On ^Profits and Profit Sharing
ZUBAIR HASAN, THEORY OF PROFIT, Vikas Publishing House (P) Ltd, Delhi 1975, pp 182, Rs 35.
PROFIT theory has been one of the most unsatisfactory, controversial and neglected areas in economics. Theoretical discussions on the subject are marred by explanations which do not have ^'a dialectical content or operational value". The task of the author accordingly, is to attempt to clear up this unsatisfactory state of affairs. In his opinion, every theoretical formulation in the literature has sought in one way or the other to justify the assumption that the firm's surplus, over the payments made to the hired factors of production, primarily accrues to the entrepreneuró the ^accrual assumption' as it is termed. Despite the subsequent developments in the literature, there has hardly been any significant change as regards this assumption. Consequently, these analyses have become increasingly apologetic, taking into account the fact that capitalism has changed tremendously, that it is difficult to identify the ^entrepreneur" today and that corporate earnings have assumed, by and large, an impersonal character.
The author attempts to clear up this state of affairs by putting forward an alternative formulation in which the locus of profit is shifted from the entrepreneur to the firm, to take into account observable realities, and the emergence of profit is delinked from that of its appropriation. He then proceeds to analyse and identify the real source of profits.
Source of Profits
The starting point is a no-profit model which has the following assumptions: (1) The factors of production combine together and agree to share in the net revenue product they produce over time. This assumption leaves no residual claimant; (2) The economy is devoid of developmentóno change in the technique of production, no innovations,