WHAT DOES DETERMINE THE PROFIT RATE - THE NEOCLASSICAL THEORIES PRESENTED IN INTRODUCTORY TEXTBOOKS

The theory of the profit rate varies across introductory texts. Econom ic profits are caused by entrepreneurship, or not. Entrepreneurship is a kind of human capital, or not. Normal profits are determined in the money market, the market for loanable funds, or a hybrid market invol ving demand or supply of physical capital. The downward-sloping demand for capital reflects diminishing marginal productivity (the Cambridge controversy is forgotten), or rank-ordered investment projects. The s upply is a physical capital stock, accumulated or current saving(s) (o r wealth), or desired accumulation. We conclude that the inconsistenci es and confusions in the textbooks reflect the state of high theory. ( C) 1996 Academic Press Limited