Is the Rate of Profit Falling?

Lawrence H. Summers and

Lawrence H. Summers Charles W. Eliot University Professor and President Emeritus - Harvard University

Martin S. Feldstein

MSF

Martin S. Feldstein NBER and Harvard University

Discussants: Michael Wachter

MW

Michael Wachter

THE PRETAX net rate of return on corporate capital reached a thirty-year low in 1974 of only 6.4 percent, according to the estimates that we develop in this paper. Although profits have rebounded substantially since then, there is still a widespread suspicion that the rate of profit may have been declining over a number of years. A primary purpose of this paper is to use the new official estimates of profits, capital consumption, and the capital stock to assess whether such a decline has in fact occurred.