Revisiting Adam Smith’s Theory of the Falling Rate of Profit

Lefteris Tsoulfidis () and Dimitris Paitaridis
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Dimitris Paitaridis: Department of Economics, University of Macedonia

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: Smith’s theory of the falling rate of profit has been usually interpreted as a result of the intensification of competition in the markets of goods and services of the factors of production. This aspect of Adam Smith had been initially posed by Ricardo and subsequently was widely adopted by the major economists of the past as well as from the majority of the modern historians of economic thought. In our view, Smith’s analysis of the falling tendency in the rate of profit is by far more complex than usually presented and that the intensification of competition is the result of the falling rate of profit rather than its cause which is the capitalization of the production process.

Keywords: Rate of Profit; competition; mechanization; Adam Smith; Stationary State. (search for similar items in EconPapers)
JEL-codes: B10 B12 B13 B14 B16 H50 (search for similar items in EconPapers)
Date: 2011-11, Revised 2011-11
New Economics Papers: this item is included in nep-his, nep-hme and nep-hpe
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Journal Article: Revisiting Adam Smith's theory of the falling rate of profit (2012)
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