The Real Rate of Profits/Returns Equals Zero, Actually and Endogenously

This paper aims at presenting and proving two new discoveries found after the author’s book (the EES) publication, 15 May 2013:  (1) The real rate of profits/returns is zero, r=0, under the author’s two-dimensions (2D) plane hyperbola (2DPH).  (2) The relative share of capital (a)-neutral to macro-inequality is realized simultaneously under perfect competition and, leads to effective increase in the wage rate.  These two discoveries, (1) and (2), are consistent with the author’s money-neutral (Int Adv Econ Res16: 282-296, 2010).  This paper examines the author’s money-neutral, using KEWT database up-dated and testing ten-year debt yield, money supply M2, and the exchange rate, each by country.  These discoveries, (1) and (2), are wholly proved and backed up by Iyonoishi’s new discoveries on geometrical topology incidentally found after the author’s book publication.

Explanation and implication of (1):  The real rate of return=zero (simply RRR=0) expresses that the technology coefficient, , reduces to zero at convergence and under the endogenous-equilibrium.  This fact implies that the growth rate of nominal GDP matches the rate of inflation/deflation.  First of all, the rate of technological progress, , is endogenously measured.  Then, numerous equations are simultaneously measured using seven endogenous parameters, which convert the Phelps (1961) coefficient to endogenous from exogenous.  As a result, the valuation ratio is measured and the ratio expresses the qualitative level of equilibrium, avoiding repeating assets-bubbles.  Further, three parameters (the relative share of capital a, the rate of change in population n_E=n, and ) enable policy-makers to control the rate of return and the growth rate of output.  These facts are cyclically connected with (2).

Explanation and implication of (2):  a-neutral stops macro-inequality.  a-neutral is tightly connected with consumption-neutral to growth and technology, where the technology coefficient, , is independent of national taste, preferences, and culture.  Consumption and  are compatible each other.  This fact implies that any country could enjoy a Utopia economy that harmonizes national taste, consumption, growth, technology, stop macro-inequality, a high wage rate, and full-employment by sector and year and over years.

The above facts are proved by using KEWT database, 1960/90 to 2010/11 by sector (the government and private sectors just before tax redistribution, where national disposable income, as a surrogate for GDP.