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Home› Part II - Political economy propositions› Chapter 6 - Profit›Proposition 6.1
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6.1 Let us reserve the term profit for distributed earnings provided in return for a placement in capital or quasi-capital.132

Definitions of capital and quasi-capital: see the previous chapter.

1. The Objective Political Economy gives the noun "profit" an unequivocal meaning.

In this sense, profit is the effective remuneration for the permanent financing of an enterprise.

2. The profit thus defined is always a financial product for those who receive it.

However, this financial product is only income when it is in return for a placement in capital. The profit received in return for a placement in quasi-capital is onlyCapital_Quasi_Capital a financial product, and not also an income.

3. Profit thus defined has a status and functions of its own.

The economic status of profit thus defined lies in the fact that it is the end of a commodity exchange whose other term is the putting into capital or quasi-capital. The functions that this status confers are part of what economic science must elucidate. The remuneration of placement in capital or quasi-capital raises the following three questions:133

  • Is the level of this remuneration the variable of a systemic relationship?
  • Does this relationship have the effect of regulating this level?
  • Does income from placement in capital reduce labor income?

Notes

  1. Profit and interest are the prices of two opposite placements; on the weighted average cost of capital (WACC), see the appendix Cost of capital, CAPEX and OPEX, Statement 4 and section 4. ↩
  2. Sraffa’s “rate of profits” r is a different object: a rate, uniform across industries, applied to the value of the means of production of each industry, counterpart of the part of the surplus that does not go to wages (P. Sraffa, Production of Commodities by Means of Commodities, Cambridge University Press, 1960, ch. II). In the vocabulary of the Objective Political Economy, r is a rate of return on investment at the scale of the industry (Proposition 8.6), not a rate of profit on capital. Sraffa’s system distinguishes neither placement in capital from placement in credit, nor earnings from their allocations (Proposition 6.3), nor the saver who sells the placement service from the enterprise that buys it. Fabra credits Sraffa with having restated the problem of profit and price in terms of cost of production, free of marginalist analysis, and reproaches him for not having put profit back into the general mechanism of exchange (P. Fabra, Capital for Profit, Rowman & Littlefield, 1991, pp. 335–338). See the appendix Objective Political Economy and Sraffa. ↩
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