Profits, Productivity, and Thrift: The Neoclassical Theory of Capital and Distribution Revisited

Abstract

In responding to the sustained critique of the neoclassical marginal productivity theory of profits (or interest) that has come out of the recent debate on capital theory,1 neoclassical economists have tended to follow a number of distinct approaches. One such approach is to relegate marginal productivity theory to a special status as a simple parable (Samuelson, 1966, 1976) or crude simplification (Solow, 1975) that does limited service for more complex and theoretical constructions. One extreme variation of this approach seeks to drop marginal productivity theory altogether in favor of what is considered to be a more general theory-the neoclassical theory of intertemporal equilibrium in which everything depends on everything else and there is no such thing as the rate of profit (Bliss, 1975; Dixit, 1977). This latter route involves, in effect, a retreat from the central issue posed by the recent critique: to provide an explicit theoretical account of the determination of distributive shares of

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