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When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism

19 Pages Posted: 23 Sep 2011 Last revised: 22 Apr 2015

Egmont Kakarot-Handtke

University of Stuttgart - Institute of Economics and Law

Date Written: September 22, 2011

Abstract

According to Ricardo the principal problem in Political Economy is to determine the laws which regulate the distribution of profits, rents, and wages. Ricardo determined the respective shares in real terms and to this end invented an engine of analysis that became paradigmatic. The present paper applies a consistent real and monetary analysis, which is based on a set of objective structural axioms, and contrasts the results with Ricardo’s approach. The general result is that real analysis misses economic reality. The specific result is that rent is a misnomer for the distributed profit of the land owning firm.

Keywords: new framework of concepts, structure-centric, axiom set, real analysis, nominal analysis, economic literacy, profit, distributed profit, ownership, pricing of land services, profit ratio equalization, factors of production

JEL Classification: B12, E25

Suggested Citation

Kakarot-Handtke, Egmont, When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism (September 22, 2011). Available at SSRN: https://ssrn.com/abstract=1932119 or http://dx.doi.org/10.2139/ssrn.1932119

Egmont Kakarot-Handtke (Contact Author)

University of Stuttgart - Institute of Economics and Law ( email )

Keplerstrasse 17
Stuttgart
Germany

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