Commons most cited article is "Institutional Economics" from the American Economic Review of December 1931. He defines an institution as "collective action in control, liberation and expansion of individual action". Many of us imagine that collective action of any group against an individual is inherently negative or restrictive. In Commons view however, collective action can both restrict or liberate individuals. In fact, in any transaction or relationship between two individuals, the rules of the collective may liberate one party and restrict the other. This is a critical point to understand. Traditional economics views the individual as being set against nature or the market and not any other individual. Any rules are by definition restrictive in this view of the world. In the Commons view of the world, the rules that help restrict one party may provide a liberation or expansion of activity for another party. This begins to help understand power in the world which is rarely touched upon in the traditional economic view.
Commons Futurity VII. The Margin for Profit pg 526-528 In this section, Commons turns to thinking about a specific aspect of modern banker capitalism addressing the question of profit's role in the economy. He starts with some terminology regarding profit share - the share of national income that goes to profit earners and the profit margin - the dynamic aspect that drives a going concern forward. We then move into another set of terms that are rate of profit and profit yield. The rate of profit is related to the par value of stock and yield is related to market value of stock or outstanding equity. The social question to Commons is what the role of profit in keeping the overall economy and does society or community pay too much or too little for this service. Economists have long thought about the role of profits in driving the economy up or down. Commons believes there are profit share theories and profit margin theories as two diction categories in economic thinking...
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