BPEA | 1977 No. 1

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
Martin S. Feldstein NBER and Harvard University

1977, No. 1

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.