Vertically integrated measures of the rate of profit in the United States 1950-90

This paper investigates the importance of increases in the productivity of producing capital in estimates of the profit rate decline which occurred in the United States during the period 1950-90. We find that, when profit rat e measures take into account the increasing productivity of producing capit al stock (as measured by the embodied labor required to produce it), the ob served decline is about one-half that found using conventional measures of profit. This finding has important implications for interest rate and inves tment policies.