The Cyclical Profit Squeeze: A Marxian Microfoundation

Jonathan P. Goldstein
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Jonathan P. Goldstein: Economics, Bowdoin College, Brunswick, ME.

Review of Radical Political Economics, 1985, vol. 17, issue 1-2, 103-128

Abstract: This paper develops a microfoundation for the cyclical profit squeeze theory of crisis. An optimal cyclical mark-up pricing policy is derived. The mark-up rises from initial trough until midexpansion and then declines until the terminal trough. The necessary and sufficient conditions for the resulting decline in the profit rate are the capital-labor struggle which determines the behavior of costs and the competition among capitals which restricts rising costs from being fully passed on. It is also shown that this optimal mark-up behavior serves as a microfoundation for a profit squeeze theory of the business cycle.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:sae:reorpe:v:17:y:1985:i:1-2:p:103-128

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