Introduction

It is usually taken as a postulate in Marxian discussions that the rate of profit is equal, at equilibrium, for all capitalists. Such a phenomenon should not, however, be a postulate, but rather a theorem, for what capitalists try to do is maximize profits, and any macroeconomic phenomenon (such as an economy-wide unique rate) should be derived as a consequence of individual capitalist accumulation behavior. In Chapter 1 we showed that for a special linear model where all capitalists face the same Leontief technology, profit rates are equalized at reproducible solutions. It was also shown, in the monopolistic competition model of that chapter, how imperfect entry could prevent the equalization of profit rates.

In the general model of Chapter 2, profit rates are not equalized at reproducible solutions. (Clearly the model of monopolistic competition is a special case of the general model.) This is due to the non-existence of a market for finance capital: Capitalists are not able to borrow or lend. In this chapter, a finance capital market is appended to the model of Chapter 2, and it is shown that Marxian equilibria continue to exist and, furthermore, profit rates are always equalized at equilibrium.

This sounds like a familiar story – the existence of a capital market will allow investment funds to be efficiently allocated, so that the rate of return on the marginal dollar is everywhere the same.