Surplus Theories of Profit: A Critique from the Perspective of Supply and Demand Theory

Abstract

In the light of the results discussed in the previous chapter, it is clear that any criticism of the surplus approach to profit from a neoclassical perspective must be in terms of the Walrasian variant. Furthermore, some important matters remain subjudice at this stage. This is the case with regard to the ‘one at a time’ method often employed by surplus theorists and, more particularly, with regard to their treating outputs and employment as determined by factors not systematically related to commodity price determination. From a Walrasian perspective this makes no sense. The latter determines equilibrium quantities at market-clearing levels simultaneously with equilibrium prices, and therefore the same forces determine both. Moreover, the structure of Walrasian theory is such that market-clearing is essential to its notion of a terminal state, whether it be a concept of temporary or intertemporal equilibrium. However, these matters cannot be properly dealt with here because a rationalisation of the surplus methodology has not yet been considered analytically. Nevertheless, there are other issues which Walrasian theory highlights. The most important is a questioning of the uniformity principle which defines the ‘long-period’ states discussed by surplus theorists.