ABSTRACT
This chapter investigates the determinants of profits in short and long periods. It examines the level of the rate of profit in long periods, in particular in relation to the rate of interest. If capitalists decided always to consume and to invest in a given period what they have earned in the preceding period, the profits in the given period would be equal to those in the preceding one. Since profits in a given short period are determined by capitalists' decisions as to their consumption and investment formed in the past, the factors determining the distribution of income will affect not real profits but the real wage and salary bill—and consequently the national output. As profits are understood throughout the argument to be after taxation, the rate of interest, when compared with the rate of profit as given by formula, must also be taken after deduction of income tax.
