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Literaturverz. S. 16 - 17

Abstract
Using simple national income accounting and a fixed coefficient two sector model this paper examines how the problem of capital valuation upsets the foundations of the marginal productivity theory of distribution. Assuming no capital valuation problem and zero Wicksell effect, both marginalist theory and the labour theory of value hold. However, the same equation that makes the Wicksell effect zero also entails the profit realization condition of effective demand for the 'golden age'. This argument is extended providing a new perspective to the link between effective demand and capital theory.

This short paper is a demonstration of the difficulty with the textbook production function which uses the notion of capital as a factor of production. Because, this notion is logically incompatible with the other notion of the money value of capital needed for distribution theory. Theories of production and distribution become incompatible. Outside a one commodity world, this leads to insurmountable circular reasoning. The value of capital cannot be measured without first knowing its distributional parameters (e.g. real wage or the profit rate) and if they are known the marginal productivity theory based on the notion of the relative scarcity of capital as a factor of production is not only superfluous but meaningless. The scarcity of something which cannot be measured even in theory cannot be defined.

This short note introduces the debate on the future of economic policy and reform of capitalism, to be hosted in a new temporary section of the journal. It is essential to debate how to achieve a balance between 'bread' (economic security) and 'liberty' (political freedom), in a dynamic sense, implying that the relative importance between the two logical extremes must vary with the context. In the new section, the Review welcomes contributions and comments on the foreseeable future and the options available for economic policy and for reforms at the global and/or national level. JEL codes: P11, P21, D72

The debate about how to reconcile political with economic democracy is translated in the framework of wage- and profit-led growth in this paper. The inherent tension between providing sufficient profit incentive to motivate investment by the capitalist class and maintaining electoral accountability to the economically less privileged majority is examined through an analysis of policies towards raising the social wage. The paper shows how wider circumstances characterising a regime as wage- or profit-led is of consequence for determining the possibility of combining a higher profit share with a higher social wage through the effectiveness of such policies.