at all, let alone a crucial variable. Supply-side theory focuses on individuals, not firms. The central variable in supply-side theory is personal income tax rates. The argument in that a reduction of personal tax rates would cause individuals to save more. This increased saving somehow gets channeled to firms, who then increase their investment. I don't see profit anywhere in this theory. I agree with Patrick that no one takes seriously the "madness of supply-side rhetoric." So I repeat: Marx's emphasis on the rate of profit is unique in the history of economics. Comradely, Fred
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