Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Rate of profit: The rate of profit in economics measures the return on investment, calculated as profit relative to the total capital employed. It indicates the efficiency of capital use, influenced by factors like production costs, pricing, and market demand. Higher profit rates suggest better economic performance and investment opportunities._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Murray N. Rothbard on Rate of Profit - Dictionary of Arguments
Rothbard III 509 Rate of profit/entrepreneur/Rothbard: The capitalist-entrepreneur buys factors or factor services in the present; his product must be sold in the future. He is always on the alert, then, for discrepancies, for areas where he can earn more than the going rate of interest. >Rate of interest/Rothbard, >Factors of production/Rothbard, >Factor market/Rothbard. What gave rise to this realized profit, this ex post profit fulfilling the producer’s ex ante expectations? The fact that the factors of production in this process were underpriced and undercapitalized - underpriced in so far as their unit services were bought, undercapitalized in so far as the factors were bought as wholes. >Time/Rothbard, >Capitalization/Rothbard. In either case, the general expectations of the market erred by underestimating the future rents (MVPs) of the factors. >Marginal product/Rothbard. Rothbard III 510 What function has the entrepreneur performed? By recognizing the discrepancy and doing something about it, he shifted factors of production (obviously nonspecific factors) from other productive processes to this one. Marginal product: He detected that the factors’ prices did not adequately reflect their potential DMVPs (discounted marginal products); by bidding for, and hiring, these factors, he was able to allocate them from production of lower DMVP to production of higher DMVP. >Discounting/Rothbard. Rate of profit: It is clear that there is no sense whatever in talking of a going rate of profit. There is no such rate beyond the ephemeral and momentary. For any realized profit tends to disappear because of the entrepreneurial actions it generates. Interest rate: The basic rate, then, is the rate of interest, which does not disappear. If we start with a dynamic economy, and if we postulate given value scales and given original factors and technical knowledge throughout, the result will be a wiping out of profits to reach an ERE (Evenly Rotting Economy) with a pure interest rate. >Evenly Rotating Economy, >Gain and Loss/Rothbard. Rothbard III 513 „Rate of loss“: The absurdity of the concept of “rate of profit” is even more evident if we attempt to postulate a rate of loss. Obviously, no meaningful use can be made of “rate of loss”; entrepreneurs will be very quick to leave the losing investment and take their capital elsewhere. With entrepreneurs leaving the line of production, the prices of the factors there will drop and the price of the product will rise (with reduced supply), until the net return in that branch of production will be the same as in every branch, and this return will be the uniform interest rate of the ERE. It is clear, therefore, that the process of equalization of rate of return throughout the economy, one that results in a uniform rate of interest, is the very same process that brings about the abolition of profits and losses in the ERE (Evenly Rotating Economy)._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
||
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
