Incomes from Capital in Alternative Economic Theories

CSWP 42 (July 2020)

Author Saverio M. Fratini

Keywords Capital profit; interest.

JEL B51; D24; D51.

This paper addresses the theoretical explanation of profit and interest within three different approaches: i) classical/Marxian; ii) marginalist; and iii) Arrow-Debreu. In the classical/Marxian approach, incomes from capital are understood as a surplus whose amount depends on the class conflict. In the marginalist theory, the rate of interest is the price firms pay to households for the use of a factor of production named ‘capital’. In the Arrow-Debreu equilibrium theory, interest rates and firm profit are still present, but, as we shall try to show, they can hardly be seen as income from capital.

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