Accumulation and the rate of profit: regulating the macroeconomy

In this paper we argue that as models of profitability and growth within th e Marxist tradition have become more formal, they have relied increasingly upon assumptions of equilibrium. An alternative single-region, single-commo dity model is proposed in which output, demand, and capital accumulation ar e independently determined and therefore potentially in disequilibrium. In the short run this means that profitability can be rising or falling, depen ding upon the rates of growth of demand, supply, and net exports, the rate of capital accumulation, the rate of change of unit costs of production, an d the initial starting position of the economy. In the longer run, though, output is limited by the capacity of capital to produce and by the size of the labour force, and demand cannot exceed supply. These constraints place an upper bound on the rate of profit and its growth, a bound that depends o n the rate of change in the unit costs of production and on the rate of gro wth of the labour force. In the longest term, net exports cannot continue t o grow, and certain regulatory conditions are deduced: if those conditions are met as equalities then the rate of profit is constant; if they are met as inequalities, the rate of profit falls.