Three Models of the Falling Rate of Profit

Abstract

Three models are presented which hold in common the assumption of imperfect competition but differ in their treatment of technical change. When technical change is purely endogenous (Model I) or exogenous (Model II), the rate of profit declines to some steady-state value, either as capital accumulates or as time passes. Dynamic wage-profit curves describe the paths over time of the product wage and profit rate. Under a combined form of technical change (Model III), the slope of the dynamic wage-profit curve is indeterminate but it converges on some steady state. These steady states are the terminus of a historical process rather than the equilibria of the models. The models invite comparisons between neoclassical and Marxian theory.