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Commons Futurity pg.526-528

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 on this subject.  Corporations and business people through their responses to profit in turn drive much of the broader economy and the impact on other peoples income and employment.  Common's concerns for labor is why he turned his attention to economic cycles as key drivers of worker welfare and stability or instability.

Commons view is that the malthusian profit share argument was that too much national income went to rent, profit and interest and not to consumers. This kept the economy in low gear and restricted prosperity to a small group.  The Ricardian theory was that profit margins were tight and that instability in profit margins drive business people to react and in turn impact the rest of the economy.

The profit margin theorist spilt from that point with some arguing that only wage cuts could restore stability while others argued that prices needed to rise faster than wages and wages didn't have to be cut. Commons then provides a table and talks about the different forms of profit margin that exist.

From here we will explore these ideas in much greater detail. A note - this section demonstrates Common interest in practical issues that impact the dynamics of a capitalist economy.


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