TY - JOUR
T1 - Imperfect Competition and the Theory of the Falling Rate of Profit
AU - Skott, Peter
PY - 1992/3
Y1 - 1992/3
N2 - According to the Okishio theorem, profit-maximizing firms will not introduce new techniques which, when adopted by all firms, reduce the rate of profit. This paper presents a simple model which shows that this conclusion need not hold under imperfect competition. The model excludes working-class pressures for increased real wages - the supply of labor is infinitely elastic at a given money wage rate - and it is assumed that firms aim to maximize profits. It is shown that, if the economy starts from an initial position with a low organic composition, then the rate of profit will fall. Asymptotically, the profit rate approaches a long-run equilibrium value, but the model may explain some of the observed decline in profitability during the early stages of industrialization.
AB - According to the Okishio theorem, profit-maximizing firms will not introduce new techniques which, when adopted by all firms, reduce the rate of profit. This paper presents a simple model which shows that this conclusion need not hold under imperfect competition. The model excludes working-class pressures for increased real wages - the supply of labor is infinitely elastic at a given money wage rate - and it is assumed that firms aim to maximize profits. It is shown that, if the economy starts from an initial position with a low organic composition, then the rate of profit will fall. Asymptotically, the profit rate approaches a long-run equilibrium value, but the model may explain some of the observed decline in profitability during the early stages of industrialization.
UR - http://www.scopus.com/inward/record.url?scp=84965450854&partnerID=8YFLogxK
U2 - 10.1177/048661349202400106
DO - 10.1177/048661349202400106
M3 - Journal article
AN - SCOPUS:84965450854
SN - 0486-6134
VL - 24
SP - 101
EP - 113
JO - Review of Radical Political Economics
JF - Review of Radical Political Economics
IS - 1
ER -