November 9, 2015

Distribution, profit, income and other embarrassments

Comment on David Ruccio on ‘Unequal distributions of income’


Distribution theory suffers from the known fact that, after more than 200 years, economists cannot tell the difference between income, profit, distributed profit and retained profit. As the Palgrave summarizes: “A satisfactory theory of profits is still elusive.” (Desai, 2008)

Therefore, the defenders and attackers of capitalism have one important thing in common: they have no idea of what they are talking about.

For a crash course in elementary economics take this formula.

This is the fundamental economic law that contains the interrelation between the consolidated business sector’s cost/profit situation rhoF, the real rhoX and the nominal rhoE side of the product market, and the income distribution rhoD. It’s all in this formal nutshell.

And this is how the economy evolves over time as an open system.

For details see
The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?
Profit for Marxists
Essentials of Constructive Heterodoxy: Profit
'The Synthesis of Economic Law, Evolution, and History'.

Remember what Plato wrote above the entrance of the first academy of sciences? "Let None But Geometers Enter Here." As soon as economics has become a genuine science one will read above the entrance: “Let no one who cannot tell what profit is enter here.” And, guess what: all orthodox economists, as well as all heterodox economists, will be left out in the cold. Forever and ever and ever!

Egmont Kakarot-Handtke