Introduction

Recent controversies in capital theory have centered around a number of related issues concerning, for instance, the meaning and measurement of capital, the problem of reswitching of techniques of production and capital reversal, the significance, if any, to be attached to the neoclassical propositions that the equilibrium rate of profits in a capitalist economy is equal to the social rate of return to saving or equal to the “marginal product of capital” (Bhaduri, 1969; Dobb, 1970; Robinson, 1970; Harcourt, 1972). Some of those standing on the sidelines tend to dismiss this whole debate as a matter of meaningless formalism. Indeed, the terms on which the debate is conducted sometimes appear to be rather like those of medieval scholastic discussions concerning the number of angels that could stand on the head of a pin. But to dismiss the substance of the recent debate as a meaningless matter would be a serious mistake. Underlying it are deep and far-reaching issues in economic theory going back in time to the classical economists and which have reappeared from time to time in different forms.

The central theoretical problem which lies at the root of these debates has two sides, one qualitative, the other quantitative. On the qualitative side is the question of what is the nature and origin of profits in a capitalist economy. On the quantitative side is the question of what determines the relative shares of profits and wages (or of capitalists and workers) in the net product and hence the magnitude of the overall rate of profits.