March 2, 2012

Income Distribution, Profit, and Real Shares {27}

This paper clarifies first the nature and significance of monetary profit by applying the structural axiom set as a consistent point of departure. As a crucial result, the fundamental theorem of income distribution emerges. It states: profit is no factor income. Since the individual firm is blind to this structural fact it subjectively interprets profit as some kind of reward. As a matter of fact, firms do not ‘make’ profit, they only redistribute it among themselves. With profit consistently defined it is possible to determine the nominal and real shares of the elementary income categories wage income and distributed profit.