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

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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.

Suggested Citation

  • Lefteris Tsoulfidis & Dimitris Paitaridis, 2011. "Revisiting Adam Smith’s Theory of the Falling Rate of Profit," Discussion Paper Series 2011_18, Department of Economics, University of Macedonia, revised Nov 2011.
    • Handle: RePEc:mcd:mcddps:2011_18
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    1. Lefteris Tsoulfidis, 2024. "Competing Schools of Economic Thought," Springer Studies in the History of Economic Thought, Springer, edition 2, number 978-3-031-58580-7, April.
    2. Verdera, Francisco, 1992. "Adam Smith on the Falling Rate of Profit: A Reappraisal," Scottish Journal of Political Economy, Scottish Economic Society, vol. 39(1), pages 100-110, February.
    3. Blaug,Mark, 1997. "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number 9780521577014, January.
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    Cited by:

    1. Ivan D. Trofimov, 2017. "Profit rates in the developed capitalist economies: a time series investigation," PSL Quarterly Review, Economia civile, vol. 70(281), pages 85-128.
    2. Trofimov, Ivan D., 2017. "Profit rates in the developed capitalist economies: a time series investigation," MPRA Paper 79529, University Library of Munich, Germany.

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    More about this item

    Keywords

    Rate of Profit; competition; mechanization; Adam Smith; Stationary State.;
    All these keywords.

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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