The paradox of profits in an AB-SFC model

This paper presents a scheme of monetary profit realization\r\nwithin the traditional structure of the monetary circuit. We point out that\r\nin a framework reproducing a monetary economy of production without\r\nexogenous components of demand and investments, the reciprocal\r\nconsumption of the capitalist class is the key channel of monetary profit\r\nrealization. We develop an Agent Based – Stock Flow Consistent model\r\nof the monetary circuit consisting of a multiplicity of consumer sectors\r\nwhere the original formation of monetary profits is due to unequal shares\r\nof consumer goods in the wage basket and/or different labor productivities\r\nacross sectors. Within each production period, the sectors with a higher\r\nweight in the production of wage goods will generate monetary profits\r\nthrough the consumption of workers, while the capitalists’ consumption\r\nresulting from such profits will recursively generate the monetary profits\r\nof other sectors, and so on. In this sense, the core of the solution of the\r\nprofit paradox lies in the monetary mechanism through which the capitalist\r\nclass appropriates the corresponding share of production. This\r\nrepresentation confirms Kalecki's insight: “capitalists earn what they\r\nspend, workers spend what they earn”.