Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth

Abstract

Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. The Review of Economic Studies Ltd. is collaborating with JSTOR to digitize, preserve and extend access to The Review of Economic Studies. http://www.jstor.org-The theory of distribution is due to Nicholas Kaldor, who put it forward in " Alternative Theories of Distribution," Tlhe Review of Economic Studies, 1955-56. The relation of the rate of profit to the rate of growth has a longer story. In the thirties, J. von Neumann and also N. Kaldor, while still accepting a marginal productivity theory of the rate of interest, analysed the case of a slave economy, showing that the rate of growth is maximum when it is equal to the rate of interest. (J. von Neumann, " A Model of General Economic Equilibrium," Tlhe Review of Economic Stuidies 1945-46, a paper first presented at a seminar of Princeton University in 1932; N. Kaldor, " The Controversy on the Theory of Capital," Economiietrica 1937, p. 228 and ff.). It was, however, only with the recent macro-dynamic models that the causal link has been reversed. A relation of dependence of the rate of profit on the rate of growth appeared first, in the form of verbal statements supplemented with an arithmetical example, in

Macrodynamics of debt regimes, financial instability and growth

“…Following the tradition of Marx, Kalecki (1971), Kaldor (1956), Robinson (1962), and Pasinetti (1962), we assume that they have a different saving behavior. Workers, who are always in excess supply, provide labor and earn only wage income, which is all spent in consumption.…”

A nonbehavioral theory of saving

“…Now we can go back to Kaldor (1955), Pasinetti (1962), Godley (1999) and our non-behavioral theory of saving. Assume that the capital output ratio (v) is exogenous like in Kaldor and Pasinetti. In the face of a "successful invasion" of domestic markets from foreign exporters, and if fiscal policy becomes restrictive-if ca and d decrease-the only way for the economy to maintain full employment (a constant g at the full employment level) is through a decrease in the saving of the private sector's saving relative to income.…”

“…As it is well known, the theory of Kaldor was further elaborated by Pasinetti (1962). Pasinetti proved the famous theorem (that was named after him) that under the Kaldorian assumptions the distribution of income is determined only as a function of the growth rate and the saving propensity of the capitalists; the saving rate of the workers does not play any role.…”

Rethinking Economic Growth Theory From a Biophysical Perspective

“…Kaldor (1955) argued that the marginal propensity to save should be greater among capitalists than among workers, while Pasinetti (1962) argued that the marginal propensity to save was an increasing function of income size (regardless of functional income-type). Since the rich have a greater marginal propensity to save than the poor, the trickledown school argues that an increase in inequality will result in increased savings.…”