March 31, 2016

Profit, marginalism, and other anomalies

Comment on Larry Summers on ‘Corporate profits are near record highs. That’s a problem’


You write: “The rate of profit under standard assumptions reflects the marginal productivity of capital.”

Only for economists who have not yet realized that marginalism is dead since more than 140 years. The correct profit equation for the closed investment economy reads Qm=Yd+I-Sm (2014, p. 8, eq. (18)). Legend: Qm monetary profit, Yd distributed profit, I investment expenditures, Sm monetary saving.

When the profit theory is false, then the rest of economic theory is false. The reason why the profit development appears “anomalous” to you is that you simply do not know what profit is.*

Egmont Kakarot-Handtke

Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL

* See ‘How the intelligent non-economist can refute every economist hands down

For details of the big picture see cross-references Profit

Immediately following post 'How the American working class can bring overall profits down to zero without bloody revolution'.