Is There a Tendency for the Rate of Profit to Fall? Econometric Evidence for the U.S. Economy, 1948-2007

Abstract

The law of the tendential fall in the rate of profit has been at the center of theoretical and empirical debates within Marxian political economy since the publication of volume III of Capital. An important limitation of this literature is the relative paucity of modern econometric investigations of the behavior of the rate of profit. The central objective of this paper is to remedy this lacuna. We investigate the properties of the profit rate series utilizing the methods of time series econometrics. The evidence suggests that the rate of profit is non-stationary. We also specify a test of Marx’s law of the tendential fall in the rate of profit with a novel econometric model that explicitly accounts for the counter-tendencies and their time series properties. We find weak evidence of a long-run downward trend in the general profit rate for the U.S. economy for the period 1948-2007. JEL Codes: B51, C22, E11.