chapter  14
Can Investment Solve the “Paradox of Profit” in a Monetary Economy?
Pages 12

Introduction The existence of profit in a non-monetary economy does not create conceptual problems. The part of production which is not allocated to labor remains in the hands of capital owners and gives rise to profit. In a monetary economy, the issue of the existence of profit is much less intuitive. This is the well-known “paradox of profit.” Firms pay their employees with money and expect to make monetary profit. Profit of a firm is the result of the excess of its receipts on its production costs. The question then is to know how firms can globally get more money from their production than they have spent to produce. This point seems paradoxical. Indeed, households get their income from the production expenditures of firms. How can consumption expenditures be higher than production ones?