Full text: Lecture Notes: Maturity and Stagnation

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THE PROFIT FUNCTION 
1 11 
to explain the interaction of distribution and a<Si£umula±ion 
we need the profit function^which enables us to distinguish 
between changes in the profit rate due to a change in utilisation 
and changes in the profit rate taking place at constant utilisation . 
The profit function is inspired by Kalecki, but in using it 
I follow my own wa^s. 
[the profit function plays a role similar to the production function 
4 H 6 O i 
iiTjclassical theory: It replaces it, in a sense. 
Let us define 
h direct labour iput in hours 
h Q overhead labour in hours 
w wage per hour 
’ff price of output 
T „ , , P profits K capital, both in 
W wage and salary bill current prices £1 ____—_ 
We adopt now the theory that the wage and salary bill 
depends on output and on capacity; it is assumed that the capacity 
dH±BrmiHSs of the equipment determines the amount of overhead labour. 
W = hw Y* + h Q w K* 
P = IT Y* - W = Y*( IT -hw ) - h Q w K* ( 6 ) 
We may now express the profits as a ration of income, 
or as a ratio of capacity income, or as a ratio of capital, i.e. 
as a profit rate: 
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