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A Theory of Productive Activity, Profit, and, Saving

George Reisman

Presented at: TJS 1987

Date: Aug 02, 1987

Summary from the conference schedule:

These lectures will present a modernized, radically restructured version of the ideas of the British Classical Economists on the subjects of productive activity, saving, and profit. They will deal with the connection between money making and productive activity, the productive role of businessmen and capitalists, the role of saving both as the source of most spending in the economic system and in relation to technological progress and capital accumulation, and the determinants of the average rate of profit on capital invested. Classical economics, when freed of its errors and inconsistencies, will be shown to provide the basis for the overthrow of the central ideas both of Keynesianism and––despite the prevailing contrary view––the Marxian exploitation theory.

NOTE:  titles and content may not reflect the exact content of the conference - secondary sources.

1. Basic Concepts. Definitions of such fundamental concepts as productive expenditure and consumption expenditure, capital goods and consumers' goods. Adam Smith's positive contribution to the concept of productive activity and his contradictory development of the conceptual framework of the Marxian exploitation theory.

2. The Marxian Exploitation Theory. Marx's version of the labor theory of value and the “iron law” of wages. How profits are made to appear as essentially the same as the gains of slave owners. The exploitation theory as the theoretical basis of the economic policies of the contemporary “liberals.”

3. Böhm-Bawerk's Critique of the Exploitation Theory. Exposition of the leading critique of Marx as developed by a father of the Austrian school of economics. The time preference theory of profit/interest. Böhm-Bawerk's fundamental concessions to the exploitation theory.

4. Reisman's Theory of Profit/Interest vs. the Framework of the Exploitation Theory. How business in the aggregate generates sales revenues greater than costs. Profits, not wages, as the original and primary form of income. Businessmen do not deduct profits from wages, but are responsible for the creation of wages, which along with other costs, are a deduction from sales revenues, all of which were originally profit. Businessmen and capitalists as the primary workers in the economic system.

5. Specific Productive Functions in the Light of the Division of Labor. The division of labor as the explanatory principle of the specific productive functions of businessmen and capitalists, the financial markets and financial institutions, retailing, wholesaling, and advertising.

6. Further Development of Reisman's Theory of Profit/Interest. Say's Law II: not only does production create purchasing power, but also the productive process itself is what generates monetary profitability. Radical implications for the role of saving and technological progress in the process of capital accumulation.

(original title:  A Theory of Productive Activity, Saving, and Profit)


Parts: 6

Handout: none


  • CD, 2018 (En)