A Division of the Capitalist Class and the Market for Money Capital

Metroeconomica, Forthcoming

28 Pages Posted: 20 Jul 2020 Last revised: 27 Jul 2020

See all articles by Hyun Woong Park

Hyun Woong Park

Denison University - Department of Economics

Date Written: July 10, 2020

Abstract

In an one-commodity economy populated by capitalists equipped with equal endowment but with heterogeneous linear production technology, a division of the capitalist class emerges endogenously. The capitalists with relatively weak technology, yielding the profit rate lower than the interest rate, become a money capitalist (lender), whereas the capitalists with relatively strong technology, yielding the profit rate greater than the interest rate, become an industrial capitalist (borrower). The equilibrium interest rate is derived by the associated demand and supply relation. From this setup of the model follow two essential relationships Marx establishes between the average profit rate and the interest rate: (i) that the profit (rate) sets a maximum limit of interest (rate), and (ii) that the two rates are correlated in the long-run. Lastly, the profit rate of financial sector is less than that of industrial sector due to the basic setup of the model where the industrial sector uses leverage to amplify the underlying capital profit rate, whereas the financial sector lacks inter-mediation technology, which would have enabled it to borrow profitably.

Keywords: Marx, Money Capital, Interest-Bearing Capital, Loan-Able Capital, Credit, Interest Rate

JEL Classification: B51

Suggested Citation

Park, Hyun Woong, A Division of the Capitalist Class and the Market for Money Capital (July 10, 2020). Metroeconomica, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3651377 or http://dx.doi.org/10.2139/ssrn.3651377

Hyun Woong Park (Contact Author)

Denison University - Department of Economics ( email )

Granville, OH 43023
United States

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